SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 25, 1999
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BORG-WARNER AUTOMOTIVE, INC.
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(Exact Name of Registrant as Specified in Charter)
Delaware 1-12162 13-3404508
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(State or Other (Commission File Number) IRS Employer
Jurisdiction of Identification
Incorporation) Number
200 South Michigan Avenue, Chicago, Illinois 60604
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (312) 322-8500
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Page 1 of 13
<PAGE>
Item 5. Other Events.
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On January 25, 1999, Borg-Warner Automotive, Inc., a Delaware
corporation ("Borg-Warner"), issued a press release announcing (a) the
expiration of the waiting period under the Hart-Scott-Rodino Act for its
acquisition of Kuhlman Corporation ("Kuhlman") and (b) Kuhlman's mailing of
proxy materials in connection with Kuhlman's special meeting of stockholders
scheduled to be held on March 1, 1999. The press release is attached hereto as
Exhibit 99.1 and is incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(b) Pro Forma Financial Information.
-------------------------------
The following pro forma financial information related to the
pending acquisition of Kuhlman Corporation is attached hereto as Exhibit 99.2
and is incorporated herein by reference:
Unaudited Pro Forma Consolidated Balance Sheet as of September
30, 1998;
Unaudited Pro Forma Consolidated Statement of Operations For
the Year Ended December 31, 1997;
Unaudited Pro Forma Consolidated Statement of Operations For
the Nine Months Ended September 30, 1998;
Unaudited Pro Forma Consolidated Statement of Operations For
the Nine Months Ended September 30, 1997; and
Notes to Unaudited Pro Forma Consolidated Financial Statements
Year Ended December 31, 1997 and Nine Months Ended
September 30, 1998 and 1997.
(c) Exhibits.
--------
99.1. Borg-Warner Automotive, Inc. Press Release dated
January 25, 1999.
99.2 Unaudited Pro Forma Consolidated Financial Statements
Related to Potential Acquisition of Kuhlman
Corporation.
Page 2 of 13
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 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.
Dated: January 27, 1999
BORG-WARNER AUTOMOTIVE, INC.
By /s/ Vincent M. Lichtenberger
-----------------------------------
Name: Vincent M. Lichtenberger
Title: Assistant Secretary
Page 3 of 13
<PAGE>
EXHIBIT INDEX
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Page No.
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99.1. Borg-Warner Automotive, Inc. Press Release dated
January 25, 1999 5
99.2. Unaudited Pro Forma Consolidated Financial Statements
Related to Potential Acquisition of Kuhlman Corporation. 6-13
Page 4 of 13
EXHIBIT 99.1
Immediate Release
Contact
Mary Brevard
Director, Investor Relations
& Communications
Phone: 312/322-8683
Fax: 312/461-0507
BORG-WARNER AUTOMOTIVE ANNOUNCES
EXPIRATION OF HART-SCOTT-RODINO
WAITING PERIOD FOR KUHLMAN ACQUISITION
Chicago, Illinois, January 25, 1999 -- Borg-Warner Automotive, Inc. (NYSE:BWA)
announced that the waiting period under the Hart-Scott-Rodino Act for its
acquisition of Kuhlman Corporation expired at midnight on January 22, 1999. The
acquisition is subject to antitrust review in other countries.
Kuhlman began mailing proxy materials to its stockholders on
January 23. Kuhlman stockholders of record on January 19 will be entitled to
vote on the merger at a special meeting of Kuhlman stockholders to be held on
March 1.
Chicago-based Borg-Warner Automotive, Inc. is a product leader in
highly engineered components and systems primarily for automotive drivetrain
applications. The company operates manufacturing facilities in 12 countries
serving automakers in North America, Europe and Asia.
