EX-99.3 4 a04-8590_1ex99d3.htm EX-99.3

EXHIBIT 99.3

 

Unaudited Pro Forma Combined Financial Statements

 

The following unaudited pro forma combined financial statements give effect to the aquisition of the KRONE Companies by ADC as described under Item 2 of this report as amended. The unaudited pro forma condensed combined statement of operations for the fiscal year ended October 31, 2003 has been prepared by combining the consolidated statement of continuing operations of ADC for the fiscal year ended October 31, 2003 with the consolidated statement of continuing operations of the KRONE Companies for the fiscal year ended December 31, 2003, adjusted to give effect to the acquisition as if it occurred on November 1, 2002.  The unaudited pro forma condensed combined statement of continuing operations for the six months ended April 30, 2004 has been prepared by combining the condensed consolidated statement of continuing operations of ADC for the six months ended April 30, 2004 (unaudited) with the condensed consolidated statement of operations of the KRONE Companies for the six months ended March 31, 2004 (unaudited), adjusted to give effect to the acquisition as if it occurred on November 1, 2002.  The KRONE Companies condensed consolidated statement of operations for the fiscal year ended December 31, 2003 and the six months ended March 31, 2004, both contain the period October 1, 2003 through December 31, 2003.  Net sales and net loss for the three months ended December 31, 2003 were $87.3 million and $9.5 million, respectively.  The unaudited pro forma condensed combined balance sheet as of April 30, 2004 has been prepared by combining the condensed consolidated balance sheet of ADC as of April 30, 2004 (unaudited) with the condensed consolidated balance sheet of the KRONE Companies as of March 31, 2004 (unaudited), adjusted to give effect to the acquisition as if it had occurred on April 30, 2004.

 

The unaudited pro forma combined financial statements presented are based on the assumptions and adjustments described in the accompanying notes.  The unaudited pro forma combined financial statements are presented for informational purposes only and are not necessarily indicative of the financial position or results of operations that would actually have been reported had the acquisition occurred as assumed.  The unaudited pro forma combined financial statements also report the results of certain of ADC’s business activities as discontinued operations, due to certain restructuring actions taken by ADC since the date of the previously issued financial statements.  Due to the substantial level of restructuring undertaken by ADC during the periods presented, particularly the KRONE acquisition and several divestitures, ADC cautions readers that the unaudited pro forma combined financial statements may not be indicative of future operating results.

 

The unaudited pro forma combined financial statements and accompanying notes should be read in conjunction with the historical financial statements and related notes of ADC included in our annual report on Form 10-K and quarterly reports on Form 10-Q and the financial statements and related notes of the KRONE Companies attached as Exhibits 99.1 and 99.2.

 


 

ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

April 30, 2004

(In millions)

 

 

 

Historical
ADC (b)

 

ADC
Discontinued
Operations
(c)

 

Historical
KRONE
Companies
(d)

 

Pro Forma
Adjustments

 

Pro Forma

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

730.2

 

$

(0.4

)

$

33.2

 

$

(293.6

)(g)

$

469.4

 

Available-for-sale securities

 

11.2

 

—

 

—

 

—

 

11.2

 

Accounts receivable, net

 

106.6

 

(4.9

)

59.2

 

—

 

160.9

 

Unbilled revenue

 

29.4

 

(3.5

)

—

 

—

 

25.9

 

Inventories, net

 

76.7

 

(7.4

)

42.6

 

—

 

111.9

 

Deferred income taxes

 

—

 

—

 

1.8

 

(0.6

)(g)

1.2

 

Assets of discontinued operations

 

—

 

—

 

—

 

—

 

—

 

Prepaid and other current assets

 

42.0

 

(4.0

)

4.8

 

—

 

42.8

 

Total current assets

 

996.1

 

(20.2

)

141.6

 

(294.2

)

823.3

 

 

 

 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT, NET

 

169.6

 

(5.8

)

61.3

 

19.8

(g) 

244.9

 

GOODWILL

 

—

 

—

 

—

 

163.6

(g)

163.6

 

INTANGIBLE ASSETS

 

—

 

—

 

—

 

68.1

(g)

68.1

 

ASSETS HELD FOR SALE

 

17.8

 

—

 

—

 

—

 

17.8

 

RESTRICTED CASH

 

18.0

 

—

 

—

 

—

 

18.0

 

DEFERRED TAX ASSET

 

—

 

—

 

52.1

 

(51.6

)(g)

0.5

 

AVAILABLE-FOR-SALE SECURITIES

 

16.6

 

—

 

—

 

—

 

16.6

 

OTHER ASSETS

 

