Vishay Precision Group, Inc. - FORM 8-K/A - EX-99.3 - UNAUDITED PRO FORMA CONSOLIDATING FINANCIAL STATEMENTS - April 16, 2013

Attached files

file filename
8-K/A - AMENDMENT TO CURRENT REPORT - Vishay Precision Group, Inc.vpg_8ka.htm
EX-99.1 - AUDITED FINANCIAL STATEMENTS AND RELATED NOTES OF GEORGE KELK CORPORATION - Vishay Precision Group, Inc.exhibit99-1.htm
EX-23.1 - CONSENT OF KPMG LLP, INDEPENDENT AUDITORS AS OF AND FOR THE YEAR - Vishay Precision Group, Inc.exhibit23-1.htm
EX-99.2 - UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS AND RELATED NOTES - Vishay Precision Group, Inc.exhibit99-2.htm

Exhibit 99.3

Index to Unaudited Pro forma Condensed Combined Financial Statements

Page
Vishay Precision Group, Inc. and Subsidiaries Unaudited Pro Forma
Condensed Combined Financial Statements 2
 
Unaudited Pro Forma Condensed Combined Balance Sheet as of
December 31, 2012 3
 
Unaudited Pro Forma Condensed Combined Statement of Operations
for the year ended December 31, 2012 5
 
Notes to Unaudited Pro Forma Condensed Combined Financial
Statements 6

1


Vishay Precision Group, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Combined Financial Statements

The unaudited pro forma condensed combined balance sheet as of December 31, 2012, has been prepared assuming Vishay Precision Group, Inc.‘s( the “Company”) acquisition of substantially all of the assets of George Kelk Corporation (“KELK”) had been consummated on December 31, 2012. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 is presented assuming the Company’s acquisition of KELK had occurred on January 1, 2012.

The unaudited pro forma financial statements are based upon the historical financial statements of the Company and KELK, as well as publicly available information, and certain assumptions which the Company believes to be reasonable, which are detailed in "Notes to Unaudited Pro Forma Condensed Combined Financial Statements" below. These statements were prepared using the acquisition method of accounting under accounting principles generally accepted in the United States of America ("U.S. GAAP"), which are subject to change and interpretation. The Company has been treated as the acquirer in the acquisition for accounting purposes. Acquisition accounting is dependent upon certain valuations and other studies that have yet to be finalized, and accordingly, the adjustments to record the assets acquired and liabilities assumed at fair value reflect the Company’s best estimate and are subject to change once the detailed analyses are completed. These adjustments may be material.

The unaudited pro forma condensed combined financial statements do not purport to represent what the Company’s financial position or results of operations would have been assuming the completion of the Company’s acquisition of KELK, nor do they purport to project the Company’s financial position or results of operations at any future date or for any future period.

These unaudited pro forma condensed combined financial statements should be read in conjunction with:

       a)        Notes to Unaudited Pro Forma Condensed Combined Financial Statements;
  b)   the Company’s Form 10-K for the year ended December 31, 2012, filed on March 12, 2013; and
  c)   the Company’s Form 8-K filed on February 1, 2013.

2


VISHAY PRECISION GROUP, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Balance Sheet
(In thousands)

Vishay
KELK Adjustment KELK Precision Pro Forma
        (CAD) (A)         to USD (B)         (USD) (C)         Group, Inc. (D)         Adjustments         F/N         Pro Forma
Assets
Current assets:
       Cash and cash equivalents $        3,600 $             (2 ) $        3,598 $        93,881 $         (28,598 ) (E)(F) $        68,881
       Accounts receivable, net 6,017 (4 ) 6,013 28,766 87 (E) 34,866
       Inventories, net 10,683 (6 ) 10,677 49,389 1,223 (E) 61,289
       Deferred income taxes 446 - 446 4,258 (446 ) (F) 4,258
       Prepaid expenses and other current
              assets 407 - 407 9,572 (307 ) (E) 9,672
Total current assets 21,153 (12 ) 21,141 185,866 (28,041 ) 178,966
 
Property and equipment, net 1,618 - 1,618 52,092 482 (E) 54,192
 
Goodwill - - - - 21,700 (E) 21,700
Intangible assets, net - - - 8,009 19,200 (E) 27,209
 
Other assets - - - 17,206 - 17,206
Total assets $ 22,771 $ (12 ) $ 22,759 $ 263,173 $ 13,341 $ 299,273

Continues on the following page.

