ML20055H035
| ML20055H035 | |
| Person / Time | |
|---|---|
| Site: | Framatome ANP Richland |
| Issue date: | 07/19/1990 |
| From: | Malody C SIEMENS POWER CORP. (FORMERLY SIEMENS NUCLEAR POWER |
| To: | Haughney C NRC OFFICE OF NUCLEAR MATERIAL SAFETY & SAFEGUARDS (NMSS) |
| Shared Package | |
| ML20055H036 | List: |
| References | |
| CWM:90:100, NUDOCS 9007250089 | |
| Download: ML20055H035 (27) | |
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ADM6NCEDNUCLEARFUELS CORPORATION REGULAroRY COMPLIANCE i
210f NORN RAPIDS h3AD. PC e*10X 130. RICHLAND, na past+1to rwo> snesoo retti ssure j
1l July 19,1990 CWM:90:100 J
f U.S. Nuclear Regulatory Commission Attn: Mr. C. J. Haughney, Chief i
Fuel Cycle Sttfety Branch
)
DMslon of Industrial and Medical Nuclear Safety, NMSS Washington, DC 20555
)
Ucense No. SNM-1227
'l Docket No. 70-1257
Dear Mr. Haughney:
DECOMMISSIONING FUNDING PLAN Advanced Nuclear Fuels Corpostion (ANF) hereby submits a Decommissioning Funding Plan (DFP)in satisfaction of the requirements of 10 CFR 70.25(c)(2) and requests that the DFP be approved by amendment to the license application. The DFP was compiled using the January 1990 draft of NUREG 1336 for guidance. Copies of the DFP and revised pages to the license application are enclosed for your review. A copy of the latest Siemens Corporation financial report is also enclosed as reque.,ted by the NRC staff.
The DFP contains a site specific cost estimate in 1990 dollars which totals $10,000,000, including a 15% contingency. ANF has successfully decommissioned three facilities to the same criteria as was used as a basis for this cost estimate.
The DFP addresses a request for cost estimate adjustment through future years. The time and effort to compile the DFP is substantial and provides incentive to minimize any revisions.
Therefore, ANF has proposed a financial assurance penkage of $20,000,000 in the DFP or twice the current cost estimate. The $10 million current estimate equates to $20 million 13 years from 1990 assuming that annual escalation averages ~5.5% during those 13 years. Therefore, cost adjustment, as best it can be determined today, is bulit into the ANF DFP.
The current materials license expires on September 30,1992. The renewal application I j will request a 10-year license period as will subsequent license renewals. The $20 million financial assurance package should cover escalation of decommissioning costs through the end of that 10-year license period. ANF will submit a revised cost estimate as a part of the next license renewal application in 1992 and again halfway through (end of Sth year) the renewed license period. In addition, the estimate will be Internally updated annually to current year costs 9007250089 900719 PD C. R. ADoCK 07001257 pt,c A Siemens Company lf u
Mr. C. J. Haughney CWM:90:100 July 19,1990 i
Page 2 J.ccording to ANF accounting practices by correcting for known changes in labor, materials, disposal and other service rates, regulatory requirements and facilities conditions. Should the l
current dollar estimate exceed the $20 million level, the NRC will be noafied by ANF and additional financial assurance will be provided on a timely basis, if not required earlier, the total DFP would be updated on expiration of that 10-year license period.
I A draft of the DFP was submitted to your office for review on April 13,1990. Comments from your review were returned by letter dated May 21,1990. ANF subsequently met with you, your staff, and other NRC staff on June 26,1990 to discuss our reply to your comments and to review the entire proposed submittal. Conversations with Scott Pennington of your staff and Mike Finkelsteln of the General Counsel's office subsequent to the meeting provided feedback of
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comments resulting from the meeting. We believe that the DFP contained in this submittal L
resolves all comments except one. That one comment has to do with the use of Standard and l
Poor's and Moody's ratings of Siemens Corporation commercial paper in place of a corporate l
bond rating. The reason for this is that Siemens Corporation does not issue bonds. The comment from Mr. Finkelstein was that his review of the wording in the regulation and his research into the background for that wording did not permit an interpretation of the regulation which would allow acceptance of anything other than bond ratings. There was no comment or judgment to the effect that a commercial paper rating was not an adequate replacement for a bond rating in our case but was strictly an interpretation of the regulation. ANF, therefore, requests that the NRC (by exemption, waiver on other means) permit ANF to use the commercial paper rating in lieu of a bond rating pursuant to 10 CFR 30, Appendix A,11,2, (1). The following paragraphs describe the basis for our request.
