SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
-----------------------
Date of Report
(Date of earliest
event reported): August 2, 1999
A. O. Smith Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-475 39-0619790
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
P.O. Box 245009, Milwaukee, Wisconsin 53224-9509
(Address of principal executive offices, including zip code)
(414) 359-4000
(Registrant's telephone number)
1
<PAGE>
A. O. Smith Corporation (the Company) hereby amends Item 7 of the Company's
Current Report on Form 8-K dated August 2, 1999, reporting the Company's
acquisition of substantially all of the assets of the motors business (the
Motors Business) of MagneTek, Inc. (MagneTek) to include the requisite
historical financial statements of the Motors Business and pro forma financial
statements of the Company. The complete text of Item 7 as amended is as follows:
Item 7 - Financial Statements, Pro Forma Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Financial statements of MagneTek's Motors Business are included as follows:
As of June 30, 1999, and for the year ended June 30, 1999.
o Report of Independent Auditors
o Combined Statement of Assets, Liabilities and Parent Company
Investment
o Combined Statement of Revenues, Expenses and Parent Company
Investment
o Combined Statement of Cash Flows
o Notes to Combined Financial Statements
(b) Pro Forma Financial Information
Pro forma financial statements of A. O. Smith Corporation are included as
follows:
Pro Forma Condensed Consolidated Financial Statements
o Condensed Consolidated Balance Sheet as of June 30, 1999, and related
notes
o Condensed Consolidated Statements of Earnings for the year ended
December 31, 1998 and six months ended June 30, 1999, and related
notes
(c) Exhibits
The exhibits listed in the accompanying Exhibit Index are filed as part of
this Current Report on Form 8-K.
2
<PAGE>
Report Of Independent Auditors
The Board of Directors
MagneTek, Inc.
We have audited the accompanying combined statement of assets, liabilities and
parent company investment of the Motors Business of MagneTek, Inc. as of June
30, 1999, and the related combined statement of revenues, expenses and parent
company investment and cash flows for the year ended June 30, 1999. These
financial statements are the responsibility of MagneTek, Inc.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the Motors Business of
MagneTek, Inc. as of June 30, 1999, and the combined results of its operations
and its cash flows for the year then ended in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
September 24, 1999
3
<PAGE>
MagneTek, Inc. Motors Business
Combined Statement of Assets, Liabilities and
Parent Company Investment
June 30, 1999
(Dollars in Thousands)
Assets
Current assets:
Cash $ 6,049
Trade receivables, net of allowance for
doubtful accounts of $2,417 63,739
Receivable from affiliated companies 5,165
Inventories 58,743
Other current assets 2,330
-----------------
Total current assets 136,026
Property, plant and equipment, net 66,215
Goodwill, net 10,195
Other assets 40
-----------------
Total assets $212,476
=================
Liabilities and parent company investment
Current liabilities:
Accounts payable $ 23,433
Payable to affiliated companies 7,013
Accrued payroll and benefits 7,407
Accrued warranty 4,511
Accrued income taxes 594
Other accrued liabilities 3,874
-----------------
Total current liabilities 46,832
Deferred income taxes 45
Commitments and contingencies (Note 6)
Parent company investment 165,599
-----------------
Total liabilities and parent company investment $212,476
=================
See accompanying notes which are an integral part of these statements.
4
<PAGE>
MagneTek, Inc. Motors Business
Combined Statement of Revenues, Expenses and
Parent Company Investment
For the year ended June 30, 1999
(Dollars in Thousands)
Net sales $382,086
Cost of products sold 315,193
-----------------
Gross profit 66,893
Selling, general and administrative expenses 45,530
Research and development expenses 2,331
Parent company allocations:
Interest expense 12,019
Other expense 12,426
-----------------
Loss before income taxes (5,413)
Income tax benefit (1,732)
-----------------
Net loss (3,681)
Parent company investment, beginning of year 156,060
Parent company investment activity, net 13,220
-----------------
Parent company investment, end of year $165,599
=================
See accompanying notes which are an integral part of these statements.
5
<PAGE>
MagneTek, Inc. Motors Business
Combined Statement of Cash Flows
For the year ended June 30, 1999
(Dollars in Thousands)
Operating activities
Net loss $ (3,681)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 13,042
Changes in other operating items:
Trade receivables (4,028)
Receivable from affiliated companies 3,073
Inventories (3,891)
Other current assets (722)
Accounts payable (4,775)
Payable to affiliated companies 4,944
Accrued liabilities (47)
-----------------
Net cash provided by operating activities 3,915
Investing activities
Capital expenditures (14,854)
Financing activities
Increase in Parent company investment 13,220
-----------------
Net increase in cash 2,281
Cash at beginning of year 3,768
-----------------
Cash at end of year $ 6,049
=================
See accompanying notes which are an integral part of these statements.
