<PAGE>
As filed with the Securities and Exchange Commission on September 14, 1998
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): July 1, 1998
Global Industrial Technologies, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-11160 75-2617871
-------- ------- ----------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
2121 San Jacinto Street, Suite 2500, Dallas, Texas 75201
-------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(214) 953-4500
(Registrant's telephone number, including area code)
2 of 13
<PAGE>
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.
Global Industrial Technologies, Inc.
September 14, 1998 By
-------------------------------------
Donna A. Reeves
Vice President--Controller
(Authorized Officer and Chief Accounting
Officer)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired. Not applicable
(b) Unaudited Pro Forma Financial Information
The following unaudited pro forma condensed consolidated financial information
is filed with this report:
Unaudited Pro Forma Condensed Consolidated
Balance Sheet as at April 30, 1998 Page F-1
Unaudited Pro Forma Condensed Consolidated
Statements of Operations:
Six Months Ended April 30, 1998 Page F-2
Year Ended October 31, 1997 Page F-3
As discussed in its filing on Form 8-K, filed with the Securities and Exchange
Commission on July 9, 1998, Global Industrial Technologies, Inc. and its wholly
owned subsidiary, BGN Acquisition Corp. (collectively referred to herein as the
"Company") acquired all of the outstanding shares of common stock of A.P. Green
Industries, Inc. ("Green") effective as of July 1, 1998. The purchase was
effected through a public tender offer for Green's outstanding common stock at
an offering price of $22.00 per share and resulted in a total cash purchase
price of approximately $202 million. The total cash purchase price includes
approximately $24 million in other direct transaction costs such as severance
and other change-in-control benefits, and accounting, legal and investment
banking fees. The purchase price was funded through cash on hand, the issuance
of unsecured senior notes (discussed in Note 2 below), and unused lines of
credit. The Company has accounted for the acquisition as a purchase and,
accordingly, the results of operations of Green will be consolidated with those
of the Company prospectively, beginning on July 1, 1998.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet of the Company at
April 30, 1998 reflects the financial position of the Company after giving
effect to the acquisition of Green, and assumes the acquisition took place on
April 30, 1998. The Unaudited Pro Forma Condensed Consolidated Balance Sheet is
based on the unaudited historical statements of financial position of the
Company and Green at April 30, 1998 and June 30, 1998, respectively. The
Unaudited Pro Forma Condensed Consolidated Statements of Operations for the six
months ended April 30, 1998 and fiscal year ended October 31, 1997 assume that
the acquisition occurred on November 1, 1996, and are based on the historical
results of operations of the Company for the six months ended April 30, 1998,
and fiscal year ended October 31, 1997. The comparable periods of Green included
herein are based on the six month period ended June 30, 1998 and fiscal year
ended December 31, 1997, respectively.
The unaudited pro forma financial information is based on the historical
financial statements of the Company and Green and assumptions and adjustments
described in the accompanying Notes. These statements reflect the preliminary
allocation of purchase price to the Company's tangible and intangible assets and
liabilities. The final allocation of the purchase price, and the resulting
amortization expense may differ somewhat from the preliminary estimates
primarily due to the final allocation of the purchase price to the property,
plants, equipment and intangible assets acquired. The unaudited pro forma
condensed consolidated financial information presented herein is shown for
illustrative purposes only and is not necessarily indicative of the future
financial position or future results of operations of the Company, or of the
financial position or results of operations of the Company that would have
actually occurred had the transaction been in effect as of the date or for the
periods presented.
The Company expects to incur (i) certain obligations in connection with the
acquisition and (ii) certain charges to restructure and integrate the operations
of the two combined companies. Such costs, as they relate to Green's
operations, are reflected in the preliminary purchase price allocation in
accordance with the Emerging Issues Task Force Release #95-3, "Recognition of
Liabilities in Connection with a Purchase Business Combination ," as more fully
described in Note 1 to the unaudited pro forma financial information. The
restructuring costs related to the operations of the Company are estimated to be
<PAGE>
approximately $13 million to $16 million, and are not reflected in the unaudited
pro forma condensed consolidated statements of operations. See Note 4
"Special Charges" for more information.
The unaudited pro forma financial information has been prepared based on
assumptions the Company believes are reasonable, and should be read in
conjunction with the historical financial statements and related notes thereto
of the Company.
