AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 22, 2002
REGISTRATION NO. 333-82800
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--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
GOODRICH CORPORATION
(Exact name of Registrant as Specified in its Charter)
NEW YORK 3728 34-0252680
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
---------------------
FOUR COLISEUM CENTRE
2730 WEST TYVOLA ROAD
CHARLOTTE, NORTH CAROLINA 28217
(704) 423-7000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
---------------------
KENNETH L. WAGNER
SENIOR COUNSEL AND ASSISTANT SECRETARY
GOODRICH CORPORATION
FOUR COLISEUM CENTRE
2730 WEST TYVOLA ROAD
CHARLOTTE, NORTH CAROLINA 28217
(704) 423-7000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
---------------------
WITH COPIES TO:
ELLIOTT V. STEIN, ESQ. DAVID LOPEZ, ESQ.
WACHTELL, LIPTON, ROSEN & KATZ CLEARY, GOTTLIEB, STEEN & HAMILTON
51 WEST 52(ND) STREET ONE LIBERTY PLAZA
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10006
(212) 403-1000 (212) 225-2000
---------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective and all other
conditions to the exchange offer described in the enclosed prospectus have been
satisfied or waived.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE AGGREGATE OFFERING AMOUNT OF REGISTRATION
TO BE REGISTERED REGISTERED(1) PRICE(1, 2) FEE(3)
------------------------------------------------------------------------------------------------------------------
Goodrich Corporation 7 1/2%
Notes due 2008........... $300,000,000 $290,682,000 $26,743
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(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f) of the Securities Act based on the outstanding
principal amount of the old Coltec notes, $300,000,000, multiplied by the
average of the bid and ask market price for the old Coltec notes on February
13, 2002 represented as a percentage of par (96.894%).
(2) Exclusive of accrued interest, if any.
(3) Calculated by multiplying 0.000092 by the proposed maximum aggregate
offering price. This fee was paid by the registrant on February 14, 2002.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 22, 2002
PROSPECTUS
(GOODRICH LOGO)
GOODRICH CORPORATION
$300,000,000
OFFER TO EXCHANGE ITS NEW 7 1/2% NOTES DUE 2008
FOR
7 1/2% SERIES B SENIOR NOTES DUE 2008 OF
COLTEC INDUSTRIES INC
------------------
This is an offer to exchange the outstanding 7 1/2% Series B Senior Notes
due 2008 of Coltec Industries Inc (which we refer to in this document as the
"old Coltec notes") for 7 1/2% Notes due 2008 of Goodrich Corporation (which we
refer to in this document as the "new Goodrich notes"). The interest rate, term,
payment dates, and redemption provisions of the new Goodrich notes will be
substantially identical to those of the old Coltec notes. See "Comparison of
Terms of Notes" beginning on page 67 for a description of the material
differences between the terms of the old Coltec notes and the new Goodrich
notes. This offer will expire at 5:00 p.m., New York City time, on ,
2002 unless we extend it. We refer to this date and time in this prospectus, if
and as it is extended, as the "expiration date."
We are making the exchange offer in connection with the spin-off of 100% of
the common stock of EnPro Industries, Inc. ("EnPro"). Coltec Industries Inc will
be a wholly owned subsidiary of EnPro following the spin-off. We expect the
exchange offer to be completed approximately two weeks prior to the spin-off.
The new Goodrich notes will not be listed on any national securities exchange.
The new Goodrich notes will be governed by the Indenture dated May 1, 1991
between Goodrich Corporation and The Bank of New York, as the successor to
Harris Trust and Savings Bank (we refer to the Indenture as the "Goodrich
indenture"). Goodrich may redeem all or part of the new Goodrich notes at any
time at a redemption price equal to the greater of (i) 100% of the principal
amount and (ii) the sum of the present value of the remaining scheduled payments
of principal and interest from the redemption date to the maturity date,
discounted to the redemption date on a semiannual basis at a treasury rate
specified in the new Goodrich notes plus 37.5 basis points, plus accrued
interest to the date of redemption. The new Goodrich notes will be unsecured and
rank equally with all of our existing and future unsecured senior debt.
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF IMPORTANT
FACTORS THAT HOLDERS OF OLD COLTEC NOTES SHOULD CONSIDER IN CONNECTION WITH THE
EXCHANGE OFFER AND AN INVESTMENT IN THE NEW GOODRICH NOTES.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the new Goodrich notes or determined
if this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense. We are not making or soliciting an offer to exchange
notes in any jurisdiction where the offer is not permitted.
------------------
The Dealer-Manager for the Exchange Offer is
SALOMON SMITH BARNEY
, 2002
TABLE OF CONTENTS
PAGE
----
Where You Can Find More Information......................... ii
Incorporation of Certain Documents by Reference............. ii
Forward-Looking Statements.................................. iii
Prospectus Summary.......................................... 1
The Companies............................................. 1
The Exchange Offer........................................ 3
Description of New Goodrich Notes......................... 5
Selected Historical and Unaudited Pro Forma Consolidated
Financial Information.................................. 7
Ratio of Earnings to Fixed Charges........................ 8
Risk Factors................................................ 9
The Exchange Offer.......................................... 16
The Spin-Off................................................ 26
Use of Proceeds............................................. 28
Goodrich Corporation Unaudited Pro Forma Consolidated
Financial Statements...................................... 29
Coltec Industries Inc Unaudited Pro Forma Consolidated
Financial Statements...................................... 33
Information About Coltec.................................... 37
Certain Relationships and Related Transactions.............. 55
Description of New Goodrich Notes........................... 58
Comparison of Terms of Notes................................ 67
United States Federal Income Tax Considerations............. 71
Legal Matters............................................... 74
Experts..................................................... 74
Index to Financial Statements............................... F-1
i
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-4 under the
Securities Act of 1933, as amended, relating to the exchange offer that includes
important business and financial information about us that is not included in or
delivered with this prospectus. This prospectus does not contain all of the
information included in the registration statement. This information is
available from us without charge to holders of the old Coltec notes as specified
below. Any statement made in this prospectus concerning the contents of any
contract, agreement or other document is qualified in its entirety by reference
to that contract, agreement or document. If we have filed any of those
contracts, agreements or other documents as an exhibit to the registration
statement, you should read the exhibit for a more complete understanding of the
document or matter involved. Following the exchange offer, we will continue to
file periodic reports and other information with the SEC under the Securities
Exchange Act of 1934, as amended.
Information that we file with the SEC after the date of this prospectus
will automatically supersede the information in this prospectus and any earlier
filed information incorporated by reference in this prospectus. We are also
incorporating by reference in this prospectus any future filings made with the
SEC under sections 13(a), 13(e), 14, or 15(d) of the Exchange Act until the
termination of the exchange offer.
You may read and copy the registration statement, including the attached
exhibits, and any reports, statements or other information that we file at the
SEC's headquarters located at 450 Fifth Street, N.W., Washington, D.C. 20549.
You may also obtain copies of our SEC filings by mail from the Office of
Investor Education and Assistance of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by telephone at 800/SEC-0330. You may obtain
information on the operation of the Office of Investor Education and Assistance
by calling the SEC at 800/SEC-0330. Our SEC filings will also be available to
the public from commercial document retrieval services and at the SEC's Internet
site (http://www.sec.gov).
You may request a copy of any of our filings with the SEC, or any of the
agreements or other documents that are exhibits to those filings, at no cost, by
writing or telephoning us at the following address or phone number:
Goodrich Corporation
2730 West Tyvola Road
Charlotte, North Carolina 28217
(704) 423-7000
Attention: Investor Relations
TO OBTAIN TIMELY DELIVERY OF ANY OF OUR FILINGS, AGREEMENTS OR OTHER
DOCUMENTS, YOU MUST MAKE YOUR REQUEST TO US NO LATER THAN FIVE BUSINESS DAYS
BEFORE THE EXPIRATION DATE OF THE EXCHANGE OFFER.
You should rely only on the information provided or incorporated by
reference in this prospectus and the registration statement. No person has been
authorized to provide you with different information. The information in this
prospectus is accurate as of the date on the front cover. You should not assume
that the information contained in this prospectus is accurate as of any other
date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them into this prospectus, which means that:
- incorporated documents are considered part of this prospectus; and
- we can disclose to you important business and financial information about
us, which is not included in or delivered with this prospectus, by
referring you to those other documents.
ii
We incorporate by reference into this prospectus the documents listed
below, as amended and supplemented, and all documents filed by us with the SEC
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this prospectus and prior to the date on which the exchange offer is completed:
- our Annual Report on Form 10-K for the year ended December 31, 2001; and
- our Proxy Statement for our Annual Meeting of Shareholders that was filed
with the SEC on March 12, 2002.
You can obtain any of the filings incorporated by reference into this
document through us or from the SEC through the SEC's web site or at the
addresses listed above under "Where You Can Find More Information."
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements. In particular, the statements about Goodrich's and Coltec's plans,
strategies and prospects under the headings "Prospectus Summary," "Information
About Coltec -- Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "-- Industry and Business of Coltec After the
Spin-Off," and in the unaudited pro forma consolidated financial statements
included in this prospectus and the related notes are forward-looking
statements. Although we believe that our plans, intentions and expectations
reflected in or suggested by those forward-looking statements are reasonable, we
cannot assure you that those plans, intentions or expectations will be achieved.
These forward-looking statements are subject to risks, uncertainties and
assumptions about us. Important factors that could cause actual results to
differ materially from the forward-looking statements we make in this prospectus
are described in this prospectus, including under the headings:
- "Risk Factors;"
- "Management's Discussion and Analysis of Financial Condition and Results
of Operations;" and
- "Business."
All forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by the cautionary statements
and risk factors contained throughout this prospectus.
iii
PROSPECTUS SUMMARY
This summary highlights some of the information described in greater detail
in other parts of this prospectus and may not contain all of the information
that is important to you. Before making an investment decision, you should read
this entire prospectus, including "Risk Factors" and the financial statements
(including the related notes to the financial statements) that we have included.
Unless the context otherwise requires, the terms "we," "our," "us" and
"Goodrich" refer to Goodrich Corporation, and the term "Coltec" refers to Coltec
Industries Inc. The term "spin-off" refers to those transactions described under
"The Spin-Off." When we refer to "pro forma" financial results, we mean the
financial results of the subject company and its subsidiaries on a consolidated
basis as if the spin-off had occurred at the beginning of the relevant time
period. See "Goodrich Corporation Unaudited Pro Forma Consolidated Financial
Statements" and "Coltec Industries Inc Unaudited Pro Forma Consolidated
Financial Statements."
THE COMPANIES
GOODRICH
We are a leading worldwide supplier of aerospace components, systems and
services serving the commercial, military, regional, business and general
aviation markets. Until the spin-off we will also be a leading provider of
engineered industrial products for the processing and general manufacturing
industries.
Our continuing operations are classified into four reportable business
segments: Aerostructures and Aviation Technical Services, Landing Systems,
Engine and Safety Systems, and Electronic Systems.
Aerostructures and Aviation Technical Services: Aerostructures is a
leading supplier of nacelles, pylons, thrust reversers and related aircraft
engine housing components. The aviation technical sales division performs
comprehensive total aircraft maintenance, repair, overhaul and modification for
many commercial airlines, independent operations, aircraft leasing companies and
airfreight carriers.
Landing Systems: Landing Systems provides systems and components
pertaining to aircraft taxi, take-off, landing and stopping. Several divisions
within the segment are linked by their ability to contribute to the integration,
design, manufacture and service of entire aircraft undercarriage systems,
including sensors, landing gear, certain brake controls and wheels and brakes.
Engine and Safety Systems: Engine and Safety Systems produces engine and
fuel controls, pumps, fuel delivery systems, as well as structural and rotating
components such as disks, blisks, shafts and airfoils for both aerospace and
industrial gas turbine applications. This segment also produces aircraft
evacuation, de-icing and passenger restraint systems, as well as ejection seats
and crew and attendant seating.
Electronic Systems: Electronic Systems produces a wide array of products
that provide flight performance measurements, flight management and control and
safety data. Included are a variety of sensor systems that measure and manage
aircraft fuel and monitor oil debris; engine, transmission and structural
health; and aircraft motion control systems. The segment's products also include
instruments and avionics, warning and detection systems, ice detection systems,
test equipment, aircraft lighting systems, landing gear cables and harnesses,
satellite control, data management and payload systems, launch and missile
telemetry systems, airborne surveillance and reconnaissance systems and laser
warning systems.
Our business is conducted on a global basis with manufacturing, service and
sales undertaken in various locations throughout the world. Our principal
executive offices are located at Four Coliseum Centre, 2730 West Tyvola Road,
Charlotte, North Carolina 28217 and our main phone number is (704) 423-7000.
1
COLTEC
When the spin-off is complete, Coltec will be a wholly-owned subsidiary of
EnPro, and the assets of EnPro will consist primarily of its equity interest in
Coltec and, potentially, its ownership of a portion of the old Coltec notes. See
"Use of Proceeds" at page 28. Coltec's business will consist of the historical
sealing and engineered industrial products businesses of Coltec, including
Glacier (which is described in more detail below). Coltec will manage its
operations in two business segments. The following description of Coltec is on a
pro forma basis, giving effect to the spin-off and related transactions.
Coltec is a leader in the design, development, manufacturing and marketing
of proprietary engineered industrial products, including sealing products,
self-lubricating, non-rolling metal polymer bearing products, air compressor
systems and vacuum pumps and heavy-duty diesel and natural gas engines. Coltec
also designs, manufactures and sells engineered industrial products such as
polytetrafluoroethylene, or PTFE, products and specialized tooling. Coltec has
33 primary manufacturing facilities located in nine countries in the Americas,
Europe and Australia. Coltec sells its products through approximately 2,600
independent agents and distributors worldwide and has over 200 internal sales
managers and representatives. These sales managers and representatives are
complemented by teams of highly experienced engineers. In 2001 on a pro forma
basis, Coltec had revenues of $696.4 million, operating income of $54.0 million
and net income of $0.9 million.
Coltec sells its products to more than 60,000 customers worldwide and is
diversified both by industry served and geographically. In 2001, no single
customer accounted for more than 2% of its revenues. Coltec management estimates
that its percentage of revenues by industry in 2001 were as follows: general
industrial 43%, automotive and heavy-duty vehicle 18%, chemical and
petrochemical 17%, utility 9%, marine 7%, other transportation 4% and other
industries 2%. Management estimates that its percentage of revenues by
geographic region in 2001 were as follows: United States 70%, Canada 7%, Europe
14% and the rest of the world 9%. Coltec's management estimates that it derived
approximately 62% of Coltec's revenues in 2001 from its aftermarket, or parts
and services, sales.
In September 2001, Coltec acquired the Glacier industrial metal polymer
bearing business from Dana Corporation. The acquisition of Glacier, in
combination with Coltec's existing bearing business, created the largest
manufacturer of self-lubricating, non-rolling, metal polymer bearings in the
world. The combined company is now operating as Glacier Garlock Bearings. Coltec
believes that the combination of these businesses will enable Coltec to serve
worldwide customers more effectively and create economies of scale in research
and development and in marketing. With the acquisition of Glacier, Coltec added
manufacturing facilities in Annecy and Dieuze, France; Heilbronn, Germany;
Kilmarnock, U.K.; Dolny Kubin, Slovakia; and Sao Paulo, Brazil. In addition,
Coltec acquired extensive sales and marketing resources in Europe and South
America. The combined companies will operate research and development facilities
in Thorofare, New Jersey and Annecy, France.
The principal executive offices of Coltec are located at c/o Goodrich
Corporation, Four Coliseum Centre, 2730 West Tyvola Road, Charlotte, North
Carolina 28217 and Coltec's main phone number is (704) 423-7000.
2
THE EXCHANGE OFFER
THE EXCHANGE OFFER............ We are offering to exchange an aggregate
principal amount of up to $300,000,000 of the
new Goodrich notes for a like principal amount
of the old Coltec notes. We will issue the new
Goodrich notes on or promptly after the
exchange date. As of the date of this
prospectus, $300,000,000 aggregate principal
amount of the old Coltec notes is outstanding.
The interest rate, term, payment dates, and
redemption provisions of the new Goodrich notes
will be substantially identical to those of the
old Coltec notes. The new Goodrich notes will
not include those terms of the old Coltec notes
that are no longer applicable. For example, the
new Goodrich notes will not contain terms with
respect to collateral or subsidiary guarantees.
The new Goodrich notes will be issued under the
Goodrich indenture. See "The Exchange Offer." A
description of the differences between the
terms of the new Goodrich notes and the old
Coltec notes is set forth below in "Comparison
of Terms of Notes."
EXPIRATION DATE............... The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2002 unless
extended by us in our sole discretion. See "The
Exchange Offer -- Expiration Date; Extensions;
Amendments."
EXCHANGE DATE................. The date of acceptance for exchange of the old
Coltec notes and the completion of the exchange
offer will be the first business day following
the expiration date (we refer to this date as
the "exchange date"). See "The Exchange
Offer -- Terms of the Exchange."
WITHDRAWAL RIGHTS............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
expiration date; otherwise, all tenders will be
irrevocable. See "The Exchange
Offer -- Withdrawal of Tenders."
CONDITIONS OF THE EXCHANGE
OFFER......................... The exchange offer is subject to conditions,
such as the absence of court and governmental
action prohibiting the exchange offer and of
changes in general market conditions or our
business that, in our judgment, are or may be
materially adverse to us. We may also amend or
terminate the exchange offer if we determine,
in our reasonable judgment, that it would not
be advantageous for Goodrich to complete the
spin-off. See "The Exchange Offer -- Conditions
to the Exchange Offer."
PROCEDURES FOR TENDERING OLD
COLTEC NOTES.................. See "The Exchange Offer -- Procedures for
Tendering."
TAXATION...................... The exchange of the old Coltec notes for the
new Goodrich notes pursuant to the exchange
offer will be a taxable exchange for United
States federal income tax purposes. See "United
States Federal Income Tax Considerations."
REMAINING OLD COLTEC NOTES.... If you do not tender your old Coltec notes in
the exchange offer or if your old Coltec notes
are not accepted for exchange you will continue
to hold your old Coltec notes.
3
In general, we will not accept for exchange old
Coltec notes that have been tendered if:
- the old Coltec notes were not validly
tendered pursuant to the procedures for
tendering; see "The Exchange
Offer -- Procedures for Tendering;"
- we determine, in our reasonable discretion,
that any of the conditions to the exchange
offer have not been satisfied; see "The
Exchange Offer -- Conditions to the Exchange
Offer;"
- a holder has validly withdrawn a tender of
old Coltec notes as described under "The
Exchange Offer -- Withdrawal of Tenders;" or
- we have, in our reasonable judgment, delayed
or terminated the exchange offer; see "The
Exchange Offer -- Expiration Date; Extension;
Amendments."
To the extent that the old Coltec notes are
acquired in the exchange offer, the trading
market, if any, for remaining old Coltec notes
could be adversely affected (including, among
other things, a decline in trading activity).
See "Risk Factors -- Risks Related to Not
Tendering in the Exchange Offer." The old
Coltec notes which are not tendered for
exchange or are tendered but not accepted in
connection with the exchange offer will remain
outstanding and be entitled to the benefits of
the old Coltec notes indenture. The old Coltec
notes are not, and will not be, guaranteed by
Goodrich.
APPROVALS..................... No vote of our shareholders is required to
complete the exchange offer. We are not aware
of any material license or regulatory permit
that might be adversely affected by the
completion of the exchange offer or of any
approval or other action by any government or
governmental, administrative or regulatory
authority or agency that would be required for
the completion of the exchange offer.
EXCHANGE AGENT................ The exchange agent with respect to the exchange
offer is The Bank of New York. The address and
telephone number of the exchange agent are
stated in "The Exchange Offer -- Exchange
Agent."
USE OF PROCEEDS............... There will be no proceeds to us from the
exchange pursuant to the exchange offer. See
"Use of Proceeds."
4
DESCRIPTION OF NEW GOODRICH NOTES
The new Goodrich notes will have substantially the same interest rate,
term, payment dates, and redemption provisions as the old Coltec notes. The
terms of the new Goodrich notes include the following:
ISSUER........................ Goodrich
SECURITIES OFFERED............ $300.0 million aggregate principal amount of
7 1/2% Notes due 2008 of Goodrich.
MATURITY DATE................. April 15, 2008
INTEREST AND PAYMENT DATES.... April 15 and October 15 of each year. Except as
described below, interest on the new Goodrich
notes will accrue from the last interest
payment date on which interest was paid on the
old Coltec notes surrendered in exchange.
Holders of old Coltec notes whose old Coltec
notes are accepted for exchange will not
receive any payment in respect of interest on
those old Coltec notes otherwise payable on any
interest payment date the record date for which
occurs on or after completion of the exchange
offer. If the exchange offer is completed after
a record date for the payment of interest on
the old Coltec notes and before the payment
date associated with that record date, then the
interest payable with respect to the first
interest payment date after the completion of
the exchange offer will be paid to the person
in whose name the old Coltec note was
registered on that record date. See
"Description of the New Goodrich Notes."
OPTIONAL REDEMPTION........... The new Goodrich notes are redeemable, in whole
or in part, at any time and from time to time,
at the option of Goodrich, at a redemption
price equal to the greater of (i) 100% of the
principal amount of such new Goodrich notes and
(ii) the sum of the present value of the
remaining scheduled payments of principal and
interest from the redemption date to the
maturity date, discounted to the redemption
date on a semiannual basis (assuming a 360-day
year consisting of twelve 30-day months) at a
specified treasury rate plus 37.5 basis points,
plus accrued interest thereon to the date of
redemption.
RANKING....................... The new Goodrich notes are senior unsecured
obligations of Goodrich and will rank pari
passu in right of payment with all existing and
future senior unsecured obligations of Goodrich
and will rank senior in right of payment to all
subordinated obligations of Goodrich. As of
December 31, 2001, on a pro forma basis after
giving effect to the spin-off, Goodrich would
have had approximately $906 million of other
senior indebtedness (which includes a $7
million adjustment increasing certain debt
instruments that are hedged through the use of
an interest rate swap agreement). The new
Goodrich notes will effectively rank junior to
any of our and our subsidiaries' secured
indebtedness to the extent of the value of the
assets providing the security, and will also be
structurally subordinated to the unsecured
obligations of our subsidiaries with regard to
competing claims to the assets of our
subsidiaries. As of December 31, 2001, on a pro
forma basis after giving effect to the
spin-off, Goodrich and our subsidiaries would
have had approximately
5
$82 million of secured indebtedness, and our
subsidiaries would have had approximately $25
million of unsecured indebtedness. The Goodrich
indenture does not contain any limitation on
the incurrence of additional indebtedness by
Goodrich or by any subsidiary of Goodrich.
GUARANTEES.................... The old Coltec notes were originally guaranteed
by certain subsidiaries of Coltec. Under the
terms of the indenture governing the old Coltec
notes, these subsidiary guarantees have ceased.
The old Coltec notes are not guaranteed by
Goodrich. There will be no guarantees for the
new Goodrich notes.
RESTRICTIVE COVENANTS......... The Goodrich indenture contains covenants that
limit (i) the granting of additional liens
without securing the new Goodrich notes equally
and ratably and (ii) the entering into of sale
and leaseback transactions. However, these
limitations are subject to a number of
important exceptions. See "Description of the
New Goodrich Notes -- Certain Covenants."
YOU SHOULD REFER TO THE SECTION ENTITLED "RISK FACTORS" FOR AN EXPLANATION
OF THE RISKS OF INVESTING IN THE NEW GOODRICH NOTES.
6
SELECTED HISTORICAL AND UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
We are providing the following selected financial data and unaudited pro
forma consolidated financial data, which reflect the spin-off, to help you in
analyzing the financial aspects of the exchange offer. This information is only
a summary and you should read it in conjunction with the historical financial
statements (and related notes) contained in the reports that Goodrich has filed
with the SEC. See "Where You Can Find More Information" on page ii.
GOODRICH CORPORATION SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial information of Goodrich as of December
31, 2001 and 2000 and for each of the three years ended December 31, 2001, has
been derived from, and should be read together with, Goodrich's audited
consolidated financial statements and the related notes, which are incorporated
by reference into this prospectus. The selected historical financial information
as of December 31, 1999 and for the year ended December 31, 1998 has been
derived from, and should be read together with, Goodrich's audited consolidated
financial statements, which have not been included in or incorporated by
reference into this prospectus. The selected historical financial information as
of December 31, 1998 and 1997 and for the year ended December 31, 1997 has been
derived from Goodrich's unaudited consolidated financial statements, which have
not been included in or incorporated by reference into this prospectus.
YEAR ENDED DECEMBER 31,
----------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF INCOME DATA:(1)
Sales.......................................... $4,184.5 $3,700.5 $3,646.2 $3,510.3 $3,060.3
Operating income............................... 384.6 489.7 274.1 440.6 190.8
Income from continuing operations.............. 176.9 235.2 85.9 213.3 67.8
BALANCE SHEET DATA:(1)
Total assets................................... $4,638.1 $5,138.9 $4,622.6 $4,415.8 $3,906.7
Total debt..................................... 1,426.4 2,236.2 1,741.9 1,704.2 1,487.5
Mandatorily redeemable preferred securities of
trusts....................................... 125.0 124.5 124.0 123.6 123.1
Total shareholders' equity..................... 1,361.4 1,228.5 1,295.6 1,238.9 992.2
DILUTED EARNINGS PER SHARE OF COMMON STOCK:(1)
Income from continuing operations.............. $ 1.65 $ 2.16 $ 0.76 $ 1.87 $ 0.61
------------------
(1) Except as otherwise indicated, the historical amounts presented above
reflect the Company's Performance Materials and Engineered Industrial
Products businesses as discontinued operations.
7
GOODRICH CORPORATION SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
This table presents summary unaudited pro forma consolidated financial
information for Goodrich derived from our unaudited pro forma consolidated
financial statements for the year ended December 31, 2001 which are included in
this prospectus. The summary unaudited pro forma consolidated income statement
gives effect to the spin-off as if it had occurred on January 1, 2001. The
summary unaudited pro forma consolidated balance sheet gives effect to the
spin-off as if it had occurred on December 31, 2001. In both cases the pro forma
calculations assume that the exchange offer has been fully subscribed. The
summary unaudited pro forma consolidated financial information does not purport
to represent what our consolidated results of operations would have been had the
spin-off in fact occurred on these dates and does not project our consolidated
financial position or consolidated results of operations for the current year or
any future period. It is important that you read the unaudited pro forma
consolidated financial statements of Goodrich and the accompanying notes
included in this prospectus. See "Goodrich Corporation Unaudited Pro Forma
Consolidated Financial Statements," starting on page 29.
PRO FORMA
YEAR ENDED
DECEMBER 31, 2001
---------------------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE
AMOUNTS)
STATEMENT OF INCOME DATA:
Sales....................................................... $4,184.5
Operating income............................................ 384.6
Income from continuing operations........................... 176.9
BALANCE SHEET DATA:
Total assets................................................ $4,353.6
Total debt.................................................. 1,426.4
Mandatorily redeemable preferred securities of trusts....... 125.0
Total shareholders' equity.................................. 1,076.9
DILUTED EARNINGS PER SHARE DATA:
Continuing operations....................................... $ 1.70
Net income.................................................. $ 2.58
RATIO OF EARNINGS TO FIXED CHARGES
For these ratios, "earnings" consists of income from continuing operations
before income taxes, fixed charges (excluding capitalized interest and
distributions on quarterly income preferred securities), amortization of
previously capitalized interest and undistributed earnings (losses) of
affiliated companies which are accounted for on the equity method. For this
purpose, "fixed charges" consists of (1) interest on all indebtedness (including
capitalized interest and interest costs on company-owned life insurance
policies), (2) amortization of debt discount or premium, (3) an interest factor
attributable to rentals and (4) distributions on quarterly income preferred
securities.
The ratio of earnings to fixed charges for Goodrich for each of the
following periods indicated is as follows:
YEAR ENDED DECEMBER 31,
--------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
RATIO OF EARNINGS TO FIXED CHARGES.................. 2.60 2.72 1.91 2.78 1.77
8
RISK FACTORS
BEFORE YOU INVEST IN THE NEW GOODRICH NOTES, YOU SHOULD BE AWARE THAT AN
INVESTMENT IN THE NEW GOODRICH NOTES INVOLVES VARIOUS RISKS, INCLUDING THOSE
DESCRIBED IN THIS SECTION. YOU SHOULD CAREFULLY CONSIDER THESE RISK FACTORS,
TOGETHER WITH THE OTHER INFORMATION IN THIS PROSPECTUS, BEFORE DECIDING TO
EXCHANGE THE OLD COLTEC NOTES.
RISKS RELATED TO GOODRICH
THE MARKETS WE SERVE ARE CYCLICAL AND SENSITIVE TO DOMESTIC AND FOREIGN ECONOMIC
CONSIDERATIONS, WHICH COULD HARM OUR BUSINESS AND FINANCIAL RESULTS.
The markets in which we sell our products are, to varying degrees, cyclical
and have experienced periodic downturns. For example, markets for certain of our
commercial aviation products sold to original equipment manufacturers ("OEMs")
have experienced downturns during periods of slowdowns in the commercial airline
industry and during periods of weak conditions in the economy generally, as
demand for new aircraft typically declines during these periods. Although we
believe that aftermarket demand for many of our products may reduce our exposure
to these business downturns, we have experienced these conditions in our
business in the past and may experience downturns in the future.
The U.S. and other world markets are currently experiencing an economic
downturn and many of the markets that we serve have been affected by this
downturn. As a result, our business and financial results have been harmed. If
this economic downturn were to continue for an extended period or if conditions
were to worsen, the negative impact on our business and financial results could
be further exacerbated.
Further, the terrorist attacks of September 11, 2001 weakened the U.S. and
world economies and a wide range of industries. Those terrorist attacks, the
allied military response and subsequent developments may lead to future acts of
terrorism, additional hostilities and financial, economic and political
instability. While the precise effects of this instability on our industry and
our business is difficult to determine, it may harm our business, financial
condition, profitability and cash flows.
CURRENT CONDITIONS IN THE AIRLINE INDUSTRY COULD HARM OUR BUSINESS AND FINANCIAL
RESULTS.
The downturn in the commercial air transport market, exacerbated by the
terrorist attacks of September 11, has adversely affected the financial
condition of many of our commercial airline customers. Many of our airline
customers have announced reductions in their aircraft fleet sizes, resulting in
decreased aftermarket demand for many of our products. In addition, many of our
airline customers have requested extended payment terms or reduced pricing. We
have been evaluating these requests on a case-by-case basis. To the extent
extended payment terms are granted to customers, it may negatively affect our
future cash flow. We perform ongoing credit evaluations on the financial
condition of all of our customers and maintain reserves for uncollectible
accounts receivable based upon expected collectibility. Although we believe that
our reserves are adequate, we are not able to predict with certainty the changes
in the financial stability of these customers. Any material change in the
financial status of any one or group of customers could materially harm our
financial condition, results of operations, or cash flows.
A SIGNIFICANT DECLINE IN BUSINESS WITH BOEING OR AIRBUS COULD HARM OUR BUSINESS
AND FINANCIAL RESULTS.
Approximately 23% and 13% of our sales for the year ended December 31, 2001
were made to Boeing and its designated subcontractors, and Airbus and its
designated subcontractors, respectively. Accordingly, a significant reduction in
purchases by either of these customers could materially impair our profitability
and weaken our financial condition. Boeing and Airbus have both announced that
new commercial aircraft deliveries for 2002 will be lower than 2001 as a result
of reduced demand. We expect that this reduction in commercial aircraft
deliveries by Boeing and Airbus will harm our results of operations and cash
flows.
9
DEMAND FOR OUR DEFENSE- AND SPACE-RELATED PRODUCTS BUDGETS IS DEPENDENT ON
GOVERNMENT SPENDING.
Approximately 20% of our net sales for the year ended December 31, 2001
were derived from the defense and space industry. The defense and space industry
is largely dependent upon government budgets, particularly the U.S. defense
budget. We cannot assure you that new military aircraft programs will enter
full-scale production as expected. A change in levels of defense spending could
curtail prospects in our military business. A change in the level of anticipated
new product development costs could negatively impact our business.
COMPETITIVE PRESSURES MAY HARM OUR BUSINESS AND FINANCIAL RESULTS.
The aerospace industry in which we operate is highly competitive. We
compete worldwide with a number of United States and international companies
that are both larger and smaller than us in terms of resources and market share,
and some of which are our customers. While we are the market and technology
leader in many of our products, in certain areas some of our competitors may
have more extensive or more specialized engineering, manufacturing and marketing
capabilities than we do in areas in which we compete. As a result, in these
areas some of our competitors may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements or may be able to
devote greater resources to the development, promotion and sale of their
products than we can.
THE SIGNIFICANT CONSOLIDATION OCCURRING IN THE AEROSPACE INDUSTRY COULD HARM OUR
BUSINESS AND FINANCIAL RESULTS.
The aerospace industry in which we operate has been experiencing
significant consolidation among suppliers, including us and our competitors, and
the customers we serve. Commercial airlines have increasingly been merging and
creating global alliances to achieve greater scale and enhance their geographic
reach. Aircraft manufacturers have made acquisitions to expand their product
portfolios to better compete in the global marketplace. In addition, aviation
suppliers have been consolidating and forming alliances to broaden their product
and integrated system offerings and achieve critical mass. This supplier
consolidation is in part attributable to aircraft manufacturers and airlines
more frequently awarding long-term sole source or preferred supplier contracts
to the most capable suppliers, thus reducing the total number of suppliers from
whom components and systems are purchased. We cannot assure you that our
business and financial results will not be hurt by consolidation among our
competitors or customers.
WE MAY NOT ACHIEVE THE EXPECTED LEVEL OF COST SAVINGS FROM OUR CONSOLIDATION AND
RESTRUCTURING ACTIONS.
During the fourth quarter of 2001, we announced that we were eliminating
approximately 2,400 aerospace and corporate positions and consolidating various
aerospace operations in order to align capacity with current customer demand. We
cannot assure you that these consolidation and restructuring actions will prove
successful or result in all of the cost savings that we currently anticipate
within the time frame expected.
OUR ACQUISITION STRATEGY EXPOSES US TO RISKS, INCLUDING THE RISK THAT WE MAY NOT
BE ABLE TO SUCCESSFULLY INTEGRATE ACQUIRED BUSINESSES.
We have a consistent strategy to grow, in part, by the acquisition of
additional businesses in the aerospace industry and are continuously evaluating
various acquisition opportunities. Our ability to grow by acquisition is
dependent upon, among other factors, the availability of suitable acquisition
candidates. Growth by acquisition involves risks that could harm our operating
results, including difficulties in integrating the operations and personnel of
acquired companies, the potential amortization of acquired intangible assets and
the potential loss of key employees of acquired companies. We may not be able to
complete acquisitions on satisfactory terms or, if any acquisitions are
completed, satisfactorily integrate these acquired businesses.
10
THE AEROSPACE INDUSTRY IS HIGHLY REGULATED.
The aerospace industry is highly regulated in the United States by the
Federal Aviation Administration, or FAA, and in other countries by similar
agencies. We must be certified by the FAA and, in some cases, by individual
original equipment manufacturers, or OEMs, in order to engineer and service
parts and components used in specific aircraft models. If material
authorizations or approvals were revoked or suspended, our operations would be
adversely affected. New or more stringent governmental regulations may be
adopted, or industry oversight heightened, in the future, and we may incur
significant expenses to comply with any new regulations or any heightened
industry oversight.
WE MAY HAVE LIABILITIES RELATING TO ENVIRONMENTAL LAWS AND REGULATIONS WHICH
COULD HARM OUR FINANCIAL RESULTS.
We are subject to various domestic and international environmental laws and
regulations which may require that we investigate and remediate the effects of
the release or disposal of materials at sites associated with past and present
operations. We are currently involved in the investigation and remediation of a
number of sites under these laws. Based on currently available information, we
do not believe that future environmental costs in excess of those accrued with
respect to such sites will materially harm our financial condition. We cannot
assure you, however, that additional future developments, administrative actions
or liabilities relating to environmental matters will not materially harm our
profitability or cash flows in a given period.
ANY PRODUCT LIABILITY CLAIMS IN EXCESS OF INSURANCE MAY HARM OUR FINANCIAL
CONDITION.
Our operations expose us to potential liability for personal injury or
death as a result of the failure of an aircraft component that has been serviced
by us, the failure of an aircraft component designed or manufactured by us or
the irregularity of metal products processed or distributed by us. While we
believe that our liability insurance is adequate to protect us from these
liabilities, our insurance may not cover all liabilities. Additionally,
insurance coverage may not be available in the future at a cost acceptable to
us. Any material liability not covered by insurance or for which third party
indemnification is not available could materially harm our financial condition.
OUR FACILITIES COULD BE DAMAGED BY CATASTROPHES WHICH COULD REDUCE OUR
PRODUCTION CAPACITY AND RESULT IN A LOSS OF CUSTOMERS.
We have facilities in the U.S. and in foreign countries, which, by virtue
of their geographical location are susceptible to earthquakes and other natural
disasters. Although we carry property insurance, including earthquake insurance
and business interruption insurance, our inability to meet customer schedules as
a result of a catastrophe may result in a loss of customers or significant
additional costs, such as penalty claims, under customer contracts.
IF COLTEC IS UNABLE TO MEET ITS OBLIGATIONS IN THE FUTURE, INCLUDING OBLIGATIONS
TO ASBESTOS CLAIMANTS, COLTEC CREDITORS MAY SEEK TO RECOVER FROM GOODRICH.
