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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
October 9, 1998
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Date of report (date of earliest event reported)
RELTEC CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 001-13947 94-3227019
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(State or other jurisdiction of Commission File Number (I.R.S. Employer
incorporation or organization) Identification Number)
5900 Landerbrook Drive, Suite 300, Cleveland, Ohio 44124-4019
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(Address of Principal Executive Offices) (Zip Code)
(440) 460-3600
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(Registrant's telephone number, including area code)
Not applicable
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(Former name or former address, if changed since last report)
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RELTEC CORPORATION
INDEX TO FORM 8-K/A
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
(1) The following Positron Fiber Systems, Inc.
("PFS") documents filed with the Securities and
Exchange Commission by PFS are incorporated by
reference in this Form 8-K/A:
1. PFS' Annual Report on Form 20-F for the
fiscal year ended March 31, 1998; and
2. PFS' Quarterly Report on Form 6-K for the
quarter ended June 30, 1998.
(b) Pro Forma Financial Information
(1) The following documents are filed with this
Current Report of Form 8-K/A:
1. Unaudited Pro Forma Condensed Consolidated
Statements of Operations for the Nine Months
Ended September 30, 1998;
2. Unaudited Pro Forma Condensed Consolidated
Statements of Operations for the Year Ended
December 31, 1997;
3. Notes to Unaudited Pro Forma Condensed
Consolidated Statements of Operations.
(c) Exhibits
23.1 Consent of Ernst & Young LLP, Independent
Auditors (Montreal).
99.1 Unaudited Pro Forma Condensed Consolidated
Financial Information.
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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 hereunto duly authorized.
RELTEC Corporation
Date: December 18, 1998
By: /s/ John L. Wilson
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John L. Wilson
Vice President and Controller
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<C> <S>
23.1 Consent of Ernst & Young LLP, Independent
Auditors (Montreal).
99.1 Unaudited Pro Forma Condensed Consolidated
Financial Information.
</TABLE>
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Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Current Report (Form 8-K/A)
of RELTEC Corporation of our report dated May 14, 1998 with respect to the
consolidated financial statements of Positron Fiber Systems Corporation included
in its Annual Report (Form 20-F) for the year ended March 31, 1998, filed with
the Securities and Exchange Commission.
ERNST & YOUNG LLP
Montreal, Canada
December 17, 1998
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Exhibit 99.1
INTRODUCTION TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
As described under Item 2 of Form 8-K, filed by the Company on October 22,
1998, RELTEC Corporation ("RELTEC" or the "Company"), through an indirect,
wholly-owned subsidiary, became the sole shareholder of Positron Fiber
Systems Corporation ("PFS"), a Canadian corporation (the "PFS Acquisition").
The following unaudited pro forma condensed consolidated statements of
operations give effect to the PFS Acquisition using the purchase method of
accounting. For financial reporting purposes, a preliminary allocation of the
purchase price has been made using estimated fair market values as of the
acquisition date in accordance with Accounting Principles Board Opinion No. 16 -
"Business Combinations". The preliminary allocation may be adjusted as the fair
market values are finalized. The pro forma condensed consolidated statements of
operations have been prepared by the Company utilizing the historical financial
statements of the Company and PFS, respectively.
These pro forma statements have been prepared and included herein as required by
the rules and regulations of the Securities and Exchange Commission and are
provided for comparative purposes only. These pro forma statements are not
necessarily indicative of the operating results that would have occurred had the
acquisition been consummated as of January 1, 1997, nor is it necessarily
indicative of future operating results.
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<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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RELTEC
RELTEC PFS Pro Forma
Nine Months January 1, 1998 Nine Months
Ended through Ended
September 30, September 16, September 30,
(Dollars in millions, except share data) 1998 1998 Adjustments 1998
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<S> <C> <C> <C> <C>
Net sales ......................................... $ 769.6 $ 17.8 $ - $ 787.4
Cost of sales ..................................... 540.2 10.0 (1.1) (1) 549.1
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Gross profit .................................. 229.4 7.8 1.1 238.3
Operating expenses:
Research and product engineering .............. 52.1 4.3 - 56.4
Selling and administrative .................... 94.1 13.6 - 107.7
Goodwill and intangible amortization .......... 25.2 - 5.3 (2) 30.5
Write-off of acquired in-process research
and development ............................ 58.4 - (58.4) (1) -
Other expense, net ............................ 10.7 (0.8) 9.9
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Total operating expenses .......................... 240.5 17.1 (53.1) 204.5
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Operating income (loss) ........................... (11.1) (9.3) 54.2 33.8
Interest expense, net ............................. 9.1 (0.6) 8.1 (3) 16.6
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Income (loss) before income taxes ................. (20.2) (8.7) 46.1 17.2
Income tax provision (benefit) .................... 23.6 0.6 (6.3) (4) 17.9
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Net income (loss) ................................. $ (43.8) $ (9.3) $ 52.4 $ (0.7)
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EARNINGS (LOSS) PER COMMON SHARE DATA:
Basic net income (loss) per common share .......... $ (0.80) $ (0.01)
Weighted average shares outstanding ............... 54.7 54.7
Diluted net income (loss) per common share ........ $ (0.80) $ (0.01)
Weighted average shares and options outstanding ... 54.7 54.7
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS.