(c) Exhibits - Not applicable
<PAGE>
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AT APRIL 30, 1998
(000's)
ASSETS
<TABLE>
<CAPTION>
Historical Pro forma
-------------------------------------- --------------------------------------
Acquisition
Global Industrial A.P. Green Adjustments
Technologies, Inc. Industries, Inc. (Note 1) Combined
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C>
Cash $ 46,800 $ 2,460 $ (14,000) a $ 35,260
Accounts and notes receivable (net) 117,600 48,181 6,323 e 172,104
Inventories 95,300 54,319 16,554 f 166,173
Projected insurance recovery on asbestos claims 66,800 - - 66,800
Other 46,300 13,514 7,180 l 77,094
10,100 j
------------------ ------------------ ------------------ -----------------
Total current assets 372,800 118,474 26,157 517,431
Property, plant and equipment (net) 251,300 108,715 55,457 i 405,372
(10,100) j
Goodwill (net) 55,000 - 20,036 d 75,036
Projected insurance recovery on asbestos claims 47,800 194,161 - 241,961
Other 83,900 18,141 14,774 g 116,881
66 l
------------------ ------------------ ------------------ -----------------
Total assets $ 810,800 $ 439,491 $ 106,390 $ 1,356,681
================== ================== ================== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Asbestos claims $ 55,100 $ - - $ 55,100
Other current liabilities 151,500 45,477 18,196 c 221,463
6,290 l
------------------ ------------------ ------------------ -----------------
Total current liabilities 206,600 45,477 24,486 276,563
Long-term notes payable 104,100 32,405 187,750 a 324,955
700 h
Projected asbestos claims 54,400 194,161 - 248,561
Other non-current liabilities 75,200 39,883 (12,235) g 136,102
30,270 l
2,984 k
------------------ ------------------ ------------------ -----------------
Total liabilities 440,300 311,926 233,955 986,181
------------------ ------------------ ------------------ -----------------
Shareholders' equity
Common stock 6,800 9,028 (9,028) b 6,800
Capital in excess of par value 381,800 73,160 (73,160) b 381,800
Retained earnings 115,300 66,069 (66,069) b 115,300
Treasury stock, at cost (74,600) (9,498) 9,498 b (74,600)
Other (58,800) (11,194) 11,194 b (58,800)
------------------ ------------------ ------------------ -----------------
Total shareholders' equity 370,500 127,565 (127,565) 370,500
------------------ ------------------ ------------------ -----------------
Total liabilities and shareholders' equity $ 810,800 $ 439,491 $ 106,390 $ 1,356,681
================== ================== ================== =================
</TABLE>
See accompanying notes to this unaudited pro forma financial information
F-1
<PAGE>
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1998
(000's) Except per share data
<TABLE>
<CAPTION>
Historical Pro forma
----------------------------------- ---------------------------
Global Industrial Acquisition
Technologies, Inc. A.P. Green Adjustments Combined
(Note 3) Industries, Inc. (Note 2) (Note 2)
------------------ ---------------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales, operating revenues and other $ 230,700 $ 134,744 $ - $ 365,444
Costs and expenses
Cost of sales 179,400 112,631 1,096 a 292,199
- - (928) e
Selling, engineering, administrative and general 44,300 20,202 250 b 58,451
- - (5,014) f
- - (1,287) e
Interest expense 5,100 1,020 5,854 c 11,974
Other (income) expense (net) 3,900 2,589 (3,164) d 3,325
----------------- --------------- ----------- ----------
Total costs and expenses 232,700 136,442 (3,193) 365,949
----------------- --------------- ----------- ----------
Income (loss) from continuing operations
before income taxes (2,000) (1,698) 3,193 (505)
Income tax benefit (provision) 600 805 (1,721) g (316)
----------------- --------------- ------------- ----------
Income (loss) from continuing operations $ (1,400) $ (893) $ 1,472 $ (821)
================= =============== ============= ==========
Basic loss from continuing operations
per common share $ (0.07) $ (0.04) (h)
----------------- ----------
Weighted average number of common shares - basic 21,940 21,940
----------------- ----------
Diluted loss from continuing operations
per common share $ (0.07) $ (0.04) (h)
----------------- ----------
Weighted average number of common shares - diluted 21,940 21,940
----------------- ----------
</TABLE>
See accompanying notes to this unaudited pro forma financial information
F-2
<PAGE>
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
GLOBAL INDUSTRIAL TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997
(000's) Except per share data
<TABLE>
<CAPTION>
Historical Pro forma
----------------------------------- --------------------------------
Global Industrial
Technologies, Inc. A.P. Green Adjustments Combined
(Notes 3, 4) Industries, Inc. (Note 2) (Note 2)
------------------ ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales, operating revenues and other $ 489,218 $ 277,907 $ - $ 767,125
Costs and expenses
Cost of sales 367,049 227,851 1,593 a 595,099
- - (1,394) e