32.5

 

(5.0

)

2.7

 

—

 

30.2

 

Total assets

 

$

1,250.6

 

$

(31.0

)

$

257.7

 

$

(94.3

)

$

1,383.0

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREOWNERS’ INVESTMENT:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

51.8

 

$

(1.1

)

$

26.5

 

$

—

 

$

77.2

 

Accrued compensation and benefits

 

45.9

 

(6.6

)

10.5

 

—

 

49.8

 

Other accrued liabilities

 

109.7

 

(24.7

)

35.3

 

5.0

(g)

 

 

 

 

 

 

 

 

 

 

3.7

(j)

 

 

 

 

 

 

 

 

 

 

24.6

(g)

 

 

 

 

 

 

 

 

 

 

(7.6

)(m)

146.0

 

Current long-term notes payable

 

—

 

—

 

14.9

 

(14.6

)(m)

0.3

 

Restructuring accrual

 

32.5

 

—

 

5.0

 

—

 

37.5

 

Liabilities of discontinued operations

 

—

 

—

 

—

 

—

 

—

 

Total current liabilities

 

239.9

 

(32.4

)

92.2

 

11.1

 

310.8

 

 

 

 

 

 

 

 

 

 

 

 

 

LONG-TERM NOTES PAYABLE

 

400.0

 

—

 

193.3

 

(192.9

)(m)

400.4

 

OTHER LONG-TERM LIABILITIES

 

2.4

 

—

 

30.0

 

(24.8

)(g)

7.6

 

PENSION AND POSTRETIREMENT OBLIGATION

 

—

 

—

 

58.2

 

—

 

58.2

 

Total liabilities

 

642.3

 

(32.4

)

373.7

 

(206.6

)

777.0

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREOWNERS’ INVESTMENT (808.8 shares outstanding)

 

608.3

 

1.4

 

(116.0

)

116.0

(p) 

 

 

 

 

 

 

 

 

 

 

(3.7

)(j)

606.0

 

Total liabilities and shareowners’ investment

 

$

1,250.6

 

$

(31.0

)

$

257.7

 

$

(94.3

)

$

1,383.0

 

 

See accompanying notes to unaudited pro forma combined financial statements.

 


 

ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

PRO FORMA CONDENSED COMBINED STATEMENTS OF CONTINUING OPERATIONS

Year Ended October 31, 2003

(In millions, except per share amounts)

 

 

 

Historical
ADC (a)

 

Discontinued
Operations
ADC (c)

 

Historical
Predecessor
KRONE
Companies
(e)

 

Historical
Successor
KRONE
Companies
(e)

 

Pro Forma
Adjustments

 

Pro
Forma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

571.7

 

$

(77.6

)

$

269.5

 

$

46.8

 

$

(42.4

)(k)

$

768.0

 

Service

 

201.5

 

(76.0

)

—

 

—

 

42.4

(k) 

167.9

 

TOTAL NET SALES

 

773.2

 

(153.6

)

269.5

 

46.8

 

—

 

935.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF SALES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

316.6

 

(35.1

)

190.3

 

33.8

 

(46.1

)(k)

459.5

 

Service

 

165.2

 

(52.5

)

—

 

—

 

37.2

(k) 

149.9

 

TOTAL COST OF SALES

 

481.8

 

(87.6

)

190.3

 

33.8

 

(8.9

)

609.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

291.4

 

(66.0

)

79.2

 

13.0

 

8.9

 

326.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

108.6

 

(42.0

)

—

 

—

 

9.3

(k)

75.9

 

Selling and administration

 

222.1

 

(59.2

)

68.5

 

11.8

 

3.7

(j) 

 

 

 

 

 

 

 

 

 

 

 

 

(3.1

)(i)

 

 

 

 

 

 

 

 

 

 

 

 

(0.4

)(k)

243.4

 

Impairment charges

 

15.6

 

—

 

—

 

—

 

0.2

(k)

15.8

 

Restructuring charges

 

41.8

 

(9.5

)

4.3

 

0.7

 

(0.2

)(k)

37.1

 

Amortization of acquired intangibles

 

—

 

—

 

—

 

—

 

7.9

(h)

7.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Expenses

 

388.1

 

(110.7

)

72.8

 

12.5

 

17.4

 

380.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING LOSS

 

(96.7

)

44.7

 

6.4

 

0.5

 

(8.5

)

(53.6

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME, NET

 

14.6

 

(5.6

)

(20.1

)

(3.5

)

(4.6

)(l)

 

 

 

 

 

 

 

 

 

 

 

 

4.3

(n)

