Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On April 7, 2021, pursuant to the terms set forth in the previously announced Agreement and Plan of Merger, dated March 1, 2021, Columbus McKinnon Corporation (the Company or CMCO), completed its acquisition (Acquisition) of Precision Blocker, Inc, and its subsidiaries, including its indirect wholly-owned operating subsidiary Dorner Mfg. Corp. (collectively Dorner). The unaudited pro forma condensed combined balance sheet as of December 31, 2020 and the condensed combined statements of operations for the nine months ended December 31, 2020 and for the twelve months ended March 31, 2020, illustrate the effects of the Acquisition (the Transaction or the Transaction Accounting Adjustments), as well as contemporaneous financing activities and certain other related adjustments described below (the Other Transaction Accounting Adjustments and, together with the Transaction, the Transactions).
The Other Transaction Accounting Adjustments include but are not limited to the Companys borrowing of $650 million under a new first lien term loan facility (the New Term Loan) to fund the Acquisition, the replacement of the prior revolving credit facility with an aggregate principal amount of $100 million (the Existing Revolver) with a new revolving credit facility with an aggregate principal amount of $100 million (the New Revolver), and the repayment of the remaining outstanding balance of the Companys existing term loan (the Existing Term Loan). In addition, the Company plans to raise $150 million through the issuance of shares of the Companys common stock, par value $0.01 per share (the Equity Issuance), with the proceeds of such Equity Issuance expected to be used to repay a portion of the New Term Loan. The completion of the Equity Issuance is subject to market and other conditions, and there can be no assurance as to whether or when the Equity Issuance may be completed, or as to the actual size or terms of the Equity Issuance. For more information about the Equity Issuance, refer to Note 6(e).
The Companys fiscal year ends on March 31st, while Dorners fiscal year ends on September 30th. As the Companys fiscal year end differs by more than one quarter from Dorners fiscal year end, the unaudited pro forma condensed combined statement of operations presented herein have been presented using the different fiscal periods as discussed below. The unaudited pro forma condensed combined statement of operations for the twelve months ended March 31, 2020 presented herein reflects a combination of the Companys results of operations for its fiscal year ended March 31, 2020 and Dorners results of operations from April 1, 2019 through March 31, 2020, which were calculated using its fiscal year ended September 30, 2019, less the six months ended March 31, 2019, plus the six months ended March 31, 2020. The unaudited pro forma condensed combined statement of operations for the nine months ended December 31, 2020 presented herein reflects a combination of the Companys results of operations for the nine months ended December 31, 2020 and Dorners results of operations from April 1, 2020 through December 31, 2020, calculated using its fiscal year ended September 30, 2020, less the six months ended March 31, 2020, plus the three months ended December 31, 2020. The unaudited pro forma condensed combined balance sheet as of December 31, 2020 presented herein reflects a combination of the Companys financial position as of December 31, 2020 and Dorners financial position as of December 31, 2020.
The unaudited pro forma condensed combined balance sheet data as of December 31, 2020 gives effect to the Transactions as if they occurred on December 31, 2020. The unaudited pro forma condensed consolidated statements of operations data for the nine months ended December 31, 2020 and for the twelve months ended March 31, 2020, have been prepared as if the Transactions had occurred on April 1, 2019.
The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes, the Companys audited annual consolidated financial statements included in its Annual Report on Form 10-K for the fiscal year ended March 31, 2020, filed with the Securities and Exchange Commission (the SEC) on May 27, 2020, and the Companys unaudited quarterly consolidated financial statements included in its Quarterly Report on Form 10-Q for the quarter ended December 31, 2020, filed with the SEC on January 28, 2021.
The adjustments to the unaudited pro forma condensed combined financial information described herein are based on available information and assumptions management believes are reasonable. These adjustments are estimates, subject to risks and uncertainties that could cause the unaudited pro forma condensed combined financial statements to differ materially from actual results.
1
The unaudited pro forma condensed combined financial information does not reflect any cost savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the Acquisition, nor the costs that may be incurred to achieve such benefits.
