EX-99.2 2 a05-14322_2ex99d2.htm EX-99.2

Exhibit 99.2

 

AEROFLEX INCORPORATED AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

 

The following pro forma condensed consolidated balance sheet (unaudited) adjusts the historical consolidated balance sheet of Aeroflex Incorporated and subsidiaries as of March 31, 2005 for the effects of the acquisition of the SPG division of UbiNetics Holdings Limited.  The acquisition has been accounted for under the purchase method of accounting.

 

The pro forma balance sheet gives effect to the acquisition described in Item 2 of the Form 8-K filed on May 26, 2005, as if it had occurred on March 31, 2005.  The balance sheet should be read in conjunction with the notes to the pro forma financial statements.

 


 

AEROFLEX INCORPORATED AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

REFLECTING THE ACQUISITION OF THE SPG DIVISION OF UBINETICS HOLDINGS LIMITED (“SPG”)

March 31, 2005

(In thousands, except per share amounts)

 

 

 

Historical

 

SPG (1)

 

Pro Forma
Adjustments(2)

 

Pro Forma

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,186

 

$

3,390

 

$

(8,000

)

$

3,576

 

Marketable securities

 

117,788

 

—

 

(79,000

)

38,788

 

Accounts receivable, net

 

90,110

 

5,703

 

 

 

95,813

 

Inventories

 

112,361

 

1,887

 

95

 

114,343

 

Deferred income taxes

 

18,223

 

—

 

 

 

18,223

 

Prepaid expenses and other current assets

 

8,180

 

—

 

 

 

8,180

 

Total current assets

 

354,848

 

10,980

 

(86,905

)

278,923

 

Property, plant and equipment, net

 

75,007

 

1,877

 

669

 

77,553

 

Intangible assets with definite lives, net

 

36,434

 

1,375

 

21,202

 

59,011

 

Goodwill

 

85,329

 

—

 

60,541

 

145,870

 

Deferred income taxes

 

—

 

—

 

 

 

—

 

Other assets

 

14,965

 

—

 

 

 

14,965

 

Total assets

 

$

566,583

 

$

14,232

 

$

(4,493

)

$

576,322

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

660

 

$

—

 

$

 

$

660

 

Accounts payable

 

28,663

 

5,026

 

 

 

33,689

 

Advance payments by customers

 

11,333

 

—

 

 

 

11,333

 

Accrued expenses and other current liabilities

 

43,305

 

—

 

 

 

43,305

 

Total current liabilities

 

83,961

 

5,026

 

 

 

88,987

 

Long-term debt

 

4,607

 

—

 

 

 

4,607

 

Deferred income taxes

 

9,878

 

—

 

6,590

 

16,468

 

Other long-term liabilities

 

18,587

 

923

 

 

 

19,510

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

Common stock, par value $.10 per share; authorized
110,000 shares; issued 74,615 shares

 

7,462

 

—

 

 

 

7,462

 

Additional paid-in capital

 

372,772

 

—

 

 

 

372,772

 

Accumulated other comprehensive income

 

16,614

 

—

 

 

 

16,614

 

Retained earnings

 

52,716

 

8,283

 

(11,083

)

49,916

 

Less: Treasury stock, at cost (4 shares)

 

(14

)

—

 

 

 

(14

)

 

 

449,550

 

8,283

 

(11,083

)

446,750

 

Total liabilities and stockholders’ equity

 

$

566,583

 

$

14,232

 

$

(4,493

)

$

576,322

 

 

(1) (2) See accompanying notes to pro forma condensed consolidated financial statements.