6
<PAGE>
MagneTek, Inc. Motors Business
Notes to Combined Financial Statements
June 30, 1999
1. Basis of Presentation
The accompanying combined financial statements present, on a historical cost
basis, the assets, liabilities, revenues and expenses related to the motors
business (the Motors Business) of MagneTek, Inc. (MagneTek). The Motors Business
consists of those assets and liabilities of MagneTek located in the United
States used in the production and sale of electric motors and the operations of
six wholly-owned subsidiaries of MagneTek located in Hungary, Mexico, the United
Kingdom, Canada, Singapore and the Netherlands. On June 28, 1999, MagneTek
entered into an Asset Purchase Agreement with A. O. Smith Corporation (A. O.
Smith or the Company) for the sale of its Motors Business (see Note 7). Not
included in the purchase of the Motors Business, and therefore, excluded from
the accompanying combined financial statements, are the assets and liabilities
of the generator business of MagneTek, which were sold, effective as of April
26, 1999, to another company.
The financial information included herein includes certain allocations of
expenses based on historical data and/or management's estimates (see Note 2).
Therefore, the accompanying combined financial statements may not necessarily
reflect the combined financial position, results of operations or cash flows of
the Motors Business in the future, or the combined financial position, results
of operations or cash flows of the Motors Business had it existed as a separate,
stand-alone company during the period presented.
The Motors Business operates in one business segment, the design, manufacture,
sale and distribution of fractional, integral and direct current electric
motors, which are sold throughout the United States and several foreign
countries to a number of customers.
MagneTek uses a fifty-two, fifty-three week fiscal year which ends on the Sunday
nearest June 30. For clarity of presentation, the combined financial statements
are presented as if the year ended on June 30. All significant intercompany
accounts and transactions have been eliminated in the combined financial
statements.
7
<PAGE>
MagneTek, Inc. Motors Business
Notes to Combined Financial Statements (continued)
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the accompanying financial statements and notes.
Actual results could differ from those estimates.
Fair Values
The carrying amounts of cash, trade receivables and accounts payable
approximated fair value as of June 30, 1999.
Foreign Currency Translation
For all subsidiaries outside the United States with the exception of Mexico and
Hungary, the Motors Business uses the local currency as the functional currency.
For these operations, assets and liabilities are translated into U.S. dollars at
year-end exchange rates, and revenues and expenses are translated at
weighted-average exchange rates. Gains and losses from foreign currency
transactions are included in net earnings.
Inventory Valuation
Inventories are carried at lower of cost or market. Cost is determined on the
first in, first out method.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided over
the estimated useful lives of the respective assets principally on the
straight-line method. Interest costs capitalized totaled $426,000 for the year
ended June 30, 1999.
8
<PAGE>
MagneTek, Inc. Motors Business
Notes to Combined Financial Statements (continued)
2. Significant Accounting Policies (continued)
Goodwill
Goodwill, representing the excess of cost over net assets of businesses
acquired, is stated at cost and is amortized on a straight-line basis over 40
years. Accumulated amortization at June 30, 1999 totaled $3,253,000.
Amortization charged to operations totaled $375,000 for the year ended June 30,
1999.
Impairment of Long-Lived Assets
Property, plant and equipment and goodwill are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected undiscounted cash flows is less than the
carrying value of the related asset or group of assets, a loss is recognized for
the difference between the fair value and carrying value of the related asset.
Revenue Recognition
The Motors Business recognizes revenue upon shipment of product to the customer.
Parent Company Allocations
MagneTek has historically provided various services to the Motors Business,
including income tax, internal audit, employee benefits, legal, risk management,
strategic and treasury related services. Determination of the costs associated
with these services that relate directly to the Motors Business is not
practicable; accordingly, the amounts presented in the accompanying combined
financial statements related to these services reflect estimates, which
management of MagneTek believes were reasonable and appropriate in the
circumstances. Management of MagneTek does not believe that such estimates would
differ materially from actual amounts had it been practicable to specifically
identify such actual amounts.
In addition to the above allocations, interest expense in the accompanying
combined financial statements is allocated to the Motors Business based on the
proportionate share of the debt incurred by MagneTek on behalf of the Motors
Business to MagneTek's total consolidated debt.
