EX-99 2 mm06-1107_8kae993.txt EX.99.3 EXHIBIT 99.3 On March 26, 2007, pursuant to the terms of the Agreement and Plan of Merger, dated as of February 9, 2007, by and among BMCA Acquisition Inc. ("Parent"), BMCA Acquisition Sub Inc. ("Purchaser"), an indirect wholly-owned subsidiary of Building Materials Corporation of America ("BMCA" or the "Company")), and ElkCorp ("Elk"), Purchaser was merged with and into Elk (the "Merger"), and all remaining common stock, par value $1.00 per share (the "Shares"), not tendered into the previously commenced tender offer by Parent, Purchaser and BMCA (other than Shares held by Purchaser or its affiliates or stockholders who properly perfected appraisal rights under Delaware law) were cancelled and converted into the right to receive $43.50 cash per Share, without interest. Elk is the surviving corporation and is now an indirect wholly-owned subsidiary of BMCA. The following Unaudited Pro Forma Condensed Combined Financial Statements contained herein (the "Statements") are presented to illustrate the effects of the acquisition of Elk on the historical financial position and operating results of BMCA. The Unaudited Pro Forma Condensed Combined Balance Sheet is based on historical data of the separate companies, and reflects adjustments as if the acquisition had occurred on December 31, 2006. The Unaudited Pro Forma Condensed Combined Statement of Operations for the twelve months ended December 31, 2006 is based on historical data of the separate companies and reflects adjustments as if the acquisition had occurred on January 1, 2006. The Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended April 1, 2007 is based on historical data of the separate companies and reflects adjustments as if the acquisition had occurred on January 1, 2007. The Unaudited Pro Forma Condensed Combined Statement of Operations for the three months ended April 2, 2006 is based on historical data of the separate companies and reflects adjustments as if the acquisition had occurred on January 1, 2006. The Statements include adjustments having a continuing impact on the combined company as a result of accounting for the acquisition under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141, "Business Combinations" ("SFAS No. 141"). The pro forma adjustments are described in the notes accompanying the Statements (the "Notes"). The Statements have been prepared based on available information, using assumptions that BMCA's management believes are reasonable. Under the purchase method of accounting, the total consideration payable in the acquisition will be allocated to Elk's tangible and intangible assets and liabilities based on their estimated fair values at the date of acquisition. The purchase price allocation herein is preliminary and, accordingly, the actual purchase accounting adjustments may differ from the pro forma adjustments reflected herein. The Statements do not purport to represent the actual financial position or results of operations that would have occurred if the acquisition had taken place on the dates specified, nor is it necessarily indicative of the results of operations that may be achieved in the future. The Statements do not reflect any adjustments for the effect of operating synergies or potential cost savings which may result from the acquisition. The Statements include certain reclassifications to conform the historical financial information of Elk to the presentation of BMCA. The assumptions used and adjustments made in preparing the Statements are described in the Notes, which should be read in conjunction with the Statements. The Statements and related Notes contained herein should be read in conjunction with the Consolidated Financial Statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and the Unaudited Condensed Consolidated Financial Statements and the related notes