###
Page 5 of 13
EXHIBIT 99.2
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements
consist of an unaudited pro forma consolidated balance sheet as of September 30,
1998, and unaudited pro forma consolidated statements of operations for the year
ended December 31, 1997 and for the nine-month periods ended September 30, 1998
and 1997. The pro forma statements combine the historical financial statements
of Borg-Warner Automotive, Inc. ("Borg-Warner Automotive") and Kuhlman
Corporation ("Kuhlman") as of and for the periods indicated. The pro forma
financial statements also reflect the following:
o The merger will be accounted for as a purchase. Borg-Warner
Automotive will fund the transaction by issuing approximately $150
million in Borg-Warner Automotive common stock and borrowing the
remainder. Subject to the provisions of the Agreement and Plan of
Merger among Borg-Warner Automotive, BWA Merger Corp., and
Kuhlman, dated as of December 17, 1998, each outstanding share of
Kuhlman common stock will be converted into the right to receive
(1) $39.00 in cash, without interest, or (2) $39.00 worth of
shares of Borg-Warner Automotive common stock.
o Borg-Warner Automotive will assume or refinance Kuhlman's existing
indebtedness which was $98.4 million as of September 30, 1998 and
is estimated to be between $80 million and $90 million at the
closing of the merger. In addition Borg-Warner Automotive will
incur additional indebtedness for the settlement of stock options
and certain long-term incentive programs and severance programs,
which are estimated to be approximately $45 million, net of tax
benefits. To the extent that additional stock options are
exercised prior to the completion of the merger, the number of
shares of Kuhlman common stock outstanding will increase and the
related settlement cost relating to stock options will decrease.
o Borg-Warner Automotive and Kuhlman will pay anticipated investment
banking, legal, accounting and regulatory fees and costs related
to the merger estimated to be $12 million.
Borg-Warner Automotive has not completed the analyses necessary to
determine the allocation of purchase price based on the fair values of assets
and liabilities acquired and, therefore, the excess of purchase price over net
assets acquired, except for the amount allocated to the electrical products
businesses as discussed below, is reflected as goodwill in these pro forma
financial statements.
Borg-Warner Automotive intends to sell Kuhlman's electrical products
businesses. In the pro forma balance sheet, Borg-Warner Automotive's net
investment in the electrical products businesses is reflected as an asset held
for sale in current assets. The investment includes a portion of the goodwill
related to the merger. The amount of goodwill was allocated based on the
relative historical performance of the electrical pro-
Page 6 of 13
<PAGE>
ducts businesses compared with the total Kuhlman business. While the result is
not certain, Borg-Warner Automotive believes that the net investment in the
electrical products businesses is not greater than the amounts that Borg-Warner
Automotive will receive upon sale of the businesses. Proceeds from the sale will
be used to repay merger indebtedness.
The pro forma consolidated financial statements should be read in
conjunction with the Borg-Warner Automotive and Kuhlman historical consolidated
financial statements and notes thereto. The pro forma consolidated statements
are presented for informational purposes only and do not purport to be
indicative of what the actual results would have been had the merger occurred as
described above for the periods presented. The pro forma consolidated statements
of operations should not be considered indicative of the results of future
operations of the merged companies.
The pro forma consolidated balance sheet was prepared assuming the
merger occurred on September 30, 1998, and the pro forma consolidated statements
of operations were prepared assuming that the merger took place on January 1,
1998 and 1997, respectively. In addition to an accrual for merger-related costs
noted above, the pro forma consolidated statements include the following:
o the effects of amortization of the goodwill related to the merger
(which is being amortized over a 40-year life),
o interest expense on borrowings to be incurred to finance the
merger, but excluding the portion of the interest expense
allocated to the electrical products businesses,
o the elimination of expenses related to Kuhlman's corporate
headquarters which will be closed,
o exclusion of revenues, costs and expenses for the electrical
products businesses, and
o tax effects of all the preceding adjustments.
