Attached files
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The unaudited pro forma condensed consolidated financial data set forth below gives effect to the acquisition of GenWoods HoldCo, LLC (“Woods Holdings”) and its wholly owned subsidiary, Woods Equipment Company (“Woods”) by SP Companies, Inc., an indirect wholly-owned subsidiary of Blount International, Inc. (the “Company”) (the “Acquisition”) by the application of the pro forma adjustments to the historical consolidated financial statements of the Company. The unaudited pro forma condensed consolidated financial data should be read in conjunction with the Company’s most recent annual report on Form 10-K filed March 9, 2011, and with the audited consolidated financial statements and related notes as of January 1, 2011, and the unaudited consolidated financial statements and related notes as of July 2, 2011 of GenWoods HoldCo, LLC included elsewhere in this report, and the accompanying notes to the unaudited pro forma condensed consolidated financial data.
The unaudited pro forma condensed consolidated balance sheet data as of June 30, 2011 gives effect to the Acquisition as if it occurred on June 30, 2011. The unaudited pro forma condensed consolidated statements of operations data give effect to the Acquisition as if it occurred on January 1, 2010. The unaudited pro forma condensed consolidated financial data do not purport to represent what the Company’s results of operations or financial position would have been if the Acquisition had occurred as of the dates indicated or what such results will be for any future periods. The actual results in the periods following the Acquisition may differ significantly from that reflected in the unaudited pro forma condensed consolidated financial data for a number of reasons including, but not limited to, differences between the assumptions used to prepare the unaudited pro forma condensed consolidated financial data and actual amounts, finalization of the purchase price, and the final determination of certain preliminary tax effects. In addition, no adjustments have been made for non-recurring costs related to the Acquisition, including costs reflected in the Woods Holdings historical financial statements that are not expected to continue under the Company’s ownership, potential upgrades related to information technology integration, accounting migration and other activities necessary to handle financial reporting, tax and regulatory compliance in the future.
The unaudited pro forma condensed consolidated financial data has been prepared giving effect to the Acquisition accounted for as a purchase business combination in accordance with FASB Accounting Standards Codification section 805, “Business Combinations”. The total purchase price for Woods was allocated to the net assets based upon preliminary estimates of fair value. The purchase price allocations for the Acquisition are preliminary and further refinements may be made based on the results of final valuations and final settlement of the purchase price.
The unaudited pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable, which assumptions are described in the accompanying notes.
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Index
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| Unaudited Pro Forma Condensed Consolidated Financial Data |
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| Unaudited Pro Forma Condensed Consolidated Balance Sheet Data as of June 30, 2011 |
3 | |||
| Unaudited Pro Forma Condensed Consolidated Statement of Operations Data for the Year Ended December 31, 2010 |
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| Unaudited Pro Forma Condensed Consolidated Statement of Operations Data for the Six Months Ended June 30, 2011 |
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| Notes to Unaudited Pro Forma Condensed Consolidated Financial Data |
6-7 | |||
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET DATA
As of June 30, 2011
| (Amounts in thousands) |
Blount Historical |
Woods Historical |
Adjustments (1) |
Pro Forma | ||||||||||||
| Assets |
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| Current assets: |
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| Cash and cash equivalents |
$ | 80,527 | $ | 588 | $ | — | $ | 81,115 | ||||||||
| Accounts receivable, net |
100,511 | 40,666 | (449 | ) | 140,728 | |||||||||||
| Inventories |
102,980 | 33,019 | 3,461 | 139,460 | ||||||||||||
| Deferred income taxes |
10,579 | 2,137 | 684 | 13,400 | ||||||||||||
| Other current assets |
18,703 | 1,449 | 1,549 | 21,701 | ||||||||||||
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| Total current assets |
313,300 | 77,859 | 5,245 | 396,404 | ||||||||||||
| Property, plant, and equipment, net |
111,602 | 15,227 | 2,911 | 129,740 | ||||||||||||
| Deferred income taxes |
1,558 | — | 1,942 | 3,500 | ||||||||||||
| Intangible assets |
63,416 | — | 96,730 | 160,146 | ||||||||||||
| Goodwill |
107,422 | 4,342 | 51,592 | 163,356 | ||||||||||||
| Other assets |
25,945 | 1,305 | 1,951 | 29,201 | ||||||||||||
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| Total Assets |
$ | 623,243 | $ | 98,733 | $ | 160,371 | $ | 882,347 | ||||||||
