<PAGE>
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
Date of Report (Date of earliest event reported) December 12, 1997 (December 2,
1997)
CULLIGAN WATER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
--------------------
Delaware 51-0350629
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Culligan Parkway 60062
Northbrook, Illinois (Zip Code)
(Address of principal
executive offices)
Registrant's telephone number, including area code: (847) 205-6000
--------------------
<PAGE>
As previously reported in the Registrant's Current Report on Form 8-K dated
December 12, 1997, on December 2, 1997, the Registrant declared its recommended
cash offer to acquire all of the outstanding shares of Protean plc, a United
Kingdom corporation ("Protean"), unconditional in all respects. As of December
2, 1997, the Registrant owned or had received valid acceptances for an aggregate
of 97.9% of Protean's outstanding shares. Subsequent thereto the Registrant
acquired the remaining outstanding shares of Protean in accordance with United
Kingdom law and Protean has become an indirect wholly-owned subsidiary of the
Registrant. In connection with such acquisition, Item 7 of the Registrant's
Current Report on Form 8-K dated December 12, 1997 is hereby amended and
restated as set forth below:
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired
Index to Consolidated Financial Statements;
Independent Auditors' Report;
Consolidated Balance Sheet as of March 31, 1997;
Consolidated Profit and Loss Account for the year ended March 31, 1997;
Consolidated Cash Flow Statement for the year ended March 31, 1997;
Reconciliation of Net Cash Flow to Movement in Net Debt for the year ended
March 31, 1997;
Consolidated Statement of Total Recognised Gains and Losses for the year
ended March 31, 1997;
Reconciliation of Movements in Shareholders' Funds for the year ended
March 31, 1997;
Note of Consolidated Historic Cost Profits and Losses for the year ended
March 31, 1997;
Notes to the Consolidated Financial Statements.
(b) Pro Forma financial information
Unaudited Pro Forma Combined Balance Sheet as of October 31, 1997;
Unaudited Pro Forma Combined Statement of Operations for the fiscal
2
<PAGE>
year ended March 31, 1997 and the nine months ended December 31, 1997;
and
Notes to Unaudited Pro Forma Combined Financial Information.
(c) Exhibits
Exhibit 23.01 Consent of KPMG Peat Marwick LLP
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.
CULLIGAN WATER TECHNOLOGIES, INC.
Date: February 17, 1998 ..........................................
Michael E. Salvati
Vice President and Chief Financial Officer
3
<PAGE>
Protean Plc
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report F-2
Consolidated Balance Sheet................................... F-3
Consolidated Profit and Loss Account......................... F-4
Consolidated Cash Flow Statement............................. F-5
Reconciliation of Net Cash Flow to Movement in Net Debt...... F-5
Consolidated Statement of Total Recognised Gains and Losses.. F-6
Reconciliation of Movements in Shareholders' Funds........... F-6
Note of Consolidated Historic Cost Profits and Losses........ F-6
Notes to the Consolidated Financial Statements............... F-7
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the members of Protean plc:
We have audited the accompanying consolidated balance sheet of Protean plc as of
31 March 1997 and the related consolidated profit and loss account, cash flow
statement, reconciliation of net cash flow to movement in net debt, statement
of total recognised gains and losses, reconciliation of movements in
shareholders' funds, and note of consolidated historical cost profits and losses
for the year ended 31 March 1997. These consolidated financial statements are
the responsibility of the management of Protean plc. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United Kingdom which do not differ in any material respects from auditing
standards generally accepted in the United States. Those standards require that
we plan and perform our 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Protean plc and its
subsidiaries as of 31 March 1997 and the results of their operations and their
cash flows for the year ended 31 March 1997 in conformity with generally
accepted accounting principles in the United Kingdom.
Generally accepted accounting principles in the United Kingdom vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would have affected results of operations for year ended 31 March 1997
and shareholders' funds as of 31 March 1997 to the extent summarised in note 28
to the consolidated financial statements.
KPMG Audit Plc
Chartered Accountants and Registered Auditor
London
12 June 1997, except for note 27
which is as of 2 December 1997
F-2
<PAGE>
Protean Plc
Consolidated Balance Sheet
as at 31 March 1997
<TABLE>
<CAPTION>
Notes 1997
(Pounds)000
<S> <C> <C>
Fixed assets
Tangible assets 10 9,081
Current assets
Stocks 11 12,936
Debtors 12 21,855
Cash deposits as security for Loan Notes 400
Cash at bank and in hand 6,356
-------
41,547
Creditors: Amounts falling due within one year 13 (27,464)
-------
-------
Net current assets 14,083
-------
Total assets less current liabilities 23,164
Creditors: Amounts falling due after more
than one year 14 (6,487)
Provisions for liabilities and charges 15 (1,127)
-------
-------
Net assets 15,550
=======
Capital and reserves
Called up share capital 16 2,190
Share premium account 17 13,046
Revaluation reserve 17 206
Capital reserve 10
Profit and loss account 17 98
-------
Shareholders' equity 15,550
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Protean Plc
Consolidated Profit and Loss Account
for the year ended 31 March 1997
<TABLE>
<CAPTION>
Notes 1997
(Pounds)000
<S> <C> <C>
Turnover
Continuing operations 2 75,978
Acquisitions 2 5,163
-------
Total continuing operations 81,141
Operating costs before exceptional item:
Continuing operations 3 (66,602)
Acquisitions 3 (4,068)
Exceptional item:
Continuing operations: reorganisation costs 4 (1,324)
-------
Total operating costs (71,994)
Operating profit
Continuing operations 2 8,052
Acquisitions 2 1,095
-------
Total operating profit 9,147
Net interest payable 6 (406)
-------
Profit on ordinary activities before taxation 8,741
Tax on profit on ordinary activities 7 (3,033)
-------
Profit for the financial year 5,708
Dividends paid and proposed 8 (2,890)
-------
Retained profit for the financial year 2,818
=======
Earnings per share 9 13.3p
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Protean Plc
Consolidated Cash Flow Statement
for the year ended 31 March 1997
<TABLE>
<CAPTION>
Notes 1997
(Pounds)000
<S> <C> <C>
Net cash inflow from operating activities 22 9,992
Returns on investments and servicing of
finance 23 (105)
Taxation (3,484)
Capital expenditure 23 (1,430)
------
4,973
Acquisitions and disposals 23 (9,599)
Equity dividends paid (2,781)
------
Cash outflow before financing (7,407)
------
Financing-Issue of shares 23 5,140
-Increase in loans and finance leases 23 4,505
------
9,645
------
Increase in cash in the period 2,238
======
</TABLE>
Reconciliation of Net Cash Flow to Movement in Net Debt
for the year ended 31 March 1997
<TABLE>
<CAPTION>
Notes 1997
(Pounds)000
<S> <C> <C>
Increase in cash in the period 2,238
Cash (inflow)/outflow from increase/decrease
in loans and finance leases 24 (4,505)
Release of Loan Note security deposit 24 (568)
------
Change in net debt resulting from cash flows 24 (2,835)
Loans acquired with subsidiaries 24 (554)
New finance leases 24 (13)
Translation difference 24 272
------
Movement in net debt in the period (3,130)
Net debt at 1 April 1996 24 (1,085)
------
Net debt at 31 March 1997 (4,215)
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Protean Plc
Consolidated Statement of Total Recognised Gains and Losses
for the year ended 31 March 1997
<TABLE>
<CAPTION>
Total
(Pounds)000
<S> <C>
Profit for the financial year 5,708
Currency translation difference on foreign
currency net investments (895)
------
Total recognised gains and losses in the period 4,813
======
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 March 1997
1997
(Pounds)000
Profit for the financial year 5,708
Dividends paid and proposed (2,890)
------
2,818
Other recognised gains and losses relating to
the year (net) (895)
Net share capital subscribed 5,140
Net goodwill written off (9,124)
------
Net (deduction)/addition to shareholders'
funds (2,061)
Opening shareholders' funds 17,611
------
Closing shareholders' funds 15,550
======
Note of Consolidated Historic Cost Profits and Losses
for the year ended 31 March 1997
1997
(Pounds)000
Reported and historical cost profit on ordinary activities
before taxation 8,741
======
Historical cost profit for the year retained after taxation
and dividends 2,818
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
Protean Plc
Notes to the Consolidated Financial Statements
(1) Accounting Policies
The principal accounting policies that have been adopted in the preparation of
these financial statements are given below:
Basis of preparation
The consolidated financial statements have been prepared in conformity with
accounting standards applicable in the United Kingdom, under the historical cost
accounting standards.