9
<PAGE>
MagneTek, Inc. Motors Business
Notes to Combined Financial Statements (continued)
2. Significant Accounting Policies (continued)
Research and Development
Research and development costs are charged to expense as incurred.
Derivative Instruments
MagneTek utilizes derivative financial instruments to reduce commodity and
financial market risks. Certain of these instruments are used to hedge copper
material purchases and foreign currency exposures of the Motors Business.
MagneTek does not use derivative financial instruments for speculative or
trading purposes.
3. Inventories
Inventories at June 30, 1999, consist of the following (dollars in thousands):
Finished products $33,977
Work in process 14,736
Raw materials 10,030
------------------
$58,743
==================
4. Property, Plant and Equipment
Property, plant and equipment at June 30, 1999, consist of the following
(dollars in thousands):
Land $ 796
Buildings and improvements 15,223
Machinery and equipment 149,706
------------------
165,725
Less accumulated depreciation (99,510)
------------------
$66,215
==================
10
<PAGE>
MagneTek, Inc. Motors Business
Notes to Combined Financial Statements (continued)
5. Income Tax
The domestic results of operations of the Motors Business have been included in
the consolidated federal income tax returns of MagneTek and all domestic income
tax payments have been made by MagneTek. The income tax benefit of the Motors
Business for the year ended June 30, 1999 has been determined using the overall
effective income tax rate of MagneTek for its year ended June 30, 1999. Deferred
income tax assets and liabilities related to the temporary differences of the
domestic Motors Business are recorded by MagneTek and are not included in the
accompanying combined financial statements.
6. Commitments and Contingencies
Pension and Other Postretirement Benefits
Substantially all domestic salaried and hourly employees of the Motors Business
are covered by defined-benefit retirement plans and health care plans sponsored
by MagneTek. Liabilities in connection with such employee benefits are not
included in the accompanying combined financial statements.
In connection with the sale of the Motors Business to A. O. Smith (see Note 7),
A. O. Smith will provide the transferred employees with identical pension
benefits. A determination shall be made of the accrued benefits and related
assets of the transferred employees. A. O. Smith shall pay MagneTek for any
excess of allocated assets over accrued benefits or MagneTek shall pay A. O.
Smith for any excess of accrued benefits over allocated assets of the
transferred employees. Such determination has not yet been performed.
A. O. Smith assumed liability for retiree health care benefits in respect of the
transferred employees who were employees of the Motors Business prior to January
1, 1992.
Certain employees of the Motors Business participate in a defined-contribution
savings plan sponsored by MagneTek. In connection with the sale of the Motors
Business, A. O. Smith will provide the transferred employees with identical
benefits.
11
<PAGE>
MagneTek, Inc. Motors Business
Notes to Combined Financial Statements (continued)
6. Commitments and Contingencies (continued)
Leases
The Motors Business leases certain facilities and machinery and equipment
primarily under operating lease arrangements. Rent expense for the year ended
June 30, 1999 totaled $3.4 million. Future minimum payments under noncancelable
operating leases as of June 30, 1999, total $13.7 million and are payable in
future fiscal years as follows: in 2000-$2.8 million; in 2001-$2.0 million; in
2002-$1.9 million; in 2003-$1.9 million; in 2004-$1.9 million and
thereafter-$3.2 million.
Environmental and Legal Matters
Prior to its purchase by MagneTek in 1986, Century Electric, Inc. (Century
Electric), the former parent of the Motors Business, acquired a business from
Gould Inc. (Gould) in May 1983 which included a leasehold interest in a
fractional horsepower electric motor manufacturing facility located in
McMinnville, Tennessee. In connection with this acquisition, Gould agreed to
indemnify Century Electric from and against liabilities and expenses arising out
of the handling and cleanup of certain waste materials, including but not
limited to cleaning up any PCBs at the McMinnville facility (the 1983
Indemnity). Investigation has revealed the presence of PCBs and other
substances, including solvents, in portions of the soil and in the groundwater
underlying the facility and in certain offsite soil, sediment and biota samples.
Century Electric has kept the Tennessee Department of Environment and
Conservation, Division of Superfund, apprised of test results from the
investigation. The McMinnville plant has been listed as a Tennessee inactive
hazardous substance site, a report on that site has been presented to the
Tennessee legislature and community officials and plant employees have been
notified of the presence of contaminants as described above. In 1995, Gould
completed an interim remedial measure of excavating and disposing onsite soil
containing PCBs. Gould also conducted preliminary investigation and cleanup of
certain onsite and offsite contamination. The cost of any further investigation
and cleanup of onsite and offsite contamination cannot presently be determined.