included in the Company's Quarterly Report on Form 10-Q for the three months ended April 1, 2007, both filed with the Securities and Exchange Commission, and the Consolidated Financial Statements of Elk and the related notes included in Elk's Annual Report on Form 10-K for the fiscal year ended June 30, 2006, and the Unaudited Consolidated Financial Statements of Elk and the related notes included in Elk's Quarterly Report on Form 10-Q for the three month and six month periods ended December 31, 2006 and December 31, 2005, which are incorporated by reference in Item 9.01(a) of this Current Report on Form 8-K/A. 1
BUILDING MATERIALS CORPORATION OF AMERICA UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET DECEMBER 31, 2006 (DOLLARS IN THOUSANDS) PRO FORMA REFINANCING ACQUISITION PRO FORMA PRO FORMA BMCA ELKCORP ADJUSTMENTS ADJUSTMENTS BMCA ----------- ----------- ----------- ----------- ----------- ASSETS Current Assets: Cash and cash equivalents $ 7,777 $ 1,762 $(1,189,580) (1)(5) $ 1,182,897 (1)(5) $ 2,856 Short-term investments -- 27,200 (27,200) (1) -- -- Accounts receivable, trade 190,859 130,164 -- -- 321,023 Accounts receivable, other 5,599 -- -- -- 5,599 Tax receivable from parent corporation 9,132 -- -- -- 9,132 Inventories, net 238,709 132,772 (5,785) (3) -- 365,696 Deferred income tax assets, net 21,710 9,334 1,923 (3) -- 32,967 Other current assets 12,209 9,770 -- -- 21,979 Discontinued operations - current assets -- 2,844 -- -- 2,844 ----------- ----------- ----------- ----------- ----------- Total Current Assets 485,995 313,846 (1,220,642) 1,182,897 762,096 Property, plant and equipment, net 411,729 301,394 119,513 (2)(3) -- 832,636 Goodwill, net of accumulated amortization 64,794 17,009 565,660 (3)(7) -- 647,463 Intangible assets -- 13,390 -- -- 13,390 Other noncurrent assets 67,323 6,063 31,908 (4)(6) 30,133 (4) 135,427 Discontinued operations - noncurrent assets -- 1,770 (415) (3) -- 1,355 ----------- ----------- ----------- ----------- ----------- Total Assets $ 1,029,841 $ 653,472 $ (503,976) $ 1,213,030 $ 2,392,367 =========== =========== =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current Liabilities: Current maturities of long-term debt $ 102,918 $ 25,972 $ (25,000) (1) $ (87,692) (1) $ 16,198 Accounts payable 90,951 27,109 -- -- 118,060 Payable to related parties 5,952 -- -- -- 5,952 Loans payable to parent corporation 52,840 -- -- -- 52,840 Accrued liabilities 101,382 32,847 (20,157) (3)(5) (7,338) (5) 106,734 Product warranty claims 9,000 -- 4,500 (5) -- 13,500 Discontinued operations - current liabilities -- 560 371 (3) -- 931 ----------- ----------- ----------- ----------- ----------- Total Current Liabilities 363,043 86,488 (40,286) (95,030) 314,215 Long-term debt less current maturities 484,406 176,246 (170,000) (1) 1,315,256 (1) 1,805,908 ----------- ----------- ----------- ----------- ----------- Product warranty claims 17,972 -- 9,424 (5) -- 27,396 ----------- ----------- ----------- ----------- ----------- Deferred income tax liabilities 39,551 51,024 45,216 (3) -- 135,791 ----------- ----------- ----------- ----------- ----------- Other liabilities 62,664 -- 34 (6) -- 62,698 ----------- ----------- ----------- ----------- ----------- Stockholders' Equity (Deficit): Series A Cumulative Redeemable Convertible Preferred Stock -- -- -- -- -- Class A Common Stock 1 -- -- -- 1 Class B Common Stock -- -- -- -- -- Common Stock -- 20,621 (20,621) (7) -- -- Paid-in capital -- 81,777 (81,777) (7) -- -- Loans receivable from parent corporation (56,031) -- -- -- (56,031) Retained earnings 118,201 237,373 (246,023) (7)(8) (7,196) (8) 102,355 Less - Treasury Stock -- (57) 57 (7) -- -- Accumulated other comprehensive income 34 -- -- -- 34 ----------- ----------- ----------- ----------- ----------- Total Stockholders' Equity (Deficit) 62,205 339,714 (348,364) (7,196) 46,359 ----------- ----------- ----------- ----------- ----------- Total Liabilities and Stockholders' Equity (Deficit) $ 1,029,841 $ 653,472 $ (503,976) $ 1,213,030 $ 2,392,367 =========== =========== =========== =========== ===========