The capitalization structure of Siemens Corporation does not currently include a corporate bond program as a method to fund long term debt. It does however incorporate a commercla' paper program which is investment grade rated by the same services identified as acceptable l
options in the regulation guidelines. Slemens Corporation senior debt obligations carry Moody's
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highest rating of Prime 1 and also Standard & Poor's highest rating of A1+,
A comparison of the definitions shows that the rating service's judgment of Siemens Corporation's financial viability is at least equal to that which would be O!ven for the upper range of Moody's and Standard and Poor's long-term debt ratings.
1.
Moody's rating definitions:
A.
Rating range allowable for bonds in 10 CFR 30, Appendix A,11,2, (i) Ana through Baa.
" Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as " gilt edged." Interest payments are protected by a large or by an eptionally stable margin and principal is secu;e. While the various b
l Mr. C. J. Haughney CWM:90:100 July 19,1990 Page 3 protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of suchissues?
- Bonds which are rated Baa are considered as medium-grade obligations (i.e., they are neither highly protected nor poorly secured). Interest payments and principal security appear adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any praat length of time. Such bonds lack outstanding investment charactuatics and in fact have speculative characteristics as well?
B.
Rating of Siemens Corporation commercial paper program is Prime 1.
- issuers (or supporting institutions) rated Prime 1 (P 1) have a superior ability for repayment of senior short term debt obligations. P 1 repayment ability will often be evidenced by many of the following characteristics:
Leading market positions in well established industries.
High rates of return on funds employed.
Conservati/e capitalization structure with moderate reliance on debt and ample asset protection.
Broad margins in earnings coverage of fixed financial charges and high internal cash generation.
Well-established access to a range of financial markets and assured
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sources of alternate liquidity?
2.
Standard & Poor's rating definitions:
A.
Rating range allowable for bonds in 10 CFR 30, Appendix A,11,2, (1) AAA through
- BBB,
' Debt rated 'AAA' has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong?
" Debt rated 'BBB' is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions or changing i
circumstances are more likely to lead to a weakened capacity to pay l
Interest and repay principal for debt in this category than in higher rated categories?
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I Mr.C.J.Haughney CWM:90:100 July 19,1990 Page 4 D.
Rating of Slemens Corporation commercial paper program is A1 +.
- A issues assigned this highest rating are regarded as having the i
greatest capacity for timely payment.
Issues in this category are delineated with the numbers 1,2, and 3 to indicate the relative degree of safety.
A1 This designation Indicates that the degree of safety regarding timely payment is either overwhelming or very strong. Those issues determined to possess overwhelming safety characteristics are denoted with a plus
(+) sign designation."
The Moody's and Standard & Poor's ratings address Glemens Corporation $1.2 billion commercial paper program, an amount which is 120 times greater than the current decommissioning cost estimate. Siemens Corporation has enjoyed these superior ratings since 1978. The ratings and magnitude of the program appear adequate to assure the NRC that the Corporation has the character, capacity and capital resources necessary to meet the $20 million assurance level. In addition the Corporation has been giv9n one of Dun & Bradstreet's highest ratings for financial strength and credit stability. Dun & Bradstreet rates Siemens Corporation 5A2. The Dun's number for Siemens Corporation is 06 499 5533.
l We believe the DFP as submitted, including the Siemens Corporation guarantee and related financial tosts, is responsive to the intent of the regulations, and provides reasonable assurance of the availability of funds for decommissioning in a safe and timely manner.
Please feel free to call if there are any questions regarding this submittal.
The amendment fee of $150 is enclosed.
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Very truly yours, pa y,/
Charles W. Malody, Manager jrs i
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j ADVANCED NUCLEAR FUELS CORPORATION n.p.y SPECIAL NUCLEAR MATERIAL LICENSE NO. SNM 1227, NRC DOCKET NO. 701257 PART I LICENSE CCNDITIONS R E V-14 CHAPTER 7 DECOMMISSIONING 7.1 Decommissionina Plan A decommissioning plan has been prepared which moots tho guidelinos and requirements as specified in
- Guidelines for Decontamination of Facilitics and Equipment Prior to Roloase for Unrestricted Use or Termination of Uconses for By Product, Sourco or Special Nuclear Material,* U.S. Nuclear Regulatory Commission, May 1987 which is appended to Chaptor 3. The disposition of uncontaminated equipment and facilities is not within tho scopo of this plan, provided that such facilitics are verified to bo uncontaminated in accordanco with approved radiation survoy proceduros, and are therefore not addressed further.
Tho resideal contamination lovois in docontaminated facilitlos to bo unconditionally roloased shall be within the values glvon in the guidelinos montioned abovo. Any equipment or facility which cannot be docontaminated to those lovels shall be transforrod 3
to another licensed facility or domolished, packaged and disposed of at a licensod low level radicactive wasto disposal sito, The decommissioning plan is described in moro dotall in a document entitled, Advanced Nuclear Fuels Corporation, Docommissioning Funding Plan, Richland, Washington, July 1990" (DFP).
