Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8-K/A - COLUMBUS MCKINNON CORP | a8k.htm |
| EX-23.1 - EXHIBIT 23.1 - COLUMBUS MCKINNON CORP | exh231.htm |
Exhibit 99.2
Unaudited pro forma condensed combined financial information
The following unaudited pro forma condensed combined financial data are based on the historical financial statements of the Company and the historical financial statements of Magnetek.
The Company's fiscal year ends on March 31st. Magnetek's fiscal year ended on the Sunday closest to December 31st. As both the Company's and Magnetek's fiscal year ends differ by 93 days or less, the pro forma condensed combined financial statements presented herein have been presented using the different fiscal periods as discussed below.
For the twelve months ended pro forma condensed combined statement of operations, the Company's fiscal year ended March 31, 2015 and Magnetek's fiscal year ended December 28, 2014 have been combined. For the three months ended pro forma condensed statement of operations and the pro forma condensed combined balance sheet, the Company's first quarter ended June 30, 2015 and Magnetek's first quarter ended March 29, 2015 have been combined.
The information included in the “CMCO historical” column of the unaudited pro forma condensed combined financial data sets forth the Company’s historical balance sheet data as of June 30, 2015 and the Company’s historical statements of operations data for the year ended March 31, 2015 and the three months ended June 30, 2015, which data are derived from the Company’s audited and unaudited consolidated financial statements which have been previously filed in the Company’s Annual Report on Form 10-K filed May 28, 2015 and its Quarterly Report on Form 10-Q filed July 31, 2015, respectively.
The information included in the “MAG historical” column of the unaudited pro forma condensed combined financial data sets forth Magnetek's historical balance sheet data as of March 29, 2015 and Magnetek's historical statement of operations data for the year ended December 28, 2014 and the three months ended March 29, 2015, which data are derived from Magnetek's audited and unaudited consolidated financial statements which have been previously filed in Magnetek’s Annual Report on Form 10-K filed March 20, 2015 and its Quarterly Report on Form 10-Q filed May 13, 2015, respectively
The information contained in the “Pro forma” column of the unaudited pro forma condensed combined balance sheet gives effect to the Acquisition as if it had occurred on June 30, 2015.
The information included in the “Pro forma” column of the unaudited pro forma condensed combined statements of operations for the year ended March 31, 2015 and the three months ended June 30, 2015 gives effect to the Acquisition as if it had occurred on April 1, 2014.
The unaudited pro forma adjustments are based on available information and certain assumptions that we believe are reasonable. These unaudited pro forma adjustments include a preliminary allocation of the purchase price of Magnetek based on a preliminary estimate of fair market value. The final allocation of the purchase price to the acquired assets and liabilities will be completed as soon as the Company is able to complete a full valuation of the acquired assets and liabilities. Pro forma adjustments have been recorded:
• | to record inventory of Magnetek at estimated fair market value; |
• | to record the property, plant and equipment of Magnetek at estimated fair market value and adjustments to the related depreciation; |
• | to record identifiable intangible assets of Magnetek at estimated fair market value and adjustments to the related amortization; |
• | to record Magnetek's pension liability at fair value and eliminate its closing balance of accumulated other comprehensive loss associated with the pension; |
• | to reclassify certain balance sheet and income statement lines to conform with the Company's accounting policies; |
• | to record additional debt incurred in connection with the acquisition of Magnetek and the related interest expense. |
• | to record deferred income taxes related to the above pro forma adjustments; |