 


 

AEROFLEX INCORPORATED AND SUBSIDIARIES

PRO FORMA STATEMENTS OF OPERATIONS (Unaudited)

 

The following pro forma statements of operations (unaudited) adjust the historical consolidated statements of operations of Aeroflex Incorporated and subsidiaries for the nine months ended March 31 2005 and the year ended June 30, 2004 for the effects of the acquisition of the SPG division of UbiNetics Holdings Limited (“SPG”) on May 23, 2005.  The acquisition of SPG was accounted for under the purchase method of accounting.  The pro forma statements of operations give effect to the acquisition described in Item 2 of the Form 8-K filed on May 26, 2005, as if it had occurred on July 1, 2003.

 

The pro forma statements of operations do not purport to be indicative of the operating results that would have been achieved had the acquisition been effected on the date indicated, are not necessarily indicative of future operating results and should not be used as a forecast of future operations.  These statements should be read in conjunction with the notes to the pro forma financial statements.

 


 

AEROFLEX INCORPORATED AND SUBSIDIARIES

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

REFLECTING THE ACQUISITION OF THE SPG DIVISION OF UBINETICS HOLDINGS LIMITED (“SPG”)

NINE MONTHS ENDED MARCH 31, 2005

(In thousands, except per share amounts)

 

 

 

 

 

 

 

Pro Forma

 

 

 

 

 

Historical

 

SPG

 

Adjustments(3)

 

Pro Forma

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

335,406

 

$

29,192

 

$

—

 

$

364,598

 

Cost of sales

 

176,802

 

6,156

 

—

 

182,958

 

Special charge (credit)

 

—

 

(9,049

)

—

 

(9,049

)

Gross profit

 

158,604

 

32,085

 

—

 

190,689

 

Selling, general and administrative costs

 

81,597

 

6,276

 

—

 

87,873

 

Research and development costs

 

45,122

 

7,978

 

183

 

53,283

 

Amortization of acquired intangibles

 

6,164

 

1,028

 

2,751

 

9,943

 

Operating income

 

25,721

 

16,803

 

(2,934

)

39,590

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest expense

 

(738

)

—

 

—

 

(738

)

Other income, net

 

1,371

 

26

 

(1,048

)

349

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

633

 

26

 

(1,048

)

(389

)

Income from continuing operations before income taxes

 

26,354

 

16,829

 

(3,982

)

39,201

 

Provision for income taxes

 

9,947

 

—

 

3,774

 

13,721

 

Income from continuing operations before non-recurring charges directly attributable to the transaction

 

$

16,407

 

$

16,829

 

$

7,756

 

$

25,480

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations per common share

 

 

 

 

 

 

 

 

 

Basic

 

$

0.22

 

 

 

 

 

$

0.34

 

Diluted

 

$

0.22

 

 

 

 

 

$

0.34

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

74,595

 

 

 

 

 

74,595

 

Diluted

 

76,047

 

 

 

 

 

76,047

 

 

(3)          See accompanying notes to pro forma condensed consolidated financial statements

 


 

AEROFLEX INCORPORATED

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

REFLECTING THE ACQUISITION OF THE SPG DIVISION OF UBINETICS HOLDINGS LIMITED (“SPG”)

YEAR ENDED JUNE 30, 2004

(In thousands, except per share amounts)

 

 

 

 

 

 

 

Pro Forma

 

 

 

 

 

Historical

 

SPG

 

Adjustments(3)

 

Pro Forma

 

 

 

 

 

 

 

 

 

 

 

Sales

 

$

414,101

 

$

21,473

 

$

—

 

$

435,574

 

Cost of sales

 

221,409

 

2,593

 

—

 

224,002

 

Gross profit

 

192,692

 

18,880

 

—

 

211,572

 

Selling, general and administrative costs

 

94,735

 

6,519

 

—

 

101,254

 

Research and development costs

 

49,972

 

15,165

 

318

 

65,455

 

Amortization of acquired intangibles

 

7,730

 

1,249

 

3,469

 

12,448

 

Acquired in-process R&D

 

4,220

 

—

 

—

 

4,220

 

Operating income

 

36,035

 

(4,053

)

(3,787

)

28,195

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest expense

 

(1,403

)

—

 

(1,250

)