Selling, engineering, administrative and general 93,136 37,445 501 b 117,054
(10,027) f
- - (4,001) e
Interest expense 10,100 2,339 11,676 c 24,115
Special charges 43,500 - 43,500
Other (income) expense (net) 1,863 (1,739) 124
------------------ --------------- --------------- ----------------
Total costs and expenses 515,648 265,896 (1,652) 779,892
------------------ --------------- --------------- ----------------
Income (loss) from continuing operations
before income taxes (26,430) 12,011 1,652 (12,767)
Income tax benefit (provision) 10,600 (3,943) (818) g 5,839
------------------ --------------- --------------- ----------------
Income (loss) from continuing operations $ (15,830) $ 8,068 $ 834 $ (6,928)
================== =============== =============== ================
Basic loss from continuing operations
per common share $ (0.71) $ (0.31) h
------------------ ----------------
Weighted average number of common shares - basic 22,448 22,448
------------------ ----------------
Diluted loss from continuing operations
per common share $ (0.71) $ (0.31) h
------------------ ----------------
Weighted average number of common shares - diluted 22,448 22,448
------------------ ----------------
</TABLE>
See accompanying notes to this unaudited pro forma financial information
F-3
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
NOTE 1 -- The unaudited pro forma condensed consolidated balance sheet has been
prepared to reflect the acquisition of Green by the Company for an aggregate
cash purchase price of approximately $202 million as if the purchase had taken
place on April 30, 1998. Pro forma adjustments are made to reflect the
preliminary allocation of purchase price as follows:
a. Adjustment represents the payment of cash, issuance of unsecured senior
notes and increase in amounts outstanding under existing credit facilities
necessary to effect the transaction on July 1, 1998. See Note 2. c. for
discussion on incremental borrowings following the Company's sale of
Industrial Tool.
b. Adjustment represents the elimination of Green's historical shareholders'
equity accounts.
c. Adjustment represents the Company's estimate of direct expenditures to be
incurred in connection with the consolidation and integration of certain
corporate functions and Green's manufacturing facilities. Such costs
include severance, other employee termination payments and other costs
directly associated with the consolidation and integration activities, and
has been established in accordance with the provisions of the Emerging
Issues Task Force Release #95-3 (EITF 95-3), "Recognition of Liabilities in
Connection with a Purchase Business Combination." Management's
consolidation and integration plans include the elimination of certain
historical expenses of Green and the Company, particularly salary, benefit
and various other associated direct overhead costs related primarily to the
executive, legal, accounting, tax, engineering, sales and marketing
functions. Management expects these actions to enable the Company to
achieve certain economies of scale in these areas, resulting in future cost
savings. The reserve discussed herein includes such costs as severance,
employee relocation and other incremental, non-recurring charges to close
down the facilities, but does not include those expenditures expected to
result from reductions of the Company's own workforce and closing of
duplicate facilities, as more fully described in NOTE 4 "Special Charges."
d. Adjustment represents the recognition of the excess of acquisition cost
over the fair market value of net assets acquired (goodwill), and will be
amortized over a period of 40 years.
e. Adjustment reflects the reclassification of the note receivable from
Green's Employee Stock Ownership Trust (the "Plan") from shareholder's
equity to current notes receivable. This note represents a receivable from
the Plan, which stems from its original purchase of Green common stock. The
Plan sold both its allocated and remaining unallocated shares of Green
common stock to the Company in connection with the Company's tender offer
of $22.00 per share. As of July 1, 1998, however, the Plan had not yet
repaid its note to the Company, hence requiring its reclassification to
current assets. The balance due was fully repaid in August 1998.
f. Adjustment represents the write-up of work-in-progress and finished goods
inventory to fair market value in accordance with Accounting Principles
Board Opinion #16 (APB 16) "Business Combinations," including the
elimination of Green's historical LIFO reserve. Inventory is reflected in
the historical financial statements of Green at cost, as determined using
the last-in-first-out (LIFO) method of inventory valuation, which is the
same method as that historically used by the Company's refractory
operations. For financial reporting purposes, this "stepped-up" value of
inventory will become the Company's new base-year cost and will not effect
cost of goods sold in the future unless these inventory levels are reduced.
