EX-99.3 6 j0551501exv99w3.htm EXHIBIT 99.3 Ex-99.3
 

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

  (1)   Unaudited Pro Forma Condensed Consolidated Statements of Operations for the years ended August 31, 2003 and August 31, 2002 (as restated).
 
  (2)   Unaudited Pro Forma Condensed Consolidated Statements of Operations for the Three-Month Periods Ended November 30, 2003 and 2002.
 
  (3)   Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations, as restated.

28

 

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

     The following unaudited pro forma condensed consolidated financial statements have been prepared to give the effect to the acquisition by Portola Packaging, Inc. (“Portola”) of all of the outstanding stock of Tech Industries, Inc., and its acquisition of Tech Industries U.K. Ltd. and partnership interests of 84 Fairmount Street Ltd. Partnership and Fairmount Realty Associates, affiliated entities, prior to Portola’s acquisition of Tech Industries, Inc. Tech Industries, Inc. and such affiliated entities are referred to collectively as “Tech”. These pro forma financial statements do not purport to be indicative of the consolidated financial position or results of operations for future periods or the results that actually would have been realized had Portola and Tech been a consolidated company during the specified periods.

     The acquisition of Tech was accounted for using the purchase method of accounting pursuant to which the purchase price at closing was allocated to the tangible and intangible assets based on their estimated fair values. The purchase allocations were made based upon preliminary valuations and other studies, which have not yet been finalized. The actual allocation of purchase price may differ significantly from the pro forma amounts included herein.

     The unaudited pro forma condensed consolidated financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with the historical consolidated financial statements and the notes thereto of Portola which were previously reported in Portola’s Annual Report on Form 10-K for the year ended August 31, 2003 and the Quarterly Report on Form 10-Q for the quarter ended November 30, 2003, and the historical financial statements of Tech for the year ended December 29, 2002 included elsewhere in this Form 8-K/A.

     The unaudited pro forma condensed consolidated statements of operations for the years ended August 31, 2003 and August 31, 2002 (as restated) and the three-month periods ended November 30, 2003 and 2002 were prepared as if the acquisition had occurred on September 1, 2002. To prepare the unaudited pro forma condensed consolidated statements of operations for the years ended August 31, 2003 and 2002, Portola’s statement of operations for the years ended August 31, 2003 and 2002 have been combined with Tech’s unaudited statement of operations for the twelve months ended August 31, 2003 and August 31, 2002 (as restated), respectively, which are not included in this Form 8-K/A. To prepare the unaudited pro forma condensed consolidated statement of operations for the three-month period ended November 30, 2003, Portola’s statement of operations for the three-month period ended November 30, 2003 was combined with Tech’s unaudited statement of operations for the period from September 1, 2003 to September 18, 2003 (the date prior to acquisition). To prepare the unaudited pro forma condensed consolidated statement of operations for the three-month period ended November 30, 2002, Portola’s statement of operations for the three-month period ended November 30, 2002 was combined with Tech’s unaudited statement of operations for the thirteen-week period ended November 24 2002. Tech’s fiscal year and fiscal quarters end on the last Sunday of each calendar quarter. The fifty-two-week period ended August 24, 2003 and the thirteen-week period ended November 24, 2002 are not the usual annual and quarterly period ends for Tech.

29

 

     As Tech is included on a historical basis in Portola’s November 30, 2003 consolidated balance sheet, a pro forma consolidated balance sheet as of November 30, 2003 was not included herein. The unaudited pro forma condensed consolidated statement of operations for the year ended August 31, 2002 was included herein to restate the unaudited pro forma condensed consolidated statement of operations that had been originally reported in the Form 8-K/A filed on December 4, 2003. The unaudited pro forma condensed consolidated balance sheet as of May 31, 2003 and the unaudited pro forma condensed consolidated statements of operations for the nine-month periods ended May 31, 2003 and 2003 included in the Form 8-K/A of Portola Packaging, Inc. dated December 4, 2003 has not been restated and included herein as the financial information is included in the unaudited pro forma condensed consolidated statements of operations for the twelve-months ended August 31, 2003 and August 31, 2002 (as restated).

30

 

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

STATEMENT OF OPERATIONS

For the Year Ended August 31, 2003
(in thousands)

                                             
                        Pro Forma           Portola
        Portola   Tech   Adjustments           Pro Forma
       
 
 
         
Sales
   $ 215,315     $ 33,934     $ —             $ 249,249  
Cost of sales
     166,689       25,698       981       (1 )     193,368  
 
    
     
     
             
 
 
Gross profit
     48,626       8,236       (981 )             55,881  
 
    
     
     
             
 
Selling, general and administrative
     29,307       4,047       (75 )     (2 )     33,279  
Research and development
     4,729       167       —               4,896  
Amortization of intangibles
     903       —       285       (3 )     1,188  
Impairment charge
     207       —       —               207  
Restructuring costs
     405       —       —               405  
 
    
     
     
             
 
 
     35,551       4,214       210               39,975  
 
    
     