 

 

 

 

 

 

 

 

 

 

 

 

16.5

(m)

1.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS BEFORE INCOME TAXES

 

(82.1

)

39.1

 

(13.7

)

(3.0

)

7.7

 

 

(52.0

)

PROVISION (BENEFIT) FOR INCOME TAXES

 

(5.4

)

0.9

 

0.6

 

0.2

 

0.9

(o)

(2.8

)

LOSS FROM CONTINUING OPERATIONS

 

$

(76.7

)

$

38.2

 

$

(14.3

)

$

(3.2

)

$

6.8

 

$

(49.2

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVERAGE COMMON SHARES OUTSTANDING (BASIC AND DILUTED)

 

803.4

 

 

 

 

 

 

 

 

 

803.4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED LOSS FROM CONTINUING OPERATIONS PER SHARE

 

$

(0.10

)

 

 

 

 

 

 

 

 

$

(0.06

)

 

See accompanying notes to unaudited pro forma combined financial statements.

 


 

ADC TELECOMMUNICATIONS, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF CONTINUING OPERATIONS

Six Months Ended April 30, 2004

(In millions, except per share amounts)

 

 

 

Historical
ADC (b)

 

Discontinued
Operations
ADC (c)

 

Historical
Predecessor
KRONE
Companies
(f)

 

Historical
Successor
KRONE
Companies
(f)

 

Pro Forma
Adjustments

 

Pro
Forma

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

261.2

 

$

(16.5

)

$

40.5

 

$

130.7

 

$

(26.5

)(k)

$

389.4

 

Service

 

89.5

 

(30.6

)

—

 

—

 

26.5

(k)

85.4

 

TOTAL NET SALES

 

350.7

 

(47.1

)

40.5

 

130.7

 

—

 

474.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COST OF SALES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

137.2

 

(10.4

)

27.7

 

90.6

 

(27.3

)(k)

217.8

 

Service

 

74.7

 

(21.2

)

—

 

—

 

23.2

(k)

76.7

 

TOTAL COST OF SALES

 

211.9

 

(31.6

)

27.7

 

90.6

 

(4.1

)

294.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

138.8

 

(15.5

)

12.8

 

40.1

 

4.1

 

180.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

45.8

 

(16.5

)

—

 

—

 

5.2

(k)

34.5

 

Selling and administration

 

94.1

 

(17.1

)

11.9

 

33.6

 

(0.8

)(i)

 

 

 

 

 

 

 

 

 

 

 

 

(1.1

)(k) 

120.6

 

Impairment charges

 

9.2

 

(7.6

)

—

 

—

 

—

 

1.6

 

Restructuring charges

 

20.5

 

(8.6

)

1.7

 

0.8

 

—

 

14.4

 

Amortization of acquired intangibles

 

—

 

—

 

—

 

—

 

3.9

(h)

3.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Operating Expenses

 

169.6

 

(49.8

)

13.6

 

34.4

 

7.2

 

175.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING LOSS

 

(30.8

)

34.3

 

(0.8

)

5.7

 

(3.1

)

5.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME, NET

 

8.7

 

0.2

 

(5.9

)

(5.8

)

(2.3

)(l)

 

 

 

 

 

 

 

 

 

 

 

 

4.5

(n)

 

 

 

 

 

 

 

 

 

 

 

 

8.3

(m)

7.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS) INCOME BEFORE INCOME TAXES

 

(22.1

)

34.5

 

(6.7

)

(0.1

)

7.4

 

13.0

 

PROVISION (BENEFIT) FOR INCOME TAXES

 

—

 

0.4

 

(0.4

)

1.7

 

(0.5

)(o)

1.2

 

(LOSS) INCOME FROM CONTINUING OPERATIONS

 

$

(22.1

)

$

34.1

 

$

(6.3

)

$

(1.8

)

$

7.9

 

$

11.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVERAGE COMMON SHARES OUTSTANDING (BASIC)

 

807.5

 

 

 

 

 

 

 

 

 

807.5

 

AVERAGE COMMON SHARES OUTSTANDING (DILUTED)

 

807.5

 

 

 

 

 

 

 

 

 

812.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BASIC AND DILUTED (LOSS) INCOME FROM CONTINUING OPERATIONS PER SHARE

 

$

(0.03

)

 

 

 

 

 

 

 

 

$

0.01

 

 

See accompanying notes to unaudited pro forma combined financial statements.

 


 

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS

(In millions, except per share amounts)

 

1.     Pro Forma Basis of Presentation

 

The unaudited pro forma combined financial statements have been prepared based on assumptions relating to the allocation of the acquisition price to the assets and liabilities of the KRONE Companies.  The actual allocation may differ from that reflected below after final valuation procedures are completed.