Prior to the start of docontamination, a dotalled decommissioning plan, including a proposed closcout survey plan, will bo submittod to the NRC for review and approval. The closcout survey shall be reviewod and approved by the NRC prior to roloaso of equipment or grounds to unrestricted uso.
7.2 Decommissionino Cost Estimate A docommissioning cost estimato has boon mado in 1990 dollars using the documented decommissioning plan as a basis. The cost estimato summary is in Table l 7.1. This cost ostimato will bo reviewed and updated as a part of the licenso renowal i
application which is schoduled to be submittod 30 days prior to September 30,1992.
Further cost estimato review schedulos are discussed in the DFP.
7.3 Decommissionina Fundina Plan Advanced Nuclear Fuels Corporation is using the parent company guarantoo to provido assuranco that sufficient funding will bo availablo for plant decommissioning. The documentation demonstrating that the parent company (Slomons Corporation) passes tho j
financial test as described in 10 CFR 30, Appendix A are compiled in the DFP. It should l bo noted that Slomons Corporation does not issue bonds. Slomons Corporation does j
issuo commercial paper routinoly; thoroforo, the ratings for commercial paper woro used.
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"-~1 July 10,1990 l
7-1
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J ANF GC?3 051 (G'89)
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I ADVANCED ARbCLEAR FUELS CORPORATION
,n7,2 SPECIAL NUCLEAR MATERIAL LICENSE No. SNM 1227, NRC DOCKET NO. 701257 i
PART I LICENSE CONDITIONS REV.
14 j
7.4 Updatina The Plan j
The Decommissioning Cost Estimato section of the DFP shall be updated with the next application for license renewal 30 days prior to September 30,1992. Additional 1
updatos shall be scheduled in that license application. No changes shall bo made which adversely affect the financial assurance portion of the plan without prior approval of the NRC.
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g, Planning, Administration, 522,600 522,600 7
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mm mt UO2 Building 715.300 72,200 180,000 38,000 2,100,000 3,105,500 mg zOx
.O 3 Specialty Fuels Building 539,400 26,500 90,000 10,800 1,050,000 1,716,700 m
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l Ancillary I-acilities 285.200 36,500 30,000 16,000-350,000 717,700 0
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- 480.000 79,800 5,600,000 8,700,000 z
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SIEMENS CORPORATION I
(A wholly owned subsidiary of Siemens AG) i CONSOLIDATED FINANCIAL STATEliENTS
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SEPTEMBER 30, 1989 AND 1988
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November 15, 1989 l
I To the Board of Directors and Stockholder of Siemens Corporation REPORT OT INDEPENDENT ACCOUNTANTS l
In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations and accumulated deficit and of cash flows present fairly, in all I
material respects, the financial position of Siemens Cormoration and its subsidiaries at September-30, 1989 and 1983, and the results of their operations and their cash flows for the years then ended in conformity with generally I
accepted accounting princi les.
These financial statements are the responsibility of iemens Corporation mana ement; our responsibility is to express an opinion on these f nancial I
statements based on our audits.
We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the 1
I to obtain reasonable assurance about whether the finan-audit cial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assess-I ing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable bacis for the opinion expressed above, t
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II SIEMENS CORPORATION (A wholly owned subsidiary oT~Siemens AG) j CONSOLIDATED BALANCE SHEETS S
September 30, 1989 1988 i*
(S in thousands)
ASSETS Current assets:
Cash and cash equivalents S
65,260 59,544 Marketable securities 949,524 798,244 24,344 22,884 Notes and accounts receivatle, net Investments in sales-type leases, net 46,625 25,645 Inventory, net 823,078 787,975 Other 193,036
_ 105.470 Total current assets 2,101,867 1,799,762 Long-term receivables and other assets 266,119 198,290 I
Investments in sales-type leases, net 119,826 64,747 Investments in and advances to less than majority-owned companies 121,195 123,090 I-Fixed assets, net 554,217 536,650 Intangible assets, net 284,063 392,307 Total assets
$3,447,287
$3,114,846 LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities:
1 I
Loans and notes payable 970,164 722,175 l
Accounts payable and accrued expenses 922,783 868,200 Other 214,760 174,768 l
Total current liabilities 2,107,707 1,765,143 Long-term debt 113,818 107,745 Other long-term liabilities 56,863 35,197 Total liabilities 2,278,388 1,908,085 l
Stockholder's equity Preferred stock - $100 par value 50,000 shares authorized; none issued Common stock - $1,000 par value 200,000 shares authorized: 124,900 shares l l outatanding 124,900 124,900 l