Page 7 of 13
<PAGE>
BORG-WARNER AUTOMOTIVE
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Less:
Electrical Pro Forma
Borg-Warner Pro Forma Products Borg-Warner
Automotive Kuhlman Adjustments Businesses (1) Automotive
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash................................................ $ 4.5 $ 4.9 $ 0.2 $ 9.2
Short-term securities............................... 7.2 7.2
Receivables......................................... 192.0 120.3 48.2 264.1
Inventories......................................... 130.8 76.7 35.8 171.7
Deferred income tax asset........................... 8.5 13.0 5.6 15.9
Prepayments and other current assets................ 25.5 5.4 2.7 28.2
Investment in electrical products businesses........ $ 250.0 (1) 250.0
--------------------------------------------------------------------------
Total current assets........................... 368.5 220.3 250.0 92.5 746.3
Property, plant and equipment at cost............... 1,004.8 240.1 72.8 1,172.1
Less accumulated depreciation....................... (400.9) (118.5) (34.2) (485.2)
--------------------------------------------------------------------------
Net property, plant and equipment.............. 603.9 121.6 38.6 686.9
Investments and advances............................ 122.6 122.6
Goodwill............................................ 527.7 120.9 511.9 (2) 176.3 984.2
Deferred income tax asset........................... 18.7 18.7
Other noncurrent assets............................. 118.1 12.5 4.5 126.1
--------------------------------------------------------------------------
$ 1,759.5 $ 475.3 $ 761.9 $ 311.9 $ 2,684.8
==========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable....................................... $ 46.2 $ 1.0 $ 0.5 $ 46.7
Accounts payable and accrued expenses............... 266.6 133.6 $ 57.0 (2) 50.5 406.7
Income taxes payable................................ 33.4 9.3 1.9 40.8
--------------------------------------------------------------------------
Total current liabilities...................... 346.2 143.9 57.0 52.9 494.2
Long-term debt...................................... 305.5 97.4 508.6 (2) 3.3 908.2
Long-term liabilities:
Retirement-related liabilities................. 313.2 20.0 2.2 331.0
Other long-term liabilities.................... 65.3 10.3 3.5 72.1
Common stock........................................ 0.2 16.9 (16.9) (2) 0.2
Other stockholders' equity.......................... 729.1 186.8 213.2 (2) 250.0 879.1
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Total stockholders' equity..................... 729.3 203.7 196.3 250.0 879.3
--------------------------------------------------------------------------
$ 1,759.5 $ 475.3 $ 761.9 $ 311.9 $ 2,684.8
==========================================================================
See accompanying notes to unaudited pro forma consolidated financial statements.
</TABLE>
Page 8 of 13
<PAGE>
BORG-WARNER AUTOMOTIVE
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Less:
Electrical Pro Forma
Borg-Warner Pro Forma Products Borg-Warner
Automotive Kuhlman Adjustments Businesses (1) Automotive
----------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
Net sales............................................... $ 1,767.0 $ 643.4 $ 303.5 $ 2,106.9
Cost of sales........................................... 1,375.4 481.4 235.4 1,621.4
Depreciation............................................ 70.4 16.9 5.9 81.4
Selling, general and administrative expenses............ 132.0 85.3 $ (12.4) (3) 38.4 166.5
Minority interest in earnings........................... 3.2 3.2
Goodwill amortization................................... 16.7 3.0 12.8 (2) 4.8 27.7
Equity in affiliate earnings and other income........... (13.2) 1.0 0.3 (12.5)
-------------------------------------------------------------------------
Earnings before interest, finance
charges, and income taxes........................ 182.5 55.8 (0.4) 18.7 219.2
Interest expense and finance charges.................... 24.6 9.3 33.6 (2) 14.9 52.6
-------------------------------------------------------------------------
Earnings before income taxes....................... 157.9 46.5 (34.0) 3.8 166.6
Provision for income taxes.............................. 54.7 18.6 (7.9) (4) 3.8 61.6
-------------------------------------------------------------------------
Net earnings ...................................... $ 103.2 $ 27.9 $ (26.1) $ 0.0 $ 105.0
=========================================================================
Net earnings per share
Basic.............................................. $ 4.35 $ 1.84 $ 3.95
=========================== =================
Diluted............................................ $ 4.31 $ 1.75 $ 3.91
=========================== =================
Average shares outstanding (thousands)
Basic.............................................. 23,683 15,160 2,879 26,562
========================================= =================
Diluted............................................ 23,934 15,929 2,879 26,813
========================================= =================
See accompanying notes to unaudited pro forma consolidated financial statements.