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VISHAY PRECISION GROUP, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Balance Sheet
(In thousands)

Vishay
KELK Adjustment KELK Precision Pro Forma Pro
    (CAD) (A)          to USD (B)         (USD) (C)         Group, Inc. (D)         Adjustments         F/N         Forma
Liabilities and equity
Current liabilities:
       Trade accounts payable $        583 $             - $ 583 $            9,190 $         (83 ) (E) $         9,690
       Advances from parent 3,942 (2 ) 3,940 - (3,940 ) (F) -
       Payroll and related expenses - - - 12,831 - 12,831
       Other accrued expenses 9,871 (5 ) 9,866 8,499 734 (E) 19,099
       Income taxes 269 - 269 1,425 (269 ) (F) 1,425
       Current portion of long-term debt - - - 167 3,000 (E) 3,167
Total current liabilities 14,665 (7 ) 14,658 32,112 (558 ) 46,212
 
Long-term debt, less current portion - - - 11,154 22,000 (E) 33,154
Deferred income taxes 178 - 178 1,831 (178 ) (F) 1,831
Other liabilities - - - 7,433 - 7,433
Accrued pension and other
       postretirement costs - - - 13,835 - 13,835
Total liabilities 14,843 (7 ) 14,836 66,365 21,264 102,465
 
Commitments and contingencies
 
Equity:
       Common stock - - - 1,235 - 1,235
       Class B convertible common stock - - - 103 - 103
       Capital in excess of par value - - - 181,938 - 181,938
       Retained earnings 7,928 (5 ) 7,923 28,356 (7,923 ) (F) 28,356
       Accumulated other comprehensive
              income (loss) - - - (14,983 ) - (14,983 )
       Total Vishay Precision Group, Inc.
              stockholders' equity 7,928 (5 ) 7,923 196,649 (7,923 ) 196,649
Noncontrolling interests - - - 159 - 159
Total equity 7,928 (5 ) 7,923 196,808 (7,923 ) 196,808
Total liabilities and equity $ 22,771 $ (12 ) $ 22,759 $ 263,173 $ 13,341 $ 299,273

See accompanying notes.

4


VISHAY PRECISION GROUP, INC. AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Statement of Operations
For the year ended December 31, 2012
(Unaudited - In thousands, except per share amounts)

Vishay
KELK        Adjustment KELK Precision Pro Forma
         (CAD) (A) to USD (B)        (USD) (C)        Group, Inc. (D)        Adjustments        F/N        Pro Forma
Net revenues $       29,732 $           (151 ) $       29,581 $            217,616 $          - $       247,197
Costs of products sold 15,993 (81 ) 15,912 142,584 1,223 (E) 159,719
Gross profit 13,739 (70 ) 13,669 75,032 (1,223 ) 87,478
 
Selling, general, and administrative expenses 8,739 (44 ) 8,695 63,666 1,119 (F) 73,480
Acquisition costs - - - 275 (275 ) (G) -
Operating income 5,000 (26 ) 4,974 11,091 (2,067 ) 13,998
 
Other income (expense):
       Interest expense - - - (266 ) (797 ) (H) (1,063 )
       Other 208 (1 ) 207 (301 ) - (94 )
              Other income (expense) - net 208 (1 ) 207 (567 ) (797 ) (1,157 )
 
Income before taxes 5,208 (27 ) 5,181 10,524 (2,864 ) 12,841
 
Income tax expense/(benefit) 954 (5 ) 949 (1,240 ) (904 ) (I) (1,195 )
 
Net earnings 4,254 (22 ) 4,232 11,764 (1,960 ) 14,036
Less: net earnings attributable to
       noncontrolling interests - - - 73 - 73
Net earnings attributable to VPG stockholders $ 4,254 $ (22 ) $ 4,232 $ 11,691 $ (1,960 ) $ 13,963
 
Basic earnings per share attributable to VPG
       stockholders $ 0.87 $ 1.04
 
Diluted earnings per share attributable to
       VPG stockholders $ 0.84 $ 1.01
 
 
Weighted average shares outstanding - basic 13,367 13,367
 
Weighted average shares outstanding - diluted 13,889 13,889

See accompanying notes.

5


Vishay Precision Group, Inc. and Subsidiaries

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

1. Description of the Transactions

On January 31, 2013, the Company and VPG Canada completed the assets acquisition of KELK (“KELK Acquisition”). The aggregate purchase price of approximately $50 million (CDN) ($50 million USD), subject to working capital and other adjustments, was financed using a combination of cash on hand as well as borrowings under the Company’s amended and restated credit agreement.

2. Basis of Presentation

The unaudited pro forma condensed combined financial statements have been compiled from underlying financial statements prepared in accordance with U.S. GAAP and reflect the KELK Acquisition prepared using the acquisition method of accounting under existing U.S. GAAP standards. The fair value of the assets and liabilities of KELK reflect the Company’s best estimate and are subject to change once detailed analyses are completed. These adjustments may be material.

