SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) October 27, 1997
Motors & Gears, Inc.
(Exact name of registrant as specified in its charter)
Delaware 333-19257 36-4109641
(State or other (Commission (I.R.S. Employer
Jurisdiction) File Number) Identification No.)
ArborLake Centre, Suite 550
1751 Lake Cook Road, Deerfield, IL 60015
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (847) 945-5591
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Item 2. Acquisition or disposition of assets
On October 27, 1997, Motor & Gears Industries, Inc. ("The Company")
acquired all of the outstanding stock of ED&C Company ("ED&C"). The Company
acquired ED&C through its newly formed wholly owned subsidiary, Electrical
Design and Control Company. ED&C is a full-service electrical engineering
company which designs, engineers, and manufactures electrical control systems
and panels for material handling systems and other like applications. ED&C
provides comprehensive design, build, and support services to produce
electronic control panels which regulate the speed and movement of conveyor
systems used in a variety of automotive plants and other industrial
applications.
The purchase price of $20.0 million, including costs directly related to
the transaction, was preliminarily allocated to working capital of $3.5
million, property, plant, and equipment of $0.1 million, and resulted in an
excess of purchase price over net identifiable assets of $16.4 million. The
cash was provided from borrowings under the Company's existing Credit
Agreement.
Item 7. Financial Statements and Exhibits
The following sections (a) and (b) amend, in their entirety, sections (a) and
(b) of Item 7 of Form 8-K previously filed on November 7, 1997.
(a) Financial Statements
See Exhibit 28(a) of Item 7(c).
(b) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated statements of
operations are based on the historical statements of operations of the Company,
adjusted to give effect to the 1997 acquisitions of the FIR Group Companies,
ED&C Company, and the 1996 acquisition of Barber-Colman Motors. The pro forma
condensed consolidated statements of operations for the year ended December
31, 1996 and for the nine months ended September 30, 1997 were derived from
the audited historical statements of operations for the year ended December
31, 1996 and the unaudited historical statements of operations for the nine
months ended September 30, 1997, adjusted to give effect to the acquisitions
and related transactions as if they occurred as of the beginning of each
period.
The pro forma adjustments included in the pro forma condensed
consolidated statements of operations are based upon available information
and certain assumptions that management believes are reasonable. With
respect to the pro forma acquisition adjustments described in the notes
accompanying the pro forma condensed consolidated statement of operations,
the allocation of the purchase price of the FIR Group Companies and ED&C
Company is preliminary and subject to
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final determination by the Company's management. The unaudited pro forma
condensed consolidated statements of operations do not purport to represent
what the Company's results of operations would actually have been had the
transactions in fact occurred as of the beginning of each period presented.
In addition, the unaudited pro forma condensed consolidated statements of
operations do not purport to project the Company's results of operations for
any future date or period.
The pro forma condensed consolidated statements of operations should be
read in connection with the Company's audited consolidated financial statements
for the year ended December 31, 1996, which are included in the Company's
prospectus issued in connection with the offering of its 10 3/4% Series B
Senior Notes due 2006, and filed on April 3, 1997, and the Company's
unaudited interim condensed consolidated financial statements included in the
Company's Form 10-Q for the quarter ended September 30, 1997.
(c) Exhibits
28(a) ED&C Company combined audited financial statements for the year
ended December 31, 1996, and for the seven months ended July 31,
1997.
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MOTORS & GEARS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
($ in thousands)
Company Pro forma
Historical ED&C Adjustments Pro forma
ASSETS
Current Assets:
Cash and cash
equivalents $ 5,104 $ 2,127 $ (1,000)(1) $ 6,231
Accounts receivable,
net 29,988 2,526 - 32,514
Inventories 25,442 1,105 - 26,547
Prepaid expenses and other
current assets 4,301 2 - 4,303
Total Current
Assets $ 64,835 $ 5,760 $ (1,000) $ 69,595
Property and equipment,
net 14,081 142 - 14,223
Intangibles, net 139,537 - 15,382 (2) 154,919
Other assets 9,842 - 9,842
Total Assets $ 228,295 $ 5,902 $ 14,382 $ 248,579
LIABILITIES AND STOCHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current Liabilities $ 27,532 $ 1,284 $ - $ 28,816
Current portion of long term
debt 20 840 (840)(2) 20
Long-term obligations
Credit Agreement 34,000 - 15,000 (1) 49,000
Senior Notes 170,000 - - 170,000
Sellers' Notes 5,000 - 4,000 (1) 9,000
Other Debt 75 - - 75
Total long-term
Obligations $ 209,075 $ - $19,000 $ 228,075
Other non-current liabilities
and deferred income
taxes 5,129 - - 5,129
Stockholders' equity (net
capital deficiency) (13,461) 3,778 (3,778)(2) (13,461)
Total liabilities and
Stockholders' equity $ 228,295 $ 5,902 $ 14,382 $ 248,579
See notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations.