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (DOLLARS IN THOUSANDS) (1) Represents the sources and uses of funds from the Refinancing Transactions: $325 million Junior Lien Term Loan Facility (the "Junior Lien Term Loan") $ 325,000 $975 million Term Loan Facility (the "Term Loan") 975,000 Borrowings under the new $600 million Senior Secured Revolving Credit Facility 234,967 Repurchase of a portion of the BMCA 8% Senior Notes due 2008 (149,961) Repayment of amounts outstanding under the then outstanding BMCA Senior Secured Revolving Credit Facility (60,000) Reclass of $9,750 Term Loan debt from long-term debt to current portion of long-term debt (9,750) ----------- Increase in long-term debt related to Refinancing Pro Forma Adjustments 1,315,256 ----------- Reclass of $9,750 of Term Loan debt from long-term debt to current portion of long-term debt 9,750 Repurchase of a portion of the BMCA 8% Senior Notes due 2007 (97,442) ----------- Decrease in current portion of long-term debt related to Refinancing Pro Forma Adjustments (87,692) ----------- Increase in total debt related to Refinancing Pro Forma Adjustments 1,227,564 Repayment of ElkCorp then outstanding current portion senior notes (25,000) Repayment of ElkCorp then outstanding long-term senior notes (170,000) ----------- Increase in total debt 1,032,564 Purchase of outstanding ElkCorp shares, net of differential on BMCA beneficially owned shares (974,300) Elk change of control payment to escrow (32,574) Elk senior notes make whole premium (13,400) Liquidation of ElkCorp short-term investments 27,200 Cash paid for interest accrued on ElkCorp debt (a) (1,506) Cash paid for interest accrued on repurchased portion of BMCA 8% Senior Notes due 2007 and 2008 (2,804) Estimated deferred financing fees related to the Junior Lien Term Loan, the Term Loan and the new Senior Secured Revolving Credit Facility (33,674) Cash paid for tender premium related to repurchase of a portion of BMCA 8% Senior Notes due 2007 and 2008 (8,189) ----------- Net decrease to cash and cash equivalents $ (6,683) =========== (a) Consists of ElkCorp then outstanding senior notes. (2) Represents the adjustment to the value of the property, plant and equipment of ElkCorp to fair market value. $ 119,513 =========== (3) Represents adjustments to Goodwill as follows: Purchase of outstanding ElkCorp shares, net of differential on BMCA beneficially owned shares $ 974,300 Acquisition and repayment of ElkCorp debt 195,000 Less net assets acquired (a) (603,640) ----------- Pro Forma Acquisition Adjustments for Goodwill $ 565,660 ===========
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(a) Net assets acquired of ElkCorp: Total Assets less total liabilities, excluding ElkCorp debt paid at closing $ 534,714 Pro Forma Acquisition Adjustment to property, plant and equipment 119,513 Pro Forma Acquisition Adjustment to write-down ElkCorp inventory (5,785) Pro Forma Acquisition Adjustment to write-up ElkCorp discontinued operation liability (371) Pro Forma Acquisition Adjustment to write-up ElkCorp accrued liabilities (723) Pro Forma Acquisition Adjustment to reflect gross up in ElkCorp deferred tax assets 1,923 Pro Forma Acquisition Adjustment to reflect gross up in ElkCorp deferred tax liabilities (45,216) Pro Forma Acquisition Adjustment to write-off ElkCorp discontinued operation asset (415) ----------- Net assets acquired of ElkCorp $ 603,640 =========== (4) Represents deferred financing fees related to the refinancing transactions and write-offs of unamortized deferred financing fees and discounts related to the repurchased portion of the 8% Senior Notes due 2007 and 8% Senior