EX-99.3 5 w28047exv99w3.htm UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME exv99w3
 

K-Tron International, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
On October 5, 2006, K-Tron International, Inc. (“K-Tron”), through its indirect, wholly- owned subsidiary Premier Pneumatics, Inc., a Delaware corporation (“Acquisition Co.”), acquired all of the outstanding capital stock (the “Premier Stock”) of Premier Pneumatics, Inc., a Kansas corporation (“Premier”), from the shareholder (“Shareholder”) of Premier. The acquisition of the Premier Stock was made pursuant to a Stock Purchase Agreement (the “Premier Stock Purchase Agreement”) by and among Acquisition Co. and the Shareholder.
Prior to the October 5, 2006 acquisition of Premier, Premier’s wholly-owned subsidiary, Mariposa Group, LLC (“Mariposa”), was transferred to the Shareholder.
The following unaudited pro forma condensed consolidated balance sheet as of September 30, 2006 gives effect to the acquisition of Premier by K-Tron as of such date. The unaudited pro forma condensed consolidated statements of income for the fiscal year ended December 31, 2005 and the nine months ended September 30, 2006 give effect to the acquisition of Premier by K-Tron as if it had occurred on January 2, 2005 and January 1, 2006. The pro forma information is based on the historical consolidated financial statements of Premier and K-Tron, and the assumptions and adjustments in the accompanying notes to the unaudited pro forma condensed consolidated financial statements give effect to the acquisition as of the beginning of each respective period and under the purchase method of accounting.
The unaudited pro forma condensed consolidated financial statements are presented for informational purposes only and should not be construed to be indicative of the actual financial position or results of operations of the combined companies on the dates indicated or of those results that may be obtained in the future. The unaudited pro forma condensed consolidated financial statements reflect Premier’s balance sheet as of September 30, 2006 and its consolidated statements of income for the year ended December 31, 2005 and nine months ended September 30, 2006.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of K-Tron as filed with the Securities and Exchange Commission on Form 10-K for the fiscal year ended December 31, 2005 and the audited consolidated financial statements and notes thereto of Premier filed herein.

 

 

K-TRON INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
FISCAL YEAR ENDED DECEMBER 31, 2005
(UNAUDITED)
(IN THOUSANDS EXCEPT EARNINGS PER SHARE)
                                   
    AS REPORTED     PRO FORMA       PRO FORMA  
    K-TRON     PREMIER     ADJUSTMENTS       CONSOLIDATED  
REVENUES
   $ 118,940     $ 18,933     $ 1,964   (9)   $ 139,837  
COST OF REVENUES
     68,944       12,364       67   (9)     81,375  
 
                          
GROSS PROFIT
     49,996       6,569       1,897         58,462  
OPERATING EXPENSES
                                 
SELLING, GENERAL AND ADMINISTRATIVE
     34,330       5,034       1,897   (9)     40,717  
 
                     (90 ) (1)        
 
                     222   (5)        
 
                     (676 ) (10)        
RESEARCH AND DEVELOPMENT
     2,449       0                 2,449  
 
                          
 
     36,779       5,034       1,353         43,166  
 
                          
OPERATING INCOME
     13,217       1,535       544         15,296  
INTEREST EXPENSE, NET
     1,016       12       1,772   (6)     2,696  
 
                     (104 ) (1)        
 
                          
INCOME BEFORE INCOME TAXES
     12,201       1,523       (1,124 )       12,600  
INCOME TAX PROVISION
     4,919               609   (7)     5,078  
 
                     (450 ) (8)        
 
                          
NET INCOME
   $ 7,282     $ 1,523     $ (1,284 )     $ 7,521  
 
                          
BASIC EARNINGS PER SHARE
   $ 2.85                       $ 2.94  
 
                              
DILUTED EARNINGS PER SHARE
   $ 2.68                       $ 2.77  
 
                              
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (BASIC)
     2,555                         2,555  
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (DILUTED)
     2,719                         2,719  
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

 

K-TRON INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2006
(UNAUDITED)
(IN THOUSANDS EXCEPT EARNINGS PER SHARE)
                                   
    AS REPORTED     PRO FORMA       PRO FORMA  
    K-TRON     PREMIER     ADJUSTMENTS       CONSOLIDATED  
REVENUES
   $ 103,761     $ 16,380     $ 1,800   (9)   $ 121,941  
COST OF REVENUES
                                  
GROSS PROFIT
     60,426       10,465       209   (9)     71,100  
 
                          
 
     43,335       5,915       1,591         50,841  
OPERATING EXPENSES
                                 
SELLING, GENERAL AND ADMINISTRATIVE
     28,218       4,185       1,591   (9)     33,504  
 
                     (71 ) (1)        
 
                     173   (5)        
 
                     (592 ) (10)        
RESEARCH AND DEVELOPMENT
                                 
 
     1,741       0                 1,741  
 
                          
OPERATING INCOME
     29,959       4,185       1,101         35,245  
 
                          
 
     13,376       1,730       490         15,596  
INTEREST EXPENSE, NET
     519       (49 )     1,329   (6)     1,759  
 
                     (40 ) (1)        
 
                          
INCOME BEFORE INCOME TAXES
     12,857       1,779       (799 )       13,837  
INCOME TAX PROVISION
     4,446               712   (7)     4,838  
 
                     (320)   (8)        
 
                          
NET INCOME
   $ 8,411     $ 1,779     $ (1,191 )     $ 8,999  
 
                          
BASIC EARNINGS PER SHARE
   $ 3.24                       $ 3.47  
 
                              
DILUTED EARNINGS PER SHARE
   $ 3.01                       $ 3.22  
 
                              
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (BASIC)
     2,595                         2,595  
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING (DILUTED)
     2,793                         2,793  
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