' Additional paid-in capital 1,975,616 1,775,616 l
Accumulated deficit (931,617)
(693,755)
. -l 1,168,899 1,206,761 Commitments and contingent liabilities I
Total liabilities and stockholder's equity
$3,447,287 S3,114,846 See accompanying notes to the consolidated financial statements, g
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SIEMENS CORPORATION (A wholly owned subsidiary of Siemens AG) j CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT i
I For the years ended
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September 30, I
1989 1 9. 8 8
~~ S ih thousands) l
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I Sales and other income Net sales (including S301,850 in 1989 and $324,944 in 1988 to affiliates)
S3,443,539 S3,124,584 Other income, net (including income I
of $5,527 in 1989 and $4,466 in 1988 from affiliates) 5,660 4.982 3,449,199 3.129.566 Costs and expenses:
.I Cost of products sold 2.565,044 2,322,707 Selling, general and administrative 1,085,069 982,460 Interest, net 20,476 14,577 3,670.589 3,319,744 Loss before equity in net loss of I
associated companies and income tax provision (221,390)
(190,178)
Equity in net loss of associated I
companies (6 913)
(4,647) 2 Loss before income tax provision (228,303)
(194,825)
Income tax provision (9,559)
(7,605)
Net loss (237,862)
(202,430)
Accumulated deficit at beginning of year (693,755)
(491,325)
I Accumulated deficit a; end of year (S
931,617)
(S 693,755)
See accompanying notes to the consolidated financial statements.
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I SIEMENS CORPORATION (A wholly own2d subsidiary of Sicmsns AG) l CONSOLIDATED STATEMENTS OF CASH FLOVS (Increase (decrease) in cash and cash equivalents)
I For the years ended September 30, 1989 1988 (S in thousands) j I
Cash flows from operating activities:
Net loss
($237,862)
($202,430) l Adjustments to reconcile net loss I
to net cash used for operating i
activities:
Depreciation and amortization 233,650 172,920 I
Equity in net loss of associated companies 6,913 4,647 Change in assets and liabilities m
which affect operations:
g Notes and accounts receivable, net (151,280) 14,991 Investments in sales-type leases, net (76,059)
(20,613)
I-Inventory, net (35,103)
(97,739)
Accounts payable and accrued expenses 54,583 54,884 Other current assets and I
liabilities, net (47,574) 36,534 Other long-term liabilities 21,666
.(1,656)
Working capital acquired (5,187)
(13,556)
I Other 4,858 19,686 Net cash used for operating activities (231,395)
(32,332)
'E Cash flows from investing activities:
m Cost of acquisitions, net of cash acquired (14,735)
(91,280)
Capital expenditures (148,718)
(130,681)
I Proceeds from sale of tixed assets 34,500 24,745 (Purchases) sales of.arketable securities (1,460) 30,878 Net cash used for investing activities (130,413)
,L166,338)
Cash flows from financing activities:
Capital contribution 200,000 200,000 Proceeds from issuance of commercial paper 963,450 598,000 Repayments of commercial paper (986,450)
(363,000)
Proceeds (repayments) of loans and notes I
payable 190,524 1215,255)
Net cash provided by financing activities 367,524
_219,745 I
Net-increase in cash and cash equivalents 5,716 21,075 Cash and cash equivalents at beginning of year 59.544 38,469 Cash and cash equivalents at end of year
,$ 65,260
$ 59,544 Interest and income taxes paid totaled $100 million and $8 million in I
1989 and $60 million and $8 million in 1988.
See accompanying notes to the c tidated financial statements.
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SIEMENS CORPORATION (A wholly owned subsidiary of Siemens AG)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1989 AND 1988 I
NOTE 1 - BUSINESS:
I Effective October 1, 1988, siemens Capital Corporation changed its name to Siemens Corporation.
Siemens Corporation is a holding and I
finance company.
Its subsidiaries, in cooperation with the Siemens AG worldwide group, develop, manufacture and market equipment for the distribution, regulation and control of electrical energy,ipment equipment for diagnostic imagery, cardiac pacemakers, electronic equ for I
telephone applications, electronic printing equipment and a wide range of electronic components.
In addition, Siemens Corporation subsid-iaries import medical, power engineering, communication, and electronic component and lighting products from their ultimate aarent, Siemens AG, or its af filiates, which are sold or leased in the 'Jnited States.
Reflected in the accompanying consolidated statements of I
oaerations are amounts received from affiliates principally to cover the costs of certain projects and services carried out by various units of the Company under agreements with and for the benefit of those affiliates.
NOTE 2 -
SUMMARY
OF SIGNITICANT ACCOUNTING POLICIES:
Principles of consolidation:
The consolidated financial statements include the accounts of Siemens Corporation and majority-owned subsidiaries (the " Company").