g. Adjustment represents the recognition of assets at fair market value
related to Green's defined benefit pension plans. Pursuant to purchase
accounting standards, the Company recorded the excess of fair market value
of total plan assets over the total projected benefit obligation ("PBO") at
the date of acquisition, as a non-current asset. The PBO of Green's defined
benefit pension
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
plans represents the actuarial present value, as obtained from an
independent actuarial firm, as of July 1, 1998, of the total cost of all
employees' vested and non-vested pension benefits that have been attributed
by the pension benefit formula (as defined in the respective plan's
document) to services performed by employees to that date.
h. Adjustment represents the write-up of assumed long-term notes payable to
estimated fair market value at the acquisition date.
i. Adjustment reflects the increase in accounting basis of the property,
plants and equipment acquired to fair market value on the acquisition date,
which is based on a preliminary valuation estimate prepared by an
independent appraisor.
j. Adjustment reclassifies property, plants and equipment acquired from Green
that are slated to be sold.
k. Adjustment reflects the postretirement welfare benefit liability acquired
from Green at fair market value at the acquisition date, using an assumed
discount rate of 6.75%, as obtained from an independent actuarial firm.
l. Adjustment reflects deferred taxes resulting from the foregoing purchase
price adjustments.
NOTE 2 -- The unaudited pro forma condensed consolidated statements of
operations give effect to the following pro forma adjustments necessary to
reflect the acquisition of Green as if it had taken place on November 1, 1996.
Historical amounts reflect the results of operations of the Company for the
unaudited six-month period ended April 30, 1998 and fiscal year ended
October 31, 1997, and of Green for the unaudited six-month period and year ended
June 30, 1998 and December 31, 1997, respectively. Note: Certain
reclassifications were made to the historical results of operations of Green in
order to conform to the Company's presentation. Pro forma adjustments are made
to reflect the preliminary allocation of purchase price as follows:
a. Reflects the adjustment to depreciation expense for the effects of the
increase in accounting basis of the property, plants and equipment
acquired, and adjustment of remaining useful lives. The adjustment is
calculated on a straight-line basis and is based on weighted average
estimated useful lives remaining as follows (in years):
Land Improvements 6
Buildings and Improvements 14
Machinery and Equipment 10
Including this adjustment, and the pro forma amortization adjustment
discussed in 2.b. below, total pro forma depreciation, depletion and
amortization expense as reflected in the accompanying unaudited pro forma
condensed consolidated statments of operations is approximately $19 million
and $37 million for the six month period ended April 30, 1998 and year
ended December 31, 1997, respectively.
b. Adjustment reflects the amortization of goodwill from the Green acquisition
on a straight-line basis over 40 years.
c. Adjustment reflects the annual interest charges on borrowings incurred in
connection with the acquisition. In order to effect the transaction, the
Company issued $75 million in unsecured senior notes to institutional
investors bearing interest at a rate of 6.83% per annum payable semi-
annually, with the entire principle balance due on June 30, 2008
("Unsecured Notes"). Additionally, the Company increased its indebtedness
under existing credit facilities by approximately $113 million to finance
the acquisition. Pro forma interest expense on the credit facilities has
been computed at 6.25%, which was the rate in effect at the time of
acquisition. The Company's credit facilities bear interest at floating
market rates and, accordingly, a 1/8% change in the effective interest rate
would result in a $70,000 and $141,000 increase or decrease in the related
pro forma interest expense (assuming no reductions in principal) for the
six and twelve month periods ended April 30, 1998 and October 31, 1997,
respectively. In addition, as part of the
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
acquisition, the Company became obligated for approximately $20 million in
unsecured notes of Green, which bear a fixed stated rate of interest equal
to 8.55% per annum ("Green Notes"). The provisions of the underlying Green
Note agreements include certain change-in-control covenants, which
obligate any potential acquiror to offer to redeem the notes immediately,
potentially at a premium. Shortly after July 1, 1998, the Company made an
offer to redeem the Green Notes, which was accepted by the respective
bondholders. In order to effect the redemption, the Company will draw
additional borrowings under its existing credit facilities which, as
indicated above, bear a floating rate of interest, which was approximately
6.25% at the time of the acquisition. Accordingly, the pro forma adjustment
included herein includes the effect of the difference between the stated
interest rate of the Green Notes (8.55%) and the redemption rate of 6.25%
as a decrease to historical interest expense. A 1/8% change in the
redemption rate would have, however, resulted in a $13,000 and $27,000
increase or decrease in the related interest expense for the six and twelve
month periods ended April 30, 1998 and October 31, 1997, respectively. The
following is a summary of the pro forma adjustments to interest expense as
a result of the acquisition (in thousands):
<TABLE>
<CAPTION>
Six months ended Year ended
April 30, October 31,
1998 1997
---- ----------
<S> <C> <C>
Unsecured Notes 2,561 5,123
Credit Facilities 3,523 7,047
Green Notes (230) (494)
---------- ----------
Net additional interest expense 5,854 11,676
----- ------
</TABLE>
It should be noted that the Company used a portion of the $218 million in
proceeds from the second quarter sale of Industrial Tool (see Note 3 below
for more information) to repay indebtedness. In fact, during the six month
period ended April 30, 1998, the Company's debt levels decreased in excess
of $100 million. The unaudited pro forma condensed consolidated statements
of operations included herein does not, however, include an adjustment for
the reduction of historical interest expense reflecting the reduced level
of borrowings, since the Company was not contractually obligated by its
bank agreements to use the sale proceeds in such a way. Had such an
adjustment been made, a lower level of pro forma interest expense would
have been shown, since such expense would have reflected the repayment of
an equal amount of debt had the Industrial Tool sale occurred on
November 1, 1996, as well.