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Our unaudited pro forma financial data do not purport to present what our actual financial position or results would have been if the events described above had occurred as of the dates indicated and are not necessarily indicative of our future financial position or results. For example, we expect our future results to be affected by the following factors, among others:
• | In connection with the Acquisition in September 2015, at the date of acquisition we must record Magnetek's inventory and backlog on our consolidated balance sheet at fair market value. Our margins from the Magnetek business will be depressed in the second, third, and fourth quarters of fiscal 2016 as we sell the inventory and backlog acquired. Additionally, the recording of Magnetek's acquired inventory and backlog at fair market value will result in additional deferred tax liabilities reducing our consolidated deferred tax assets. |
• | We will be required to record identifiable intangible assets and property, plant and equipment acquired with Magnetek on our consolidated balance sheet at fair market value at the date of acquisition. Any resulting write-up of assets will increase our depreciation and amortization expense when we depreciate or amortize the acquired assets and will reduce gross profit, operating income, income from continuing operations and net income, and such reductions may be significant. Based upon our past acquisitions and the nature of the assets acquired in the Acquisition, we expect to recognize, when we complete our fair market value calculations, identifiable intangible assets such as trademarks/patents, unpatented technology, and customer relationships. We will not complete our fair market value calculations of these assets until later in fiscal 2016, therefore, the amounts included herein are based on preliminary estimates. The actual values determined when the valuation is completed could vary materially from the amounts shown herein. Amortization periods to be used for these identifiable intangible assets and property, plant and equipment acquired will be based primarily upon the estimated useful lives of the assets, which at this point are based upon our preliminary estimates. The actual useful lives could vary materially from the lives shown herein. Additionally, the completion of the valuation of intangible assets and the recording of the acquired property, plant and equipment at fair market value will give rise to adjustments in deferred tax assets and liabilities. |
• | In connection with the Acquision, at the date of acquisition we must record Magnetek's pension liability at fair value and eliminate the previously recorded unrecognized actuarial loss recorded in accumulated other comprehensive loss. This will result in pension gains or expenses that are different from what Magnetek had historically experienced. |
• | In connection with the Acquisition, at the date of acquisition there were certain deferred tax assets acquired that had previously been reserved through a deferred tax asset valuation allowance by Magnetek. The Company will be able to utilize some of these deferred tax assets and as a result, the Company's effective tax rate will differ from the the rate historically experienced by Magnetek. |
The unaudited pro forma condensed combined financial data set forth below should be read in conjunction with the audited consolidated financial statements and the related notes of the Company and Magnetek, and the unaudited consolidated financial statements and the related notes of the Company and Magnetek.
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Unaudited pro forma condensed combined
balance sheet as of June 30, 2015
(in thousands)
CMCO Historical | MAG Historical | Proforma adjustments | Pro forma combined | |||||||||||||||
As of June 30, 2015 | As of March 29, 2015 | |||||||||||||||||
ASSETS: | ||||||||||||||||||
Current assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 58,064 | $ | 7,129 | $ | — | $ | 65,193 | ||||||||||
Restricted cash | 262 | (262 | ) | (1) | — | |||||||||||||
Trade accounts receivable | 71,939 | 17,476 | (332 | ) | (2) | 89,083 | ||||||||||||
Inventories | 110,892 | 14,289 | 668 | (3) | 125,849 | |||||||||||||
Prepaid expenses and other | 25,347 | 785 | (7,225 | ) | (4) | 18,907 | ||||||||||||
Total current assets | 266,242 | 39,941 | (7,151 | ) | 299,032 | |||||||||||||
Property, plant, and equipment, net | 92,207 | 2,945 | 3,415 | (5) | 98,567 | |||||||||||||
