SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
Form 8-K/A
CURRENT REPORT
Filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
February 26, 1999
-----------------
Date of Report (Date of earliest event report)
Commission File Number 1-302
ARVIN INDUSTRIES, INC.
----------------------
(Exact name of registrant as specified in its charter)
Indiana 35-0550190
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Noblitt Plaza, Box 3000
---------------------------
Columbus, IN 47202-3000
------------ ----------
(Address of principal executive offices) (Zip Code)
812-379-3000
------------
(Registrant's telephone number including area code)
AMENDMENT No. 1
Item 7. Financial Statements and Exhibits
As previously reported in a Current Report on Form 8-K, dated February 26, 1999
and filed with the Securities and Exchange Commission on March 12, 1999, the
registrant acquired the Purolator Products automotive filter business from Mark
IV Industries, Inc. on February 26, 1999. In connection therewith, the
registrant hereby files the following financial statements and reports regard-
ing Purolator Products:
a) Financial statements of businesses acquired:
o Report of PricewaterhouseCoopers, LLP
o Combined balance sheet as of January 31, 1999
o Combined statement of income and net assets for the 11-month period
ended January 31, 1999
o Combined statement of cash flows for the 11-month period ended January
31, 1999
o Notes to combined financial statements
o Consent of Independent Accountants
b) Pro Forma Financial Information:
o Combined Statement of Financial Condition as of January 3, 1999
o Combined Statement of Operations for the Year Ended Juanuary 3, 1999
o Notes to Pro Forma Combined Financial Statements
Item 7(a) Financial Statements of Businesses Acquired
PUROLATOR AUTOMOTIVE FILTER BUSINESS
COMBINED FINANCIAL STATEMENTS
AT JANUARY 31, 1999
AND FOR THE ELEVEN-MONTH PERIOD THEN ENDED
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Management of the Purolator Automotive Filter Business
In our opinion, the accompanying combined balance sheet and the related com-
bined statements of income and net assets and cash flows present fairly, in
all material respects, the financial position of the Purolator Automotive
Filter Business (the "Company") as of January 31, 1999, and the results of its
operations and its cash flows for the eleven-month period ended January 31,
1999, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Rochester, New York
May 7, 1999
Purolator Automotive Filter Business
Combined Balance Sheet
January 31, 1999
(dollars in thousands)
Assets
Current Assets:
Cash $ 400
Accounts receivable, net 52,200
Inventories, net 53,600
Deferred Taxes 7,300
Other current assets 3,900
----------------
Total Current Assets 117,400
Joint-venture investments 21,500
Fixed assets, net 99,000
Cost in excess of net assets acquired 84,300
----------------
Total Assets $ 322,200
================
Liabilities and Net Assets
Current Liabilities:
Accounts payable $ 18,300
Note payable 6,300
Compensation related liabilities 4,000
Accrued expenses and other liabilities 5,600
----------------
Total Current Liabilities 34,200
Post-retirement health-care liability 3,600
Deferred taxes 18,000
----------------
Total Liabilities 55,800
Net Assets 266,400
----------------
Total Liabilities and Net Assets $ 322,200
================
The accompanying notes are an integral part of these financial statements.
Purolator Automotive Filter Business
Combined Statement of Income and Net Assets
For the Eleven-Month Period Ended January 31, 1999
(dollars in thousands)
Net sales $ 314,600
--------------
Operating costs:
Cost of products sold (including a repositioning
charge of $7.4 million) 244,300
Selling and administration 38,800
Research and development 4,000
Depreciation and amortization 12,500
--------------
Total operating costs 299,600
--------------
Income before taxes and joint ventures 15,000
Provision for income taxes (5,500)
Income from joint ventures, net of tax 1,200
--------------
NET INCOME 10,700
Net assets at the beginning of the period 279,200
Cash transfers to parent, net (23,500)
--------------
Net assets at the end of the period $ 266,400
==============
The accompanying notes are an integral part of these financial statements.
