Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8K/A ON ACQUISITION OF VOCOLLECT - Intermec, Inc. | closingmerger_amendment.htm |
| EX-23.1 - CONSENT OF URISH POPECK & CO. LLC - Intermec, Inc. | exhibit23_1.htm |
| EX-99.2 - 2010 AUDITED CONSOLIDATED FINANCIAL STATEMENTS - Intermec, Inc. | vocollect_financials.htm |
| EX-99.1 - 2009 AUDITED CONSOLIDATED FINANCIAL STATEMENTS - Intermec, Inc. | vocollect_financials2009.htm |
| EX-23.2 - CONSENT OF MCGLADREY & POLLEN LLP - Intermec, Inc. | exhibit23_2.htm |
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial information gives effect to Intermec, Inc.’s (“Intermec”) acquisition of Vocollect, Inc. (Vocollect”) on March 3, 2011.
The unaudited pro forma combined condensed consolidated statement of operations for the year ended December 31, 2010 (the “Pro Forma Statement of Operations”) has been prepared to reflect the Vocollect acquisition, as if the transaction had occurred on January 1, 2010. A pro forma balance sheet is not provided as the transaction is fully reflected in the condensed consolidated balance sheet presented in Intermec’s Form 10-Q filing for the quarter ended April 3, 2011.
The unaudited Pro Forma Statement of Operations is presented for illustrative purposes only and is not necessarily indicative of the combined condensed consolidated results of operation in future periods or the results that actually would have been realized had Intermec and Vocollect been a combined company during the specified period. The unaudited pro forma financial information, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements of Intermec, included in its Annual Report on Form 10-K for the year ended December 31, 2010 and its Quarterly Report on Form 10-Q for the fiscal quarter ended April 3, 2011.
The unaudited Pro Forma Statement of Operations is based upon the historical financial statements of Intermec and Vocollect and was prepared using the acquisition method of accounting in accordance with FASB Accounting Standards Codification 805: Business Combination ("ASC 805"). Under the acquisition method of accounting, the accounting price is allocated to the assets acquired and the liabilities assumed based on their estimated fair values. Estimates of the fair values of Vocollect have been combined with the historical values of the assets and liabilities of Intermec in the Pro Forma Financial Information. The purchase price allocation is preliminary and may be subject to change prior to finalization.
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INTERMEC, INC.
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PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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(In thousands, except per share amounts)
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For the Year Ended December 31, 2010
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(Unaudited)
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Pro Forma
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Note
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Pro Forma
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|||||||||||||||||
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Intermec, Inc.
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Vocollect, Inc.
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Adjustments
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Reference
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Combined
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Revenues:
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Product
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$ | 542,783 | $ | 91,751 | $ | 199 | e , f | $ | 634,733 | ||||||||||
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Service
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136,328 | 27,565 | (7,639 | ) | b, e , f | 156,254 | |||||||||||||
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Total revenues
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679,111 | 119,316 | (7,440 | ) | 790,987 | ||||||||||||||
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Costs and expenses:
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Cost of product revenues
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338,220 | 33,986 | 10,851 | c , e , f | 383,057 | ||||||||||||||
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Cost of service revenues
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79,619 | 4,947 | 4,760 | e , f | 89,326 | ||||||||||||||
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Research and development
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67,271 | 22,124 | 2,277 | f | 91,672 | ||||||||||||||
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Selling, general and administrative
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191,070 | 46,092 | (4,031 | ) | c, f | 233,131 | |||||||||||||
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Gain on intellectual property sales
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(3,148 | ) | - | (3,148 | ) | ||||||||||||||
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Restructuring charges
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2,780 | - | 2,780 | ||||||||||||||||
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Impairment of facility
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3,008 | - | 3,008 | ||||||||||||||||
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Total costs and expenses
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678,820 | 107,149 | 13,857 | 799,826 | |||||||||||||||
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Operating income (loss)
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291 | 12,167 | (21,297 | ) | (8,839 | ) | |||||||||||||
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Interest income
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1,229 | (522 | ) | a (i) | 707 | ||||||||||||||
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Interest benefit
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(1,296 | ) | (277 | ) | (2,125 | ) |
a(ii)
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(3,698 | ) | ||||||||||
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Income (loss) before income taxes
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224 | 11,890 | (23,944 | ) | (11,830 | ) | |||||||||||||
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Income tax expense
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5,549 | 4,750 | (9,395 | ) | d | 904 | |||||||||||||
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Net (loss) income
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$ | (5,325 | ) | $ | 7,140 | $ | (14,549 | ) | $ | (12,734 | ) | ||||||||
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Basic loss per share
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$ | (0.09 | ) | $ | (0.21 | ) | |||||||||||||
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Diluted loss per share
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$ | (0.09 | ) | $ | (0.21 | ) | |||||||||||||
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Shares used in computing basic loss per share
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61,364 | 61,364 | |||||||||||||||||
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Shares used in computing diluted loss per share
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61,364 | 61,364 | |||||||||||||||||
See accompanying notes
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
1. BASIS OF PRESENTATION
On March 3, 2011, Intermec acquired all of Vocollect’s outstanding shares of common stock and in-the-money options for an aggregate purchase price of $196 million in cash. We have included Vocollect in our condensed consolidated financial statements from the date of acquisition in our Form 10-Q quarterly filing for April 3, 2011.