After the spin-off is completed, it is possible that asbestos-related
claims might be asserted against us on the theory that we have some
responsibility for the asbestos-related liabilities of Coltec or its
subsidiaries, even though the activities that led to those claims occurred prior
to our ownership of Coltec. Also, it is possible that a claim might be asserted
against us that Coltec's dividend of its aerospace business to us prior to the
spin-off was made at a time when Coltec was insolvent or caused Coltec to become
insolvent. Such a claim could seek recovery from us on behalf of Coltec of the
fair market value of the dividend.
No such claims have been asserted against us to date. We believe that we
would have substantial legal defenses against any such claims. Any such claims
would likely require, as a practical matter, that Coltec's subsidiaries were
unable to satisfy their asbestos-related liabilities and that Coltec was found
to be responsible for these liabilities and is unable to meet its financial
obligations. In addition, the distribution
11
agreement between EnPro and Goodrich that will be used to effectuate the
spin-off will provide Goodrich with an indemnification from EnPro covering,
among other things, these liabilities. We believe any such claims would be
without merit and that Coltec will be solvent both before and after the
dividend. If we are ultimately found to be responsible for the asbestos-related
liabilities of Coltec's subsidiaries, we believe it would not have a material
adverse effect on our financial condition, but could have a material adverse
effect on our results of operations and cash flows in a particular period.
However, because of the uncertainty as to the number, timing and payments
related to future asbestos-related claims, there can be no assurance that any
such claims will not have a material adverse effect on our financial condition,
results of operations and cash flows. If a claim related to the dividend of
Coltec's aerospace business were successful, it could have a material adverse
impact on our financial condition, results of operations and cash flows.
SOME OF OUR OTHER DEBT RANKS AHEAD OF THE NEW GOODRICH NOTES IN RIGHT OF
REPAYMENT.
The new Goodrich notes will be senior unsecured debt of Goodrich, and rank
equally in right of payment with our other senior unsecured debt. The holders of
our and our subsidiaries' secured debt will have a prior claim on the assets
that secure their debt. Your right to payment under the new Goodrich notes will
also be structurally subordinated to claims to the assets of our subsidiaries by
holders of our subsidiaries' debt. As of December 31, 2001, on a pro forma basis
after giving effect to the spin-off and assuming that we exchanged all of the
outstanding old Coltec notes for new Goodrich notes, we and our subsidiaries
would have had $82 million in secured debt, we would have had approximately $906
million in senior unsecured debt (which includes $7 million fair market value of
an interest rate swap), and our subsidiaries would have had approximately $25
million in unsecured debt.
AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOR THE NEW GOODRICH NOTES, AND YOU MAY
NOT BE ABLE TO RESELL THE NEW GOODRICH NOTES.
The new Goodrich notes are new securities and no market exists where you
can resell them. Although the dealer manager intends to make a market in the new
Goodrich notes, it is not required to do so. In addition, even if the
dealer-manager starts market making activities, it could stop these activities
at any time without notice. As a result, your ability to resell your new
Goodrich notes may be limited.
RISKS RELATED TO THE SPIN-OFF
FOLLOWING THE SPIN-OFF, GOODRICH AND COLTEC WILL NOT BE CONSOLIDATED FOR TAX
PURPOSES AND GOODRICH'S RECOGNITION OF THE BENEFITS OF ANY TAX LOSSES MAY BE
DELAYED.
Prior to the spin-off, we filed consolidated, combined and unitary tax
returns for federal and many states' income taxes, which included the results of
operations of Coltec. As a result of the spin-off, we will not be able to join
with Coltec in any consolidated, combined, or unitary tax returns for taxable
periods ending after the effective time of the spin-off. Consequently, for
federal and state income tax purposes, taxable income or losses, and other tax
attributes of Goodrich for taxable periods ending after the effective time of
the spin-off generally cannot offset, or be offset by, taxable income or losses
and other tax attributes of Coltec.
Additionally, the present Goodrich tax allocation policy requires Goodrich
and Coltec to pay each other for tax benefits resulting from tax attributes
which cannot be utilized currently by the group to which such attributes are
attributable on a stand- alone basis but which can be utilized on a
consolidated, combined, or unitary basis. After the spin-off, if we generate
losses or other tax attributes, generally, we would benefit from those losses or
other tax attributes only if and when we generated sufficient taxable income in
future years to utilize those losses or other tax attributes on a stand-alone
basis. Such a delay will affect cash flows, which may require reduction or
postponement of capital expenditures or acquisitions.
12
THE SPIN-OFF MAY BECOME TAXABLE UNDER SECTION 355(E) OF THE INTERNAL REVENUE
CODE IF 50% OR MORE OF GOODRICH'S SHARES OR ENPRO'S SHARES ARE ACQUIRED AS PART
OF A PLAN.
The spin-off may become taxable to us pursuant to section 355(e) of the
Internal Revenue Code if 50% or more of either our shares or EnPro's shares are
acquired, directly or indirectly, as part of a plan or series of related
transactions that include the spin-off. If section 355(e) applies, we would be
required to pay a corporate tax based on the excess of the fair market value of
the shares distributed over our tax basis for such shares. The amount of such
tax would be materially greater if the spin-off were deemed to be a distribution
of Coltec's shares. If an acquisition occurs which results in the spin-off being
taxable under section 355(e), the tax sharing arrangements between Goodrich and
EnPro (described in this prospectus in "Certain Relationships and Related
Transactions -- Tax Matters Arrangements") will provide that the resulting
corporate tax liability will be borne by the entity, either Goodrich or EnPro,
with respect to which the acquisition has occurred.
WE MAY BECOME RESPONSIBLE FOR A CORPORATE TAX IF THE SPIN-OFF FAILS TO QUALIFY
AS A TAX-FREE TRANSACTION.
To the extent that a breach of a representation or covenant results in
corporate tax being imposed on us, EnPro will be responsible for the payment of
the corporate tax. If the spin-off fails to qualify as a tax-free transaction
through no fault of EnPro, the resulting corporate tax liability, if any, likely
will be borne by us pursuant to the tax sharing arrangements between us and
EnPro. See the discussion in "Certain Relationships and Related
Transactions -- Tax Matters Arrangements".
RISKS RELATED TO NOT TENDERING IN THE EXCHANGE OFFER
If you choose not to exchange your old Coltec notes for new Goodrich notes
you will continue to hold notes of Coltec. Such a continuing investment would
involve various risks, including the following:
THE OLD COLTEC NOTES ARE EXPECTED TO BECOME LESS LIQUID.
Because we anticipate that most holders of the old Coltec notes will elect
to exchange their old Coltec notes, we expect that the liquidity of the markets,
if any, for any old Coltec notes remaining after the completion of the exchange
offer may be substantially limited. Any old Coltec notes tendered and exchanged
in the exchange offer will reduce the aggregate principal amount of the old
Coltec notes outstanding.
COLTEC WILL BE A SUBSTANTIALLY SMALLER COMPANY FOLLOWING THE SPIN-OFF, WITH
SUBSTANTIALLY LESS CASH FLOW AVAILABLE TO PAY DEBT SERVICE ON THE OLD COLTEC
NOTES.
Prior to the spin-off, Coltec's aerospace business will assume all
intercompany balances outstanding between Coltec and Goodrich and Coltec will
then transfer to Goodrich by way of a dividend all of the assets, liabilities
and operations of Coltec's aerospace business, including these assumed balances.
As a result, the cash flow from the Coltec aerospace business will no longer be
available to pay interest or principal on the old Coltec notes.
COLTEC MAY INCUR GREATER COSTS AS AN INDEPENDENT COMPANY THAN IT DID WHEN ITS
BUSINESS WAS A PART OF GOODRICH.
Prior to the spin-off, Coltec took advantage of Goodrich's size and
purchasing power in procuring certain goods, services such as insurance and
health care benefits and technology such as computer software licenses. Coltec
also relied on Goodrich to provide various corporate functions. As a subsidiary
of EnPro, Coltec may be unable to obtain these goods, services and technology at
prices and on terms as favorable to Coltec as those Coltec obtained prior to the
spin-off, which could cause Coltec's profitability to decrease.
13
AS PART OF THE SPIN-OFF, COLTEC WILL RETAIN AND INCUR DEBT, WHICH WILL SUBJECT
COLTEC TO VARIOUS RESTRICTIONS AND INCREASED INTEREST COSTS AND MAY AFFECT
COLTEC'S PROFITABILITY. COLTEC MAY ALSO ELECT AND/OR NEED TO INCREASE ITS DEBT
IN THE FUTURE, WHICH COULD LIMIT ITS ABILITY TO MEET ITS OBLIGATIONS UNDER THE
OLD COLTEC NOTES.
Debt Retained or Incurred. Following the spin-off, some of Coltec's
current debt obligations and convertible trust preferred securities will remain
outstanding. In addition, Coltec may enter into a new revolving credit facility
or secure the obligations of EnPro and its affiliates. We expect that the
agreements relating to any revolving credit facility will impose limitations on
Coltec's and EnPro's corporate activities. These limitations could impede
Coltec's ability to respond to market conditions, address unanticipated capital
investments and/or take advantage of business opportunities.
Increase in Coltec's Cost of Capital. Goodrich's debt is currently rated
as investment grade. Coltec anticipates that both Coltec and EnPro will have a
lower credit rating; therefore, Coltec expects to have a higher cost of capital
for any debt it may incur in the future, which could decrease its profitability.
Ability to Increase Coltec's Debt and Raise Additional Capital. Coltec may
elect and/or need to increase its debt or raise additional capital in the
future. If Coltec's cash flow from operations is less than Coltec expects, or if
cash requirements of Coltec's affiliates to pay asbestos claims are more than
Coltec expects, Coltec may require more financing. However, debt or equity
financing may not be available to Coltec on terms acceptable to Coltec, if at
all. If Coltec incurs additional debt, the terms of the debt may give the
holders rights, preferences and privileges senior to those of holders of the old
Coltec notes, particularly in the event of a liquidation. The terms of the debt
may also impose restrictions on Coltec's operations. Also, regardless of the
terms of any subsequent debt or equity financing, Coltec may be limited in the
amount of its stock that it can issue because the issuance of its stock may
cause the spin-off to be a taxable event for Goodrich under Section 355(e) of
the Internal Revenue Code, and under a tax sharing arrangement between EnPro and
Goodrich, EnPro could be required to indemnify Goodrich for that tax. If Coltec
is unable to obtain needed capital, its ability to continue its operations will
be compromised.
CERTAIN OF COLTEC'S SUBSIDIARIES ARE DEFENDANTS IN ASBESTOS LITIGATION.
The historical business operations of two Coltec subsidiaries, Garlock
Sealing Technologies LLC and The Anchor Packing Company have resulted in a
substantial volume of asbestos litigation in which plaintiffs have alleged
personal injury or death as a result of exposure to asbestos fibers. Those
subsidiaries manufactured and/or sold industrial sealing products, predominately
gaskets, which contained encapsulated asbestos fibers. Although those
subsidiaries actively manage their exposure to asbestos litigation and their
relationships with insurance carriers through another Coltec subsidiary,
Garrison Litigation Management Group, Ltd., several risks and uncertainties may
result in potential liabilities to us in the future that could materially harm
Coltec's business, financial condition, income and cash flows. Those risks and
uncertainties include the following:
- the potential for a large volume of future asbestos claims to the extent
such claims are not covered by insurance because insurance coverage is,
or will be, depleted;
- the uncertainty of the per claim value of current and potential future
asbestos claims;
- the timing of payout of claims relative to recoveries of amounts covered
by insurance from our subsidiaries' insurance carriers and limitations
imposed on the amount that may be recovered in any given year;
- the financial viability of the subsidiaries' insurance carriers and their
reinsurance carriers, and the subsidiaries' ability to collect on claims
from them;
- an increase in litigation or other costs that are not covered by
insurance;
14
- the unavailability of any insurance for claims alleging first exposure to
asbestos after July 1, 1984; and
- bankruptcies of other defendants.
Potential liability for asbestos claims may reduce Coltec's ability to
retain and attract customers and quality personnel. To the extent insurance is
depleted or the payments required in any given year exceed the annual
limitations on insurance recoveries from carriers, Coltec's subsidiaries would
be required to fund these obligations from available cash, even if these amounts
are recoverable under these insurance policies in later years. This could reduce
their ability to use cash for other purposes, including growth of Coltec's
business, and harm Coltec's financial condition.
COLTEC HAS EXPOSURE TO SOME CONTINGENT LIABILITIES RELATING TO DISCONTINUED
OPERATIONS, WHICH COULD MATERIALLY HARM ITS FINANCIAL CONDITION, INCOME OR CASH
FLOWS IN ANY FISCAL PERIOD.
Coltec has some contingent liabilities related to discontinued operations
of its predecessors, including environmental liabilities and liabilities for
certain products and other matters. In some instances, Coltec has indemnified
others against those liabilities, and in other instances, Coltec has received
indemnities from third parties against those liabilities.
Under federal and state environmental laws, Coltec, or one of its
subsidiaries, has been named as a potentially responsible party at 17 sites
where the costs to it at each site are expected to exceed $100 thousand.
Investigations have been completed or are near completion for 14 of these sites
and are in progress at the other three sites. The majority of these sites
involve remediation projects at former operating facilities that have been sold
or closed and primarily deal with soil and groundwater contamination. Coltec
believes that any liability incurred for cleanup at these sites will be
satisfied over a number of years, and, in some cases, the costs will be shared
with other potentially responsible parties.
In addition, there is the potential for claims to arise relating to
products or other matters related to discontinued operations. Some of these
claims could seek substantial monetary damages. Specifically, Coltec may
potentially be subject to the liabilities related to the firearms manufactured
prior to 1990 by Colt Firearms, a former operation of Coltec, and for electrical
transformers manufactured prior to 1994 by Central Maloney, another former
Coltec operation. Coltec also has ongoing obligations with regard to workers
compensation and medical benefit matters associated with Crucible Materials
Corporation and Colt Firearms that relate to its periods of ownership of these
companies.
Coltec has insurance and reserves to address these liabilities. However, if
its insurance coverage is depleted or its reserves are not adequate,
environmental and other liabilities relating to discontinued operations could
materially harm its business, financial condition, profitability and cash flows.
15
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
We are making this offer in connection with the planned tax-free spin-off
of EnPro to our shareholders. This transaction, if and when completed, will
create two independent publicly traded companies, each focused on its own
customers, products and markets. Following the spin-off, Coltec will be a
subsidiary of EnPro. See "The Spin-Off," starting on page 26, for more
information about the spin-off. From a financial perspective, EnPro will include
substantially all the assets and liabilities of Goodrich's Engineered Industrial
Products segment, including the associated asbestos liabilities and related
insurance.
The exchange offer is not being made to, nor will we accept tenders for
exchange from, holders of old Coltec notes in any jurisdiction in which the
exchange offer or the acceptance of it would not be in compliance with the
securities or blue sky laws of such jurisdiction.
TERMS OF THE EXCHANGE
Upon the terms and subject to the conditions of the exchange offer, we will
accept any and all old Coltec notes validly tendered prior to the expiration
date unless such old Coltec notes are withdrawn in accordance with the
withdrawal right specified in "Withdrawal of Tenders" below. The date of
acceptance for exchange of the old Coltec notes, and completion of the exchange
offer, is the exchange date, which will be the first business day following the
expiration date. We will issue on, or promptly after, the exchange date an
aggregate principal amount of up to $300,000,000 of new Goodrich notes in
exchange for an equal principal amount of the outstanding old Coltec notes that
are tendered and accepted in connection with the exchange offer.
The new Goodrich notes issued in connection with the exchange offer will be
delivered on the earliest practicable date following the exchange date. Holders
may tender some or all of their old Coltec notes in connection with the exchange
offer. However, old Coltec notes may be tendered only in integral multiples of
$1,000.
TERMS OF NEW GOODRICH NOTES
The interest rate, term, payment dates, and redemption provisions of the
new Goodrich notes will be substantially identical to the terms of the old
Coltec notes. The new Goodrich notes will not contain terms with respect to
collateral or subsidiary guarantees, which have by their terms expired under the
old Coltec notes. A description of the terms of the new Goodrich notes and the
differences between the terms of the new Goodrich notes and the terms of the old
Coltec notes is included in this prospectus. See "Description of New Goodrich
Notes" and "Comparison of Terms of Notes." As of the date of this prospectus,
$300,000,000 aggregate principal amount of the old Coltec notes is outstanding.
METHOD OF EXCHANGE
In connection with the issuance of the old Coltec notes, we arranged for
the old Coltec notes to be issued in the form of global notes and transferable
in book-entry form through the facilities of The Depository Trust Company,
acting as depositary. Except as described under "Description of New Goodrich
Notes -- Book-Entry, Delivery and Form," the new Goodrich notes also will be
issued in the form of global notes registered in the name of DTC or its nominee
and each holder's interest in it will be transferable only in book-entry form
through DTC. See "Description of New Goodrich Notes -- Book-Entry, Delivery and
Form."
TENDER AND ACCEPTANCE
We will have accepted validly tendered old Coltec notes if and when we have
given oral or written notice to the exchange agent. The exchange agent will act
as agent for the tendering holders for the purposes of receiving the new
Goodrich notes from us. The date of acceptance for exchange of the old
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Coltec notes, the exchange date, will be the first business day following the
expiration date. The exchange agent will make the exchange on, or promptly
after, this exchange date, and as a result of this exchange the holders in whose
names the new Goodrich notes will be issuable upon exchange will be deemed to be
the holders of record of the new Goodrich notes.
If we do not accept any tendered old Coltec notes for exchange because:
- the old Coltec notes were not validly tendered pursuant to the procedures
for tendering; see "-- Procedures for Tendering";
- we determine in our reasonable discretion that any of the conditions to
the exchange offer have not been satisfied; see "-- Conditions to the
Exchange Offer";
- a holder has validly withdrawn a tender of old Coltec notes as described
under "-- Withdrawal of Tenders"; or
- we have, in our sole discretion, delayed or terminated the exchange
offer; see "-- Expiration Date; Extensions; Amendments";
as quickly as possible after the expiration date, we will cause a financial
institution that participates in DTC's book-entry transfer facility system to
make a book-entry delivery of the old Coltec notes which have been tendered into
the account from which they were originally transferred, without expense to the
tendering holders. See "-- Procedures for Tendering" for a more complete
description of how to tender your old Coltec notes.
Old Coltec notes which are not tendered for exchange or are tendered but
not accepted in connection with the exchange offer will remain outstanding and
be entitled to the benefits of the old Coltec indenture.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date for the exchange offer is , 2002, unless
extended by us in our sole discretion, in which case the term "expiration date"
means the latest date and time to which the exchange offer is extended.
We reserve the right, in our sole discretion:
- to delay, to extend or to terminate the exchange offer if, in our
reasonable judgment, any of the conditions described below are not
satisfied, by giving oral or written notice of the delay, extension or
termination to the exchange agent; or
- to amend the terms of the exchange offer in any manner.
If we amend the exchange offer in a manner that we consider material, we
will:
- disclose the amendment by means of a prospectus supplement; and
- extend the exchange offer for a period of five to ten business days,
depending upon the significance of the amendment and the manner of
disclosure to the registered holders, if the exchange offer would
otherwise expire during that five to ten business day period.
If we determine to make a public announcement of any delay, extension,
amendment or termination of the exchange offer, we will do so by making a timely
release through PRNewswire.
CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, we will not be required to
accept for exchange any old Coltec notes and may terminate, amend, or extend the
exchange offer before the acceptance of the old Coltec notes, if, on or prior to
the expiration date:
- there has been any action threatened, pending or taken, or approval
withheld, or any statute, rule, regulation, judgment, order or injunction
threatened, proposed, sought, promulgated, enacted,
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entered, amended, enforced or deemed to be applicable to the exchange
offer or Goodrich or any of its subsidiaries, by any court or any person,
authority, governmental agency or tribunal that, in Goodrich's judgment,
would or might, directly or indirectly, (a) make the acceptance for
exchange of, or the exchange of, some or all of the old Coltec notes
illegal or otherwise restrict or prohibit completion of the tender offer,
(b) delay or restrict the ability of Goodrich, or render Goodrich unable,
to accept for exchange, or exchange some or all of, the old Coltec notes,
(c) materially impair the contemplated benefits of the tender offer to
Goodrich, or (d) materially and adversely affect the business, condition
(financial or other), income, operations or prospects of Goodrich and its
subsidiaries, taken as a whole, or otherwise materially impair in any way
the contemplated future conduct of the business of Goodrich or any of its
subsidiaries;
- there has occurred (a) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange
or in the over-the-counter market in the United States or the European
Union, (b) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or the European Union,
(c) the commencement of a war, armed hostilities or other international
or national calamity (or, with regard to the conflict in Afghanistan, any
material escalation or expansion of such conflict) directly or indirectly
involving the United States or any of its territories, (d) any limitation
(whether or not mandatory) by any governmental, regulatory or
administrative agency or authority on, or any event, or any disruption or
adverse change in the financial or capital markets generally or the
market for loan syndications in particular, that, in our reasonable
judgment, might affect the extension of credit by banks or other lending
institutions in the United States, (e) any change in the general
political, market, economic or financial conditions in the United States
or abroad that could, in our reasonable judgment, have a material adverse
effect on our (or our subsidiaries') business, condition (financial or
other), income, operations or prospects, taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of our (or
our subsidiaries') business, (f) in the case of any of the foregoing
existing at the time of the commencement of the exchange offer, a
material acceleration or worsening thereof;
- either the Dow Jones Industrial Average or the Standard and Poor's Index
of 500 Industrial Companies, as measured as of the close of regular
trading on the expiration date, has declined by an amount greater than 10%
from the close of business on , 2002;
- any change has occurred in the business, condition (financial or other),
income, operations or prospects of Goodrich and its subsidiaries, taken
as a whole, that would materially impair in any way the contemplated
future conduct of the business of Goodrich or any of its subsidiaries;
- the exchange offer would impair or interfere with, in any material
respect, the spin-off, or other contemplated financing, acquisition,
disposition, corporate reorganization or other similar material corporate
transaction involving us or any of our subsidiaries; or
- we determine, in our reasonable judgment, that it would be advantageous
for Goodrich not to proceed with its plans to conduct the spin-off.
The conditions listed above are for our sole benefit and may be asserted by
us regardless of the circumstances giving rise to any of these conditions. On or
prior to the expiration date, we may waive these conditions in our sole
discretion in whole or in part at any time and from time to time. The failure by
us at any time to exercise any of the above rights will not be considered a
waiver of that right, and these rights will be considered to be ongoing rights
which may be asserted, prior to the expiration date, at any time and from time
to time.
If we determine in our reasonable discretion that any of the conditions are
not satisfied, we may:
- refuse to accept any old Coltec notes, return all tendered old Coltec
notes the tendering holders, and terminate the exchange offer;
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- extend the exchange offer and retain all old Coltec notes tendered before
the expiration of the exchange offer, subject, however, to the rights of
holders to withdraw these old Coltec notes (see "-- Withdrawal of
Tenders" below); or
- waive unsatisfied conditions relating to the exchange offer and accept
all properly tendered old Coltec notes that have not been withdrawn.
PROCEDURES FOR TENDERING
Any beneficial owner whose old Coltec notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on behalf of the beneficial owner.
VALID TENDER OF BOOK-ENTRY NOTES:
To tender old Coltec notes held in book-entry form, a holder of old Coltec
notes must cause a financial institution that participates in DTC's book-entry
transfer facility system to make a book-entry delivery of the old Coltec notes.
Pursuant to this delivery, DTC will credit the old Coltec notes into the
exchange agent's account. Unless the transferring financial institution causes
delivery to the exchange agent, and the exchange agent receives timely
confirmation of the book-entry transfer of the old Coltec notes into the
exchange agent's account at DTC, prior to 5:00 p.m., New York City time, on the
expiration date, the transfer will not constitute delivery to the exchange
agent. In addition, although delivery of old Coltec notes held in book-entry
form may be effected through book-entry transfer into the exchange agent's
account at DTC, a holder of old Coltec notes held in book-entry form must also,
prior to 5:00 p.m., New York City time, on the expiration date, cause DTC to
transmit to the exchange agent a message stating that the tendering holder has
expressly acknowledged receipt of, and agreement to be bound by and held
accountable under, the letter of transmittal.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES WITHOUT
TIMELY CONFIRMATION TO THE EXCHANGE AGENT DOES NOT CONSTITUTE DELIVERY TO THE
EXCHANGE AGENT.
To receive confirmation of book-entry delivery, a holder should contact the
financial institution that made the book-entry delivery of the old Coltec notes.
In addition, to receive confirmation of valid tender of the old Coltec notes, a
holder should contact the exchange agent at the telephone number listed under
the caption "-- Exchange Agent."
A holder of old Coltec notes held in book-entry form may also tender
pursuant to the guaranteed delivery procedures described below.
The tender by a holder of old Coltec notes held in book-entry form by
delivery of an agent's message will constitute an agreement between us and the
holder in accordance with the terms and subject to the conditions set forth in
this prospectus and in the letter of transmittal. The total principal amount of
old Coltec notes delivered to the exchange agent in book-entry form will be
deemed to have been tendered.
VALID TENDER OF CERTIFICATED NOTES:
To tender any old Coltec notes held in certificated form, a holder must
mail or otherwise deliver to the exchange agent at its addresses listed under
the caption "Exchange Agent" prior to 5:00 p.m., New York City time, on the
expiration date:
- a completed, signed and dated letter of transmittal (or a facsimile),
with the required signature guarantees; and
- certificates representing the old Coltec notes held in certificated form
and any other required documents.
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To receive confirmation of valid tender of any old Coltec notes held in
certificated form, a holder should contact the exchange agent at the telephone
number listed under the caption "-- Exchange Agent."
A holder of old Coltec notes held in certificated form may also tender
pursuant to the guaranteed delivery procedures described below.
Holders should receive copies of the letter of transmittal with this
prospectus. A holder may obtain additional copies of the letter of transmittal
for the old Coltec notes from the exchange agent at its offices listed under the
caption "-- Exchange Agent."
The tender by a holder of old Coltec notes will constitute an agreement
between us and the holder in accordance with the terms and subject to the
conditions set forth in this prospectus and in the letter of transmittal. If a
holder tenders less than all of the old Coltec notes held by that holder, that
tendering holder should fill in the applicable box of the letter of transmittal.
The total principal amount of old Coltec notes delivered to the exchange agent
by physical delivery will be deemed to have been tendered unless otherwise
indicated in the letter of transmittal.
If the letter of transmittal or any old Coltec notes or bond powers are
signed or endorsed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, those people should so indicate when signing, and
unless waived by us, submit to the exchange agent evidence satisfactory to us of
their authority to act in that capacity with the letter of transmittal.
THE METHOD OF DELIVERY OF OLD COLTEC NOTES AND THE LETTER OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND
RISK OF THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, HOLDERS SHOULD ALLOW
SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. NO LETTER OF TRANSMITTAL OF OLD COLTEC NOTES SHOULD BE SENT TO US. HOLDERS
MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES
OR NOMINEES TO EFFECT THE TENDERS FOR THEM.
SIGNATURES, SIGNATURE GUARANTEES, ENDORSEMENTS:
If the letter of transmittal is signed by the record holder(s) of the old
Coltec notes being tendered, the signature must correspond with the name(s)
written on the face of the old Coltec notes without alteration, enlargement or
any change whatsoever. If the letter of transmittal is signed by a participant
in DTC, the signature must correspond with the name as it appears on the
security position listing as the holder of the old Coltec notes.
A signature on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible guarantor institution within the meaning of Rule
17Ad-15 under the Exchange Act, unless the old Coltec notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Payment Instructions" or "Special Delivery Instructions" on the letter of
transmittal; or
- for the account of an eligible guarantor institution.
In the event that signatures on a letter of transmittal or a notice of
withdrawal are required to be guaranteed, the guarantee must be by:
- a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc.;
- a commercial bank or trust company having an office or correspondent in
the United States; or
- an "eligible guarantor institution."
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If the letter of transmittal is signed by a person other than the
registered holder of any old Coltec notes, the old Coltec notes must be endorsed
by the registered holder or accompanied by a properly completed bond power,
signed or endorsed in blank by the registered holder.
DETERMINATION OF VALIDITY, RECEIPT, ACCEPTANCE:
We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance and withdrawal of tendered old Coltec
notes in our sole discretion. We reserve the absolute right to reject any and
all old Coltec notes not properly tendered or any old Coltec notes whose
acceptance by us would, in the opinion of our counsel, be unlawful. We also
reserve the right to waive any defects, irregularities or conditions of tender
as to any particular old Coltec notes either before or after the expiration
date. Our interpretation of the terms and conditions of the exchange offer
(including the instructions in the letter of transmittal) will be final and
binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
old Coltec notes must be cured within a time period we will determine. Although
we intend to request the exchange agent to notify holders of defects or
irregularities relating to tenders of old Coltec notes, neither we, the exchange
agent, the dealer manager, nor any other person will have any duty or incur any
liability for failure to give that notification. Tenders of old Coltec notes
will not be considered to have been made until any defects or irregularities
have been cured or waived. Any old Coltec notes received by the exchange agent
that are not properly tendered and as to which the defects or irregularities
have not been cured or waived will be returned by the exchange agent to the
tendering holders, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
In addition, we reserve the right, as described above under the caption
"-- Conditions to the Exchange Offer," to terminate the exchange offer.
A tender will be deemed to have been received as of the date when the
exchange agent receives:
- the tendering holder's duly signed letter of transmittal accompanied by
old Coltec notes;
- a timely confirmation of book-entry transfer of old Coltec notes into the
exchange agent's account at DTC with a message from DTC stating that the
tendering holder has expressly acknowledged receipt of, and agreement to
be bound by and held accountable under, the letter of transmittal; or
- a notice of guaranteed delivery from an eligible institution.
If fewer than all of the old Coltec notes held in certificated form evidenced by
a submitted certificate are to be tendered, the tendering holder(s) should fill
in the aggregate principal amount of the old Coltec notes to be tendered in the
letter of transmittal. A newly reissued certificate for the old Coltec notes
held in certificated form submitted but not tendered will be sent to the holder
as soon as practicable after the expiration date. All of the old Coltec notes
held in certificated form delivered to the exchange agent will be deemed to have
been tendered unless otherwise clearly indicated.
Issuances of new Goodrich notes in exchange for old Coltec notes tendered
pursuant to a notice of guaranteed delivery by an eligible institution will be
made only against:
- delivery to the exchange agent of the letter of transmittal and any other
required documents; and
- receipt by the exchange agent of the tendered old Coltec notes or a
timely confirmation of a book-entry transfer of old Coltec notes into the
exchange agent's account at DTC.
We will not accept for exchange old Coltec notes which have been tendered
if:
- the old Coltec notes were not validly tendered pursuant to the procedures
for tendering;
- we determine in our reasonable discretion that any of the conditions to
the exchange offer have not been satisfied (see "-- Conditions to the
Exchange Offer");
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- a holder has validly withdrawn a tender of old Coltec notes as described
under "-- Withdrawal of Tenders"; or
- we have delayed or terminated the exchange offer (see "-- Expiration
Date; Extensions; Amendments").
GUARANTEED DELIVERY PROCEDURES
A holder who wishes to tender its old Coltec notes and:
- whose old Coltec notes are not immediately available;
- who cannot deliver the holder's old Coltec notes, the letter of
transmittal or any other required documents to the exchange agent before
the expiration date; or
- who cannot complete the procedures for book-entry transfer before the
expiration date,
may effect a tender if:
- the holder makes the tender through an eligible guarantor institution
within the meaning of Rule 17Ad-15 under the Exchange Act;
- before the expiration date, the exchange agent receives from the eligible
guarantor institution a properly completed and duly executed notice of
guaranteed delivery substantially in the form accompanying the letter of
transmittal, by facsimile transmission, mail or hand delivery including:
- the name and address of the holder,
- the certificate number(s) of the old Coltec notes if they are held in
certificated form,
- the principal amount of old Coltec notes tendered,
- a statement that the tender is being made, and
- a guarantee that the eligible guarantor institution will deliver to the
exchange agent, within three New York Stock Exchange trading days after
the expiration date, a properly completed and duly executed letter of
transmittal, or facsimile thereof, a confirmation of book-entry transfer
of the old Coltec notes or the certificate(s) representing the old
Coltec notes held in certificated form in proper form for transfer, and
any other documents required by the letter of transmittal; and
- the eligible guarantor institution mails or otherwise delivers to the
exchange agent within three New York Stock Exchange trading days after
the expiration date a properly completed and executed letter of
transmittal, or facsimile thereof, as well as a confirmation of
book-entry transfer of the old Coltec notes or the certificate(s)
representing all tendered old Coltec notes held in certificated form in
proper form for transfer, and all other documents required by the letter
of transmittal.
A holder or eligible guarantor institution may obtain additional forms for
the notice of guaranteed delivery from the exchange agent at its offices listed
under "-- Exchange Agent."
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders may withdraw their
tenders of old Coltec notes at any time prior to 5:00 p.m., New York City time,
on the expiration date.
To withdraw a tender of old Coltec notes in connection with the exchange
offer, a holder must mail or otherwise deliver to the exchange agent at its
offices listed under "-- Exchange Agent" a written notice
22
of withdrawal by mail or by facsimile transmission prior to 5:00 p.m., New York
City time, on the expiration date of the exchange offer. This notice of
withdrawal must:
- specify the name of the person who deposited the old Coltec notes to be
withdrawn;
- identify the old Coltec notes to be withdrawn (including the principal
amount of the old Coltec notes and the certificate number or numbers of
the old Coltec notes tendered in certificated form);
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the old Coltec notes were tendered,
with any required signature guarantees, or be accompanied by documents of
transfer sufficient to have the trustee register the transfer of the old
Coltec notes into the name of the person withdrawing the tender; and
- specify the name in which any of the old Coltec notes are to be
registered, if different from that of the depositor.
If old Coltec notes have been tendered pursuant to the procedures of
book-entry transfer described above under "-- Procedures for Tendering," any
notice of withdrawal must specify the name and number of the account at DTC's
book-entry transfer facility to be credited with the withdrawn old Coltec notes
and otherwise comply with the procedures of that facility.
A holder may obtain a form of the notice of withdrawal from the exchange
agent at its offices listed under "-- Exchange Agent."
We will be the final arbiters of all questions as to the validity, form and
eligibility (including time of receipt) of all withdrawal notices. Any old
Coltec notes properly withdrawn will be considered not to have been validly
tendered for purposes of the exchange offer and no new Goodrich notes will be
issued unless the old Coltec notes withdrawn are validly re-tendered. Any old
Coltec notes which have been tendered but which are not accepted for exchange or
which are withdrawn will be returned to the holder without cost to that holder
(or, in the case of the old Coltec notes tendered by book-entry transfer into
the exchange agent's account at DTC's book-entry transfer facility pursuant to
the book-entry transfer procedures described above under "-- Procedures for
Tendering," these old Coltec notes will be credited to an account maintained
with the book-entry transfer facility for the old Coltec notes) as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. Properly withdrawn old Coltec notes may be retendered by following one of
the procedures described above under the caption "-- Procedures for Tendering"
at any time prior to the expiration date. Old Coltec notes that have been
accepted for exchange by Goodrich may not be withdrawn.
EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent in connection
with the exchange offer. Questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal, the form
of notice of guaranteed delivery or the notice of withdrawal should be directed
to the exchange agent, by one of the following methods:
- if by mail, to The Bank of New York, 15 Broad Street, Corporate Trust
Department, 16th Floor, New York, NY 10286, Attn: Mr. Kin Lau;
- if by overnight mail or courier, to The Bank of New York, 15 Broad
Street, Corporate Trust Department, 16th Floor, New York, NY 10286 (to
confirm by telephone, call (212) 235-2358 Attn: Kin Lau);
- if by hand, to The Bank of New York, 15 Broad Street, Corporate Trust
Department, Ground Floor, Attn: Mr. Kin Lau, Reorganization Section;
- if by fax, to (212) 235-2261; or
- if by phone, to Mr. Kin Lau at phone number (212) 235-2358.
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INFORMATION AGENT
Mellon Investor Services LLC has been appointed as the information agent
for the exchange offer and will receive customary compensation for its services.
Questions concerning exchange procedures and requests for additional copies of
this prospectus or the letter of transmittal should be directed to the
information agent at the address and telephone number provided on the back cover
page of this prospectus. Holders of old Coltec notes may also contact their
commercial bank, broker, dealer, trust company or other nominee for assistance
concerning the exchange offer.
DEALER MANAGER
We have retained Salomon Smith Barney Inc. to act as dealer manager in
connection with the exchange offer. We will pay a customary fee to the dealer
manager for soliciting the exchange of old Coltec notes in the exchange offer,
which fee will be on the aggregate principal amount of the old Coltec notes. We
will also reimburse the dealer manager for its reasonable out-of-pocket
expenses. The obligations of the dealer manager to perform this function is
subject to certain conditions. We have agreed to indemnify the dealer manager
against certain liabilities, including certain liabilities under federal
securities laws. Questions regarding the terms of the exchange offer may be
directed to the dealer manager at the address and telephone number provided on
the back cover page of this prospectus.
From time to time, the dealer manager has provided us with investment
banking and other services for customary compensation.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders pursuant to the exchange
offer including the dealer manager fees. We will not make any payment to
brokers, dealers or others soliciting acceptances of the exchange offer. We will
pay our other expenses to be incurred in connection with the exchange offer,
including the fees and expenses of the exchange agent, the information agent,
and the dealer manager. Holders who tender old Coltec notes in connection with
the exchange offer will not be required to pay any fee or commission to the
dealer manager. If, however, a holder who tenders old Coltec notes in connection
with the exchange offer handles its transactions through a broker, dealer,
commercial bank, trust company, or other institution, that holder may be
required to pay brokerage commissions or fees in connection with the
transaction.