Purolator Automotive Filter Business
Combined Statement of Cash Flows
For the Eleven-Month Period Ended January 31, 1999
(dollars in thousands)
Cash flows from operating activities:
Net income $ 10,700
Items not affecting cash:
Depreciation and amortization 12,500
Repositioning charge, net of tax 2,000
Changes in assets and liabilities:
Accounts receivable 7,700
Inventory (2,400)
Other assets 4,200
Accounts payable and other liabilities (14,200)
-------------------
Net cash provided by
operating activities 20,500
Cash flows from investing activities, to
purchase fixed assets (3,100)
Cash flows from financing activities,
proceeds from long-term debt 6,100
-------------------
Net cash transferred to parent $ 23,500
===================
The accompanying notes are an integral part of these financial statements.
PUROLATOR AUTOMOTIVE FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
JANUARY 31, 1999
1. THE PUROLATOR AUTOMOTIVE FILTER BUSINESS AND ITS SIGNIFICANT ACCOUNTING
POLICIES
As of January 31, 1999, Mark IV Industries, Inc. (Mark IV) was the owner
of a number of operating divisions and subsidiaries which made up its
Purolator Automotive Filter Business (the Filter Business or the Company).
Such operating divisions and subsidiaries are as follows:
>> Purolator Products Company (PPC)
>> Purolator Products NA, Inc.
>> Facet Advanced Technology Company
>> M-Filter OY
>> Foreign Distributors
The Foreign Distributors represent Filter Business activities in Canada,
Italy, Germany and Australia, each operating as a division of a first or
second-tier subsidiary of Mark IV.
On February 26, 1999, all of the above business units were sold by Mark IV
(or an affiliate) to Arvin Industries, Inc. (Arvin), or one of its
affiliates.
The accompanying combined balance sheet includes the accounts of the Filter
Business as of January 31, 1999, and all significant inter-company
transactions have been eliminated. Such combined balance sheet has been
prepared in conformity with generally accepted accounting principles, which
require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of such financial
statements. It should be recognized that the actual results could differ
from those estimates. The Filter Business' significant accounting policies
are as follows:
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentra-
tions of credit risk consist principally of its trade accounts receivable.
The credit risk associated with such receivables is minimal due to the
Company's large customer base and ongoing control procedures which monitor
the creditworthiness of customers.
Inventories
Inventories are stated at the lower of cost or market, with cost determined
primarily on the First-In, First-Out (FIFO) method. Tool crib inventories
are expensed as consumed.
Customer Acquisition Costs
Non-standard pricing concessions and inventory replacement costs ("lifts")
incurred to secure new business are deferred initially and amortized over
the related contract term.
PUROLATOR AUTOMOTIVE FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
JANUARY 31, 1999
Property, Plant and Equipment
Property, plant and equipment are presented at cost, net of accumulated
depreciation. The cost of property, plant and equipment retired or
otherwise disposed of, and the accumulated depreciation thereon, are
eliminated from the asset and related accumulated depreciation
accounts, and any resulting gain or loss is reflected in income. The
Filter Business provides for depreciation of plant and equipment
primarily on the straight-line method to amortize the cost of such
plant and equipment over its useful life.
Cost in Excess of Net Assets Acquired
Cost in excess of net assets acquired (goodwill) is amortized on the
straight-line method over 40 years. The Company continually evaluates
the existence of goodwill impairment on the basis of whether the
goodwill is fully recoverable from projected, undiscounted net cash
flows of the related business.
Foreign Currency
The assets and liabilities of the Filter Business' foreign operations
have been translated at exchange rates in effect as of the balance
sheet date, and resulting gains and losses have been included as a part
of net assets. Foreign currency transactions are included in income as
realized.
Income Taxes
Mark IV accounts for income taxes under Statement of Financial
Accounting Standards No. 109 - Accounting for Income Taxes. This
statement requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax basis of assets
and liabilities. The Company's provision for income taxes has been
calculated on the separate return basis.