Invest-I ments in companies owned 20% to 50% are accounted for on the equity method.
Companies owned less than 20% are accounted for on the cost method.
All significant intercompany accounts and transactions have l
been eliminated.
Research and development:
Research and development expenses are included in sellingadministrativeexpensesasincu lion in 1989 and $86 million in 1988.
Foreign exchange:
I-The Comaany may enter into forward foreign exchange agreements to hedge the exchange rate on foreign currency-denominated receivables and payables.
The net gains and losses resulting from the translation I
of foreign currency-denominated receivables and payables, forward foreign exchange agreements and foreign currency transactions are reflected in operations currently and are not significant.
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.I. p I Interest income and expense l
TheCompanymayenterintointerestrateswaffectsoftheseagreements agreements to effec-tively manage interest rate exposure.
The e are reflected in current operations as components of interest income l
and expense.
Income taxes:
The federal income tax return of Siemens Corporation includes all 80'A or more owned domestic subsidiaries.
Income taxes have been deter-mined under Statement of Financial Accounting Standards No. 96, I
" Accounting For Income Taxes."
Under this statement, income taxes are determined using the " liability method."
The liability method requires that any deferred tax liability or asset be determined based I
upon the differences between the financial statement and tax bases of assets and liabilities as measured by enacted tax rates in effect when these differences are expected to reverse.
ihe principal types of differences between the Company's bases of assets and liabilities for I
financial statement and tax purposes are acquisitions accounted for by the purchase method, recognition of installment sales, inventory valuations, provisions for warranty and certain other accrued expenses I
and depreciation of fixed assets.
Revenue reconnition:
Sales are recognized generally when products are shipped.
Certain equipment lease agreements are accounted for as sales-type leases, whereby unearned income is recognized through amortization over the I
life of the lease.
Marketable securities:
Marketable securities are carried at the lower of cost or market.
Net realized gains and losses from sales are determined on a specific identification cost basis.
At September 30, 1989 and 1988, cost I
approximated market value.
Inventory:
Inventories are stated at the lower of cost or market.
The primary methods of determining cost are first-in, first-out and average cost.
Market is determined based upon net realizable value.
Fixed assets and depreciation:
Fixed assets are recorded at cost and depreciated usin the straight-linemethod,forfinancialreportingpurposes,overthhirestimated useful lives.
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1 I I Additions and betterments are capitalized.
Maintenance and repairs are charged to operations as incurred.
Intannible assets and amortiration:
1 Intangible assets are recorded at cost, less accumulated amortization.
I The excess of cost over the fair value at the date of acquisition of net assets of businesses acquired is generally amortized over a period of 30 years on a straight-line basis.
Patents, trademarks and other E
intangible assets are amortized over their estimated useful lives (3 to 20 years) on a straight-line basis.
i Through the ongoing review of operating plans, the Company determined during fiscal 1989 tht.t certain intangible assets were permanently impaired.
Accordingly, a provision of approximately $92 million was recorded as selling, general and administrative expense for the year I
ended September 30, 1989.
i Accumulated amortization at September 30, 1989 and 1988 was $277 million and $166 million, respectively.
i NOTE 3 - ACQUISITIONS:
During the year ended September 30, 1989 theComNnycompleteda number of acquisitions, none of which were signi cant.
Durin the year ended Se 1988, the Com ny made several acquiitionsinthemedi!tember30, al equipment business, e excess of the total recorded purchase price over the estimated fair value of the l
aggregate net assets acquired totalled $72 million.
The results of operations of all acquired businesses have been included in the consolidated financial statements from the respective I
dates of acquisition.
Tel-Plus Communications. Inc.:
During fiscal 1987, the Company completed its 100% purchase of Tel-Plus Communications, Inc. and two affiliated companies (collectively, I
"Tel-Plus") pursuant to the 1986 Stock Purchase Agreement (the
" Agreement") between the Company and TPI Enterprises. Inc. ("TPI").
The Agreement provided for a cash purchase price of S110 million, subject to adjustment, and the satisfaction by the Company of certain Tel-Plus indebtedness to TPI.
The purchase price was to be paid in two installments, the first ($75 million) on March 24, 1987 (the
" Closing Date") and the second ($35 million) upon the receipt and I
verification of certain financial statements.
However, on June 3, 1987, the Company filed suit agai.'st TPI claiming, among other things, fraud, breach of contract and breach of fiduciary duty by TPI in the I
management of Tel-Plus and in connection with the sale of Tel-Plus to the Company.
The Company has asked for damages in an unspecified I
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I thatTPIclaimsastbe.theCompanyhasformallydisputed$31million amount.
Additional 1~
indubtedness due to TPI from Tel-Plus and, I
pursuant to the Agreement, withheld the maximum of $21 million at the Closing Date.