Holders who tender their old Coltec notes for exchange will not be
obligated to pay any transfer taxes unless:
- new Goodrich notes are to be delivered to, or issued in the name of, any
person other than the registered holder of the old Coltec notes tendered;
or
- tendered old Coltec notes are registered in the name of any person other
than the person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of old
Coltec notes in connection with the exchange offer.
If satisfactory evidence of payment of transfer taxes or exemption from
them is not submitted with the letter of transmittal, the amount of any
applicable transfer taxes will be billed directly to the tendering holder.
ACCOUNTING TREATMENT
The new Goodrich notes will be recorded in our accounting records at the
same carrying value as the old Coltec notes as reflected in our consolidated
accounting records on the date of the exchange. Any gains/losses incurred as a
result of the exchange offer, as well as all expenses incurred by us will be
charged against our earnings in accordance with generally accepted accounting
principles.
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CONSEQUENCES OF FAILURES TO PROPERLY TENDER OLD COLTEC NOTES IN THE EXCHANGE
OFFER
Issuance of the new Goodrich notes in exchange for the old Coltec notes
under the exchange offer will be made only after timely receipt by the exchange
agent of such old Coltec notes, a properly completed and duly executed letter of
transmittal and all other required documents. Therefore, holders desiring to
tender old Coltec notes in exchange for new Goodrich notes should allow
sufficient time to ensure timely delivery. We are under no duty to give
notification of defects or irregularities of tenders of old Coltec notes for
exchange.
To the extent that old Coltec notes are tendered and accepted in connection
with the exchange offer, any trading markets for the remaining old Coltec notes
could be adversely affected. See "Risk Factors -- Risks Related to Not Tendering
in the Exchange Offer."
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THE SPIN-OFF
GENERAL
The Goodrich board of directors has approved in principle a spin-off that
would result in Goodrich becoming two independent, publicly traded companies:
(a) Goodrich, a leading worldwide supplier of aerospace components,
systems and services; and
(b) EnPro, a leading provider of engineered industrial products for
the processing and general manufacturing industries.
ACTIONS TO BE TAKEN PRIOR TO THE SPIN-OFF
Prior to the spin-off, Goodrich owned and operated both an aerospace
business, part of which was operated by Coltec, and an engineered industrial
products business, all of which was operated by Coltec. Prior to the spin-off,
Coltec will transfer its aerospace business to Goodrich and Coltec will become a
subsidiary of EnPro. Prior to this transfer, Coltec's aerospace business will
assume all intercompany balances currently outstanding between Coltec and its
subsidiaries, on the one hand, and Goodrich and its subsidiaries, on the other
hand. After the spin-off is completed, EnPro will own and operate all of the
former engineered industrial products business, through Coltec, and Goodrich
will continue to own and operate the aerospace business, including the aerospace
business previously owned and operated by Coltec.
MANNER OF EFFECTING THE SPIN-OFF
The general terms relating to the spin-off, including the conditions to the
consummation of the spin-off, will be set forth in a distribution agreement
between Goodrich and EnPro and are described in more detail in "Certain
Relationships and Related Transactions" beginning on page 55. Under that
distribution agreement, provided that these conditions are met, the spin-off
will be effective at 11:59 p.m. on the distribution date specified in the
agreement. No vote of Goodrich shareholders is required or will be sought in
connection with the spin-off.
REASONS FOR THE SPIN-OFF
Goodrich's board of directors has determined that the separation of its
engineered industrial products business and its aerospace business is in the
best interests of Goodrich and its shareholders because the spin-off will
provide the following key benefits:
- greater strategic focus for each management's efforts and financial
resources;
- increased speed and responsiveness in management decision making and
resource allocation;
- direct and differentiated access to capital markets; and
- enhanced investor choices by offering investment opportunities in two
separate highly focused companies.
GREATER STRATEGIC FOCUS FOR MANAGEMENT'S EFFORTS AND FINANCIAL RESOURCES
Historically, Goodrich's engineered industrial products business has
exhibited different financial and operating characteristics than its aerospace
business. Additionally, Goodrich's aerospace business has a smaller number of
larger customers, while its engineered industrial products business has a larger
number of smaller customers. Because Goodrich expects these differences to
continue in the future, it believes that its engineered industrial products
business and its aerospace business will require inherently different strategies
in order to maximize their long-term value. Consequently, Goodrich has
determined that its current structure may not be the most effective to design
and implement the distinct strategies necessary to operate its engineered
industrial products business and its aerospace business successfully in a manner
that maximizes the long-term value of each.
26
Both Goodrich and EnPro expect to have increased management attention and
better use of financial resources as a result of our having board and management
teams solely focused on their respective businesses. Goodrich believes that it
will benefit from its management's ability to focus on the management and
operation of its aerospace business.
INCREASED SPEED AND RESPONSIVENESS
Both Goodrich and EnPro believe that their respective businesses will be
able to make decisions more quickly, deploy resources more rapidly and
efficiently and operate with more agility than either business could as part of
a combined organization. The spin-off will provide Goodrich and EnPro with the
opportunity to adopt resource allocation and acquisition criteria policies that
best reflect the cash flow, investment requirements, competitive environment,
corporate strategy and business objectives of their respective businesses. In
particular, the spin-off will give both Goodrich and EnPro flexibility to
allocate resources, including both capital and management time and attention. In
addition, for Goodrich and potentially in the long term for EnPro, the spin-off
will enable each company to pursue potential transactions in its respective
industries, including acquisitions and joint ventures that each company believes
is strategically or financially desirable, without being required to satisfy the
acquisition criteria of the other company. In addition, Goodrich and EnPro
expect the spin-off to enhance each company's responsiveness to customers and
companies with whom each company has strategic relationships, enhance
competitiveness in each company's respective industries and enhance success in
each company's respective product initiatives.
DIRECT AND DIFFERENTIATED ACCESS TO CAPITAL MARKETS
As an independent company, EnPro will be able to access the capital markets
directly to issue debt or equity securities without regard to constraints on the
type of capital EnPro might otherwise be subject to in a combined company. After
the distribution, EnPro will no longer need to compete with Goodrich's other
businesses for limited capital resources. Although potential acquisitions are
only part of EnPro's long-term strategy, EnPro expects the distribution to
enhance EnPro's ability to eventually pursue acquisitions and other investment
opportunities by:
- providing differentiated access to the capital markets for such potential
transactions; and
- allowing for potential target companies to receive, as consideration in
an acquisition, stock in a corporation that is focused solely on the
industry in which the target operates.
Accordingly, EnPro will be able to create more focused acquisition
strategies that meet the different needs of its business.
ENHANCED INVESTOR CHOICES BY OFFERING INVESTMENT OPPORTUNITIES IN SEPARATE
ENTITIES
After the distribution, investors should be better able to evaluate the
financial performances of Goodrich and EnPro, as well as their respective
strategies within the context of their respective industries, thereby enhancing
the likelihood that they will achieve appropriate market valuations. As a
result, management of both companies will be able to adjust goals and evaluate
strategic opportunities in light of investor expectations within their
respective industries, without undue attention to investor expectations in other
industries. In addition, each company will be able to focus its public relations
efforts on cultivating its own separate identity.
27
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the new Goodrich
notes under the exchange offer. In consideration for issuing the new Goodrich
notes as contemplated in this prospectus, we will receive old Coltec notes in
like quantities. To the extent that any old Coltec notes remain outstanding
following completion of the exchange offer, they remain obligations of Coltec.
With regard to any old Coltec notes that are surrendered by the holders for
exchange in the exchange offer, Goodrich plans to sell to Coltec a portion of
those notes, at which point Coltec plans to cancel them. The purchase will be
financed through an intercompany loan from Goodrich to Coltec. Any remaining old
Coltec notes surrendered for exchange and not purchased by Coltec will be
contributed by Goodrich to EnPro, and those notes will remain an outstanding
obligation of Coltec to EnPro.
28
GOODRICH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial statements reported below
consist of unaudited pro forma consolidated statements of income for the year
ended December 31, 2001 and an unaudited pro forma consolidated balance sheet as
of December 31, 2001. The unaudited pro forma consolidated financial statements
should be read in conjunction with "Information About Coltec -- Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
Goodrich's historical consolidated financial statements and the related notes
incorporated by reference into this prospectus. The following unaudited pro
forma consolidated financial statements have been prepared giving effect to the
following transactions as if they had occurred as of December 31, 2001 for the
unaudited pro forma consolidated balance sheet and as of January 1, 2001 for the
unaudited pro forma consolidated statement of income:
- the spin-off; and
- the exchange of all of the old Coltec notes for the new Goodrich notes.
The unaudited pro forma consolidated financial statements included in this
prospectus have been derived from Goodrich's consolidated financial statements
incorporated by reference into this prospectus and do not purport to represent
what Goodrich's financial condition and results of operations actually would
have been had the spin-off and related transactions and events occurred on the
dates indicated or to project our financial performance for any future period.
29
GOODRICH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2001
-------------------------------------
HISTORICAL ADJUSTMENT PRO FORMA
---------- ---------- ---------
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE AMOUNTS)
Sales...................................................... $4,184.5 $ $4,184.5
Operating costs and expenses:
Cost of sales............................................ 3,127.6 3,127.6
Selling and administrative costs......................... 565.0 565.0
Merger-related and consolidation costs................... 107.3 107.3
-------- --------
3,799.9 3,799.9
-------- --------
Operating income........................................... 384.6 384.6
Interest expense........................................... (107.8) (107.8)
Interest income............................................ 24.1 24.1
Other income (expense), net................................ (19.2) (19.2)
-------- --------
Income from continuing operations before income taxes and
distributions on trust preferred securities.............. 281.7 281.7
Income tax expense......................................... (94.3) (94.3)
Distributions on trust preferred securities................ (10.5) (10.5)
-------- --------
Income from continuing operations.......................... 176.9 176.9
Income from discontinued operations -- net of taxes........ 112.3 (20.9)(a) 91.4
-------- ------- --------
Net income................................................. $ 289.2 $ (20.9) $ 268.3
======== ======= ========
Basic earnings per share:
Continuing operations.................................... $ 1.72 $ 1.72
Net income............................................... $ 2.80 $ 2.60
Diluted earnings per share(b):
Continuing operations.................................... $ 1.65 $ 1.70
Net income............................................... $ 2.76 $ 2.58
Average shares used in computing earnings per share (in
millions)(b):
Basic.................................................... 103.1 103.1
Diluted.................................................. 106.9 104.0
See Notes to Unaudited Pro Forma Consolidated Financial Statements
30
GOODRICH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
--------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(DOLLARS IN MILLIONS,
EXCEPT SHARE AND PER SHARE AMOUNTS)
ASSETS
Current Assets
Cash and cash equivalents................................. $ 85.8 $ $ 85.8
Accounts and notes receivable............................. 570.4 -- 570.4
Inventories............................................... 841.5 -- 841.5
Deferred income taxes..................................... 112.9 -- 112.9
Prepaid expenses and other assets......................... 26.2 -- 26.2
Net assets of discontinued operations..................... 284.5 (284.5)(a) --
-------- ------- --------
Total Current Assets.................................... 1,921.3 (284.5) 1,636.8
Property, plant and equipment............................... 955.5 -- 955.5
Prepaid pension............................................. 238.7 -- 238.7
Goodwill.................................................... 747.3 -- 747.3
Identifiable intangible assets.............................. 138.8 -- 138.8
Payment-in-kind notes receivable............................ 168.4 -- 168.4
Other assets................................................ 468.1 -- 468.1
-------- ------- --------
Total Assets............................................ $4,638.1 $(284.5) $4,353.6
-------- ------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt........................................... $ 113.3 $ -- $ 113.3
Accounts payable.......................................... 396.6 -- 396.6
Accrued expenses.......................................... 523.6 523.6
Income taxes payable...................................... 119.2 119.2
Current maturities of long-term debt...................... 5.9 -- 5.9
-------- ------- --------
Total Current Liabilities............................... 1,158.6 1,158.6
Long-term debt.............................................. 1,307.2 1,307.2
Pension obligations......................................... 155.5 -- 155.5
Postretirement benefits other than pensions................. 320.1 -- 320.1
Deferred income taxes....................................... 13.9 -- 13.9
Other non-current liabilities............................... 196.4 -- 196.4
Commitments and contingent liabilities...................... -- -- --
Mandatorily redeemable QUIPS................................ 125.0 -- 125.0
Shareholders' Equity
Common stock, par value $5 per share, 115,144,771 shares
issued.................................................. 575.7 575.7
Additional paid in capital................................ 973.5 973.5
Income retained in the business........................... 333.7 (284.5)(a) 49.2
Accumulated other comprehensive income.................... (110.1) (110.1)
Unearned portion of restricted stock...................... (0.6) (0.6)
Common stock held in treasury............................. (410.8) (410.8)
-------- ------- --------
Total Shareholders' Equity.............................. 1,361.4 (284.5) 1,076.9
-------- ------- --------
Total Liabilities and Shareholders' Equity.............. $4,638.1 $(284.5) $4,353.6
======== ======= ========
See Notes to Unaudited Pro Forma Consolidated Financial Statements
31
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(a) Adjustment reflects the distribution of the Company's Engineered
Industrial Products business to shareholders.
(b) The pro forma number of weighted average shares outstanding used to
compute pro forma diluted earnings per share excludes 2.9 million potential
common shares for assumed conversions of convertible preferred securities as
these securities were issued by Coltec and will remain obligations of Coltec
subsequent to the distribution.
NOTE: Goodrich intends to make an offer to exchange the old Coltec notes
for debt securities of Goodrich having similar terms. For purposes of the pro
forma consolidated financial statements we have assumed that this offer is fully
subscribed. Since the new notes will have the same financial terms as the old
notes, no pro forma adjustment is necessary.
32
COLTEC INDUSTRIES INC
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma consolidated financial statements reported below
consist of an unaudited pro forma consolidated statement of income for the year
ended December 31, 2001 and an unaudited pro forma consolidated balance sheet as
of December 31, 2001. The unaudited pro forma consolidated financial statements
should be read in conjunction with "Information About Coltec -- Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
Coltec's historical consolidated financial statements and the related notes
included elsewhere in this prospectus. The following unaudited pro forma
consolidated financial statements have been prepared giving effect to the
following transactions as if they had occurred as of December 31, 2001 for the
unaudited pro forma consolidated balance sheet and as of January 1, 2001 for the
unaudited pro forma consolidated statement of income:
- the spin-off;
- the transfer to Goodrich by way of a dividend of Coltec's aerospace
business;
- the exchange of $300 million of the old Coltec notes for new Goodrich
notes in the exchange offer;
- the sale by Goodrich to Coltec of $95.0 million of the old Coltec notes
and the cancellation of such notes subsequent to the exchange offer;
- the contribution by Goodrich to EnPro of $205.0 million of the old Coltec
notes, which notes will remain outstanding as an intercompany obligation
of Coltec to EnPro;
- the purchase by EnPro of call options on shares of Goodrich common stock;
and
- the Glacier acquisition by Coltec.
The unaudited pro forma consolidated financial statements included in this
prospectus have been derived from Coltec's consolidated financial statements
included elsewhere in this prospectus and do not purport to represent what
Coltec's financial condition and results of operations actually would have been
had the distribution and related transactions and events occurred on the dates
indicated or to project Coltec's financial performance for any future period.
Goodrich did not account for Coltec as a separate, stand-alone entity for the
periods presented.
The unaudited pro forma consolidated financial statements reflect pro forma
adjustments for the Glacier acquisition, which was completed in September 2001.
As of December 31, 2001, the final purchase price was subject to post-closing
settlements. In February 2002, Coltec received $4.8 million in satisfaction of
the final post-closing settlements, which is reflected as a pro forma
adjustment. The Glacier acquisition was accounted for under the purchase method
of accounting. Under this method of accounting, the identifiable assets and
liabilities of Glacier were adjusted to their estimated fair values based on
independent third-party appraisals. The unaudited pro forma consolidated
financial statements have been prepared using available information and the
assumptions described in the notes thereto.
Goodrich will pay substantially all costs directly related to the
distribution and accordingly these costs are not reflected in the historical
consolidated financial statements or as a pro forma adjustment. Prior to the
transfer of Coltec's aerospace business to Goodrich, the aerospace business will
assume all intercompany balances. As a result, there will be no intercompany
balances outstanding between Coltec and its subsidiaries, on the one hand, and
Goodrich and its subsidiaries, on the other hand. Further, the aerospace
business will also assume substantially all of Coltec's pension and
post-retirement obligations for retired and departed employees.
Following the distribution and until February 15, 2028, each TIDES will be
convertible, at the option of the holder, into a combination of 0.955248 of a
share of Goodrich common stock and 0.1910496 of a share of EnPro common stock,
subject to adjustment. Coltec has purchased call options on 2,865,744 shares of
Goodrich common stock at a price of $52.34 per share, which represents the total
Goodrich shares that would be required if all TIDES holders convert. One-third
of these call options expire in March 2005, and the remainder expire in March
2007. Until they expire, the call options will reduce Coltec's risk that the
cash required to finance conversions of the TIDES would exceed the $150 million
liquidation value.
33
COLTEC INDUSTRIES INC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2001
-------------------------------------
HISTORICAL ADJUSTMENT PRO FORMA
---------- ---------- ---------
(DOLLARS IN MILLIONS)
Sales....................................................... $628.3 $ 68.1(a) $696.4
Operating costs and expenses:
Cost of sales............................................. 445.7 41.2(a) 490.2
3.3(b)
Selling and administrative costs.......................... 126.1 6.9(c) 148.4
15.4(a)
Merger-related and consolidation costs.................... 3.8 -- 3.8
------ ------ ------
575.6 66.8 642.4
------ ------ ------
Operating income............................................ 52.7 1.3 54.0
Interest expense............................................ (26.9) 7.4(d) (19.5)
Interest income............................................. 0.5 -- 0.5
Other income (expense), net................................. (3.1) (17.9)(e) (21.0)
------ ------ ------
Income from continuing operations before income taxes and
distributions on convertible preferred securities of trust
(TIDES)................................................... 23.2 (9.2) 14.0
Income tax expense.......................................... (8.7) 3.5(f) (5.2)
Distributions on convertible preferred securities of trust
(TIDES)................................................... (7.9) -- (7.9)
------ ------ ------
Income from continuing operations........................... 6.6 (5.7) 0.9
Income from discontinued operations -- net of taxes......... 94.1 (94.1)(g) --
------ ------ ------
Net income.................................................. $100.7 $(99.8) $ 0.9
====== ====== ======
See Notes to Unaudited Pro Forma Consolidated Financial Statements
34
COLTEC INDUSTRIES INC
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2001
--------------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------------- ---------
(DOLLARS IN MILLIONS)
ASSETS
Current Assets
Cash and cash equivalents........................... $ 25.9 $ (0.9)(h) $ 25.0
Accounts and notes receivable....................... 82.2 -- 82.2
Asbestos insurance receivable....................... 90.8 90.8
Inventories......................................... 83.0 -- 83.0
Deferred income taxes............................... 5.2 (5.2)(f) --
Prepaid expenses and other assets................... 5.6 -- 5.6
-------- -------- ------
Total Current Assets............................. 292.7 (6.1) 286.6
Property, plant and equipment -- net.................. 138.2 -- 138.2
Prepaid pension....................................... 90.8 (77.4)(b) 13.4
Goodwill -- net....................................... 146.1 (4.8)(a) 141.3
Identifiable intangible assets........................ 64.5 -- 64.5
Asbestos insurance receivable......................... 202.8 -- 202.8
Other assets.......................................... 64.2 (16.7)(b) 54.9
(1.7)(d)
9.1(e)
Net assets of discontinued operations................. 267.9 (267.9)(g) --
-------- -------- ------
Total Assets.......................................... $1,267.2 $ (365.5) $901.7
-------- -------- ------
LIABILITIES AND PARENT COMPANY INVESTMENT
Current Liabilities
Short-term debt..................................... $ 0.3 $ -- $ 0.3
Accounts payable.................................... 47.1 -- 47.1
Accrued asbestos liability.......................... 150.3 -- 150.3
Other accrued expenses.............................. 69.0 (3.1)(b) 64.4
(1.5)(d)
Income taxes payable................................ 59.8 (55.1)(f) 4.7
Deferred income taxes............................... -- 5.1(f) 5.1
Current maturities of long-term debt................ 1.6 -- 1.6
-------- -------- ------
Total current liabilities........................ 328.1 (54.6) 273.5
Long-term debt........................................ 313.0 (300.0)(d) 13.0
Long-term debt payable to EnPro....................... -- 205.0(d) 205.0
Pension obligations................................... 17.3 (14.1)(b) 3.2
Postretirement benefits other than pensions........... 12.1 (10.0)(b) 2.1
Deferred income taxes................................. 46.2 (28.2)(f) 18.0
Liabilities of previously owned businesses............ 57.8 -- 57.8
Environmental liabilities............................. 21.8 -- 21.8
Asbestos liability.................................... 20.6 -- 20.6
Minority interest..................................... 9.0 -- 9.0
Other non-current liabilities......................... 14.9 (10.2)(b) 4.7
Commitments and contingent liabilities................ -- -- --
Mandatorily redeemable TIDES.......................... 150.0 -- 150.0
Parent company investment............................. 276.4 (153.4) 123.0
-------- -------- ------
Total Liabilities and Parent Company
Investment..................................... $1,267.2 $ (365.5) $901.7
-------- -------- ------
See Notes to Unaudited Pro Forma Consolidated Financial Statements
35
NOTES TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(a) Pro forma adjustment to reflect the Glacier acquisition completed in
September 2001. Approximately $59 million of the purchase price was allocated to
identifiable intangible assets including customer relationships (approximately
$27 million), existing technology (approximately $16 million), trademarks
(approximately $14 million) and other (approximately $2 million). The trademarks
are deemed to have an indefinite life and are therefore not subject to
amortization. Customer relationships, existing technologies and other intangible
assets are being amortized based primarily on undiscounted cash flows which
reflect the patterns in which the economic benefits of the assets are expected
to be consumed over 14 years, 25 years and 5 years, respectively. The weighted
average life of the amortizable intangible assets is 17 years. Included in the
selling and administrative cost adjustment is $3.6 million per year representing
amortization of identifiable intangible assets. The adjustment to goodwill
represents the receipt in February 2002 of $4.8 million in satisfaction of final
post-closing adjustments.
(b) Pro forma adjustments to reflect the elimination of certain assets and
liabilities that will be retained by Goodrich pursuant to the distribution and
employee matters agreements, and the related income statement impact.
(c) The adjustment amount for administrative overhead costs is the
difference between the actual administrative overhead costs recorded in the 2001
income statement and the estimated $27 million of administrative overhead costs
expected to be incurred as a stand-alone company. The $27 million includes
approximately $10 million of annual non-reimbursable costs associated with
managing and settling asbestos claims, which is consistent with historical
amounts incurred. The remaining $17 million is management's estimate of the
annual corporate headquarters cost that will be incurred as a stand-alone
entity. This estimate is based on the operating budget that management has
prepared and was developed based on a detailed analysis of expected costs by
department based on anticipated resource needs.
Goodrich has historically allocated a portion of certain headquarters
department expenses to individual business units. Business units are only
allocated amounts for departments providing services to the business units.
These departments include Tax, Government Relations, Accounting and Financial
Analysis, Compensation and Benefit Administration and Information Technology.
The portion of the department expenses which is considered to benefit
headquarters only is not allocated. The determination is made by each department
head and reviewed annually.
To determine how much to allocate to each business unit, management
identifies certain items which, in management's opinion, drive the costs of the
benefits that are being allocated. These items include Employee Compensation
Costs, Trade Sales, Net Inventory and Net Property, Plant and Equipment. Each
business unit is then allocated an amount based on their percentage of the
total. Management believes that the allocation methods used are reasonable.
(d) Coltec intends to purchase a portion of the old Coltec notes
surrendered for exchange in the exchange offer, which will be financed through
an intercompany loan from Goodrich (approximately $95 million). The remaining
portion of old Coltec notes accepted by Goodrich for exchange will be
contributed to EnPro in connection with the distribution and would thereafter be
an intercompany obligation of Coltec to EnPro. For purposes of the pro forma
consolidated financial statements we have assumed that this offer is fully
subscribed.
(e) Pro forma adjustments to reflect in other expense, net the change in
fair value, and in other assets the fair value of Coltec's call options on
Goodrich common stock purchased to reduce its economic risk created by the
conversion feature of the TIDES. The fair values of Coltec's call options were
determined using an option pricing model.
(f) Pro forma adjustment to the provision for income taxes and deferred tax
assets and liabilities represents the estimated income tax effect of pro forma
adjustments (a) through (e) at an effective tax rate of 37.5%. Pro forma
adjustment to income taxes payable reflects the assumption by Goodrich of
domestic income tax receivables and payables in accordance with the tax matters
arrangements.
(g) Pro forma adjustments to reflect the transfer to Goodrich by way of a
dividend of all of Coltec's aerospace business.
(h) Pro forma adjustment to adjust cash balance to $25 million at the time
of the distribution.
36
INFORMATION ABOUT COLTEC
INDUSTRY AND BUSINESS OF COLTEC AFTER THE SPIN-OFF
After the spin-off, Coltec will continue to be a leader in the design,
development, manufacturing and marketing of proprietary engineered industrial
products, including sealing products, self-lubricating, non-rolling, metal
polymer bearing products, air compressor systems and vacuum pumps and heavy-duty
diesel and natural gas engines. Coltec will also continue to design, manufacture
and sell other engineered industrial products such as PTFE products and
specialized tooling. After the spin-off Coltec will have 33 primary
manufacturing facilities located in nine countries in the Americas, Europe and
Australia, and will sell its products through approximately 2,600 independent
agents and distributors worldwide and have over 200 internal sales managers and
representatives. These sales managers and representatives are complemented by
teams of highly experienced engineers. In 2001, Coltec had pro forma revenues of
$696.4 million, operating income of $54.0 million and net income of $0.9
million.
After the spin-off, Coltec will sell its products to more than 60,000
customers worldwide and is diversified both by industry served and
geographically. In 2001, no single customer accounted for more than 2% of its
revenues on a pro forma basis. Coltec's management estimates that its revenues
by industry in 2001 on a pro forma basis were general industrial (43%),
automotive and heavy-duty vehicle (18%), chemical and petrochemical (17%),
utility (9%), marine (7%), other transportation (4%) and other industries (2%).
Coltec's management also estimates that its percentage of revenues by geographic
region in 2001 on a pro forma basis were United States (70%), Canada (7%),
Europe (14%) and the rest of the world (9%), and that Coltec derived
approximately 62% of its revenues in 2001 on a pro forma basis from its
aftermarket, or parts and services, sales.
Coltec's sales by geographic region in 2001, 2000 and 1999 are as follows:
2001 2000 1999
------ ------ ------
(DOLLARS IN MILLIONS)
Geographic Areas
Net Sales
United States.............................................. $438.4 $480.0 $496.2
Canada..................................................... 43.1 41.7 44.6
Europe..................................................... 91.4 48.5 67.3
Other Foreign.............................................. 55.4 84.2 57.6
------ ------ ------
Total...................................................... $628.3 $654.4 $665.7
====== ====== ======
MARKET PRICE OF AND DIVIDENDS ON COMMON EQUITY
Coltec is presently a wholly-owned subsidiary of Goodrich, and there is no
public trading market for any class of Coltec's common equity securities. Since
Goodrich's acquisition of Coltec, Coltec has not paid any cash dividends on its
common equity securities. EnPro, of which Coltec will be a wholly-owned
subsidiary after the spin-off, intends to apply to lists its common stock on the
New York Stock Exchange under the symbol "NPO."
SELECTED COLTEC HISTORICAL FINANCIAL DATA
The following historical consolidated financial information as of December
31, 2001 and 2000 and for each of the three years ended December 31, 2001, has
been derived from, and should be read together with, Coltec's audited
consolidated financial statements and the related notes which are included
elsewhere in this prospectus. The historical consolidated financial information
as of December 31, 1999 and for the year ended December 31, 1998 has been
derived from, and should be read together with, Coltec's audited consolidated
financial statements and the related notes, which have not been included in this
prospectus. The historical consolidated financial information as of December 31,
1998 and 1997 and for the year ended
37
December 31, 1997 has been derived from Coltec's unaudited consolidated
financial statements, which have not been included in this prospectus.
During the periods presented, Coltec effected a number of acquisitions and
divestitures, some of which were significant. As a result, Coltec's historical
financial results for the periods presented may not be directly comparable. The
information presented below should also be read together with "-- Management's
Discussion and Analysis of Financial Condition and Results of Operations."
YEAR ENDED
DECEMBER 31,
--------------------------
2001 2000 1999 1998 1997
-------- ------ -------- ------ ------
(DOLLARS IN MILLIONS)
STATEMENT OF INCOME DATA:
Sales.............................................. $ 628.3 $654.4 $ 665.7 $749.5 $725.1
Income (loss) from continuing operations........... $ 6.6 $ 36.7 $ (62.0) $ 69.0 $ 37.9
BALANCE SHEET DATA:
Total assets....................................... $1,267.2 $991.8 $1,019.2 $900.2 $792.2
Total debt......................................... $ 314.9 $318.0 $ 326.5 $490.2 $704.9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion in conjunction with Coltec's
audited consolidated financial statements and the related notes, included
elsewhere in this prospectus. This Management's Discussion and Analysis of
Financial Condition and Results of Operations contains forward-looking
statements. See "Forward-Looking Statements" for a discussion of the
uncertainties, risks and assumptions associated with these statements.
The consolidated financial statements, which are discussed below, reflect
the historical financial condition, results of operations and cash flows of
Coltec, which will be a subsidiary of EnPro at the time of the spin-off. The
financial information discussed below and included in this information
statement, however, may not necessarily reflect what Coltec's financial
condition, results of operations and cash flows would have been had it been a
subsidiary of EnPro during the periods presented or what Coltec's financial
condition, results of operations and cash flows as a subsidiary of EnPro may be
in the future.
Unless otherwise noted, the following discussion pertains only to the
business of Coltec as it will be operated after the spin-off, i.e., only the
engineered industrial products business, and does not pertain to Coltec's
aerospace business, which will be transferred to Goodrich prior to the spin-off.
When the spin-off is complete, Coltec will be a wholly-owned subsidiary of
EnPro, and the assets of EnPro will consist primarily of its equity interest in
Coltec and, potentially, its ownership of a portion of the old Coltec notes.
OVERVIEW
Upon completion of the spin-off Coltec will continue to be a leader in the
design, development, manufacturing and marketing of well recognized, proprietary
engineered industrial products that include sealing products, self-lubricating,
non-rolling metal polymer bearing products, air compressor systems and vacuum
pumps and heavy-duty diesel and natural gas engines. Coltec will also continue
to design, manufacture and sell other engineered industrial products such as
PTFE products and specialized tooling. Coltec will manufacture its products in
33 primary facilities located in nine countries in the Americas, Europe and
Australia.
Coltec operated as a stand alone company prior to its acquisition by
Goodrich in July 1999. On September 1, 2001, Coltec acquired Glacier. The
results of Glacier's operations have been included in the consolidated financial
statements of Coltec since that date. The combination of the Coltec bearings
business and Glacier created the largest manufacturer of self-lubricating,
non-rolling, metal polymer bearings in the world. Coltec's management believes
that the Glacier acquisition will enable it to serve
38
worldwide customers more effectively and create economies of scale in research
and development and marketing.
The following discusses Coltec's consolidated results of operations and
financial condition as it operated as a wholly owned subsidiary of Goodrich,
including the adjustments and allocations necessary for a fair presentation of
the business, as described in more detail in Note C to Coltec's consolidated
financial statements, included elsewhere in this prospectus. The transfer of
Coltec's aerospace business to Goodrich represents the disposal of a segment
under APB Opinion No. 30, or APB 30. Accordingly, Coltec's aerospace business
has been accounted for as a discontinued operation and the revenues, costs and
expenses, assets and liabilities and cash flows have been segregated in Coltec's
historical consolidated financial statements included elsewhere in this
prospectus. Unless otherwise noted, the following discussion pertains only to
Coltec's continuing operations.
EnPro will enter into a distribution agreement and a number of ancillary
agreements with Goodrich for the purpose of accomplishing the spin-off. These
agreements will govern the relationship between Goodrich and EnPro subsequent to
the spin-off and provide for the allocation of employee benefits, taxes and
other liabilities and obligations attributable to periods prior to the
distribution. The ancillary agreements include a transition services agreement,
an employee matters agreement and tax matters arrangements.
As of December 31, 2001, Coltec had outstanding $150 million of 5 1/4%
Convertible Preferred Securities -- Term Income Deferred Equity Securities
(which we refer to as "TIDES"), $300 million of old Coltec notes, $12 million of
industrial revenue bonds and $1 million of additional long-term debt. To the
extent that any old Coltec notes remain outstanding following completion of the
exchange offer, they remain obligations of Coltec. If any outstanding old Coltec
notes are surrendered by the holders for exchange in the exchange offer, Coltec
plans to purchase a portion of those notes and then cancel them. The purchase
will be financed through an intercompany loan from Goodrich. The remaining old
Coltec notes surrendered for exchange and not purchased by Coltec will be
contributed by Goodrich to EnPro and those notes will remain an outstanding
obligation of Coltec to EnPro.
All significant transactions among Coltec's operations have been eliminated
in its financial statements. Intercompany balances existing between Coltec and
Goodrich or its subsidiaries, including the loan from Goodrich to Coltec to
finance the purchase by Coltec of the old Coltec notes, will be assumed by
Coltec's aerospace business prior to the spin-off and the transfer of the
aerospace business to Goodrich. As a result, at the time of the spin-off, there
will be no intercompany balances outstanding between Coltec and its
subsidiaries, on the one hand, and Goodrich and its subsidiaries, on the other
hand.
The following discussion of Coltec's consolidated results of operations
does not necessarily include all the expenses that would have been incurred by
Coltec had it been a separate, stand-alone entity and may not necessarily
reflect what Coltec's consolidated financial condition, results of operations
and cash flows would have been had Coltec been a stand-alone entity during the
periods presented or what EnPro's or Coltec's consolidated financial condition,
results of operations and cash flows may be in the future.
Coltec manages its business as two segments, a sealing products segment
(sealing and PTFE products) and an engineered products segment (metal polymer
bearings, air compressor systems, medium-speed engines and specialized tooling),
which encompass its primary product lines.
OUTLOOK
Coltec believes that its businesses are fundamentally sound and that they
should generate solid operating margins and cash flows. However, Coltec does
anticipate continued softness in most of the major markets that it serves during
the first half of 2002, with a modest recovery taking hold during the second
half of the year. Overall capacity utilization in the U.S. fell to 74% in 2001,
the lowest level since 1983. With this as a backdrop, Coltec's primary markets
are facing increasingly competitive environments that are characterized by
severe pricing pressure. In addition, Coltec may be required to incur or fund
incremental costs, over and above the levels historically incurred or funded as
part of Goodrich, related to
39
EnPro becoming an independent public company. These factors will combine to put
further downward pressure on Coltec's operating margins.
In response to the market conditions outlined above, Coltec has taken steps
to reduce its cost base and improve its manufacturing productivity going
forward. In that regard, Coltec initiated a number of restructuring actions in
late 2001 and early 2002 that will result in the reduction of headcount, the
discontinuance of certain marginally profitable product lines and the closure or
consolidation of some facilities. Based on the annualized savings growing out of
these restructuring activities, the economic recovery anticipated during the
second half of 2002 and the inclusion of Glacier's results for the full year,
Coltec expects a modest increase in 2002 sales and operating income over 2001
results. Coltec expects the first quarter of 2002 to be the weakest quarter of
the year.
The foregoing expectations are forward-looking statements that are subject
to change, perhaps materially, as a result of factors identified under
"Forward-Looking Statements" included elsewhere in this prospectus.
RESULTS OF OPERATIONS
The following table summarizes Coltec's results of operations:
YEAR ENDED DECEMBER 31,
------------------------
2001 2000 1999
------ ------ ------
(DOLLARS IN MILLIONS)
STATEMENT OF INCOME DATA:
Sales:
Sealing Products.......................................... $354.7 $391.1 $394.6
Engineered Products....................................... 273.6 263.3 271.1
------ ------ ------
Total sales................................................. $628.3 $654.4 $665.7
====== ====== ======
Operating income:
Sealing Products.......................................... $ 45.0 $ 67.5 $ 71.0
Engineered Products....................................... 22.2 46.8 52.6
------ ------ ------
Segment operating income.................................... 67.2 114.3 123.6
Corporate unallocated....................................... (10.7) (10.2) (26.8)
Merger-related and consolidation costs...................... (3.8) (1.4) (128.4)
------ ------ ------
Operating income (loss)..................................... 52.7 102.7 (31.6)
Interest expense, net....................................... (26.4) (27.1) (35.9)
Other income (expense), net................................. (3.1) (4.3) 3.1
------ ------ ------
Income (loss) before taxes and distributions on convertible
preferred securities of trust (TIDES)..................... 23.2 71.3 (64.4)
Income tax (expense) benefit................................ (8.7) (26.7) 10.3
Distributions on convertible preferred securities of trust
(TIDES)................................................... (7.9) (7.9) (7.9)
------ ------ ------
Income (loss) from continuing operations.................... 6.6 36.7 (62.0)
Income from discontinued operations -- net of taxes......... 94.1 64.2 61.9
------ ------ ------
Net income (loss)........................................... $100.7 $100.9 $ (0.1)
====== ====== ======
The following discussion and analysis focuses on major changes and results from
period to period.
