EX-99.3 5 w02012exv99w3.txt INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS Exhibit 99.3 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The unaudited pro forma condensed combined balance sheet assumes the Hudson Respiratory Care Inc. transaction occurred on June 27, 2004. The unaudited pro forma condensed combined statements of income assume the Hudson Respiratory Care Inc. transaction occurred on December 30, 2002. For purposes of developing the unaudited pro forma condensed combined balance sheet as of June 27, 2004, Hudson Respiratory Care Inc.'s assets and liabilities have been recorded at their estimated fair values and the excess purchase price has been assigned to goodwill. The fair values assigned in these pro forma financial statements are preliminary and represent management's best estimate of current fair values which are subject to revision. A final determination of required purchase accounting will be made upon completion of a study by Teleflex Incorporated in conjunction with independent appraisers to determine fair value of certain of Hudson Respiratory Care Inc.'s assets and liabilities. The actual financial position and results of operations may differ from the pro forma amounts reflected. Teleflex Incorporated and Hudson Respiratory Care Inc. financial statements are prepared in conformity with generally accepted accounting principles and require Teleflex Incorporated and Hudson Respiratory Care Inc. management to make accounting estimates that could affect the financial condition and operating results of the companies. The unaudited pro forma condensed combined financial statements reflect neither the impact of costs to integrate Hudson Respiratory Care Inc. nor the benefit expected from the synergies. These costs will be part of purchase accounting once a final plan has been approved and implemented. Certain costs in the consolidated statements of income for Hudson Respiratory Care Inc. have been reclassified to conform to the line item presentation in the pro forma condensed combined statements of income. Certain liability balances of Hudson Respiratory Care Inc. have been reclassified to conform to the line item presentation in the pro forma condensed combined balance sheet. Intercompany sales and purchase transactions have been eliminated in the unaudited pro forma condensed combined statements of income. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JUNE 27, 2004 (DOLLARS IN THOUSANDS)
HISTORICAL HISTORICAL PRO FORMA PRO FORMA TELEFLEX HUDSON ADJUSTMENTS COMBINED -------- ------ ----------- -------- ASSETS Current assets Cash and cash equivalents $ 81,522 $ 5,835 $ (3,777) A $ 83,580 Accounts receivable less allowance for doubtful accounts 505,838 26,706 -- 532,544 Inventories 425,139 27,695 3,237 B 456,071 Prepaid expenses 22,718 2,205 12 C 24,935 ---------- ---------- ---------- ---------- Total current assets 1,035,217 62,441 (528) 1,097,130 Property, plant and equipment, at cost, less accumulated depreciation 629,531 38,725 16,722 D 684,978 Goodwill 286,130 39,912 153,383 E 479,425 Intangibles and other assets 114,534 7,021 122,974 F 244,529 Investments in affiliates 32,362 -- -- 32,362 ---------- ---------- ---------- ---------- Total assets $2,097,774 $ 148,099 $ 292,551 $2,538,424 ========== ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Current portion of borrowings and demand loans $ 172,326 $ 8,979 $ 77,203 G $ 258,508 Accounts payable and accrued expenses 337,913 26,635 (1,901) H 362,647 Income taxes payable 48,579 507 -- 49,086 ---------- ---------- ---------- ---------- Total current liabilities 558,818 36,121 75,302 670,241 Long-term borrowings 205,692 223,738 163,822 G 593,252 Mandatory redeemable preferred stock -- 59,791 (59,791) G -- Deferred income taxes and other 218,385 2,199 (60,532) I 160,052 ---------- ---------- ---------- ---------- Total liabilities 982,895 321,849 118,801 1,423,545 Shareholders' equity 1,114,879 (173,750) 173,750 1,114,879 ---------- ---------- ---------- ---------- Total liabilities and shareholders' equity $2,097,774 $ 148,099 $ 292,551 $2,538,424 ========== ========== ========== ==========
The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JUNE 27, 2004 A Record payment of deferred financing costs B Preliminary fair value adjustment of inventory C Preliminary adjustment for quarterly fees to bond holder D Preliminary fair value adjustment of fixed assets E Preliminary estimate of goodwill Acquisition goodwill 193,295 Value of Hudson Respiratory Care Inc. goodwill eliminated in purchase accounting (39,912) --------- 153,383 F Preliminary estimate of intangible and other assets adjustment Preliminary estimate of intangible assets Trade names (indefinite life) 74,500 Patents (11.5 year life) 900 Customer relationships (10 year life) 49,700 Net value of Hudson Respiratory Care Inc. deferred financing costs eliminated in purchase accounting and deferred financing costs recorded by Teleflex. (2,126) --------- 122,974 G Preliminary estimate of changes in demand loans and long-term debt Teleflex debt borrowed as part of the acquisition 463,850 Hudson Respiratory Care Inc. debt outstanding as of June 30, 2004 and repaid by Teleflex (282,616) --------- 181,234 H Preliminary estimate of accounts payable and accrued expenses adjustment Preliminary estimate of a reserve for vendor debit memos deemed uncollectible. 354 Accrued interest on debt outstanding at June 30, 2004 and repaid by Teleflex (2,255) -------- (1,901) I Preliminary estimate of deferred tax benefit. An escrow of $43,000 was established at settlement in case of impairment. The deferred tax benefit is a result of Hudson Respiratory Care Inc's net operating loss carry forward. (46,000) Preliminary deferred tax adjustment resulting from a difference in tax basis prior to acquisition (39,000) Preliminary deferred tax adjustment resulting from the difference in tax basis of depreciable fixed assets and intangible step-ups. 24,468 --------- (60,532)
