EX-99.2 3 ex99-2.txt EXHIBIT 99.2 Exhibit 99.2 INTERMAGNETICS GENERAL CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands, Except Per Share Amounts)
As of As of May 30, 2004 May 31, 2004 Historical Historical Pro Forma Pro Forma Intermagnetics MRID Adjustments Total -------------- ------------ ----------- --------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 11,868 $ 6,389 $ (44,177)(4) $ 17,942 45,000 (2) (155)(2) (983)(1) Trade accounts receivable, net 41,345 11,895 53,240 Inventories 27,037 6,934 33,971 Deferred income taxes 4,333 -- 4,333 Prepaid expenses and other 8,893 506 (124)(4) 9,275 --------- --------- --------- --------- TOTAL CURRENT ASSETS 93,476 25,724 (439) 118,761 Property, plant and equipment, net 36,736 5,892 1,028 (9) 43,656 INTANGIBLE AND OTHER ASSETS Goodwill 118,816 955 (955)(4) 176,824 58,008 (4) Other intangibles, net 32,491 85 26,800 (4) 59,376 Other assets 3,416 71 155 (2) 3,642 --------- --------- --------- --------- TOTAL ASSETS $ 284,935 $ 32,727 $ 84,597 $ 402,259 ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 4,171 $ 436 $ 4,607 Accounts payable 10,242 1,489 11,731 Accrued expenses and other current liabilities 27,043 1,965 29,008 --------- --------- --------- --------- TOTAL CURRENT LIABILITIES 41,456 3,890 -- 45,346 LONG-TERM DEBT, less current portion 57,635 2,657 45,000 (2) 105,292 NOTE PAYABLE -- -- 5,000 (4) 5,000 DEFERRED INCOME TAXES 10,050 -- 10,555 (4) 20,605 DERIVATIVE LIABILITY 225 -- 225 Total Shareholders' equity 175,569 26,180 (26,180)(4) 225,791 50,222 (4) --------- --------- --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 284,935 $ 32,727 $ 84,597 $ 402,259 ========= ========= ========= =========
Exhibit 99.2 INTERMAGNETICS GENERAL CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS (Dollars in Thousands, Except Per Share Amounts)
Fiscal Year Eight Month Twelve Month Ended Period Ended Period Ended May 30, 2004 January 26, 2004 Pro Forma May 31, 2004 Pro Forma Historical Historical Adjustments Historical Adjustments Pro Forma Intermagnetics Invivo Invivo MRID MRID Total -------------- ---------------- ----------- ------------ ----------- --------- Net sales $ 164,447 $ 45,071 $ -- $ 49,532 $ -- $ 259,050 Cost of products sold 95,662 22,377 (36) (5) 21,298 -- 139,301 ---------- --------- ---------- ----------- ----------- ---------- Gross margin 68,785 22,694 36 28,234 -- 119,749 Product research and development 12,940 2,772 -- 4,784 -- 20,496 Selling, general and administrative 29,596 21,728 (50) (6) 7,802 23 (9) 50,901 (8,198) (8) -- Amortization of intangible assets 3,145 -- 1,523 (7) -- 2,753 (7) 7,421 ---------- --------- ---------- ----------- ----------- ---------- 45,681 24,500 (6,725) 12,586 2,776 78,818 ---------- --------- ---------- ----------- ----------- ---------- Operating income 23,104 (1,806) 6,761 15,648 (2,776) 40,931 Interest and other income 790 93 (611) (9) 531 (16)(10) 787 Interest and other expense (1,252) (310) (1,568 (10) (266) (1,500)(11) (5,122) (193) (3) (33) (2) Gain on available-for-sale securities 114 -- -- -- -- 114 ---------- --------- ---------- ----------- ----------- ---------- Income before income taxes 22,756 (2,023) 4,389 15,913 (4,325) 36,710 Provision for income taxes 7,896 83 1,523 -- 4,021 (13) 13,523 ---------- --------- ---------- ----------- ----------- ---------- INCOME FROM CONTINUING OPERATIONS $ 14,860 $ (2,106) $ 2,866 $ 15,913 $ (8,346) $ 23,187 ========== ========= ========== =========== =========== ========== Income from continuing operations per Common Share: Basic $ 0.59 $ 0.84 ========== ========== Diluted $ 0.58 $ 0.83 ========== ========== Weighted average outstanding common shares: Basic 25,046,718 2,460,889 (12) 27,507,607 ========== ========= ========== Diluted 25,493,379 2,460,889 (12) 27,954,268 ========== ========= ==========
Exhibit 99.2 INTERMAGNETICS GENERAL CORPORATION UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENTS (Dollars in Thousands, Except Per Share Amounts)
The Period from Six Months Ended June 1, 2004 to November 28, 2004 July 16, 2004 Pro Forma Historical Historical Adjustments Pro Forma Intermagnetics MRID MRID Total -------------- --------------- ----------- --------- Net sales $ 134,904 $ 6,460 $ -- $ 141,364 Cost of products sold 72,680 3,049 -- 75,729 ------------ --------- -------- ----------- Gross margin 62,224 3,411 -- 65,635 Product research and development 11,508 777 -- 12,285 Selling, general and administrative 31,951 1,042 3 (9) 32,996 -- Amortization of intangible assets 3,081 -- 344 (7) 3,425 Impairment of intangible assets 913 -- -- 913 ------------ --------- -------- ----------- 47,453 1,819 347 49,619 ------------ --------- -------- ----------- Operating income 14,771 1,592 (347) 16,016 Interest and other income 413 19 (2)(10) 430 Interest and other expense (2,134) (69) (188)(11) (2,395) (4) (2) Gain on prior period sale of division 1,094 -- -- 1,094 ------------ --------- -------- ----------- Income before income taxes 14,144 1,542 (541) 15,145 Provision for income taxes 4,698 -- 347 (13) 5,045 ------------ --------- -------- ----------- INCOME FROM CONTINUING OPERATIONS $ 9,446 $ 1,542 $ (888) $ 10,100 ============ ========= ======== =========== Income from continuing operations per Common Share: Basic $ 0.35 $ 0.36 ============ =========== Diluted $ 0.34 $ 0.36 ============ =========== Weighted average outstanding common shares: Basic 27,334,721 469,810 (12) 27,804,531 ========== ======= ========== Diluted 27,801,185 469,810 (12) 28,270,995 ========== ======= ==========