The unaudited Pro Forma Statements of Operation for the year ended December 31, 2010, give effect to Intermec’s acquisition as if the transaction had occurred on January 1, 2010, consolidating the results of Intermec with the results of Vocollect for the year ended December 31, 2010. The unaudited Pro Forma Statement of Operations is based upon the historical financial statements of Intermec and Vocollect and was prepared using the acquisition method of accounting in accordance with ASC 805. Under the acquisition method of accounting, the acquisition price is allocated to the assets acquired and the liabilities assumed based on their estimated fair values. Estimates of the fair values of Vocollect have been combined with the historical values of the assets and liabilities of Intermec in the Pro Forma Financial Information. The acquisition price allocation is preliminary and may be subject to change prior to finalization.
2. VOCOLLECT ACQUISITION
The preliminary allocation of the Vocollect acquisition price, assets acquired and liabilities assumed, net of cash acquired is as follows (in thousands):
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March 3, 2011
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Accounts receivable (gross contractual receivables totals of $21,461)
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$
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20,569
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Inventories
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6,800
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| Current deferred tax assets | 7,552 | |||
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Other current assets
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1,606
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Goodwill (including $7.9 million for assembled workforce)
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131,167
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Intangibles assets
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85,600
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Property, plant and equipment
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10,060
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Other assets
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3,235
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Accounts payable
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(6,818
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)
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Payroll and related expenses
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(531
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)
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Deferred revenue
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(11,616
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)
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Accrued expenses
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(11,231
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)
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| Deferred tax liabilities | (35,370 | ) | ||
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Long-term deferred revenue
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(4,282
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)
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Other long-term liabilities
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(370
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)
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Total net assets acquired
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$
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196,371
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The intangible assets have a weighted average useful life of approximately 9 years and are comprised of the following:
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Intangible Assets
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Amortization
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Value
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Period
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(thousands)
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(years)
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Developed technology
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$ | 40,000 | 5 | |||||
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In-process research and development
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1,900 | 7 | ||||||
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Customer relationships
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36,000 | 13 | ||||||
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Registered trademarks
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5,200 | 10 | ||||||
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Lease agreements
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2,500 | 8 | ||||||
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Total
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$ | 85,600 | ||||||
The total purchase price allocation is preliminary and may be subject to change prior to finalization in the second quarter of 2011.
3. DEBT
Concurrent with the acquisition of Vocollect, effective March 3, 2011, we amended our credit agreement with Wells Fargo Bank, National Association (the "Bank"), to provide a new three year, $100 million, secured revolving credit facility (the "New Facility") which matures on March 3, 2014. The new credit agreement and New Facility were filed with our Form 8-K filings on January 18, 2011, and March 3, 2011. The New Facility includes standard financial covenants and is secured by pledges of equity in and assets of certain of our domestic subsidiaries and guaranties of payment obligations from certain of our domestic subsidiaries.
The amount outstanding under the New Facility bears interest at a variable rate equal to LIBOR plus 1.75%. We will also be required to pay a fee ranging from 1.25% to 1.75% on the amount drawn under each letter of credit issued and outstanding under the New Facility. The fee on the unused portion of the New Facility ranges from 0.15% to 0.25%. The unused portion of the New Facility was $1.5 million at April 3, 2011.
If we default under certain provisions of the New Facility, the Bank may accelerate payment of amounts due under the loan, and the Bank’s obligation to extend further credit will cease. The Bank may also exercise its security interest in of our equity interests and the assets of certain of our domestic subsidiaries and/or call the guaranties of payment obligations made by certain of our domestic subsidiaries.
4. ACQUISITION-RELATED COSTS
In conjunction with the acquisition of Vocollect in first quarter of 2011, Intermec has incurred certain direct and incremental acquisition-related charges, totaling approximately $4.4 million, related primarily to investment banking, legal, accounting, and other professional services.