The process for estimating the fair values of identifiable intangible assets requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The excess of the purchase price over the estimated fair value of identifiable assets and liabilities of KELK as of the effective date of the acquisition will be allocated to goodwill. The Company defines fair value in accordance with U.S. GAAP as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The preliminary purchase price allocation is subject to finalizing the Company's analysis of the fair value of KELK’s assets and liabilities as of the effective date of the KELK acquisition and will be adjusted upon completion of the valuation. The use of different estimates could yield materially different results.

The unaudited pro forma condensed combined financial statements are not intended to reflect the financial position or results of operations which would have actually resulted had the acquisition been effected on the dates indicated. Further, the results of operations are not necessarily indicative of the results of operations that may be obtained in the future.

3. Summary of Significant Accounting Policies

The unaudited pro forma condensed combined financial statements have been compiled on a basis consistent with the Company’s accounting policies. Balances have been translated from CAD to USD using average exchange rates applicable during the periods presented for the unaudited pro forma condensed combined statement of operations and the period end CAD to USD exchange rate for the unaudited pro forma condensed combined balance sheet.

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4. Pro Forma Adjustments

The following adjustments have been made to the unaudited pro forma condensed combined financial statements related to the KELK Acquisition (dollars in thousands unless otherwise stated):

     Notes to Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2012

       (A)        To reflect the historical balance sheet of KELK as of October 31, 2012 in Canadian dollars. Due to the difference in the fiscal year ends of KELK and the Company, the October 31, 2012 balance sheet is utilized for purposes of the pro forma presentation.
  (B)   To convert the historical balance sheet of KELK as of October 31, 2012 from Canadian dollars to U.S. dollars based on an exchange rate of 1.0006.
  (C)   To reflect the historical balance sheet of KELK as of October 31, 2012, in U.S. dollars.
  (D)   To reflect the historical balance sheet of the Company as of December 31, 2012.
  (E)   To record the consideration of $50 million for the purchase of KELK. This was financed through a combination of $25 million cash on hand and $25 million in borrowing under the Company’s amended and restated credit agreement. These amounts are determined based upon certain valuations and studies that have yet to be finalized, and accordingly, the assets acquired and liabilities assumed as detailed below are subject to adjustments once the detailed analyses are completed. The preliminary estimated fair values of the KELK assets and liabilities are allocated as follows:

Amount
Description         (in thousands)
Accounts receivable $              6,100
Inventories 11,900
Prepaids 100
Accounts payable and accrued liabilities (3,200 )
Customer's advance payments (7,900 )
Total working capital 7,000
Property and equipment 2,100
Intangible assets (*) 19,200
Goodwill 21,700
Total fair value of assets acquired $ 50,000
 

* Weighted average amortization period of 17 years.


      

(F)

       

To eliminate assets and liabilities not acquired, including $3,598 of cash and cash equivalents and $3,940 of advances from KELK’s parent corporation.

       

Notes to Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2012

   
(A) To reflect the historical statement of operations of KELK for the 12 months ended October 31, 2012 in Canadian dollars. Due to the difference in the fiscal year ends of KELK and the Company, the 12 month period ended October 31, 2012 is utilized for purposes of the pro forma presentation in accordance with Article 11-02 (C) (3) of Regulation S-X.
  (B)   To convert the historical statement of operations of KELK for the 12 months ended October 31, 2012 from Canadian dollars to U.S. dollars based on a weighted average exchange rate of 1.0051.
  (C)   To reflect the historical statement of operations of KELK for the 12 months ended October 31, 2012 in U.S. dollars.
  (D)   To reflect the historical statement of operations of the Company for the 12 months ended December 31, 2012.
  (E)   To record inventory step-up amortization, based on inventory turning approximately twice per year.

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       (F)        To record one year of amortization expense on the intangible assets. Amortization expense is recorded on a straight-line basis.
  (G)   To eliminate acquisition costs from the Company’s statement of operations.
  (H)   To record interest expense at a rate of 3% on the debt incurred to finance the acquisition. The impact of a 1/8% interest rate change is not material.
  (I)   To record the tax effect of the statement of operations adjustments. A tax rate of 35.8% was used for the interest adjustment impacting the U.S. term loan and the elimination of the acquisition costs, and a tax rate of 31.5% was used for the Canadian term loan interest adjustment, the intangible amortization adjustment, and the inventory step-up amortization.

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Vishay Precision Group, Inc. Reports