(2,653

)

Other income (expense)

 

(1,711

)

370

 

(308

)

(1,649

)

Total other income (expense)

 

(3,114

)

370

 

(1,558

)

(4,302

)

Income from continuing operations before income taxes

 

32,921

 

(3,683

)

(5,345

)

23,893

 

Provision for income taxes

 

12,457

 

—

 

(2,830

)

9,627

 

Income from continuing operations before non-recurring charges directly attributable to the transaction

 

$

20,464

 

$

(3,683

)

$

(2,515

)

$

14,266

 

 

 

 

 

 

 

 

 

 

 

Income from continuing operations per common share

 

 

 

 

 

 

 

 

 

Basic

 

$

0.30

 

 

 

 

 

$

.21

 

Diluted

 

$

0.29

 

 

 

 

 

$

.20

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

67,917

 

 

 

 

 

67,917

 

Diluted

 

69,931

 

 

 

 

 

69,931

 

 

(3)  See accompanying notes to pro forma condensed consolidated financial statements.

 


 

AEROFLEX INCORPORATED AND SUBSIDIARIES

NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited)

 

A.            BASIS OF PRESENTATION

 

The accompanying pro forma financial statements (unaudited) present the financial position and results of operations of Aeroflex Incorporated and subsidiaries (“ARX”) giving effect to the acquisition of the SPG division of UbiNetics Holdings Limited (“SPG”).  The acquisition of SPG by ARX was accounted for as a purchase and accordingly, the purchase price was allocated to the assets and liabilities of SPG based on their estimated fair values at May 23, 2005 (the date of acquisition).  Adjustments to the purchase price allocation are expected to be finalized before May 2006, upon the receipt of an independent appraisal and the final determination of certain exit costs.  Such adjustments are not expected to be material.

 

For the purpose of the pro forma balance sheet and the pro forma statements of operations, it is assumed that the acquisition occurred on March 31, 2005 and July 1, 2003, respectively.  In order to provide comparability to the respective historical periods, the pro forma statements of operations for the nine months ended March 31, 2005 and the year ended June 30, 2004 do not include a one-time charge of $2,800,000 which was recorded upon acquisition to reflect the write-off of the purchase prices allocated to acquired in-process research and development.  As the fiscal year end of SPG was December 31, the accompanying historical statement of operations data related to SPG for the nine months ended March 31, 2005, was derived from their historical results of operations for the year ended December 31, 2004, adding their results of operations for the three months ended March 31, 2005, and subtracting their results of operations for the six months ended June 30, 2004.  SPG’s historical statement of operations data for the year ended June 30, 2004, was derived from their historical results of operations for the year ended December 31, 2003, adding their results of operations for the six months ended June 30, 2004, and subtracting their results of operations for the six months ended June 30, 2003.

 

B.            PRO FORMA ADJUSTMENTS AND ASSUMPTIONS

 

The pro forma financial statements of ARX give effect to the following pro forma adjustments and assumptions:

 

1.               To record the acquisition of SPG by ARX as described in Item 2.01 on Form 8-K filed on May 26, 2005.

 

2.               To record the a) purchase price of $87 million, consisting of: i) $84 million for the acquisition of SPG and (ii) $3 million of acquisition costs, both from ARX’s available cash and proceeds from the sale of marketable securities; b) elimination of SPG’s equity accounts, c) allocation of the purchase price to the fair value of the assets acquired and liabilities assumed, including, for purposes of the pro forma balance sheet, the aforementioned $2,800,000 write-off of the fair value of the acquired in-process research and development and d) deferred tax liabilities related to c) above.

 

3.               To record a) depreciation and amortization based on estimated average remaining lives (average 4 years for intangibles) of assets and adjustments to fair value of assets acquired, b) interest expense on assumed ARX debt incurred and interest income forgone due to the use of available cash and marketable securities to acquire SPG and c) the tax effects of a) and b).