40
2001 COMPARED WITH 2000
SALES
Sealing Products. Sales of $354.7 million in 2001 were 9% lower than the
$391.1 million in 2000. The lower sales volumes were due to continued softness
in all major markets, including chemical processing, heavy-duty truck and
trailer assembly and pulp and paper production. The terrorist attacks on
September 11, 2001 contributed further to the weakness in Coltec's major markets
and caused a temporary drop in orders to varying degrees by product line and
market in the fourth quarter. This event and its negative impact contributed to
Coltec's decision to make certain restructuring measures discussed below. New
truck and trailer production throughout 2001 was approximately half the levels
of early 2000. In addition, capacity utilization in U.S. factories declined to
levels well below the historical average in 2001 while U.S. industrial
production has fallen nearly every month since mid-2000. These factors have
contributed to a decrease in capital spending and delays in scheduled
maintenance programs throughout the process industries.
Engineered Products. Sales of $273.6 million in 2001 were 4% higher than
the $263.3 million in 2000. Lower North American bearings sales in 2001 due, in
part, to weak automotive markets and competitive pricing pressure were offset by
the impact of the Glacier acquisition completed in September 2001 ($27.6
million). Weak automotive markets also negatively impacted sales of tooling
products. Sales of diesel engines increased slightly due to increased shipments
of commercial engines in the fourth quarter. Weak capital spending in the
industrial manufacturing sector adversely affected sales of air compressors.
This segment also experienced a decline in orders after September 11, 2001 as
mentioned above.
SEGMENT OPERATING INCOME
Sealing Products. Operating income of $45.0 million in 2001 was 33% lower
than the $67.5 million in 2000. The decline was principally attributable to
lower sales volumes including lower sales volumes in some of Coltec's higher
margin products. In addition, operating margins declined from 17.2% to 12.7% due
to weaker pricing in certain market segments and an inability in the short term
to reduce fixed costs at the same rate as sales declined. Increased expenses
associated with inventories and asset write-downs, severance and labor costs not
associated with a formal restructuring plan also contributed to reduced margins.
Engineered Products. Operating income of $22.2 million in 2001 was 53%
lower than the $46.8 million in 2000. In addition to the impact of lower sales
volumes, operating margins declined from 17.8% in 2000 to 8.1% in 2001.
Profitability of diesel engines declined due to a combination of reduced pricing
in the commercial power generation market, increased warranty costs and the
completion of a very profitable project in 2000. Lower sales volumes,
competitive pricing pressures, wage and benefit cost increases and an inability
in the short term to reduce fixed costs at the same rate as sales declined
combined to reduce earnings in all other product lines as well.
CORPORATE UNALLOCATED COSTS
Corporate unallocated costs increased $0.5 million, or 5%, from $10.2
million in 2000 to $10.7 million in 2001. The increase was mainly due to lower
reimbursements of Garrison's administrative costs from insurance carriers, which
is dependent on the mix of insurance policies during a given period.
MERGER-RELATED AND CONSOLIDATION COSTS
Coltec incurred a total of $3.8 million of consolidation costs in 2001.
Coltec incurred $2.4 million of personnel-related costs related to the
termination of 170 positions of which approximately 90 were terminated by
December 31, 2001, including early retirement medical continuation ($0.2
million) and pension continuation costs ($0.4 million) for 22 employees. Coltec
also incurred $1.4 million for facility closures and asset write-downs.
41
The merger-related and consolidation reserves were reduced by $2.0 million
in 2001, of which $1.1 million represented cash payments. The remaining $0.9
million of reserve reductions represented asset impairment charges or reserves
that were transferred to, and subsequently administered by, Goodrich.
Coltec incurred $1.4 million of consolidation costs in 2000 consisting of
$1.3 million of personnel-related costs associated with workforce reductions and
$0.1 million related to an asset write-down. The merger-related and
consolidation reserves were reduced by $7.5 million in 2000, of which $4.0
million represented cash payments. The remaining $3.5 million of reserve
reductions represented the remaining reserves associated with Goodrich's
acquisition of Coltec, which were transferred to, and subsequently administered
by, Goodrich.
See Note E to Coltec's consolidated financial statements included elsewhere
in this prospectus for additional discussion.
NET INTEREST EXPENSE
Net interest expense decreased by $0.7 million from $27.1 million in 2000
to $26.4 million in 2001. The decrease was primarily attributable to a $1.3
million reduction in interest expense related to the sale of certain trade
accounts receivable.
OTHER INCOME (EXPENSE) -- NET
Other income (expense) -- net decreased $1.2 million or 28% from $4.3
million in 2000 to $3.1 million in 2001 due to lower amortization of issuance
costs related to the TIDES. Issuance costs related to the TIDES were fully
amortized in mid-2001.
INCOME TAX EXPENSE
Coltec's effective tax rate from continuing operations was 37.5% in 2001
and 2000.
INCOME FROM DISCONTINUED OPERATIONS
Income from discontinued operations increased $29.9 million, or 47%, from
$64.2 million in 2000 to $94.1 million in 2001. The increase was due to higher
sales and operating income generated by Coltec's aerospace business.
2000 COMPARED WITH 1999
SALES
Sealing Products. Sales of $391.1 million in 2000 were down slightly (1%)
from the $394.6 million in 1999. The primary factor behind the decline was the
industry-wide decline in heavy-duty truck and trailer production, a major market
for this segment, in the second half of 2000. Sales to the process industries
were flat.
Engineered Products. Sales of $263.3 million declined in 2000 by 3% from
$271.1 million in 1999. Revenue declines were experienced in all product lines
except air compressors. The loss of significant customers accounted for a drop
in bearings sales, while the completion of a large engine project in late 1999
accounted for a decrease in engines sales in 2000. Inventory reduction efforts
and cutbacks in spending by the major automotive companies in late 2000 resulted
in a revenue decline for tooling products. Compressor sales increased as a
result of strong capital spending and a higher proportion of aftermarket sales.
SEGMENT OPERATING INCOME
Sealing Products. Operating income declined 5% from $71.0 million in 1999
to $67.5 million in 2000. The decline in heavy-duty truck and trailer volumes
was partially offset by cost-saving programs
42
involving both headcount reductions and raw materials. Overall operating margins
decreased to 17.3% in 2000 from 18.0% in 1999.
Engineered Products. Operating income decreased by 11% from $52.6 million
in 1999 to $46.8 million in 2000. Strong volume gains accounted for improved
profitability in compressor products. Lower sales volume in other product lines
were partially offset by cost reduction programs in a number of businesses.
CORPORATE UNALLOCATED COSTS
Corporate unallocated costs decreased $16.6 million, or 61.9%, from $26.8
million in 1999 to $10.2 million in 2000. Prior to Goodrich's acquisition of
Coltec in 1999, Coltec operated as a separate public company with a separate
corporate headquarters. Subsequent to Goodrich's acquisition of Coltec, the
majority of corporate costs were incurred by Goodrich and have not been
reflected in Coltec's financial statements unless allocated by Goodrich.
Allocated costs from Goodrich are discussed in Note C to Coltec's consolidated
financial statements and are included in the operating income of the business,
discussed above. The corporate unallocated costs reported in 2000 primarily
represent non-reimbursable costs associated with managing and settling asbestos
claims.
MERGER-RELATED AND CONSOLIDATION COSTS
During 2000, Coltec incurred $1.3 million of personnel-related costs
associated with workforce reductions and $0.1 million related to an asset
write-down. The merger-related and consolidation reserves were reduced by $7.5
million during 2000, of which $4.0 million represented cash payments. The
additional $3.5 million of reserve reductions represented the remaining reserves
associated with the acquisition of Coltec by Goodrich, which were transferred
to, and subsequently administered by, Goodrich.
Coltec incurred $128.4 million of merger-related and consolidation costs in
1999:
- Coltec incurred $68.4 million of personnel related costs in 1999.
Personnel related costs associated with Goodrich's acquisition of Coltec
were $66.3 million, consisting of $61.8 million incurred under
change-in-control provisions in employment agreements and $4.5 million in
employee severance costs. Personnel related costs also include employee
severance costs of $2.1 million for reductions at Coltec's Garlock,
France Compressor Products and Stemco operating units (approximately 125
positions);
- $57.9 million of transaction costs; and
- $2.1 million of asset write-down and facility consolidation costs.
See Note E to Coltec's consolidated financial statements included elsewhere
in this prospectus for additional discussion.
NET INTEREST EXPENSE
Net interest expense decreased by $8.8 million, or 24.5%, from $35.9
million in 1999 to $27.1 million in 2000. The reduction in interest expense was
primarily a result of Coltec's termination of its revolving credit facility
following Goodrich's acquisition of Coltec. Interest expense associated with
this facility was $7.9 million in 1999.
OTHER INCOME (EXPENSE) -- NET
Included within other income (expense) -- net are gains and losses from the
sale of businesses. Excluding a $5.0 million gain on the sale of a business in
1999, other income (expense) -- net was expense of $4.3 million and $1.9 million
in 2000 and 1999, respectively. The increase in costs between 1999 and 2000 was
primarily attributable to increased earnings attributable to minority interests.
43
INCOME TAX EXPENSE
Coltec's effective tax rate from continuing operations was 37.5% and 16.0%
in 2000 and 1999, respectively. In 1999, Coltec accrued a tax benefit due to
reported book losses. The benefit in 1999 was reduced mainly due to
non-deductible merger-related costs.
INCOME FROM DISCONTINUED OPERATIONS
Income from discontinued operations increased $2.3 million, or 3.7%, from
$61.9 million in 1999 to $64.2 million in 2000. Pre-tax income from discontinued
operations in 2000 was approximately $5 million lower than in 1999. The decrease
in pre-tax income from discontinued operations was offset by a reduction in the
effective tax rate from 39% in 1999 to 34% in 2000. The higher rate in 1999 was
a result of taxes attributable to Coltec's foreign aerospace operations.
LIQUIDITY AND CAPITAL RESOURCES
Operating Cash Flows. Operating activities used $62.7 million, $114.8
million and $82.6 million of cash in 2001, 2000 and 1999, respectively. The use
of cash in 2001 was attributable to the termination of a receivables
securitization program ($30.5 million) and an increase in working capital and
other non-current assets and liabilities, net. The use of cash in 2000 was
attributable to a $113.7 million payment to the Internal Revenue Service noted
above. The use of cash in 1999 was attributable to payments of $120.9 million
for merger-related and consolidation costs, primarily related to payments in
connection with Goodrich's acquisition of Coltec. Also contributing to the trend
in operating cash flows during these periods was the trend in asbestos
litigation related payments and recoveries. In 2001, 2000 and 1999,
asbestos-related expenditures exceeded proceeds from asbestos-related insurance
by $74.8 million, $36.4 million and $19.3 million, respectively, as a result of
the short-term aggressive settlement strategy implemented during 1999 and 2000,
as described below under "-- Contingencies."
Investing Cash Flows. Coltec used $169.8 million, $13.8 million, and $24.1
million in investing activities in 2001, 2000 and 1999, respectively. Coltec's
investing activities related solely to capital expenditures, with the exception
of 2001, during which it used approximately $150 million to acquire Glacier. In
February 2002, Coltec received $4.8 million in satisfaction of the final
post-closing settlements. The reduction in capital expenditures between 1999 and
2000 reflects decisions made in response to the continued softness in the
industrial markets.
Financing Cash Flows. Financing activities provided $191.8 million and
$74.3 million in 2001 and 1999, respectively, and used $54.5 million in 2000.
Goodrich provided $203.3 million of cash in 2001 which was used for the Glacier
acquisition and to fund operating cash requirements and capital expenditures. In
2000, cash was used to repay debt and was transferred to Goodrich. Goodrich
provided $246.0 million of cash in 1999, which was used to reduce outstanding
borrowings under Coltec's revolving credit facility that was terminated in July
1999.
Capital Resources. In April 1998, Coltec Capital Trust placed with
institutional investors $150.0 million of TIDES. In connection with the issuance
of the TIDES, Coltec issued an equivalent aggregate principal amount of its
5 1/4% Convertible Junior Subordinated Deferrable Interest Debentures (the
"TIDES Debentures"), all of which were acquired by Coltec Capital Trust with the
proceeds from the private placement of the TIDES. Coltec Capital Trust has
essentially no other assets or liabilities other than the TIDES Debentures.
Coltec and Goodrich have guaranteed certain payments with respect to the TIDES.
In April 1998, Coltec also issued $300.0 million aggregate principal amount of
the old Coltec notes. In 1993, Coltec also issued $12.0 million of industrial
revenue bonds that mature in 2009.
Coltec's principal sources of liquidity are intercompany loans and
contributions from Goodrich.
To the extent that any old Coltec notes remain outstanding following
completion of the exchange offer, they will remain obligations of Coltec. If any
outstanding old Coltec notes are surrendered by the holders for exchange in the
exchange offer, Coltec plans to purchase a portion of those notes and then
cancel them. The purchase will be financed through an intercompany loan from
Goodrich that will be
44
assumed by Coltec's aerospace business. The remaining old Coltec notes
surrendered for exchange and not purchased by Coltec will be contributed by
Goodrich to EnPro and those notes will remain an outstanding obligation of
Coltec to EnPro.
In connection with the spin-off, EnPro and/or Coltec also plans to enter
into a new senior revolving credit facility, which Coltec expects will be
secured by receivables and inventories, and will have a maximum available amount
of $75 million. Formal commitments have not yet been obtained from Coltec's
lenders, but negotiations are underway regarding the level of the borrowing base
and work is ongoing to complete the lenders' due diligence procedures. Coltec
anticipates that as of the date of the spin-off the initial availability under
this facility will be approximately $50 million. Coltec expects that the senior
credit facility will contain customary restrictions, covenants and events of
default for financings of these types, including a prohibition against the
payment of dividends. Coltec does not expect compliance with these restrictions
and covenants to materially affect its operations, and does not expect to have
any borrowings outstanding under this facility at the time of the spin-off. If
Coltec is unsuccessful in obtaining this financing, Coltec intends to pursue
alternative secured revolving financing arrangements.
Prior to the spin-off and the transfer of Coltec's aerospace business to
Goodrich, all intercompany balances outstanding between Coltec and its
subsidiaries, on the one hand, and Goodrich and its subsidiaries on the other
hand, including the loan to finance the purchase by Coltec of old Coltec notes
surrendered by holders in the exchange offer, will be assumed by Coltec's
aerospace business. As a result, at the time of the spin-off, there will be no
intercompany balances outstanding between Coltec and its subsidiaries, on the
one hand, and Goodrich and its subsidiaries, on the other hand.
Coltec's ability to make payments on and to refinance its indebtedness,
including the debt retained or incurred pursuant to the new revolving credit
facility as well as any future indebtedness, and to fund working capital,
capital expenditures, asbestos claims of its subsidiaries and strategic
acquisitions and investments, will depend on its ability to generate cash in the
future from operations, financings and sales of assets.
Coltec's primary recurring cash needs will be working capital, capital
expenditures, asbestos claims of its subsidiaries and debt service. Coltec
believes that its cash flow from operations, together with available borrowings
under the new revolving credit facility, will be sufficient to meet its
recurring cash needs during the next 12 months. Depending upon conditions in the
capital markets and other factors, Coltec will from time to time consider the
issuance of debt or other securities, or other possible capital markets
transactions, the proceeds of which could be used to refinance current
indebtedness or for other corporate purposes in the future. Coltec cannot be
certain that it will be successful in obtaining additional financing if needed
or that, if obtained, any additional financing will be on terms favorable to it.
Following the spin-off and until April 15, 2028, each TIDES will be
convertible, at the option of the holder, into a combination of 0.955248 of a
share of Goodrich common stock and 0.1910496 of a share of EnPro common stock,
subject to adjustment. Should the holders exercise their right to convert the
TIDES, Coltec would be required to deliver shares of Goodrich and EnPro common
stock to the holders as promptly as practicable after the conversion date and in
connection with that would be required to purchase shares of Goodrich common
stock on the open market, directly from Goodrich or by exercising its call
options on Goodrich common stock discussed below. Coltec may not have sufficient
cash on hand or the ability to finance these transactions in the time period
required by the TIDES agreements. Failure to honor conversion rights would be a
default under those agreements.
Further, the value of Goodrich and EnPro common stock may increase to the
level where Coltec's cost to acquire shares in a conversion could exceed, with
no maximum, the aggregate liquidation value of the TIDES of $150 million. Coltec
has purchased call options on 2,865,744 shares of Goodrich common stock at a
price of $52.34 per share, which represents the total Goodrich shares that would
be required if all TIDES holders convert. One-third of these call options expire
in March 2005, and remainder expire in March 2007. Until they expire, the call
options will reduce Coltec's risk that the cash required to finance conversions
of the TIDES would exceed the $150 liquidation value. While Coltec has the right
to redeem the TIDES for cash, at a premium to liquidation value of up to 3%, and
has hedged this exposure, as
45
described earlier, Coltec cannot be certain that it will have the financial
resources to redeem these securities at a cost at or near the liquidation value
of the TIDES or effectively hedge this exposure beyond the term of the call
options.
If Coltec is unable to obtain the capital it requires to implement its
business strategy, or to obtain the capital it requires on acceptable terms or
in a timely manner, it would attempt to take appropriate responsive actions to
tailor its activities to its available financing, including making revisions to
its business strategies to accommodate the reduced financing. Coltec's ability
to raise capital through the issuance of additional equity is constrained
because it may cause the spin-off to be taxable under Section 355(e) of the
Internal Revenue Code and under the tax sharing agreement EnPro would be
required to indemnify Goodrich against that tax.
Discontinued Operations Cash Flow. Discontinued operations provided $44.6
million, $190.4 million, and $25.7 million of cash in 2001, 2000 and 1999. The
decrease in 2001 compared to 2000 was a result of lower operating cash flows
($13 million approximately), and repaying approximately $80 million on a
short-term credit facility in 2001 compared to borrowing approximately $35
million against the same facility in 2000. The change in 2000 versus 1999
resulted from higher operating cash flows (approximately $100 million), cash
paid for an acquisition of $15.4 million versus proceeds from the sale of a
business of $15.8 million in 1999, and repayment of approximately $80 million on
a short-term revolving credit facility in 1999.
Dividends. The terms of Coltec's senior secured revolving credit facility
as well as the terms of the TIDES will impact directly or indirectly Coltec's
ability to pay dividends. The senior secured revolving credit facility is
expected to contain a restriction on dividend payments. This restriction would
not allow any dividends to be paid to holders of common stock while the facility
is in place. In addition, Coltec is entitled to withhold interest payments to
Coltec Capital Trust in connection with the TIDES for up to 20 quarters. If
these interest payments are withheld, Coltec would be unable to pay dividends to
EnPro.
OFF BALANCE SHEET ARRANGEMENTS
Lease Agreements. Coltec has several operating leases for real estate,
equipment and vehicles. Operating lease arrangements are generally utilized to
acquire assets from time to time if the terms and conditions of the lease or the
nature of the asset makes the lease arrangement more favorable than a purchase.
As of December 31, 2001, approximately $32 million of future minimum lease
payments were outstanding under these agreements. See Note K to Coltec's
consolidated financial statements included elsewhere in this prospectus for
additional discussion.
Sale of Receivables. At December 31, 2000, Coltec had in place a trade
receivables securitization program pursuant to which it could sell receivables
up to a maximum of $95.0 million. Accounts receivable sold under this program as
of December 31, 2000 were $81.5 million, of which $51 million were related to
Coltec's discontinued operations and $30.5 million related to Coltec's
continuing operations. In December 2001, this program was terminated. The
termination of the program resulted in an increase of $30.5 million in Coltec's
trade receivables, which is reflected in Coltec's accompanying consolidated
balance sheets and consolidated statements of cash flows. Coltec does not have
any plans to enter into a new trade receivables securitization at this time, but
is in the process of finalizing a senior secured revolving credit facility as
discussed in "-- Liquidity and Capital Resources -- Capital Resources."
CONTINGENCIES
General. There are pending or threatened against Coltec or its
subsidiaries various claims, lawsuits and administrative proceedings, all
arising from the ordinary course of business with respect to commercial, product
liability, asbestos and environmental matters, which seek remedies or damages.
Coltec believes that any liability that may finally be determined with respect
to commercial and non-asbestos product liability claims should not have a
material effect on Coltec's consolidated financial condition, results of
operations and cash flows. From time to time, Coltec and its subsidiaries are
also involved as plaintiffs in
46
legal proceedings involving contract, patent protection, environmental and other
matters. Gain contingencies, if any, are recognized when they are realized.
Environmental. Coltec's facilities and operations are subject to federal,
state and local environmental and occupational health and safety requirements of
the U.S. and foreign countries. Coltec takes a proactive approach in addressing
the applicability of all environmental, health and safety laws as they relate to
its manufacturing operations and in proposing and implementing any remedial
plans that may be necessary. Coltec believes that it and its subsidiaries are in
material compliance with all currently applicable regulations.
Coltec or one of its subsidiaries has been notified that it is among the
potentially responsible parties under environmental laws for the cost of
investigating and, in some cases, remediating contamination by hazardous
materials at 17 sites at which the costs to it at each site are expected to
exceed $100,000. The majority of these sites relate to remediation projects at
former operating facilities that have been sold or closed and primarily deal
with soil and groundwater remediation. Investigations have been completed for 14
sites and are in progress at three sites. The laws governing investigation and
remediation of these sites can impose joint and several liability for the
associated costs. Liability for these costs can be imposed on present and former
owners or operators of the properties or on parties that generated the wastes
that contributed to the contamination. Coltec's policy is to accrue
environmental investigation and remediation costs when it is both probable that
a liability has been incurred and the amount can be reasonably estimated. The
measurement of the liability is based on an evaluation of currently available
facts with respect to each individual situation and takes into consideration
factors such as existing technology, presently enacted laws and regulations and
prior experience in remediation of contaminated sites. Accruals are provided for
all sites based on the factors discussed above. As assessments and remediation
progress at individual sites, these liabilities are reviewed periodically and
adjusted to reflect additional technical data and legal information.
At Coltec's operating facilities it initiates corrective and preventive
environmental projects in an effort to ensure safe and lawful operations at its
facilities. Coltec also conducts comprehensive compliance and management system
audits at its facilities to maintain compliance and improve operational
efficiency. Coltec believes that maintaining compliance with current
governmental regulations and capital expenditures associated therewith will not
have a material adverse effect on its results of operations or competitive
position.
As of December 31, 2001, Coltec had an accrued liability of $27.0 million
for expenditures relating to environmental contingencies. Although Coltec is
pursuing insurance recovery in connection with certain of the underlying
matters, no receivable has been recorded with respect to any potential recovery
of costs in connection with any environmental matter.
Actual costs to be incurred for identified situations in future periods may
vary from estimates because of the inherent uncertainties in evaluating
environmental exposures due to unknown conditions, changing government
regulations and legal standards regarding liability. Subject to the imprecision
in estimating future environmental costs, Coltec believes that maintaining
compliance with current environmental laws and government regulations will not
require significant capital expenditures or have a material adverse effect on
its financial condition, results of operations and cash flows.
OTHER CONTINGENT LIABILITY MATTERS
Coltec has some contingent liabilities related to discontinued operations
of its predecessors for which it retained liability or is obligated under
indemnity agreements. These contingent liabilities include potential product
liability and associated claims related to Coltec's former Colt Firearms
subsidiary for firearms manufactured prior to 1990 and related to Coltec's
former Central Maloney subsidiary for electrical transformers manufactured prior
to 1994. There are currently no claims pending against Coltec related to these
former subsidiaries. However, such claims could arise in the future. Coltec also
has ongoing obligations with regard to workers compensation and medical benefit
matters associated with
47
Crucible Materials Corporation and Colt Firearms that relate to Coltec's periods
of ownership of these companies.
Asbestos
Garlock and Anchor. Two subsidiaries of Coltec, Garlock and Anchor, have
been among a number of defendants (typically 15 to 40) in actions filed in
various states by plaintiffs alleging injury or death as a result of exposure to
asbestos fibers. Among the products at issue in those actions are industrial
sealing products, predominantly gaskets, manufactured and/or sold by Garlock or
Anchor. The damages claimed vary from action to action and in some cases
plaintiffs seek both compensatory and punitive damages. To date, neither Garlock
nor Anchor has been required to pay any punitive damage awards, although we
cannot assure you that they will not be required to do so in the future.
Liability for compensatory damages has historically been allocated among all
responsible defendants, thus limiting the potential monetary impact of a
particular judgment or settlement on any individual defendant.
Coltec believes that Garlock and Anchor are in a favorable position
compared to many other asbestos defendants because, among other things, the
asbestos-containing products sold by Garlock and Anchor are encapsulated, which
means the asbestos fibers are incorporated into the product during the
manufacturing process and sealed in a binder. They are also nonfriable, which
means they cannot be crumbled by hand pressure. The Occupational Safety and
Health Administration, which began generally requiring warnings on
asbestos-containing products in 1972, has never required that a warning be
placed on products such as our gaskets. Notwithstanding that no warning label
has been required, Garlock included one on all of its asbestos-containing
products beginning in 1978. Further, gaskets such as those previously
manufactured and sold by Garlock are one of the few asbestos-containing products
permitted to be manufactured under regulations of the Environmental Protection
Agency. Since the mid-1980s, U.S. sales of asbestos-containing industrial
sealing products have not been a material part of Garlock's sales and those
sales have been predominantly to sophisticated purchasers such as the U.S. Navy
and large petrochemical facilities. These purchasers generally have extensive
health and safety procedures and are familiar with the risks associated with the
use and handling of industrial sealing products that contain asbestos. Garlock
discontinued distributing asbestos-containing products in the U.S. during 2000
and worldwide in mid-2001.
Garlock settles and disposes of actions on a regular basis. In addition,
some actions are disposed of at trial. Garlock's historical settlement strategy
has been to try to match the timing of payments with recoveries received from
insurance. However, in 1999 and 2000, Garlock implemented a short-term
aggressive settlement strategy. The purpose of this short-term strategy was to
achieve a permanent reduction in the number of overall asbestos claims through
the settlement of a larger than normal number of claims, including some claims
not yet filed as lawsuits. Garlock believes that these settlements were at a
lower overall cost to Garlock than would eventually have been paid even though
the timing of payment was accelerated. Mainly due to this short-term aggressive
settlement strategy and because settlements are made over a period of time, the
settlement amounts paid in 2001, 2000 and 1999 increased over prior periods and
the settlement amounts that will be paid in 2002 are also expected to be higher
than amounts paid in prior periods. In 2001, Garlock resumed its historical
settlement strategy.
Settlements are generally made on a group basis with payments made to
individual claimants over a period of one to four years and are made without any
admission of liability. Settlement amounts vary depending upon a number of
factors, including the jurisdiction where the action was brought, the nature of
the disease alleged, the occupation of the plaintiff, the presence or absence of
other possible causes of the plaintiff's alleged illness, the availability of
legal defenses, such as the statute of limitations, and whether the action is an
individual one or part of a group. Garlock's allocable portion of the total
settlement amount for an action typically ranges from 1% to 2% of the total
amount.
Before any payment on a settled claim is made, the claimant is required to
submit a medical report acceptable to Garlock substantiating the
asbestos-related illness and meeting specific criteria of disability. In
addition, sworn testimony that the claimant worked with or around Garlock
asbestos-containing products is required. Generally, the claimant is also
required to sign a full and unconditional release of
48
Garlock, its subsidiaries, parent, officers, directors, affiliates and related
parties from any liability for asbestos-related injuries or claims.
When a settlement demand is not reasonable given the totality of the
circumstances, Garlock generally will try the case. Garlock has been successful
in winning a substantial majority of the cases it has tried to verdict.
Garlock's share of adverse verdicts in these cases in 2001, 2000 and 1999
totaled less than $7 million in the aggregate, and some of those verdicts are on
appeal.
Anchor is an inactive and insolvent subsidiary of Coltec. The insurance
coverage available to it is fully committed. Anchor continues to pay settlement
amounts covered by its insurance but has not committed to settle any further
actions since 1998. As cases reach the trial stage, Anchor is typically
dismissed without payment.
The insurance coverage available to Garlock is substantial. As of December
31, 2001, Garlock had available $1.011 billion of insurance coverage from
carriers that it believes to be solvent. Of that amount, $119 million is
allocated to claims that have been paid by Garlock and submitted to its
insurance companies for reimbursement and $161 million has been committed to
claim settlements not yet paid by Garlock. Thus, at December 31, 2001, $731
million remained available for coverage of future claims. Insurance coverage for
asbestos claims is not available to cover exposures initially occurring on and
after July 1, 1984. Garlock and Anchor continue to be named as defendants in new
actions, a few of which allege initial exposure after July 1, 1984. To date, no
payments with respect to these claims, pursuant to a settlement or otherwise,
have been made. In addition, Garlock and Anchor believe that they have
substantial defenses to these claims and therefore automatically reject them for
settlement. However, Coltec cannot assure you that any or all of these defenses
will be successful in the future.
Arrangements with Garlock's insurance carriers limit the amount that can be
received by it in any one year. The amount of insurance available to cover
claims paid by Garlock currently is limited to $80 million per year in 2001 and
2000, and $60 million in 1999, covering both settlements and reimbursements of
legal fees. This limit automatically increases by 8% every three years. Amounts
paid by Garlock in excess of this annual limit that would otherwise be
recoverable from insurance may be collected from the insurance companies in
subsequent years so long as insurance is available but subject to the annual
limit in each subsequent year. As a result, Garlock is required to pay out of
its own cash any amounts paid to settle or dispose of asbestos-related claims in
excess of the annual limit and collect these amounts from its insurance carriers
in subsequent years. Various options, such as raising the annual limit, are
being pursued to ensure as close a match as possible between payments by Garlock
and recoveries received from insurance. Coltec cannot assure you that Garlock
will be successful as to any or all of these options.
In accordance with internal procedures for the processing of asbestos
product liability actions and due to the proximity to trial or settlement,
certain outstanding actions against Garlock and Anchor have progressed to a
stage where the cost to dispose of these actions can reasonably be estimated.
These actions are classified as actions in advanced stages and are included in
the table as such below. With respect to outstanding actions against Garlock and
Anchor that are in preliminary procedural stages, as well as any actions that
may be filed in the future, insufficient information exists upon which judgments
can be made as to the validity or ultimate disposition of such actions, thereby
making it difficult to reasonably estimate what, if any, potential liability or
costs may be incurred. Accordingly, no estimate of future liability has been
included in the table below for such claims.
Coltec records an accrual for liabilities related to Garlock and Anchor
asbestos-related matters that are deemed probable and can be reasonably
estimated, which consist of settled claims and actions in advanced stages of
processing. Coltec also records an asset equal to the amount of those
liabilities that is
49
expected to be recovered by insurance. A table is provided below depicting
quantitatively the items discussed above.
YEAR ENDED DECEMBER 31,
---------------------------
2001 2000 1999
------- ------- -------
(NUMBER OF CASES)
New actions filed during the period(1)...................... 37,600 36,200 30,200
Actions in advanced stages at period-end.................... 2,500 5,800 8,300
Open actions at period-end.................................. 95,400 96,300 96,000
(DOLLARS IN MILLIONS AT PERIOD-END)
Estimated liability for settled claims and actions in
advanced stages of processing(2).......................... $ 170.9 $ 231.2 $ 163.1
Estimated amounts recoverable from insurance(2)(3).......... $ 293.7 $ 285.7 $ 188.2
(DOLLARS IN MILLIONS)
Payments(2)................................................. $ 162.7 $ 119.7 $ 84.5
Insurance recoveries(2)..................................... 87.9 83.3 65.2
------- ------- -------
Net cash flow(3)............................................ $ (74.8) $ (36.4) $ (19.3)
------- ------- -------
------------------
(1) Consists only of actions actually filed with a court of competent
jurisdiction. To the extent that a particular action names both Garlock and
Anchor as defendants, for purposes of this table the action is treated as a
single action.
(2) Includes amounts with respect to all claims settled, whether or not an
action has actually been filed with a court of competent jurisdiction,
claims which have been dismissed or tried and claims otherwise closed during
the period.
(3) Payments made during the period for which Garlock does not receive a
corresponding insurance recovery due to the annual limit imposed under
Garlock's insurance policies will be recovered in future periods to the
extent insurance is available. When estimating the amounts recoverable,
Garlock only includes insurance coverage available from carriers believed to
be solvent.
As shown in the table above, the number of new actions filed during 2001
increased slightly over 2000, while the number of new actions filed during 2000
increased significantly over 1999. Coltec believes these increases represent an
acceleration of claims from future periods mostly attributable to bankruptcies
of other asbestos defendants. The acceleration of claims may have the impact of
accelerating the associated settlement payments. Coltec believes the number of
new actions will decrease in future years due, in part, to the
previously-described acceleration of future claims and because the largest
asbestos exposures occurred prior to the mid-1970s. However, Coltec cannot
assure you that the number of new claims filed will not remain at current levels
or increase in future years.
Garlock and Anchor recorded charges to operations amounting to
approximately $8.0 million in each of 2001, 2000 and 1999, representing payments
and related expenditures made during the periods which are not recoverable at
all under insurance, whether in the present period or in future periods.
Garlock and Anchor paid $74.8 million, $36.4 million and $19.3 million for
the defense and disposition of asbestos-related actions, net of amounts received
from insurance carriers, during 2001, 2000 and 1999, respectively. The amount of
payments in 2001 was consistent with the expectation that payments during 2001
would be higher than in 2000 and 1999. During 2001, Garlock was able to
negotiate the receipt of $10 million from one of its excess insurance carriers,
$7.5 million of which was received in the fourth quarter of 2001 and $2.5
million of which is expected to be received during the first quarter of 2002.
Garlock was able to securitize this cash flow stream during the third quarter of
2001 and we have reflected the cash received ($9.9 million) in the amounts
presented above.
Considering the foregoing, as well as the experience of Coltec's
subsidiaries and other defendants in asbestos litigation, the likely sharing of
judgments among multiple responsible defendants, recent
50
bankruptcies of other defendants, legislative efforts and given the substantial
amount of insurance coverage that Garlock expects to be available from its
solvent carriers, Coltec believes that pending actions against Garlock and
Anchor are not likely to have a material adverse effect on its financial
condition, but could be material to its results of operations or cash flows in a
given period. However, because of the uncertainty as to the number and timing of
potential future actions, as well as the amount that will have to be paid to
settle or satisfy any such actions in the future, Coltec cannot assure you that
those future actions will not have a material adverse effect on its financial
condition, results of operations and cash flows.
Other. Some of Coltec's subsidiaries (other than Garlock and Anchor) have
also been named as defendants in various actions by plaintiffs alleging injury
or death as a result of exposure to asbestos fibers. The number of claims to
date has not been significant and Coltec has substantial insurance coverage
available to it. Based on the above, Coltec believes that these pending and
reasonably anticipated future actions are not likely to have a material adverse
effect on its financial condition, results of operations and cash flows and are
therefore not discussed above.
Garlock, Anchor and some of Coltec's other subsidiaries are also defendants
in other asbestos-related lawsuits or claims involving maritime workers, medical
monitoring claimants and co-defendants. Based on Coltec's past experience, it
believes that these categories of claims are not likely to have a material
adverse effect on its financial condition, results of operations and cash flows
and are therefore not discussed above.
TRANSITION TO THE EURO
Coltec successfully addressed the many areas involved with the introduction
of the Euro on January 1, 2002, including information technology, business and
finance systems, as well as the impact on the pricing and distribution of
Coltec's products.
The effect of the introduction of the Euro, as well as any related costs of
conversion, did not have a material impact on Coltec's financial condition,
results of operations or cash flows.
NEW ACCOUNTING STANDARDS
In July 2001, the FASB issued Statement No. 141 "Business Combinations," or
SFAS 141, and Statement No. 142 "Goodwill and Other Intangible Assets," or SFAS
142. SFAS 141 is effective as follows: a) use of the pooling-of-interest method
is prohibited for business combinations initiated after June 30, 2001; and b)
the provisions of SFAS 141 also apply to all business combinations accounted for
by the purchase method that are completed after June 30, 2001. There are also
transition provisions that apply to business combinations completed before July
1, 2001, that were accounted for by the purchase method. SFAS 142 is effective
for fiscal years beginning after December 15, 2001 and applies to all goodwill
and other intangible assets recognized in an entity's statement of financial
condition at that date, regardless of when those assets were initially
recognized.
Coltec will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002 and for acquisitions
made subsequent to July 1, 2001. Application of the non-amortization provisions
of SFAS 142 is expected to result in an increase in pre-tax income of
approximately $4 million per year. During 2002, Coltec will perform the first of
the required impairment tests of goodwill and indefinite lived intangible assets
as of January 1, 2002 and has not yet determined what the effect of these tests
will be on Coltec's consolidated financial condition or results of operations.
In June 2001, the FASB issued Statement No. 143 "Accounting for Asset
Retirement Obligations," or SFAS 143. SFAS 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. Coltec has not yet determined what the effect of SFAS 143 will be on
its consolidated financial condition or results of operations.
51
In October 2001, the FASB issued Statement No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets," or SFAS 144. SFAS 144 supersedes
FASB Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," or SFAS 121; however, it retains the
fundamental provisions of that statement related to the recognition and
measurement of the impairment of long-lived assets to be "held and used." In
addition, SFAS 144 provides more guidance on estimating cash flows when
performing a recoverability test, requires that a long-lived asset (group) to be
disposed of other than by sale (e.g. abandoned) be classified as "held and used"
until it is disposed of, and establishes more restrictive criteria to classify
an asset (group) as "held for sale." SFAS 144 is effective for year-ends
beginning after December 15, 2001. Coltec has not yet determined what the effect
of SFAS 144 will be on its consolidated financial condition or results of
operations.