Notes due 2008, and the repayment of the then outstanding Senior Secured Revolving Credit Facilities and the ElkCorp senior notes. Deferred financing fees on the Junior Lien Term Loan, the Term Loan and the new Senior Secured Revolving Credit Facility $ 33,674 Write-off of deferred financing fees on repurchased portion of BMCA 8% Senior Notes due 2007 (134) Write-off of discount on repurchased portion of BMCA 8% Senior Notes due 2007 (59) Write-off deferred financing fees on then outstanding BMCA Senior Secured Revolving Credit Facilities (2,573) Write-off of deferred financing fees on repurchased portion of BMCA 8% Senior Notes due 2008 (619) Write-off of discount on repurchased portion of BMCA 8% Senior Notes due 2008 (156) ----------- Total increase to other noncurrent assets related to Refinancing Pro Forma Adjustments 30,133 ElkCorp change of control payment to escrow 32,574 Represents interest related to ElkCorp change of control escrow 34 Write-off of deferred financing fees on the then outstanding ElkCorp senior notes (700) ----------- Total increase to other noncurrent assets related to Pro Forma Acquisition Adjustments 31,908 ----------- Net increase to other non-current assets $ 62,041 =========== (5) Represents cash paid for accrued interest related to the repurchased portion of BMCA 8% Senior Notes due 2007, the BMCA 8% Senior Notes due 2008 and the repayment of the ElkCorp then outstanding senior notes, and the tax impact of the write-off of the related deferred financing fees and discounts to such debt. See Notes (4) (8). Cash paid for interest accrued on the repurchased portion of BMCA 8% Senior Notes due 2007 $ (1,650) Cash paid for interest accrued on the repurchased portion of BMCA 8% Senior Notes due 2008 (1,154) Tax impact of the write-off of the BMCA deferred financing fees, discounts and the cash paid for tender premium (4,534) ----------- Total decrease to accrued liabilities related to Refinancing Pro Forma Adjustments (7,338) Cash paid for interest accrued on the then outstanding ElkCorp senior notes (1,506) Represents the reclass of $13,924 from ElkCorp accrued liabilities, which includes $4,500 to the current portion of product warranty claims and $9,424 to the long-term portion of product warranty claims (13,924) Represents the write-up of ElkCorp accrued liabilities of $723. 723 Tax impact of the cash paid for ElkCorp senior notes make whole premium and the write-off of deferred fees related to such debt (5,450) ----------- Total decrease to accrued liabilities related to Pro Forma Acquisition Adjustments (20,157) ---------- Net decrease to accrued liabilities $ (27,495) =========== (6) Represents interest related to ElkCorp change of control escrow 34 ----------- Net increase to other liabilities $ 34 ===========
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(7) Eliminate ElkCorp's Common Stock, Paid-in-Capital, Retained Earnings and Treasury Stock as follows: Common Stock $ (20,621) Paid-in capital (81,777) Retained Earnings (237,373) Treasury Stock 57 (8) Reflects the tax impact of the write-off of BMCA deferred financing fees and discounts, ElkCorp deferred financing fees and the impact on retained earnings related to such debt: BMCA ---- Write-off of deferred financing fees on the repurchased portion of BMCA 8% Senior Notes due 2007 $ (134) Write-off of discount on the repurchased portion of BMCA 8% Senior Notes due 2007 (59) Write-off of deferred financing fees on the then outstanding BMCA Senior Secured Revolving Credit Facilities (2,573) Write-off of deferred financing fees on repurchased portion of BMCA 8% Senior Notes due 2008 (619) Write-off of discount on the repurchased portion of BMCA 8% Senior Notes due 2008 (156) Cash paid for tender premium related to BMCA 8% Senior Notes due 2007 and 2008 (8,189) ----------- Total (11,730) Tax effect @ 38.65%, See Note (5) above 4,534 ----------- Total decrease to retained earnings related to Refinancing Pro Forma Adjustments $ (7,196) =========== ELK --- Write-off of the deferred financing fees on the then outstanding ElkCorp senior notes (700) Cash paid for make whole premium related to then outstanding ElkCorp senior notes (13,400) ----------- Total (14,100) Tax effect @ 38.65%, See Note (5) above 5,450 ----------- Total decrease to retained earnings related to Pro Forma Acquisition Adjustments $ (8,650) ===========