2. REPOSITIONING ACTIVITY
Prior to January 31, 1999, Mark IV committed to a plan to improve its
inventory management practices, consolidate its distribution
activities, and make certain other changes to restructure the Filter
Business. As a result, the accompanying combined income statement
reflects a charge to cost of products sold in the amount of $7.4
million to provide for the cost of such actions, consisting of the
following elements (dollars in thousands):
Inventory valuation $3,800
Warehouse consolidation 2,300
Facility closure and
severance related costs 1,300
-----
$7,400
======
The warehouse consolidation costs were incurred in the eleven-month
period ended January 31, 1999, and included costs to move product into
a new Distribution Center, as well as temporary freight premiums and
personnel costs incurred during the transition process. As of January
31, 1999, all such warehouse consolidation efforts had been completed.
PUROLATOR AUTOMOTIVE FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
JANUARY 31, 1999
The combined balance sheet as of January 31, 1999 reflects reserves to
provide for the cost of such actions which have not been completed as
of such date. The reserves consist of the $3.8 million inventory
valuation adjustment, and the $1.3 million reserve for facility closure
and severance related costs, included in accrued expenses.
3. ACCOUNTS RECEIVABLE
Accounts receivable are reflected net of an allowance for doubtful
accounts of approximately $3.1 million as of January 31, 1999.
4. INVENTORY
Inventory consists of the following as of January 31, 1999 (dollars in
thousands):
Tool crib items $ 2,100
Purchased materials and parts 9,900
Work in process 5,700
Finished goods 39,700
--------
Gross inventory 57,400
Valuation reserve ( 3,800)
--------
Net inventory $ 53,600
========
5. CUSTOMER ACQUISITION COSTS
Deferred customer acquisition costs are included in other current
assets, net of their accumulated amortization. The amount of such
costs at January 31, 1999 was approximately $1.5 million.
6. JOINT VENTURES
The Filter Business has a 50% owned joint-venture interest in Purodenso
Company, a U.S.-based manufacturer of automotive filters and other
products. The Filter Business also has a 39% interest in Purolator
India Limited, a manufacturer of filter products based in India. The
investments in these two businesses are accounted for on the equity
method in the accompanying combined balance sheet. As of January 31,
1999, Purolator's investments in Purodenso and Purolator India were
$17.4 million and $4.1 million, respectively.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and consist of the
following as of January 31, 1999 (dollars in thousands):
Land and improvements 1,700
Buildings and improvements 16,300
Machinery and equipment 108,700
--------
Total property, plant and equipment 126,700
Less accumulated depreciation 27,700
--------
Property, plant and equipment, net $ 99,000
========
Depreciation expense was approximately $10.3 million for the eleven-month
period ended January 31, 1999.
PUROLATOR AUTOMOTIVE FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
JANUARY 31, 1999
8. COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired is presented net of accumulated
amortization of approximately $9.9 million at January 31, 1999.
Amortization expense was approximately $2.2 million for the
eleven-month period ended January 31, 1999.
9. NOTE PAYABLE
The Filter Business' M-Filter OY unit, based in Finland, has debt
outstanding with Merita Bank in the amount of $6.3 million at January
31, 1999. The indebtedness is a demand line of credit, secured by a
guarantee from Mark IV. The guarantee was replaced by Arvin as a part
of the sale transaction. The debt bears interest keyed to LIBOR, and
amounted to approximately 7.0% as of January 31, 1999.
10. INCOME TAXES
The Company's income before taxes was generated primarily in the United
States. The related provision for income taxes for the eleven-month
period ended January 31, 1999 includes $7.3 million which is a currently
payable expense, and $1.8 million which is a deferred tax benefit.