Subsequent to year end, MagneTek sold its leasehold interest in the McMinnville
plant to A. O. Smith (see Note 7) and believes that the costs for further onsite
and offsite cleanup (including ancillary costs) are covered by the 1983
Indemnity. While MagneTek believes that Gould will continue to perform
substantially under its indemnity obligations, Gould's substantial failure to
perform such obligations could have a material adverse effect on the Motors
Business.
12
<PAGE>
MagneTek, Inc. Motors Business
Notes to Combined Financial Statements (continued)
6. Commitments and Contingencies (continued)
Due to the nature of its business, the Motors Business has been exposed to other
potential liabilities related to environmental matters. In addition, the Motors
Business is involved in legal proceedings during the ordinary course of
business. In the opinion of management of MagneTek, other than the above
environmental matter in McMinnville, Tennessee, such environmental and legal
matters are not expected to have a material impact on the Motors Business'
future operating results or financial position.
7. Subsequent Event
On August 2, 1999, MagneTek sold the Motors Business to A. O. Smith for $253
million subject to certain post closing adjustments. The sale was made pursuant
to an Asset Purchase Agreement between MagneTek and A. O. Smith dated June 28,
1999.
13
<PAGE>
A. O. Smith Corporation
Pro Forma Condensed Consolidated
Financial Statements
(Unaudited)
The following unaudited pro forma condensed consolidated balance sheet and
statements of earnings (collectively, the Pro Forma Statements) were prepared to
illustrate the estimated effects of the acquisition (the Acquisition) of
substantially all of the assets of the motors business (the Motors Business) of
MagneTek, Inc. (MagneTek) by A. O. Smith Corporation (the Company), as if the
acquisition had occurred for balance sheet presentation purposes as of June 30,
1999, and for statement of earnings purposes as of the beginning of the
respective periods presented.
The Pro Forma Statements do not purport to represent what the Company's
financial position or results of operations would actually have been if the
Acquisition in fact had occurred as of June 30, 1999, or as of the beginning of
the periods indicated, or to project the Company's financial position or results
of operations for any future date or period.
The pro forma adjustments are based upon available information and upon certain
assumptions that the Company believes are reasonable. The Pro Forma Statements
and accompanying notes should be read in conjunction with the historical
consolidated financial statements of the Company, including the notes thereto.
The Acquisition will be accounted for using the purchase method of accounting.
The total purchase price of $253 million will be allocated to the assets and
liabilities of the Motors Business based upon their respective fair values, with
the remainder allocated to goodwill. For purposes of the Pro Forma Statements,
such allocation has been made based upon valuations and other studies, which may
be subject to adjustment. Accordingly, the allocation of the purchase price
included in the accompanying Pro Forma Statements is preliminary. The final
values may differ from those set forth in the historical consolidated financial
statements of the Company and from those set forth herein.
14
<PAGE>
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 1999
(Dollars in Thousands)
<TABLE>
<CAPTION>
Historical
--------------------------------
The Motors Pro Forma
Company Business Adjustments Pro Forma
-----------------------------------------------------------------------
Assets
Current assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 31,703 $ 6,049 $ (35,944)(1,2) $ 1,808
Receivables 165,335 68,904 (5,165)(3) 229,074
Inventories 102,392 58,743 400 (1) 161,535
Deferred income taxes 10,343 - - 10,343
Other current assets 5,932 2,330 - 8,262
-----------------------------------------------------------------------
Total current assets 315,705 136,026 (40,709) 411,022
Net property, plant and equipment 254,482 66,215 14,652 (1) 335,349
Goodwill and other intangibles 147,827 10,195 97,597 (1,4) 255,619
Other assets 89,974 40 - (1,5) 90,014
-----------------------------------------------------------------------
Total assets $807,988 $212,476 $ 71,540 $1,092,004
=======================================================================
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated balance
sheet.