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BUILDING MATERIALS CORPORATION OF AMERICA UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS TWELVE MONTHS ENDED DECEMBER 31, 2006 (DOLLARS IN THOUSANDS) PRO FORMA REFINANCING ACQUISITION PRO FORMA PRO FORMA BMCA ELKCORP ADJUSTMENTS ADJUSTMENTS BMCA ----------- ----------- ----------- ----------- ----------- Net sales $ 1,969,170 $ 896,208 $ -- $ -- $ 2,865,378 ----------- ----------- ----------- ----------- ----------- Costs and expenses, net: Cost of products sold 1,396,376 737,739 2,542 (1) -- 2,136,657 Selling, general and administrative 447,655 88,000 -- -- 535,655 Merger related expenses -- 3,000 -- -- 3,000 Other (income) expense, net 282 (85) -- -- 197 ----------- ----------- ----------- ----------- ----------- Total costs and expenses 1,844,313 828,654 2,542 -- 2,675,509 ----------- ----------- ----------- ----------- ----------- Income (loss) before interest expense and income taxes 124,857 67,554 (2,542) -- 189,869 Interest income (expense), net (61,509) (12,696) 13,329 (2) (103,635) (2)(3) (164,511) ----------- ----------- ----------- ----------- ----------- Income (loss) before income taxes 63,348 54,858 10,787 (103,635) 25,358 Income tax (expense) benefit (24,598) (19,239) (4,169) 38,205 (9,801) (4) ----------- ----------- ----------- ----------- ----------- Net income (loss) $ 38,750 $ 35,619 $ 6,618 $ (65,430) $ 15,557 =========== =========== =========== =========== ===========
6 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS)
(1) Reflects adjustments to depreciation expense for the purchase accounting step-up to fair value for property, plant and equipment acquired. Buildings are depreciated over 40 years less the average life to date, machinery and equipment are depreciated over 30 years less the average life to date and land improvements are depreciated over 40 years less the average life to date. Pro Forma Acquisition depreciation expense $ 29,054 Less: ElkCorp LTM historical depreciation expense (26,512) ------------ PRO FORMA ACQUISITION ADJUSTMENT DEPRECIATION EXPENSE $ 2,542 ============ (2) Reflects adjustments to give effect to the interest expense and related deferred financing fees on the Junior Lien Term Loan, the Term Loan and the new Senior Secured Revolving Credit Facility. These adjustments are offset by the reduction in interest expense related to the repurchased portion of the BMCA 8% Senior Notes due 2007 and the BMCA 8% Senior Notes due 2008, the then outstanding BMCA Senior Secured Revolving Credit Facilities and the then outstanding current and long-term debt of ElkCorp. REFINANCING PRO FORMA ADJUSTMENTS RELATED TO INTEREST EXPENSE: -------------------------------------------------------------- Interest expense on the repurchased portion of BMCA 2007 8% Senior Notes $ 7,800 Interest expense on the repurchased portion of BMCA 2008 8% Senior Notes 12,009 Interest expense on then outstanding BMCA Senior Secured Revolving Credit Facilities 12,079 Interest expense on the Junior Lien Term Loan (36,563) Interest expense on the Term Loan (80,437) Interest expense on additional borrowings under the new Senior Secured Revolving Credit Facility (16,448) Amortization of deferred financing fees related to the repurchased portion of BMCA 2007 8% Senior Notes 165 Amortization of deferred financing fees related to the repurchased portion