PRELIMINARY ALLOCATION OF PURCHASE PRICE CASH CONSIDERATION Cash payments $ 419,585 Escrow in case of deferred tax asset impairment 43,000 Cash received (5,835) --------- $ 456,750 Transaction costs 1,265 --------- $ 458,015 ASSETS Inventory $ 26,706 Receivables 30,932 Other current assets 2,217 Property, plant and equipment 55,447 Intangibles 125,100 Deferred tax asset 85,000 Other assets 1,118 --------- $ 326,520 LIABILITIES Short-term debt assumed $ 5,299 Accounts payable and accrued expenses 24,734 Taxes payable 507 Long-term debt assumed 4,593 Deferred tax liability 24,468 Other liabilities 2,199 --------- 61,800 PRELIMINARY ESTIMATE OF NET ASSETS ACQUIRED $ 264,720 Acquisition goodwill $ 193,295 Hudson Respiratory Care Inc. goodwill (39,912) --------- Goodwill acquisition adjustment $ 153,383 =========
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 28, 2003 (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE)
HISTORICAL ---------------------------- HUDSON RESPIRATORY PRO FORMA COMBINED TELEFLEX CARE ADJUSTMENTS PRO FORMA -------- ---- ----------- --------- Revenues $ 2,282,435 $ 184,595 $ (7) A $ 2,467,023 ----------- ----------- ---------- ----------- Cost of sales 1,684,647 102,610 2,404 B 1,789,661 Operating expenses 423,028 53,405 5,048 C 481,481 Loss on early extinguishment of debt -- 573 -- 573 (Gain)/loss on sale of businesses and assets (3,068) 95 -- (2,973) ----------- ----------- ---------- ----------- Total costs and expenses 2,104,607 156,683 7,452 2,268,742 ----------- ----------- ---------- ----------- Income before interest and taxes 177,828 27,912 (7,459) 198,281 Interest expense 26,337 24,612 (1,756) D 49,193 ----------- ----------- ---------- ----------- Income before taxes 151,491 3,300 (5,703) 149,088 Provision for taxes on income 42,388 1,716 (2,073) E 42,031 ----------- ----------- ---------- ----------- Net income $ 109,103 $ 1,584 $ (3,630) $ 107,057 =========== =========== ========== =========== Earnings per share Basic $ 2.76 $ 2.70 Diluted $ 2.73 $ 2.68 Average number of common and common equivalent shares outstanding Basic 39,598 39,598 Diluted 39,942 39,942
The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME A Represents pro forma adjustment to eliminate sales activity between Teleflex and Hudson Respiratory Care Inc. B Represents pro forma adjustment to eliminate sales activity between Teleflex and Hudson Respiratory Care Inc. (7) Represents pro forma adjustment to reflect additional depreciation expense for the fair value increase to property, plant and equipment 2,411 ----- 2,404 C Represents pro forma adjustment to reflect amortization of intangible assets. D Represents pro forma adjustment to reflect debt incurred to acquire Hudson Respiratory Care Inc. and retire a portion of its debt outstanding and net difference in amortization of deferred financing costs. E Represents the aggregate pro forma income tax effect of notes B, C and D. Note: The statement of income does not reflect the expected synergies of the acquisition.
] UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 27, 2004 (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE)
HISTORICAL ---------------------------- HUDSON RESPIRATORY PRO FORMA COMBINED TELEFLEX CARE ADJUSTMENTS PRO FORMA -------- ---- ----------- --------- Revenues $ 1,291,429 $ 97,601 $ (4) A $ 1,389,026 ----------- ----------- ----------- ----------- Cost of sales 951,817 52,451 1,202 B 1,005,470 Operating expenses 243,391 34,293 2,524 C 280,208 Gain on sale of businesses and assets (5,083) -- -- (5,083) ----------- ----------- ----------- ----------- Total costs and expenses 1,190,125 86,744 3,726 1,280,595 ----------- ----------- ----------- ----------- Income before interest and taxes 101,304 10,857 (3,730) 108,431 Interest expense 12,920 14,359 (2,853) D 24,426 ----------- ----------- ----------- ----------- Income before taxes 88,384 (3,502) (877) 84,005 Provision for taxes on income 24,747 1,332 (312) E 25,767 ----------- ----------- ----------- ----------- Net income $ 63,637 $ (4,834) $ (565) $ 58,238 =========== =========== =========== =========== Earnings per share Basic $ 1.59 $ 1.45 Diluted $ 1.57 $ 1.44 Average number of common and common equivalent shares outstanding Basic 40,093 40,093 Diluted 40,498 40,498
The accompanying notes are an integral part of the unaudited pro forma condensed combined financial statements.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME A Represents pro forma adjustment to eliminate sales activity between Teleflex and Hudson Respiratory Care Inc. B Represents pro forma adjustment to eliminate sales activity between Teleflex and Hudson Respiratory Care Inc. (4) Represents pro forma adjustment to reflect additional depreciation expense for the fair value increase to property, plant and equipment 1,206 ----- 1,202 C Represents pro forma adjustment to reflect amortization of intangibles assets D Represents pro forma adjustment to reflect debt incurred to acquire Hudson Respiratory Care Inc. and retire a portion of its debt outstanding, and net difference in amortization of deferred financing costs. E Represents the aggregate pro forma income tax effect of notes B, C and D
Note: The statement of income does not reflect the expected synergies of the acquisition.