SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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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): November 9, 1999
Commission file number 1-13879
OCTEL CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 98-0181725
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Global House
Bailey Lane
Manchester
United Kingdom M90 4AA
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 011-44-161-498-8889
Item 2 of Form 8-K dated November 9, 1999, filed by Octel Corp. ("Octel") on
November 12, 1999, is hereby updated and amended as follows:
ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
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Regarding the Federal Trade Commission ("FTC") Agreement and Consent Order
approving the OBOAdler acquisition, the 60 day public notice period referenced
in the November 9, 1999 Form 8-K expired on December 9, 1999. Thereafter the
FTC gave final approval and as a result the Agreement and Consent Order became
final as of December 28, 1999.
Item 7 of the Current Report on Form 8-K dated November 9, 1999, filed by Octel
Corp. ("Octel") on November 12, 1999, is hereby amended as set out below.
ITEM 7 - FINANCIAL STATEMENTS
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(a) Financial Statements of Business Acquired.
The Consolidated Financial Statements of OBOAdler Company Limited (OBOAdler) as
of June 30, 1999 and for the period then ended are filed herewith as Exhibit
99.1.
(b) Unaudited Proforma Combined Financial Information.
On November 9, 1999 Octel completed its acquisition of all the outstanding
shares of OBOAdler, for payment of $94.5 million. The purchase price was funded
by entering into a $100 million credit agreement with Barclays Bank plc
repayable by December 2002. OBOAdler acquired the Alcor group of companies on
June 4, 1999. The Alcor group is based in Baar, Switzerland and includes a TEL
manufacturing plant in Germany.
The business combination will be accounted for as a purchase.
The following unaudited pro forma balance sheet as at September 30, 1999
illustrates the effect of the acquisition of OBOAdler as if it had taken place
on September 30, 1999. The unaudited pro forma statements of income illustrate
the results of operations for the year ended December 31, 1998 and the nine
months ended September 30, 1999 as if the acquisition occurred on January 1,
1998.
The unaudited proforma combined financial statements have been adjusted to give
effect to (i) the goodwill and associated amortization expense generated by the
acquisition of OBOAdler referred to above, (ii) the related financing
transactions and associated interest expense (described in note d), (iii) the
uplift in the customer contracts intangible asset (described in note c) and (iv)
the elimination of sales and purchases between Octel and OBOAdler group
(described in note g).
These unaudited pro forma financial statements should be read in conjunction
with the historical financial statements of Octel and OBOAdler group. The
historical financial statements of Octel are contained in Octel's Quarterly
Report on Form 10-Q for the nine months ended September 30, 1999 and in Octel's
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Annual Report on Form 10-K for the year ended December 31, 1998. The historical
consolidated financial statements of OBOAdler group for the period ended June
30, 1999 are filed herein as exhibit 99.1.
For pro forma presentation, OBOAdler group's historical financial statements
have been conformed to Octel's calendar year by deducting the results for the
six months ended June 30, 1999 and adding the results for the six months ended
June 30, 1998. The unaudited pro forma financial statements for the nine months
ended September 30, 1999 include OBOAdler's unaudited results for the three
months to September 30, 1999 and the unaudited balance sheet as at that date.
The unaudited pro forma financial statements are for illustrative purposes only
and are not meant to be indicative of actual results that may have been achieved
had the transaction occurred as of the date indicated above, nor do they purport
to indicate results which may be attained in the future.
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PRO FORMA COMBINED BALANCE SHEET AT SEPTEMBER 30, 1999
(Unaudited)
(millions of dollars) Octel OBOAdler Proforma Adjustments Combined
(Note a)
ASSETS
Current assets:
Cash and cash equivalents 25.8 21.9 47.7
Accounts receivable 153.7 17.3 g. (2.2) 168.8
Inventories 62.7 5.0 67.7
Prepaid expenses 5.1 1.4 6.5
----- -------- -------- -------- ------- --------
Total current assets 247.3 45.6 g. (2.2) 290.7
Property, plant and equipment 106.9 3.2 110.1
Investments b. 100.4 c.(100.4)
Goodwill 332.1 48.0 c. 15.6 395.7
Intangible asset 21.3 c. 3.7 25.0
Prepaid pension cost 73.4 73.4
Other assets 22.4 b. (10.4) 12.0
----- -------- -------- -------- ------- --------
782.1 118.1 b. 90.0 c. (81.1) g. (2.2) 906.9
===== ======== ======== ======== ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Accounts payable and accrued
expenses 107.0 20.7 g. (2.2) 125.5
Accrued income taxes 39.2 2.9 42.1
Current portion of long-term
debt 60.0 60.0
----- -------- -------- -------- ------- --------
Total current liabilities 206.2 23.6 g. (2.2) 227.6
Plant closure provisions 30.9 11.0 41.9
Deferred income taxes 23.7 0.9 24.6
Long-term debt 194.1 90.0 b. 90.0 c. (90.0) 284.1
Other liabilities 2.8 1.5 4.3
Stockholders' equity
Common stock 0.1 0.8 c. (0.8) 0.1
Additional paid-in capital 276.1 0.7 c. (0.7) 276.1
Treasury stock (14.2) (14.2)