of BMCA 2008 8% Senior Notes 325 Amortization of deferred financing fees on then outstanding BMCA Senior Secured Revolving Credit Facilities 2,441 Amortization of the discounts related to the repurchased portion of BMCA 2007 8% Senior Notes 73 Amortization of the discounts related to the repurchased portion of BMCA 2008 8% Senior Notes 81 Amortization of deferred financing fees related to the Term Loan (2,624) Amortization of deferred financing fees related to the Junior Lien Term Loan (1,051) Amortization of deferred financing fees related to the new Senior Secured Revolving Credit Facility (1,485) ------------ TOTAL INCREASE TO REFINANCING PRO FORMA ADJUSTMENT INTEREST EXPENSE $ (103,635) ============ PRO FORMA ACQUISITION ADJUSTMENTS RELATED TO INTEREST EXPENSE: -------------------------------------------------------------- Interest expense on ElkCorp July 2007 4.69% Notes $ 1,558 Interest expense on ElkCorp June 2009 6.99% Notes 4,194 Interest expense on ElkCorp June 2012 7.49% Notes 4,437 Interest expense on ElkCorp November 2014 6.28% Notes 3,140 ------------ TOTAL DECREASE TO PRO FORMA ACQUISITION ADJUSTMENT INTEREST EXPENSE $ 13,329 ============
7 (3) Interest rates on the Junior Lien Term Loan and the Term Loan are at variable rates. The Company has utilized an expected rate of the Eurodollar rate (LIBOR) (5.50%) plus a specified fixed rate of (5.75%) as of December 31, 2006 for purposes of estimating our interest expense on the Junior Lien Term Loan throughout the duration of the loan. The Company has utilized an expected rate of (LIBOR) (5.50%) plus a specified fixed rate of (2.75%) as of December 31, 2006 for purposes of estimating its interest expense on the Term Loan throughout the duration of the loan. A change in these rates due to changes in the prevailing market rates would result in a plus or minus adjustment to interest expense of approximately $3.0 million relating to the Junior Lien Term Loan and $8.3 million relating to the Term Loan. (4) The statutory tax rate for the pro forma combined company is 38.65%. 8
BUILDING MATERIALS CORPORATION OF AMERICA UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS THREE MONTHS ENDED APRIL 1, 2007 (DOLLARS IN THOUSANDS) PRO FORMA REFINANCING ACQUISITION PRO FORMA PRO FORMA BMCA ELKCORP ADJUSTMENTS ADJUSTMENTS BMCA ------------ ------------ ------------ ------------ ------------ Net sales $ 529,990 $ 73,728 $ -- $ -- $ 603,718 ------------ ------------ ------------ ------------ ------------ Costs and expenses, net: Cost of products sold 393,294 75,562 391 (1) -- 469,247 Selling, general and administrative 110,803 14,255 -- -- 125,058 Other expense, net 419 13,635 -- -- 14,054 ------------ ------------ ------------ ------------ ------------ Total costs and expenses 504,516 103,452 391 -- 608,359 ------------ ------------ ------------ ------------ ------------ Income (loss) before interest expense and income taxes 25,474 (29,724) (391) -- (4,641) Interest income (expense), net (49,278) (1,977) 3,133 (2) (13,363)(2) (61,485) ------------ ------------ ------------ ------------ ------------ Income (loss) before income taxes (23,804) (31,701) 2,742 (13,363) (66,126) Income tax (expense) benefit 8,522 11,617 (1,060) 6,479 25,558 (3) ------------ ------------ ------------ ------------ ------------ Net income (loss) $ (15,282) $ (20,084) $ 1,682 $ (6,884) $ (40,568) ============ ============ ============ ============ ============
9 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS) (1) Reflects adjustments to depreciation expense for the purchase accounting step-up to fair value for property, plant and equipment acquired. Buildings are depreciated over 40 years less the average life to date, machinery and equipment are depreciated over 20 years less the average life to date and land improvements are depreciated over 25 years less the average life to date.