</TABLE>
Page 9 or 13
<PAGE>
BORG-WARNER AUTOMOTIVE
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN MILLIONS, EXPECT PER SHARE DATA)
<TABLE>
<CAPTION>
Less:
Electrical Pro Forma
Borg-Warner Pro Forma Products Borg-Warner
Automotive Kuhlman Adjustments Businesses (1) Automotive
------------------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C>
Net sales............................................... $ 1,347.6 $ 571.1 $ 228.1 $ 1,690.6
Cost of sales........................................... 1,058.6 426.1 169.7 1,315.0
Depreciation............................................ 57.5 16.5 4.8 69.2
Selling, general and administrative expenses............ 112.7 72.9 $ (13.0) (3) 30.5 142.1
Minority interest in earnings........................... 2.4 2.4
Goodwill amortization................................... 12.7 2.7 9.6 (2) 3.6 21.4
Equity in affiliate earnings and other income........... (8.9) 0.4 (8.5)
-------------------------------------------------------------------------
Earnings before interest, finance
charges, and income taxes........................ 112.6 52.5 3.4 19.5 149.0
Interest expense and finance charges.................... 20.6 5.8 24.6 (2) 11.1 39.9
-------------------------------------------------------------------------
Earnings before income taxes....................... 92.0 46.7 (21.2) 8.4 109.1
Provision for income taxes.............................. 29.1 18.1 (3.7) (4) 5.4 38.1
-------------------------------------------------------------------------
Net earnings ...................................... $ 62.9 $ 28.6 $ (17.5) $ 3.0 $ 71.0
=========================================================================
Net earnings per share
Basic.............................................. $ 2.68 $ 1.71 $ 2.69
=========================== =============
Diluted............................................ $ 2.65 $ 1.64 $ 2.67
=========================== =============
Average shares outstanding (thousands)
Basic.............................................. 23,509 16,704 2,879 26,388
========================================== =============
Diluted............................................ 23,690 17,430 2,879 26,569
========================================== =============
See accompanying notes to unaudited pro forma consolidated financial statements.
</TABLE>
Page 10 of 13
<PAGE>
BORG-WARNER AUTOMOTIVE
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Less:
Electrical Pro Forma
Borg-Warner Pro Forma Products Borg-Warner
Automotive Kuhlman Adjustments Businesses (1) Automotive
--------------------------------------- ---------------------------
<S> <C> <C> <C> <C> <C>
Net sales..................................................... $ 1,300.0 $ 468.7 $ 225.9 $ 1,542.8
Cost of sales................................................. 1,016.3 350.9 176.6 1,190.6
Depreciation.................................................. 51.5 12.7 4.5 59.7
Selling, general and administrative expenses.................. 95.5 62.5 $ (8.6) (3) 28.7 120.7
Minority interest in earnings................................. 1.8 1.8
Goodwill amortization......................................... 12.4 2.1 9.6 (2) 3.7 20.4
Equity in affiliate earnings and other income................. (11.7) 0.7 0.2 (11.2)
--------------------------------------------------------------------
Earnings before interest, finance charges, and
income taxes............................................. 134.2 39.8 (1.0) 12.2 160.8
Interest expense and finance charges.......................... 19.0 7.3 24.9 (2) 11.2 40.0
--------------------------------------------------------------------
Earnings before income taxes............................. 115.2 32.5 (25.9) 1.0 120.8
Provision for income taxes.................................... 39.2 13.1 (6.1) (4) 2.1 44.1
--------------------------------------------------------------------
Net earnings ............................................ $ 76.0 $ 19.4 $ (19.8) $ (1.1) $ 76.7
====================================================================
Net earnings per share
Basic.................................................... $ 3.21 $ 1.32 $ 2.89
======================== ============
Diluted.................................................. $ 3.17 $ 1.25 $ 2.86
======================== ============
Average shares outstanding (thousands)
Basic.................................................... 23,692 14,698 2,879 26,571
====================================== ============
Diluted.................................................. 23,907 15,464 2,879 26,786
====================================== ============
See accompanying notes to unaudited pro forma consolidated financial statements.