Accounting principles generally accepted in the United Kingdom vary in certain
respects from accounting principles generally accepted in the United States.
Application of accounting principles generally accepted in the United States
would have affected the results of operations for periods reported in the year
ended 31 March 1997 and the shareholders' funds at 31 March 1997 to the extent
summarised in note 28 to the consolidated financial statements.
Goodwill
Fair values are ascribed to assets and liabilities of subsidiary companies at
the dates of acquisition. Goodwill, which is the difference between the fair
value of the consideration and the fair value of the assets acquired is dealt
with through reserves in the year of acquisition.
On the subsequent disposal of a previously acquired business, the profit or loss
on disposal is calculated after charging any related goodwill previously taken
to reserves.
Turnover
Turnover comprises amounts charged by Group companies for goods and services
provided to customers and the for value carried out during the year, excluding
sales taxes and inter-company sales.
Depreciation
Depreciation is provided on a straight-line basis on all tangible fixed assets,
with the exception of land, at rates calculated to write off the cost or
valuation of each asset less estimated residual value over its expected useful
life. Leased assets are depreciated over the shorter of their useful life and
the term of the lease. The principal rates used are:
<TABLE>
<CAPTION>
<S> <C>
Freehold and long leasehold buildings 2-4%
Fixtures, fittings and equipment 10-20%
Plant and machinery 10-20%
Computer equipment 20-33%
Motor vehicles 25%
</TABLE>
Leases
Tangible fixed assets include assets operated by the Group under finance leases
and hire purchase contracts where the Group has substantially all the risks and
rewards of ownership of the asset. Correspondingly, creditors shown in the
balance sheet include the commitment for the capital element of future lease or
hire purchase payments. The finance element of lease or hire purchase payments
is charged to the profit and loss account over the term of the lease or the hire
purchase contract.
All other leases are treated as operating assets and payments are charged to the
profit and loss account as they are incurred.
F-7
<PAGE>
Protean Plc
Notes to the Consolidated Financial Statements - (Continued)
(1) Accounting Policies - (Continued)
Stocks
Stocks have been valued at the lower of cost and net realisable value. Cost
includes the cost of materials, labour and an appropriate proportion of
production overhead expenses.
Research and development
Research and development expenditure is written off against the profit and loss
account in the year in which it is incurred.
Taxation
The charge for taxation is based on the profits for the year and takes into
account taxation deferred because of timing differences between the treatment of
certain items for taxation and accounting purposes.
Provision is made for deferred taxation only to the extent that the Directors
consider that a liability will become payable in the foreseeable future. No
provision is made for any additional taxation that might arise should the
retained reserves of certain overseas companies be remitted to the United
Kingdom.
Deferred income
Amounts received from customers for vouchers entitling them to future services
are not credited to revenue until redemption or expiry of the vouchers. The
amount so deferred is calculated by reference to the issue price of the voucher.
Translation of foreign currencies
Assets and liabilities in foreign currencies are expressed in sterling at the
rates of exchange ruling at the end of the financial period. Gains or losses
arising on the translation of net assets of overseas companies, net of related
foreign currency borrowings are taken to reserves. Trading results of overseas
companies are translated into sterling at the average rates of exchange for the
period.
Transactions in foreign currencies are recorded at the rate of exchange at the
date of the transaction or, if hedged forward, at the rate of exchange under the
related forward currency contract. Differences arising between the transaction
date and the payment date are taken immediately to the profit and loss account.
Pension costs
The Group operates a number of pension schemes, covering the majority of
employees, under which contributions by eligible employees and the employing
companies are administered in funds independent from the companies' assets. The
regular cost of providing benefits is charged to profit so as to spread the cost
over the employee working lives on a systematic basis. Variations from regular
cost are spread over the remaining service lives of the employees.
F-8
<PAGE>
(2) Geographical analysis of turnover
<TABLE>
<CAPTION>
1997
By customer location (Pounds)000
<S> <C>
United Kingdom 29,427
France 10,985
Germany 9,177
Other Western Europe 11,139
USA and Canada 9,423
Asia and Far East 5,621
Others 5,369
------
81,141
======
</TABLE>
<TABLE>
<CAPTION>
By operating location
Other
United Western Inter
Kingdom Europe USA Segment Total
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
Turnover
continuing operations 54,743 20,684 4,999 (4,448) 75,978
acquisitions -- -- 5,163 -- 5,163
-------------------------------------------------------------------------------------
Total turnover 54,743 20,684 10,162 (4,448) 81,141
Operating costs
continuing operations (46,888) (19,029) (5,133) 4,448 (66,602)
acquisitions -- (4,068) -- (4,068)
Exceptional item (1,324) (1,324)
Operating profit before interest
continuing operations 7,855 331 (134) -- 8,052
acquisitions -- -- 1,095 -- 1,095
-------------------------------------------------------------------------------------
Total operating profit before
interest 7,855 331 961 -- 9,147
-------------------------------------------------------------------------------------
Net operating assets 12,410 4,380 2,975 -- 19,765
-------------------------------------------------------------------------------------
</TABLE>
Net operating assets are stated before deducting net debt of
(Pounds)4,215,000 to give net assets of (Pounds)15,550,000
F-9
<PAGE>
(3) Operating costs before exceptional item
<TABLE>
<CAPTION>
1997 1997 1997
Continuing Acquisitions
operations
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Change in stocks of finished goods
and work in progress (219) 108 (111)
Raw materials and consumables 28,675 1,236 29,911
Staff costs (note 5) 24,310 1,688 25,998
Depreciation of fixed tangible assets:
owned 1,079 35 1,114
leased 230 -- 230
Amounts paid to KPMG Audit plc and its
associates:
As auditors 219 10 229
For non audit services 60 -- 60
Operating leases:
Plant and machinery 1,262 4 1,266
Land and buildings 877 7 884
Research and development 1,992 298 2,290
Other operating charges 8,117 682 8,799
------ ----- ------
66,602 4,068 70,670
====== ===== ======
</TABLE>
Group auditors: in addition to the above, (Pounds)61,000 and
(Pounds)139,000 were paid to the Group auditor and its associates in
respect of non audit services, which have been included in the cost of
acquisitions and exceptional item respectively.
(4) Exceptional item
The exceptional item represents reorganisation costs incurred in respect of
DWA GmbH & Co. KG totalling (Pounds)1,324,000, and consists of redundancies
and professional and consultancy assistance in Germany, together with stock
wrtie downs and other provisions.