The tax effects of temporary differences which give rise to deferred
tax assets (liabilities) consist of the following at January 31, 1999
(dollars in thousands):
Current:
Inventories $ 2,800
Compensation related liabilities 1,100
Other items 3,400
--------
Net current deferred tax asset 7,300
--------
Non-current:
Investment in Joint Ventures $ (3,100)
Fixed and intangible assets (16,200)
Post-retirement health-care liability 1,300
---------
Net non-current deferred tax liability $ (18,000)
=========
11. LEASES
The Company has operating leases with, in some instances, cost
escalation and renewal privileges. Total rental expense under operating
leases was approximately $1.7 million during the eleven-month period
ended January 31, 1999. Future minimum rental payments under operating
leases (for fiscal years ended the last day of February) are
approximately: 2000 - $2.2 million; 2001 - $2.1 million; 2002 - $2.1
million; 2003 - $1.8 million; 2004 - $1.2 million; and 2005 and
thereafter - $2.7 million.
PUROLATOR AUTOMOTIVE FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
JANUARY 31, 1999
12. PENSION AND RETIREMENT SAVINGS PLANS
The Filter Business' U.S. employees participate in a defined-benefit
pension plan which is funded and administered by Mark IV. Such plan
provides retirement benefits based upon the employee's earnings and
years of service. The plan is a part of Mark IV's Master Defined
Benefit Plan, and the funded position and responsibility for benefit
payments to retirees for service through February 26, 1999 remains with
Mark IV and its related Master Defined Benefit Plan Trust. The service
cost associated with the Filter Business' employees for the
eleven-month period ended January 31, 1999 was approximately $1.2
million, and such amount has been recognized as an expense in the
accompanying combined statement of income.
The Filter Business' U.S. employees also participate in a defined
contribution (401(k)) plan which is also administered by Mark IV. Mark
IV's contribution match to the 401(k) plan was in the form of Mark IV
common stock and the accompanying combined statement of income reflects
an expense of approximately $2.5 million for such cost in the
eleven-month period ended January 31, 1999. Once Arvin has established
a Trust for the benefit of the Filter Business employees, all
applicable funds held in Mark IV's Trust will be transferred over to
Arvin's Trust.
13. POST-RETIREMENT BENEFITS
The Filter Business currently provides health and life insurance
benefits to a number of existing retirees from its U.S. operations.
Contributions currently required to be paid by the retirees towards the
cost of such plans are based upon the retirees years of service with
PPC or its subsidiaries. The Filter Business also has a number of
active employees who may receive such benefits upon their retirement.
The following table sets forth the liability for the cost of these
benefits included in the combined balance sheet at January 31, 1999
(dollars in thousands):
Accumulated post-retirement benefit obligation (APBO):
Active employees fully eligible for benefits $ 400
Active employees, not yet fully eligible for benefits 1,000
Existing retirees 2,200
--------
Post-retirement benefit liability recognized
in the combined balance sheet $3,600
========
The Company's post-retirement benefit expense on the accrual method for
the eleven-month period ended January 31, 1999 includes the following
components (dollars in thousands):
Service cost-benefits earned during the period $ 100
Interest cost on the APBO 300
--------
Total expense $ 400
========
The APBO was calculated using a discount rate of 7.0%, and assumes an
initial health- care cost trend rate of approximately 7.0%, trending
down ratably to an ultimate rate of 4.5%. A one-percentage-point
increase in such trend rate would not have a significant effect on the
Company's obligations or annual expense.
PUROLATOR AUTOMOTIVE FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
JANUARY 31, 1999
14. LEGAL AND ENVIRONMENTAL MATTERS
The estate of Jerome Lemelson and related parties have alleged that
Mark IV, including the Filter Business, has violated certain patents
held by Lemelson. Costs sought include compensation for past violations
and the requirement that Mark IV pay future royalties under one or more
Lemelson patent. As a part of the sale transaction to Arvin, the
ultimate liability for all such costs related to the operations of the
Filter Business has been assumed by Arvin. At the present time, it is
not practical to determine the range of financial exposures assumed by
Arvin in that regard.
The Filter Business is involved in various other legal and
environmental matters. In the opinion of Mark IV management, the
ultimate cost to resolve these matters will not have a material adverse
effect on the Filter Business' financial position, results of
operations or cash flows.