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MOTORS & GEARS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
($ in thousands)
Barber
Colman
Thru
Company March 8, Proforma
Historical 1996 FIR ED&C Adjustments Pro Forma
Net Sales $117,571 $4,806 $38,476 $14,566 $ - $175,419
Cost of sales excluding
depreciation 75,751 3,559 25,905 10,550 - 115,765
Gross profit excluding
depreciation 41,820 1,247 12,571 4,016 - 59,654
Selling, general and
administrative expenses
excluding
depreciation 8,796 871 3,688 1,236 1,317 (3) 15,908
Depreciation and
amortization 7,078 203 949 56 1,213 (4) 9,499
Management fees 2,717 - - - (963)(5) 1,754
Operating
Income 23,229 173 7,934 2,724 (1,567) 32,493
Interest expense
(netof interest
income) 10,987 66 2,301 42 10,579 (6) 23,975
Other (income)
expense (68) 2 19 - 65 18
Income (loss) before
income taxes and
minority
interest 12,310 105 5,614 2,682 (12,211) 8,500
Provision (benefit) for
income taxes 5,291 - 3,123 107 (5,121)(7) 3,400
Income (loss) from
continuing
operations $ 7,019 $ 105 $ 2,491 $ 2,575 $(7,090) $ 5,100
See notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations.
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MOTORS & GEARS, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
($ in thousands)
Company Proforma
Historical FIR ED&C Adjustments Pro Forma
Net Sales $106,379 $20,591 $10,135 $ - $137,105
Cost of sales
excluding
depreciation 68,349 14,176 6,630 - 89,155
Gross profit excluding
depreciation 38,030 6,415 3,505 - 47,950
Selling, general and
administrative
expenses 8,638 2,179 794 739(3) 12,350
Depreciation and
amortization 6,259 626 24 698(4) 7,607
Other (income) and
expenses 91 16 - - 107
Management
fees 1,064 - - 307(5) 1,371
Operating
income 21,978 3,594 2,687 (1,744) 26,515
Interest expense (net
of interest
income) 15,596 1,165 - 915(6) 17,676
Other (income)
expense - (70) (24) - (94)
Income (loss) before
income taxes and minority
interest 6,382 2,499 2,711 (2,659) 8,933
Provision (benefit)
for income
taxes 2,805 1,381 114 (727)(7) 3,573
Income (loss) from
continuing
operations $ 3,577 $ 1,118 $ 2,597 $(1,932) $ 5,360
See notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations.
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MOTORS & GEARS, INC.
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
Adjustments to the Pro forma Condensed Consolidated Balance Sheet:
1). The purchase price of $20,000, including costs directly related to the
transaction, was financed with (i) borrowings from the Company's
revolving credit facility of $15,000, (ii) available excess cash of
$1,000, and (iii) a $4,000 subordinated seller note which has a final
maturity date of December 31, 2002.
2). The purchase price of $20,000 is allocated as follows:
Cash $ 2,127
Accounts Receivable 2,526
Inventories 1,105
Prepaid Expenses and other assets 2
Property, Plant, Equipment 142
Current liabilities (1,284)
Excess Purchase Price over Net
Identifiable Assets 15,382
$20,000
No non-operating liabilities were assumed by Motors and Gears, Inc.
Adjustments to the Pro forma Condensed Consolidated Statement of Operations:
3). Adjustments to selling, general, and administrative expenses include: (i)
the elimination of $369 relating to the completed headcount reductions and
administrative savings in connection with the Barber-Colman acquisition
by the Company for the year ended December 31, 1996, (ii) the
elimination of $791 and $190 for the year ended December 31, 1996 and
the nine months ended September 30, 1997, respectively, for reductions
in executive compensation expenses, and (iii) the addition of $2,477 and
$929 for the year ended December 31, 1996 and the nine months ended
September 30, 1997, respectively, for shared general, administrative,
and overhead expenses of Jordan Industries and estimated costs of the
Motors & Gears Corporate Group.
4). Adjustments to amortization of goodwill reflect the allocation of
purchase price for FIR and ED&C Company. Estimated amortization of
goodwill is based on a straight line basis over thirty years.
5). Adjustments to Management fees reflects fees payable to Jordan Industries
under the management consulting agreement in the amount of 1% of sales.
6). Adjustments to interest expense reflect additional borrowings related to
the acquisition, using an effective annual interest rate of 8.5%.
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MOTORS & GEARS, INC.
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
7). Adjustments to provision for income taxes, primarily resulting from
additional interest expense in connection with borrowings related to the
acquisition.
8). Significant Accounting Policies - Consolidation Principles
The consolidated financial statements include the accounts of Motors &
Gears, Inc. and its subsidiaries. Material intercompany transactions and
balances are eliminated in consolidations. Operations of subsidiaries
outside the United States are included for periods ending two months
prior to the Company's year end and interim periods to ensure timely
preparation of the consolidated financial statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOTORS AND GEARS, INC.
By: /s/ Norman R. Bates
Norman R. Bates
Chief Financial Officer
January 9, 1998