(5) Employees and Directors
The average number of employees during the year was as follows:
<TABLE>
<CAPTION>
1997
(Pounds)000
<S> <C>
Production 600
Sales and administration 537
-----
1,137
-----
Staff (including Directors) costs were (Pounds)000
as follows:
Wages and salaries 22,191
Social security costs 2,932
Other pension costs 875
-----
25,998
======
</TABLE>
F-10
<PAGE>
(5) Employees and Directors - (Continued)
The emoluments of the directors, including 1997
pension contributions were as follows: (Pounds)000
Basic remuneration 506
Performance related bonuses -
Pension contributions and benefits in kind 93
-----
599
=====
Included in the above is (Pounds)14,500 paid to the management service
company of a director for the provision of his services.
The aggregate emoluments of the highest paid Director were
(Pounds)139,828. He is a member of a defined benefit pension scheme, under
which his accrued pension entitlement at 31 March 1997 was (Pounds)66,096.
(6) Net interest payable
1997
(Pounds)000
Interest payable on loans and other borrowings:
Bank loans and overdrafts 645
Other loans 154
Finance leases 9
-----
808
Interest receivable (402)
-----
406
=====
(7) Tax on profit on ordinary activities
1997
(Pounds)000
UK corporation tax at 33% 2,783
Under-provision in prior years charges 104
Overseas corporate taxation 232
Deferred taxation (86)
-----
3,033
=====
The taxation charge for the water division includes a tax credit in
respect of the exceptional item of (Pounds)542,000.
(8) Dividends paid and proposed
1997
(Pounds)000
Interim (paid): 1.60p per share 700
Final (proposed): 5.00p per share 2,190
-----
2,890
=====
F-11
<PAGE>
(9) Earnings per share
Earnings per share is calculated by dividing the profit after taxation
attributable to ordinary shareholders of (Pounds)5,708,000 by the weighted
average number of shares in issue during the year, 42,968,438. The fully
diluted earnings per share is not materially different from the basic
earnings per share.
(10) Tangible fixed assets
<TABLE>
<CAPTION>
Fixtures,
Land and fittings an Plant and
buildings equipment machinery Total
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Cost or valuation
1 April 1996 5,201 4,417 7,124 16,742
Currency translation (218) (244) (191) (653)
Subsidiary acquired 613 83 194 890
Additions 90 747 889 1,726
Disposals - (54) (364) (418)
-----------------------------------------------------------
31 March 1997 5,686 4,949 7,652 18,287
===========================================================
Depreciation
1 April 1996 564 3,118 4,738 8,420
Currency translation (14) (174) (115) (303)
Charge for the year 166 444 734 1,344
Disposals - (30) (225) (255)
-----------------------------------------------------------
31 March 1997 716 3,358 5,132 9,206
===========================================================
Net book value -----------------------------------------------------------
31 March 1997 4,970 1,591 2,520 9,081
===========================================================
</TABLE>
(11) Stocks
<TABLE>
<CAPTION>
1997
(Pounds)000
<S> <C>
Raw materials and consumable 6,647
Work in progress 2,208
Finished goods 4,081
------
12,936
======
</TABLE>
F-12
<PAGE>
(12) Debtors
<TABLE>
<CAPTION>
1997
(Pounds)000
<S> <C>
Trade debtors 17,233
Amounts recoverable on contracts 794
Other debtors 1,879
Prepayments 878
Corporation tax recoverable 1,071
------
21,855
======
</TABLE>
Debtors at 31 March 1997 are all due within one year with the exception of
(Pounds)555,000 consisting of taxation recoverable and other debtors.
(13) Creditors: Amounts falling due within one year
<TABLE>
<CAPTION>
1997
(Pounds)000
<S> <C>
Loan notes 1993/2000 2,202
Bank loans and overdrafts 2,266
Payments on account 566
Trade creditors 7,237
Other creditors including taxation and
social security 7,369
Accruals 4,145
Deferred income 1,473
Finance lease obligations 16
Dividends payable 2,190
------
27,464
======
</TABLE>
The loan notes 1993/2000 are unsecured and:
a) are guaranteed by Midland Bank plc;
b) are wholly or partly redeemable at certain dates in any year, but
no later than 11 December 2000;
c) carry a floating interest rate linked to Midland Bank base rate.
Cash deposits of (Pounds)400,000 are held by Midland Bank plc as security
for certain of their guarantees and this has been separately disclosed in
the Group Balance Sheet and the analysis of net debt (Note 24)
F-13
<PAGE>
(14) Creditors: Amounts falling due after more than one year
<TABLE>
<CAPTION>
Total
(POUND)000
<S> <C>
Bank loans 6,464
Finance lease obligations 23
----------
6,487
</TABLE>
Interest rates are set by reference to prevailing bank base rates.
Borrowings are repayable by instalments as follows:
<TABLE>
<CAPTION>
Bank Finance
loans leases
(POUND)000 (POUND)000
<S> <C> <C>
In less than one year 1,385 16
Between one and two years 1,528 8
Between two and five years 4,438 15
After five years 498 -
------------------------
7,849 39
========================
</TABLE>
Bank loans and overdrafts totalling (POUND)1,043,000 are secured on certain
assets in subsidiaries of the water group.
(15) Provisions for liabilities and charges
<TABLE>
<CAPTION>
Warranty Pension Deferred
provision provision taxation Total
(POUND)000 (POUND)000 (POUND)000 (POUND)000
<S> <C> <C> <C> <C>
1 April 1996 950 98 215 1,263
Currency translation (87) (8) (11) (106)
Transfer to profit and loss account (95) (11) (86) (192)
Subsidiaries acquired 189 - - 189
Movement on ACT recoverable - - (27) (27)
---------------------------------------------
957 79 91 1,127
=============================================
</TABLE>
Deferred taxation is made up as follows:
<TABLE>
<CAPTION>
Provided Full
potential
liability
(POUND)000 (POUND)000
<S> <C> <C>
Surplus on property valuation - 23
Accelerated capital allowances 310 310
Short term timing differences (47) (47)
---------------------------
263 286
Less ACT recoverable (172) ==========
--------------
91
==============
</TABLE>
F-14
<PAGE>
(16) Called up share capital
<TABLE>
<CAPTION>
<S> <C> <C>
Authorised (Pound)000
56,500,000 Ordinary 5p shares 2,825
----------
Issued and fully paid Ordinary 5p shares: Number (Pound)000
1 April 1996 41,608,535 2,080
Issued during the year
Share options exercised 110,273 6
Share placing 2,080,420 104
------------------------
31 March 1997 43,799,228 2,190
========================
</TABLE>
Shares were issued by way of a public placing on 21 August 1996 at a value
of 245p per ordinary share (market price 257p).
At 31 March 1997 there were outstanding options in respect of the following
Protean Share Option Schemes:
<TABLE>
<CAPTION>
Outstanding Exercise dates Exercise
options prices
<S> <C> <C> <C>
Directors' Share Option Scheme 97,500 July 2000-July 2006 260p
Group Share Option Plan 145,250 July 1999-July 2006 260p
Executive Share Option Plan 605,945 June 1990-July 2005 70p-192p
Savings Related Share Option Plan 566,445 October 1997-January 2002 97p-209p
</TABLE>
(17) Reserves
<TABLE>
<CAPTION>
Share Revaluation Profit and
premium reserve loss
account account
(Pound)000 (Pound)000 (Pound)000
<S> <C> <C> <C>
1 April 1996 8,016 261 7,244
Currency translation - - (895)
Retained profit for the year - - 2,818
Shares issued 4,993 - -
Share issue expenses (49) - -
Share options exercised 86 - -
Goodwill arising on acquisitions - - (9,124)
Transfer - (55) 55
---------------------------------------
13,046 206 98
=======================================
</TABLE>
(18) Contingent Liabilities
Guarantees and bonds totalling (Pound)2,235,000 had been given as at 31
March 1997 in the normal course of business.