15. ANCILLARY AGREEMENTS AND COMMITMENTS
A number of lease commitments and other service arrangements were
provided to the Filter Business by Mark IV on an informal basis, with
costs allocated on a pre-determined basis in an arms-length manner. As
a part of the sale transaction between Mark IV and Arvin, a number of
side agreements (Ancillary Agreements) were entered into in order to
formalize such shared activities and/or commitments. These agreements
were established on an arms-length basis, and provide for the following
arrangements (dollars in thousands):
>> Fayetteville Distribution Center - leased from Mark IV at an annual
cost of approximately $1.3 million (plus operating costs), for a
10-year term, with renewal options.
>> Tulsa (Warren Place) Administration Center - leased from Mark IV at an
annual cost of approximately $500,000 (plus operating costs), through
June 30, 2000.
>> Other Lease Commitments - short-term lease arrangements to and from
Mark IV, requiring net monthly payments to Mark IV of approximately
$21,000.
>> Distribution Agreements - administration and distribution
services provided by Mark IV in Canada, Italy, Germany and
Australia. The costs for such services include a fixed charge element
of approximately $60,000 per month, plus a variable cost element
based upon sales volume. Such services are expected to be provided
on a month-to-month basis, for no more than one year.
>> Supply Agreements - certain products will be provided to/from Mark IV
for sale by the other party, for a two-year period of time. The
agreements include specific pricing and payment terms, with
provisions for increases in the event the manufacturing party incurs a
certain level of cost increases. A continuation of such arrangements
after the initial 2-year period would occur upon the mutual agreement of
the parties.
PUROLATOR AUTOMOTIVE FILTER BUSINESS
NOTES TO COMBINED FINANCIAL STATEMENTS
JANUARY 31, 1999
>> Other Transition Services - a number of agreements have been established
to facilitate each party's ability to operate in the post-closing
environment with the least amount of disruption, with the intention for
each to be completely self-sufficient at the earliest possible date.
Such agreements provide for the sharing of certain computer hardware and
personal computer related equipment, transportation equipment, software
programs and systems, information networks, communication lines,
personnel and other items. The costs for all such services are assessed
on a monthly basis, to the extent remaining in place, and are expected
to result initially in a net payment to Mark IV of approximately $25,000
per month (plus certain directly allocated costs, such as long distance
telephone services). It is anticipated that substantially all of such
shared arrangements will be eliminated in less than one year.
The accompanying combined statement of income for the eleven-month
period ended January 31, 1999 reflects the cost of the above
arrangements as if such formal agreements were in effect on March 1,
1998, the beginning of such period.
16. OTHER RELATED PARTY TRANSACTIONS
Mark IV provides or coordinates treasury, tax, audit, legal, medical
and risk insurance, and employee benefits administration services to
the various operating locations of the Filter Business. Insurance,
legal, audit and direct employee benefits-related costs are charged
specifically to the Filter Business. An allocation of Mark IV's costs
for tax, treasury and other administrative work performed is not made,
as they are not believed to be significant. All inter-company accounts
with Mark IV, and other affiliates outside of the Filter Business, have
been included as a part of net assets.
Bank indebtedness was established for the M-Filter business unit during
the eleven-month period ended January 31, 1999. However, the
substantial part of the Company's financing needs are established
through inter-company borrowing arrangements with Mark IV or one of its
affiliates outside of the Filter Business. No interest costs have been
allocated to the Filter Business for any of its financing needs;
therefore, the accompanying combined statement of income does not
reflect any costs for interest during the eleven-month period ended
January 31, 1999.
During the eleven-month period ended January 31, 1999, the Filter
Business was charged approximately $600,000 by a Mark IV affiliate for
costs associated with the development of a new combination water pump
and cooler product. Such amount has been expensed in the accompanying
combined statement of income for such period, and included in the
research and development cost line.
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement of Arvin Industries, Inc. on
Form S-3 (File No. 333-78131) and in the Registration Statements on Form S-8
(File Nos. 333-76232, 333-76239, 333-35529, 333-35531, 333-27081, 333-16833,
33-50371, 33-21717, and 33-40438) of our report dated May 7, 1999, on our audit
of the consolidated financial statements of the Purolator Automotive Filter
Business as of January 31, 1999 and for the eleven months in the period then
ended, which report is included in this Form 8-K.