Retained earnings 74.3 (10.5) c. 10.5 74.3
Accumulated other
comprehensive income (11.9) 0.1 c. (0.1) (11.9)
----- -------- -------- -------- ------- --------
Total stockholders' equity 324.4 (8.9) c. 8.9 324.4
----- -------- -------- -------- ------- --------
782.1 118.1 b. 90.0 c. (81.1) g. (2.2) 906.9
===== ======== ======== ======== ======= ========
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PRO FORMA COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED
DECEMBER 31, 1998
(Unaudited)
(millions of dollars) Octel OBOAdler Proforma Adjustments Combined
(Note a)
Net sales 465.0 79.9 544.9
Cost of goods sold 244.3 42.7 287.0
------ -------- ------- -------- ------- --------
Gross profit 220.7 37.2 257.9
Sales, general and admin. 43.2 2.5 45.7
Amortization of intangible assets 42.6 e. 17.7 60.3
------ -------- ------- -------- ------- --------
85.8 2.5 e. 17.7 106.0
------ -------- ------- -------- ------- --------
Operating income 134.9 34.7 e. (17.7) 151.9
Interest expense/(income) 22.5 (1.3) d. 7.1 28.3
Other expense/(income) 0.5 (1.6) (1.1)
------ -------- ------- -------- ------- --------
Income before income taxes 111.9 37.6 d. (7.1) e. (17.7) 124.7
Income taxes 41.5 7.1 f. (2.1) 46.5
------ -------- ------- -------- ------- --------
Net income 70.4 30.5 d. (7.1) e. (17.7) f. 2.1 78.2
====== ======== ======= ======== ======= ========
Earnings per share:
Basic 4.85 5.39
------ --------
Diluted 4.85 5.39
------ --------
Weighted average shares outstanding
(in thousands)
Basic 14,514 14,514
------ --------
Diluted 14,514 14,514
------ --------
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PRO FORMA COMBINED STATEMENT OF INCOME FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 1999
(Unaudited)
(millions of dollars) Octel OBOAdler Proforma Adjustments Combined
(Note a)
Net sales 384.7 52.4 g. (2.2) 434.9
Cost of goods sold 238.2 24.7 g. (2.2) 260.7
------ -------- ------- ------- ------- --------
Gross profit 146.5 27.7 174.2
Sales, general and admin. 36.4 1.5 37.9
Amortization of intangible assets 34.4 6.1 e. 7.2 47.7
------ -------- ------- ------- ------- --------
70.8 7.6 e. 7.2 85.6
------ -------- ------- ------- ------- --------
Operating income 75.7 20.1 e. (7.2) 88.6
Interest expense/(income) 16.5 2.2 d. 2.5 21.2
Other expense/(income) 0.6 (4.2) (3.6)
Income before income taxes 58.6 22.1 d. (2.5) e. (7.2) 71.0
Income taxes 24.2 4.8 f. (1.4) 27.6
------ -------- ------- ------- ------- --------
Net income 34.4 17.3 d. (2.5) e. (7.2) f. 1.4 43.4
====== ======== ======= ======= ======= ========
Earnings per share:
Basic 2.48 3.12
------ --------
Diluted 2.46 3.10
------ --------
Weighted average shares outstanding
(in thousands)
Basic 13,895 13,895
------ --------
Diluted 13,992 13,992
------ --------
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
a. The consolidated financial statements of OBOAdler have been prepared in
accordance with US GAAP and translated into US$ at the following rates:
September December
30, 1999 31, 1998
$1 to CHF 1.5006 1.3735
DM 1.8365 1.6655
GBP 0.6072 0.6010
b. Reflects the reclassification of $10.4 million Octel advances and
acquisition costs already incurred in respect of OBOAdler from other assets
to investments and a further $90 million investment by Octel in OBOAdler,
financed by amounts drawn down under the credit arrangement dated June 3,
1999 with Barclays Bank plc.
c. Reflects the adjustment to create the equity position of the combined group
by netting off Octel's investment against OBOAdler group creditor, common
stock and pre-acquisition reserves and retained earnings. The intangible
asset relating to OBOAdler group customer contracts is uplifted by $3.7
million to its estimated value of $25 million. The balance of $15.6 million
is recognized as goodwill, which together with the $48 million goodwill
arising on OBOAdler's balance sheet leaves a total of $63.6 million
goodwill in the combined balance sheet relating to the Alcor group of
companies.
d. Reflects the increase in interest expense arising from $100 million Senior
Debt raised in connection with the acquisition ($90 million in note b.
above and $10 million raised previously by Octel) had the Senior Debt been
in place throughout the period.
e. Reflects the amortization of goodwill over 10 years from January 1, 1998,
and of the OBOAdler customer list over the relevant contract periods, the
average period being 2.25 years.
f. Reflects the reduction in income tax arising as a result of the increase in
interest expense in d. above.
g. Reflects the removal of intercompany sales and purchases between Octel and
OBOAdler and of the related period end intercompany balances.
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(c) Exhibits.
Number Exhibit
7.1* Share purchase agreement between OBOAdler Holdings Limited and
The Associated Octel Company Limited relating to the sale and
purchase of the whole of the issued share capital of OBOAdler
Company Limited, dated June 1, 1999.
7.2* $100,000,000 term loan agreement between Octel Corp., Octel
Associates, Barclays Capital, Barclays Bank plc and others, dated
June 3, 1999.
99.1 Consolidated financial statements of OBOAdler Company Limited, as
of June 30, 1999 and for the year then ended.
* Previously filed.
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SIGNATURE
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.
OCTEL CORP.
Date: January 20, 2000 By: /s/ Alan G Jarvis
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Alan G Jarvis
Vice President and Chief Financial Officer
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