The Company has provided cross guarantees in respect of the bank facilities
of certain subsidiary undertakings.
Under the terms of the acquisition of FTS Systems Inc, additional
consideration on a rising sale will be payable if the adjusted net
operating profit for FTS Systems for the two years ending 31 December 1997
exceeds US$5,750,000. The maximum additional consideration payable is
US$6,000,000 ((Pound)3,680,000) in cash.
F-15
<PAGE>
(19) Commitments
At 31 March 1997 capital expenditure contracted but not provided for in
these financial statements was (Pound)102,000.
(20) Operating leases
Payments under operating leases due to be made in the next year, analysed
over the periods when the leases expire, are as follows.
<TABLE>
<CAPTION>
Land and Buildings Other
1997 1997
(Pound)000 (Pound)000
<S> <C> <C>
Within one year 81 107
Between two and five years 268 489
After five years 442 1
---------- ----------
791 597
========== ==========
</TABLE>
(21) Purchase of subsidiary undertakings
<TABLE>
<CAPTION>
Book Fair Accounting Fair
values value policy value
adjustments adjustments
<S> <C> <C> <C> <C>
Net assets/(liabilities) acquired
Acquisitions in the year ended 31 March
1997: FTS Systems Inc
Fixed tangible assets 761 151 - 912
Stock and work in progress 1,932 (258) - 1,674
Debtors 1,511 (32) (31) 1,448
Cash 269 - - 269
Creditors and accruals (1,088) (440) (61) (1,589)
Bank loans and overdrafts (998) - - (998)
Provisions (107) (82) - (189)
--------------------------------------------------
2,280 (661) (92) 1,527
=====================================
Goodwill arising on acquisition 11,626
------
Fair value of consideration 13,153
------
Satisfied by:
Cash paid 12,539
Accrual in respect of earnout subsequently paid on 15 May 1997 614
------
13,153
======
</TABLE>
The fair value adjustments above reflect the revaluation of fixed assets
and other adjustments to recognise previously unrecorded provisions and
liabilities. Further adjustments have been made to ensure consistency
between the accounting policies of the Group and FTS Systems Inc.
F-16
<PAGE>
(21) Purchase of subsidiary undertakings (continued)
Goodwill
Goodwill arising on the acquisition of subsidiary companies is analysed
below:
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
Adjustment to goodwill arising on acquisitions in the
year ended 31 March 1996
DWA GmbH & Co. KG (2,652)
HPLC Technology Company Limited 150
------------
(2,502)
Goodwill arising on acquisition in the year ended
31 March 1997
FTS Systems Inc 11,626
------------
Goodwill taken to reserves 9,124
============
</TABLE>
The adjustment to goodwill in respect of DWA is a cash rebate of tax
suffered by former subsidiaries of DWA. This has been accounted for as a
reduction in the fair value of the consideration for the acquisition.
The adjustment in respect of HPLC Technology Company Arises from a final
appraisal of the value of net assets acquired, and consists mainly of a
reduction in the value of stocks.
Pre-acquisition trading of FTS Systems Inc
The profit before tax (after interest charges of (pound)653,000) included
in these accounts for FTS Systems Inc is (pound)383,000. The profit after
tax for the year ended 31 December 1995, the last financial year for which
the published figures for FTS are available was (pound)1,365,000 and for
the period from 1 January 1996 to 31 August 1996 (the date of acquisition
by the Group) was (pound)1,014,000. Prior to the acquisition, the tax
status of the company was such that the majority of federal and state taxes
was met by the shareholders.
FTS Systems Inc, which was acquired during the year, contributed
(pound)830,000 to the Group's net operating cash flow, paid (pound)541,000
in respect of repayment of loan finance, paid (pound)105,000 in respect of
taxation and utilised (pound)76,000 for capital expenditure.
(22) Reconciliation of operating profit to operating cash flows
<TABLE>
<CAPTION>
1997
(pound)000
<S> <C>
Operating profit 9,147
Depreciation charges 1,344
Profit on sale of tangible fixed assets (31)
Increase in stocks (476)
Decrease in debtors 27
Increase in creditors 82
Decrease in provisions (101)
------
Net cash inflow from operating activities 9,992
------
</TABLE>
F-17
<PAGE>
(23) Analysis of cash flows for headings netted in the Cash Flow Statement
1997
(Pounds)000
Returns on investment and servicing of finance
Interest received 357
Interest paid (453)
Interest element of finance lease rental payments (9)
-------
Net cash flow for returns on investment and servicing
of finance (105)
-------
Capital expenditure
Purchase of tangible fixed assets (1,623)
Sale of plant and machinery 193
-------
Net cash flow for capital expenditure (1,430)
-------
Acquisitions and disposals
Purchase of subsidiary undertaking (12,539)
Cash acquired with subsidiary 269
Receipt of cash re prior year acquisitions 2,671
-------
Net cash flows from acquisitions (9,599)
-------
Financing
Issue of ordinary share capital 5,140
Debt due within a year: increase in short term
borrowings (1,121)
Debt due beyond a year: new loans 5,676
Capital element of finance lease rental payments (50)
-------
Net cash flow from financing 9,645
-------
(24) Analysis of net debt
<TABLE>
<CAPTION>
1996 Cash Loans on Other Exchange Total
flow acquisition non-cash movement
changes
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
000 000 000 000 000 000
<S> <C> <C> <C> <C> <C> <C>
Cash at bank and in hand 4,620 1,881 -- -- (145) 6,356
Overdrafts (1,379) 357 -- -- 141 (881)
-------
2,238 -- -- --
Bank loans due after one
year (1,249) (5,523) -- -- 308 (6,464)
Bank loans due within one
year -- (799) (554) -- (32) (1,385)
Finance leases (75) 49 -- (13) -- (39)
Loan Notes 1993/2000 (3,970) 1,768 -- -- -- (2,202)
-------
(4,505)
Cash deposit as security
for Loan Notes 968 (568) -- -- -- 400
-------
(5,073)
-----------------------------------------------------------
Total (1,085) (2,835) (554) (13) 272 (4,215)
-----------------------------------------------------------
</TABLE>
Cash deposits are held by Midland Bank plc as security for certain of
their guarantees given in respect to Loan Notes (Note 13)
F-18
<PAGE>
(25) Pension commitments
There are three defined benefit and six defined contribution schemes
within the Group. All schemes have assets held in separate funds
administered by trustees.
All defined benefit schemes are subject to valuation by qualified
actuaries and all valuations assume that investment returns exceed salary
growth by 2 to 2.50%. The latest valuations were at dates between
1 February 1994 and 6 April 1995 and in each case the assets exceeded the
liabilities for benefits that had accrued to members at those dates, when
using the Project Unit method.
