EX-99.3 4 ex99-3.txt UNAUDITED PRO FORMA INFORMATION 1 EXHIBIT 99.3 UNAUDITED PRO FORMA FINANCIAL INFORMATION ----------------------------------------- The Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet as of March 31, 2000 (the "Pro Forma Balance Sheet") and Unaudited Pro Forma Combined Condensed Consolidated Statements of Operations (the "Pro Forma Statements of Operations" and together with the Pro Forma Balance Sheet, the "Pro Forma Financial Statements") for the fiscal year ended December 31, 1999 and the three month period ended March 31, 2000 have been prepared to illustrate the estimated effect of the Company's acquisition of Rittenhouse Paper Company (the "Acquisition") and $35 million of borrowings incurred by the Company in connection with the Acquisition. The Pro Forma Statements of Operations reflect adjustments as if the Acquisition had occurred on January 1, 1999. The Pro Forma Balance Sheet reflects adjustments as if the Acquisition had occurred on March 31, 2000. The Acquisition has been accounted for using the purchase method of accounting. Accordingly, assets acquired and liabilities assumed have been recorded at their estimated fair values, which are subject to further adjustment. The final allocation of the purchase price for the Acquisition may differ materially from the allocations set forth in the Pro Forma Financial Statements presented herein due to several contingencies that could impact the final purchase price. These contingencies include a contingent payment of up to $6 million if certain financial targets are achieved for the year ending December 31, 2000. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable. The Pro Forma Financial Statements do not purport to present the financial position or results of operations of the Company had the Acquisition occurred on the dates specified, nor are they necessarily indicative of the results of operations that may be achieved in the future. The Pro Forma Statements of Operations do not reflect any adjustments for synergies that management expects to realize commencing upon consummation of the acquisition. No assurances can be made as to the amount of cost savings or revenue enhancements, if any, that actually will be realized. The Pro Forma Financial Statements are based on certain assumptions and adjustments described in the Notes to Pro Forma Financial Statements and should be read in conjunction therewith and with the Consolidated Financial Statements and related notes of the Company included in its Annual Report on Form 10-K for the fiscal year ended December 31, 1999 and in its Form 10-Q for the quarter ended March 31, 2000 and the historical financial statements of Rittenhouse which are included as Exhibit 99.2 to this Form 8-K/A. -1- 2 UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET ----------------------------------------------------------------- (In thousands)
MARCH 31, 2000 --------------------------------------------------------------------- Pro Forma Pro Forma Nashua Rittenhouse Adjustments Balance ------ ----------- ----------- --------- ASSETS ------ Cash and cash equivalents $ 24,574 $ 1,684 $ (23,543)(A) $ 2,715 Restricted cash 5,361 -- -- 5,361 Accounts receivable 16,539 14,425 -- 30,964 Inventories: Materials and supplies 7,304 7,513 -- 14,817 Work in process 4,101 266 -- 4,367 Finished goods 5,806 7,873 -- 13,679 --------- --------- --------- --------- 17,211 15,652 -- 32,863 Other current assets 11,315 1,382 -- 12,697 --------- --------- --------- --------- Total current assets 75,000 33,143 (23,543) 84,600 --------- --------- --------- --------- Plant and equipment 77,510 21,197 (6,873)(C) 91,834 Accumulated depreciation (37,571) (14,923) 14,923(C) (37,571) --------- --------- --------- --------- 39,939 6,274 8,050 54,263 Other assets 16,876 472 1,158(D)(E)(F) 18,506 Goodwill -- -- 28,694(B) 28,694 Net non-current assets of discontinued operations 756 -- -- 756 --------- --------- --------- --------- Total assets $ 132,571 $ 39,889 $ 14,359 $ 186,819 ========= ========= ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current maturities of long-term debt $ 511 $ 14,316 $ (14,316)(D)(H) $ 511 Accounts payable 11,070 9,411 -- 20,481 Accrued expenses 28,756 2,167 7,077(D)(G) 38,000 Income tax payable 2,295 297 -- 2,592 --------- --------- --------- --------- Total current liabilities 42,632 26,191 (7,239) 61,584 --------- --------- --------- --------- Long-term debt 383 -- 35,072(H) 35,455 Other long-term liabilities 12,889 1,539 (1,315)(D) 13,113 --------- --------- --------- --------- Total long-term liabilities 13,272 1,539 33,757 48,568 --------- --------- --------- --------- Shareholders'/Members' Equity: Common stock and additional capital 22,098 -- -- 22,098 Retained earnings 69,491 -- -- 69,491 Members' equity -- 12,159 (12,159)(I) -- Treasury stock, at cost (14,922) -- -- (14,922) --------- --------- --------- --------- 76,667 12,159 (12,159) 76,667 --------- --------- --------- --------- Total liabilities and shareholders' equity $ 132,571 $ 39,889 $ 14,359 $ 186,819 ========= ========= ========= =========