Twelve Months Pro Forma Acquisition depreciation expense $ 29,054 Less: ElkCorp LTM historical depreciation expense (26,512) ------------ TWELVE MONTHS PRO FORMA ACQUISITION ADJUSTMENT DEPRECIATION EXPENSE $ 2,542 ============ FIRST QUARTER IMPACT OF PRO FORMA ACQUISITION ADJUSTMENT DEPRECIATION EXPENSE $ 391 ============ (2) Reflects adjustments to give effect to the interest expense and related deferred financing fees on the Junior Lien Term Loan, the Term Loan and the new Senior Secured Revolving Credit Facility. These adjustments are offset by the reduction in interest expense related to the repurchased portion of the BMCA 8% Senior Notes due 2007 and the BMCA 8% Senior Notes due 2008, the then outstanding BMCA Senior Secured Revolving Credit Facilities and the then outstanding current and long-term debt of ElkCorp. REFINANCING PRO FORMA ADJUSTMENTS RELATED TO INTEREST EXPENSE: -------------------------------------------------------------- Interest expense on the repurchased portion of BMCA 2007 8% Senior Notes $ 1,200 Interest expense on the repurchased portion of BMCA 2008 8% Senior Notes 1,848 Interest expense on then outstanding BMCA Senior Secured Revolving Credit Facilities 1,385 Interest expense on the Junior Lien Term Loan (5,626) Interest expense on the Term Loan (12,377) Interest expense on additional borrowings under the new Senior Secured Revolving Credit Facility (2,530) Amortization of deferred financing fees related to the repurchased portion of BMCA 2007 8% Senior Notes 132 Amortization of deferred financing fees related to the repurchased portion of BMCA 2008 8% Senior Notes 602 Amortization of deferred financing fees on then outstanding BMCA Senior Secured Revolving Credit Facilities 2,587 Amortization of the discounts related to the repurchased portion of BMCA 2007 8% Senior Notes 58 Amortization of the discounts related to the repurchased portion of BMCA 2008 8% Senior Notes 152 Amortization of deferred financing fees related to the Term Loan (404) Amortization of deferred financing fees related to the Junior Lien Term Loan (162) Amortization of deferred financing fees related to the new Senior Secured Revolving Credit Facility (228) ------------ TOTAL INCREASE TO REFINANCING PRO FORMA ADJUSTMENT INTEREST EXPENSE $ (13,363) ============
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PRO FORMA ACQUISITION ADJUSTMENTS RELATED TO INTEREST EXPENSE: Interest expense on ElkCorp July 2007 4.69% Notes $ 355 Interest expense on ElkCorp June 2009 6.99% Notes 1,002 Interest expense on ElkCorp June 2012 7.49% Notes 1,026 Interest expense on ElkCorp November 2014 6.28% Notes 750 ------------ TOTAL DECREASE TO PRO FORMA ACQUISITION ADJUSTMENT INTEREST EXPENSE $ 3,133 ============
(3) The statutory tax rate for the pro forma combined company is 38.65%. 11
BUILDING MATERIALS CORPORATION OF AMERICA UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS THREE MONTHS ENDED APRIL 2, 2006 (DOLLARS IN THOUSANDS) PRO FORMA REFINANCING ACQUISITION PRO FORMA PRO FORMA BMCA ELKCORP ADJUSTMENTS ADJUSTMENTS BMCA ----------- ----------- ----------- ----------- ----------- Net sales $ 504,975 $ 243,194 $ -- $ -- $ 748,169 ----------- ----------- ----------- ----------- ----------- Costs and expenses, net: Cost of products sold 359,480 200,917 636 (1) -- 561,033 Selling, general and administrative 114,598 23,476 -- -- 138,074 Other income, net (326) -- -- -- (326) ----------- ----------- ----------- ----------- ----------- Total costs and expenses 473,752 224,393 636 -- 698,781 ----------- ----------- ----------- ----------- ----------- Income (loss) before interest expense and income taxes 31,223 18,801 (636) -- 49,388 Interest income (expense), net (14,526) (2,700) 3,317 (2) (26,989) (2) (40,898) ----------- ----------- ----------- ----------- ----------- Income (loss) before income taxes 16,697 16,101 2,681 (26,989) 8,490 Income tax (expense) benefit (6,345) (5,955) (1,036) 10,055 (3,281) (3) ----------- ----------- ----------- ----------- ----------- Net income (loss) $ 10,352 $ 10,146 $ 1,645 $ (16,934) $ 5,209 =========== =========== =========== =========== ===========
12 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (DOLLARS IN THOUSANDS) (1) Reflects adjustments to depreciation expense for the purchase accounting step-up to fair value for property, plant and equipment acquired. Buildings are depreciated over 40 years less the average life to date, machinery and equipment are depreciated over 20 years less the average life to date and land improvements are depreciated over 25 years less the average life to date.
