EX-99.3 5 a05-3918_1ex99d3.htm EX-99.3

Exhibit 99.3

 

Unaudited Pro Forma Condensed Combined Financial Statement Information

 

The unaudited pro forma condensed combined financial statement information (unaudited pro forma information) set forth below is presented to reflect the pro forma effects of DRS Technologies, Inc.’s (DRS or the Company) December 14, 2004 acquisition of certain assets and liabilities of Night Vision Equipment Co., Inc. (NVEC) and Excalibur Electro Optics, Inc. (Excalibur), privately-held businesses headquartered in Allentown, Pennsylvania. NVEC and Excalibur are related businesses, as they are under common control and have common management  (hereinafter referred to as NVEC and Affiliate, respectively). The purchase price was $42.5 million in cash (subject to a working capital adjustment), with additional consideration of up to a maximum of $37.5 million payable upon achieving certain annual revenue targets (for a period of three years). In addition to purchase price, the Company recorded approximately $0.3 million for acquisition related costs. The acquisition has been accounted for under the purchase method of accounting in accordance with accounting principles generally accepted in the United States of America. Accordingly, NVEC’s operating results were included in DRS’s operating results beginning December 15, 2004.

 

The unaudited pro forma information shows the results of continuing operations of DRS for the year ended March 31, 2004 and for the nine-month periods ended December 31, 2004 and 2003, as though the acquisition of NVEC and Affiliate had occurred on April 1, 2003.  A pro forma combined balance sheet is not presented as the acquisition of NVEC and Affiliate have been reported in the unaudited consolidated balance sheet of DRS as of December 31, 2004 as filed on Form 10-Q.

 

The unaudited pro forma adjustments related to the acquisition are based on preliminary purchase price allocations. Actual adjustments will be based on analyses of fair values of assets acquired and liabilities assumed, including identifiable tangible and intangible assets and deferred tax assets and liabilities as well as estimates of the useful lives of tangible and amortizable intangible assets, which will be completed after DRS obtains third–party appraisals, performs its own internal assessments and reviews all available data. The unaudited pro forma information does not reflect an estimate of amortization for acquired intangible assets, as the valuation of the acquired intangible assets is currently in process. Differences between the preliminary and final purchase price allocations could have a significant impact on the accompanying unaudited pro forma information. The Company expects to complete its purchase price allocation in the first quarter of fiscal 2006.

 

As more fully described in DRS’s December 31, 2004, report on Form 10-Q, during the three months ended December 31, 2004, Company management agreed to a plan to sell two of its operating units, DRS Weather Systems, Inc. (DRS Weather) and DRS Broadcast Technology (DRS Broadcast). As a result of the planned divestiture, the discontinued operations of DRS Weather and DRS Broadcast are excluded from the unaudited pro forma condensed combined statements of earnings for all periods presented.

 

The unaudited pro forma condensed combined financial statement information is based on, and should be read together with (i) DRS’s historical consolidated financial statements as of and for the year ended March 31, 2004, and DRS’s unaudited consolidated financial statements as of December 31, 2004 and for the three-and nine-month periods ended December 31, 2004 and 2003 and (ii) NVEC and Affiliate’s historical combined financial statements as of and for the year ended December 31, 2003 and as of and for the nine-month periods ended September 30, 2004 and 2003, included elsewhere in this Current Report on Form 8-K/A.  The unaudited pro forma condensed combined financial statement information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the acquisition been completed as of April 1, 2003, or of the results of operations that may be attained by DRS in the future.

 


 

DRS TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED

COMBINED STATEMENT OF EARNINGS

Year Ended March 31, 2004

(in thousands, except per share data)

 

 

 

Historical

 

 

 

 

 

 

 

DRS (1)

 

NVEC and Affiliate (2)

 

Pro Forma Adjustments

 

Pro Forma DRS

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

986,931

 

$

55,175

 

$

—

 

$

1,042,106

 

Costs and expenses

 

883,599

 

37,651

 

—

(5)

921,250

 

Operating income

 

103,332

 

17,524

 

—

 

120,856

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

754

 

14

 

—

 

768

 

Interest and related expenses

 

24,259

 

—

 

—

 

24,259

 

Other expense

 

545

 

—

 

—

 

545

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations before minority interest and income taxes

 

79,282

 

17,538

 

—

 

96,820

 

 

 

 

 

 

 

 

 

 

 

Minority interest

 

1,951

 

—

 

—

 

1,951

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations before income taxes

 

77,331

 

17,538

 

—

 

94,869

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

33,789

 

—

 

7,103

(3)

40,892

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations

 

$

43,542

 

$

17,538

 

$

(7,103

)

$

53,977

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share from continuing operations

 

$

1.80

 

 

 

 

 

$

2.23

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share from continuing operations

 

$

1.76

 

 

 

 

 

$

2.18

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

24,251

 

 

 

 

 

24,251

 

Diluted

 

24,777

 

 

 

 

 

24,777

 

 

 See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statement Information

 

2


 

 

DRS TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED

COMBINED STATEMENT OF EARNINGS

 

Nine Months Ended December 31, 2004

(in thousands, except per share data)

 

 

 

Historical

 

 

 

 

 

 

 

DRS (1)

 

NVEC and Affiliate (2)

 