CRITICAL ACCOUNTING POLICIES
Coltec's discussion and analysis of its financial condition and results of
operations are based upon its consolidated financial statements that have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires Coltec to
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, Coltec evaluates its estimates, including
those related to product returns, bad debts, inventories, investments,
intangible assets, income taxes, financing operations, warranty obligations,
restructuring, pensions and other post-retirement benefits, and contingencies
and litigation. Coltec bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis of making judgments about the
carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates.
Coltec believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.
Revenue Recognition. Revenue from the sale of products is recognized when
title passes, which is at the time of shipment.
Asbestos. Coltec records an accrual for asbestos-related matters that are
deemed probable and can be reasonably estimated, which consist of settled claims
and actions in advanced stages of processing. Coltec also records an asset equal
to the amount of this liability that is expected to be recovered from insurance.
In accordance with internal procedures for the processing of asbestos
product liability actions and due to the proximity to trial or settlement,
certain outstanding actions progress to a stage where the cost to dispose of
these actions can be reasonably estimated. These actions are classified as
actions in advanced stages. With respect to outstanding actions that are in
preliminary procedural stages, as well as any actions that may be filed in the
future, insufficient information exists upon which judgments can be made as to
the validity or ultimate disposition of such actions, thereby making it
difficult to reasonably estimate what, if any, potential liability or costs may
be incurred. Accordingly, no estimate of future liability has been included for
such claims. See "Contingencies -- Asbestos" and Note V of the accompanying
consolidated financial statements for additional discussion of asbestos matters.
TIDES and Derivative Instruments and Hedging Activities. Following the
spin-off and until February 15, 2028, each TIDES will be convertible, at the
option of the holder, into a combination of 0.955248 of a share of Goodrich
common stock and 0.1910496 of a share of EnPro common stock, subject to
adjustment. Upon the adoption of Statement of Financial Accounting Standards No.
133, Coltec elected not to apply the provisions of the statement to embedded
derivatives existing before January 1, 1999 as permitted by the transition
provisions of the statement. As a result, the feature of the TIDES that allows
them to be converted into Goodrich common stock will not be accounted for
separately as a derivative. However, the call options on Goodrich common stock
purchased by Coltec in March 2002 to mitigate its economic risk created by the
conversion feature of the TIDES is a derivative instrument and will be
52
carried at fair value in Coltec's balance sheet with changes in the fair value
reflected currently in its earnings as other income (expense), net. Changes in
the fair value of the derivative could be material to Coltec's financial
condition and results of operations in a given period.
Coltec has purchased call options on 2,865,744 shares of Goodrich common
stock at a price of $52.34 per share, which represents the total Goodrich shares
that would be required if all TIDES holders convert. One-third of these call
options expire in March 2005, and the remainder expire in March 2007. Until they
expire, the call options will reduce Coltec's risk that the cash required to
finance conversions of the TIDES would exceed the $150 million liquidation
value.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Coltec is exposed to certain market risks as part of its ongoing business
operations, including risks from changes in interest rates and foreign currency
exchange rates, that could impact its financial condition, results of operations
and cash flows. Goodrich historically has managed these types of risks on our
behalf as part of its company-wide management of market risks. Coltec plans to
manage its exposure to these and other market risks through regular operating
and financing activities, and on a limited basis, through the use of derivative
financial instruments. Coltec intends to use such derivative financial
instruments as risk management tools and not for speculative investment
purposes.
Interest Rate Risk. Coltec is exposed to interest rate risk as a result of
its outstanding debt obligations. Coltec expects that its interest rate risk
profile will change substantially as a result of changes in the nature and
amount of its indebtedness made in connection with the spin-off and related
transactions, including the exchange offer.
The table below provides information about Coltec's current debt
obligations, without giving pro forma effect to the exchange offer. The table
represents principal cash flows and related weighted average interest rates by
expected (contractual) maturity dates.
EXPECTED MATURITY DATE
FAIR
2002 2003 2004 2005 2006 THEREAFTER TOTAL VALUE
---- ---- ---- ---- ---- ---------- ------ ------
(DOLLARS IN MILLIONS)
Debt:
Fixed Rate......................... $1.6 $0.4 $0.3 $0.2 $0.0 $312.1 $314.6 $330.0
Average Interest Rate.............. 1.2% 3.3% 3.3% 3.0% 3.0% 7.5% 7.4%
Foreign Currency Risk. Coltec is exposed to foreign currency risks that arise
from normal business operations. These risks include the translation of local
currency balances of its foreign subsidiaries, intercompany loans with foreign
subsidiaries and transactions denominated in foreign currencies. Coltec's
objective is to minimize its exposure to these risks through its normal
operating activities and, where appropriate, through foreign currency forward
contracts. In 2001, approximately 30% of its total sales consisted of sales
outside the United States, with approximately 20% of total sales denominated in
currencies other than the United States dollar. At December 31, 2001, Coltec had
no outstanding foreign currency forward contracts.
Risk Due to Convertibility of TIDES. Following the spin-off and until April
15, 2028, each TIDES will be convertible, at the option of the holder, into a
combination of 0.955248 of a share of Goodrich common stock and 0.1910496 of a
share of EnPro common stock, subject to adjustment. Should the holders exercise
their right to convert the TIDES, Coltec would be required to deliver shares of
Goodrich and EnPro common stock to the holders as promptly as practicable on or
after the conversion date and in connection therewith would be required to
purchase shares of Goodrich common stock on the open market, directly from
Goodrich or by exercising its call options on Goodrich common stock discussed
below. Coltec may not have sufficient cash on hand or the ability to finance
these transactions in the time period required by the agreements relating to the
TIDES. Failure to honor conversion rights would be a default under the TIDES
agreements.
53
Further, the value of Goodrich and EnPro common stock may increase to the
level where Coltec's cost to acquire shares in a conversion could exceed, with
no maximum, the aggregate liquidation value of the TIDES of $150 million. Coltec
has purchased call options on 2,865,744 shares of Goodrich common stock, which
represents the total Goodrich shares that would be required if all TIDES holders
convert. One-third of these call options expire in March 2005, and the remainder
expire in March 2007. Until they expire, the call options will reduce Coltec's
risk that the cash required to finance conversions of the TIDES would exceed the
$150 million liquidation value. While Coltec has the right to redeem the TIDES
for cash, at a premium to liquidation value of up to 3% and has hedged this
exposure as described above, Coltec cannot assure you that it will have the
financial resources to redeem these securities at a cost at or near the
liquidation value of the TIDES or effectively hedge this exposure beyond the
term of the call options.
The feature of the TIDES that allows them to be converted into Goodrich
common stock will not be accounted for separately as a derivative. However, the
call options on Goodrich common stock purchased by Coltec in March 2002 to
mitigate its economic risk created by the conversion feature of the TIDES is a
derivative instrument and will be carried at fair value in Coltec's balance
sheet with changes in the fair value reflected currently in its earnings as
other income (expense), net. Changes in the fair value of the call options will
not result in a current cash obligation to Coltec. The change in fair value of
the derivative could be material to Coltec's financial condition and results of
operations in a given period.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
When the spin-off is complete, Coltec will be a wholly-owned subsidiary of
EnPro, and the assets of EnPro will consist primarily of its equity interest in
Coltec and, potentially, its ownership of a portion of the old Coltec notes.
EnPro will enter into a distribution agreement and a number of ancillary
agreements with Goodrich for the purpose of accomplishing the spin-off. These
agreements will govern the relationship between Goodrich and EnPro (and,
therefore, Coltec) subsequent to the spin-off and provide for the allocation of
employee benefits, tax and other liabilities and obligations attributable to
periods prior to the distribution. The ancillary agreements will cover:
- services and support arrangements;
- employee matters;
- tax matters arrangements; and
- obligations in respect of the TIDES.
The material agreements summarized below will be filed as exhibits to this
prospectus and the summaries of these agreements are qualified in their entirety
by reference to the full text of such agreements. The terms of these agreements
have not yet been finalized and are being reviewed by EnPro and Goodrich. None
of these agreements will restrict either EnPro or Goodrich from developing or
acquiring products that may compete against the products offered by the other
party.
DISTRIBUTION AGREEMENT
Goodrich plans to enter into a distribution agreement with EnPro and Coltec
prior to the spin-off. The distribution agreement will set forth the agreements
between Goodrich and EnPro with respect to the principal corporate transactions
required to effect the distribution of shares of EnPro common stock to
Goodrich's shareholders and other agreements governing the relationship between
Goodrich and EnPro.
THE SPIN-OFF
The distribution agreement will provide that, subject to the terms and
conditions contained in the agreement, Goodrich and EnPro will take all
reasonable steps necessary and appropriate to cause all conditions to the
spin-off to be satisfied, and to effect the spin-off as of 11:59 p.m. Eastern
time on , 2002. Goodrich's agreement to complete the spin-off is
subject to the satisfaction or waiver by Goodrich, in its sole discretion, of a
number of conditions including the following:
- an opinion of tax counsel has been obtained and continues in effect, to
the effect that, among other things, the spin-off will qualify as a
tax-free distribution for U.S. federal income tax purposes under Section
355 of the Internal Revenue Code and the transfer to EnPro of the assets
and the assumption by EnPro of the liabilities in connection with the
spin-off will not result in recognition of any gain or loss for U.S.
federal income tax purposes to Goodrich's or EnPro's shareholders except
with respect to cash received in lieu of fractional shares of EnPro
common stock; and this opinion will be in form and substance satisfactory
to Goodrich, in its sole discretion;
- the transfer of Coltec's aerospace business to Goodrich shall have been
completed;
- any material governmental approvals and consents necessary to complete
the spin-off has been obtained and be in full force and effect;
- no order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the
completion of the spin-off is in effect, and no other event outside the
control of Goodrich has occurred or failed to occur that prevents the
completion of the spin-off; and
- no other events or developments have occurred that, in the judgment of
the board of directors of Goodrich, would result in the spin-off having
an adverse effect on Goodrich or Goodrich's shareholders.
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RELEASES AND INDEMNIFICATION
The distribution agreement will provide for a full and complete release and
discharge of all liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or before the
date of the agreement, between or among EnPro or any of its subsidiaries or
affiliates, on the one hand, and Goodrich or any of its subsidiaries or
affiliates other than EnPro, on the other hand, except as expressly set forth in
the agreement. The liabilities released or discharged will include liabilities
arising under any contractual agreements or arrangements existing or alleged to
exist between or among any such parties on or before the date of the agreement.
The distribution agreement will also provide that EnPro and Coltec, on the one
hand, and Goodrich, on the other hand, will indemnify each other with respect to
contingent liabilities primarily relating to their respective businesses or
otherwise assigned to each of them. Additionally, the distribution agreement
will also specify procedures with respect to claims subject to indemnification
and related matters.
TERMINATION; AMENDMENTS
The distribution agreement will provide that it may be terminated and the
spin-off may be amended, modified or abandoned at any time prior to the
distribution date in the sole discretion of Goodrich without the approval of the
Goodrich shareholders or of EnPro. In the event of a termination of the
distribution agreement, no party has any liability of any kind to any other
party or any other person. After the distribution date, the distribution
agreement will also provide that it may not be terminated except by an agreement
in writing signed by Goodrich, EnPro and Coltec.
TRANSITION SERVICES AGREEMENT
Goodrich and EnPro will enter into a transition services agreement pursuant
to which Goodrich will provide to EnPro, on a transitional basis, various
services, including, but not limited to, treasury administration, employee
benefits administration and information technology services. The agreed upon
charges for such services are generally intended to allow Goodrich to recover
fully the allocated costs of providing the services, plus all incremental
out-of-pocket costs and expenses directly related to the provision of such
services.
In general, the services will commence on the distribution date and will
expire on a specified date following the distribution date. The agreement may be
extended, either in whole or in part, by the parties in writing. With respect to
particular services, EnPro may terminate the agreement with respect to one or
more of those services upon prior written notice.
EMPLOYEE MATTERS AGREEMENT
Goodrich and EnPro will enter into an employee matters agreement to
allocate liabilities and responsibilities relating to employee compensation and
benefit plans and programs and other related matters.
The employee matters agreement will provide that as of the distribution
date, EnPro generally will assume, retain and be liable for all wages, salaries,
welfare, incentive compensation and other employee-related obligations and
liabilities for all current employees of EnPro's business, except as
specifically provided in the employee benefits agreement. Active employees of
EnPro's business generally participate in retirement plans maintained by Coltec.
These Coltec retirement plans will remain as part of EnPro's business and
EnPro's employees will remain covered by the plans. To the extent that any
employees of EnPro's business participate in retirement plans or other benefit
plans sponsored by Goodrich, such employees will cease to be active participants
in the Goodrich plans and will become eligible to participate in EnPro's
applicable plans as of a date to be specified for each applicable plan in the
employee matters agreement. In connection with the distribution, EnPro expects
to continue its retirement plans and it expects to adopt a variety of other
employee benefit plans for its employees, in both the U.S. and jurisdictions
outside of the U.S., comparable to the plans of Goodrich. Once EnPro establishes
its own
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benefit plans, EnPro may modify or terminate each plan in accordance with the
terms of that plan and its policies.
In general, Coltec will credit each active employee in its business for his
or her service with Goodrich for purposes of determining eligibility to
participate, eligibility for benefits, benefit forms and vesting under plans
maintained by Coltec, to the extent the corresponding Goodrich plans gave credit
for such service. In addition, Coltec expects to give credit under its plans for
deductibles, coinsurance payments, cafeteria plan deferrals and payments, and
other welfare benefit plan payments and credits applicable to Coltec's employees
while they were covered under a Goodrich plan, to the extent the corresponding
Goodrich plans would have given credit for such deferrals or payments.
For the most part, current retirees of Coltec's business receive, and will
continue to receive, pension benefits out of the Goodrich Pension Plan. However,
Coltec's subsidiaries will continue to sponsor two plans covering certain
union-represented employees at Garlock and Quincy Compressor, both of which
provide pension benefits to current retirees. To the extent any current retirees
are entitled to additional benefits, such as medical insurance or life
insurance, Goodrich will continue to provide those benefits except for retirees
of certain discontinued operations of Coltec (such as Crucible Inc. and Colt
Firearms) and retirees who receive pension benefits under the Garlock plan
referred to in the preceding sentence, for which the benefits will be provided
by Coltec or one of its subsidiaries. Coltec will also provide retiree medical
or life insurance benefits to any of Coltec's active employees upon their
retirement to the extent that the employee is entitled to such coverage.
TAX MATTERS ARRANGEMENTS
Goodrich and EnPro will enter into arrangements that govern Goodrich's and
EnPro's respective post-spin-off rights, responsibilities and obligations with
respect to taxes. Except as provided below, the tax matters arrangements will
provide that the benefits and burdens of all taxes and payments with respect to
taxes attributable to all periods prior to the spin-off, including periods prior
to Goodrich's acquisition of Coltec, will be for the account of Goodrich.
The tax matters arrangements will provide that EnPro is liable for taxes
incurred by Goodrich and Coltec if the spin-off and certain associated
restructuring activities are taxable to Goodrich and Coltec (i) as a result of
EnPro taking or failing to take, as the case may be, certain actions, or (ii) as
a result of certain acquisitions or issuances of EnPro's stock.
INDEMNIFICATION AGREEMENT
Coltec and Goodrich have guaranteed on a joint and several basis amounts
owed by Coltec Capital Trust with respect to the TIDES and Goodrich has
guaranteed Coltec's performance of its obligations with respect to the TIDES and
the TIDES Debentures. We expect that EnPro will enter into a similar guarantee
with respect to the TIDES and the TIDES Debentures. EnPro, Goodrich, Coltec and
Coltec Capital Trust will enter into an indemnification agreement that outlines
the obligations of the various parties with respect to the TIDES and under which
EnPro, Coltec and Coltec Capital Trust indemnify Goodrich from any costs and
liabilities arising under or related to the TIDES after the spin-off.
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DESCRIPTION OF NEW GOODRICH NOTES
The new Goodrich notes are senior obligations of Goodrich, issuable under
the Goodrich indenture and limited to $300 million aggregate principal amount,
and will mature on April 15, 2008. The following statements are subject to the
detailed provisions of the Trust Indenture Act of 1939, as amended ("TIA"), and
the Goodrich indenture, which is an exhibit to the registration statement of
which this prospectus forms a part. Wherever references are made to particular
provisions of the Goodrich indenture, those provisions or definitions are
incorporated by reference as a part of the statements.
Except as provided in the next sentence, each new Goodrich note will bear
interest at an annual rate of 7 1/2% from the most recent date to which interest
has been paid or provided for on the old Coltec notes, and will be payable
semiannually to new Goodrich noteholders of record at the close of business on
the April 1 or October 1 immediately preceding the interest payment date on
April 15 and October 15 of each year, commencing April 15, 2002. If the exchange
offer is completed after a record date for the payment of interest on the old
Coltec notes and before the payment date associated with that record date, then
the interest payable with respect to the first interest payment date after the
completion of the exchange offer will be paid to the person in whose name the
old Coltec note was registered on that record date. Interest on the new Goodrich
notes will be computed on the basis of a 360-day year of twelve 30-day months.
OPTIONAL REDEMPTION
The new Goodrich notes are redeemable, in whole or in part, at any time and
from time to time, at the option of Goodrich, at a redemption price equal to the
greater of (i) 100% of the principal amount of the new Goodrich notes being
redeemed and (ii) the sum of the present value of the remaining scheduled
payments of principal and interest on those new Goodrich notes from the
redemption date to the maturity date, discounted to the redemption date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the treasury rate (as defined below) plus 37.5 basis points, plus accrued
interest to the date of redemption.
For these purposes:
- "treasury rate" means, with respect to any redemption date for the new
Goodrich notes,
- the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Board of Governors of the Federal
Reserve System and which establishes yields on actively traded United
States Treasury securities adjusted to constant maturity under the
caption "Treasury Constant Maturities," for the maturity corresponding
to the comparable treasury issue (if no maturity is within three months
before or after the maturity date of the Goodrich notes, yields for the
two published maturities most closely corresponding to the comparable
treasury issue will be determined and the treasury rate will be
interpolated or extrapolated from such yields on a straight line basis,
rounding to the nearest month) or
- if the above release (or any successor release) is not published during
the week preceding the calculation date or does not contain the yield
described above, the rate per annum equal to the semi-annual equivalent
yield to maturity of the comparable treasury issue, calculated using a
price for the comparable treasury issue (expressed as a percentage of
its principal amount) equal to the comparable treasury price for the
applicable redemption date. The treasury rate will be calculated on the
third business day preceding the redemption date.
- "comparable treasury issue" means the United States Treasury security
selected by an independent investment banker as having a maturity
comparable to the remaining term of the new Goodrich notes to be redeemed
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining term of such new
Goodrich notes.
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- "independent investment banker" means one of the reference treasury
dealers appointed by the Trustee after consultation with Goodrich.
- "comparable treasury price" means, with respect to any redemption date
for the new Goodrich notes, (i) the average of four reference treasury
dealer quotations for that redemption date, after excluding the highest
and lowest reference treasury dealer quotations, or (ii) if the Trustee
obtains fewer than four reference treasury dealer quotations, the average
of all quotations.
- "reference treasury dealer" means each of CS First Boston, Citibank N.A.
and two other primary U.S. Government securities dealers in New York City
(each, a "primary treasury dealer") appointed by the Trustee in
consultation with Goodrich; provided, however, that if any dealer so
appointed ceases to be a primary treasury dealer, Goodrich will
substitute therefor another primary treasury dealer.
- "reference treasury dealer quotations" means, with respect to each
reference treasury dealer and any redemption date, the average, as
determined by the Trustee, of the bid and asked prices for the comparable
treasury issue (expressed in each case as a percentage of its principal
amount) quoted in writing to the Trustee by that reference treasury
dealer at 5:00 p.m. on the third business day preceding the applicable
redemption date.
Notice of any redemption will be mailed at least 30 days but no more than
60 days before the redemption date to each holder of new Goodrich notes to be
redeemed. Unless Goodrich defaults in payment of the redemption price, on and
after the redemption date interest will cease to accrue on the new Goodrich
notes or portions of the notes called for redemption.
Except as set forth above, the new Goodrich notes are not redeemable by
Goodrich prior to maturity and are not entitled to the benefit of any sinking
fund.
RANKING
The new Goodrich notes will be unsecured, unsubordinated indebtedness of
Goodrich and will rank on a parity with all other unsecured and unsubordinated
indebtedness of Goodrich. The new Goodrich notes are not guaranteed by any
subsidiary of Goodrich.
The new Goodrich notes will effectively rank junior to any of our and our
subsidiaries' secured indebtedness to the extent of the value of the assets
providing the security, and will also be structurally subordinated to the
unsecured obligations of our subsidiaries with regard to competing claims to the
assets of our subsidiaries. As of December 31, 2001, on a pro forma basis after
giving effect to the spin-off, Goodrich and our subsidiaries would have had
approximately $82 million of secured indebtedness, and our subsidiaries would
have had approximately $25 million of unsecured indebtedness. The Goodrich
indenture does not contain limitations on the amount of additional indebtedness,
whether senior or subordinated, which Goodrich may incur.
CERTAIN COVENANTS
The Goodrich indenture does not contain any restrictions on the declaration
of dividends or require the maintenance of any asset ratio or the creation or
maintenance of any reserves. The Goodrich indenture contains covenants,
including, among others, the following:
LIMITATION ON LIENS
Under the Goodrich indenture, Goodrich may not, nor may it permit any
Restricted Subsidiary (which we define below in "-- Definitions") to, incur,
issue, assume or guarantee any indebtedness for money borrowed or any other
indebtedness evidenced by notes, bonds, debentures or other similar evidences of
indebtedness for money borrowed (to which we refer in this prospectus as "Debt")
other than guarantees arising in connection with the sale, discount, guarantee
or pledge of notes, chattel mortgages, leases, accounts receivable, trade
acceptances and other paper arising, in the ordinary course of business,
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out of installment or conditional sales to or by, or transactions involving
title retention with, distributors, dealers or other customers, of merchandise,
equipment or services, secured by pledge of, or mortgage, deed of trust or other
lien on, any Principal Property (which we define below in "-- Definitions")
owned by Goodrich or any Restricted Subsidiary, or any shares of stock or Debt
of any Restricted Subsidiary (we refer to these pledges, mortgages, deeds of
trust and other liens as "Mortgage" or "Mortgages"), except any Debt so secured
on the date of issuance of the new Goodrich notes, without effectively providing
that the new Goodrich notes (together with, if Goodrich so determines, any other
Debt of Goodrich or Restricted Subsidiaries then existing or thereafter created
which is not subordinate to the new Goodrich notes) will be secured equally and
ratably with (or prior to) that secured Debt, and for as long as the secured
Debt is so secured. The prohibition in the preceding sentence will not be
applicable if, after giving effect to the newly secured Debt, the aggregate
principal amount of all such secured Debt which would otherwise be prohibited,
plus all Attributable Debt (which we define below in "-- Definitions") of the
Company and its Restricted Subsidiaries in respect of sale and leaseback
transactions (as described below) which would otherwise be prohibited by the
covenant limiting sale and leaseback transactions described below would not
exceed the sum of 10% of Consolidated Net Tangible Assets (which we define below
in "-- Definitions"). In addition, the restrictions on the incurrence of liens
do not apply to (and there will be excluded from secured Debt in any computation
under these restrictions) Debt secured by:
(i) Mortgages on property of, or on any shares of stock or Debt of,
any corporation existing at the time that corporation becomes a Restricted
Subsidiary;
(ii) Mortgages to secure indebtedness of any Restricted Subsidiary to
the Company or to another Restricted Subsidiary;
(iii) Mortgages for taxes, assessments or governmental charges or
levies in each case (a) not then due and delinquent or (b) the validity of
which is being contested in good faith by appropriate proceedings, and
materialmen's, mechanics', carriers', workmen's, repairmen's, landlord's or
other like Mortgages, or deposits to obtain the release of such Mortgages;
(iv) Mortgages arising under an order of attachment or distraint or
similar legal process so long as the execution or enforcement thereof is
effectively stayed and the claims secured thereby are being contested in
good faith;
(v) Mortgages to secure public or statutory obligations or to secure
payment of workmen's compensation or to secure performance in connection
with tenders, leases of real property, bids or contracts or to secure (or
in lieu of) surety or appeal bonds and Mortgages made in the ordinary
course of business for similar purposes;
(vi) Mortgages in favor of the United States of America or any State
thereof, or any department, agency or instrumentality or political
subdivision of the United States of America or any State thereof, or in
favor of any other country, or any political subdivision thereof, to secure
partial, progress, advance or other payments pursuant to any contract or
statute (including Debt of the Pollution Control or Industrial Revenue Bond
type) or to secure any indebtedness incurred for the purpose of financing
all or any part of the purchase price or the cost of construction of the
property subject to such Mortgages;
(vii) Mortgages on property (including any lease which should be
capitalized on the lessee's balance sheet in accordance with generally
accepted accounting principles), shares of stock or Debt existing at the
time of acquisition thereof (including acquisition through merger or
consolidation or through purchase or transfer of the properties of a
corporation as an entirety or substantially as an entirety) or to secure
the payment of all or any part of the purchase price or construction cost
or improvement cost thereof or to secure any Debt incurred prior to, at the
time of, or within one year after, the acquisition of such property or
shares or Debt or the completion of any such construction (including any
improvements on an existing property) or the commencement of commercial
operation of such property, whichever is later, for the purpose of
financing all or any part of the purchase price or construction cost
thereof;
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(viii) Mortgages existing as of May 1, 1991; and
(ix) any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Mortgage referred
to in the foregoing clauses (i) to (viii), inclusive; provided, however,
that (a) the extension, renewal or replacement Mortgage will be limited to
all or a part of the same property, shares of stock or Debt that secured
the Mortgage extended, renewed or replaced (plus improvements on the
property) and (b) the Debt secured by the Mortgage at that time is not
increased.
LIMITATION ON SALE AND LEASE-BACK TRANSACTIONS
For the benefit of holders of the new Goodrich notes, Goodrich will not,
nor will it permit any Restricted Subsidiary to, enter into any arrangement with
any bank, insurance company or other lender or investor (not including Goodrich
or any Restricted Subsidiary) or to which any lender or investor is a party,
providing for the leasing by the Company or any such Restricted Subsidiary for a
period in excess of three years (including renewals), of any Principal Property
owned by Goodrich or a Restricted Subsidiary which has been or is to be sold or
transferred more than one year after the acquisition of that Principal Property
or after the completion of construction and commencement of full operation of
that Principal Property, by Goodrich or any Restricted Subsidiary to that lender
or investor or to any person to whom funds have been or are to be advanced by
that lender or investor on the security of that Principal Property (which we
refer to as a "sale and leaseback transaction") unless either:
(i) Goodrich or the Restricted Subsidiary could create Debt secured by
a Mortgage on the Principal Property to be leased back in an amount equal
to the Attributable Debt with respect to the sale and leaseback transaction
without equally and ratably securing the Debt Securities of all series
pursuant to the provisions of the covenant on limitation on liens described
above (which provisions include the exceptions set forth in clauses (i)
through (ix) of such covenant) or
(ii) Within 270 days after the sale or transfer has been made by
Goodrich or by any Restricted Subsidiary, Goodrich applies an amount equal
to the greater of (a) the net proceeds of the sale of the Principal
Property sold and leased back pursuant to that arrangement or (b) the fair
market value of the Principal Property so sold and leased back at the time
of entering into that arrangement (as determined by any two of the
following: the chairman of the Board of Directors of Goodrich, its
president, any vice president, its treasurer and its controller) to (x) the
purchase of property, facilities or equipment (other than the property,
facilities or equipment involved in that sale) having a value at least
equal to the net proceeds of that sale or (y) the retirement of Funded Debt
of Goodrich (and any retirement of new Goodrich notes under this provision
will not be deemed to constitute a refunding operation or anticipated
refunding operation for the purposes of any provision restricting any
refunding operations with moneys borrowed having an interest cost to
Goodrich in excess of a certain amount with respect to the new Goodrich
notes); provided, however, that the amount to be applied to the retirement
of Funded Debt of Goodrich will be reduced by (a) the principal amount of
any new Goodrich notes delivered within 270 days after such sale to the
Trustee for retirement and cancellation and (b) the principal amount of
Funded Debt, other than the new Goodrich notes, voluntarily retired by the
Company within 270 days after such sale.
Notwithstanding the foregoing, no retirement referred to in clause (ii) may be
effected by payment at maturity or pursuant to any mandatory sinking fund
payment or any mandatory prepayment provision.
ABSENCE OF CERTAIN OTHER RESTRICTIONS
The Goodrich indenture does not contain (i) any restrictions on the
declaration of dividends; (ii) any requirements concerning the maintenance of
any asset or interest coverage ratio; or (iii) any requirement for the creation
or maintenance of reserves.
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MERGER, CONSOLIDATION OR SALE OF ASSETS
The Goodrich indenture permits Goodrich to consolidate or merge with or
into any other entity or entities, or to sell, convey or lease all or
substantially all of its property to any other entity authorized to acquire and
operate the same. For a consolidation, merger, sale, conveyance or lease
described in the preceding sentence to be permissible, however, (i) the Person
(if other than Goodrich) formed by any consolidation, or into which Goodrich is
merged or which acquires or leases substantially all of the property of
Goodrich, expressly assumes the Company's obligations on the Debt Securities and
under the Indenture, and (ii) Goodrich or the successor entity may not
immediately after the consolidation merger, sale, conveyance or lease be in
default in the performance of any covenant or condition of the Goodrich
indenture.
DEFAULTS
As to the new Goodrich notes, an Event of Default is defined in the
Goodrich indenture as:
(a) default in the payment of any installment of interest on the new
Goodrich notes and the continuance of such default for a period of 10 days;
(b) default in the payment of the principal of (and premium, if any,
on) any of the new Goodrich notes when due, whether at maturity, upon
redemption, by declaration or otherwise;
(c) default by Goodrich in the performance of any other covenant or
agreement contained in the Goodrich indenture for the benefit of the new
Goodrich notes and the continuance of that default for a period of 90 days
after written notice has been given as provided in the Goodrich indenture;
(d) acceleration of any indebtedness for money borrowed by Goodrich in
excess of $50,000,000 under the terms of the instrument under or by which
that indebtedness is issued, evidenced or secured if the acceleration is
not rescinded or annulled within 10 days after written notice as provided
in the Goodrich indenture; and
(e) certain events of bankruptcy, insolvency and reorganization of
Goodrich.
The Trustee is required, within 90 days after the occurrence of a default
with respect to the Goodrich notes, to give all holders of new Goodrich notes
then outstanding notice of all uncured defaults known to it (the term default to
mean the events specified above without grace periods); provided that, except in
the case of a default in the payment of principal (and premium, if any) or
interest, if any, on any new Goodrich note, the Trustee will be protected in
withholding this notice if it in good faith determines that the withholding of
this notice is in the interest of all holders of new Goodrich notes then
outstanding.
The Goodrich indenture provides that, if an Event of Default occurs and is
continuing, either the Trustee or the holders of at least 25% in aggregate
principal amount (calculated as provided in the Goodrich indenture) of the new
Goodrich notes then outstanding may declare the principal of the new Goodrich
notes and the interest accrued thereon, if any, to be due and payable
immediately.
A declaration of default may be annulled and past defaults (except for
defaults in the payment of principal (or premium, if any) or interest, if any,
on such new Goodrich notes that are not cured earlier) may be waived by the
holders of not less than a majority in aggregate principal amount (calculated as
provided in the Goodrich indenture) of the new Goodrich notes then outstanding,
provided that certain conditions, described in detail in the Goodrich indenture,
are met.
The TIA requires that Goodrich file with the Trustee annually a written
statement as to the presence or absence of certain defaults under the terms of
the Goodrich indenture.
The Goodrich indenture provides that, if a default or an Event of Default
occurs and is continuing, the holders of not less than a majority in aggregate
principal amount (calculated as provided in the Goodrich indenture) of the new
Goodrich notes then outstanding have the right to direct the time, method and
place of conducting any proceeding or remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee by the Goodrich indenture
with respect to the new Goodrich notes.
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The Goodrich indenture provides that the Trustee is under no obligation to
exercise any of the rights or powers vested in it by the Goodrich indenture at
the direction of the holders of new Goodrich notes unless those holders offer to
the Trustee reasonable security or indemnity against expenses and liabilities.
MODIFICATION OF THE INDENTURE
The Goodrich indenture contains provisions permitting Goodrich and the
Trustee, with the consent of the holders of not less than a majority in
aggregate principal amount (calculated as provided in the Goodrich indenture) of
the outstanding debt securities of all series issued under the Goodrich
indenture and affected by such modification (all such series voting as a single
class), to modify the Goodrich indenture or any supplemental indenture or the
rights of the holders of the debt securities issued under the Goodrich indenture
including the new Goodrich notes); provided that no modification may
(i) extend the fixed maturity of any debt security, or reduce the
principal or premium amount thereof, or reduce the rate or extend the time
of payment of interest thereon, or make the principal amount thereof or
interest or premium thereon payable in any coin or currency other than that
provided in the debt security, or reduce the portion of the principal
amount of an original issue discount debt security due and payable upon
acceleration of the maturity thereof or the portion of the principal amount
thereof provable in bankruptcy, or reduce any amount payable upon
redemption of any debt security, or reduce the overdue rate thereof, or
impair, if the debt securities provide therefor, any right of repayment at
the option of the holder of a debt security, without the consent of the
holder of each debt security so affected; or
(ii) reduce the percentage of debt securities the consent of the
holders of which is required for any such modification, without the consent
of the holder of each debt security so affected.
The Goodrich indenture also permits Goodrich and the Trustee to amend the
Goodrich indenture without the consent of the holders of the Goodrich notes to
evidence the merger of Goodrich or the replacement of the Trustee, to cure
ambiguities, and for some other customary purposes.
DEFEASANCE AND DISCHARGE
The Goodrich indenture provides that Goodrich will be discharged from any
and all obligations in respect of the new Goodrich notes (except for certain
obligations to register the transfer or exchange of the new Goodrich notes, to
replace stolen, lost or mutilated new Goodrich notes, to maintain paying
agencies, and to hold monies for payment in trust), upon the deposit with the
Trustee, in trust, of money and/or U.S. Government Obligations (as defined in
the Goodrich indenture) which through the payment of interest and principal in
respect of these monies or obligations in accordance with their terms will
provide money in an amount sufficient to pay the principal of and each
installment of interest on the new Goodrich notes on the stated maturity of the
payments in accordance with the terms of the Goodrich indenture and the new
Goodrich notes. Such a trust may only be established if, among other things,
Goodrich delivers to the Trustee an opinion of counsel (who may be counsel to
Goodrich) stating that either (i) Goodrich has received from, or there has been
published by, the Internal Revenue Service a ruling or (ii) since the date of
the Goodrich indenture there has been a change in the applicable Federal income
tax law, in either case to the effect that holders of the new Goodrich notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to federal
income tax on the same amount and in the same manner and at the same times, as
would have been the case if such deposit, defeasance and discharge had not
occurred.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT
The Goodrich indenture provides that the Company may omit to comply with
the limitations on liens and sales-leaseback transactions described above, and
the event of default described in clause (c) under the caption "Events of
Default" above, and this noncompliance will not be deemed to be an Event of
Default under the Goodrich indenture and the new Goodrich notes, upon the
deposit with the Trustee, in trust, of money and/or U.S. Government Obligations
(as defined in the Goodrich indenture) which
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through the payment of interest and principal in respect of these monies and
obligations in accordance with their terms will provide money in an amount
sufficient to pay the principal of and each installment of interest on the new
Goodrich notes on the stated maturity of the payments in accordance with the
terms of the Goodrich indenture and the new Goodrich notes. The obligations of
Goodrich under the Goodrich indenture and the new Goodrich notes, other than
with respect to the covenants referred to above, and the Events of Default,
other than the Event of Default referred to above, will remain in full force and
effect. Such a trust may only be established if, among other things, the Company
has delivered to the Trustee an opinion of counsel (who may be counsel to the
Company) to the effect that the holders of the new Goodrich notes will not
recognize income, gain, or loss for federal income tax purposes as a result of
the deposit and defeasance of covenants and Events of Default and will be
subject to federal income tax on the same amounts and in the same manner and at
the same times, as would have been the case if such deposit and defeasance had
not occurred.
In the event Goodrich exercises its option to omit compliance with the
covenants and obligations of the new Goodrich notes with respect to the new
Goodrich notes as described in the preceding paragraph and the new Goodrich
notes are declared due and payable because of the occurrence of any Event of
Default other than an Event of Default described in clause (c) under the caption
"Defaults" above, the amount of money and U.S. Government Obligations on deposit
with the Trustee will be sufficient to pay amounts due on the new Goodrich notes
at the time of their stated maturity but may not be sufficient to pay amounts
due on the new Goodrich notes at the time of the acceleration resulting from
such Event of Default.
CONCERNING THE TRUSTEE
Goodrich maintains deposit accounts and conducts other banking transactions
with the Trustee in the ordinary course of Goodrich's business.
GOVERNING LAW
The Goodrich indenture provides that it and the new Goodrich notes will be
governed by, and construed in accordance with, the laws of the state of New
York.