Goodwill | 121,046 | 30,307 | 24,791 | (6) | 176,144 | |||||||||||||
Other intangibles, net | 20,117 | 116,755 | (7) | 136,872 | ||||||||||||||
Marketable securities | 19,646 | — | 19,646 | |||||||||||||||
Deferred taxes on income | 30,027 | 33,514 | (8) (11) | 63,541 | ||||||||||||||
Other assets | 8,755 | 4,072 | 262 | (1) | 13,089 | |||||||||||||
Total assets | $ | 558,040 | $ | 77,265 | $ | 171,586 | $ | 806,891 | ||||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||||||||||||||
Current liabilities: | ||||||||||||||||||
Trade accounts payable | $ | 27,890 | $ | 9,192 | $ | (1,728 | ) | (13) | $ | 35,354 | ||||||||
Accrued liabilities | 48,748 | 4,374 | 8,545 | (14) | 61,667 | |||||||||||||
Current portion of long term debt | 13,299 | 40,000 | (9) | 53,299 | ||||||||||||||
Total current liabilities | 89,937 | 13,566 | 46,817 | 150,320 | ||||||||||||||
Senior debt, less current portion | 1,366 | — | 1,366 | |||||||||||||||
Term loan and revolving credit | 108,846 | 150,672 | (9) | 259,518 | ||||||||||||||
Pension benefit obligations, net | 26,186 | (26,186 | ) | (10) | — | |||||||||||||
Deferred income taxes | 9,813 | (9,813 | ) | (11) | — | |||||||||||||
Other non current liabilities | 77,756 | 828 | 44,600 | (10) (12) | 123,184 | |||||||||||||
Total liabilities | 277,905 | 50,393 | 206,090 | 534,388 | ||||||||||||||
Shareholders' equity: | ||||||||||||||||||
Voting common stock | 201 | 36 | (36 | ) | (15) | 201 | ||||||||||||
Additional paid-in capital | 203,218 | 150,254 | (150,254 | ) | (15) | 203,218 | ||||||||||||
Retained earnings (accumulated deficit) | 164,722 | (7,871 | ) | 239 | (15) | 157,090 | ||||||||||||
Accumulated other comprehensive loss | (88,006 | ) | (115,547 | ) | 115,547 | (15) | (88,006 | ) | ||||||||||
Total shareholders' equity | 280,135 | 26,872 | (34,504 | ) | 272,503 | |||||||||||||
Total liabilities and shareholders' equity | $ | 558,040 | $ | 77,265 | $ | 171,586 | $ | 806,891 | ||||||||||
See accompanying notes to these unaudited pro forma condensed combined financial statements.
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Unaudited pro forma condensed combined statement of
operations for the year ended March 31, 2015
(dollars and shares in thousands, except per share amounts)
CMCO Historical | MAG Historical | Proforma adjustments | (1) (7) | Pro forma combined | ||||||||||||||
Year ended March 31, 2015 | Year ended December 28, 2014 | |||||||||||||||||
Net sales | $ | 579,643 | $ | 109,713 | $ | (1,105 | ) | (2) | $ | 688,251 | ||||||||
Cost of products sold | 398,036 | 69,762 | 135 | (2) | 467,933 | |||||||||||||
Gross profit | 181,607 | 39,951 | (1,240 | ) | 220,318 | |||||||||||||
Selling expenses | 69,819 | 11,612 | (6) | 81,431 | ||||||||||||||
General and administrative expenses | 54,874 | 54,069 | (6) | 108,943 | ||||||||||||||
Amortization of intangibles | 2,266 | 5,216 | (3) | 7,482 | ||||||||||||||
Research and development | 3,174 | (3,174 | ) | (6) | — | |||||||||||||
Pension expense | 40,349 | (40,349 | ) | (6) | — | |||||||||||||
Sales, general and administrative | 22,158 | (22,158 | ) | (6) | — | |||||||||||||
Income (loss) from operations | 54,648 | (25,730 | ) | (6,456 | ) | 22,462 | ||||||||||||
Interest and debt expense | 12,390 | 4,632 | (4) | 17,022 | ||||||||||||||
Cost of bond redemption | 8,567 | — | 8,567 | |||||||||||||||
Investment (income) loss | (2,725 | ) | — | (2,725 | ) | |||||||||||||
Foreign currency exchange loss (gain) | 863 | — | 863 | |||||||||||||||
Other income, net | (462 | ) | — | (462 | ) | |||||||||||||
Income (loss) from continuing operations before income tax expense (benefit) | 36,015 | (25,730 | ) | (11,088 | ) | (803 | ) | |||||||||||
Income tax expense (benefit) | 8,825 | 715 | (4,213 | ) | (5) | 5,327 | ||||||||||||
Income (loss) from continuing operations | $ | 27,190 | $ | (26,445 | ) | $ | (6,875 | ) | $ | (6,130 | ) | |||||||
Weighted-average basic shares outstanding | 19,939 | 19,939 | ||||||||||||||||
Weighted-average diluted shares outstanding | 20,224 | (285 | ) | (8) | 19,939 | |||||||||||||
Basic income per share from continuing operations | $ | 1.36 | $ | (0.31 | ) | |||||||||||||
Diluted income per share from continuing operations | $ | 1.34 | $ | (0.31 | ) | |||||||||||||
See accompanying notes to these unaudited pro forma condensed combined financial statements.