The largest scheme in the Group is the Elga Pension Scheme, which is a
defined benefit scheme. The most recent valuation of the scheme was based
on membership details as at 6 April 1995 using the Defined Accrued Benefit
method. The market value of scheme assets was (pounds)5,056,064 which,
together with assets in the form of annuity contracts, represented 99% of
accrued liabilities allowing for future earnings increases. This valuation
assumed that the investment returns would be 9% pa and would exceed salary
growth by 2.50%. (The funding level on the Project Unit method was 106%).
Details of the other individual operating company schemes are given in the
financial statements of those companies as appropriate.
Contributions by Group companies totalled (pounds)875,000 for the year
which were charged against profit. The pension costs on a basis consistent
with the requirements of SSAP24, were not materially different from the
contributions paid.
(26) Related party transactions
The Group had no related party transactions which might reasonably be
expected to influence decisions made by the users of these financial
statements.
F-19
<PAGE>
Protean Plc
Notes to the Consolidated Financial Statements - (Continued)
(27) Post balance sheet Event
Following discussions between Protean plc (Protean) and Culligan Water
Technologies, Inc. (Culligan), a U.S. based manufacturer of water purifying
systems, Protean received a proposal from Culligan to purchase their business,
offering to acquire all of the issued share capital of Protean for 105 million
British pound sterling. This offer was recommended to shareholders by the Board
of the Company on 24 October 1997 . The offer was declared wholly unconditional
on 2 December 1997.
(28) Significant differences between UK and US Accounting Principles
The above accounts have been prepared in accordance with generally accepted
accounting principles (GAAP) in the U.K. which differ in certain material
respects from U.S. GAAP. The significant differences relate principally to the
following items and the adjustments necessary to restate net income and
shareholders' equity in accordance with U.S. GAAP are shown below.
a) Goodwill
In the consolidated financial statements, goodwill, together with the fair value
of purchased trademarks, patents and other related intangibles, arising on the
acquisition of a subsidiary, is immediately eliminated against reserves. Under
U.S. GAAP, such goodwill and other intangibles would be capitalised and
amortised against income over the estimated useful lives of the assets, not
exceeding 40 years. For the purposes of calculating the effect of capitalising
the goodwill on the balance sheet and amortising the goodwill and other
intangibles through the statement of income, a life of 40 years has generally
been assumed.
b) Tangible Asset Revaluation
U.K. GAAP allows the periodic revaluation of land and buildings. Professional
revaluations of Protean properties were carried out during the past several
years. Under U.S. GAAP, revaluations would not be permitted and all fixed
assets, other than land, would be depreciated over their estimated economic
lives. The reconciling adjustments in respect of tangible fixed assets relate
primarily to Elga properties.
c) Ordinary Dividends
Under U.K. GAAP, the proposed dividends on ordinary shares, as recommended by
the directors, are deducted from shareholders' equity and shown as a liability
in the balance sheet at the end of the period to which they relate. Under U.S.
GAAP, such dividends are only deducted from shareholders' equity at the date of
the declaration of the dividend.
d) Pension Costs (Credits)
The company provides for the cost of retirement benefits based upon consistent
percentages of employees' pension payable as recommended by independent
qualified actuaries. U.S. GAAP requires that projected benefit obligation
(pension liability) be matched against the fair value of the plans' assets and
be adjusted to reflect unrecognised obligations or assets in determining the
pension cost or credit for the year.
F-20
<PAGE>
Protean Plc
Notes to the Consolidated Financial Statements - (Continued)
The following is a summary of the significant adjustments to net income for the
year ended 31 March 1997 and to parent company investment as of 31 March 1997,
which would have been required if the combined financial statements had been
reported in accordance with U.S. GAAP instead of U.K. GAAP.
<TABLE>
<CAPTION>
(In thousands of British pounds sterling) 1997
- --------------------------------------------------------------------------------
<S> <C>
Profit for the financial year according to the
consolidated financial statements prepared
under U.K. GAAP. 5,708
U.S. GAAP Adjustments:
Decrease due to effects of goodwill previously
written off against reserves (296)
Increase related to differences in projected pension
obligations 95
-----
Net Income in accordance with U.S. GAAP 5,507
=====
</TABLE>
The following is a summary of the significant adjustments to shareholders' funds
for the year ended 31 March 1997 and to parent company investment as of 31
March 1997, which would have been required if the combined financial statements
had been reported in accordance with U.S. GAAP instead of U.K. GAAP.
<TABLE>
<CAPTION>
(In thousands of British pounds sterling) 1997
- --------------------------------------------------------------------------------
<S> <C>
Equity shareholders' funds under U.K. GAAP 15,550
U.S. GAAP Adjustments:
Increase due to the effects of goodwill previously
written off against reserves 10,935
Decrease due to the revaluation of tangible fixed
assets (206)
Increase due to the timing of dividends declared 2,190
Increase related to differences in projected
pension obligations 712
------
Equity shareholders' funds under U.S. GAAP 29,181
======
</TABLE>
F-21
<PAGE>
Protean Plc
Notes to the Consolidated Financial Statements - (Continued)
Cash Flows
The above combined financial statements comply with Financial Reporting Standard
No. 1 -- "Cash flow statements" (FRS 1). Its objective and principles are
similar to those set out in Statement of Financial Accounting Standards No. 95
- --"Statement of Cash Flows" (SFAS 95). The principle difference between the
standards relates to classification. Under FRS 1, cash flows are presented for
a) operating activities; b) returns on investments and servicing of finance; c)
taxation; d) investing activities; and e) financing activities. SFAS 95 requires
only three categories of cash flow activities: a) operating; b) investing; c)
financing.
Cash flows arising from taxation and returns on investments and servicing of
finance under FRS 1 would, with the exception of dividends paid, be included as
operating activities under SFAS 95; dividend payments would be included as a
financing activity under SFAS 95. In addition, under FRS 1, cash and cash
equivalents include short term borrowings with original maturities of less than
90 days. SFAS 95 requires that movements on such short term borrowings to be
included in financing activities.
A summarised consolidated cash flow under U.S. GAAP is as follows:
<TABLE>
<CAPTION>
(In thousands of British pounds sterling) 1997
- --------------------------------------------------------------------------------
<S> <C>
Cash inflow from operating activities 6,403
Cash outflow from investing activities (11,029)
Cash inflow from finance activities 6,507
-------
Increase in cash and cash equivalents at year end 1,881
Exchange adjustments (145)
Cash and cash equivalents at beginning of year 4,620
-------
Cash and cash equivalents at end of year 6,356
=======
</TABLE>
F-22
<PAGE>
CULLIGAN UNAUDITED PROFORMA FINANCIAL INFORMATION
On December 2, 1997, Culligan Water Technologies, Inc. ("Culligan" or the
"Company") declared its cash offer of approximately $174 million to acquire all
of the outstanding shares of Protean plc ("Protean"), a United Kingdom
corporation, unconditional in all respects. As a result, the Company has
successfully completed its offer to acquire Protean. As of December 2, 1997, the
Company owned or received valid acceptances for an aggregate of 97.9% of
Protean's outstanding shares. Subsequent thereto, Culligan acquired the
remaining outstanding shares of Protean in accordance with United Kingdom law
and Protean has become a wholly-owned subsidiary.
In January 1998, the Company's Board of Directors decided to divest the
Analytical and Thermal Equipment Division of Protean. This Division consists of
8 operating units involved in the manufacture and sale of analytical and thermal
equipment and consumables principally for use in medical, academic, research and
industrial laboratories worldwide. These operations are reflected as
discontinued operations for all periods presented in the accompanying unaudited
condensed pro forma combined financial statements.
