EX-99.3 7 a2065096zex-99_3.htm EXHIBIT 99.3 Prepared by MERRILL CORPORATION
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Exhibit 99.3


UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

    Titan's acquisition of BTG will be accounted for as a purchase. Titan has presented below unaudited pro forma condensed combined financial data that reflects the acquisition of BTG and is intended to give you a better picture of what the businesses of Titan combined with the recent acquisition of Datron and the acquisition of BTG might have looked like if the merger between the companies had occurred on January 1, 2000, the first day of the first period for which financial information is presented. The unaudited pro forma condensed combined statements of operations combine the Titan consolidated statement of operations data for the year ended December 31, 2000 and for the nine months ended September 30, 2001 with the Datron consolidated statements of operations for the year ended March 31, 2001 and for the eight months from the period January 1, 2001 through the date of acquisition of August 4, 2001, with the BTG consolidated statements of operations for the year ended March 31, 2001 and for the nine months ended September 30, 2001, respectively, to reflect the acquisition of BTG by Titan. The unaudited pro forma condensed combined statements of operations are not necessarily indicative of the results that would have occurred had the acquisition of BTG and the recent acquisition of Datron been consummated at the beginning of the periods presented or the results that may be attained in the future.

    The unaudited pro forma condensed combined balance sheet has been prepared as of September 30, 2001, giving effect to the acquisition of BTG by Titan including the recent acquisition of Datron as though both had been consummated on that date.

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The Titan Corporation
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Year Ended December 31, 2000
(in thousands, except per share data)

 
  Titan
  Datron
  Pro Forma
Adjustments
(Note 2)

  Pro Forma Combined
  BTG
  Pro Forma
Adjustments
(Note 3)

  Pro Forma
Combined

 
Revenues   $ 1,008,003   $ 62,262   $   $ 1,070,265   $ 224,843   $   $ 1,295,108  
Costs and expenses:                                            
  Cost of revenues     742,294     44,352         786,646     149,766         936,412  
  Selling, general and administrative expense     202,118     12,567     128 (d)   214,813     66,564         281,377  
  Research and development expense     11,762     3,993         15,755             15,755  
  Acquisition related charges and other     39,358             39,358             39,358  
  Gain on sale of product line         (2,801 )       (2,801 )           (2,801 )
   
 
 
 
 
 
 
 
    Total costs and expenses     995,532     58,111     128     1,053,771     216,330         1,270,101  
Operating profit (loss)     12,471     4,151     (128 )   16,494     8,513         25,007  
Interest expense     (35,981 )   (212 )       (36,193 )   (3,131 )   (2,265) (e)   (41,589 )
Interest income     3,582     405         3,987             3,987  
Other income (loss)         64         64     (955 )       (891 )
Income (loss) from continuing operations before income taxes and minority interests     (19,928 )   4,408     (128 )   (15,648 )   4,427     (2,265 )   (13,486 )
Income tax provision (benefit)     (3,712 )   1,451         (2,261 )   1,750     (906 )   (1,417 )
   
 
 
 
 
 
 
 
Income (loss) from continuing operations before minority interests and extraordinary loss     (16,216 )   2,957     (128 )   (13,387 )   2,677     (1,359 )   (12,069 )
Minority interests     4,127             4,127             4,127  
   
 
 
 
 
 
 
 
Income (loss) from continuing operations before extraordinary loss   $ (12,089 ) $ 2,957   $ (128 ) $ (9,260 ) $ 2,677   $ (1,359 ) $ (7,942 )
   
 
 
 
 
 
 
 
Basic earnings per share:                                            
Income (loss) from continuing operations before extraordinary loss(1)   $ (0.30 ) $ 1.08   $   $ (0.24 ) $ 0.30   $   $ (0.20 )
   
 
 
 
 
 
 
 
Weighted average shares     52,717     2,735     (495 )(e)   54,957     8,955     (4,137 )(f)   59,775  
   
 
 
 
 
 
 
 
Diluted earnings per share:                                            
Income (loss) from continuing operations before extraordinary loss(1)   $ (0.30 ) $ 1.06   $   $ (0.24 ) $ 0.30   $   $ (0.20 )
   
 
 
 
 
 
 
 
Weighted average shares     52,717     2,792     (505 )(e)   55,004     9,029     (4,171 )(f)   59,862  
   
 
 
 
 
 
 
 

Note(1): Calculation of Pro Forma Combined earnings per share includes dividend requirements on preferred stock of $692.