Twelve Months Pro Forma Acquisition depreciation expense $ 29,054 Less: ElkCorp LTM historical depreciation expense (26,512) ------------ TWELVE MONTHS PRO FORMA ACQUISITION ADJUSTMENT DEPRECIATION EXPENSE $ 2,542 ============ FIRST QUARTER IMPACT OF PRO FORMA ACQUISITION ADJUSTMENT DEPRECIATION EXPENSE $ 636 ============ (2) Reflects adjustments to give effect to the interest expense and related deferred financing fees on the Junior Lien Term Loan, the Term Loan and the new Senior Secured Revolving Credit Facility. These adjustments are offset by the reduction in interest expense related to the repurchased portion of the BMCA 8% Senior Notes due 2007 and the BMCA 8% Senior Notes due 2008, the then outstanding BMCA Senior Secured Revolving Credit Facilities and the then outstanding current and long-term debt of ElkCorp. REFINANCING PRO FORMA ADJUSTMENTS RELATED TO INTEREST EXPENSE: -------------------------------------------------------------- Interest expense on the repurchased portion of BMCA 2007 8% Senior Notes $ 1,950 Interest expense on the repurchased portion of BMCA 2008 8% Senior Notes 3,002 Interest expense on then outstanding BMCA Senior Secured Revolving Credit Facilities 1,779 Interest expense on Junior Lien Term Loan (9,142) Interest expense on the Term Loan (20,109) Interest expense on additional borrowings under the new Senior Secured Revolving Credit Facility (4,112) Amortization of deferred financing fees related to the repurchased portion of BMCA 2007 8% Senior Notes 41 Amortization of deferred financing fees related to the repurchased portion of BMCA 2008 8% Senior Notes 81 Amortization of deferred financing fees on then outstanding BMCA Senior Secured Revolving Credit Facilities 772 Amortization of the discounts related to the repurchased portion of BMCA 2007 8% Senior Notes 19 Amortization of the discounts related to the repurchased portion of BMCA 2008 8% Senior Notes 20 Amortization of deferred financing fees related to the Term Loan (656) Amortization of deferred financing fees related to the Junior Lien Term Loan (263) Amortization of deferred financing fees related to the new Senior Secured Revolving Credit Facility (371) ------------ TOTAL INCREASE TO REFINANCING PRO FORMA ADJUSTMENT INTEREST EXPENSE $ (26,989) ============
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PRO FORMA ACQUISITION ADJUSTMENTS RELATED TO INTEREST EXPENSE: -------------------------------------------------------------- Interest expense on ElkCorp July 2007 4.69% Notes $ 384 Interest expense on ElkCorp June 2009 6.99% Notes 1,048 Interest expense on ElkCorp June 2012 7.49% Notes 1,100 Interest expense on ElkCorp November 2014 6.28% Notes 785 ------------ TOTAL DECREASE TO PRO FORMA ACQUISITION ADJUSTMENT INTEREST EXPENSE $ 3,317 ============
(3) The statutory tax rate for the pro forma combined company is 38.65%. 14