15
<PAGE>
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 1999
(Dollars in Thousands)
<TABLE>
<CAPTION>
Historical
--------------------------------
The Motors Pro Forma
Company Business Adjustments Pro Forma
-----------------------------------------------------------------------
Liabilities and stockholders' equity
Current liabilities:
<S> <C> <C> <C> <C>
Trade payables $ 83,223 $ 30,446 $ (7,013)(3) $ 106,656
Accrued payroll and benefits 28,255 7,407 - 35,662
Product warranty 7,749 4,511 - 12,260
Accrued income taxes 6,063 594 - 6,657
Long-term debt due within one year 4,629 - - 4,629
Other current liabilities 23,609 3,874 7,948 (1) 35,431
-----------------------------------------------------------------------
Total current liabilities 153,528 46,832 935 201,295
Long-term debt 131,212 - 223,000 (1) 354,212
Other liabilities 58,347 - 13,204 (1,5) 71,551
Deferred income taxes 47,286 45 - 47,331
Stockholders' equity:
Class A common stock 43,668 - - 43,668
Common stock 23,816 - - 23,816
Capital in excess of par value 51,434 - - 51,434
Retained earnings 519,434 - - 519,434
Accumulated other comprehensive
income (2,461) - - (2,461)
Treasury stock at cost (218,535) - - (218,535)
Parent company investment - 165,599 (165,599)(1-5) -
-----------------------------------------------------------------------
Total stockholders' equity 417,615 165,599 (165,599) 417,615
-----------------------------------------------------------------------
Total liabilities and stockholders' equity $ 807,988 $212,476 $ 71,540 $1,092,004
=======================================================================
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated balance
sheet.
16
<PAGE>
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
(Dollars in Thousands)
(1) On August 2, 1999, the Company acquired substantially all of the assets and
assumed certain liabilities of the Motors Business of MagneTek for $253
million. The Company funded the acquisition through available cash ($42
million), proceeds from the issuance of commercial paper ($103 million) and
borrowings under a revolving credit facility and available lines of credit
($108 million). The Acquisition will be accounted for by the Company using
the purchase method of accounting. The total purchase price will be
allocated to assets acquired and liabilities assumed of the Motors Business
based upon their respective fair values, with the remainder allocated to
goodwill. The aggregate purchase price and its preliminary allocation to
the assets and liabilities of the Motors Business are as follows:
Purchase price $252,944
Direct costs of acquisition 2,065
------------
Total purchase price $255,009
============
The total purchase price is allocated as follows:
Net assets acquired at historical cost $151,547
Revaluation of inventories 400
Adjustment of property, plant and equipment to
estimated fair values 14,652
Intangible assets, including assembled workforce
and customer lists 13,554
Current liabilities established in connection
with the Acquisition (7,948)
Long-term liabilities established in connection
with the Acquisition (11,434)
Excess purchase price over net assets acquired
allocated to goodwill 94,238
------------
Total purchase price $255,009
============
(2) To eliminate $3,935 in domestic cash of the Motors Business, which was
excluded from the Acquisition purchase transaction.
(3) To eliminate receivable and payable balances due from/to affiliated
companies at June 30, 1999.
(4) To eliminate recorded goodwill of $10,195 of the Motors Business at June
30, 1999.
(5) Represents the assumed liability of $1,770 for retiree health care benefits
in respect of the transferred employees who were employees of the Motors
Business prior to January 1, 1992, which was included on the MagneTek
financial statements at June 30, 1999. No amounts have been accrued for
pension related benefits.
17
<PAGE>
Unaudited Pro Forma Condensed Consolidated
Statement of Earnings
Year ended December 31, 1998
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Historical
--------------------------------
The Motors Pro Forma
Company Business Adjustments Pro Forma
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $917,569 $382,086 $ - $1,299,655
Cost of products sold 730,543 315,193 1,080 (1) 1,046,816
-----------------------------------------------------------------------
Gross profit 187,026 66,893 (1,080) 252,839
Selling, general and administrative
expenses 106,622 47,861 2,625 (1) 157,108
Interest expense 6,887 10,990 1,200 (2) 19,077
Interest income (3,828) - 2,200 (3) (1,628)
Other expense - net 4,382 - - 4,382
Parent company allocations - 5,345 - 5,345
-----------------------------------------------------------------------
72,963 2,697 (7,105) 68,555
Provision for income taxes 25,283 863 (2,357)(4) 23,789
-----------------------------------------------------------------------
Earnings before equity in loss of joint
ventures 47,680 1,834 (4,748) 44,766
Equity in loss of joint ventures (3,189) - - (3,189)
-----------------------------------------------------------------------
Net earnings $ 44,491 $ 1,834 $ (4,748) $ 41,577
=======================================================================
Net earnings per share of common stock:
Basic $ 1.89 $ 1.77
Diluted $ 1.84 $ 1.72
============= =============
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated statements
of earnings.