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

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The Titan Corporation
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 2001
(in thousands, except per share data)

 
  Titan
  Datron
  Pro Forma
Adjustments
(Note 2)

  Pro Forma Combined
  BTG
  Pro Forma
Adjustments
(Note 3)

  Pro Forma
Combined

 
Revenues   $ 800,146   $ 31,831   $   $ 831,977   $ 187,295   $   $ 1,019,272  
Costs and expenses:                                            
  Cost of revenues     596,888     22,945         619,833     122,907         742,740  
  Selling, general and administrative expense     159,481     7,137     64 (d)   166,682     57,758         224,440  
  Research and development expense     10,399     1,485         11,884             11,884  
  Acquisition and integration related charges and other     36,768             36,768     904         37,672  
   
 
 
 
 
 
 
 
    Total costs and expenses     803,536     31,567     64     835,167     181,569         1,016,736  
Operating profit (loss)     (3,390 )   264     (64 )   (3,190 )   5,726         2,536  
Interest expense     (28,530 )   (105 )       (28,635 )   (1,789 )   (1,511 )(e)   (31,935 )
Interest income     1,311     166         1,477             1,477  
Other income         28         28             28  
   
 
 
 
 
 
 
 
Income (loss) from continuing operations before income taxes and minority interests     (30,609 )   353     (64 )   (30,320 )   3,937     (1,511 )   (27,894 )
Income tax provision (benefit)     (1,732 )   (68 )       (1,800 )   1,462     (604 )   (942 )
   
 
 
 
 
 
 
 
Income (loss) from continuing operations before minority interests     (28,877 )   421     (64 )   (28,520 )   2,475     (907 )   (26,952 )
Minority interests     6,826             6,826             6,826  
   
 
 
 
 
 
 
 
Income (loss) from continuing operations   $ (22,051 ) $ 421   $ (64 ) $ (21,694 ) $ 2,475   $ (907 ) $ (20,126 )
   
 
 
 
 
 
 
 
Basic earnings per share:                                            
  Income (loss) from continuing operations(2)   $ (0.48 ) $ 0.15   $   $ (0.46 ) $ 0.28   $   $ (0.40 )
   
 
 
 
 
 
 
 
  Weighted average shares     56,019     2,749     (497 )(e)   58,271     8,921     (4,121 )(f)   63,071  
   
 
 
 
 
 
 
 
Diluted earnings per share:                                            
  Income (loss) from continuing operations(2)   $ (0.48 ) $ 0.15   $   $ (0.46 ) $ 0.27   $   $ (0.40 )
   
 
 
 
 
 
 
 
  Weighted average shares     56,019     2,788     (504 )(e)   58,303     9,117     (4,212 )(f)   63,208  
   
 
 
 
 
 
 
 

Note(2): Calculation of Pro Forma Combined earnings per share includes dividend requirements on preferred stock of $517.

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

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The Titan Corporation
Unaudited Pro Forma Condensed Combined Balance Sheet
as of September 30, 2001
(in thousands)

 
  Titan
  BTG
  Pro Forma
Adjustments
(Note 3)

  Pro Forma
Combined

 
Assets                          
Current assets:                          
  Cash and cash equivalents   $ 126,149   $ 50   $ (61,300 )(a) $ 64,899  
  Accounts receivable—net     337,548     59,609         397,157  
  Inventories     36,683             36,683  
  Prepaid expenses and other     29,465     2,949         32,414  
  Deferred income taxes     38,807             38,807  
  Net assets of discontinued operations     23,034             23,034  
   
 
 
 
 
    Total current assets     591,686     62,608     (61,300 )   592,994  
Property and equipment—net     94,741     8,481         103,222  
Goodwill—net     361,061     29,388     72,947  (b)   463,396  
Other assets     81,223     4,875     18,237  (b)   104,335  
Net assets of discontinued operations     45,414             45,414  
   
 
 
 
 
Total assets   $ 1,174,125   $ 105,352   $ 29,884   $ 1,309,361  
   
 
 
 
 
Liabilities and Stockholders' Equity                          
Current liabilities:                          
  Amounts outstanding under line of credit   $ 11,875   $ 25,877   $ (25,877 ) $ 11,875  
  Accounts payable     52,818     15,604         68,422  
  Acquisition debt     2,000             2,000  
  Current portion of long-term debt     594     1,462         2,056  
  Accrued compensation and benefits     57,164             57,164  
  Other accrued liabilities     66,433     15,849         82,282  
   
 
 
 
 
    Total current liabilities     190,884     58,792     (25,877 )   223,799  
   
 
 
 
 
Amounts outstanding under line of credit     335,625             335,625  
Other long-term debt     4,277     2,063         6,340  
Other non-current liabilities     38,736     403         39,139  
Company obligated mandatory redeemable preferred securities of a subsidiary trust whose sole assets are senior subordinated debentures of Titan     250,000             250,000  
Minority interests     870             870  
Stockholders' equity:                          
  Preferred stock                          
    Cumulative convertible     690             690  
    Series A junior participating                  
  Common stock     654     54,191     (54,151 )(d)   694  
  Capital in excess of par value     457,984         99,815  (d)   557,799  
  Deferred compensation     (40,142 )           (40,142 )
  Retained earnings (deficit)     (64,919 )   (10,028 )   10,028  (d)   (64,919 )
  Accumulated other comprehensive income     165     69     69  (d)   165  
  Treasury stock, at cost     (699 )           (699 )
   
 
 
 
 
    Total stockholders' equity     353,733     44,094     55,761     453,588  
   
 
 
 
 
Total liabilities and stockholders' equity   $ 1,174,125   $ 105,352   $ 29,884   $ 1,309,361  
   
 
 
 
 

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements.