The accompanying notes are an integral part of the combined condensed consolidated financial statements. -2- 3 UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED --------------------------------------------------- STATEMENTS OF OPERATIONS ------------------------
Three Months Ended March 31, 2000 ----------------------------------------------------------------------- Pro Forma Pro Forma (In thousands, except per share data) Nashua Rittenhouse Adjustments Balance ------ ----------- ----------- --------- Net sales $ 44,010 $ 30,695 $ -- $ 74,705 Cost of products sold 35,088 23,056 (126)(4)(5) 58,018 -------- -------- -------- -------- Gross margin 8,922 7,639 126 16,687 -------- -------- -------- -------- Research, selling, distribution and administrative expenses 10,039 7,000 240(4)(5) 17,279 Pension settlement income (18,606) -- -- (18,606) Restructuring and other unusual charges 1,452 -- -- 1,452 Equity in loss of unconsolidated joint ventures 4 -- -- 4 Interest expense 201 285 477(5)(7) 963 Interest income (421) (2) 404(6) (19) Other income -- (29) -- (29) -------- -------- -------- -------- Income from continuing operations before income tax provision 16,253 385 (995) 15,643 Income tax provision 6,412 17 (248)(8) 6,181 -------- -------- -------- -------- Net income $ 9,841 $ 368 $ (747) $ 9,462 ======== ======== ======== ======== Basic earnings per share: Net income per common share $ 1.75 $ 1.68 ======== ======== Average common shares 5,639 5,639 ======== ======== Diluted earnings per share: Net income per common share assuming dilution $ 1.74 $ 1.67 ======== ======== Average common and potential common shares 5,655 5,655 ======== ========
The accompanying notes are an integral part of the combined condensed consolidated financial statements. -3- 4 UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED --------------------------------------------------- STATEMENTS OF OPERATIONS ------------------------
Year Ended December 31, 1999 ----------------------------------------------------------------------- Pro Forma Pro Forma (In thousands, except per share data) Nashua Rittenhouse Adjustments Balance ------ ----------- ----------- --------- Net sales $ 170,844 $ 139,106 $ -- $ 309,950 Cost of products sold 129,872 106,030 (412)(4)(5) 235,490 --------- --------- --------- --------- Gross margin 40,972 33,076 412 74,460 --------- --------- --------- --------- Research, selling, distribution and administrative expenses 39,747 30,269 813(4)(5) 70,829 Restructuring and other unusual income (1,300) -- -- (1,300) Equity in loss of unconsolidated joint ventures 320 -- -- 320 Interest expense 743 1,194 1,948(5)(7) 3,885 Interest income (1,421) -- 1,342(6) (79) Other income -- (30) -- (30) --------- --------- --------- --------- Income from continuing operations before income tax provision 2,883 1,643 (3,691) 835 Income tax provision 3,303 103 (910)(8) 2,496 --------- --------- --------- --------- Income (loss) from continuing operations $ (420) $ 1,540 $ (2,781) $ (1,661) ========= ========= ========= ========= Basic earnings per share: Income (loss) from continuing operations per common share $ (.07) $ (.29) ========= ========= Average common shares 5,718 5,718 ========= ========= Diluted earnings per share: Income (loss) from continuing operations per common share assuming dilution $ (.07) $ (.29) ========= ========= Average common and potential common shares 5,718 5,718 ========= =========
The accompanying notes are an integral part of the combined condensed consolidated financial statements. -4- 5 NOTES TO PRO FORMA FINANCIAL STATEMENTS --------------------------------------- (1) BASIS OF PRESENTATION The Acquisition has been accounted for using the purchase method of accounting. Accordingly, assets acquired and liabilities assumed have been recorded at their estimated fair values, which are subject to further adjustment, based upon appraisals and other analyses, with appropriate recognition given to the effect of the Company's borrowing rates and income taxes. The final allocation of the purchase price for the Acquisition may differ materially from the allocations set forth in the Pro Forma Financial Statements presented herein due to several contingencies that could impact the final purchase price. These contingencies include a contingent payment of up to $6 million if certain financial targets are achieved for the year ending December 31, 2000. The Pro Forma Statements of Operations reflect adjustments as if the acquisition of Rittenhouse had occurred on January 1, 1999. The Pro Forma Balance Sheet reflects adjustments as if the Acquisition had occurred on March 31, 2000. Certain reclassifications have been made to the historical balance sheet and statements of operations of Rittenhouse to conform to the Company's presentation. (2) DESCRIPTION OF CONSIDERATION The pro forma cost of the Acquisition has been allocated to assets acquired and liabilities assumed at their estimated fair values as follows:
(In thousands) Purchase of Rittenhouse stock and options $57,000 Purchase price adjustments (net) 6,814 Transaction costs 1,455 Estimated fair value of liabilities assumed and accrued acquisition liabilities: Accounts payable 9,411 Accrued expenses 2,333 Other liabilities 224 Accrued acquisition liabilities 415 ------- Pro forma cost of the acquisition (a) 77,652 ------- Estimated fair value of acquired assets 48,958 ------- Excess of cost over estimated fair value of net assets acquired (b) $28,694 ======= Allocation of purchase price: Cash $ 1,684 Accounts receivable 14,425 Inventories 15,652 Other current assets 1,382 Plant and equipment 14,324 Other assets 1,491 Goodwill 28,694 ------- $77,652 =======
-5- 6 (a) The Acquisition was funded through $35 million of borrowings under a $55 million credit facility from Fleet Bank-NH and LaSalle Bank, which consists of a $20 million term loan and a $35 million revolving credit loan. The Company funded the remainder of the purchase price from its cash reserves. (b) The excess of cost over the estimated fair value of net assets acquired was allocated to goodwill and will be amortized on a straight-line basis over 20 years. (3) BALANCE SHEET ADJUSTMENTS The following adjustments have been made in preparation of the Pro Forma Balance Sheet: A. Reduction in Nashua cash used to finance the acquisition. B. To record the excess of cost over estimated fair value of net assets acquired. C. To adjust Rittenhouse property, plant and equipment to fair values and to record purchased real estate and equipment at its fair values (see separate note on "Purchased Real Estate and Equipment"). D. Includes reductions for other assets not acquired and for debt, accrued expenses and other liabilities not assumed. E. Includes capitalized debt issuance costs related to new debt. F. Includes deposits on new machinery and equipment acquired by Rittenhouse from related partnerships prior to closing. G. Includes accrued expenses related to purchase price adjustments due to Rittenhouse shareholders, direct transaction costs and estimated acquisition liabilities. H. Includes increased borrowings used to finance the Acquisition. I. Adjustment to eliminate Rittenhouse members' equity. (4) PURCHASED REAL ESTATE AND EQUIPMENT Prior to closing, Rittenhouse acquired real estate and equipment having appraised values of $5,525,000 and $1,840,040, respectively, from related partnerships. Prior to this transaction, these assets were leased to Rittenhouse. The Pro Forma Statements of Operations have been adjusted to eliminate related lease charges and reflect estimated pro forma depreciation for these purchased assets. The Pro Forma Balance Sheet includes purchased real estate and equipment at its estimated fair values. (5) DEPRECIATION AND AMORTIZATION The adjustments for estimated pro forma depreciation and amortization of purchased assets and goodwill are based on their estimated fair values. Property, plant and equipment is being depreciated on a straight-line basis over estimated useful lives of 15 - 30 years for buildings and improvements and 1 - 10 years for machinery and equipment. Goodwill is being amortized on a straight-line basis over 20 years. Deferred financing costs directly related to the financing of the Acquisition are being amortized over the life of the fixed-term debt of 5 years. -6- 7 (6) INTEREST INCOME The Acquisition was funded in part with the Company's existing cash and cash equivalents. Accordingly, had the acquisition occurred on January 1, 1999, the Company would have earned lower interest income as a result of the reduction in cash and cash equivalents. The Pro Forma Statements of Operations give effect to the lower interest income that would have been earned during the periods presented. Such adjustments were based on the Company's actual weighted average yields on its cash balances during those periods. (7) INTEREST EXPENSE In connection with the Acquisition, the Company borrowed $35 million under its credit facility to fund a portion of the cash consideration. The Pro Forma Statements of Operations give effect to the interest charges that would have been incurred during the periods presented, assuming the Company's borrowing rates under its term and revolving loans of 8.53% and 8.28%, respectively, at April 17, 2000. Annual interest expense would change by approximately $44,000 for each 1/8% change in the interest rate. (8) INCOME TAXES The Pro Forma Statements of Operations have been adjusted to reflect the amount of income taxes that would have been accrued had the Acquisition taken place on January 1, 1999 based on the statutory rate in effect for the periods shown. The excess of cost over the estimated fair value of net assets acquired is not adjusted for deferred taxes. -7-