18
<PAGE>
Unaudited Pro Forma Condensed Consolidated
Statement of Earnings
Six Months ended June 30, 1999
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Historical
--------------------------------
The Motors Pro Forma
Company Business Adjustments Pro Forma
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $520,106 $201,580 $ - $721,686
Cost of products sold 415,847 168,511 540 (1) 584,898
-----------------------------------------------------------------------
Gross profit 104,259 33,069 (540) 136,788
Selling, general and administrative
expenses 56,966 24,099 1,315 (1) 82,380
Interest expense 4,499 5,880 756 (2) 11,135
Interest income (554) - 554 (3) -
Other expense - net 3,539 - - 3,539
Parent company allocations - 9,350 - 9,350
-----------------------------------------------------------------------
39,809 (6,260) (3,165) 30,384
Provision for (benefit from) income taxes 14,492 (2,003) (1,429)(4) 11,060
-----------------------------------------------------------------------
Net earnings (loss) $25,317 $ (4,257) $ (1,736) $ 19,324
=======================================================================
Net earnings per share of common stock:
Basic $ 1.09 $ 0.83
Diluted $ 1.07 $ 0.82
============= =============
</TABLE>
See accompanying notes to unaudited pro form condensed consolidated statements
of earnings.
19
<PAGE>
Notes to Unaudited Pro Forma Condensed
Consolidated Statements of Earnings
(Dollars in Thousands)
(1) Represents adjustments to cost of products sold and selling, general and
administrative expenses which are comprised of the following:
Year ended Six Months
December 31, ended June 30,
1998 1999
---------------------------
Depreciation of property, plant and equipment(a)
Cost of products sold $ 9,720 $ 4,860
Selling, general and administrative expenses 1,080 540
Elimination of historical depreciation of
property, plant and equipment
Cost of products sold (8,640) (4,320)
Selling, general and administrative expenses (960) (480)
Amortization of identified intangible assets (b) 730 365
Amortization of goodwill (c) 2,150 1,075
Elimination of historical amortization of goodwill (375) (185)
(a) The valuation of property, plant and equipment is based on preliminary
estimates of the fair values of such assets and is subject to change.
Depreciation is computed over the remaining estimated useful lives of
the respective assets. The useful lives of assets acquired have been
conformed to the useful lives used by the Company.
(b) Approximately $10.2 million of the purchase price has been allocated
to identifiable intangible assets. Amortization of such intangible
assets is based on lives which are expected to range from 10 to 25
years.
(c) Amortization of goodwill is based on a useful life of 40 years. The
allocation of the purchase price in excess of net assets acquired will
differ from that set forth herein upon finalization of detailed
valuations and other studies. The amount of the goodwill amortization
is an estimate and is subject to change upon finalization of the
allocation of such excess. It is not expected that the final
allocation of the purchase price will differ materially from that
presented herein.
(2) Represents incremental interest expense based upon the pro forma debt of
the Company following the Acquisition, at interest rates ranging from 5.66%
to 5.89%, as if the Acquisition had been consummated as of the beginning of
the periods presented.
20
<PAGE>
Notes to Unaudited Pro Forma Condensed
Consolidated Statements of Earnings
(Dollars in Thousands)
(3) Elimination of interest income as a result of the use of $43 million of
available cash to fund a portion of the purchase price.
(4) Represents adjustment to the provision for income taxes on a pro forma
basis to reflect the Company's effective tax rate of 34.7% for the year
ended December 31, 1998 and 36.4% for the six months ended June 30, 1999.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: October 18, 1999
A. O. Smith Corporation
By /s/W. David Romoser
-----------------------------
Vice President, General
Counsel and Secretary
22
<PAGE>
A. O. SMITH CORPORATION
Exhibit Index to Current Report on Form 8-K
Dated August 2, 1999
Exhibit
Number Description
- ------ ------------
(2) Asset Purchase Agreement, dated as of June 28, 1999, among MagneTek,
Inc., MagneTek, Service (U.K.) Limited and A. O. Smith Corporation.
[Previously filed with this Current Report on Form 8-K]
(23) Consent of Independent Auditors
23
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 2-72542, 33-19015, 33-21356, 33-37878, 33-56827 and 333-05799)
pertaining to the 1980 Long-Term Executive Incentive Compensation Plan and the
1990 Long-Term Executive Incentive Compensation Plan of A. O. Smith Corporation
and in the related prospectuses of our report dated September 24, 1999, with
respect to the combined financial statements of MagneTek, Inc. Motors Business
included in this Current Report on Form 8-K/A dated October 18, 1999.
/s/Ernst & Young LLP
Milwaukee, Wisconsin
October 14, 1999