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Unaudited pro forma condensed combined statement of
operations for the three months ended June 30, 2015
(dollars and shares in thousands, except per share amounts)
CMCO Historical | MAG Historical | Proforma adjustments | (1) (7) | Pro forma combined | ||||||||||||||
Three months ended June 30, 2015 | Three months ended March 29, 2015 | |||||||||||||||||
Net sales | $ | 136,236 | $ | 26,612 | $ | (290 | ) | (2) | $ | 162,558 | ||||||||
Cost of products sold | 92,652 | 17,213 | 26 | (2) | 109,891 | |||||||||||||
Gross profit | 43,584 | 9,399 | (316 | ) | 52,667 | |||||||||||||
Selling expenses | 16,598 | 2,895 | (6) | 19,493 | ||||||||||||||
General and administrative expenses | 15,102 | 3,996 | (6) | 19,098 | ||||||||||||||
Amortization of intangibles | 593 | 1,304 | (3) | 1,897 | ||||||||||||||
Research and development | 899 | (899 | ) | (6) | — | |||||||||||||
Pension expense | 502 | (502 | ) | (6) | — | |||||||||||||
Sales, general and administrative | 5,490 | (5,490 | ) | (6) | — | |||||||||||||
Income (loss) from operations | 11,291 | 2,508 | (1,620 | ) | 12,179 | |||||||||||||
Interest and debt expense | 1,156 | 1,158 | (4) | 2,314 | ||||||||||||||
Investment (income) loss | (128 | ) | — | (128 | ) | |||||||||||||
Foreign currency exchange loss (gain) | (185 | ) | — | (185 | ) | |||||||||||||
Other income, net | (5 | ) | — | (5 | ) | |||||||||||||
Income from continuing operations before income tax expense (benefit) | 10,453 | 2,508 | (2,778 | ) | 10,183 | |||||||||||||
Income tax expense (benefit) | 3,542 | 41 | (1,055 | ) | (5) | 2,528 | ||||||||||||
Income (loss) from continuing operations | $ | 6,911 | $ | 2,467 | $ | (1,723 | ) | $ | 7,655 | |||||||||
Weighted-average basic shares outstanding | 20,022 | 20,022 | ||||||||||||||||
Weighted-average diluted shares outstanding | 20,229 | 20,229 | ||||||||||||||||
Basic income per share from continuing operations | $ | 0.35 | $ | 0.38 | ||||||||||||||
Diluted income per share from continuing operations | $ | 0.34 | $ | 0.38 | ||||||||||||||
See accompanying notes to these unaudited pro forma condensed combined financial statements.
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Notes to the unaudited pro forma condensed combined balance sheet.
(1) Reclassification of $262,000 in restricted cash to conform with the Company's presentation as other assets.
(2) Represents the adjustment to accounts receivable as a result of eliminating intercompany activity and the alignment of accounts receivable reserves to the accounting policies of the Company.
(3)* Represents the adjustment to record the acquired inventory at its estimated fair value. This also includes the adjustment to inventory as a result of the alignment of inventory accounting policies of the Company relating to the calculation of slow moving inventory.