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| Liabilities and Stockholders’ Equity |
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| Current liabilities: |
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| Current maturities of long-term debt |
$ | 10,250 | $ | 27,921 | $ | (22,457 | ) | $ | 15,714 | |||||||
| Accounts payable |
39,184 | 10,436 | 1,693 | 51,313 | ||||||||||||
| Accrued expenses |
54,348 | 8,188 | (1,999 | ) | 60,537 | |||||||||||
| Deferred income taxes |
1,061 | — | 1,619 | 2,680 | ||||||||||||
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| Total current liabilities |
104,843 | 46,545 | (21,144 | ) | 130,244 | |||||||||||
| Long-term debt, less current maturities |
334,625 | 5,231 | 185,145 | 525,001 | ||||||||||||
| Deferred income taxes |
16,162 | 1,922 | 39,744 | 57,828 | ||||||||||||
| Employee benefit obligations |
65,428 | — | — | 65,428 | ||||||||||||
| Other liabilities |
20,991 | 1,988 | 1,906 | 24,885 | ||||||||||||
| Stockholders’ equity |
81,194 | 43,047 | (45,280 | ) | 78,961 | |||||||||||
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| Total Liabilities and Stockholders’ Equity |
$ | 623,243 | $ | 98,733 | $ | 160,371 | $ | 882,347 | ||||||||
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The accompanying notes are an integral part of this Unaudited Pro Forma Condensed Consolidated Balance Sheet Data.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS DATA
Year Ended December 31, 2010
| (In thousands, except per share data) |
Blount Historical |
Woods Historical |
Adjustments | Pro Forma | ||||||||||||
| Sales |
$ | 611,480 | $ | 151,310 | $ | (198 | ) (2) | $ | 762,592 | |||||||
| Cost of sales |
407,454 | 114,156 | 9,514 | (2,3) | 531,124 | |||||||||||
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| Gross profit |
204,026 | 37,154 | (9,712 | ) | 231,468 | |||||||||||
| Selling, general, and administrative expenses |
118,471 | 20,730 | — | 139,201 | ||||||||||||
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| Operating income |
85,555 | 16,424 | (9,712 | ) | 92,267 | |||||||||||
| Interest income |
119 | — | — | 119 | ||||||||||||
| Interest expense |
(25,636 | ) | (1,103 | ) | (5,183 | ) (4) | (31,922 | ) | ||||||||
| Other income (expense), net |
(7,427 | ) | — | — | (7,427 | ) | ||||||||||
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| Income from continuing operations before income taxes |
52,611 | 15,321 | (14,895 | ) | 53,037 | |||||||||||
| Provision for income taxes |
11,209 | 6,018 | (5,679 | ) (5) | 11,548 | |||||||||||
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| Income from continuing operations |
$ | 41,402 | $ | 9,303 | $ | (9,216 | ) | $ | 41,489 | |||||||
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| Basic income per share from continuing operations |
$ | 0.86 | $ | 0.87 | ||||||||||||
| Diluted income per share from continuing operations |
$ | 0.85 | $ | 0.86 | ||||||||||||
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| Weighted average shares used in per share calculations: |
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| Basic |
47,917 | 47,917 | ||||||||||||||
| Diluted |
48,508 | 48,508 | ||||||||||||||
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The accompanying notes are an integral part of this Unaudited Pro Forma Condensed Consolidated Statement of Operations Data.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS DATA
Six Months Ended June 30, 2011
| (In thousands, except per share data) |
Blount Historical |
Woods Historical |
Adjustments | Pro Forma | ||||||||||||
| Sales |
$ | 382,211 | $ | 85,512 | $ | (449 | ) (2) | $ | 467,274 | |||||||
| Cost of sales |
257,975 | 62,622 | 2,911 | (2,3) | 323,508 | |||||||||||
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| Gross profit |
124,236 | 22,890 | (3,360 | ) | 143,766 | |||||||||||
| Selling, general, and administrative expenses |
71,576 | 12,355 | — | 83,931 | ||||||||||||
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| Operating income |
52,660 | 10,535 | (3,360 | ) | 59,835 | |||||||||||
| Interest income |
131 | — | — | 131 | ||||||||||||
| Interest expense |
(9,782 | ) | (671 | ) | (2,517 | ) (4) | (12,970 | ) | ||||||||
| Other expense, net |
(295 | ) | — | — | (295 | ) | ||||||||||
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| Income before income taxes |
42,714 | 9,864 | (5,877 | ) | 46,701 | |||||||||||
| Provision for income taxes |
13,340 | 2,762 | (2,229 | ) (5) | 13,873 | |||||||||||
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| Net income |
$ | 29,374 | $ | 7,102 | $ | (3,648 | ) | $ | 32,828 | |||||||
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| Basic net income per share |
$ | 0.61 | $ | 0.68 | ||||||||||||
| Diluted net income per share |
$ | 0.60 | $ | 0.67 | ||||||||||||
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| Weighted average shares used in per share calculations: |
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| Basic |
48,533 | 48,533 | ||||||||||||||
| Diluted |
49,324 | 49,324 | ||||||||||||||
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The accompanying notes are an integral part of this Unaudited Pro Forma Condensed Consolidated Statement of Operations Data.