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THE TITAN CORPORATION

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(in thousands, except share information)

Note 1.  Basis of Presentation

    The Titan Corporation (Titan) completed its acquisition of all of the stock of Datron Systems Incorporated (Datron) on September 28, 2001. On November 27, 2001, Titan completed its acquisition of all outstanding shares of common stock of BTG, Inc. (BTG). The accompanying unaudited pro forma condensed combined statements of operations combine the consolidated statements of operations of Titan for the year ended December 31, 2000 and for the nine months ended September 30, 2001 with the consolidated statements of operations of Datron for the year ended March 31, 2001 and for the eight months ended August 4, 2001 (through the date of acquisition), with the consolidated statements of operations of BTG for the year ended March 31, 2001 and for the nine months ended September 30, 2001, respectively, to reflect the recently closed acquisition of BTG by Titan.

    The unaudited pro forma condensed combined statements of operations reflect the acquisition of BTG and the recent acquisition of Datron as though both were consummated at the beginning of the periods presented. The unaudited pro forma condensed combined statements of operations are not necessarily indicative of results that would have occurred had the acquisition of BTG and the recent acquisition of Datron been consummated at the beginning of the periods presented or the results that may be attained in the future.

    The unaudited pro forma condensed combined balance sheet has been prepared as of September 30, 2001, giving effect to the acquisition of BTG by Titan including the recent Datron acquisition as though both had been consummated on that date.

    Certain information normally included in financial statements prepared in accordance with generally accepted accounting principles has been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements of Titan and the historical consolidated financial statements of Datron and BTG.

Note 2.  Pro Forma Adjustments For Datron Acquisition

    (a)
    Record allocation of excess of Titan's purchase price over the estimated fair value of the net assets acquired, to goodwill and other intangibles. Upon completion of the proposed transaction, an independent valuation will be performed to determine the purchase price allocation based upon the fair value of the assets and liabilities acquired.

    (b)
    Record estimated other accrued liabilities arising as a result of the transaction as follows:

Employment termination agreements for Datron employees   $ 2,400
Direct transaction costs to consummate acquisition including investment banking, legal, printing and accounting fees     1,600
   
    $ 4,000
   
    (c)
    Issue 2,621,000 shares, assuming 2,749,000 Datron shares outstanding and 451,000 Datron stock options outstanding, assuming a $16.01 price per share paid for Datron shares and a ten-day average Titan stock price of $19.54, equivalent to a .81919 exchange ratio of Titan shares paid for each Datron share outstanding. Eliminate Datron common stock, capital in excess of par value and retained earnings as of June 30, 2001.

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    (d)
    Record deferred compensation of $383 for all unvested Datron stock options based on the difference between the fair value on the date of consummation of the acquisition and the exercise price of the unvested Datron stock options, after giving effect to the exchange ratio described in Note (c) above. Amortization of deferred compensation of $128 and $64 has been reflected in the pro forma condensed combined statements of operations for the year ended December 31, 2000 and the eight months ended August 4, 2001, respectively.

    (e)
    Reflect the net change to the combined shares outstanding after calculating the number of shares to be issued by Titan in the transaction less the Datron shares currently outstanding, using the price and exchange assumptions described in Note (c) above.

Note 3.  Pro Forma Adjustments For Proposed BTG Acquisition

    (a)
    To reflect the 19% cash portion of total merger consideration for BTG.

    (b)
    Record allocation of excess of Titan's purchase price over the estimated fair value of the net assets acquired, to goodwill and other intangibles. Upon completion of the proposed transaction, an independent valuation will be performed to determine the purchase price allocation based upon the fair value of the assets and liabilities acquired.

    (c)
    Record estimated other accrued liabilities arising as a result of the transaction as follows:

Employment termination agreements for BTG employees   $ 4,500
Direct transaction costs to consummate acquisition including investment banking, advisory, legal, printing and accounting fees     7,500
   
    $ 12,000
   
    (d)
    Issue 4,024,000 shares and assume 734,000 options, assuming 9,234,000 BTG shares outstanding and 1,365,000 BTG stock options and other stock purchase rights outstanding, assuming a $13.35 price per share paid for BTG shares and an average Titan stock price of $24.814, equivalent to a 0.5380 exchange ratio of Titan shares paid for each BTG share outstanding multiplied by 81%, the ratio of merger consideration to be paid in Titan common stock, equalling a .43578 exchange ratio of Titan common stock to be paid for each BTG share outstanding. Eliminate BTG common stock and retained earnings as of September 30, 2001.

    (e)
    To reflect incremental interest expense on advances under Titan's line of credit to fund the 19% cash portion of the purchase price of BTG.

    (f)
    Reflect the net change to the combined shares outstanding after calculating the number of shares to be issued by Titan in the transaction less the BTG shares currently outstanding, using the price and exchange assumptions described in Note (d) above.

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
THE TITAN CORPORATION NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (in thousands, except share information)