(4)* Represents the allocation of $650,000 of the purchase price to backlog and the reclassification of $8,552,000 of current deferred tax liabilities to deferred tax assets. This is net of a $677,000 reduction in working capital from the historical balance sheet to the balance sheet as of September 2, 2015.
(5)* Represents the adjustment to reflect property, plant and equipment at the Company's preliminary estimate of fair market value.
(6)* Reflects adjustments to remove Magnetek's historical goodwill and record estimated goodwill resulting from the Acquisition, as if the Acquisition had occurred on June 30, 2015. The acquired assets and liabilities are reflected at their preliminarily estimated fair values with the excess consideration recorded as goodwill. The purchase price and goodwill have been calculated as follows:
(Dollars in thousands) | |||
Consideration: | |||
Purchase price | $ | 190,672 | |
Less: net value of assets acquired | $ | 135,574 | |
Goodwill Balance | $ | 55,098 | |
The net book value of assets acquired has been calculated as follows: | |||
Assets acquired | $ | 250,144 | |
Liabilities Assumed | $ | (114,570 | ) |
Net book value of assets acquired | $ | 135,574 | |
(7)* Reflects the preliminarily estimated fair value of the identifiable intangible assets acquired.
(Dollars in thousands) | Fair value | Weighted Average Useful life (in years) | ||
Trademark | $ | 26,600 | Indefinite life | |
Patents and technology | 9,910 | 17.4 | ||
In-process research and development | 160 | 20.0 | ||
Engineered drawings | 28,494 | 17.6 | ||
Customer relationships | 51,400 | 19.2 | ||
IP Addresses | 191 | Indefinite life | ||
Total identifiable intangible assets | $ | 116,755 | ||
(8)* Reflects the net deferred tax assets acquired, including approximately $62,000,000 in net operating losses offset by other deferred tax liabilities relating to opening balance temporary differences. This also reflects the reduction of the valuation allowance recorded against Magnetek's deferred tax assets. Because Magnetek will be included in the Company's consolidated tax return following the acquisition, the Company has determined that the combined entities will generate sufficient taxable income to realize Magnetek's deferred tax assets, subject to certain limitations.
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(9) Reflects adjustments for the following changes in borrowings used to finance the acquisition of Magnetek:
Dollars in thousands | Actual balance June 30, 2015 | Net borrowings | Pro forma balance June 30, 2015 | ||||||
Term loan | $ | 121,346 | $ | — | $ | 121,346 | |||
Revolving credit facility | $ | — | $ | 190,672 | $ | 190,672 | |||
Other debt | $ | 2,165 | $ | — | $ | 2,165 | |||
Less: current maturities | $ | 13,299 | $ | 40,000 | $ | 53,299 | |||
Total long-term debt | $ | 110,212 | $ | 150,672 | $ | 260,884 | |||
Interest rates on revolver borrowings are determined on the basis of either a Eurocurrency rate or a Base rate plus an applicable margin based upon the Company's Total Leverage Ratio (as defined in the New Credit Agreement).
(10) Reclassification of $26,186,000 in pension liabilities to conform with the Company's presentation as other non current liabilities.
(11) Reclassification of long term deferred tax liabilities to conform with the Company's presentation as other non current assets for temporary differences that exist in the same tax jurisdictions.
(12) In addition to the reclassification adjustment discussed above in note (10), remaining adjustment relates to long term liabilities identified and recorded during the purchase accounting process. These primarily include a $16,929,000 increase to the long term pension liability and $1,223,000 in additional product liability.
(13) Adjustments represent the elimination of intercompany accounts payable and certain adjustments to existing liabilities.
(14) Adjustment primarily relates to the accrual of acquisition costs and acquisition-related severance costs totaling $7,632,000.
