EX-99 5 e9930730.htm EXHIBIT 99.3 UNAUDITED PRO-FORMA BALANCE SHEET   12/31/03

Exhibit 99.3




PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The following unaudited pro forma condensed consolidated financial statements combine the historical consolidated balance sheets and income statements of First Albany Companies Inc. and Descap Securities, Inc.  These unaudited pro forma condensed consolidated financial statements give effect to our acquisition of Descap Securities, Inc. that was effective May 14, 2004, using the purchase method of accounting.


We derived this information from our unaudited consolidated financial statements for the three months ended March 31, 2004, our audited financial statements for the year ended December 31, 2003, the unaudited financial statements of Descap Securities, Inc. for the three months ended March 31, 2004, and the unaudited financial statements of Descap Securities, Inc. for the year ended September 30, 2003.  The historical financial statements used in preparing the pro forma financial statements are summarized in the pro forma statements and should be read in conjunction with the complete historical financial statements and related notes of Descap Securities, Inc., which are incorporated by reference here and contained in Exhibit 99.1 to this filing, and of First Albany Companies Inc., which were filed on form 10-K with the SEC on March 12, 2004.


The unaudited pro forma condensed consolidated income statements for the three months ended March 31, 2004, and for the year ended December 31, 2003, give effect to the acquisition as if the acquisition had been consummated at the beginning of each of the periods presented.  The unaudited pro forma condensed consolidated balance sheet as of March 31, 2004, gives effect to the acquisition as if it was effective March 31, 2004.


The pro forma adjustments, which are based upon available information and upon certain assumptions that we believe are reasonable, are described in the accompanying pro forma adjustments.  We engaged a nationally recognized valuation expert to assist us in determining fair values of identifiable assets.


We are providing the unaudited pro forma condensed consolidated financial information for illustrative purposes only.  The companies may have performed differently had they been combined during the periods presented.  You should not rely on the unaudited pro forma condensed consolidated financial information as being indicative of the historical results that would have been achieved had the companies actually been combined during the periods presented or the future results that the combined company will experience.  The unaudited pro forma condensed consolidated financial statements do not give effect to any cost savings or operating synergies expected to result from the acquisition or the costs to achieve such cost savings or operating synergies.


UNAUDITED PRO-FORMA INCOME STATEMENT 12/31/03

          

(in thousands of dollars)

            
            

Pro-Forma

  

FACI

         

Adjusted

  

Consolidated

 

Descap

  

Pro-Forma Adjustments

 

Totals

For the three months ended

 

12/31/03

 

9/30/03

  

Debits

  

Credits

 

12/31/03

Revenues

            

Commissions

$

16,946

$

  

$

  

$

 

$

16,946

Principal transactions

 

107,529

 

31,161

       

138,690

Investment banking

 

34,730

         

34,730

Investment (losses) gains

 

23,597

         

23,597

Interest income

 

6,688

 

1,294

       

7,982

Fees and others

 

6,001

         

6,001

Total revenues

 

195,491

 

32,455

       

227,946

Interest expense

 

3,370

 

1,140

[1]

 

700

    

5,210

Net revenues

 

192,121

 

31,315

  

(700)

    

222,736

Expenses (excluding interest):

            

Compensation and benefits

 

129,855

 

23,370

[2]

 

930

[4]

 

10,032

 

144,123

Clearing, settlement and brokerage costs

 

5,169

 

1,212

       

6,381

Communications and data processing

 

14,462

 

550

       

15,012

Occupancy and depreciation

 

9,339

 

380

       

9,719

Selling

 

7,473

 

412

       

7,885

Other

 

8,507

 

344

[3]

 

53

    

8,904

Total expenses (excluding interest)

 

174,805

 

26,268

  

983

  

10,032

 

192,024

Income (loss) before income taxes

 

17,316

 

5,047

  

1,683

  

10,032

 

30,712

Income tax expense/(benefit)

 

6,929

 

2,220

[5]

 

3,272

    

12,421

Income(loss) from continuing operations

$

10,387

$

2,827

 

$

4,955

 

$

10,032

$

18,291

Basic earnings per share:

            

Continuing operations

$

0.98

        

$

1.53

Diluted earnings per share:

            

Continuing operations

$

0.88

        

$

1.36

             

Shared Outstanding:

            

   Basic

 

10,547,676

    

1,445,516

    

11,993,192

   Dilutive

 

11,856,843

    

1,556,134

    

13,412,977

             