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<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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PFS RELTEC
RELTEC Fiscal Year Pro Forma
Year Ended Ended Year Ended
December 31, March 31, December 31,
(Dollars in millions, except share data) 1997 1998 Adjustments 1997
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<S> <C> <C> <C> <C>
Net sales ......................................... $ 887.2 $ 17.8 $ - $ 905.0
Cost of sales ..................................... 633.4 9.7 - 643.1
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Gross profit .................................. 253.8 8.1 - 261.9
Operating expenses:
Research and product engineering .............. 55.7 4.8 - 60.5
Selling and administrative .................... 94.1 7.7 - 101.8
Goodwill and intangible amortization .......... 31.9 - 7.0 (2) 38.9
Write-off of acquired in-process research
and development ............................ 0.7 - - 0.7
Other income, net ............................. (1.8) (0.4) - (2.2)
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Total operating expenses .......................... 180.6 12.1 7.0 199.7
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Operating income (loss) ........................... 73.2 (4.0) (7.0) 62.2
Interest expense, net ............................. 18.6 (0.5) 12.8 (3) 30.9
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Income (loss)before income taxes .................. 54.6 (3.5) (19.8) 31.3
Income tax provision (benefit) .................... 29.6 0.2 (10.2) (4) 19.6
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Net income (loss) ................................. $ 25.0 $ (3.7) $ (9.6) $ 11.7
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EARNINGS PER COMMON SHARE DATA:
Basic net income per common share ................. $ 0.51 $ 0.24
Weighted average shares outstanding ............... 48.8 48.8
Diluted net income per common share ............... $ 0.50 $ 0.23
Weighted average shares and options outstanding ... 49.7 50.2
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS.
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RELTEC CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
1. PERIODS COMBINED
The condensed consolidated statements of operations for RELTEC Corporation
("RELTEC" or the "Company") for the nine months ended September 30, 1998 and
for the year ended December 31, 1997 have been combined with the Positron
Fiber Systems ("PFS") condensed consolidated statements of operations for the
period January 1, 1998 through September 16, 1998 and for the fiscal year
ended March 31, 1998.
2. RECLASSIFICATIONS
Certain reclassifications have been made to conform PFS' historical statements
of operations to RELTEC's method of reporting.
3. PRO FORMA ADJUSTMENTS
The following pro forma adjustments have been made to derive the pro forma
condensed consolidated statements of operations for the nine months ended
September 30, 1998 and for the year ended December 31, 1997:
(1) The pro forma condensed consolidated statements of operations for the
nine months ended September 30, 1998 exclude the write-off of $58.4
million of acquired in-process research and development costs and the
write-off of $1.1 million of inventory acquisition step-up.
(2) The preliminary independent appraisal of acquired assets resulted in
$83.3 million being assigned to goodwill and $46.5 million being
assigned to intangible assets such as developed technology, assembled
workforce, sales channels and customer relationships. These assets are
being amortized over periods ranging from five to 25 years.
(3) Pro forma interest expense has been calculated assuming $181.4 million
of indebtedness required to complete the acquisition of PFS was
outstanding during the periods presented and has been calculated using
an annual rate of 5.97% and 7.05% for the nine months ended September
30, 1998 and for the year ended December 31, 1997, respectively.
(4) The net income tax benefit results from applying a 31% effective
Canadian tax rate to the adjustments in (1), (2) and (3) above (with the
exception of goodwill, which is nondeductible for tax purposes). The
Company's acquisition tax structure will result in an additional U.S.
income tax benefit of 40% for the interest expense assumed in (3) above.
9