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Notes to Unaudited Pro Forma Condensed Consolidated Financial Data
(Amounts in thousands, except per share amounts)
The unaudited pro forma condensed consolidated financial data have been derived from the financial information of the Company and Woods. Reclassifications have been made to the Woods information to conform to the Company’s presentation. Such reclassifications have no effect on Woods’ previously reported net income, or net members’ equity. The Acquisition has been treated as an acquisition with the Company as the acquirer and Woods as the acquiree, assuming that the Acquisition had been completed on June 30, 2011, for the unaudited pro forma condensed consolidated balance sheet data, and on January 1, 2010 for the unaudited condensed consolidated statements of operations data.
The following entries reflect the pro forma adjustments related to the Acquisition.
Note 1: Adjustment Based Upon Purchase Price Allocation. The unaudited pro forma condensed consolidated financial data includes adjustments based upon the preliminary purchase price allocation. Further adjustments may be made based on the completion of the final valuation of the Acquisition and finalization of the purchase price. The acquisition price of $185.0 million, plus a working capital adjustment of $5.4 million for a total purchase price of $190.4 million, was paid in cash on September 7, 2011. The Company did not assume any debt of Woods and $27.7 million of the purchase price was applied directly to the retirement of all of Woods’ debt on the acquisition date. The following table summarizes the net assets acquired from Woods and the pro forma purchase price allocation based on the September 7, 2011 acquisition date:
| Net book value of Woods as of September 7, 2011 |
$ | 45,280 | ||
| Total purchase price |
190,376 | |||
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| Purchase price in excess of net book value |
$ | 145,096 |
A summary of the allocation of the purchase price in excess of Woods’ net book value is presented below.
| (Amounts in thousands) |
September 7, 2011 |
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| Accounts receivable, net |
$ | (449 | ) | |
| Inventories |
3,461 | |||
| Current deferred income tax asset |
684 | |||
| Other current assets |
1,549 | |||
| Property, plant, and equipment, net |
2,911 | |||
| Non-current deferred income tax asset |
1,942 | |||
| Intangible assets |
96,730 | |||
| Goodwill |
51,592 | |||
| Other assets |
1,951 | |||
| Current maturities of long-term debt |
22,457 | |||
| Accounts payable |
(1,693 | ) | ||
| Accrued expenses |
1,999 | |||
| Current deferred income tax liability |
(1,619 | ) | ||
| Long-term debt, excluding current maturities |
5,231 | |||
| Non-current deferred income tax liability |
(39,744 | ) | ||
| Other liabilities |
(1,906 | ) | ||
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| Purchase price in excess of net book value |
$ | 145,096 | ||
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The following table summarizes the intangible assets associated with Woods:
| (Amounts in thousands) |
Estimated Useful Life In Years |
September 7, 2011 |
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| Goodwill |
Indefinite | $ | 55,934 | |||||
| Trademarks and trade names |
Indefinite | 44,330 | ||||||
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| Total with indefinite lives |
100,264 | |||||||
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| Customer relationships, including sales order backlog |
20 | 52,400 | ||||||
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| Total intangible assets |
$ | 152,664 | ||||||
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Note 2: Adjustments to Sales and Cost of Sales. Adjustments have been made to remove pro forma intercompany sales between the Company and Woods. For the twelve months ended December 31, 2010, and the six months ended June 30, 2011, sales from the Company to Woods were $0.2 million and $0.4 million, respectively. Additionally, adjustments have been made to cost of sales to reflect the expensing of the step up to fair value on Woods’ inventory.
Note 3: Adjustments to Depreciation and Amortization Expense. The adjustments reflect additional depreciation and amortization expenses associated with the fair market value adjustments to property, plant, and equipment and to finite-lived intangible assets. See also Note 1.
Note 4: Adjustments for Interest Expense. Adjustments have been made to interest expense to reflect borrowing of the purchase price under the Company’s current revolving credit facility. This pro forma borrowing is reduced by the cash generated by Woods during the historical periods in order to determine the pro forma interest expense. The following table summarizes the pro forma debt and interest expense:
| (Amounts in thousands) |
Year Ended December 31, 2010 |
Six Months Ended June 30, 2011 |
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| Average amount of pro forma debt outstanding to fund the acquisition |
$ | 187,095 | $ | 183,205 | ||||
| Blount’s weighted average interest rate on revolving credit facility as of the acquisition date |
2.77 | % | 2.77 | % | ||||
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| Pro forma interest expense |
$ | 5,183 | $ | 2,517 | ||||
The interest rate on the Company’s revolving credit facility is variable. A change of 1/8 percent on the variable interest rate would change pro forma net income, on an after tax basis, by $149 thousand in the year ended December 31, 2010 and by $72 thousand in the six months ended June 30, 2011.
Note 5: Adjustments to Provision for Income Taxes. Adjustments have been made for pro forma income tax effects based upon the applicable statutory income tax rates.
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