As such, the unaudited pro forma condensed combined financial information is shown purely for illustrative purposes and is not indicative of the combined financial position or results of operations that would have been realized had the Transactions occurred as of the dates indicated above. The unaudited pro forma condensed combined financial information should not be considered representative of future financial conditions or results of operations.
2
Unaudited pro forma condensed combined balance sheet as of
December 31, 2020
(in thousands)
Historical | ||||||||||||||||||||||||||||
CMCO
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Dorner (as adjusted) Note 2
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Transaction
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Reference
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Other Transaction Accounting Adjustments
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Reference
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Pro Forma
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ASSETS: |
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Current assets: |
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Cash and cash equivalents |
$ | 187,626 | $ | 11,682 | $ | (497,085) | 5(a) | $ | 366,629 | 6(a) | $ | 68,852 | ||||||||||||||||
Trade accounts receivables, less allowance for doubtful accounts |
94,177 | 13,336 | (179) | 5(b) | - | 107,334 | ||||||||||||||||||||||
Inventories |
113,446 | 11,149 | 2,558 | 5(c) | - | 127,153 | ||||||||||||||||||||||
Prepaid expenses and other |
18,850 | 1,819 | - | - | 20,669 | |||||||||||||||||||||||
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Total current assets |
414,099 | 37,986 | (494,706) | 366,629 | 324,008 | |||||||||||||||||||||||
Property, plant, and equipment, net |
72,304 | 18,436 | 10,258 | 5(d) | - | 100,998 | ||||||||||||||||||||||
Goodwill |
338,995 | 87,836 | 213,919 | 5(e) | - | 640,750 | ||||||||||||||||||||||
Other intangibles, net |
221,741 | 120,041 | 72,959 | 5(f) | - | 414,741 | ||||||||||||||||||||||
Marketable securities |
7,925 | - | - | - | 7,925 | |||||||||||||||||||||||
Deferred taxes on income |
27,777 | - | (27,080) | 5(m) | - | 697 | ||||||||||||||||||||||
Other assets |
64,545 | 373 | 514 | 5(g) | 2,188 | 6(b) | 67,620 | |||||||||||||||||||||
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Total assets |
$ | 1,147,386 | $ | 264,672 | $ | (224,136) | $ | 368,817 | $ | 1,556,739 | ||||||||||||||||||
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LIABILITIES AND SHAREHOLDERS EQUITY: |
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Current liabilities: |
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Trade accounts payable |
$ | 49,576 | $ | 5,451 | $ | - | $ | - | $ | 55,027 | ||||||||||||||||||
Accrued liabilities |
90,086 | 9,618 | 434 | 5(h) | - | 100,138 | ||||||||||||||||||||||
Current portion of long-term debt |
4,450 | 902 | (902) | 5(i) | (4,450) | 6(c) | - | |||||||||||||||||||||
Current portion financing lease liability |
- | 450 | (75) | 5(j) | 375 | |||||||||||||||||||||||
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Total current liabilities |
144,112 | 16,421 | (543) | (4,450) | 155,540 | |||||||||||||||||||||||
Term loan and revolving credit facility |
245,092 | 60,965 | (60,965) | 5(k) | 244,913 | 6(d) | 490,005 | |||||||||||||||||||||
Financing lease liability |
- | 12,118 | 2,891 | 5(l) | 15,009 | |||||||||||||||||||||||
Other non-current liabilities |
260,858 | 28,324 | (7,862) | 5(m) | - | 281,320 | ||||||||||||||||||||||
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Total liabilities |
650,062 | 117,828 | (66,479) | 240,463 | 941,874 | |||||||||||||||||||||||
Shareholders equity: |
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Voting common stock |
240 | - | - | 33 | 6(e) | 273 | ||||||||||||||||||||||
Additional paid-in capital |
293,869 | 141,748 | (141,748) | 5(n) | 143,967 | 6(e) | 437,836 | |||||||||||||||||||||
Retained earnings |
287,095 | 5,127 | (15,940) | 5(n) | (15,646) | 6(e) | 260,636 | |||||||||||||||||||||
Accumulated other comprehensive loss |
(83,880) | (31) | 31 | 5(n) | - | (83,880) | ||||||||||||||||||||||
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Total shareholders equity |
497,324 | 146,844 | (157,657) | 128,354 | 614,865 | |||||||||||||||||||||||
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Total liabilities and shareholders equity |