 

K-TRON INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2006
(UNAUDITED)
(IN THOUSANDS)
                                 
    AS REPORTED     PRO FORMA     PRO FORMA  
    K-TRON     PREMIER     ADJUSTMENTS     CONSOLIDATED  
ASSETS
                                
 
                                
CASH & CASH EQUIVALENTS
   $ 12,876     $ 2,436     $ 27,565  (3)   $ 12,416  
 
                     (27,565 )(3)        
 
                     111  (3)        
 
                     (600 )(4)        
 
                     (2,407 )(2)        
RESTRICTED CASH
     701                       701  
ACCOUNTS RECEIVABLE, NET
     21,637       2,873               24,510  
INVENTORIES, NET
     22,915       1,287       1,110  (4)     25,312  
OTHER CURRENT ASSETS
     5,020       53               5,073  
 
                        
TOTAL CURRENT ASSETS
     63,149       6,649       (1,786 )     68,012  
 
                                
PROPERTY, PLANT AND EQUIPMENT, NET
     26,082       3,144       2,327  (4)     29,537  
 
                     (2,016 )(1)        
PATENTS, NET
     1,479       0               1,479  
GOODWILL
     3,779       0       18,635  (4)     22,414  
OTHER IDENTIFIABLE INTANGIBLES, NET
     13,116       0       4,800  (4)     17,916  
NOTES RECEIVABLE AND OTHER ASSETS
     2,371       0               2,371  
 
                        
TOTAL ASSETS
   $ 109,976     $ 9,793     $ 21,960     $ 141,729  
 
                        
 
                                
LIABILITIES AND SHAREHOLDERS’ EQUITY
                                
 
                                
CURRENT PORTION OF LONG-TERM DEBT
   $ 392     $ 0     $       $ 392  
ACCOUNTS PAYABLE
     8,816       848               9,664  
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
     23,341       3,776       (436 )(2)     26,681  
 
                        
TOTAL CURRENT LIABILITIES
     32,549       4,624       (436 )     36,737  
 
                                
LONG-TERM DEBT
     14,214       0       27,565  (3)     41,779  
 
                                
DEFERRED INCOME TAXES
     3,418                       3,418  
 
                                
SHAREHOLDERS’ EQUITY
     59,795       5,169       (1,971 )(2)     59,795  
 
                     (2,016 )(1)        
 
                     (27,565 )(3)        
 
                     111  (3)        
 
                     26,272  (4)        
 
                        
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
   $ 109,976     $ 9,793     $ 21,960     $ 141,729  
 
                        
SEE NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

 

 

K-Tron International, Inc. and Subsidiaries
Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
1.   To record, prior to the October 5, 2006 acquisition, the transfer of Premier’s wholly-owned subsidiary, Mariposa, to the Shareholder and to eliminate Mariposa’s operating results.
 
2.   To record distributions made to the Shareholder subsequent to September 30, 2006 and prior to the October 5, 2006 acquisition.
 
3.   To recognize the financing associated with the acquisition of the Premier Stock by K-Tron.
 
    The purchase price paid on October 5, 2006 for the acquisition of the Premier Stock was $27.565 million. K-Tron expects to receive from the Shareholder an estimated post-closing adjustment of $111 thousand based on Premier’s net working capital on the closing date. K-Tron incurred approximately $600 thousand in acquisition costs. K-Tron will reimburse the Shareholder for income taxes related to making an Internal Revenue Code (“IRC”) section 338(h)(10) election. The amount of the income tax reimbursement has not yet been calculated.
 
    The $27.565 million paid at closing was borrowed under a new $50 million unsecured revolving credit facility that K-Tron entered into on September 29, 2006. The entire purchase price of $27.565 million was paid in cash, including a $2.0 million escrow. K-Tron borrowed the funds using LIBOR rate loans that bear interest at LIBOR for the relevant period plus a percentage ranging from 0.875% to 1.625%, depending on K-Tron’s consolidated debt-to-EBITDA ratio. K-Tron entered into two $5 million interest rate swaps with durations of three and four years. The balance of the loan, $17.565 million, was borrowed at one to six month LIBOR rates with the average effective interest rate on the $27.565 million borrowing equal to approximately 6.4% per annum as of the end of October 2006.
 
4.   The excess ($26.872 million) of the purchase price over the carrying value of the net identifiable assets acquired ($1.182 million) has been allocated as follows:
         
    (In Thousands)  
Fair Value Adjustments for:
        
Inventory
   $ 1,110  
Property, Plant and Equipment
     2,327  
Goodwill
     18,635  
Trade Names
     2,600  
Customer Relationships
     2,200  
 
      
Excess of Purchase Price Over Carrying Value
   $ 26,872  
 
      

 

 

5.   To record depreciation and amortization on the fair value adjustments.
     
Property Plant and Equipment   3 to 17 years
Trade Names   Indefinite life
Customer Relationships   10 years
6.   To record the interest expense on the funds borrowed based upon the interest rates disclosed in Note 3 above.
 
7.   To record income taxes for 2006 and 2005 since Premier elected S Corporation status for Federal and State purposes and, as such, did not incur any tax liability.
 
8.   To adjust for the pro forma adjustments to the extent the adjustments would create allowable deductions, at the appropriate U.S. Federal and State statutory rates.
 
9.   To reclassify commissions, profit sharing and other income to conform to the classification used by K-Tron.
 
10.   To eliminate nonrecurring Shareholder expenses primarily related to compensation and aircraft expenses.
 
11.   Deferred taxes related to the fair value adjustments have not been provided for in the Condensed Consolidated Pro Forma Balance Sheet since an IRC section 338(h)(10) election is expected to be made.