In October 1988 TPI provided the Company with certain financial statements, the receipt of which was a condition precedent I
to a dispute resolution procedure contained in the Agreement.
Pursuant to this dispute resolution procedure, the Company has disputed the valuation of Tel-Plus at both December 31, 1986 and the Closing Date and the nature and amount of certain Tel-Plus I
intercompany indebtedness to TPI.
The Company has recorded as purchase cost only the amounts paid to TPI to date and continues to withhold both the $35 million and $21 million amounts pending the l
outcome of the dispute resolution procedure and the litigation.
NOTE 4 - CASH AND CASH EQUIVALENTS:
At September 30, 1989 and 1988, the Company had time deposits of $30 million and $31 million, respectively.
NOTE 5 - NOTES AND ACCOUNTS RECEIVABLE:
Notes and accounts receivable included in current assets consist of the following:
September 30 1989 1988 I
($ in thousands)
Third party receivables
$772,031
$719,967 Less - Allowance for doubtful accounts (75,320)
(74,779)
I 696,711 645,188 Receivables from affiliated companies, net 252,813 153,056 I
$949,524
$798,244 i
Long-term receivables and other assets of $266 million and $198 i
I million at September 30, 1989 and 1988, include amounts due from affiliates of aaproximately $101 million and $28 million, respectively.
.ong-term receivables earn interest at rates varying I
from approximately 9.0% to approximately 17.2% and mature in varying amounts through 1999.
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I I NOTE 6 - INVESTMENTS IN SALES-TYPE LEASES, NET:
Investments in sales-type leases consist of the following:
September 30 I
1989 1988
($ in thousands)
Total minimum lease payments to be received
$202.941
$114,613 l
Less - Unearned income (36,490)
(24,221)
Investments in sales-type leases, net
$166,451
$ 90.392 l
TheCompany'sleasingokerationsconsistprinciallyofleasing medical,telecommunicatonsandelectronicprin!ingequimment.
The terms of these leases generally allow the lessee to purcasse the I
equipment at the end of the lease period at a nominal charge or at the equipment's fair market value.
At September 30, 1989, minimum lease payments receivable for each of I
the five succeeding fiscal years are as follows:
($ in thousands) 1990
$55,304 1991 45,668 1992 40,264 I
1993 33,415 1994 22,893 g
NOTE 7 - INVENTORY, NET:
Inventory consists of the following:
September 30, 1989 1988
($ in thousands)
Raw materials
$175,319
$170,229 Work in process 138,912 136,391 Finished goods 508,847 481,355 I
$823,078
$787,975 I
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l NOTE 8 - OTHER CURRENT ASSETS:
g Other current assets consist of the following:
September 30 1989 1988 I
($ in thousands)
Miscellaneous receivables
$155,372
$ 79,460 I
Prepaid expenses 28,868 16,910 Income and other taxes receivable 8.796 9.100
$193.036
$105.470 NOTE 9 - INVESTMENTS IN AND ADVANCES TO LESS THAN MAJORITY-0WNED COMPANIES:
L Investments in and advances to less than majority-owned companies include investments in companies accounted for by the equity and cost methods.
Significant investments in companies accounted for on the equity method consist of the following at both September 30, 1989 and 1988:
Percent P.gne_d I
General Numeric Corporation 50%
Siecor Corporation 50 i
CTI Pet Systems, Inc.
49.9 Pacesetter Infusion, Ltd.
30 Summary financial information for all companies accounted for on the equity method is shown belows (Unaudited)
September 30.
1989 1988 I
(S in thousands)
Total assets
$274,980 S221,825 Total liabilities (172.512)
(116.437)
Net assets
$102.468
$105.388 I
Revenues
$381,477
$293,802 Net loss (9,255)
(15,363)
Company's equity in net assets 53,476 54,606 l
Company's equity in net loss (6,913)
(4,647)
The Company's 1989 equity in net loss exceeds its ownership interest t
due to a contractual requirement.
The excess of the Compan 's
' l investments over its equity in values assi i le assets amountedtoapproximately$38millionandgnedtonettangeptember30, 37 million at I
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1989 and 1988, respectively.
Amortization of such excess investment costs amounted to $3 million and $2 million in 1989 and 1988, I
respectively.
The Company's share of the undistributed earnings of all such companies at September 30, 1989, was not significant, j
I The investments in companies accounted for by the cost method of $31 million and $29 million at September 30, 1989 and 1988, respectively, are recorded at the lower of cost or market.
The Company's cost basis investments consist principally of a 10.1% interest in unregistered I
restricted common shares of Advanced Micro Devices, Inc.