BOOK-ENTRY, DELIVERY AND FORM
The new Goodrich notes may be issued in the form of one or more global
certificates registered in the name of a depositary or a nominee of the
depositary, The Depository Trust Company ("DTC"). Goodrich has been informed by
DTC that its nominee will be Cede & Co. ("Cede"). Accordingly, Cede is expected
to be the initial registered holder of the new Goodrich notes when they are
issued in global form. No person that acquires an interest in new Goodrich notes
will be entitled to receive a certificate representing that person's interest in
the new Goodrich notes except as set forth in this prospectus. Unless and until
definitive new Goodrich notes are issued under the limited circumstances
described in this prospectus, all references to actions by holders of new
Goodrich notes issued in global form will refer to actions taken by DTC upon
instructions from its Participants (as defined below), and all references in
this prospectus to payments and notices to those holders will refer to payments
and notices to DTC or Cede, as the registered holder of the new Goodrich notes.
DTC has informed Goodrich that it is a limited purpose trust company
organized under the New York Banking Law and a "banking organization" within the
meaning of the New York Banking Law, that it is a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to Section 17A of
the Exchange Act, and that it was created to hold securities for its
participating organizations (which we refer to as "Participants") and to
facilitate the clearance and settlement of securities transactions among
Participants through electronic book-entry, thereby eliminating the need for
physical movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations, and may include
certain other organizations. Indirect access to the DTC system also is
64
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly (which we refer to as "Indirect Participants").
Holders that are not Participants or Indirect Participants but that desire
to purchase, sell or otherwise transfer ownership of, or other interests in, new
Goodrich notes may do so only through Participants and Indirect Participants.
Under a book-entry format, holders may experience some delay in their receipt of
payments, as such payments will be forwarded by the agent designated by Goodrich
to Cede, as nominee for DTC. DTC will forward these payments to its
Participants, which then will forward them to Indirect Participants or holders.
Holders that are not Participants will be permitted to exercise their rights as
such only indirectly through and subject to the procedures of Participants and,
if applicable, Indirect Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations as currently in effect, DTC will be required to make book-entry
transfers of new Goodrich notes among Participants and to receive and transmit
payments to Participants. Participants and Indirect Participants with which
holders have accounts with respect to the new Goodrich notes similarly are
required by DTC's rules to make book-entry transfers and receive and transmit
such payments on behalf of their respective holders. Because DTC can act only on
behalf of Participants, which in turn act only on behalf of holders or Indirect
Participants, and on behalf of certain banks, trust companies and other persons
approved by it, the ability of a holder to pledge new Goodrich notes to persons
or entities that do not participate in the DTC system, or to otherwise act with
respect to such Debt Securities, may be limited due to the absence of physical
certificates for the new Goodrich notes.
DTC has advised Goodrich that DTC will take any action permitted to be
taken by a registered holder of any new Goodrich note under the Goodrich
indenture or the terms of the new Goodrich notes only at the direction of one or
more Participants to whose accounts with DTC the new Goodrich notes are
credited.
A global security will be exchangeable for the new Goodrich notes in the
names of persons other than DTC or its nominee only if
(i) DTC notifies Goodrich that it is unwilling or unable to continue
as depositary for the global security or if at any time DTC ceases to be a
clearing agency registered under the Exchange Act at a time when DTC is
required to be so registered in order to act as depository,
(ii) the Company determines that the global security will be so
exchangeable or
(iii) an Event of Default has occurred and is continuing with respect
to the new Goodrich notes.
Any global security that is exchangeable pursuant to the preceding sentence will
be exchangeable for definitive new Goodrich notes registered in such names as
DTC directs.
Upon the occurrence of any event described in the immediately preceding
paragraph, DTC is generally required to notify all Participants of the
availability of definitive new Goodrich notes. Upon surrender by DTC of the
global security representing the new Goodrich notes and delivery of instructions
for re-registration, the Trustee or Depositary or the applicable registrar, as
the case may be, will reissue the new Goodrich notes as definitive new Goodrich
notes, and thereafter such Trustee, Depositary or registrar will recognize the
holders of such definitive new Goodrich notes as registered holders of new
Goodrich notes entitled to the benefits of the Goodrich indenture.
Except as described above, a global security may not be transferred except
as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another
nominee of DTC or to a successor depositary appointed by Goodrich. Except as
described above, DTC may not sell, assign, transfer or otherwise convey any
beneficial interest in a global security evidencing all or part of the new
Goodrich notes unless the beneficial interest is in an amount equal to an
authorized denomination for the new Goodrich notes.
65
DEFINITIONS
For the purposes of this "Description of New Goodrich Notes" section, the
following terms have the following meanings:
"Attributable Debt" means, as to any particular lease under which Goodrich
is at the time liable, at any date as of which the amount thereof is to be
determined, the lesser of (i) the fair value of the property subject to the
lease (as determined by certain officers of Goodrich as set forth in the
Goodrich indenture) or (ii) the total net amount of rent required to be paid by
Goodrich under the lease during the remaining term of the lease, discounted from
the respective due dates of the lease to such date at the rate of interest per
annum implicit in the terms of the lease, as determined by those officers of
Goodrich set forth in the Goodrich indenture, compounded semiannually. The net
amount of rent required to be paid under any such lease for any such period will
be the amount of the rent payable by the lessee with respect to that period,
after excluding amounts required to be paid on account of maintenance and
repairs, insurance, taxes, assessments, water rates and similar charges. In the
case of any lease which is terminable by the lessee upon the payment of a
penalty, this net amount will also include the amount of such penalty, but no
rent may be considered as required to be paid under the lease subsequent to the
first date upon which it may be so terminated.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) after deducting
(i) all current liabilities (excluding any which are by their terms extendible
or renewable at the option of the obligor to a time more than 12 months after
the time as of which the amount thereof is being computed and excluding current
maturities of long-term indebtedness and capital lease obligations) and (ii) all
goodwill, all as shown in the audited consolidated balance sheet of Goodrich and
its Subsidiaries contained in Goodrich's then most recent annual report to
stockholders.
"Funded Debt" means all indebtedness for money borrowed having a maturity
of more than 12 months from the date as of which the amount of Funded Debt is to
be determined or having a maturity of less than 12 months but by its terms being
renewable or extendible beyond 12 months from such date at the option of the
borrower.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Principal Property" means any building, structure or other facility,
together with the land upon which it is erected and fixtures comprising a part
of the property, used primarily for manufacturing and located in the United
States of America, in each case the net book value of which on the date as of
which the determination is being made exceeds 3% of Consolidated Net Tangible
Assets; provided, however, that Principal Property does not include (i) any
building, structure or facility which, in the opinion of the Board of Directors
of Goodrich, is not of material importance to the total business conducted by
Goodrich and its Subsidiaries as an entirety or (ii) any portion of a particular
building, structure or facility which, in the opinion of Goodrich, is not of
material importance to the use or operation of the building, structure or
facility.
"Restricted Subsidiary" means any Subsidiary (i) substantially all of the
property of which is located, or substantially all of the business of which is
carried on, within the United States of America and (ii) which owns a Principal
Property; provided, however, that Restricted Subsidiary may not include any
Subsidiary the primary business of which consists of financing operations in
connection with leasing and conditional sales transactions on behalf of the
Company and its Subsidiaries, and/or purchasing accounts receivable and/or
making loans secured by accounts receivable or inventory, or which is otherwise
primarily engaged in the business of a finance company.
"Subsidiary" means any corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power for the
election of directors of the corporation (irrespective of whether or not at the
time stock of any other class or classes of the corporation have or might have
voting power by reason of the happening of any contingency) is at the time
directly or indirectly owned by Goodrich, or by one or more other Subsidiaries,
or by Goodrich and one or more other Subsidiaries.
66
COMPARISON OF TERMS OF NOTES
The following is a summary comparison of the material terms of the new
Goodrich notes and the old Coltec notes. This summary does not purport to be
complete and is qualified in its entirety by reference to the Goodrich indenture
and the form of new Goodrich notes, which have been filed as exhibits to the
registration statement of which this prospectus forms a part, and the Coltec
indenture and the old Coltec notes. For a more detailed description of the new
Goodrich notes, see "Description of New Goodrich Notes" starting on page 58.
OLD COLTEC NOTES NEW GOODRICH NOTES
---------------- ------------------
ISSUER......................... Coltec Industries Inc Goodrich Corporation
PRINCIPAL AMOUNT OUTSTANDING
(AGGREGATE).................. $300 million Up to $300 million, exchanged in a 1:1
ratio with old Coltec notes tendered in
this exchange offer.
INTEREST RATE.................. 7 1/2% per annum 7 1/2% per annum
PAYMENT FREQUENCY.............. Semi-annual, payable on April 15 and Semi-annual, payable on April 15 and
October 15 of each year, up to October 15 of each year, up to
maturity. maturity. Interest on the new Goodrich
notes will accrue from the last
interest payment date on which interest
was paid on the old Coltec notes
surrendered in exchange. If the
exchange offer is completed after a
record date for the payment of interest
on the old Coltec notes and before the
payment date associated with that
record date, then the interest payable
with respect to the first interest
payment date after the completion of
the exchange offer will be paid to the
person in whose name the old Coltec
note was registered on that record
date.
MATURITY....................... April 15, 2008 April 15, 2008
OPTIONAL REDEMPTION............ Redeemable, in whole or in part, at any Redeemable, in whole or in part, at any
time or from time to time, at the time or from time to time, at the
option of Coltec, at a redemption price option of Goodrich, at a redemption
equal to the greater of (1) 100% of the price calculated utilizing the same
principal amount of the old Coltec formula as that applicable for the old
notes being redeemed and (2) the sum of Coltec notes.
the present value of the remaining
scheduled payments of principal and
interest thereon from the redemption
date to the maturity date, discounted
to the redemption date at a specified
treasury rate plus 37.5 basis points,
plus accrued interest to the date of
redemption. The old Coltec notes are
not entitled to the benefit of any
sinking fund.
SENIORITY...................... The old Coltec notes are currently The new Goodrich notes will be
unsecured unsubordinated obligations of unsecured, unsubordinated indebtedness,
Coltec, ranking equally with all of and will rank equally with all of
Coltec's other unsecured and Goodrich's other unsecured and
unsubordinated indebtedness. unsubordinated indebtedness.
LIMITATION ON LIENS............ Under the old Coltec indenture, Coltec Under the Goodrich indenture Goodrich
agrees not to create or incur any lien agrees not to create or incur any lien
on any of its assets in order to secure on any Principal Property (as defined
any indebtedness of Coltec, without in "Description of New Goodrich Notes")
effectively providing that the old owned by Goodrich or a Restricted
Coltec notes will be equally and Subsidiary (as defined in "Description
ratably secured
67
OLD COLTEC NOTES NEW GOODRICH NOTES
---------------- ------------------
until such time as such indebtedness is of New Goodrich Notes") without
no longer secured by such lien. securing the new Goodrich notes equally
and ratably.
This restriction does not apply to (1)
pre-existing liens, (2) liens securing Restriction does not apply to (1) pre-
certain intercompany indebtedness, (3) existing liens, (2) liens to secure
certain customarily permitted liens, certain intercompany indebtedness, (3)
and (4) any extensions of the above. certain customarily permitted liens,
and (4) any extensions of the above.
Notwithstanding the foregoing and the
covenant described under "Lease-Back Notwithstanding this restriction and
Transactions" below, Coltec may, the restriction on sales and lease-back
without securing any of the new Coltec transactions, Goodrich may, without
notes, create or incur liens securing securing the new Goodrich notes equally
debt ("exempted debt") if the aggregate and ratably, create and incur liens
amount of exempted debt does not exceed securing debt ("exempted debt") if the
the greater of (x) $100 million and (y) aggregate amount of exempted debt,
15% of Coltec's consolidated net assets including exempted transactions under
(as that term is defined in the old the "Lease-Back Transactions"
Coltec indenture). provisions described below, is less
than 10% of Goodrich's Consolidated Net
Tangible Assets.
"Consolidated Net Tangible Assets" is
defined as the total amount of assets
(minus applicable reserves and
deductibles) minus (1) all current
liabilities (excluding (a) certain
renewable liabilities, (b) current
maturities of long-term indebtedness
and (c) capital lease obligations) and
(2) all goodwill.
LIMITATIONS ON SALES AND
LEASEBACKS................... Under the old Coltec indenture Coltec The Goodrich indenture provides that
agrees not to enter into any sale and neither Goodrich nor any Restricted
lease-back transaction for the sale and Subsidiary may enter into most sale and
leasing back of any property or asset, lease-back transactions involving any
whether now owned or hereafter Principal Property which has been or is
acquired, of Coltec or any of its to be sold or transferred by Goodrich
subsidiaries. or such Restricted Subsidiary, unless
either (1) Goodrich could have created
This restriction does not apply to a debt secured by a mortgage on the
transactions (1) entered into prior to Principal Property without violating
the closing date, (2) for the sale and the limitation on liens covenant
leasing back of any property or asset described above, or (2) Goodrich
by a subsidiary to Goodrich, (3) applies within 270 days the greater of
involving leases for less than three the net proceeds of the transaction and
years, (4) in which the lease for the the fair market value of the Principal
property or asset is entered into Property to the purchase of property of
within 180 days after the later of the equally value, or to the repayment of
date of acquisition, completion of some types of debt.
construction or commencement or full
operations of such property or asset,
(5) where Coltec would be permitted to
incur a lien on the assets to be
disposed under the restriction on liens
above, or (6) where the proceeds of the
sale are applied to the purchase of
assets of equal value or the retirement
of debt.
MERGERS AND CONSOLIDATIONS..... The old Coltec indenture permits Coltec The Goodrich indenture permits Goodrich
to consolidate with or sell or lease to consolidate or merge with or into
its assets as, or substantially as, an another entity, or to sell, convey or
entirety, to, or merge with or into, lease all or substantially all of
any other entity without the consent of Goodrich's property to another entity,
the holders of any outstanding old provided that the successor assumes the
Coltec notes,
68
OLD COLTEC NOTES NEW GOODRICH NOTES
---------------- ------------------
provided that the successor assumes the obligations of the Goodrich indenture.
obligations of the old Coltec
indenture.
OTHER RESTRICTIONS............. The old Coltec indenture does not The Goodrich indenture also does not
contain (1) any restrictions on the contain (1) any restrictions on the
declaration of dividends; (2) any declaration of dividends; (2) any
requirements concerning the maintenance requirements concerning the maintenance
of any asset ratio; or (3) any of any asset ratio; or (3) any
requirement for the creation or requirement for the creation or
maintenance of reserves. maintenance of reserves.
EVENTS OF DEFAULT.............. Events of default is defined in the old Events of default are defined pursuant
Coltec indenture as any of the to the Goodrich indenture as any of the
following: following:
- a default in any payment of interest - a failure to pay any installment of
on the old Coltec notes when due, interest on the new Goodrich notes
that continues for 30 days; that continues for a period of 10
days;
- a default in the payment of principal
when due at its stated maturity, upon - a failure to pay the principal and
declaration or otherwise; premium, if any, on the new Goodrich
notes;
- the failure to comply with the
successor obligor clause; - a failure to perform any other
covenant or agreement in the Goodrich
- the failure by Coltec to comply with indenture that continues for 90 days
any of its obligations under the after we have been given written
restrictive covenants within 60 days notice of such failure;
after receiving notice of its failure
to do so; - an acceleration of a Goodrich debt
with a principal amount of more than
- the failure to pay any indebtedness $50 million that is not rescinded or
within any applicable grace period annulled within 10 days after written
after final maturity or the notice of such acceleration; and
acceleration of any such indebtedness
by the holders thereof because of a - certain events of bankruptcy,
default if the total amount of such insolvency and reorganization of
which we refer to as indebtedness Goodrich.
unpaid or accelerated exceeds $30
million or its foreign currency
equivalent;
- certain events of bankruptcy,
insolvency or reorganization of
Coltec; and
- any judgment or decree for the
payment of money in excess of $30
million is rendered for a period of
60 days following such judgment and
is not discharged, waived or stayed
within 30 days after notice.
EFFECTS OF DEFAULT; CURE
PERIODS...................... If an event of default occurs and is If an event of default occurs and
continuing, the old Coltec notes continues, either the Trustee or the
trustee or the holders of at least 25% holders of at least 25% in aggregate
in aggregate principal amount of the principal amount of the new Goodrich
outstanding old Coltec notes may notes may declare the principal of the
declare the principal of and accrued new Goodrich notes and the accrued
but unpaid interest on all the old interest, if any, to be due and payable
Coltec notes to be due and payable. immediately. If this happens, subject
Upon such a declaration, such principal to certain conditions, the holders of a
and interest will be due and payable majority of the aggregate principal
immediately. The holders of a majority amount of the new Goodrich notes can
in aggregate principal amount of the annul the declaration of acceleration
outstanding old Coltec notes may and waive past defaults.
rescind any such acceleration with
respect to the old Coltec notes and its
consequences, provide some conditions
set forth in the old Coltec indenture
are met.
69
OLD COLTEC NOTES NEW GOODRICH NOTES
---------------- ------------------
CHANGES TO THE INDENTURE....... In general, the old Coltec indenture Some supplemental indentures, including
may be amended with the consent of the those relating to curing ambiguities
holders of at least a majority in and evidencing successor corporations
principal amount of the notes then to Goodrich, may be entered into by
outstanding and any past default or Goodrich and the trustee without the
compliance with any provisions may be approval of the holders. A supplemental
waived with the consent of the holders indenture amending or deleting
of a majority in principal amount of provisions to the new Goodrich
the old Coltec notes then outstanding. indenture to the detriment of the
However, without the consent of each holders may be entered into by Goodrich
holder of an outstanding note affected, and the trustee with the approval of
no amendment may, among other things: not less than 50% in principal amount
of the outstanding classes of debt
- reduce the amount of notes whose securities affected by the change.
holders must consent to an amendment; However, unless the approval of each
affected holder is obtained, no
- reduce the rate of or extend the time supplemental indenture may be adopted
for payment of interest on any note; that affects:
- reduce the principal of or extend the - the fixed maturity;
stated maturity of any note;
- the principal or premium amount;
- reduce the premium payable upon any
redemption of any note or change the - the rate or the time of payment of
time at which any note may be interest; the currency;
redeemed;
- the portion of the principal amount
- make any note payable in money other of a new Goodrich note provable in
than that stated in the note; bankruptcy;
- impair the right of any holder to - amounts payable upon redemption; the
receive payment of principal of and overdue rate; any right of repayment
interest on such holder's notes on or at the option of the holder of a new
after the due dates therefor or to Goodrich note; or
institute suit for the enforcement of
any payment on or with respect to - the percentage of principal amount of
such holder's notes; the outstanding new Goodrich notes
the holders of which may change the
- make any changes that would affect terms discussed above.
the ranking of the notes; or
- make any change in the amendment
provisions which require each
holder's consent or in the waiver
provisions.
CLASS VOTING................... The holders of the old Coltec notes Goodrich is permitted to issue multiple
vote together as a single class on series of debt securities under the
occasions where a vote of the old Goodrich indenture, and there is
Coltec noteholders is required. presently $899 million principal amount
of debt securities outstanding under
the Goodrich indenture. Some options
available to holders of debt securities
under the Goodrich indenture, such as
the approval of supplemental indentures
reducing the scope of the restrictive
covenant under the Goodrich indenture,
require the vote of holders of a
majority principal amount of the debt
securities outstanding under the
Goodrich indenture, voting as a single
class. Holders of the new Goodrich
notes, therefore, may vote together
with the holders of other debt
securities issued under the Goodrich
indenture, and their voting power may
be diluted vis-a-vis their current
position as holders of old Coltec
notes.
70
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
UNITED STATES TAXATION
This is a description of the material United States federal income tax
consequences of exchanging old Coltec notes for new Goodrich notes and ownership
and disposition of new Goodrich notes received in the exchange. This discussion
only applies to holders of old Coltec notes and new Goodrich notes who hold the
notes as capital assets and to holders of new Goodrich notes who receive the
notes in exchange for old Coltec notes pursuant to the exchange offer. This
discussion does not describe all of the tax consequences that may be relevant to
a holder in light of the holder's particular circumstances or to holders subject
to special rules, such as:
- certain financial institutions;
- insurance companies;
- dealers in securities or foreign currencies;
- persons holding notes as part of a hedge, straddle or other integrated
transaction;
- U.S. holders (as defined below) whose functional currency is not the U.S.
dollar;
- partnerships or other entities classified as partnerships for United
States federal income tax purposes; and
- persons subject to the alternative minimum tax.
This description is based on the Internal Revenue Code of 1986, as amended
to the date of this prospectus (the "Code"), administrative pronouncements,
judicial decisions and final, temporary and proposed Treasury Regulations,
changes to any of which subsequent to the date of this prospectus may affect the
tax consequences described in this section. HOLDERS OF OLD COLTEC NOTES
CONSIDERING EXCHANGING THEIR NOTES FOR NEW GOODRICH NOTES SHOULD CONSULT THEIR
OWN TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE UNITED STATES FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
As used in this prospectus, a "United States person" is
- a citizen or resident of the United States;
- a corporation created or organized in the United States or under the laws
of the United States or of any state;
- an estate the income of which is includible in gross income for United
States federal income taxation regardless of its source;
- a trust if a court in the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust;
- a certain type of trust in existence on August 20, 1996, which was
treated as a United States person under the Code in effect immediately
prior to that date and which has made a valid election to be treated as a
United States person under the Code; and
- any person otherwise subject to United States federal income tax on a net
income basis in respect of its worldwide taxable income.
A "U.S. holder" is a beneficial owner of notes who is a United States
person. A "non-U.S. holder" is a beneficial owner of notes that is not a U.S.
holder.
TAX CONSEQUENCES TO U.S. HOLDERS
EXCHANGE OF OLD COLTEC NOTES FOR THE NEW GOODRICH NOTES
The exchange of old Coltec notes for new Goodrich notes will be a taxable
exchange for United States federal income tax purposes. A U.S. holder will
recognize gain or loss equal to the difference between the amount realized on
the exchange and the holder's adjusted tax basis in the old Coltec notes. For
these
71
purposes, the amount realized on the exchange will equal the issue price of the
new Goodrich notes on the date of exchange, determined as described below. The
portion of the new Goodrich notes received that is attributable to accrued but
unpaid interest on the old Coltec notes is not considered part of the amount
realized on the exchange and will be taxable to the holders as ordinary interest
income at the time it accrues or is received in accordance with the holder's
method of accounting for United States federal income tax purposes.
Gain or loss realized on the exchange of old Coltec notes will (subject to
the discussion of market discount below) be capital gain or loss and will be
long-term capital gain or loss if at the time of the exchange the old Coltec
notes have been held for more than one year. The deductibility of capital losses
is subject to limitations. However, a U.S. holder who purchased old Coltec notes
for less than the principal amount of those notes may recognize ordinary income
rather than capital gain under the "market discount" rules discussed under
"-- Market Discount" below.
This issue price of the new Goodrich notes will depend on whether the old
Coltec notes or the new Goodrich notes are considered to be traded on an
established market at any time during the 60 day period ending 30 days after the
issue date of the new Goodrich notes. Pursuant to applicable Treasury
Regulations, an established market includes among other things, (i) a system of
general circulation (including a computer listing disseminated to subscribing
brokers, dealers and traders) that provides a reasonable basis to determine fair
market value by disseminating either recent price quotations or actual prices of
recent sales transactions, or (ii) that price quotations for such notes are
readily available from dealers, brokers or traders. Based on current information
and although not free from doubt, we believe that the old Coltec notes and the
new Goodrich notes are not traded on an established market for the purpose of
these regulations and, therefore, the issue price of the new Goodrich notes will
equal their stated principal amount. If, however, either the old Coltec notes or
the new Goodrich notes are traded on an established market, the issue price of
the new Goodrich notes will equal their fair market value on the date of the
exchange. In either case, holders may elect to reduce the issue price of the new
Goodrich notes by the amount of accrued but unpaid interest on the old Coltec
notes as of the date of the exchange, and the disclosure below assumes that
holders will do so.
A U.S. holder's basis in the new Goodrich notes will equal the issue price
of the new Goodrich notes on the date of the exchange and will be adjusted for
OID or amortizable bond premium as described below. A U.S. holder's holding
period in the new Goodrich notes will begin on the day after the exchange.
MARKET DISCOUNT
A U.S. holder of old Coltec notes that purchased those notes for less than
their principal amount may recognize ordinary income on the exchange, rather
than capital gain, under the market discount rules. Under these rules, unless
the U.S. holder has made an election to include market discount in income as it
accrues, any gain recognized by the U.S. holder will be treated as ordinary
income to the extent of any market discount that has accrued for the period the
U.S. holder has owned the old Coltec notes. Market discount generally equals the
excess, if any, of (i) the unpaid principal balance of the note at the time it
is acquired by the U.S. holder, over (ii) the U.S. holder's tax basis in the
note immediately after its acquisition (subject to a de minimis exception
pursuant to which market discount is considered to be zero if it is less than
1/4 of 1 percent of the unpaid principal balance of the note multiplied by the
number of complete years to maturity from the date of acquisition). In general,
market discount is treated as accruing over the term of the note on a straight-
line basis unless the U.S. holder elects to accrue on a constant-yield basis. If
the gain recognized by a U.S. holder is in excess of the accrued market
discount, that excess will generally be treated as capital gain.
ORIGINAL ISSUE DISCOUNT AND INTEREST ON THE NEW GOODRICH NOTES
The new Goodrich notes will have original issue discount if the stated
principal amount of the new Goodrich notes exceeds their issue price (determined
as described under "-- Exchange of Old Coltec Notes for the New Goodrich Notes"
above) by more than a de minimis amount, i.e., 1/4 of 1 percent of the stated
principal amount multiplied by the number of complete years to maturity of the
new Goodrich
72
notes on the date of exchange. The portion of the first payment on the new
Goodrich notes equal to the accrued but unpaid interest on the old Coltec notes
will be treated as a non-taxable return of pre-issuance accrued interest, rather
than as a payment on the new Goodrich notes. Whether or not the new Goodrich
notes have original issue discount, payments of stated interest on the new
Goodrich notes will be considered qualified stated interest and thus a U.S.
holder will be required to include the stated interest payments in income in
accordance with the holder's method of accounting for United States federal
income tax purposes. U.S. holders will be required to include original issue
discount, if any, in income for United States federal income tax purposes as it
accrues, in accordance with a constant yield method based on a compounding of
interest, before the receipt of cash payments attributable to this income. Under
this method, if the new Goodrich notes have original issue discount U.S. holders
of new Goodrich notes will generally be required to include in income
increasingly greater amounts of original issue discount in successive accrual
periods. A U.S. holder will increase its tax basis in the new Goodrich notes by
the amount of the original issue discount included in income.
AMORTIZABLE BOND PREMIUM
If a U.S. holder receives a new Goodrich note in the exchange and has a tax
basis in the new Goodrich notes (determined as described under "-- Exchange of
Old Coltec Notes for the New Goodrich Notes" above) in excess of the stated
principal amount of the notes, the U.S. holder will be considered to have
received the new note with amortizable bond premium. The amount of this
amortizable bond premium will equal the excess of the tax basis of the new note
over the principal amount payable at maturity. A U.S. holder may elect to
amortize this premium, using a constant yield method, over the remaining term of
the new note. A holder that elects to amortize bond premium must reduce its tax
basis in the note by the amount of the premium amortized in any year. An
election to amortize bond premium applies to all taxable debt obligations then
owned and thereafter acquired by the holder and may be revoked only with the
consent of the Internal Revenue Service.
SALE, EXCHANGE, REDEMPTION OR RETIREMENT OF THE NEW GOODRICH NOTES
Upon the sale, exchange, redemption or retirement of a new Goodrich note, a
U.S. holder will recognize taxable gain equal to the difference between the
amount realized on the sale, exchange or retirement and the holder's adjusted
tax basis in the new Goodrich note. For these purposes, the amount realized on
the sale, exchange or retirement will equal the amount of cash or fair market
value of other property received in the sale, exchange or retirement. However,
the amount of money or fair market value of other property attributable to
accrued but unpaid interest on the new Goodrich note will not be considered part
of the amount realized on the sale, exchange or retirement and will be taxable
to the holder as interest income, regardless of a holder's method of accounting,
at the time of the sale, exchange or retirement.
Gain or loss realized on the sale, exchange or retirement of new Goodrich
notes will be capital gain or loss and will be long-term capital gain or loss if
at the time of the exchange the new Goodrich notes have been held for more than
one year. The deductibility of capital losses is subject to limitations.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information returns may be filed with the Internal Revenue Service in
connection with payments on the old Coltec notes and the new Goodrich notes and
the proceeds from a sale, exchange or other disposition of the notes. A U.S.
holder will not be subject to backup withholding tax on these payments if the
holder provides its taxpayer identification number to the paying agent on
Substitute Form W-9 and complies with certain certification procedures or is
otherwise exempt from backup withholding. See Section 9 of the Letter of
Transmittal accompanying this prospectus. The amount of any backup withholding
withheld from a payment to a U.S. holder will be allowed as a credit against the
holder's United States federal income tax liability and may entitle the holder
to a refund, provided that the required information is furnished to the Internal
Revenue Service.
73
LEGAL MATTERS
The validity of the new Goodrich notes to be issued in connection with the
exchange offer is being passed upon for us by Wachtell, Lipton, Rosen & Katz,
New York, New York.
EXPERTS
The consolidated financial statements of Coltec Industries Inc at December
31, 2001 and 2000, and for each of the three years in the period ended December
31, 2001, appearing in this prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Goodrich Corporation at December
31, 2001 and 2000, and for each of the three years in the period ended December
31, 2001, appearing in Goodrich Corporation's Annual Report on Form 10-K filed
with the Securities and Exchange Commission on February 25, 2002, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given on the authority of such firm as experts in accounting and
auditing.
74
INDEX TO FINANCIAL STATEMENTS
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF COLTEC
INDUSTRIES INC (A SUBSIDIARY OF GOODRICH CORPORATION):
Report of Independent Auditors............................ F-2
Consolidated Balance Sheets at December 31, 2001 and
2000................................................... F-3
Consolidated Statements of Income for the Years Ended
December 31, 2001, 2000 and 1999....................... F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2001, 2000 and 1999....................... F-5
Consolidated Statements of Parent Company Investment
(Deficit) for the Years Ended December 31, 2001, 2000
and 1999............................................... F-6
Notes to Consolidated Financial Statements................ F-7
F-1
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors of
Goodrich Corporation
We have audited the accompanying consolidated balance sheets of Coltec
Industries Inc and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income, cash flows and parent company
investment (deficit) for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about 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. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Coltec
Industries Inc and subsidiaries at December 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young LLP
Charlotte, North Carolina
March 14, 2002
F-2
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, DECEMBER 31,
2001 2000
------------ ------------
(DOLLARS IN MILLIONS)
ASSETS
Current Assets
Cash and cash equivalents................................. $ 25.9 $ 21.6
Accounts and notes receivable............................. 82.2 45.0
Asbestos insurance receivable............................. 90.8 90.3
Inventories............................................... 83.0 65.9
Deferred income taxes..................................... 5.2 5.2
Prepaid expenses and other assets......................... 5.6 3.9
-------- ------
Total Current Assets.................................... 292.7 231.9
-------- ------
Property, plant and equipment -- net........................ 138.2 124.9
Prepaid pension............................................. 90.8 71.7
Goodwill -- net............................................. 146.1 79.9
Identifiable intangible assets -- net....................... 64.5 7.0
Asbestos insurance receivable............................... 202.8 195.4
Other assets................................................ 64.2 62.4
Net assets of discontinued operations....................... 267.9 218.6
-------- ------
Total Assets............................................ $1,267.2 $991.8
======== ======
LIABILITIES AND PARENT COMPANY INVESTMENT (DEFICIT)
Current Liabilities
Short-term bank debt...................................... $ 0.3 $ 0.7
Accounts payable.......................................... 47.1 37.4
Accrued asbestos liability................................ 150.3 182.8
Other accrued expenses.................................... 69.0 50.7
Income taxes payable...................................... 59.8 86.5
Current maturities of long-term debt...................... 1.6 2.5
-------- ------
Total Current Liabilities............................... 328.1 360.6
-------- ------
Long-term debt.............................................. 313.0 314.8
Pension obligations......................................... 17.3 13.7
Postretirement benefits other than pensions................. 12.1 12.6
Deferred income taxes....................................... 46.2 7.5
Retained liabilities of previously owned businesses......... 57.8 55.9
Environmental liabilities................................... 21.8 29.3
Asbestos liability.......................................... 20.6 48.4
Minority interests.......................................... 9.0 7.1
Other non-current liabilities............................... 14.9 19.4
Commitments and contingent liabilities...................... -- --
Mandatorily redeemable convertible preferred securities of
trust (TIDES)............................................. 150.0 149.3
Parent Company Investment (Deficit)......................... 276.4 (26.8)
-------- ------
Total Liabilities and Parent Company Investment
(Deficit)............................................. $1,267.2 $991.8
======== ======
See Notes to Consolidated Financial Statements
F-3
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31,
------------------------
2001 2000 1999
------ ------ ------
(DOLLARS IN MILLIONS)
Sales....................................................... $628.3 $654.4 $665.7
Operating Costs and Expenses:
Cost of sales............................................. 445.7 430.1 418.3
Selling and administrative expenses....................... 126.1 120.2 150.6
Merger-related and consolidation costs.................... 3.8 1.4 128.4
------ ------ ------
575.6 551.7 697.3
------ ------ ------
Operating income (loss)..................................... 52.7 102.7 (31.6)
Interest expense............................................ (26.9) (27.4) (36.8)
Interest income............................................. 0.5 0.3 0.9
Other income (expense) -- net............................... (3.1) (4.3) 3.1
------ ------ ------
Income (loss) before income taxes and distributions on
convertible preferred securities of trust (TIDES)......... 23.2 71.3 (64.4)
Income tax (expense) benefit................................ (8.7) (26.7) 10.3
Distributions on convertible preferred securities of trust
(TIDES)................................................... (7.9) (7.9) (7.9)
------ ------ ------
Income (loss) from continuing operations.................... 6.6 36.7 (62.0)
Income from discontinued operations -- net of taxes......... 94.1 64.2 61.9
------ ------ ------
Net income (loss)........................................... $100.7 $100.9 $ (0.1)
====== ====== ======
See Notes to Consolidated Financial Statements
F-4
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
---------------------------
2001 2000 1999
------- ------- -------
(DOLLARS IN MILLIONS)
OPERATING ACTIVITIES
Net income (loss)......................................... $ 100.7 $ 100.9 $ (0.1)
Net income from discontinued operations................. (94.1) (64.2) (61.9)
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Merger-related and consolidation costs:
Expenses.............................................. 3.8 1.4 128.4
Payments.............................................. (1.1) (4.0) (120.9)
Expenditures for asbestos-related litigation............ (162.7) (119.7) (84.5)
Proceeds from asbestos-related insurance................ 87.9 83.3 65.2
Depreciation and amortization........................... 28.8 26.6 24.4
Deferred income taxes................................... 38.7 18.0 (30.6)
Net gain on sale of businesses.......................... -- -- (5.0)
Change in assets and liabilities, net of effects of
acquisitions and divestitures of businesses:
Receivables........................................... 12.7 1.4 7.0
Sale of receivables................................... (30.5) 2.5 --
Inventories........................................... (8.1) 4.1 10.2
Other current assets.................................. (0.9) 1.5 4.9
Accounts payable...................................... 7.9 (16.0) --
Accrued expenses...................................... 5.3 4.6 (12.4)
Income taxes payable.................................. (26.5) (118.9) 27.8
Other non-current assets and liabilities.............. (24.6) (36.3) (35.1)
------- ------- -------
Net cash used by operating activities of continuing
operations............................................. (62.7) (114.8) (82.6)
------- ------- -------
INVESTING ACTIVITIES
Purchases of property..................................... (16.4) (14.3) (24.1)
Proceeds from sale of property............................ 1.7 0.5 --
Payments made in connection with acquisitions, net of cash
acquired................................................ (155.1) -- --
------- ------- -------
Net cash used by investing activities of continuing
operations.............................................. (169.8) (13.8) (24.1)
------- ------- -------
FINANCING ACTIVITIES
Increase (decrease) in short-term debt.................... (0.7) 0.7 --
Decrease in long-term revolving credit facility, net...... -- -- (159.5)
Repayment of long-term debt............................... (2.7) (9.2) (4.3)
Distributions on convertible preferred securities of trust
(TIDES)................................................. (7.9) (7.9) (7.9)
Net transfers (to)/from Parent............................ 203.1 (38.1) 246.0
------- ------- -------
Net cash provided (used) by financing activities of
continuing operations................................... 191.8 (54.5) 74.3
------- ------- -------
DISCONTINUED OPERATIONS
Net cash provided by discontinued operations.............. 44.6 190.4 25.7
Effect of Exchange Rate Changes on Cash and Cash
Equivalents............................................... 0.4 (0.8) --
------- ------- -------
Net Increase (Decrease) in Cash and Cash Equivalents........ 4.3 6.5 (6.7)
Cash and Cash Equivalents at Beginning of Period............ 21.6 15.1 21.8
------- ------- -------
Cash and Cash Equivalents at End of Period.................. $ 25.9 $ 21.6 $ 15.1
======= ======= =======
See Notes to Consolidated Financial Statements
F-5
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
CONSOLIDATED STATEMENTS OF PARENT COMPANY INVESTMENT (DEFICIT)
YEAR ENDED DECEMBER 31,
--------------------------
2001 2000 1999
------ ------- -------
(DOLLARS IN MILLIONS)
PARENT COMPANY DEFICIT, BEGINNING OF YEAR................... $(26.8) $ (86.1) $(331.9)
Net income (loss)........................................... 100.7 100.9 (0.1)
Cumulative translation adjustment........................... (0.5) (3.9) (0.1)
Minimum pension liability adjustment........................ (0.1) 0.4 --
------ ------- -------
Comprehensive income (loss)................................. 73.3 97.4 (0.2)
Net transfers (to)/from Parent.............................. 203.1 (38.1) 246.0
------ ------- -------
PARENT COMPANY INVESTMENT (DEFICIT), END OF YEAR............ $276.4 $ (26.8) $ (86.1)
====== ======= =======
See Notes to Consolidated Financial Statements
F-6
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. OVERVIEW AND BASIS OF PRESENTATION
Coltec Industries Inc ("Coltec" or "the Company") is a leader in the
design, development, manufacturing and marketing of well recognized, proprietary
engineered industrial products that include sealing products, bearings, air
compressors and heavy-duty diesel and natural gas engines.