Intermagnetics general corporation NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED (Dollars in thousands) (1) Represents legal, accounting and other professional fees incurred by the Company that relate to the acquisition of MRID. (2) Represents the $45.0 million draw on the $130.0 million unsecured credit facility that was used to assist in financing the Company's acquisition of MRID. The Company also incurred $155,000 of costs to increase the committed amount this credit facility from $100.0 million to $130.0 million. These costs will be recorded as a deferred asset and amortized over the remaining life of the debt. Amortization to be included in interest expense is $33,000 for the fiscal year ended May 30, 2004 and $4,000 for the six months ended November 28, 2004 (four and half months of amortization are included in Intermagnetics historical income statement for the six months ended November 28, 2004). (3) Represents eight months of amortization from the deferred debt financing fees incurred in obtaining the original credit facility used to partially finance the acquisition of Invivo. (4) Represents purchase accounting adjustments that Intermagnetics recorded when the acquisition was consummated. For purposes of these pro-forma condensed consolidated financial statements, the purchase price premium has been preliminarily allocated to the acquired MRID Trade name/Trademark, Product Trade names, OEM Relationships, Know-How and Core Technology, Completed Technology, and goodwill pending further study and analysis. We anticipate having this valuation complete and finalized before the end of our fiscal year ending May 29, 2005. In June 2001, the FASB issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), which requires non-amortization of goodwill and certain intangible assets that have indefinite useful lives and annual tests of impairment of those assets. This statement also provides specific guidance about how to determine and measure goodwill and intangible asset impairment, and requires additional disclosure of information about goodwill and other intangible assets. The goodwill resulting from Intermagnetics' acquisition of MRID is subject to the non-amortization provisions of this statement.
Consideration: Cash payment to MRID shareholders $ 44,177 Issuance of Intermagnetics Common Stock to MRID Shareholders valued using the average closing stock price for two days prior to and after the measurment date (2,372,389 shares at $21.17) 50,222 Promissory note payable (payable in three years from closing date) 5,000 Intermagnetics transaction costs 983 --------- Total consideration and costs 100,382 Less: MRID net assets as of May 30, 2004 26,180 Adjustments to MRID net assets for purchase accounting Elimination of existing goodwill (955) Elimination of a note receivable from an officer of MRID (124) Estimated adjustment to fair value adjustment to property 1,028 Adjusted MRID net assets 26,129 --------- Excess purchase price over the fair value of the net assets acquired $ 74,253 ========= The excess purchase price over the fair value of the net assets acquired has been allocated on a preliminary basis as follows: Deferred tax liability (10,555) Other intangible assets: Trade name/Trademark 970 Product trade names 3,290 OEM relationships 9,300 Know-how and core technology 11,280 Completed technology 1,960 --------- Total other intangible assets 26,800 Goodwill 58,008 --------- $ 74,253 =========
(5) Represents reduced depreciation from the fair value and useful life adjustment to Invivo's manufacturing plant, property and equipment. The increase in fair value was more than offset by the increase in the weighted average life of the acquired assets. (6) Represents reduced depreciation from the fair value and useful life adjustment to Invivo's selling, general and administrative property and equipment. The increase in fair value was more than offset by the increase in the remaining weighted average life of the acquired assets. (7) Represents estimated amortization expense of the following acquired intangible assets:
INVIVO Represents the Estimated Eight Month Estimated Remaining Monthly Period Ended Intangible Asset Fair Value Economic Life Amortization January 26, 2004 ---------------- ---------- ------------- ------------ ---------------- Trade name/Trademark $ 11,510 25 years $ 38 $ 307 Product trade names/trademarks 1,350 14 years 8 64 OEM Relationships 5,650 12 years 39 312 Know-how and core technology 6,660 8 years 70 560 Product technology and design 2,970 7 years 35 280 Order backlog 540 4 months 135 - -------- ----- ------- $ 28,680 $ 325 $ 1,523 ======== ===== ======= MRID Estimated Fiscal Year Estimated Remaining 6-Weeks Ended Intangible Asset Fair Value Economic Life Amortization May 30, 2004 ---------------- ---------- ------------- ------------ ------------ Trade name/Trademark $ 970 5 years $ 24 $ 194 Product Trade name 3,290 10 years 41 $ 329 OEM Relationships 9,300 12 years 97 775 Know-how and core technology 11,280 10 years 141 1,128 Completed technology 1,960 6 years 41 327 -------- ----- ------- $ 26,800 $ 344 $ 2,753 ======== ===== =======
(8) Represents certain corporate overhead and transaction costs incurred by Invivo that would be considered superfluous subsequent to the acquisition. Invivo's corporate headquarters was shut-down and vacated within a month following the date of acquisition. (9) Represents the estimated fair value adjustment to MRID's real property located in Gainesville, FL. The $1,028 increase was allocated to land $147,000 and building $881,000. As a result of the increase in fair value to the building, depreciation expense would have increased about $23,000 and $3,000 for the year ended May 30, 2004 and the six months ended November 28, 2004, respectively (four and half months of depreciation is included in Intermagnetics historical income statement for the six months ended November 28, 2004). Depreciation is based on an average remaining useful life of 38 years. (10) Represents reduced interest income as a result of available cash used to partially finance the acquisitions. Cash used to fund the acquisitions of Invivo and MRID amounted to $92.6 million and $1.6 million, respectively. These costs which are net of proceeds received from long-term debt represent the consideration given to Invivo and MRID shareholders, related transaction costs incurred and the costs incurred in obtaining the unsecured credit facility. The interest rate used in this calculation of 0.99% represents the current average money market yield earned by the Company. (11) Represents additional interest expense on the Company's debt used to finance the Invivo and MRID acquisitions. Pro-forma interest expense adjustment for Invivo used a weighted average rate of 3.51% on $67.0 million for eight months (four months of interest expense is already included in Intermagnetics historical income statement). MRID's interest expense adjustment utilized a weighted average rate of 3.00% on $50.0 million ($45.0 million draw on our revolving credit facility plus a $5.0 million note payable). Because the interest rates on our revolver and the promissory note payable are variable, they are subject to change. The following table shows the effect on net income if the rates increased or decreased by 0.125%: Fiscal Year Ended Six Months Ended May 30, 2004 November 28, 2004 ------------ ----------------- Increase 0.125% $ 40 $ (20) ========= ========= Decrease 0.125% $ (40) $ 20 ========= ========= (12) The reconciliation of weighted-average common shares for the fiscal year ended May 30, 2004 prior to the acquisition of MRID to weighted average common shares after the acquisition is set forth below:
Intermagnetics Shares Issued at Closing Weighted average outstanding Pre-MRID ----------------------------------------- Post-MRID common shares: Acquisition as Consideration as Compensation Acquisition -------------- ----------- ---------------- --------------- ----------- Basic 25,046,718 2,372,389 88,500 27,507,607 ---------- --------- ------ ---------- Diluted 25,493,379 2,372,389 88,500 27,954,268 ------- ---------- --------- ------ ----------
The above table reflects the three-for-two stock split as approved by the Company's Board of Directors. The stock split was completed in the form of a 50% stock dividend, effective August 17, 2004 for shareholders of record on July 23, 2004. Intermagnetics issued a total of 2,460,889 shares of common stock to the shareholders of MRID to acquire the net assets of MRID. The shareholders' of MRID allocated about 88,500 of the shares to fund an employee benefit plan (the "Plan") for MRID employees. The value of the Plan shares was about $1,875,000 which was recorded as compensation expense as a result of accelerating the vesting requirements. This expense is excluded from pro-forma income as it is directly related to the acquisition and will not have a continuing impact on operations. The pro forma adjustment for the six months ended November 28, 2004 reflects the increase to weighted average shares had the shares to MRID been issued as of May 31, 2004 (the first day of Intermagnetics 2005 fiscal year). (13) The pro forma income tax provision has been calculated using the Company's current effective tax rate of 34.7%. Management is currently evaluating the potential impact (if any) on its effective tax rate as a result of this acquisition.