NOTE 10 - FIXED ASSETR, NE.T I
Major classes of fixed assets are summarized below j
I September 30, 1989 1988
($ in thousands)
Land S 55,896
$ 57,356 BuildinEs, including leasehold improvements 238,430 241,859 Machinery, equipment and other 704,245 623,879 l
998,571 923,094 Less - Accumulated depreciation (444,354)
(386,444)
$554,217
$536,65_0
}10TE 11 - LOANS AND NOTES PAYABLE:
l Loans and notes payable are summarized below:
September 30.
I 1989 1988
($ in thousands)
Demand and other loans payable to affiliates I
(6.9% to 10.5% in 1989 and 5.0% to 9.0% in 1988)
$571,646
$313,167 Notes, loans payable and commercial paper (7.0% to 9.5% in 1989 and 7.0% to 9.0%
I in 1988) 398,518 409.008
$970,164
$722,175 The Compa y may issue up to $1.2 billion of commercial paper which is guaranteed by its parent.
In addition, the Company has available formal bank lines of credit in the amount of $290 million.
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I I NOTE 12 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses are summarized below:
September 30.
(
n thous
)
Accounts payable:
Third parties
$176,307
$177,795 I
Affiliates 234,890 231,867 Accrued expenses:
Third parties 487,406 448,072 Affiliates 24.180 10.466
$922.783
$868.200 g
NOTE 13 - OTHER CURRENT LIABILITIES:
Other current liabilities are summarized below September 30.
(
n thous
)
Deferred income
$156,110
$120,839 Income and other taxes payable 24,425 19,583 Miscellaneous 34.225 34.346 I
$214.760
$174.768 NOTE 14 - LONG-TERM D QT:
Long-term debt consists of the following:
I September 30.
1989 1988
($ in thousands)
I Loans payable to affiliates (8.2%
to 10.0% in 1989 and 7.9% to 9.3%
in 19881 due in varying amounts through 1998)
$ 60,279
$ 60,255 I.
Mortgages, loans and notes payable (6.4% to 10.4%
due in varying amounts through 2017) 55,828 49,567 I
Less - Current portion (included in loans and notes payable)
(2.289)
(2.077)
$113.818
$107.745 Mortgages an'd notes payable of $20 million are secured by certain real estate and other assets pledged as collateral.
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Total interest expense on short-and long-term borrowings amounted to
$100 million and $71 million in 1989 and 1988, respectively.
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following five fkayments of long-term obligations in each of the Total scheduled scal years are as follows:
($ in thousands) 1990 52,289 1991 3,323 1992 3,354 1993 3,056 1994 791 I
1 JiOTE IS - INCOME TAXES:
The income tax provision consists of the following:
Se stember 30,
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1939 1988 i
($ in thousands)
Foreign
$1,021 409 State and local 8.538 7,196
$9,559
$7.605 I
The Company does not recognize tax benefits for losses which can only be carried forward.
Unused losses of $338 million for tax purposes and $736 million for financial statement purposes will be carried.
forward and expire as follows:
Loss carryforward
($ in thousands)
From September 30 1981 (expires in 1996)
$ 19,000 1982 (expires in 1997) 36,000 I
1986 (expires in 2001) 44,000 1987 (expires in 2002) 61,000 1988 (expires in 2003) 120,000 1989 (expires in 2004) 58,000 I
. Net operating loss carryforward - tax purposes 338,000 Unrecognized future deductible temporary differences 398.000 Net operating loss carryforward -
- financial statements
$736.000 I
The Internal Revenue Service has completed its examination of the Company's income tax returns for the three fiscal years ended September 30, 1985.
Adjustments have been proposed dealing primarily with transactions between the Company and its parent.
These proposed adjustments would not affect the consolidated financial position of I
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+he Company as reported but would reduce the tax net operating loss carryforward to $104 million.
Mana gement is vigorously contesting the I
proposed adjustments and believes t u Company will prevail in its efforts.
The Company has unused investment Oax credits of $14 million at the I
end of 1989 which may be carried forward and expire in years 1992 through 2001.
These amounts represent the investment tax credits available to be carried forward after giving effect to the 35% post-I 1986 reduction imposed by the Tax Reform Act of 1986.
Deferred taxes are not provided on the undistributed earnings of I
certain consolidated foreign subsidiaries as these earnings are considered indefinitely reinvested.
At September 30, 1989, such undistributed earnings were not significant.
In 1989 and 1988, the effective federal income tax rate differs from the statutory rate due to the nonrecognition of a benefit from the net operating loss carryforwards offset by foreign and state and local I
income taxes.
NOTE 16 - EMPLOYEE BENEFIT PLANS:
The Company has noncontributory pension plans covering most employees.
The benefits for these plans are based primarily on years of service and employees' compensation.