Pro Forma Adjustments

 

Pro Forma DRS

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

947,436

 

$

71,636

 

$

(1,334

)(4)

$

1,017,738

 

Costs and expenses

 

845,881

 

49,035

 

(1,075

)(4)(5)

893,841

 

Operating income (loss)

 

101,555

 

22,601

 

(259

)

123,897

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

687

 

12

 

—

 

699

 

Interest and related expenses

 

27,447

 

—

 

—

 

27,447

 

Other income

 

455

 

—

 

—

 

455

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations before minority interest and income taxes

 

74,340

 

22,613

 

(259

)

96,694

 

 

 

 

 

 

 

 

 

 

 

Minority interest

 

1,476

 

—

 

—

 

1,476

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations before income taxes

 

72,864

 

22,613

 

(259

)

95,218

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

31,053

 

—

 

9,158

(3)

40,211

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations

 

$

41,811

 

$

22,613

 

$

(9,417

)

$

55,007

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share from continuing operations

 

$

1.55

 

 

 

 

 

$

2.03

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share from continuing operations

 

$

1.51

 

 

 

 

 

$

1.98

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

27,042

 

 

 

 

 

27,042

 

Diluted

 

27,730

 

 

 

 

 

27,730

 

 

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statement Information

 

 

3


 

DRS TECHNOLOGIES, INC.

UNAUDITED PRO FORMA CONDENSED

COMBINED STATEMENT OF EARNINGS

 

Nine Months Ended December 31, 2003

(in thousands, except per share data)

 

 

 

Historical

 

 

 

 

 

 

 

DRS (1)

 

NVEC and Affiliate (2)

 

Pro Forma Adjustments

 

Pro Forma DRS

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

647,819

 

$

35,696

 

$

—

 

$

683,515

 

Costs and expenses

 

582,345

 

23,319

 

—

(5)

605,664

 

Operating income

 

65,474

 

12,377

 

—

 

77,851

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

600

 

11

 

—

 

611

 

Interest and related expenses

 

14,689

 

—

 

—

 

14,689

 

Other income

 

452

 

—

 

—

 

452

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations before minority interest and income taxes

 

50,933

 

12,388

 

—

 

63,321

 

 

 

 

 

 

 

 

 

 

 

Minority interest

 

1,326

 

—

 

—

 

1,326

 

 

 

 

 

 

 

 

 

 

 

Earnings from continuing operations before income taxes

 

49,607

 

12,388

 

—

 

61,995

 

 

 

 

 

 

 

 

 

 

 

Income taxes

 

21,626

 

—

 

5,017

(3)

26,643

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations

 

$

27,981

 

$

12,388

 

$

(5,017

)

$

35,352

 

 

 

 

 

 

 

 

 

 

 

Basic Earnings Per Share from continuing operations

 

$

1.20

 

 

 

 

 

$

1.51

 

 

 

 

 

 

 

 

 

 

 

Diluted Earnings Per Share from continuing operations

 

$

1.17

 

 

 

 

 

$

1.48

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

23,379

 

 

 

 

 

23,379

 

Diluted

 

23,878

 

 

 

 

 

23,878

 

 

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Statement Information

 

 

4


 

DRS TECHNOLOGIES, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENT  INFORMATION

 

1.               The DRS columns represent the condensed consolidated statements of earnings from continuing operations of DRS for the fiscal year ended March 31, 2004, and the unaudited condensed consolidated statements of earnings from continuing operations of DRS for the nine-month periods ended December 31, 2004 and 2003.  The condensed consolidated statements of earnings for the fiscal year ended March 31, 2004 have been restated to exclude the discontinued operations of DRS Weather and DRS Broadcast.

 

2.               The NVEC and Affiliate columns represent the combined statement of income of NVEC and Affiliate for the year ended December 31, 2003, and the unaudited combined statements of income of NVEC and Affiliate for the nine months ended September 30, 2004 and 2003.

 

3.               The pro forma adjustment to income taxes for the year ended March 31, 2004 and the nine months ended December 31, 2004 and 2003 include the income tax effect on the historical results of operations of NVEC and Affiliate using a statutory (federal and state) income tax rate of 40.5%.  Prior to their acquisition by DRS, NVEC and Affiliate were non-taxable entities.

 

4.               The pro forma adjustment to revenues and cost and expenses for the nine months ended December 31, 2004 represents the elimination of combined revenues and costs and expenses of NVEC and Affiliate from December 15, 2004 through December 31, 2004, the period for which NVEC and Affiliate were owned by DRS.

 

5.               The unaudited pro forma adjustments related to the acquisition are based on preliminary purchase price allocations. Actual adjustments will be based on analyses of fair values of assets acquired and liabilities assumed, including identifiable tangible and intangible assets and deferred tax assets and liabilities as well as estimates of the useful lives of tangible and amortizable intangible assets, which will be completed after DRS obtains third–party appraisals, performs its own internal assessments and reviews all available data. The unaudited pro forma information does not reflect an estimate of amortization for acquired intangible assets, as the valuation of the acquired intangible assets is currently in process. Differences between the preliminary and final purchase price allocations could have a significant impact on the accompanying unaudited pro forma information. The Company expects to complete its purchase price allocation in the first quarter of fiscal 2006.

 

 

5