Also reflected in the unaudited condensed pro forma combined financial
information is the $155 million acquisition of the water filtration business of
Ametek, Inc. (Ametek). A wholly owned subsidiary of the Company was merged into
Ametek on August 1, 1997, immediately following the spin-off of Ametek's non-
water filtration operations. As a result of the acquisition, each share of
Ametek common stock was converted into the right to receive .105 shares of
common stock of the Company (or an aggregate of 3,473,298 shares of the
Company's common stock) and cash in lieu of fractional shares.
The following unaudited condensed pro forma combined financial information
presents the Pro Forma Combined Balance Sheet at October 31, 1997, combining the
historical consolidated balance sheet of the Company and the balance sheet of
Protean as if the transaction had been consummated on October 31, 1997. The
unaudited Pro Forma Combined Statements of Operations for the fiscal year ended
January 31, 1997 and the nine months ended October 31, 1997 give effect to the
acquisitions of Protean and Ametek as if the acquisitions had been consummated
as of the beginning of their respective prior fiscal year. The unaudited Pro
Forma Combined Statement of Operations for the fiscal year ended January 31,
1997 combines the results of the Company for such year with the results of
Protean for the year ended March 31, 1997 and the results of Ametek for the year
ended December 31, 1996. The unaudited Pro Forma Combined Statement of
Operations for the nine months ended October 31, 1997 combines the results of
the Company and Ametek for such nine month period with the results of Protean
for the nine months ended September 30, 1997. Therefore, the results of
operations of Protean for the three months ended March 31, 1997 are included in
both the Pro Forma Combined Statement of Operations for the fiscal year ended
January 31, 1997 and the nine months ended October 31, 1997.
F-23
<PAGE>
Ametek was acquired by the Company on August 1, 1997. Therefore, the
Company's historical results of operations for the nine months ended October 31,
1997 already include Ametek's results of operations for the three months ended
October 31, 1997. To arrive at Ametek's results of operations for the nine
months ended October 31, 1997, the results of operations for the six months
ended July 31, 1997 must be added to the Pro Forma Combined Statement of
Operations. The results of operations of Ametek for the month of January 1997
are not included in either the Combined Statement of Operations for the fiscal
year ended January 31, 1997 or the nine months ended October 31, 1997.
The unaudited pro forma financial information of Culligan is presented for
illustrative purposes only and is not necessarily indicative of the combined
results of operations or financial position of Culligan as if the acquisitions
had occurred on the assumed dates, nor is it necessarily indicative of the
future results of operations or financial position of Culligan. The unaudited
pro forma financial information should be read in conjunction with the Company's
Annual Report on Form 10-K for the year ended January 31, 1997 filed with the
Securities and Exchange Commission.
The pro forma adjustments applied in the unaudited pro forma financial
information reflect the acquisitions as purchase transactions. Under the
purchase method of accounting, the purchase cost will be allocated to acquired
assets and liabilities based on their relative fair value as of the closing
dates with the excess of the purchase cost over fair value allocated to
goodwill. Such allocations are based on valuations and other studies that are
not yet complete. Accordingly, the final allocations will be different from
those reflected. However, based on current information, the Company does not
presently expect the final allocations to differ materially from the amounts
presented.
F-24
<PAGE>
Culligan Water Technologies, Inc.
Unaudited Pro Forma Combined Balance Sheet
as of October 31, 1997
(US Dollars In thousands)
<TABLE>
<CAPTION>
Culligan Protean(a) Discontinued Pro Forma Pro Forma
October 31, 1997 September 30, 1997 Operations(a) Adjustments(a) Combined
---------------- ------------------ ------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 8,992 $ 7,177 $ (4,012) $ - $ 12,157
Restricted Cash 143,968 - - (143,968)(b) -
Accounts and notes receivable, net of allowance
for doubtful accounts and notes receivable 113,904 25,654 (17,003) - 122,555
Inventories 63,486 22,323 (13,471) - 72,338
Deferred tax assets 10,775 - - 10,775
Prepaid and other current assets 6,499 6,377 (2,545) (1,175)(c) 9,156
Net assets of discontinued operations - - 12,595 94,148 (d) 106,743
-------- ------- -------- --------- --------
Total current assets 347,624 61,531 (24,436) (50,995) 333,724
Property, plant and equipment net of
accumulated depreciation 125,109 15,086 (9,256) 508 (e)(f) 131,447
Intangible assets, net of accumulated -
amortization 272,480 - - 56,581 (g) 329,061
Other non-current assets 47,556 - - (28,436)(h)(i) 19,120
-------- ------- -------- --------- --------
Total assets 792,769 76,617 (33,692) (22,342) 813,352
======== ======= ======== ========= ========
Current liabilities
Accounts payable and accrued expenses 93,259 38,205 (25,929) 7,039 (j) 112,574
Notes payable and current maturities of
long term debt 11,126 - - - 11,126
-------- ------- -------- --------- --------
Total current liabilities 104,385 38,205 (25,929) 7,039 123,700
Long-term liabilities
Long-term debt 307,567 8,401 (6,739) - 309,229
Deferred income taxes 29,949 - - (1,175)(c) 28,774
Other non-current liabilities 27,935 1,805 (1,024) - 28,716
-------- ------- -------- --------- --------
Total long-term liabilities 365,451 10,206 (7,763) (1,175) 366,719
Minority Interest 1,972 - - - 1,972
Stockholders' equity
Common stock 252 3,528 - (3,528)(k) 252
Additional paid in capital 366,370 21,004 - (21,004)(k) 366,370
Retained earnings (39,912) 3,674 - (3,674)(k) (39,912)
Foreign currency translation adjustment (5,749) - - - (5,749)
-------- ------- -------- --------- --------
Total stockholders' equity 320,961 28,206 - (28,206) 320,961
-------- ------- -------- --------- --------
Total liabilities and stockholders' equity $792,769 $76,617 $(33,692) $ (22,342) $813,352
======== ======= ======== ========= ========
</TABLE>
F-25
<PAGE>
Notes to Unaudited Condensed Pro Forma Combined Balance Sheet
(US Dollars in Thousands)
(a) The unaudited Protean balance sheet at September 30, 1997, has been derived
from the historical financial accounts of Protean and is presented in
accordance with U.K. generally accepted accounting principles (GAAP). The
unaudited Protean Balance Sheet has been translated into U.S. dollars using
an exchange rate of $1.61 per British pound sterling. The pro forma
adjustments column contains adjustments to present the Pro Forma Combined
Balance Sheet on a U.S. GAAP basis and to record the effect of purchase
accounting related to the acquisition of Protean. Certain reclassifications
have been made to the historical financial statements of Protean to conform
with the Company's presentation.
(b) To eliminate restricted cash that was held in escrow until the Company's
offer was declared unconditional. The restricted cash was used to acquire
Protean's outstanding shares.
(c) To reclassify non-current deferred tax assets from prepaid and other current
assets.
(d) To record the net assets of discontinued operations (i.e., the Analytical
and Thermal division) at the estimated proceeds from the sale of such
operations, plus estimated cash flows during the holding period, less
estimated interest on debt associated with the discontinued operations.
(e) To reverse the periodic revaluation of certain property, plant and equipment
allowed for U.K. GAAP purposes. Under U.S. GAAP such revaluations are not
permitted and all property, plant and equipment, other than land, is
depreciated over their estimated economic lives. The reduction of property,
plant and equipment of $332 relates to Protean's continuing operations.