$ | 1,147,386 | $ | 264,672 | $ | (224,136) | $ | 368,817 | $ | 1,556,739 | ||||||||||||||||||
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3
Unaudited pro forma condensed combined statement of operations for the twelve months
ended March 31, 2020
(dollars and shares in thousands, except per share amounts)
Historical | ||||||||||||||||||||||||||||
CMCO
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Dorner (as adjusted) Note 2
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Transaction
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Reference
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Other Transaction
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Reference
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Pro forma
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Net sales |
$ | 809,162 | $ | 82,094 | $ | - | $ | - | $ | 891,256 | ||||||||||||||||||
Cost of products sold |
525,976 | 43,289 | 3,742 | 5(o) | - | 573,007 | ||||||||||||||||||||||
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Gross Profit |
283,186 | 38,805 | (3,742) | - | 318,249 | |||||||||||||||||||||||
Selling |
91,054 | 14,738 | - | - | 105,792 | |||||||||||||||||||||||
General and administrative |
77,880 | 11,879 | 19,716 | 5(p) | 1,675 | 6(f) | 111,150 | |||||||||||||||||||||
Research and development expenses |
11,310 | 1,536 | - | - | 12,846 | |||||||||||||||||||||||
Net loss on sales of businesses, including impairment |
176 | - | - | - | 176 | |||||||||||||||||||||||
Amortization of intangibles |
12,942 | 8,033 | 4,598 | 5(q) | - | 25,573 | ||||||||||||||||||||||
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Income (loss) from operations |
89,824 | 2,619 | (28,056) | (1,675) | 62,712 | |||||||||||||||||||||||
Interest and debt expense |
14,234 | 6,675 | - | (1,155) | 6(g) | 19,754 | ||||||||||||||||||||||
Cost of debt refinancing |
- | - | - | 14,645 | 6(h) | 14,645 | ||||||||||||||||||||||
Investment (income) loss, net |
(891) | - | - | - | (891) | |||||||||||||||||||||||
Foreign currency exchange loss (gain), net |
(1,514) | (38) | - | - | (1,552) | |||||||||||||||||||||||
Other (income) expense, net |
839 | (88) | - | - | 751 | |||||||||||||||||||||||
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Income from continuing operations before income tax expense (benefit) |
77,156 | (3,930) | (28,056) | (15,165) | 30,005 | |||||||||||||||||||||||
Income tax expense |
17,484 | (379) | (7,080) | 5(r) | (3,791) | 6(i) | 6,234 | |||||||||||||||||||||
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Net income (loss) |
$ | 59,672 | $ | (3,551) | $ | (20,976) | $ | (11,374) | $ | 23,771 | ||||||||||||||||||
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Weighted average basic shares outstanding |
23,619 | - | 3,301 | 6(j) | 26,920 | |||||||||||||||||||||||
Weighted average diluted shares outstanding |
23,855 | - | 3,308 | 6(j) | 27,163 | |||||||||||||||||||||||
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Basic income per share |
$ | 2.53 | $ | 0.88 | ||||||||||||||||||||||||
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Diluted income per share |
$ | 2.50 | $ | 0.88 | ||||||||||||||||||||||||
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4
Unaudited pro forma condensed combined statement of operations for the nine
months ended December 31, 2020
(dollars and shares in thousands, except per share amounts)
Historical | ||||||||||||||||||||||||||||
CMCO
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Dorner (as adjusted) Note 2
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Transaction
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Reference
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Other Transaction Accounting Adjustments
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Reference
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Pro forma
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Net sales |
$ | 463,407 | $ | 78,091 | $ | - | $ | - | $ | 541,498 | ||||||||||||||||||
Cost of products sold |
307,270 | 38,371 | 471 | 5(o) | - | 346,112 | ||||||||||||||||||||||
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Gross Profit |
156,137 | 39,720 | (471) | - | 195,386 | |||||||||||||||||||||||
Selling |
56,087 | 12,728 | - | - | 68,815 | |||||||||||||||||||||||
General and administrative |
53,842 | 8,708 | - | 506 | 6(f) | 63,056 | ||||||||||||||||||||||