PRO-FORMA ADJUSTMENTS

For the Year Ending

December 31, 2003

   

(in thousands of dollars)

     
   

Debit

Credit

 

First Albany Companies Inc. (FACI) purchased the stock of Descap Securities, Inc. (Descap) on May 14, 2004.  The purchase price was $30.659 million, of which $20 million was financed by new debt,

$5 million in cash, and $5.659 million in stock of FACI at closing price on May 14 of $10.30 (549,476 shares).  Allocation of intangible assets was based upon 3rd party valuation, of which $641,000 related to customer relationships, $133,000 for trade names and $20.685 million for goodwill.  In addition, FACI issued 270,843 shares of restricted stock to Descap employees at closing price of $10.30 per share, which was valued at $2.9 million and vested ratably over three years.

    
   
   
      

[1]

Interest Expense

 

700

  
      
 

Interest at LIBOR plus 240 basis points calculated on a 360 day basis

   
 

per annum (20mx3.5%)

    
      

[2]

Compensation

 

930

  
      
 

Amortize restricted stock issued over 3 years (2,790÷3)

   
      

[3]

Amortization Expense

53

  
      
 

Amortization of amortizable intangible assets capitalized of $641,000

   
 

which are amortizable over 12 years based upon 3rd party valuation (641,000÷12)

   
      

[4]

     
  

Compensation Expense

 

10,032

 
 

Adjust compensation levels based upon new contractual obligations

   
      

[5]

Income Tax Expense

3,272

  
      
 

Tax effect of proforma adjustments and to annualize Descap

   
 

effective tax rate assuming 41% effective tax rate

   
      

UNAUDITED PRO-FORMA BALANCE SHEET   3/31/04

           

Pro-Forma

(in thousands of dollars)

 

FACI

         

Adjusted

  

Consolidated

 

Descap

  

Pro-Forma Adjustments

 

Total

As of

 

3/31/04

 

3/31/04

  

Debits

  

Credits

 

3/31/04

Assets

            

Cash

$

229

$

8,907

   

[1]

$

6,150

$

 
        

[2]

 

5,000

 

(2,014)

Cash and securities segregated for regulatory purposes

 

6,300

         

6,300

Securities purchased under agreement to resell

 

78,364

         

78,364

Receivables from:

            

Brokers, dealers and clearing agencies

 

39,052

         

39,052

Customers, net

 

9,600

         

9,600

Others

 

6,449

         

6,449

Securities owned

 

233,649

 

52,185

       

285,834

Investments

 

57,261

         

57,261

Office equipment and leasehold improvements, net

 

6,210

 

663

       

6,873

Other assets

 

16,580

 

1,191

[2]

 

21,459

    

39,230

Total Assets

$

453,694

$

62,946

 

$

21,459

 

$

11,150

$

526,949

Liabilities and Stockholders' Equity

            

Liabilities

            

Short-term bank loans

$

203,600

$

  

$

  

$

 

$

203,600

Payables to:

            

Brokers, dealers and clearing agencies

 

1,935

 

46,553

       

48,488

Customers

 

7,368

         

7,368

Others

 

14,222

         

14,222

Securities sold, but not yet purchased

 

83,545

         

83,545

Accounts payable

 

3,674

 

983

       

4,657

Accrued compensation

 

13,025

         

13,025

Accrued expenses

 

11,552

 

60

       

11,612

Deferred tax liability

 

785

         

785

Notes payable

 

13,727

     

[2]

 

20,000

 

33,727

Obligations under capitalized leases

 

3,082

         

3,082

Total Liabilities

 

356,515

 

47,596

 

  

 

 

20,000

 

424,111

Commitments and Contingencies

            

Subordinated debt

 

3,721

 

 

 

 

 

 

 

 

 

3,721

Stockholders' Equity

            

Preferred stock

            

 Common stock

 

140

     

[3]

 

3

  
        

[2]

 

6

 

149

Additional paid-in capital

 

134,539

 

8,060

[1]

 

6,150

[2]

 

5,653

  
     

[2]

 

1,910

[3]

 

2,787

 

142,979

Unearned compensation

 

(16,972)

  

[3]

 

2,790

    

(19,762)

Deferred compensation

 

3,328

         

3,328

Retained (deficit)

 

(22,794)

 

7,290

[2]

 

7,290

    

(22,794)

Treasury stock, at cost

 

(4,783)

         

(4,783)

Total Stockholders' Equity

 