     
             
 
 
Income (loss) from operations
     13,075       4,022       (1,191 )             15,906  
 
    
     
     
             
 
Other (income) expense:
                                        
 
Interest income
     (120 )     (85 )     —               (205 )
 
Interest expense
     12,544       —       1,842       (4 )     14,386  
 
Amortization of debt financing costs
     777       —       1,105       (5 )     1,882  
 
Minority interest expense
     73       —       —               73  
 
Equity income of affiliates
     (415 )     —       —               (415 )
 
Loss (gain) from sale of property, plant and equipment and securities
     30       (1,000 )     1,000       (2 )     30  
 
Other (income) expense, net
     (154 )     (226 )     —               (380 )
 
    
     
     
             
 
 
     12,735       (1,311 )     3,947               15,371  
 
    
     
     
             
 
 
Income (loss) before income taxes
     340       5,333       (5,138 )             535  
Income tax provision
     2,071       1       —       (6 )     2,072  
 
    
     
     
             
 
   
Net (loss) income
   $ (1,731 )   $ 5,332     $ (5,138 )           $ (1,537 )
 
    
     
     
             
 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

31

 

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

STATEMENT OF OPERATIONS

For the Year Ended August 31, 2002
(in thousands)

                                             
                        Pro Forma           Portola
        Portola   Tech   Adjustments           Pro Forma
       
 
 
         
Sales
   $ 210,757     $ 32,016     $ —             $ 242,773  
Cost of sales
     157,133       24,874       981       (1 )     182,988  
 
    
     
     
             
 
 
Gross profit
     53,624       7,142       (981 )             59,785  
 
    
     
     
             
 
Selling, general and administrative
     30,844       4,043       50       (2 )     34,937  
Research and development
     3,069       245       —               3,314  
Amortization of intangibles
     1,551       —       285       (3 )     1,836  
 
    
     
     
             
 
 
     35,464       4,288       335               40,087  
 
    
     
     
             
 
 
Income (loss) from operations
     18,160       2,854       (1,316 )             19,698  
 
    
     
     
             
 
Other (income) expense:
                                        
 
Interest income
     (1,083 )     (65 )     —               (1,148 )
 
Interest expense
     13,251       —       1,842       (4 )     15,093  
 
Amortization of debt financing costs
     756       —       1,105       (5 )     1,861  
 
Minority interest expense
     113       —       —               113  
 
Equity income of affiliates
     (815 )     —       —               (815 )
 
Gain from sale of property, plant and equipment and securities
     (20 )     —       —               (20 )
 
Income on recovery of note receivable
     (1,103 )     —       —               (1,103 )
 
Other (income) expense, net
     246       65       —               311  
 
    
     
     
             
 
 
     11,345       —       2,947               14,292  
 
    
     
     
             
 
 
Income (loss) before income taxes
     6,815       2,854       (4,263 )             5,406  
Income tax provision (benefit)
     2,242       —       (564 )     (6 )     1,678  
 
    
     
     
             
 
   
Net income (loss)
   $ 4,573     $ 2,854     $ (3,699 )           $ 3,728  
 
    
     
     
             
 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

32

 

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

STATEMENT OF OPERATIONS

For the Three-Month Period Ended November 30, 2003
(in thousands)

                                             
                Tech                        
                9/1/03 to   Pro Forma           Portola
        Portola   9/18/03   Adjustments           Pro Forma
       
 
               
Sales
   $ 59,838     $ 2,103     $ —             $ 61,941  
Cost of sales
     47,961       3,484       (46 )     (1 )     49,566  
 
                     (1,833 )     (7 )        
 
    
     
     
             
 
 
Gross profit
     11,877       (1,381 )     1,879               12,375  
 
    
     
     
             
 
Selling, general and administrative
     7,741       4,019       (3,597 )     (7 )     8,163  
Research and development
     1,396       —       —               1,396  
Amortization of intangibles
     295       —       12       (3 )     307  
Impairment charge
     —       —       —               —  
Restructuring charges
     343       —       —               343  
 
    
     
     
             
 
 
     9,775       4,019       (3,585 )             10,209  
 
    
     
     
             
 
 
Income (loss) from operations
     2,102       (5,400 )     5,464               2,166  
 
    
     
     
             
 
Other (income) expense:
                                        
 
Interest income
     (3 )     (1 )     —               (4 )
 
Interest expense
     3,405       —       65       (4 )     3,470  
 
Amortization of debt financing costs
     430       —       46       (5 )     476  
 
Minority interest expense
     16       —       —               16  
 
Equity income of affiliates
     (129 )     (27 )     —               (156 )
 
Gain from sale of property, plant and equipment and securities
     (3 )     —       —               (3 )
 
Other (income) expense, net
     (1,415 )     3       —               (1,412 )
 
    
     
     
             
 
 
     2,301       (25 )     111               2,387  
 
    
     
     
             
 
 
(Loss) income before income taxes
     (199 )     (5,375 )     5,353               (221 )
Income tax provision
     791       —       —       (6 )     791  
 