 

The unaudited pro forma combined financial statements are presented for informational purposes only.  Reliance should not be place on these unaudited pro forma combined financial statements as being indicative of the financial position or results of operations that would actually have been reported had the acquisition occurred as assumed or which may be reported in the future.

 

Our Cuda™ cable modem termination system product line, the operations related to our FastFlowÒ Broadband Provisioning Manager software and the business related to our Singl.eView® product line are classified as discontinued operations in this filing and will be classified as discontinued operations in future filings as they met the criteria for discontinued operations in our quarter ended July 31, 2004.

 

2.     Pro Forma Adjustments

 

(a)   Historical ADC from ADC’s Form 10-K for the year ended October 31, 2003.

 

(b)   Historical ADC from ADC’s Form 10-Q as of and for the six months ended April 30, 2004.

 

(c)   Represents operations discontinued subsequent to the respective period end.  Discontinued operations for the year ended October 31, 2003 includes the BroadAccess40 business, the business related to our Cuda™ cable modem termination system product line and the operations related to our FastFlowÒ Broadband Provisioning Manager software and the business related to our Singl.eView® product line. Discontinued operations as of and for the six months ended April 30, 2004, includes the business related to our Cuda™ cable modem termination system product line and the operations related to our FastFlowÒ Broadband Provisioning Manager software and the business related to our Singl.eView® product line.

 

(d)   Represents the balance sheet for the KRONE Companies as of March 31, 2004.

 

(e)   Represents the statement of operations for the KRONE Companies for the year ended December 31, 2003.  On November 11, 2003, GenTek and certain of its subsidiaries, including the KRONE Companies, emerged from reorganization under Chapter 11 of the United States Bankruptcy Code.  The Predecessor statement of operations represents the pre-emergence period and the Successor statement of operations represents the post-emergence period.

 

(f)    Represents the statement of operations for the KRONE Companies for the six months ended March 31, 2004. On November 11, 2003, GenTek and certain of its subsidiaries, including the KRONE Companies, emerged from reorganization under Chapter 11 of the United States Bankruptcy Code.  The Predecessor statement of operations represents the pre-emergence period and the Successor statement of operations represents the post-emergence period.

 


 

(g)   To record the estimated acquisition price of the KRONE Companies and the allocation of the purchase price based on the estimated fair values of the net assets as of the date of acquisition. The excess of the net tangible and intangible assets is recorded as goodwill.

 

Estimated acquisition price:

 

 

 

Cash consideration paid

 

$

306.3

 

Less cash acquired

 

(12.7

)

Net cash paid

 

293.6

 

Acquisition related costs

 

5.0

 

Net estimated acquisition price

 

$

298.6

 

 

 

 

 

Estimated purchase price allocation:

 

 

 

Net tangible assets

 

$

66.9

 

Intangible assets

 

68.1

 

Goodwill

 

163.6

 

Total

 

$

298.6

 

 

(h)   To record amortization expense of intangible assets acquired assuming the acquisition occurred on November 1, 2002.  Intangible assets are amortized on a straight-line basis over the estimated lives of the assets as follows:

 

 

 

Acquired Value

 

Estimated Life
Range (in years)

 

Acquired Technology

 

$

23.4

 

5-7

 

Acquired Trade name and Trademarks

 

23.4

 

5-20

 

Acquired Distributor Network

 

18.9

 

10

 

Other

 

2.4

 

1-13

 

Total Intangible Assets

 

$

68.1

 

 

 

 

(i)    To record depreciation expense effect for the change in the KRONE Companies historical cost basis verses the fair value of the assets acquired.

 

(j)    To accrue for estimated integration costs.

 

(k)   To reclassify related amounts per the KRONE statement of operations to conform with ADC Historical presentation.

 

(l)    To record interest income foregone due to cash paid for the KRONE Companies.

 

(m)  In conjunction with the close of the acquisition, the KRONE Companies settled intercompany debt and accrued interest payable to GenTek.  In addition, debt with a third-party was settled.  Related interest expense is adjusted assuming the acquisition took place on November 1, 2002.

 

(n)   To add back the effect of the KRONE Companies reorganization items, including settlement of pre-petition liabilities, gain on debt discharge and fresh-start accounting adjustments, resulting from GenTek’s bankruptcy proceedings.

 

(o)   To record the income tax effect of the related pro forma adjustments at applicable statutory rates.

 

(p)   To eliminate the equity accounts of the KRONE Companies.