PricewaterhouseCoopers, LLP
Rochester, New York
May 12, 1999
Item 7(b) Pro Forma Financial Information
The following unaudited pro forma combined financial information gives effect
to the acquisition of Purolator Products ("Purolator") by the registrant in a
transaction accounted for as a purchase. It is based on and should be read in
conjunction with the audited financial statements and notes thereto appearing
in the registrant's annual report on Form 10-K for the year ended January 3,
1999 and the financial statements of Purolator included elsewhere in this Form
8-K/A. The unaudited combined pro forma statement of financial condition gives
effect to the acquisition of Purolator as if the acquisition had occurred on
January 3, 1999. The unaudited combined pro forma statement of operations
gives effect to the acquisition of Purolator as if the acquisition had occurred
on December 29, 1997.
The unaudited pro forma adjustments are based upon available information,
preliminary estimates of fair value, and certain assumptions that management
believes are reasonable in the circumstances. The allocation of the purchase
price, which was based on preliminary estimates of the fair value of assets and
liabilities, may vary once the actual fair value of the assets and liabilities
are determined. The unaudited pro forma combined financial information does not
purport to represent what the registrant's financial position or results of
operations would actually have been if the acquisition of Purolator had occurred
on January 3, 1999 or December 29, 1997, nor to project the registrant's
financial position or results of operations for any future date or period.
Arvin Industries, Inc.
Pro Forma Combined Statement of Financial Condition (Unaudited)
---------------------------------------------------------------
As of January 3, 1999
(Dollars in millions, except per share amounts)
Historical Pro forma
------------------------- --------------------------
Acquisition
Arvin (1) Purolator (2)Adjust. (3)Combined
--------- --------- ---------- -----------
Assets
Current Assets:
Receivables, net of allowances $ 319.0 $ 52.2 $ - $ 371.2
Inventories 151.3 53.6 - 204.9
Other current assets 210.7 11.6 9.4 (a) 235.4
3.7 (e)
----- --- --- -----
Total current assets 681.0 117.4 13.1 811.5
----- ----- --- -----
Non-Current Assets:
Property, plant and equipment 1,289.8 126.7 (27.7) (b) 1,388.8
Less: Accumulated depreciation (704.0) (27.7) 27.7 (b) (704.0)
------ ----- ---- ------
Net property, plant and equipment 585.8 99.0 - 684.8
Goodwill, net 170.2 84.3 5.2 (d) 259.7
Other assets 209.5 21.5 - 231.0
----- ---- ----- -----
Total non-current assets 965.5 204.8 5.2 1,175.5
----- ----- ----- -------
$ 1,646.5 $ 322.2 $ 18.3 $ 1,987.0
========= ========== ========== ==========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt $ 10.1 $ 6.3 $ 125.0 (a)$ 141.4
Accounts payable 337.9 18.3 - 356.2
Other current liabilities 168.9 9.6 9.7 (e) 188.2
---- ---- ---- ----
Total current liabilities 516.9 34.2 134.7 685.8
----- ---- ----- -----
Long-term debt 307.7 - 150.0 (a) 457.7
Other long-term liabilities and
minority interest 258.2 21.6 - 279.8
Shareholders' Equity:
Common stock 68.8 - - 68.8
Capital in excess of par value 305.2 - - 305.2
Retained earnings 334.3 - - 334.3
Net assets - 266.4 (266.4) (c) -
Other shareholders' equity (144.6) - - (144.6)
------ ------ ------ ------
Total shareholders' equity 563.7 266.4 (266.4) 563.7
----- ----- ------ -----
$ 1,646.5 $ 322.2 $ 18.3 $ 1,987.0
========= ========== ============= ==========
<FN>
(1) The historical statement of financial condition for Arvin is as of January 3, 1999."