d. Adjustment reflects the elimination of certain historical expenses of Green
which will not have a continuing impact on future results of operations.
The majority of these costs relate to investment banking, accounting and
legal fees which are directly attributable to the acquisition.
e. Amount represents the adjustment needed to reflect the net periodic pension
and postretirement benefit costs of Green for the six and twelve month
periods ended April 30, 1998 and October 31, 1997, respectively, based on
actuarial calculations performed by independent actuaries as of July 1,
1998. Actuarial assumptions include a discount rate and expected long-term
rate of return on plan assets (defined benefit pension plans) of 6.75% and
9.00%, respectively, and provide for anticipated changes in the number of
employees, as a result of the acquisition. In addition, the Company has
elected to grant the same level of postretirement benefits to some of the
remaining Green employees as those afforded to its own. This change in
benefit levels was made for the benefit of the remaining former Green
employees, as opposed to being a bargained for element of the acquisition.
Accordingly, pursuant to SFAS 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," any change in the liability
resulting from this election will be recognized, although not as an element
of the purchase price, and amortized over the estimated remaining
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
average service period of the active participants. This adjustment is not
expected to have a material impact on the results of operations or
financial position of the Company, and is not reflected in the accompanying
unaudited pro forma condensed consolidated statements of operations.
f. Adjustment reflects the portion of estimated recurring cost savings
relating to selling, engineering, administrative and general activities
resulting from management's consolidation and integration plans, which had
been realized at the acquisition date or shortly thereafter. The
adjustment primarily reflects the elimination of certain redundant
historical expenses of Green, particularly salary, benefit and certain
other associated direct overhead cost decreases due to workforce
reductions; primarily executive, legal, accounting, tax, engineering, sales
and marketing functions (net of increases in the Company's staff and
related direct expenses). Such cost savings reflected herein do not include
those expected to be realized from the consolidation and integration of
Green's manufacturing facilities. The adjustment reflects only actions
taken by management as of the acquisition date, or shortly thereafter, and
which meet the criteria established by Regulation S-X, Article 11 of the
Exchange Act of 1934. Such rules provide that each pro forma adjustment
give effect to events that are (i) directly attributable to the
transaction, (ii) expected to have a continuing impact on the registrant,
and (iii) are factually supportable. In addition, the nature of the cost
reductions reflected herein relate only to those types of expenditures for
which reserves were provided in the preliminary purchase price allocation,
as prescribed by the Emerging Issues Task Force Release #95-3 (EITF 95-3),
"Recognition of Liabilities in Connection with a Purchase Business
Combination," and discussed in Note 1.c. The cost reductions represented by
the pro forma adjustment do not include other cost savings expected to be
achieved by management including, but not limited to, those which are
expected to result from reductions of the Company's own workforce and
closing of duplicate facilities, as more fully described in NOTE 4 "Special
Charges" below. It should also be noted that the staff reductions in the
sales and marketing organization primarily represents excess sales force.