Annual contributions to the plans are at I
least equal to the minimum required by law and reflect estimates of long-term funding requirements to maintain these plans,
_l The actuarial computations of 1989 and 1988 net periodic pension cost assumed discount rates of 8.0% to-8.5%, expected rates of return on plan assets of 8.0% to 8.5% and annual salary increases in the range of 3.8% to 6.0%.
The actuarially computed net periodic pension cost I
for 1989 and 1988 included the following components:
Year ended SeJtember 30, 19F9 1988
($ in thousaiids)
Current service cost
$27,635
$25,478 Interest cost on projected benefit obligations 24,959 21,373 Actual return on plan assets (47,673)
(8,569) l Net amortization and deferral 18.550 (17,990)
Net periodic pension cost
$23,471
$20,292 I
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I The following table sets forth the funding status of the plans and the amounts recorded in the Company's consolidated balance sheets at September 30, 1989 and 1988:
September 30, 1989 Overfunded Underfunded I
plans plans
($ in thousands)
Actuarial 'aresent value of accumulated benefit o'aligations:
Vested
$103,532
$144,080 Nonvested 6,602 8,214 I
Total accumulated benefit obligations
$110,134
$152,294 Projected benefit obligations
$194,330
$170,780
'I Plan net assets at fair value 247,697 129,855 Plan net assets (over) under projected benefit obligations (53,367) 40,925
'I Unrecognized prior service costs (1,826)
(430)
Unrecognized net gains (losses) 7,704 (7,607) i Unrecognized net transition asset (lisbility) 65,261 (29.091)
-l Net accrued pension cost
$ 17,772 3,797 September 30, 1988 Overfunded Underfunded plans plans
($ in thousands)
Actuarial present value of accumulated benefit o'aligations Vested S 76,868
$121,702
.'l Nonvested 11.207 7.165 Total accumulated benefit obligations S 88,075
$128,867 Projected benefit obligations
$152,679
$149,049 Plan net assets at fair value 203,882 103,604 Plan net assets (over) under projected I
benefit obligations (51,203) 45,445 Unrecognized prior service costs (612)
Unrecognized net losses (3,204)
(14,257)
Unrecognized net transition asset (liability) 70,068 (38,818)
Net accrued (prepaid) pension cost
$ 15.049
($
7,630)
I In addition to providing pension benefits, the Company currently pro-vides certain health care and life insurance benefits for its retired employees.
Substantially all of the Company's employees, providing
'E that 'aresent corporate 'aractices are continued, may become 11gible E
for t:aose benefits if t:aey reach normal retirement age while working I
33 for the Company.
The cost of retiree health care and life insurance benefits is recognized as expense as claims are paid and totaled $5 million in 1989 and in 1988.
Contributions to the Company's separate savings plans are made in participating emp oyees. programs based upon certain contributions by accordance with matching I
The Company's contributions amounted to $21 million and $17 m llion in 1989 and in 1988, respectively.
NOTE 17 - ADDITIONAL PAID-IN-CAPITAL:
During both 1989 and 1988, the Company received capital contributions of $200 million from its parent.
1 NOTE 18 - COMMITMENTS:
1 The Comp ny has entered into various leases for sales, service, office and manu acturing facilities and equipment.
Some leases require, in addition to rental payments, the payment of property taxes, assess-I Net rental expense, under all o30, 1989 and 1988, w ments and maintenance costs.
1 eases for the years ended September 93 million and $65 million, respectively.
Total minimum rental payments, under noncancellable leases that have initial or remaining noncancel-I lable lease terms in excess of one year as of September 30, 1989, are
$311 million.
Total minimum rental payments in each of the following five fiscal years are as follows:
($ in thousands) i 1990
$47,845 1991 43,325 1992 36,295 1993 27,947 1994 24,589 NOTE 19 - CONTINGENCIES:
Subsequent to the fiscal 1987 acquisition of Tel-Plus, the Company i
filed suit against the former owners of Tel-Plus claiming, among other l
things, that the former owners violated Section 10(b) of the Securities Exchange Act and Rule 10(b)-5 of the Securities and Exchange Commission, breached numerous contracts, defrauded the Company in connection with the sale of stock under various stock I
purchase agreements and breached fiduciary duties owed to the Company.
The Company has asked for damages in an uns ecified amount.
Management intends to vigorously pursue thi litigation and believes that the outcome of this litigation will be favorable.
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I At September 30, 1989, there were various other pending suits incident to the Company's businesses.
Management believes any liabilities I
resulting from such suits will not materially affect the consolidated financial position of the Company.
Siemens Corporation has provided certain guarantees and letters of I
credit for various af filiated comaanies in North and South America approximating S190 million and $200 million at September 30, 1989 and 1988, respectively.
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