93,458

 

15,350

 

 

18,140

 

 

8,449

 

99,117

Total Liabilities and Stockholders' Equity

$

453,694

$

62,946

 

$

18,140

 

$

28,449

$

526,949



UNAUDITED PRO-FORMA INCOME STATEMENT 3/31/04

          

(in thousands of dollars)

            
            

Pro-Forma

  

FACI

    

Pro-Forma Adjustments

 

Adjusted

  

Consolidated

 

Descap

       

Totals

For the three months ended

 

3/31/04

 

3/31/04

  

Debits

  

Credits

 

3/31/04

Revenues

            

Commissions

$

5,798

$

  

$

  

$

 

$

5,798

Principal transactions

 

24,963

 

3,774

       

28,737

Investment banking

 

10,229

         

10,229

Investment (losses) gains

 

(277)

         

(277)

Interest income

 

1,737

 

368

       

2,105

Fees and others

 

1,157

         

1,157

Total revenues

 

43,607

 

4,142

       

47,749

Interest expense

 

1,015

 

313

[5]

 

175

    

1,503

Net revenues

 

42,592

 

3,829

  

(175)

    

46,246

Expenses (excluding interest):

            

Compensation and benefits

 

32,762

 

2,906

[6]

 

233

[7]

 

169

 

35,732

Clearing, settlement and brokerage costs

 

1,385

 

257

       

1,642

Communications and data processing

 

4,113

 

171

       

4,284

Occupancy and depreciation

 

2,313

 

129

       

2,442

Selling

 

1,775

 

82

       

1,857

Other

 

4,167

 

262

[4]

 

13

    

4,442

Total expenses (excluding interest)

 

46,515

 

3,807

  

246

  

169

 

50,399

Income (loss) before income taxes

 

(3,923)

 

22

  

421

  

169

 

(4,153)

Income tax expense/(benefit)

 

(1,995)

 

(129)

   

[8]

 

35

 

(2,159)

Income(loss) from continuing operations

$

(1,928)

$

151

 

$

421

 

$

204

$

(1,994)

Basic earnings per share:

            

Continuing operations

$

(0.18)

        

$

(0.17)

Diluted earnings per share:

            

Continuing operations

$

(0.18)

        

$

(0.17)

             

Shared Outstanding:

            

   Basic

 

11,011,213

    

549,476

    

11,560,689

   Dilutive

 

11,011,213

    

549,476

    

11,560,689

             


PRO-FORMA ADJUSTMENTS

As of and for the Three Months Ending

 March 31, 2004

 
   

(in thousands of dollars)

 
        
   

Debit

Credit

   
        

[1]

Additional Paid In Capital

6,150

    
  

Cash

 

6,150

   
 

To adjust equity of acquired company to required

   
 

contractual amount of $9.2m from $15.350m

    
        

[2]

Intangible Assets

21,459

    
 

Retained Earnings

7,290

    
 

Additional Paid in Capital

1,910

    
  

Debt

 

20,000

   
  

Cash

 

5,000

   
  

Common Stock

 

6

   
  

Additional Paid in Capital

5,653

   
 

Purchase price of $30.659m of which $20m is financed by new debt,

 
 

$5m in cash, and $5.659m in stock of FACI at closing price on May 14 of $10.30

 
 

(549,476 shares). Allocation of intangible assets based upon 3rd party valuation.

    
        

[3]

Unearned Compensation

2,790

    
  

Common Stock

 

3

   
  

Additional Paid in Capital

2,787

   
 

Issuance of 270,843 shares of restricted stock at closing price of $10.30  

 
 

per share - vested ratably over 3 years

     
        

[4]

Amortization Expense

13

    
       
 

Amortization of amortizable intangible assets capitalized of $641,000  which

 
 

are amortizable over 12 years based upon 3rd party valuation (641,000÷12x1/4)

   
        

[5]

Interest Expense

175

    
        
 

Interest at LIBOR plus 240 basis points calculated on a 360 day basis

 
 

per annum (20mx3.5%x1/4)

     
        

[6]

Compensation

233

    
       
 

Amortize restricted stock issued over 3 years (2,790÷3x1/4)

   
        

[7]

       
  

Compensation Expense

 

169

   
 

Adjust  compensation levels based upon new contractual obligations

 
        

[8]

      
  

Income Tax Expense

 

35

   
 

Tax effect of proforma adjustments and to annualize Descap

   
 

effective tax rate assuming 41% effective tax rate