(15) Reflects the elimination of Magnetek's shareholders' equity as of March 29, 2015 and adjusting for the acquisition costs described in Note 14 above.
* We have preliminarily estimated the fair value of tangible assets, identifiable intangible assets, and property, plant and equipment acquired in the Acquisition.The final valuation could result in a material difference from the amounts shown. Any change to the preliminarily estimated fair values will result in an increase or reduction of the depreciation and amortization expenses when we depreciate or amortize the acquired assets, which could impact gross profit, operating income, income from continuing operations and net income, and such impacts may be significant.
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Notes to the unaudited pro forma condensed combined income statement.
(1) For purposes of the unaudited pro forma condensed combined statements of operations, we have used the preliminary purchase price paid in connection with the Acquisition. We have not completed the final allocation of the purchase price to our assets and liabilities; such final allocation will be completed within one year. Therefore, the acquired assets and liabilities are reflected at their preliminarily estimated fair values with the excess consideration recorded as goodwill. We have preliminarily estimated the fair value of tangible assets, identifiable intangible assets, and property, plant and equipment acquired in the Acquisition. The final valuation could result in a material difference from the amounts shown. Any change to the preliminarily estimated fair values will result in an increase or reduction of the depreciation and amortization expenses when we depreciate or amortize the acquired assets, which could impact gross profit, operating income, income from continuing operations and net income, and such impacts may be significant.
(2) Represents the elimination of intercompany sales and their related expenses as well as additional depreciation expense related to recording Magnetek's fixed assets at fair value:
Increase /(Decrease) | ||||||
Dollars in thousands | Year ended March 31, 2015 | Three months ended June 30, 2015 | ||||
Net sales | $ | (1,105 | ) | $ | (290 | ) |
Cost of products sold | 135 | 26 | ||||
Gross profit | (1,240 | ) | (316 | ) | ||
(3) Represents the adjustment to reflect the amortization resulting from the acquired identifiable intangible assets. The following table presents an analysis of this adjustment:
Increase /(Decrease) | ||||||
Dollars in thousands | Year ended March 31, 2015 | Three months ended June 30, 2015 | ||||
Amortization of identifiable intangible assets acquired | $ | 5,216 | $ | 1,304 | ||
Amortization of the identified backlog intangible asset has been excluded from the above adjustment due to the fact that it is non-recurring and does not have continuing impact to the Company’s statement of Operations.
(4) Represents the estimated increase in interest expense for the periods indicated incurred as part of the financing for the transaction.
Dollars in thousands | Year ended March 31, 2015 | Three months ended June 30, 2015 | ||||
Interest expense related to revolving credit facility | $ | 4,632 | $ | 1,158 | ||
(5) Reflects the tax effect of our pro forma adjustments at the statutory rate of 38% for the period to which the adjustments pertain.
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(6) Represents the reclassification of operating expenses to conform with the Company's accounting policies as follows:
Increase /(Decrease) | ||||||
Dollars in thousands | Year ended March 31, 2015 | Three months ended June 30, 2015 | ||||
Selling expenses | $ | 11,612 | $ | 2,895 | ||
General and administrative expenses | 54,069 | 3,996 | ||||
Research and development expense | (3,174 | ) | (899 | ) | ||
Pension expense | (40,349 | ) | (502 | ) | ||
Sales, general and administrative expense | (22,158 | ) | (5,490 | ) | ||
Net income | $ | — | $ | — | ||
(7) The pro forma income statement excludes certain nonrecurring adjustments that do not have a continuing impact on the combined companies. These nonrecurring adjustments will be fully recognized in the Company's financial statements over the next 12 months. These adjustments include acquisition costs of $5,332,000, acquisition-related severance costs of $2,300,000, inventory amortization of $877,000, and backlog amortization of $650,000.
(8) Represents the adjustment to exclude the effects of employee stock options and other share-based awards from the computation of pro forma diluted income per share from continuing operations because including such shares would be antidilutive.
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