OVERVIEW
In September 2001, Goodrich Corporation ("Goodrich" or the "Parent")
announced that its Board of Directors had approved in principle the tax-free
spin-off of its Engineered Industrial Products ("EIP") business to shareholders
(the "Distribution"). The Distribution will be effected through a tax-free
distribution to Goodrich shareholders of all of the capital stock of EnPro
Industries, Inc. ("EnPro"), a newly formed wholly owned subsidiary of Goodrich.
The EIP business, as well as an aerospace business, is currently owned by
Coltec, a wholly owned subsidiary of Goodrich. Prior to the Distribution,
Coltec's aerospace business ("Coltec Aerospace") will assume all intercompany
balances outstanding between Coltec and Goodrich and Coltec will then transfer
to Goodrich by way of a dividend (the "Aerospace Dividend") all of the assets,
liabilities and operations of Coltec Aerospace, including these assumed
balances. Following the Distribution, Coltec will be a wholly owned subsidiary
of EnPro and Coltec Aerospace will be owned by Goodrich.
The Distribution is subject to certain conditions. No consents are required
from Goodrich security holders or the holders of Coltec's outstanding debt
securities to complete the Distribution.
BASIS OF PRESENTATION
These financial statements present Coltec's consolidated financial
condition, results of operations and cash flows as it operated as a wholly owned
subsidiary of Goodrich, including certain adjustments and allocations necessary
for a fair presentation of the business (see Note C). As noted above, prior to
the Distribution, Coltec will transfer Coltec Aerospace to Goodrich. The
transfer of Coltec Aerospace to Goodrich represents the disposal of a segment
under APB Opinion No. 30 ("APB 30"). Accordingly, Coltec Aerospace has been
accounted for as a discontinued operation and the revenues, costs and expenses,
assets and liabilities, and cash flows have been segregated in the Company's
Consolidated Statements of Income, Consolidated Balance Sheets and Consolidated
Statements of Cash Flows. Unless otherwise noted, disclosures herein pertain to
the Company's continuing operations.
As a result of the Aerospace Dividend, Goodrich will retain the net assets
of Coltec Aerospace, which have been reflected as Net Assets of Discontinued
Operations in the Company's Consolidated Balance Sheets. Coltec Aerospace will
also retain certain other assets and liabilities of the Company, including the
assumed intercompany balances and other assets and liabilities relating
primarily to pensions, postretirement benefits other than pensions and income
taxes.
Coltec has outstanding certain debt the most significant of which are
Coltec's 7 1/2% Senior Notes due 2008 (the "Coltec Senior Notes") and
convertible trust preferred securities (the "TIDES"). The TIDES will remain
obligations of Coltec after the distribution. Goodrich intends to make an offer
to exchange the Coltec Senior Notes for debt securities of Goodrich having
similar terms. There can be no guarantee, however, that this exchange offer will
occur. Coltec intends to purchase a portion of the Coltec Senior Notes
surrendered for exchange in the exchange offer, which will be financed through
an intercompany loan from Goodrich. The remaining portion of Coltec Senior Notes
accepted by Goodrich for exchange will be contributed to EnPro in connection
with the Distribution and would thereafter be an intercompany obligation of
Coltec to EnPro, which will be eliminated upon consolidation in EnPro's
consolidated financial statements going forward.
F-7
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
All significant transactions among the Company's operations have been
eliminated. Intercompany balances existing between the Company and Goodrich or
its subsidiaries, including the loans from Goodrich to Coltec to finance the
purchase by Coltec of the Coltec Senior Notes, will be assumed by Coltec
Aerospace prior to the Distribution and the Aerospace Dividend, and,
accordingly, have been or will be reflected within the Parent Company Investment
line within the accompanying Consolidated Balance Sheets.
Management believes that the assumptions underlying the consolidated
financial statements are reasonable. However, the financial information in these
financial statements does not necessarily include all of the expenses that would
have been incurred by Coltec had it been a separate, stand-alone entity and may
not necessarily reflect what Coltec's consolidated financial condition, results
of operations and cash flows would have been had Coltec been a stand-alone
entity during the periods presented or what Coltec's consolidated financial
condition, results of operations and cash flows may be in the future.
B. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation The Consolidated Financial Statements reflect
the accounts of the Company and its majority-owned subsidiaries. Intercompany
accounts and transactions are eliminated.
Cash Equivalents Cash equivalents consist of highly liquid investments
with a maturity of three months or less at the time of purchase.
Inventories Certain domestic inventories are valued by the last-in,
first-out ("LIFO") cost method. Inventories not valued by the LIFO method are
valued using first-in, first-out ("FIFO"), and are recorded at the lower of cost
or market.
Long-Lived Assets Property, plant and equipment is recorded at cost.
Depreciation and amortization is computed principally using the straight-line
method over the following estimated useful lives: buildings and improvements, 15
to 40 years; machinery and equipment, 5 to 15 years. Repairs and maintenance
costs are expensed as incurred.
Goodwill represents the excess of the purchase price over the fair value of
the net assets of acquired businesses and is amortized using the straight-line
method, in most cases over 20 to 40 years. Goodwill amortization is recorded in
cost of sales.
Identifiable intangible assets are recorded at cost, or when acquired as a
part of a business combination, at estimated fair value. These assets include
patents and other technology agreements, trademarks, licenses and non-compete
agreements. They are amortized using a method that reflects the pattern in which
the economic benefits of the assets are consumed or the straight-line method
over estimated useful lives of 5 to 25 years.
Impairment of long-lived assets and related goodwill is recognized when
events or changes in circumstances indicate that the carrying value of the
asset, or related groups of assets, may not be recoverable and the estimate of
undiscounted cash flows over the asset's remaining estimated useful life are
less than the asset's carrying value. Measurement of the amount of impairment is
based on appraisal, market values of similar assets or estimated discounted
future cash flows resulting from the use and ultimate disposition of the asset.
Revenue and Income Recognition Revenue from the sale of products is
recognized when title passes, which is at the time of shipment.
Financial Instruments Financial instruments recorded on the balance sheet
include cash and cash equivalents, accounts and notes receivable, asbestos
insurance receivable, accounts payable and debt. Because of their short
maturity, the carrying value of cash and cash equivalents, accounts and notes
F-8
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
receivable, asbestos insurance receivable, accounts payable and short-term bank
debt approximates fair value. Fair value of long-term investments is based on
quoted market prices. Fair value of long-term debt is based on quoted market
prices or on rates available to the Parent for debt with similar terms and
maturities (which may not be indicative of rates available to the Company as an
unaffiliated entity).
Derivative Instruments Effective January 1, 2001, the Company adopted
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), as amended, which requires
that all derivative instruments be reported on the balance sheet at fair value
and that changes in a derivative's fair value be recognized currently in
earnings unless specific hedge criteria are met. In its adoption of SFAS 133,
the Company, as permitted by the transition provisions therein, elected not to
apply the provisions of SFAS 133 to embedded derivatives existing before January
1, 1999. As such, the conversion feature of the TIDES will not be bifurcated
from the host instrument and accounted for separately as a derivative. Further,
the Company does not believe that the spin-off creates any substantial
modification to the terms of the TIDES and therefore, the TIDES will continue to
be "grandfathered" subsequent to the spin-off.
The Company purchased a call option in March 2002 to mitigate its financial
exposure created by the conversion feature of the TIDES. The call option is a
derivative instrument and will be carried at fair value with changes reflected
currently in income beginning in 2002.
Stock-Based Compensation The Company accounts for stock-based employee
compensation in accordance with the provisions of APB Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Income Taxes The Company's operations are included in the consolidated
income tax returns filed by the Parent. Income taxes in the Company's
consolidated statement of income are calculated on a separate tax return basis
as if the Company had operated as a stand-alone entity. The provision for income
taxes is calculated in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes", which requires the recognition
of deferred income taxes using the liability method.
Research and Development Expense Costs related to research and development
activities are expensed as incurred. The Company performs research and
development under Company-funded programs for commercial products. Total
research and development expenditures from continuing operations in 2001, 2000
and 1999 were $12.7 million, $12.3 million and $15.0 million, respectively.
Use of Estimates The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
New Accounting Standards In July 2001, the FASB issued Statement No. 141
"Business Combinations" ("SFAS 141") and Statement No. 142 "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 141 is effective as follows: a) the use of
the pooling-of-interest method is prohibited for business combinations initiated
after June 30, 2001; and b) the provisions of SFAS 141 and SFAS 142 apply to all
business combinations accounted for by the purchase method that are completed
after June 30, 2001. There are also transition provisions that apply to business
combinations completed before July 1, 2001, that were accounted for by the
purchase method. SFAS 142 is effective for fiscal years beginning after December
15, 2001 and applies to all goodwill and other intangible assets recognized in
an entity's statement of financial condition at that date, regardless of when
those assets were initially recognized.
F-9
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002 and for acquisitions
made subsequent to July 1, 2001. Application of the provisions of SFAS 142,
other than those relating to amortization of goodwill and other intangibles, is
expected to result in an increase in pre-tax income of approximately $4 million
per year. By June 30, 2002, the Company will perform the first of the required
impairment tests of goodwill and indefinite lived intangible assets as of
January 1, 2002. As a result, the Company has not yet determined what the effect
of these tests will be on the Company's consolidated financial condition or
results of operations.
In June 2001, the FASB issued Statement No. 143 "Accounting for Asset
Retirement Obligations" ("SFAS 143"). SFAS 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. It applies to legal
obligations associated with the retirement of long-lived assets that result from
the acquisition, construction, development and/or the normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The Company has not yet determined what the effect of SFAS 143 will be
on its consolidated financial condition or results of operations.
In October 2001, the FASB issued Statement No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 supersedes
FASB Statement No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" ("SFAS 121"), however it retains the
fundamental provisions of that statement related to the recognition and
measurement of the impairment of long-lived assets to be "held and used." In
addition, SFAS 144 provides more guidance on estimating cash flows when
performing a recoverability test, requires that a long-lived asset (group) to be
disposed of other than by sale (e.g. abandoned) be classified as "held and used"
until it is disposed of, and establishes more restrictive criteria to classify
an asset (group) as "held for sale." SFAS 144 is effective for fiscal years
beginning after December 15, 2001. The Company has not yet determined what the
effect of SFAS 144 will be on its consolidated financial condition or results of
operations.
C. PARENT COMPANY INVESTMENT AND ALLOCATIONS
Parent company investment represents the Parent's equity investment in the
Company. The Company receives funding for its operations from the Parent as
necessary. Interest expense associated with the Parent's general corporate debt
and the Parent's funding of the Company's operations is not charged to the
Company and has not been allocated to the Company. All transfers to and from the
Parent have been reported in the parent company investment account. All funding
for the Company is included in the parent company investment account and there
are no other balances due to or from any related parties.
CORPORATE AND SEGMENT ADMINISTRATIVE COSTS REFLECTED IN OPERATING
INCOME
During 2001, 2000 and 1999 the Company's operating units were allocated
$3.4 million, $6.1 million and $9.1 million in corporate costs from the Parent,
respectively. The Parent has historically allocated a portion of certain
headquarters department expenses to individual business units. Business units
are only allocated amounts for departments providing services to the business
units. These departments include Tax, Government Relations, Accounting and
Financial Analysis, Compensation and Benefit Administration and Information
Technology. The portion of the department expenses which is considered to
benefit headquarters only is not allocated. The determination is made by each
department head and reviewed annually.
To determine how much to allocate to each business unit, management
identifies certain items which, in management's opinion, drive the costs of the
benefits that are being allocated. These items include
F-10
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Employee Compensation Costs, Trade Sales, Net Inventory and Net Property, Plant
and Equipment. Each business unit is then allocated an amount based on their
percentage of the total. The Company also participates in certain benefit plans
of the Parent, the cost of which is allocated to the Company and is included in
the accompanying consolidated financial statements but is not reflected in the
amounts above (see Note L). Management believes these allocations are
reasonable.
During 2001 and 2000, operating income also includes $6.0 million and $3.4
million, respectively, of costs associated with segment headquarters expense. As
segment headquarters was established after the Coltec Acquisition, there are no
comparable costs in 1999.
UNALLOCATED CORPORATE ADMINISTRATIVE COSTS
Corporate unallocated costs were $10.7 million, $10.2 million and $26.8
million in 2001, 2000 and 1999, respectively. These costs represent general
corporate administrative costs, and have not been included in segment operating
income. These costs include approximately $10.0 million in each of 2001, 2000
and 1999 related to non-reimbursable costs associated with managing and settling
asbestos claims.
CORPORATE AND SEGMENT ADMINISTRATIVE COSTS SUBSEQUENT TO THE
DISTRIBUTION
Prior to the acquisition of Coltec by Goodrich (the "Coltec Acquisition"),
Coltec operated as a separate public company with separate corporate
headquarters. Subsequent to the Coltec Acquisition, the majority of corporate
costs were incurred by Goodrich, and have not been reflected in these
consolidated financial statements unless allocated by the Parent. Accordingly,
the financial information in these financial statements does not necessarily
include all the expenses that would have been incurred had Coltec been a
separate, stand-alone entity and may not necessarily reflect Coltec's
consolidated financial condition, results of operations and cash flows in the
future or what its consolidated financial condition, results of operations and
cash flows would have been had Coltec been a stand-alone entity during all of
the periods presented.
D. ACQUISITIONS
On September 4, 2001, the Company acquired Dana Corporation's Glacier
Industrial Bearings business ("GIB"). The results of GIB's operations have been
included in the consolidated financial statements of the Company since that
date. The business manufactures and distributes industrial metal polymer
bearings and will be integrated with the Company's Garlock Bearings business,
which is included in the Engineered Products segment. The integrated business
will be referred to as Garlock Glacier Bearings ("GGB"). The acquisition extends
the Company's reach geographically and results in a global position in the metal
polymer bearings market; broadens its current product offerings; is expected to
result in economies of scale relating to raw material purchases; and includes
the use of the Glacier brand name trademarks and intellectual property. The
acquisition was recorded using the purchase method of accounting.
F-11
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed at the date of acquisition. The purchase price
allocation is based on independent third party appraisals.
AT SEPTEMBER 4, 2001
---------------------
(DOLLARS IN MILLIONS)
Current assets.............................................. $ 22.8
Property, plant and equipment............................... 22.3
In-process research and development......................... .5
Goodwill.................................................... 63.5
Identifiable intangible assets.............................. 59.1
------
Total assets acquired.................................. 168.2
Current and non-current liabilities......................... (14.9)
Deferred income taxes....................................... (.3)
------
Total liabilities assumed.............................. (15.2)
------
Net assets acquired.................................... $153.0
======
Approximately $64 million of the aggregate purchase price was allocated to
goodwill, all of which is expected to be deductible for income tax purposes.
Approximately $59 million of the purchase price was allocated to identifiable
intangible assets including customer relationships (approximately $27 million),
existing technology (approximately $16 million), trademarks (approximately $14
million) and other (approximately $2 million). The trademarks are deemed to have
an indefinite life and are therefore not subject to amortization. Customer
relationships, existing technologies and other intangible assets are being
amortized based primarily on undiscounted cash flows which reflect the patterns
in which the economic benefits of the assets are expected to be consumed over 14
years, 25 years and 5 years, respectively. The weighted average life of the
amortizable intangible assets is 17 years.
The $.5 million assigned to in-process research and development was
expensed at the date of acquisition in accordance with FASB Interpretation No.
4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for
by the Purchase Method. This expense was included in selling and administrative
expenses.
In February 2002, the Company received $4.8 million in satisfaction of the
final post-closing settlements. The proceeds from the settlements will reduce
goodwill in 2002.
The following pro forma information assumes that the acquisition occurred
as of January 1 of each period.
YEAR ENDED DECEMBER 31, 2001
------------------------------
HISTORICAL GIB PRO FORMA
---------- ----- ---------
(DOLLARS IN MILLIONS)
Sales.................................................... $628.3 $68.1 $696.4
Operating income......................................... $ 52.7 $11.5 $ 64.2
Income from discontinued operations...................... $ 94.1 $ -- $ 94.1
Net income............................................... $100.7 $ 7.2 $107.9
YEAR ENDED DECEMBER 31, 2000
------------------------------
HISTORICAL GIB PRO FORMA
---------- ----- ---------
(DOLLARS IN MILLIONS)
Sales.................................................... $654.4 $99.1 $753.5
Operating income......................................... $102.7 $16.9 $119.6
Income from discontinued operations...................... $ 64.2 $ -- $ 64.2
Net income............................................... $100.9 $10.6 $111.5
F-12
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In March 2001, the Company also acquired a small product line which is
included in the Engineered Products segment. The cost of this acquisition was
$2.1 million and resulted in an increase in working capital of $0.1 million and
an increase in goodwill of $2.0 million.
E. MERGER-RELATED AND CONSOLIDATION COSTS
The Company incurred $3.8 million of consolidation costs in 2001.
Merger-related and consolidation reserves at December 31, 2001, as well as
activity during the year, consisted of:
BALANCE BALANCE
DECEMBER 31, DECEMBER 31,
2000 PROVISION ACTIVITY 2001
------------ --------- -------- ------------
(DOLLARS IN MILLIONS)
Personnel related costs.... $1.3 $2.4 $(1.6) $2.1
Asset write-down and
facility
consolidation costs...... 0.1 1.4 (.4) 1.1
---- ---- ----- ----
$1.4 $3.8 $(2.0) $3.2
==== ==== ===== ====
During 2001, the Company incurred $2.4 million of personnel-related costs
associated with workforce reductions at the Company's Garlock Sealing
Technologies, Stemco, Fairbanks Morse Engine and Sterling Die operating units
(approximately 170 positions of which approximately 90 had been terminated by
December 31, 2001) and $1.4 million related to facility closures and asset
write-downs. The merger-related and consolidation reserves were reduced by $2.0
million during 2001, of which $1.1 million represented cash payments. The
remaining $0.9 million of reserve reductions represented asset impairment
charges or reserves which were transferred to, and subsequently administered by,
the Parent.
The Company incurred $1.4 million of consolidation costs in 2000.
Merger-related and consolidation reserves at December 31, 2000, as well as
activity during the year, consisted of:
BALANCE BALANCE
DECEMBER 31, DECEMBER 31,
1999 PROVISION ACTIVITY 2000
------------ --------- -------- ------------
(DOLLARS IN MILLIONS)
Personnel related costs.... $5.3 $1.3 $(5.3) $1.3
Transaction costs.......... 1.5 -- (1.5) --
Asset write-down and
facility
consolidation costs...... 0.7 0.1 (0.7) 0.1
---- ---- ----- ----
$7.5 $1.4 $(7.5) $1.4
==== ==== ===== ====
During 2000, the Company incurred $1.3 million of personnel-related costs
associated with workforce reductions and $0.1 million related to an asset
write-down. The merger-related and consolidation reserves were reduced by $7.5
million during 2000, of which $4.0 million represented cash payments. The
remaining $3.5 million of reserve reductions represented the remaining reserves
associated with the Coltec Acquisition, which were transferred to, and
subsequently administered by, the Parent.
F-13
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company incurred $128.4 million of merger-related and consolidation
costs in 1999. Merger-related and consolidation reserves at December 31, 1999,
as well as activity during the year, consisted of:
BALANCE BALANCE
DECEMBER 31, DECEMBER 31,
1998 PROVISION ACTIVITY 1999
------------ --------- -------- ------------
(DOLLARS IN MILLIONS)
Personnel related costs.... $ -- $ 68.4 $ (63.1) $5.3
Transaction costs.......... -- 57.9 (56.4) 1.5
Asset write-down and
facility
consolidation costs...... -- 2.1 (1.4) 0.7
----- ------ ------- ----
$ -- $128.4 $(120.9) $7.5
===== ====== ======= ====
The Company incurred $68.4 million of personnel-related costs in 1999.
Personnel-related costs associated with the Coltec Acquisition were $66.3
million, consisting of $61.8 million incurred under change in control provisions
in employment agreements and $4.5 million in employee severance costs.
Personnel-related costs also include employee severance costs of $2.1 million
for reductions at the Company's Garlock Sealing Technologies, France Compressor
Products and Stemco operating units (approximately 125 positions).
The Company incurred $57.9 million of transaction costs in 1999.
Transaction costs were associated with the Coltec Acquisition and include
investment banking fees, accounting fees, legal fees, litigation settlement
costs and other transaction costs.
The Company also incurred $2.1 million of asset write-down and facility
consolidation costs in 1999. Facility consolidation costs associated with the
Coltec Acquisition were $0.4 million. Asset-write down and facility
consolidation costs also include $1.7 million for consolidation activities at
the Company's Garlock Sealing Technologies and France Compressor Products
operating units. The $1.7 million was comprised of $0.8 million of equipment
relocation, $0.8 million of facility closure costs and $0.1 million in asset
write-offs.
The $120.9 million in activity during 1999 represented cash payments.
F. SALE OF ACCOUNTS RECEIVABLE
The Company had an agreement to sell certain trade accounts receivable, up
to a maximum of $95.0 million until the agreement was terminated in December
2001. At December 31, 2000, $81.5 million of the Company's receivables were sold
under this agreement, of which $51.0 million related to discontinued operations
and $30.5 million related to continuing operations. Accordingly, $30.5 million
of the Company's receivables sold under this agreement were reflected as a
reduction of accounts receivable in the 2000 balance sheet. The receivables were
sold at a discount, which was included in interest expense in the 2001, 2000 and
1999 income statements.
F-14
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
G. INVENTORIES
Inventories consisted of the following:
2001 2000
------- -------
(DOLLARS IN MILLIONS)
Finished products...................................... $ 66.2 $ 49.2
In process............................................. 58.4 51.6
Raw materials and supplies............................. 17.3 12.6
------ ------
141.9 113.4
Reserve to reduce certain inventories to LIFO basis.... (13.8) (12.9)
Progress payments and advances......................... (45.1) (34.6)
------ ------
TOTAL........................................ $ 83.0 $ 65.9
====== ======
Approximately 57% and 58% of inventories were valued by the LIFO method in 2001
and 2000, respectively.
H. PROPERTY, PLANT AND EQUIPMENT - NET
Property, plant and equipment - net consisted of the following:
2001 2000
-------- --------
(DOLLARS IN MILLIONS)
Land................................................... $ 3.8 $ 3.1
Buildings and improvements............................. 82.4 76.2
Machinery and equipment................................ 272.3 253.8
Construction in progress............................... 8.4 8.0
------- -------
366.9 341.1
Less allowances for depreciation....................... (228.7) (216.2)
------- -------
Total........................................ $ 138.2 $ 124.9
======= =======
Amounts charged to expense for depreciation from continuing operations were
approximately $21.0 million in 2001 and 2000 and $20.0 million in 1999.
I. OTHER ACCRUED EXPENSES
Other accrued expenses consisted of the following:
2001 2000
------- -------
(DOLLARS IN MILLIONS)
Wages, vacations, pensions and other employment
costs................................................ $35.0 $18.2
Taxes, other than federal and foreign taxes on
income............................................... 7.6 4.9
Accrued environmental liabilities...................... 5.2 2.6
Accrued interest....................................... 7.7 7.6
Merger-related and consolidation reserves.............. 3.2 1.4
Warranty............................................... 5.8 5.2
Other.................................................. 4.5 10.8
----- -----
Total........................................ $69.0 $50.7
===== =====
F-15
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
J. LONG-TERM DEBT
At December 31, 2001 and 2000, long-term debt, which is debt payable after
one year, consisted of:
2001 2000
------- -------
(DOLLARS IN MILLIONS)
7.5% senior notes, maturing in 2008.................... $300.0 $300.0
Other debt............................................. 13.0 14.8
------ ------
Total........................................ $313.0 $314.8
====== ======
Coltec Senior Notes. In 1998, the Company privately placed, with
institutional investors, $300.0 million of 7.5% senior notes due in 2008. As
discussed in Note C, Goodrich intends to offer to exchange all $300.0 million of
the principal amount of these notes for new, similar Goodrich securities.
Other debt includes approximately $12.0 million of industrial revenue bonds
issued in 1993, with interest rates ranging from 6.4% to 6.55%, which mature in
2009.
Maturities of long-term debt in years subsequent to December 31, 2001 are
as follows (in millions): 2002 -- $1.6; 2003 -- $0.4; 2004 -- $0.3;
2005 -- $0.2; 2006 -- $0.0; thereafter -- $312.1.
K. LEASE COMMITMENTS
Future minimum lease payments from continuing operations, by year and in
the aggregate, under noncancelable operating leases with initial or remaining
noncancelable lease terms in excess of one year, consisted of the following at
December 31, 2001:
(DOLLARS IN MILLIONS)
---------------------
2002................................................... $ 7.8
2003................................................... 6.1
2004................................................... 4.5
2005................................................... 3.0
2006................................................... 2.5
Thereafter............................................. 8.5
-----
Total minimum payments....................... $32.4
=====
Net rent expense from continuing operations was $8.2 million, $6.3 million,
and $7.8 million at December 31, 2001, 2000 and 1999, respectively.
L. PENSIONS AND POSTRETIREMENT BENEFITS
The Parent and its subsidiaries have several noncontributory defined
benefit pension plans covering eligible employees. Salaried employees' benefit
payments are generally determined using a formula that is based on an employees'
compensation and length of service. Hourly employees' benefit payments are
generally determined using stated amounts for each year of service.
The Parent and its subsidiaries also sponsor unfunded defined benefit
postretirement plans that provide certain health-care and life insurance
benefits to eligible employees. The health-care plans are contributory, with
retiree contributions adjusted periodically, and contain other cost-sharing
features, such as deductibles and coinsurance. The life insurance plans are
generally noncontributory.
F-16
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The qualified pension plans sponsored by the Parent and its subsidiaries
were fully funded on an accumulated benefit obligation basis at December 31,
2001 and 2000. Assets for these plans consist principally of corporate and
government obligations and commingled funds invested in equities, debt and real
estate.
Amortization of unrecognized transition assets and liabilities, prior
service cost and gains and losses (if applicable) are recorded using the
straight-line method over the average remaining service period of active
employees, or approximately 12 years.
The employees of the Company are eligible to participate in the pension
plans, non-qualified plans and postretirement benefit plans sponsored by the
Parent and its subsidiaries. Prior to the Coltec Acquisition, the Company
maintained its own pension and postretirement plans since it operated as a
separate company. Beginning in 2000, the Parent allocated its combined pension
and postretirement benefit cost to its operating divisions. Accordingly, the
Coltec pension and postretirement costs in 2001 and 2000 reflect amounts
allocated to Coltec by the Parent. The pension service cost identifiable to a
business is assigned to that business. The remainder of the Parent's pension
expense (or income) for domestic operations, regardless of the plan, is netted
and allocated based on each active business's pension benefit obligation (PBO).
For international plans, the subsidiary sponsor records the pension expense or
income. Post-retirement expense is actuarially determined by business.
Management believes these allocations are reasonable.
The following table summarizes information regarding the Company's pension
and postretirement benefit amounts recorded in the Consolidated Balance Sheets
at December 31, 2001 and 2000.
PENSION BENEFITS OTHER BENEFITS
---------------- ----------------
2001 2000 2001 2000
------ ------ ------ ------
(DOLLARS IN MILLIONS)
AMOUNTS RECOGNIZED IN THE
CONSOLIDATED BALANCE SHEETS CONSIST OF:
Prepaid benefit cost................... $ 90.8 $ 71.7 $ -- $ --
Intangible asset....................... 4.1 2.2 -- --
Accumulated other comprehensive
income.............................. 5.3 3.2 -- --
Accrued benefit liability.............. (20.3) (13.8) (12.3) (12.8)
------ ------ ------ ------
Net amount recognized.................. $ 79.9 $ 63.3 $(12.3) $(12.8)
====== ====== ====== ======
The Company's income from continuing operations includes $5.6 million, $7.2
million and $13.3 million of pension income in 2001, 2000 and 1999,
respectively. The Company's income from continuing operations includes $0.5
million, $0.4 million and $0.6 million of postretirement benefit expense in
2001, 2000 and 1999, respectively.
The Company's employees also participate in voluntary retirement savings
plans for salaried and wage employees maintained by the Parent and its
subsidiaries. Under provisions of these plans, eligible employees can receive
matching contributions on up to the first 6% of their eligible earnings.
F-17
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
M. INCOME TAXES
Income (loss) from continuing operations before income taxes as shown in
the Consolidated Statements of Income consists of the following:
2001 2000 1999
----- ------ ------
(DOLLARS IN MILLIONS)
Domestic............................................ $ 6.7 $ 62.1 $(72.6)
Foreign............................................. 16.5 9.2 8.2
----- ------ ------
Total..................................... $23.2 $ 71.3 $(64.4)
===== ====== ======
A summary of income tax (expense) benefit from continuing operations in the
Consolidated Statements of Income is as follows:
2001 2000 1999
------ ------ ------
(DOLLARS IN MILLIONS)
CURRENT:
Federal.......................................... $ 32.1 $ (3.7) $(16.1)
Foreign.......................................... (4.7) (4.8) (3.2)
State............................................ 2.6 (0.2) (1.0)
------ ------ ------
30.0 (8.7) (20.3)
DEFERRED:
Federal.......................................... (36.1) (16.8) 28.6
State............................................ (2.6) (1.2) 2.0
------ ------ ------
(38.7) (18.0) 30.6
------ ------ ------
Total.................................... $ (8.7) $(26.7) $ 10.3
====== ====== ======
Significant components of deferred income tax assets and liabilities at
December 31, 2001 and 2000, are as follows:
2001 2000
------- -------
(DOLLARS IN MILLIONS)
Deferred income tax assets:
Accrual for postretirement benefits other than
pensions.......................................... $ 4.6 $ 4.8
Environmental reserves............................... 12.6 11.1
Retained liabilities of previously owned
businesses........................................ 21.5 20.9
Other................................................ 15.0 15.9
------ ------
Total deferred income tax assets.................. 53.7 52.7
====== ======
Deferred income tax liabilities:
Inventories.......................................... (4.4) (2.9)
Tax over book depreciation........................... (17.6) (14.5)
Pensions............................................. (19.9) (19.0)
Payments in excess of insurance recoveries........... (38.6) (10.5)
Other................................................ (14.2) (8.1)
------ ------
Total deferred income tax liabilities........ (94.7) (55.0)
------ ------
Net deferred income taxes.................... $(41.0) $ (2.3)
====== ======
F-18
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Management has determined, based on the Company's history of prior earnings
and its expectations for the future, that taxable income of the Company will
more likely than not be sufficient to recognize fully its deferred tax assets.
In addition, management's analysis indicates that the turnaround periods for
certain of these assets are for long periods of time or are indefinite. The
remaining deferred tax assets and liabilities approximately match each other in
terms of timing and amounts and should be realizable in the future, given the
Company's operating history.
The effective income tax rate from continuing operations varied from the
statutory federal income tax rate as follows:
PERCENT OF INCOME
PRETAX
--------------------
2001 2000 1999*
----- ---- -----
Statutory federal income tax rate...................... 35.0% 35.0% 35.0%
Credits................................................ (2.1) (0.1) --
State and local taxes.................................. -- 1.2 1.1
Tax exempt income from foreign sales corporation....... (3.3) (1.3) (2.3)
Trust distributions.................................... (11.6) (3.8) (4.3)
Non-deductible merger-related costs.................... -- -- (15.9)
Repatriation of non-U.S. earnings...................... 1.7 1.5 1.3
Differences in rates on consolidated foreign
subsidiaries......................................... (4.6) 2.2 0.6
Capital loss transaction............................... 20.9 2.4 --
Other items............................................ 1.5 0.4 0.5
----- ---- -----
Effective income tax rate.............................. 37.5% 37.5% 16.0%
===== ==== =====
---------------
* Coltec's effective tax rate in 1999 was a benefit due to a pre-tax loss.
The Company has not provided for U.S. federal and foreign withholding taxes
on $56.4 million of foreign subsidiaries' undistributed earnings as of December
31, 2001, because such earnings are intended to be reinvested indefinitely. It
is not practical to determine the amount of income tax liability that would
result had such earnings actually been repatriated. On repatriation, certain
foreign countries impose withholding taxes. The amount of withholding tax that
would be payable on remittance of the entire amount of undistributed earnings
would approximate $3.6 million.
N. BUSINESS SEGMENT INFORMATION
The Company has two reportable segments. The sealing products segment
manufactures sealing and PTFE products. The engineered products segment
manufacturers metal polymer bearings, air compressors, engines and specialized
tooling. The Company's reportable segments are managed separately based on
differences in their products and services. Segment operating income is total
segment revenue reduced by operating expenses identifiable with the segment.
Corporate unallocated includes general corporate administrative costs (See Note
C for a discussion of corporate unallocated costs). Merger-related and
consolidation costs are presented separately.
The Company's business is conducted on a global basis with manufacturing,
service and sales undertaken in various locations throughout the world. Sealing
and Engineered Products' goods and services, however, are principally sold to
customers in North America and Europe.
F-19
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company evaluates performance and allocates resources based on
operating income. The accounting policies of the reportable segments are the
same as those described in the summary of significant accounting policies. There
are no significant intersegment sales.
2001 2000 1999
-------- ------ ---------
(DOLLARS IN MILLIONS)
SALES
Sealing Products............................... $ 354.7 $391.1 $ 394.6
Engineered Products............................ 273.6 263.3 271.1
-------- ------ ---------
Total Sales.......................... $ 628.3 $654.4 $ 665.7
======== ====== =========
OPERATING INCOME (LOSS)
Sealing Products............................... $ 45.0 $ 67.5 $ 71.0
Engineered Products............................ 22.2 46.8 52.6
-------- ------ ---------
67.2 114.3 123.6
Corporate unallocated.......................... (10.7) (10.2) (26.8)
Merger-related and consolidation costs......... (3.8) (1.4) (128.4)
-------- ------ ---------
Total Operating Income (Loss)........ $ 52.7 $102.7 $ (31.6)
======== ====== =========
ASSETS
Sealing Products............................... $ 210.7 $219.9 $ 206.0
Engineered Products............................ 332.6 151.1 184.5
Net assets of discontinued operations.......... 267.9 218.6 344.1
Corporate 456.0 402.2 284.6
-------- ------ ---------
Total Assets......................... $1,267.2 $991.8 $ 1,019.2
======== ====== =========
CAPITAL EXPENDITURES
Sealing Products............................... $ 6.5 $ 6.7 $ 9.8
Engineered Products............................ 9.9 7.6 13.3
Corporate...................................... -- -- 1.0
-------- ------ ---------
Total Capital Expenditures........... $ 16.4 $ 14.3 $ 24.1
======== ====== =========
DEPRECIATION AND AMORTIZATION EXPENSE
Sealing Products............................... $ 14.6 $ 14.1 $ 12.4
Engineered Products............................ 13.7 10.8 9.8
Corporate...................................... .5 1.7 2.2
-------- ------ ---------
Total Depreciation and
Amortization....................... $ 28.8 $ 26.6 $ 24.4
======== ====== =========
GEOGRAPHIC AREAS
NET SALES
United States.................................. $ 438.4 $480.0 $ 496.2
Canada......................................... 43.1 41.7 44.6
Europe......................................... 91.4 48.5 67.3
Other Foreign.................................. 55.4 84.2 57.6
-------- ------ ---------
Total................................ $ 628.3 $654.4 $ 665.7
======== ====== =========
F-20
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2001 2000 1999
-------- ------ ---------
(DOLLARS IN MILLIONS)
PROPERTY
United States.................................. $ 109.5 $111.1 $ 125.8
Canada......................................... 1.9 1.9 1.5
Europe......................................... 25.3 8.2 5.8
Other Foreign.................................. 1.5 3.7 0.6
-------- ------ ---------
Total................................ $ 138.2 $124.9 $ 133.7
======== ====== =========
No customer accounted for 10% or more of net sales in 2001, 2000 or 1999.
O. ACCOUNTS RECEIVABLE ALLOWANCE
CHARGED
BALANCE TO COSTS BALANCE
BEGINNING AND END
OF YEAR EXPENSE DEDUCTIONS(1) OTHER(2) OF YEAR
--------- -------- ------------- -------- -------
(DOLLARS IN MILLIONS)
2001................. $1.8 $ 0.7 $(0.6) $0.4 $2.3
2000................. 2.3 (0.2) (0.3) -- 1.8
1999................. 2.6 0.6 (0.9) -- 2.3
---------------
(1)Write-off of doubtful accounts, net of recoveries
(2)Acquisitions
P. FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company's accounting policies with respect to financial instruments are
described in Note B.