Management does not expect to experience any material permanent decline in
sales volumes or revenues as a result of these actions.
g. Adjustment represents the income tax effect of the foregoing pro forma
adjustments based on the estimated combined federal and state statutory tax
rates. As noted, this calculation results in a pro forma effective tax rate
which is higher than the historical rates of the combining companies. This
is due primarily to the fact that the goodwill resulting from the Company's
acquisition of Green is not tax deductible and, pursuant to Statement of
Financial Accounting Standards #109 ("SFAS 109") "Accounting for Income
Taxes," deferred taxes are not recognized on non-tax deductible goodwill
generated in purchase accounting.
h. Pro forma net earnings per share from continuing operations have been
computed pursuant to the provisions of SFAS 128, "Earnings per Share",
which requires a dual presentation of both "basic" and "diluted" earnings
per share. Basic pro forma loss from continuing operations per share is
calculated as the pro forma net loss from continuing operations divided by
the weighted average number of common shares outstanding. Diluted pro forma
loss from continuing operations per share is calculated by including the
dilutive effects of potential common shares, which include the Company's
stock options and deferred compensation units.
Outstanding stock options at April 30, 1998 and October 31, 1997,
representing 2,225,951 and 1,509,489 potential common shares, respectively,
were excluded from the calculations performed for the six month period
ended April 30, 1998 and year ended October 31, 1997, since their inclusion
would be anti-dilutive due to the pro forma net loss from continuing
operations incurred for the respective periods. Outstanding deferred
compensation units at April 30, 1998 and October 31, 1997, representing
234,450 and 250,275 potential common shares, respectively, were excluded
from the calculations performed for the six month period ended April 30,
1998 and year ended October 31,
<PAGE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
1997, since their inclusion would be anti-dilutive due to the pro forma net
loss from continuing operations incurred for the respective periods.
NOTE 3 DISCONTINUED OPERATIONS
On March 12, 1998, the Company sold its Industrial Tool segment, including the
common stock of Intool, Inc. and the assets of Industrial Tool operations in
Canada, Mexico, the Netherlands and Germany. Accordingly, this segment's
results of operations were reclassified and reflected as a single line item (net
of related income taxes) and presented below net income from continuing
operations in the Company's historical financial statements for the six month
period ended April 30, 1998, as filed on Form 10-Q. Likewise, the Company's
results of operations for the fiscal year ended October 31, 1997 have also been
reclassified and, as such, the Company's historical amounts presented in the
unaudited pro forma condensed statement of operations represent operating
results excluding those of the Industrial Tool segment. Sales, costs and
expenses and net income generated during fiscal 1997 by the Industrial Tool
segment were $113,182, $93,452 and $11,430, respectively.
NOTE 4 SPECIAL CHARGES
During fiscal 1997, the Company announced plans to divest the Marion Power
Shovel Company, British Jeffery Diamond of the United Kingdom and a partnership
interest in KOMDRESCO of South Africa. A special charge against earnings in
1997 of $43.5 million (pre-tax) which resulted from these divestitures is shown
as part of Costs and Expenses in the Company's historical results of operations.
In addition, the Company's historical results of operations for the six-month
period ended April 30, 1998 reflect a $2.4 million (pre-tax) charge to earnings
resulting from the closure of the processing equipment manufacturing operations
in Wakefield, England. Neither of these charges have been excluded from the
accompanying pro forma condensed statement of earnings since they were not
incurred as a direct result of the acquisition of Green.
In addition, in connection with the acquisition, the Company expects to incur
additional costs and expenses associated with the closure of certain of its
facilities and workforce reductions during the third quarter of fiscal 1998.
These costs stem primarily from the implementation of the Company's plans to
consolidate and integrate the operations of the Company and Green and achieve
certain synergies and economies of scale through the closure of duplicate
facilities. The Company currently estimates these charges to total between $13
million and $16 million (pre-tax), none of which are included in the
accompanying pro forma condensed statements of earnings.
FORWARD-LOOKING STATEMENTS
- --------------------------
Statements the Company may publish that are not strictly historical are
"forward-looking" statements under the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Although the Company believes the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, it can give no assurance that its expectations will be
realized. Forward-looking statements involve known and unknown risks which may
cause the Company's actual results and corporate developments to differ
materially from those expected. Factors that could cause results and
developments to differ materially from the Company's expectations include,
without limitation, changes in manufacturing and shipment schedules, delays in
completing plant construction and acquisitions, currency exchange rates, new
product and technology developments, competition within each business segment,
cyclicality of the markets for the products of a major segment, litigation,
significant cost variances, the effects of acquisitions and divestitures, and
other risks described from time to time in the Company's SEC reports including
quarterly reports on Form 10-Q, annual reports on Form 10-K and reports on Form
8-K.