(f) To adjust property, plant and equipment for the estimated step-up to fair
value in the amount of $840. Under purchase accounting, the purchase cost
allocated to acquired assets is to be based on the fair value at the
acquisition date as determined by valuations and other studies which are not
yet complete. Accordingly, the final allocation may be different from the
amount reflected in the pro forma, however, based on current information,
management does not expect the amount to differ materially from the amount
presented.
(g) To record goodwill related to the acquisition of Protean. Goodwill
represents the excess of the purchase price paid by the Company over the sum
of identifiable assets acquired less liabilities assumed. Goodwill will be
amortized over 40 years.
(h) To record a non-current asset of $1,757 to reflect Protean's pension
accounting on a U.S. GAAP basis. Protean provides for the cost of retirement
benefits based upon consistent percentages of employees' pension payables as
recommended by independent qualified actuaries. U.S. GAAP requires that the
projected benefit obligation be reduced to the extent of the plans' fair
value of assets and be adjusted to reflect unrecognized obligations or
assets in determining the pension cost or credit for the year.
(i) To eliminate Culligan's equity investment in Protean of $30,193 that was
recorded on the Company's consolidated balance sheet at October 31, 1997.
F-26
<PAGE>
(j) To record direct costs of the acquisition including fees for accounting,
legal and other financial advisors. The accrued liability also includes
estimated costs for severance.
(k) To eliminate the equity of Protean.
F-27
<PAGE>
Culligan Water Technologies, Inc.
Unaudited Pro Forma Combined Statement of Operations
Year ended January 31, 1997
<TABLE>
<CAPTION>
(US Dollars in thousands)
Culligan Ametek
Year Ended Year Ended Pro Forma Culligan/Ametek
January 31, 1997 December 31, 1996(a) Adjustments(b) Pro Forma
---------------- -------------------- -------------- ---------
<S> <C> <C> <C> <C>
Net sales $371,018 $68,650 $ (827)(c) $438,841
Cost of goods sold 205,581 44,039 834(c),(d) 250,454
-------- ------- -------(e),(f) --------
Gross profit 165,437 24,611 (1,661) 188,387
Selling, general and administrative 113,932 10,004 314(c),(d),(e) 124,250
Depreciation expense -- 1,919 (1,919)(e) --
Restructuring expenses -- -- -- --
Amortization of intangible assets 17,522 328 3,126(g) 20,976
-------- ------- ------- --------
Operating income 33,983 12,360 (3,182) 43,161
Other income, (expense) 5,023 (9) -- 5,014
-------- ------- ------- --------
Income before interest and income taxes 39,006 12,351 (3,182) 48,175
Interest income 2,633 -- -- 2,633
Interest expense (5,490) -- (1,609)(h) (7,099)
-------- ------- ------- --------
Income from continuing operations before
income taxes 36,149 12,351 (4,791) 43,709
Income taxes 20,264 4,188 (730)(i) 23,722
-------- ------- ------- --------
Net income $ 15,885 $ 8,163 $(4,061) $ 19,987
======== ======= ======= ========
Weighted average shares outstanding (000's) 21,375 n/a 3,467(j) 24,842
Net income per share $ 0.74 n/a n/a $ 0.80
======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Protean
Year Ended Discontinued Pro Forma Pro forma
March 31, 1997 Operations Adjustments(b)(k) Combined
-------------- ---------- -------------- ---------
<S> <C> <C> <C> <C>
Net sales $129,014 $(67,365) $ -- $500,490
Cost of goods sold 66,980 (35,440) -- 281,994
-------- -------- ------- --------
Gross profit 62,034 (31,925) -- 218,496
Selling, general and administrative 45,385 (21,513) 924(l),(m) 149,046
Depreciation expense -- -- -- --
Restructuring expenses 2,105 -- (975)(l) 1,130
Amortization of intangible assets -- -- 1,415(o) 22,391
-------- -------- ------- --------
Operating income 14,544 (10,412) (1,364) 45,929
Other income -- -- -- 5,014
-------- -------- ------- --------
Income before interest and income taxes 14,544 (10,412) (1,364) 50,943
Interest income 639 (467) -- 2,805
Interest expense (1,285) 1,045 (4,407)(q) (11,746)
-------- -------- ------- --------
Income from continuing operations before
income taxes 13,898 (9,834) (5,771) 42,002
Income taxes 4,822 (2,525) (1,742)(r) 24,277
-------- -------- ------- --------
Net income $ 9,076 $ (7,309) $(4,029) $17,725
======== ======== ======= ========
Weighted average shares outstanding (000's) n/a n/a n/a 24,842
Net income per share n/a n/a n/a $ 0.71
======== ======== ======= ========
</TABLE>
F-28
<PAGE>
Culligan Water Technologies, Inc.
Unaudited Pro Forma Combined Statement of Operations
Nine Months Ended October 31, 1997
(Unaudited)
(US Dollars In thousands)
<TABLE>
<CAPTION>
Culligan Ametek
Nine Months Ended Six Months Ended Pro Forma Culligan/Ametek
October 31, 1997 July 31, 1997(a) Adjustments(b) Pro Forma
----------------- ------------------ -------------- ---------------
<S> <C> <C> <C>
Net sales $354,254 $38,381 $ - $392,635
Cost of goods sold 198,204 24,623 - 222,827
----------------- ---------------- ----------- --------------
Gross profit 156,050 13,758 - 169,808
Selling, general and administrative 102,345 7,164 - 109,509
Merger and restructuring costs and write off of
in-process research and development expenses 29,643 - (17,000)(s) 12,643
Amortization of intangible asset 3,198 42 1,566 (g) 4,806
----------------- ---------------- ----------- --------------
Operating income 20,864 6,552 15,434 42,850
Other income, net 32,631 83 32,714
----------------- ---------------- ----------- --------------
Income before interest and income taxes 53,495 6,635 15,434 75,564
Interest income 865 - - 865
Interest expense (5,277) - (813)(h) (6,090)
----------------- ---------------- ----------- --------------
Income from continuing operations before
income taxes, minority interest and extraordinary
item 49,083 6,635 14,621 70,339
Income taxes 27,092 2,744 (357)(i) 29,479
Minority Interest 665 - - 665
Extraordinary Item 422 - - 422
----------------- ---------------- ----------- --------------
Net income $ 20,904 $ 3,891 $ 14,978 $ 39,773
----------------- ---------------- ----------- --------------
Weighted average shares outstanding (000's) 23,377 N/A 2,311 (j) 25,688
Income before extraordinary item $ 0.91 N/A N/A 1.57
Extraordinary item (0.02) N/A N/A (0.02)
----------------- ---------------- ----------- --------------
Net income per share $ 0.89 N/A N/A $ 1.55
================= ================ =========== ==============
</TABLE>
<TABLE>
<CAPTION>
Protean
Nine Months Ended Discontinued Pro Forma Pro Forma
September 30, 1997 Operations Adjustments(k) Combined
<S> ------------------ ------------ ----------- ---------
<C> <C> <C> <C>
Net sales $104,129 $(58,123) $ - $438,641
Cost of goods sold 54,926 (31,299) - 246,454
----------------- ------------ ----------- ---------
Gross profit 49,203 (26,824) - 192,187
Selling, general and administrative 34,683 (17,581) 459 (m)(n) 127,070
Merger and restructuring costs and write off of
in process research and development expenses - - - 12,643
Amortization of intangible asset - - 1,061 (o) 5,867
----------------- ------------ ----------- ---------
Operating income 14,520 (9,243) (1,520) 46,607
Other income - - (289)(p) 32,425
----------------- ------------ ----------- ---------
Income before interest and income taxes 14,520 (9,243) (1,809) 79,032
Interest income 867 (856) - 876
Interest expense (1,593) 1,451 (3,305)(q) (9,537)
----------------- ------------ ----------- ---------
Income from continuing operation before
income taxes, minority interest and extraordinary
item 13,794 (8,648) (5,114) 70,371
Income taxes 4,826 (2,512) (1,621)(r) 30,172
Minority Interest - - - 665
Extraordinary Item - - - 422
----------------- ------------ ----------- ---------
Net income $ 8,968 $ (6,136) $(3,493) $ 39,112
----------------- ------------ ----------- ---------
Weighted average shares outstanding (000's) N/A N/A N/A 25,688
Income before extraordinary item N/A N/A N/A $ 1.54
Extraordinary item N/A N/A N/A $ (0.02)
----------------- ------------ ----------- ---------
Net income per share N/A N/A N/A $ 1.52
================= ============ =========== =========
</TABLE>
F-29
<PAGE>
Notes to Culligan Unaudited Condensed Pro Forma Combined Statements of
Operations
(US Dollars in Thousands)
a. The Water Filtration Business statement of operations includes revenues and
expenses derived from AMETEK's historical cost financial accounts. The
associated revenues and expenses are either directly attributable to the
Water Filtration Business or have been allocated to the Water Filtration
Business based upon methods considered reasonable by management. The
statements of operations of the Water Filtration Business were prepared in
contemplation of the acquisition.