    
     
     
             
 
   
Net (loss) income
   $ (990 )   $ (5,375 )   $ 5,353             $ (1,012 )
 
    
     
     
             
 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

33

 

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED

STATEMENT OF OPERATIONS

For the Three-Month Period Ended November 30, 2002
(in thousands)

                                             
                        Pro Forma           Portola
        Portola   Tech   Adjustments           Pro Forma
       
 
               
Sales
   $ 51,954     $ 8,727     $ —             $ 60,681  
Cost of sales
     41,247       6,941       245       (1 )     48,433  
 
    
     
     
             
 
 
Gross profit
     10,707       1,786       (245 )             12,248  
 
    
     
     
             
 
Selling, general and administrative
     7,577       1,068       —               8,645  
Research and development
     1,182       —       —               1,182  
Amortization of intangibles
     204       —       71       (3 )     275  
 
    
     
     
             
 
 
     8,963       1,068       71               10,102  
 
    
     
     
             
 
 
Income (loss) from operations
     1,744       718       (316 )             2,146  
 
    
     
     
             
 
Other (income) expense:
                                        
 
Interest income
     (17 )     (14 )     —               (31 )
 
Interest expense
     3,167       —       389       (4 )     3,556  
 
Amortization of debt financing costs
     180       —       276       (5 )     456  
 
Minority interest expense
     24       —       —               24  
 
Equity income of affiliates
     (113 )     —       —               (113 )
 
Loss from sale of property, plant and equipment and securities
     49       4       —               53  
 
Other (income) expense, net
     545       (144 )     —               401  
 
    
     
     
             
 
 
     3,835       (154 )     665               4,346  
 
    
     
     
             
 
 
(Loss) income before income taxes
     (2,091 )     872       (981 )             (2,200 )
Income tax benefit
     (779 )     —       —       (6 )     (779 )
 
    
     
     
             
 
   
Net (loss) income
   $ (1,312 )   $ 872     $ (981 )           $ (1,421 )
 
    
     
     
             
 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

34

 

PORTOLA PACKAGING, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED PRO FORMA

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended August 31, 2003 and 2002
Three-Month Periods Ended November 30, 2003 and 2002
(in thousands)

The unaudited pro forma consolidated statements of operations give effect to the following unaudited pro forma adjustments:

(1)   Adjustment to reflect depreciation expense on increase of book value of property, plant and equipment to fair market value as follows:

                                         
                                    9/1/03
    Depreciation                           through
    period in years   Amount   Annual   Quarterly   9/18/03
   
 
 
 
 
Buildings
     39     $ 340     $ 8     $ 2       —  
Machinery and equipment
     7       6,785       970       242     $ 46  
Furniture and fixtures
     5       15       3       1       —  
 
            
     
     
     
 
 
           $ 7,140     $ 981     $ 245     $ 46  
 
            
     
     
     
 

(2)   Adjustment to eliminate $75 and $50 in selling, general and administrative expenses for the years ended August 31, 2003 and 2002, respectively, and $1,000 in gain on sale of assets of Tech Industries Ireland Ltd. (“Tech Ireland”) for the year ended August 31, 2003. Tech Ireland was distributed to the shareholders of Tech Industries prior to, and in contemplation of, the acquisition of Tech Industries.
 
(3)   Adjustment to reflect amortization of identifiable intangible assets as follows:

                                         
                                    9/1/03
    Amortization                           through
    period in years   Amount   Annual   Quarterly   9/18/03
   
 
 
 
 
Customer relationships
     20     $ 2,600     $ 130     $ 32     $ 5  
Website
     5       400       80       20       4  
Covenant not to compete
     5       374       75       19       3  
Trademark and tradename
     Indefinite       5,000       —       —       —  
 
            
     
     
     
 
 
           $ 8,374     $ 285     $ 71     $ 12  
 
            
     
     
     
 

(4)   Adjustment to record interest expense on the additional borrowings due to the acquisition of Tech Industries.
 
(5)   Adjustment to record amortization of debt financing costs for the amended and restated senior credit facility to finance the Tech Industries acquisition of $1,105, $1,105, $46 and $276 for the years ended August 31, 2003 and 2002, and the three-month periods ended November 30, 2003 and 2002.

35

 

(6)   Tech Industries terminated its “S” Corporation status at the time of the acquisition. No corporate income tax provision (benefit) has been recorded for the respective periods since Tech Industries’ income (loss) and the effect of the pro forma adjustments would have been offset by the reversal of a portion of Portola’s valuation allowance or an increase in the valuation allowance provided against its net deferred tax assets, except for the year ended August 31, 2002.
 
(7)   Adjustment to reflect a discretionary bonus paid to employees of Tech Industries immediately prior to, and in contemplation of, the acquisition of Tech Industries by Portola. This adjustment totaling $5,430 does not include the normalized bonus of $191 based on Tech Industries’ historical and prospective bonus plan.

36