5. PRO FORMA ADJUSTMENTS
The Pro Forma Financial Information included herein was prepared using the acquisition method of accounting for the business combination and is based upon the historical financial statements of Intermec and Vocollect and includes certain adjustments to give effect to the acquisition of Vocollect. As the adjustments are based upon currently available preliminary information and certain assumptions, the actual adjustments will likely differ from the pro forma adjustments. However, Intermec believes that the preliminary purchase price allocation and other related assumptions utilized in preparing the Pro Forma Financial Information provide a reasonable basis for presenting the pro forma effects of the acquisition of Vocollect.
After giving effect to the adjustments described below, we believe that Vocollect’s historical accounting policies align with Intermec’s accounting policies in all material respects.
The adjustments made in preparing the Pro Forma Financial Information are as follows:
(a) Debt
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i.
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Interest Expense
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An interest expense adjustment of $2.1 million has been recorded for interest charges in 2010. Consistent with the terms of the New Facility described in Note 3, the interest calculation was based on $97 million in borrowing, $1.5 million in letters of credit and $1.5 million of unused borrowing.
The variable interest for the New Facility in 2010 of 2.16% was calculated based on the average 3 month LIBOR rate.
The sensitivity of interest rate fluctuations to interest expense is illustrated as follows: a 0.125% (12.5 basis points) variance in the interest rate in the Pro Forma Statement of Operations equates to an annual variance in interest expense of $0.1 million.
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ii.
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Interest Income
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An adjustment of $0.5 million was recorded to eliminate forgone interest income for the year ended December 31, 2010. The adjustment was calculated using Intermec’s actual 2010 average interest rate earned on cash and cash equivalents and short-term investments of 0.53%.
(b) Deferred Revenue Related to Services Agreements
As the result of the fair-value adjustment to deferred revenue an adjustment to reduce service revenue was made for the year ended December 31, 2010, of $7.4 million.
5. PRO FORMA ADJUSTMENTS (CONTINUED)
(c) Amortization Expense Related to Acquired Intangible Assets
Acquired finite-lived intangible assets were recorded at their estimated fair value of approximately $85.6 million. The intangible assets are subject to a weighted average useful life of approximately 9 years; $40 million was assigned to developed technology (5 years), $1.9 million was assigned to in-process research and development (7 years), $36 million was assigned to customer relationships (13 years), $5.2 million to registered trademarks (10 years), and $2.5 million to lease agreements (8 years).
The intangible assets are amortized based on the estimated economic value of each asset category over the useful life of the acquired intangible assets. The table below summarizes the annual amortization for the first year. An adjustment to record estimated amortization expense of approximately $13.9 million was made for the year ended December 31, 2010, and was reflected in the cost of product revenues line item in the Pro Forma Statement of Operations. The table below breaks the intangible amortization adjustment by intangible category (in thousands).
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2010
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Developed technology
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$
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11,307
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In-process research and development
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312
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| Lease agreements | 315 | |||
| Total charges to cost of revenue | 11,934 | |||
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Customer relationships
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1,548
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Trademarks and trade names
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375
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Total charges to selling, general and administrative
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1,923
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Total
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$
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13,857
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Estimated future amortization expense for the acquired intangible assets for the succeeding five fiscal years on a pro forma basis is as follows (in millions): 2011 - $16.8; 2012 - $14.5; 2013 - $8.8; 2014 - $5.5 and 2015 - $4.3.
(d) Income Taxes
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Adjustments to income tax (provision) benefit have been recorded for the Pro Forma Statement of Operations adjustments of $9.4 million at the statutory rate.
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(e) Vocollect Revenue and Related Cost Classification
Certain revenue balances and associated costs from the Vocollect financial statements were reclassified so their presentations would be consistent with those of Intermec. Specifically, we have reclassified $2.3 million previously reported in product revenues to service revenues and $0.9 million previously reported in cost of product revenues to cost of service revenues.
(f) Intermec Reclassifications
Certain reclassifications have been made to the 2010 consolidated statement of operations for Intermec, Inc. to conform to the 2011 presentation. Specifically, we have reclassified certain operating expenses previously reported in selling, general and administrative expense that totaled $6.1 million and are now reported in cost of service revenues and research and development of $3.8 million and $2.3 million, respectively. We have also reclassified certain price exceptions and other incentives given to our distributors and resellers previously reported as a reduction in product revenues and are now included a portion of these as a reduction in service revenues of $2.5 million. These reclassifications had no impact on previously reported earnings (loss) from continuing operations or net income (loss).
(g) Loss per Common Share
Pro forma loss per common share for the year ended December 31, 2010, have been calculated using the same weighted average number of common shares outstanding used by Intermec in its earnings per share calculation.