</TABLE>
Page 11 of 13
<PAGE>
BORG-WARNER AUTOMOTIVE
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997 AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
(1) The electrical products businesses include two businesses of Kuhlman,
one of which manufactures transformers and the other of which
manufactures wire and cable. Borg-Warner Automotive plans to sell the
electrical products businesses after the merger. The pro forma
consolidated balance sheet reflects the electrical products businesses
at net carrying value. This carrying value of $250 million includes
$121 million of the excess purchase price of the merger. Revenues,
costs and expenses of the electrical products businesses have been
deducted from the pro forma Borg-Warner Automotive column of the pro
forma consolidated financial statements. For purposes of the unaudited
pro forma consolidated statements of operations, a portion of interest
expense and amortization of goodwill relating to the merger has been
allocated to the electrical products businesses, and accordingly has
been deducted in arriving at the pro forma consolidated statement of
operations data. The goodwill amortization was based upon the goodwill
allocated to such businesses. Interest expense was allocated assuming
the businesses were responsible for the interest on $250 million in
acquisition indebtedness. The following chart shows the amounts of
goodwill amortization and interest expense allocated to the electrical
products businesses for each of the periods presented.
Goodwill Interest
Amortization Expense
------------ --------
Year ended December 31, 1997........... $3.0 $14.9
Nine months ended
September 30, 1998................ 2.3 11.1
September 30, 1997................ 2.3 11.1
(2) The estimated purchase price for purposes of the calculation of
goodwill is as follows:
Purchase of Kuhlman common stock............................ $ 658.6
Payment for options, long-term incentives et al. ........... 45.0
Fees and expenses related to the merger..................... 12.0
--------
Subtotal 57.0
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Total purchase price................................... 715.6
Net book value of Kuhlman.............................. 203.7
--------
Excess purchase price....................................... 511.9
Excess purchase price allocated to electrical
products businesses....................................... 120.9
--------
Goodwill....................................................$ 391.0
Page 12 of 13
<PAGE>
The pro forma consolidated financial statements assume that 2,878,526
shares of Borg-Warner Automotive common stock will be issued in the
merger, corresponding to an average Borg-Warner Automotive common stock
price of $52.11. The number of shares of Borg-Warner Automotive common
stock actually issued in the merger will be based on the daily average
of the high and low sales prices of Borg-Warner Automotive common stock
price during the 20 consecutive trading days immediately preceding the
third trading date prior to the closing date. The effects on earnings
per share and number of shares to be issued in the merger if the
average Borg-Warner Automotive stock price were to equal $40.00 per
share, $50.00 per share or $60.00 per share are shown in the table
below.
<TABLE>
<CAPTION>
EARNINGS PER SHARE
Borg-Warner Number ------------------------ ------------------------ -----------------------
Automotive of Shares For the year ended For the nine months For the nine months
Price (thousands) 12/31/97 ended 9/30/98 ended 09/30/97
--------------- -------------- ------------------------ ------------------------ -----------------------
Basic Diluted Basic Diluted Basic Diluted
--------------- -------------- ----------- ------------ ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$40.00 3,750 $3.83 $3.79 $2.60 $2.59 $2.79 $2.77
$50.00 3,000 $3.93 $3.90 $2.68 $2.66 $2.87 $2.85
$60.00 2,500 $4.01 $3.97 $2.73 $2.71 $2.93 $2.90
</TABLE>
Interest expense on acquisition borrowings has been calculated at rates
in effect for the periods presented in the pro forma consolidated
statements of operations. These rates were 6.8% for the year ended
December 31, 1997, 6.4% for the nine months ended September 30, 1998
and 6.8% for the nine months ended September 30, 1997.
(3) The adjustment to eliminate the Kuhlman corporate headquarters expense
reflects the cost of operating Kuhlman's executive and administrative
offices in Savannah, Georgia, which will be closed upon completion of
the merger. A one-time charge to close the headquarters office is
included in the aggregate purchase price.
(4) The tax effect adjustment accounts for the tax effects of the various
other adjustments, using a domestic marginal rate, where applicable.
Amortization of goodwill arising from the merger is not deductible for
U. S. income tax purposes.
Page 13 of 13