The carrying values of the Company's significant financial instruments
reflected in the consolidated balance sheets approximate their respective fair
values at December 31, 2001 and 2000, except for the following instruments:
2001 2000
----------------- -----------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- ------ -------- ------
(DOLLARS IN MILLIONS)
Long-term investments.................. $ 23.7 $ 24.2 $ 22.5 $ 22.3
Long-term debt......................... $314.6 $330.0 $317.3 $318.6
Mandatorily redeemable convertible
preferred securities of trust
(TIDES).............................. $150.0 $106.7 $149.3 $123.9
The Company has an outstanding contingent liability for guaranteed debt and
lease payments of $22.5 million, and for letters of credit of $0.2 million. It
was not practical to obtain independent estimates of the fair values for the
contingent liability for guaranteed debt and lease payments and for letters of
credit without incurring excessive costs. In the opinion of management,
non-performance by the other parties to the contingent liabilities will not have
a material effect on the Company's consolidated financial condition or results
of operations.
F-21
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Q. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Accumulated other comprehensive income (loss) consisted of the following:
2001 2000
------- -------
(DOLLARS IN MILLIONS)
Unrealized translation adjustments..................... $(12.3) $(11.8)
Minimum pension liability.............................. (3.3) (3.2)
------ ------
Accumulated other comprehensive income (loss).......... $(15.6) $(15.0)
====== ======
R. SUPPLEMENTAL CASH FLOW INFORMATION
The following table sets forth supplemental cash flow information related
to acquisitions accounted for under the purchase method and interest paid:
2001 2000 1999
------- ----- ------
(DOLLARS IN MILLIONS)
Estimated fair value of tangible assets acquired... $ 45.4 $ -- $ --
Goodwill and identifiable intangible assets
acquired......................................... 125.1 -- --
Cash paid.......................................... (155.1) -- --
------- ----- ------
Liabilities assumed or created..................... $ 15.4 $ -- $ --
======= ===== ======
Interest paid (net of amount capitalized).......... $ 23.7 $28.4 $ 37.2
S. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED SECURITIES OF TRUST (TIDES)
In April 1998, Coltec Capital Trust, a Delaware business trust and a wholly
owned subsidiary of the Company privately placed with institutional investors
$150 million (3,000,000 shares at liquidation value of $50 per Convertible
Preferred Security) of 5 1/4% Convertible Preferred Securities -- Term Income
Deferred Equity Securities, or TIDES. The TIDES represent undivided beneficial
ownership interests in the trust. In connection with the issuance of the TIDES,
Coltec issued an equivalent aggregate principal amount of its 5 1/4% Convertible
Junior Subordinated Deferrable Interest Debentures due April 15, 2028, or TIDES
Debentures, all of which were acquired by Coltec Capital Trust with the proceeds
from the private placement of the TIDES. Coltec Capital Trust has essentially no
other assets or liabilities other than the TIDES Debentures. The obligations of
Coltec Capital Trust with respect to the TIDES are guaranteed jointly and
severally by Coltec and Goodrich. The TIDES are convertible at the option of the
holders at any time into the common stock of the Parent at an effective
conversion price of $52.34 per share and are redeemable at the Parent's option
after April 20, 2001 at 102.63% of the liquidation amount declining ratably to
100% after April 20, 2004.
Following the distribution and until April 15, 2028, each TIDES will be
convertible, at the option of the holder, into a combination of 0.955248 of a
share of Goodrich common stock and 0.1910496 of a share of EnPro common stock,
subject to adjustment. In March 2002, Coltec purchased call options on 2,865,744
shares of Goodrich common stock at a price of $52.34 per share, which represents
the total Goodrich shares that would be required if all TIDES holders convert.
One-third of these call options expire in March 2005, and the remainder expire
in March 2007. Until they expire, the call options will reduce Coltec's risk
that the cash required to finance conversions of the TIDES would exceed the $150
million liquidation value. The cost of these call options was approximately $15
million.
F-22
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
T. STOCK OPTION PLAN
As a business unit of the Parent, the Company has no employee stock option
plan; however, certain eligible employees of the Company participate in the
Parent's Stock Option Plan (the "Plan"). Generally, options granted by the
Parent are exercisable at the rate of 35% after one year, 70% after two years
and 100% after three years. Certain options are fully exercisable immediately
after grant. The term of each option cannot exceed 10 years from the date of
grant. All options granted under the Plan have been granted at not less than
100% of market value (as defined) on the date of grant.
Pro forma information regarding net income is required by FASB Statement
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), and has been
determined as if the Parent had accounted for its employee stock options under
the fair value method described within that statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions:
2001 2000 1999
---- ---- ----
Risk-Free Interest Rate (%)............................. 5.0 5.0 6.7
Dividend Yield (%)...................................... 3.5 3.4 3.5
Volatility Factor (%)................................... 44.2 37.5 36.0
Weighted Average Expected Life of the Options (years)... 7.0 7.0 7.0
The option valuation model requires the input of highly subjective
assumptions, primarily stock price volatility, changes in which can materially
affect the fair value estimate. The weighted-average fair values of stock
options granted by the Parent during 2001, 2000 and 1999 were $13.78, $8.65 and
$12.13, respectively.
During 1999, restricted stock awards for 89,910 shares were made under the
Parent's stock option plan including those made to employees of discontinued
operations. Restricted stock awards may be subject to conditions established by
the Board of Directors. Under the terms of the restricted stock awards, the
granted stock vests two years and 10 months after the award date. Restricted
shares held by all employees will continue to vest under their original terms
after the Distribution. The cost of these awards, determined as the market value
of the shares at the date of grant, is being amortized over the vesting period.
In 2001, 2000 and 1999, $0.2 million, $0.1 million and $0.9 million,
respectively, was charged to expense of continuing operations for restricted
stock awards. Of the $0.9 million of expense recognized in 1999, $0.8 million
related to acceleration of vesting in connection with the Coltec Acquisition.
The Stock Option Plan of the Parent also provides that shares of common
stock may be awarded as performance shares to certain key executives having a
critical impact on long-term performance. Dividends are earned on phantom shares
and are reinvested in additional phantom shares. Under this plan, compensation
expense is recorded based on the extent performance objectives are expected to
be met. Employees of the Company received grants in 2001 and 2000 only, as they
were not participants in the plan before the Coltec Acquisition. In 2001 and
2000, $.4 million and $1.1 million, respectively, was charged to expense of
continuing operations for performance shares. If the provisions of SFAS 123 had
been used to account for awards of performance shares, the weighted-average
grant-date fair value of performance shares granted in 2001 and 2000 would have
been $38.62 and $23.12 per share, respectively.
U. DISCONTINUED OPERATIONS
Prior to the Distribution, Coltec will dividend Coltec Aerospace to
Goodrich. The dividend of Coltec Aerospace to Goodrich represents the disposal
of a segment under APB 30. Accordingly, Coltec Aerospace has been accounted for
as a discontinued operation and the revenues, costs and expenses, assets and
F-23
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
liabilities, and cash flows have been segregated in the Company's Consolidated
Statements of Income, Consolidated Balance Sheets and Consolidated Statements of
Cash Flows.
The following summarizes the results of discontinued operations, which
consist solely of the results of Coltec Aerospace:
2001 2000 1999
------ ------ ------
(DOLLARS IN MILLIONS)
Sales.............................................. $843.3 $782.1 $790.9
====== ====== ======
Pretax income from discontinued operations......... $140.6 $ 97.2 $101.9
Income tax expense................................. 46.5 33.0 40.0
------ ------ ------
Income from discontinued operations................ $ 94.1 $ 64.2 $ 61.9
====== ====== ======
V. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries have numerous purchase commitments for
materials and supplies incident to the ordinary course of business.
CONTINGENCIES
GENERAL
There are pending or threatened against the Company or its subsidiaries
various claims, lawsuits and administrative proceedings, all arising from the
ordinary course of business with respect to commercial, product liability,
asbestos and environmental matters, which seek remedies or damages. The Company
believes that any liability that may finally be determined with respect to
commercial and non-asbestos product liability claims should not have a material
effect on the Company's consolidated financial condition or results of
operations. From time to time, the Company and its subsidiaries are also
involved in legal proceedings as plaintiffs involving contract, patent
protection, environmental and other matters. Gain contingencies, if any, are
recognized when they are realized.
ENVIRONMENTAL
The Company and its subsidiaries are generators of both hazardous wastes
and non-hazardous wastes, the treatment, storage, transportation and disposal of
which are subject to various laws and governmental regulations. Although past
operations were in substantial compliance with the then-applicable regulations,
the Company has been designated as a potentially responsible party ("PRP") by
the U.S. Environmental Protection Agency ("EPA"), or similar state agencies, in
connection with several sites.
The Company initiates corrective and/or preventive environmental projects
of its own to ensure safe and lawful activities at its current operations. It
also conducts a compliance and management systems audit program. The Company
believes that compliance with current laws and governmental regulations
concerning the environment will not have a material adverse effect on its
capital expenditures, earnings or competitive position.
The Company's environmental engineers and consultants review and monitor
environmental issues at past and existing operating sites, as well as off-site
disposal sites at which the Company has been identified as a PRP. This process
includes investigation and remedial selection and implementation, as well as
negotiations with other PRPs and governmental agencies.
F-24
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The environmental amounts recorded in the financial statements have been
recorded on an undiscounted basis. The Company believes that its reserves are
adequate based on currently available information. Management believes that it
is reasonably possible that additional costs may be incurred beyond the amounts
accrued as a result of new information. However, the amounts, if any, cannot be
estimated and management believes that they would not be material to the
Company's consolidated financial condition, but could be material to the
Company's consolidated results of operations in a given period.
OTHER CONTINGENT LIABILITY MATTERS
The Company has some contingent liabilities related to discontinued
operations of its predecessors and for which it retained liability or is
obligated under indemnity agreements. These contingent liabilities include
potential product liability and associated claims related to the Company's
former Colt Firearms subsidiary for firearms manufactured prior to 1990 and
related to the Company's former Central Maloney subsidiary for electrical
transformers manufactured prior to 1994. There are currently no claims pending
against the Company related to these former subsidiaries. However, such claims
could arise in the future. The Company also has ongoing obligations with regard
to workers compensation and medical benefit matters associated with Crucible
Materials Corporation and Colt Firearms that relate to the Company's periods of
ownership of these companies.
ASBESTOS
Garlock and Anchor. Two subsidiaries of the Company, Garlock Sealing
Technologies, LLC ("Garlock") and The Anchor Packing Company ("Anchor"), have
been among a number of defendants (typically 15 to 40) in actions filed in
various states by plaintiffs alleging injury or death as a result of exposure to
asbestos fibers. Among the products at issue in those actions are industrial
sealing products, predominantly gaskets, manufactured and/or sold by Garlock or
Anchor. The damages claimed vary from action to action and in some cases
plaintiffs seek both compensatory and punitive damages. To date, neither Garlock
nor Anchor has been required to pay any punitive damage awards, although there
can be no assurance that they will not be required to do so in the future.
Liability for compensatory damages has historically been allocated among all
responsible defendants, thus limiting the potential monetary impact of a
particular judgment or settlement on any individual defendant.
The Company believes that Garlock and Anchor are in a favorable position
compared to many other asbestos defendants because, among other things, the
asbestos-containing products sold by Garlock and Anchor are encapsulated, which
means the asbestos fibers are incorporated into the product during the
manufacturing process and sealed in a binder. They are also nonfriable, which
means they cannot be crumbled by hand pressure. The Occupational Safety and
Health Administration, which began generally requiring warnings on
asbestos-containing products in 1972, has never required that a warning be
placed on products such as Garlock's gaskets. Notwithstanding that no warning
label has been required, Garlock included one on all of its asbestos-containing
products beginning in 1978. Further, gaskets such as those previously
manufactured and sold by Garlock are one of the few asbestos-containing products
permitted to be manufactured under regulations of the EPA. Since the mid-1980s,
U.S. sales of asbestos-containing industrial sealing products have not been a
material part of Garlock's sales and those sales have been predominantly to
sophisticated purchasers such as the U.S. Navy and large petrochemical
facilities. These purchasers generally have extensive health and safety
procedures and are familiar with the risks associated with the use and handling
of industrial sealing products that contain asbestos. Garlock discontinued
distributing asbestos-containing products in the U.S. during 2000 and worldwide
in mid-2001.
Garlock settles and disposes of actions on a regular basis. In addition,
some actions are disposed of at trial. Garlock's historical settlement strategy
has been to try to match the timing of payments with
F-25
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recoveries received from insurance. However, in 1999 and 2000, Garlock
implemented a short-term aggressive settlement strategy. The purpose of this
short-term strategy was to achieve a permanent reduction in the number of
overall asbestos claims through the settlement of a larger than normal number of
claims, including some claims not yet filed as lawsuits. Garlock believes that
these settlements were at a lower overall cost to Garlock than would eventually
have been paid even though the timing of payment was accelerated. Mainly due to
this short-term aggressive settlement strategy and because settlements are made
over a period of time, the settlement amounts paid in 2000 and 1999 increased
over prior periods.
Settlements are generally made on a group basis with payments made to
individual claimants over a period of one to four years and are made without any
admission of liability. Settlement amounts vary depending upon a number of
factors, including the jurisdiction where the action was brought, the nature of
the disease alleged, the occupation of the plaintiff, the presence or absence of
other possible causes of the plaintiff's alleged illness, the availability of
legal defenses, such as the statute of limitations, and whether the action is an
individual one or part of a group. Garlock's allocable portion of the total
settlement amount for an action typically ranges from 1% to 2% of the total
amount.
Before any payment on a settled claim is made, the claimant is required to
submit a medical report acceptable to Garlock substantiating the
asbestos-related illness and meeting specific criteria of disability. In
addition, sworn testimony that the claimant worked with or around Garlock
asbestos-containing products is required. Generally, the claimant is also
required to sign a full and unconditional release of Garlock, its subsidiaries,
parent, officers, directors, affiliates and related parties from any liability
for asbestos-related injuries or claims.
When a settlement demand is not reasonable given the totality of the
circumstances, Garlock generally will try the case. Garlock has been successful
in winning a substantial majority of the cases it has tried to verdict.
Garlock's share of adverse verdicts in these cases in 2001, 2000 and 1999
totaled less than $7 million in the aggregate, and some of those verdicts are on
appeal.
Anchor is an inactive and insolvent subsidiary of Coltec. The insurance
coverage available to it is fully committed. Anchor continues to pay settlement
amounts covered by its insurance but has not committed to settle any further
actions since 1998. As cases reach the trial stage, Anchor is typically
dismissed without payment.
The insurance coverage available to Garlock is substantial. As of December
31, 2001, Garlock had available $1.011 billion of insurance coverage from
carriers that it believes to be solvent. Of that amount, $119 million is
allocated to claims that have been paid by Garlock and submitted to its
insurance companies for reimbursement and $161 million has been committed to
claim settlements not yet paid by Garlock. Thus, at December 31, 2001, $731
million remained available for coverage of future claims. Insurance coverage for
asbestos claims is not available to cover exposures initially occurring on and
after July 1, 1984. Garlock and Anchor continue to be named as defendants in new
actions, a few of which allege initial exposure after July 1, 1984. To date, no
payments with respect to these claims, pursuant to a settlement or otherwise,
have been made. In addition, Garlock and Anchor believe that they have
substantial defenses to these claims and therefore automatically reject them for
settlement. However, there can be no assurance that any or all of these defenses
will be successful in the future.
Arrangements with Garlock's insurance carriers limit the amount that can be
received by it in any one year. The amount of insurance available to cover
claims paid by Garlock currently is limited to $80 million per year in 2001 and
2000, and $60 million in 1999, covering both settlements and reimbursements of
legal fees. This limit automatically increases by 8% every three years. Amounts
paid by Garlock in excess of this annual limit that would otherwise be
recoverable from insurance may be collected from the insurance companies in
subsequent years so long as insurance is available but subject to the annual
limit in each
F-26
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
subsequent year. As a result, Garlock is required to pay out of its own cash any
amounts paid to settle or dispose of asbestos-related claims in excess of the
annual limit and collect these amounts from its insurance carriers in subsequent
years. Various options, such as raising the annual limit, are being pursued to
ensure as close a match as possible between payments by Garlock and recoveries
received from insurance. There can be no assurance that Garlock will be
successful as to any or all of these options.
In accordance with internal procedures for the processing of asbestos
product liability actions and due to the proximity to trial or settlement,
certain outstanding actions against Garlock and Anchor have progressed to a
stage where the cost to dispose of these actions can reasonably be estimated.
These actions are classified as actions in advanced stages and are included in
the table as such below. With respect to outstanding actions against Garlock and
Anchor that are in preliminary procedural stages, as well as any actions that
may be filed in the future, insufficient information exists upon which judgments
can be made as to the validity or ultimate disposition of such actions, thereby
making it difficult to reasonably estimate what, if any, potential liability or
costs may be incurred. Accordingly, no estimate of future liability has been
included in the table below for such claims.
The Company records an accrual for liabilities related to Garlock and
Anchor asbestos-related matters that are deemed probable and can be reasonably
estimated, which consist of settled claims and actions in advanced stages of
processing. The Company also records an asset equal to the amount of those
liabilities that is expected to be recovered by insurance. A table is provided
below depicting quantitatively the items discussed above.
YEAR ENDED YEAR ENDED YEAR ENDED
2001 2000 1999
---------- ---------- ----------
(NUMBER OF CASES)
New Actions Filed During the Year(1)................. 37,600 36,200 30,200
Actions in Advanced Stages at Year-End............... 2,500 5,800 8,300
Open Actions at Year-End............................. 95,400 96,300 96,000
(DOLLARS IN MILLIONS AT YEAR-END)
Estimated Liability for Settled Claims and Actions in
Advanced Stages of Processing(2).................. $ 170.9 $ 231.2 $ 163.1
Estimated Amounts Recoverable From Insurance(2)(3)... $ 293.7 $ 285.7 $ 188.2
(DOLLARS IN MILLIONS)
Payments(2).......................................... $ 162.7 $ 119.7 $ 84.5
Insurance Recoveries(2).............................. 87.9 83.3 65.2
------- ------- -------
Net Cash Flow(3)..................................... $ (74.8) $ (36.4) $ (19.3)
======= ======= =======
----------------------
(1)Consists only of actions actually filed with a court of competent
jurisdiction. To the extent that a particular action names both Garlock and
Anchor as defendants, for purposes of this table the action is treated as a
single action.
(2)Includes amounts with respect to all claims settled, whether or not an action
has actually been filed with a court of competent jurisdiction, claims which
have been dismissed or tried and claims otherwise closed during the period.
(3)Payments made during the period for which Garlock does not receive a
corresponding insurance recovery due to the annual limit imposed under
Garlock's insurance policies will be recovered in future periods to the
extent insurance is available. When estimating the amounts recoverable,
Garlock only includes insurance coverage available from carriers believed to
be solvent.
F-27
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As shown in the table above, the number of new actions filed during 2001
increased slightly over 2000, while the number of new actions filed during 2000
increased significantly over 1999. The Company believes these increases
represent an acceleration of claims from future periods mostly attributable to
bankruptcies of other asbestos defendants. The acceleration of claims may have
the impact of accelerating the associated settlement payments. The Company
believes the number of new actions will decrease in future years due, in part,
to the previously-described acceleration of future claims and because the
largest asbestos exposures occurred prior to the mid-1970s. However, there can
be no assurance that the number of new claims filed will not remain at current
levels or increase in future years.
Garlock and Anchor recorded charges to operations amounting to
approximately $8.0 million in each of 2001, 2000 and 1999, representing payments
and related expenditures made during the periods which are not recoverable at
all under insurance, whether in the present period or in future periods.
Garlock and Anchor paid $74.8 million, $36.4 million and $19.3 million for
the defense and disposition of asbestos-related actions, net of amounts received
from insurance carriers, during 2001, 2000 and 1999, respectively. The amount of
payments in 2001 was consistent with the expectation that payments during 2001
would be higher than in 2000 and 1999.
Considering the foregoing, as well as the experience of the Company's
subsidiaries and other defendants in asbestos litigation, the likely sharing of
judgments among multiple responsible defendants, recent bankruptcies of other
defendants, legislative efforts and given the substantial amount of insurance
coverage that Garlock expects to be available from its solvent carriers, the
Company believes that pending actions against Garlock and Anchor are not likely
to have a material adverse effect on the Company's consolidated financial
condition, but could be material to the Company's consolidated results of
operations or cash flows in a given period. However, because of the uncertainty
as to the number and timing of potential future actions, as well as the amount
that will have to be paid to settle or satisfy any such actions in the future,
there can be no assurance that those future actions will not have a material
adverse effect on the Company's consolidated financial condition, results of
operations and cash flows.
Other. The Company, and some of its subsidiaries (other than Garlock and
Anchor) have also been named as defendants in various actions by plaintiffs
alleging injury or death as a result of exposure to asbestos fibers. The number
of claims to date has not been significant and insurance coverage is available
to the Company. Based on the above, the Company believes that these pending and
reasonably anticipated future actions are not likely to have a material adverse
effect on the Company's consolidated financial condition, results of operations
and cash flows and are therefore not discussed above.
The Company, Garlock, Anchor and some of the Company's other subsidiaries
are also defendants in other asbestos-related lawsuits or claims involving
maritime workers, medical monitoring claimants and co-defendants. Based on past
experience, the Company believes that these categories of claims are not likely
to have a material adverse effect on the Company's consolidated financial
condition, results of operations and cash flows and are therefore not discussed
above.
F-28
COLTEC INDUSTRIES INC
(A SUBSIDIARY OF GOODRICH CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
QUARTERLY FINANCIAL DATA (UNAUDITED)
2001 2000
--------------------------------- ---------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
------ ------ ------ ------ ------ ------ ------ ------
(DOLLARS IN MILLIONS)
Total Sales................... $162.4 $158.2 $144.7 $163.0 $176.3 $172.6 $154.8 $150.7
Gross Profit(1)............... 52.8 50.6 42.8 36.4 61.5 59.6 53.7 49.5
Selling and Administrative
Costs.................... (30.2) (31.1) (29.3) (35.5) (32.3) (29.9) (29.7) (28.3)
Merger-Related and
Consolidation Costs...... -- (1.3) 0.5 (3.0) -- -- -- (1.4)
------ ------ ------ ------ ------ ------ ------ ------
Total Operating Income
(Loss)...................... $ 22.6 $18.2 $ 14.0 $(2.1) $ 29.2 $29.7 $ 24.0 $ 19.8
====== ====== ====== ====== ====== ====== ====== ======
Income (Loss) From:
Continuing Operations....... $ 7.3 $ 4.6 $ 2.4 $(7.7) $ 10.7 $12.5 $ 8.2 $ 5.2
Discontinued Operations..... 20.8 25.5 26.8 21.0 21.1 13.9 17.0 12.2
------ ------ ------ ------ ------ ------ ------ ------
Net Income.................... $ 28.1 $30.1 $ 29.2 $13.3 $ 31.8 $26.4 $ 25.2 $ 17.5
====== ====== ====== ====== ====== ====== ====== ======
----------------------
(1)Gross profit represents total sales less cost of sales.
The second, third and fourth quarters of 2001 include $1.3 million, $(0.5)
million and $3.0 million of pre-tax charges (credit), respectively, for
restructuring activities at the Garlock Sealing Technologies, Stemco, Fairbanks
Morse and Sterling Die operating units.
The fourth quarter of 2000 includes a $1.4 million pre-tax charge for
restructuring activities.
F-29
The letter of transmittal and any other required documents should be sent
or delivered by each holder or that holder's broker, dealer, commercial bank,
trust company or nominee to the depositary at one of its addresses set forth
below.
The depositary for the exchange offer is:
BANK OF NEW YORK
By Registered/Certified Mail By Facsimile Transmission: By Hand or Overnight
or Overnight Services: (For Eligible Institutions Courier:
Only)
15 Broad Street -- 16th Floor (212) 235-2261 15 Broad Street
Corporate Trust Department Corporate Trust Department
New York, New York 10286 New York, New York 10286
Attn: Mr. Kin Lau For Confirmation Telephone: Attn: Mr. Kin Lau
Reorganization Section (212) 235-2358 Reorganization Section
Any questions or requests for assistance may be directed to the information
agent or the dealer manager at their respective telephone numbers and addresses
set forth below. Requests for additional copies of this offer to purchase, the
letter of transmittal or the notice of guaranteed delivery may be directed to
the information agent at the telephone number and address set forth below.
Holders also may contact their broker, dealer, commercial bank, trust company or
nominee for assistance concerning the tender offer. To confirm delivery of old
Coltec notes, holders are directed to contact the depositary.
The information agent for the exchange offer is:
[Logo of Mellon Investor Services LLC]
44 Wall Street, 7th Floor
New York, NY 10005
Banks and Brokers Call Collect: (917) 320-6286
All Others Call Toll Free: (800) 241-6711
The dealer manager for the exchange offer is:
SALOMON SMITH BARNEY INC.
390 Greenwich Street
New York, NY 10013
Attn: Liability Management Group
(800) 558-3745 (Call Toll Free)
March , 2002
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Company's Restated Certificate of Incorporation no member of the
Board of Directors shall have any personal liability to the Company or its
shareholders for damages for any breach of duty in such capacity, provided that
such liability shall not be limited if a judgment or other final adjudication
adverse to the Director establishes that his or her acts or omissions were in
bad faith or involved intentional misconduct or a knowing violation of law or
that the Director personally gained in fact a financial profit or other
advantage to which he or she was not legally entitled or that the Director's
acts violated section 719 of the New York Business Corporation Law ("B.C.L.")
(generally relating to the improper declaration of dividends, improper purchases
of shares, improper distribution of assets after dissolution, or making improper
loans to directors contrary to specified statutory provisions). Reference is
made to Article TWELFTH of the Company's Restated Certificate of Incorporation
filed as Exhibit 3(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1988.
Under the Company's By-Laws, any person made, or threatened to be made, a
party to an action or proceeding by reason of the fact that he, his testator or
intestate is or was a director or officer of the Company or served any other
corporation in any capacity at the request of the Company shall be indemnified
by the Company to the extent and in a manner permissible under the laws of the
State of New York.
In addition, the Company's By-Laws provide indemnification for directors
and officers where they are acting on behalf of the Company where the final
judgment does not establish that the director or officer acted in bad faith or
was deliberately dishonest or gained a financial profit or other advantage to
which he was not legally entitled. The By-Laws provide that the indemnification
rights shall be deemed to be "contract rights" and continue after a person
ceases to be a director or officer or after rescission or modification of the
By-Laws with respect to prior occurring events. They also provide directors and
officers with the benefit of any additional indemnification which may be
permitted by later amendment to the B.C.L. The By-Laws further provide for
advancement of expenses and specify procedures in seeking and obtaining
indemnification. Reference is made to Article VI of the Company's By-Laws filed
as Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1988.
The Company has insurance to indemnify its directors and officers, within
the limits of the Company's insurance policies, for those liabilities in respect
of which such indemnification insurance is permitted under the laws of the State
of New York. We have also entered into indemnification agreements with our
officers and directors that specify the terms of our indemnification
obligations. In general, these indemnification agreements provide that we will
indemnify our officers and directors to the fullest extent now permitted under
current law and to the extent that the law is amended to increase the scope of
permitted indemnification. They also provide for the advance payment of expenses
to a director or officer incurred in an indemnifiable claim, subject to
repayment if it is later determined that the director or officer was not
entitled to be indemnified. Under these agreements we agree to reimburse the
director or officer for any expenses that they incur in seeking to enforce their
rights under the indemnification agreement, and we have the opportunity to
participate in the defense of any indemnifiable claims against the director or
officer.
Reference is made to Sections 721-726 of the B.C.L., which are summarized
below.
Section 721 of the B.C.L. provides that indemnification pursuant to the
B.C.L. shall not be deemed exclusive of other indemnification rights to which a
director or officer may be entitled, provided that no indemnification may be
made if a judgment or other final adjudication adverse to the director or
officer establishes that (i) his acts were committed in bad faith or were the
result of active and deliberate dishonesty, and, in either case, were material
to the cause of action so adjudicated, or (ii) he personally gained in fact a
financial profit or other advantage to which he was not legally entitled.
II-1
Section 722(a) of the B.C.L. provides that a corporation may indemnify a
director or officer made, or threatened to be made, a party to any civil or
criminal action, other than a derivative action, against judgments, fines,
amounts paid in settlement and reasonable expenses, including attorneys' fees
actually and necessarily incurred as a result of such action or proceeding, or
any appeal therein, if such director or officer acted, in good faith, for a
purpose which he reasonably believed to be in the best interests of the
corporation and, in criminal actions or proceedings, in addition, had no
reasonable cause to believe that his conduct was unlawful. With respect to
derivative actions, Section 722(c) of the B.C.L. provides that a director or
officer may be indemnified only against amounts paid in settlement and
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense or settlement of such action, or any
appeal therein, if such director or officer acted, in good faith, for a purpose
which he reasonably believed to be in the best interests of the corporation and
that no indemnification shall be made in respect of (1) a threatened action, or
a pending action which is settled or otherwise disposed of, or (2) any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation, unless and to the extent an appropriate court determines that
the person is fairly and reasonably entitled to partial or full indemnification.
Section 723 of the B.C.L. specifies the manner in which payment of such
indemnification may be authorized by the corporation. It provides that
indemnification by a corporation is mandatory in any case in which the director
or officer has been successful, whether on the merits or otherwise, in defending
an action. In the event that the director or officer has not been successful or
the action is settled, indemnification may be made by the corporation only if
authorized by any of the corporate actions set forth in such Section 723 (unless
the corporation has provided for indemnification in some other manner as
otherwise permitted by Section 721 of the B.C.L.).
Section 724 of the B.C.L. provides that upon proper application by a
director or officer, indemnification shall be awarded by a court to the extent
authorized under Sections 722 and 723 of the B.C.L. Section 725 of the B.C.L.
contains certain other miscellaneous provisions affecting the indemnification of
directors and officers, including provision for the return of amounts paid as
indemnification if any such person is ultimately found not to be entitled to the
indemnification.
Section 726 of the B.C.L. authorizes the purchase and maintenance of
insurance to indemnify (1) a corporation for any obligation which it incurs as a
result of the indemnification of directors and officers under the above
sections, (2) directors and officers in instances in which they may be
indemnified by a corporation under such sections, and (3) directors and officers
in instances in which they may not otherwise be indemnified by a corporation
under such sections, provided the contract of insurance covering such directors
and officers provides, in a manner acceptable to the New York State
Superintendent of Insurance, for a retention amount and for co-insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Form of Distribution Agreement among Goodrich Corporation,
EnPro Industries, Inc. and Coltec Industries Inc, filed as
Exhibit 2.1 to the Registration Statement on Form 10 filed
by EnPro Industries, Inc. (File No. 001-31225) and
incorporated herein by reference.
4.1 Indenture dated as of May 1, 1991 between the Company and
The Bank of New York, as successor to Harris Trust and
Savings Bank. This exhibit was filed as an exhibit to the
Registration Statement filed by Goodrich on Form S-3 (File
No. 33-65658) and is incorporated herein by reference.
4.2 Form of New Goodrich Note.**
4.3 Instruments defining the rights of holders of Goodrich's
long-term debt are not filed herewith since no single debt
item exceeds 10% of consolidated assets. Copies of such
instruments will be furnished to the Commission upon
request.
5.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding the
legality of the notes being issued and the binding nature of
the obligation on Goodrich.**
II-2
EXHIBIT
NUMBER DESCRIPTION
------- -----------
12.1 Statement re: computation of ratios.**
23.1 Consent of Ernst & Young LLP, Independent Auditors.**
23.2 Consent of Ernst & Young LLP, Independent Auditors.**
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 5.1).**
24.1 Powers of Attorney (set forth on the signature page of this
registration statement).*
25.1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York, as the successor
to Harris Trust and Savings Bank on Form T-1.*
99.1 Form of Letter of Transmittal.**
99.2 Form of Notice of Guaranteed Delivery.**
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies, and Other Nominees.**
99.4 Form of letter to clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.**
99.5 Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.**
99.6 Form of Tax Matters Arrangements between Goodrich
Corporation and EnPro Industries, Inc., filed as Exhibit
10.1 to the Registration Statement on Form 10 filed by EnPro
Industries, Inc. (File No. 001-31225) and incorporated
herein by reference.
99.7 Form of Transition Services Agreement between Goodrich
Corporation and EnPro Industries, Inc., filed as Exhibit
10.2 to the Registration Statement on Form 10 filed by EnPro
Industries, Inc. (File No. 001-31225) and incorporated
herein by reference.
99.8 Form of Employee Matters Agreement between Goodrich
Corporation and EnPro Industries, Inc., filed as Exhibit
10.3 to the Registration Statement on Form 10 filed by EnPro
Industries, Inc. (File No. 001-31225) and incorporated
herein by reference.
99.9 Form of Indemnification Agreement among Goodrich
Corporation, EnPro Industries, Inc., Coltec Industries Inc
and Coltec Capital Trust, filed as Exhibit 10.4 to the
Registration Statement on Form 10 filed by EnPro Industries,
Inc. (File No. 001-31225) and incorporated herein by
reference.
------------------
*Previously filed.
**Filed herewith.
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(a) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
(b) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in the documents filed subsequent to
the effective date of the registration statement through the date of
responding to the request.
(c) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-3
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Charlotte, North Carolina on March
22, 2002.
GOODRICH CORPORATION
(Registrant)
By: /s/ DAVID L. BURNER*
------------------------------------
David L. Burner
(Chairman and Chief Executive
Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated, on March 22, 2002.
/s/ DAVID L. BURNER*
------------------------------------------------------
(David L. Burner)
Chairman of the Board, President and
Chief Executive Officer and Director
(Principal Executive Officer)
/s/ GEORGE A. DAVIDSON, JR.*
------------------------------------------------------
(George A. Davidson, Jr.)
Director
/s/ JAMES J. GLASSER*
------------------------------------------------------
(James J. Glasser)
Director
/s/ WILLIAM R. HOLLAND*
------------------------------------------------------
(William R. Holland)
Director
/s/ DOUGLAS E. OLESEN*
------------------------------------------------------
(Douglas E. Olesen)
Director
/s/ ALFRED M. RANKIN, JR.*
------------------------------------------------------
(Alfred M. Rankin, Jr.)
Director
/s/ ROBERT D. KONEY, JR.*
------------------------------------------------------
(Robert D. Koney, Jr.)
Vice President and Controller
(Principal Accounting Officer)
/s/ RICHARD DE J. OSBORNE*
------------------------------------------------------
(Richard de J. Osborne)
Director
/s/ ULRICH SCHMIDT*
------------------------------------------------------
(Ulrich Schmidt)
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ DIANE C. CREEL*
------------------------------------------------------
(Diane C. Creel)
Director
/s/ HARRIS E. DELOACH, JR.*
------------------------------------------------------
(Harris E. DeLoach, Jr.)
Director
/s/ JAMES R. WILSON*
------------------------------------------------------
(James R. Wilson)
Director
/s/ A. THOMAS YOUNG*
------------------------------------------------------
(A. Thomas Young)
Director
------------------
* The undersigned, as attorney-in-fact, does hereby sign this Registration
Statement on behalf of each of the officers and directors indicated above.
/s/ KENNETH L. WAGNER
--------------------------------------
Kenneth L. Wagner
II-5
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
2.1 Form of Distribution Agreement among Goodrich Corporation,
EnPro Industries, Inc. and Coltec Industries Inc, filed as
Exhibit 2.1 to the Registration Statement on Form 10 filed
by EnPro Industries, Inc. (File No. 001-31225) and
incorporated herein by reference.
4.1 Indenture dated as of May 1, 1991 between the Company and
The Bank of New York, as the successor to Harris Trust and
Savings Bank. This exhibit was filed as an exhibit to the
Registration Statement filed by Goodrich on Form S-3 (File
No. 33-65658) and is incorporated herein by reference.
4.2 Form of New Goodrich Note.**
4.3 Other instruments defining the rights of holders of
Goodrich's long-term debt are not filed herewith since no
single debt item exceeds 10% of consolidated assets. Copies
of such instruments will be furnished to the Commission upon
request.
5.1 Opinion of Wachtell, Lipton, Rosen & Katz regarding the
legality of the notes being issued and the binding nature of
the obligation on Goodrich.**
12.1 Statement re: computation of ratios.**
23.1 Consent of Ernst & Young LLP, Independent Auditors.**
23.2 Consent of Ernst & Young LLP, Independent Auditors.**
23.3 Consent of Wachtell, Lipton, Rosen & Katz (included in
Exhibit 5.1).**
24.1 Powers of Attorney.*
25.1 Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York, as the successor
to Harris Trust and Savings Bank on Form T-1.*
99.1 Form of Letter of Transmittal.**
99.2 Form of Notice of Guaranteed Delivery.**
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies, and Other Nominees.**
99.4 Form of letter to clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies, and Other Nominees.**
99.5 Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.**
99.6 Form of Tax Matters Arrangements between Goodrich
Corporation and EnPro Industries, Inc., filed as Exhibit
10.1 to the Registration Statement on Form 10 filed by EnPro
Industries, Inc. (File No. 001-31225) and incorporated
herein by reference.
99.7 Form of Transition Services Agreement between Goodrich
Corporation and EnPro Industries, Inc., filed as Exhibit
10.2 to the Registration Statement on Form 10 filed by EnPro
Industries, Inc. (File No. 001-31225) and incorporated
herein by reference.
99.8 Form of Employee Matters Agreement between Goodrich
Corporation and EnPro Industries, Inc., filed as Exhibit
10.3 to the Registration Statement on Form 10 filed by EnPro
Industries, Inc. (File No. 001-31225) and incorporated
herein by reference.
99.9 Form of Indemnification Agreement among Goodrich
Corporation, EnPro Industries, Inc., Coltec Industries Inc
and Coltec Capital Trust, filed as Exhibit 10.4 to the
Registration Statement on Form 10 filed by EnPro Industries,
Inc. (File No. 001-31225) and incorporated herein by
reference.
---------------
*Previously filed.
**Filed herewith.