(2) The historical statement of financial condition for Purolator is as of January 31, 1999 ."
(3) See Notes to Pro Forma Combined Financial Statements
</FN>
Arvin Industries, Inc.
Pro Forma Combined Statement of Operations (Unaudited)
------------------------------------------------------
For the Year Ended January 3, 1999
(Dollars in millions, except per share amounts)
Historical Pro forma
----------------------- -----------------------
Acquisition
Arvin (1) Purolator (2) Adjust. (4) Combined
--------- ------------- ----------- --------
Net Sales $ 2,498.7 $ 342.4 $ - $ 2,841.1
Costs and Expenses:
Cost of goods sold (3) 2,128.5 281.3 - 2,409.8
Selling, operating general
and administrative 191.5 42.2 - 233.7
Corporate general and administrative 24.3 - - 24.3
Interest expense 35.8 - 17.9 (a) 53.7
Other expense, net 5.9 2.4 - 8.3
------- ----- ----- -------
2,386.0 325.9 17.9 2,729.8
------- ----- ----- -------
Earnings Before Income Taxes 112.7 16.5 (17.9) 111.3
Income taxes (38.3) (6.0) 6.9 (b) (37.4)
Minority interest in net income of
consolidated subsidiaries (1.1) - - (1.1)
Equity earnings of affiliates 5.1 1.5 - 6.6
--------- --------- --------- ---------
Net Earnings $ 78.4 $ 12.0 $ (11.0) $ 79.4
========= ========= ========= =========
Earnings per common share:
Basic $ 3.29 $ 3.33
Diluted $ 3.23 $ 3.27
Average Common Shares Outstanding (000's)
Basic 23,835 23,835
Diluted 24,249 24,249
<FN>
(1) The historical statement of operations for Arvin is for the fiscal year ended January 3, 1999.
(2) The historical statement of operations for Purolator is for the audited 11-month period ended
January 31, 1999, plus the unaudited month of February 1998.
(3) Cost of goods sold for Purolator includes $7.4 million for repositioning charges - see Note 2 to
financial statements for the 11-month period ended January 31, 1999 (Item 7a).
(4) See Notes to Pro Forma Combined Financial Statements
</FN>
Notes to Pro Forma Combined Financial Statements
Note 1. The combined pro forma Statement of Financial Condition has been
prepared to reflect the acquisition of Purolator by Arvin Industries, Inc. for
the aggregate purchase price of approximately $272 million subject to final
adjustment, which includes the assumption of $6 million in debt. Pro forma
adjustments are made to reflect:
(a) The issuance of $150.0 million of 7 1/8 percent notes maturing in March 2009
and the borrowing of $125.0 million under a committed bank facility to
fund the $266 million cash portion of the purchase price of Purolator and
the resulting $9.4 million excess funds;
(b) The adjustment of Purolator property, plant, and equipment to estimated
fair value, subject to completion of an independent appraisal;
(c) The elimination of net assets in the equity account of Purolator;
(d) The incremental excess of acquisition cost over the estimated fair value of
net assets acquired (goodwill to be amortized over 40 years); and
(e) The $9.7 million liability estimated for exit costs as a result of
severance cost and the closure of certain facilities, and the related
$3.7 million estimated deferred tax benefit.
Note 2. The combined pro forma Statement of Operations gives effect to the
following pro forma adjustments necessary to reflect the acquisitions outlined
in Note 1 above:
(a) Annual interest charges on $150.0 million of 7 1/8 percent notes maturing
in March 2009 and a $125.0 million bank facility, borrowed in connection
with the acquisition. The interest rate on the $125 million bank facility
is variable and 5.60% was assumed in the pro forma. A one-eighth of
one-percent change in the interest rate on the $125 million facility would
result in a change in interest expense of approximately .2 million; and
(b) Income tax adjustment to reflect the U.S. (federal and state) statutory
effective tax rate of 38.5 percent.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Arvin Industries, Inc.
---------------------------------
Richard A. Smith
Vice President-Finance and
Chief Financial Officer
Date: May 11, 1999