b. The pro forma adjustments do not reflect any operating efficiencies or cost
savings that may result from the acquired businesses. Also, a final
determination of the required purchase accounting adjustments has not been
made, and the earnings results will vary from those pro forma earnings shown
based on the final adjustments.
c. To eliminate November and December 1995 sales of $827 and cost of goods sold
of $359 and selling, general and administrative expenses of $367 related to
APIC International S.A., a wholly owned subsidiary of the Water Filtration
Business, that were included in the Water Filtration Business results for
the year ended December 31, 1996.
d. To reclassify research and development expenses of $618 included in the
costs of goods sold of the Water Filtration Business to selling, general and
administrative expenses for the year ended December 31, 1996. These expenses
are reclassed to selling, general and administrative expenses in order to
present the statement of operations of the Water Filtration Business on a
basis consistent with Culligan.
e. To reclassify depreciation expense of the Water Filtration Business to cost
of goods sold by $1,856; and selling, general and administrative expenses by
$63 for the year ended December 31, 1996, in order to present the statement
of operations of the Water Filtration Business on a basis consistent with
Culligan.
f. To capitalize tooling costs expenses by the Water Filtration Business, net
of additional depreciation expense related to such capitalized amounts. The
adjustment results in a net decrease of $45 to cost of goods sold of the
Water Filtration Business for the year ended December 31, 1996. The
adjustment is necessary to present the statement of operations of the Water
Filtration Business in accordance with the accounting policies that will be
used after the Acquisition.
g. To record amortization expense of $2,966 and $1,486 for the year ended
January 31, 1997 and the six months ended July 31, 1997, respectively, for
goodwill resulting from the excess of the purchase price paid by Culligan
over the sum of identifiable assets acquired and liabilities assumed. The
amortization period for goodwill is 40 years. Amortization expense also
included $160 and $80 for the year ended January 31, 1997 and the six months
ended July 31, 1997, respectively, for identifiable trademarks which are
being amortized over 20 years.
F-30
<PAGE>
h. To record interest expense of $1,609 and $813, reflecting one year's and six
months', respectively, estimated interest expense for the debt of $25,000
assumed in the Acquisition.
The effect of a 1/8 percent change in the interest rate on the $25,000 debt
assumed in the Acquisition would be approximately $31 for the year ended
January 31, 1997 and $16 for the six months ended July 31, 1997.
i. To record the tax effect (at 40%) of all pro forma adjustments except
goodwill and in-process research and development, which is not tax
deductible.
j. To adjust the shares of common stock outstanding to reflect the issuance of
3,466,667 shares of Culligan common stock as if the shares were issued on
February 1, 1996.
F-31
<PAGE>
Notes to Unaudited Condensed Pro Forma Combined Statements of Operations
(US Dollars in Thousands)
(k) The Protean statements of operations have been derived from the historical
financial accounts of Protean and are presented in accordance with U.K.
generally accepted accounting principles (GAAP). The Protean statements of
operations for the year ended March 31, 1997 and the nine months ended
September 30, 1997 have been translated into U.S. dollars using exchange
rates of $1.59 and $1.63 per British pound sterling, respectively. The pro
forma adjustments column contains adjustments to convert from U.K. GAAP to
a U.S. GAAP basis, and to present the effect of purchase accounting related
to the acquisition of Protean. Certain reclassifications have been made to
the historical financial statements of Protean to conform with the
Company's presentation.
(l) To reclassify restructuring expenses of $975 recorded in accordance with
U.K. GAAP into selling, general and administrative expenses. Such expenses,
while properly recorded during Protean's year ended March 31, 1997, do not
meet the definition of a restructuring expense under U.S. GAAP and,
therefore, should be classified as selling, general and administrative
expenses.
(m) To recognize the effect of accounting for pension costs on a U.S. GAAP
basis. Pension expense is decreased by $51 and $160 for the year ended
January 31, 1997 and the nine months ended October 31, 1997, respectively.
(n) To increase selling, general and administrative expenses by $619 for items
accrued as restructuring expenses at March 31, 1997 under U.K. GAAP. These
expenses do not meet the definition of a restructuring expense under U.S.
GAAP and are expenses for the nine months ended October 31, 1997.
(o) To record amortization expense of $1,415 and $1,061 for the year ended
January 31, 1997 and the nine months ended October 31, 1997, respectively,
for goodwill resulting from the excess of the purchase price paid by
Culligan over the sum of identifiable assets acquired and liabilities
assumed for the continuing operations of Protean. The amortization period
for goodwill is 40 years.
(p) To reverse the Protean earnings recognized by Culligan under the equity
method of $289 for the nine months ended October 31, 1997.
(q) To record interest expense of $4,407 and $3,305, reflecting the estimated
expense for the year ended January 31, 1997 and the nine months ended
October 31, 1997, respectively, for incremental debt incurred in the
acquisition of approximately $67,802. Such amount does not include the debt
that is expected to be paid down with the proceeds from the sale of the
discontinued operations of Protean.
The effect of a 1/8 percent change in the interest rate on the $67,802 debt
incurred in the acquisition of Protean would be approximately $85 for the
year ended January 31, 1997 and $64 for the nine months ended October 31,
1997.
(r) To record the tax effect (at 40%) on all pro forma adjustments except
goodwill, which is not tax deductible.
(s) To reverse the $17,000 write-off of in-process research and development
related to the Ametek acquisition recorded during the nine months ended
October 31, 1997, as this charge is non-recurring in nature and is not
representative of the results of continuing operations.
F-32
<PAGE>
EXHIBIT 23.01
[LETTERHEAD OF KPMG]
The Board of Directors
Culligan Water Technologies, Inc.
13 February 1998
We consent to the inclusion of our report dated 12 June 1997, except for note 27
which is as of 2 December 1997, in the Form 8-K filing of Culligan Water
Technologies, Inc. dated on or about 13 February 1998.
/s/ KPMG Audit Plc
- ----------------------
KPMG Audit Plc
Chartered Accountants Registered Auditor
London