Research and development expenses |
8,703 | 923 | - | - | 9,626 | |||||||||||||||||||||||
Net loss on sales of businesses, including impairment |
- | - | - | - | - | |||||||||||||||||||||||
Amortization of intangibles |
9,449 | 6,025 | 3,448 | 5(q) | - | 18,922 | ||||||||||||||||||||||
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Income (loss) from operations |
28,056 | 11,336 | (3,919) | (506) | 34,967 | |||||||||||||||||||||||
Interest and debt expense |
9,192 | 4,387 | - | 1,236 | 6(g) | 14,815 | ||||||||||||||||||||||
Cost of debt refinancing |
- | - | - | - | - | |||||||||||||||||||||||
Investment (income) loss, net |
(1,429) | - | - | - | (1,429) | |||||||||||||||||||||||
Foreign currency exchange loss (gain), net |
1,083 | 425 | - | - | 1,508 | |||||||||||||||||||||||
Other (income) expense, net |
20,081 | (51) | - | - | 20,030 | |||||||||||||||||||||||
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Income from continuing operations before income tax expense (benefit) |
(871) | 6,575 | (3,919) | (1,742) | 43 | |||||||||||||||||||||||
Income tax expense |
(392) | 1,358 | (1,002) | 5(s) | (436) | 6(i) | (472) | |||||||||||||||||||||
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Net income (loss) |
$ | (479) | $ | 5,217 | $ | (2,917) | $ | (1,306) | $ | 515 | ||||||||||||||||||
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Weighted average basic shares outstanding |
23,871 | - | 3,301 | 6(j) | 27,172 | |||||||||||||||||||||||
Weighted average diluted shares outstanding |
23,871 | - | 3,319 | 6(j) | 27,190 | |||||||||||||||||||||||
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Basic income per share |
$ | (0.02) | $ | 0.02 | ||||||||||||||||||||||||
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Diluted income per share |
$ | (0.02) | $ | 0.02 | ||||||||||||||||||||||||
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5
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
Note 1 - Basis of Presentation
The historical financial information has been adjusted to give pro forma effect to the Acquisition, as well as the related debt issuances by the Company, which were used to fund the Acquisition and repay previously existing debt of both the Company and Dorner, and the expected Equity Issuance by the Company, the proceeds of which are expected to be used to repay a portion of the New Term Loan. The unaudited pro forma condensed combined financial information has been prepared in accordance with Regulation S-X Article 11, Pro Forma Financial Information, as amended by the final rule, Amendments to Financial Disclosures about Acquired and Disposed Businesses, as adopted by the SEC on May 20, 2020 (Article 11).
The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting under the provisions of Financial Accounting Standards Board (FASB) Accounting Standard Codification (ASC) Topic 805, Business Combinations (ASC 805). The purchase price for the Acquisition will be allocated to the assets acquired and liabilities assumed based upon their estimated fair values as of the acquisition date, and any excess value of the consideration transferred over the net assets will be recognized as goodwill. The Company has made a preliminary allocation of the purchase price for the Acquisition to the assets acquired and liabilities assumed as of the acquisition date based on the Companys preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed using information currently available. Differences between these preliminary estimates and the final acquisition accounting could occur and these differences could have a material impact on the accompanying unaudited pro forma condensed combined financial information and the Companys future results of operations and financial position.
Note 2 - Presentation of Dorner Reclassification Adjustments
Historical Dorner financial information included within the unaudited pro forma condensed combined financial information has been reclassified to conform the presentation to that of the Company as indicated in the table below:
Balance sheet as of December 31, 2020
Presentation in Dorners Financial Statements
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Presentation in Pro Forma Condensed Combined
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Amount (in | |||||
Accounts receivable, less allowance for doubtful accounts |
Trade accounts receivable, less allowance for doubtful accounts | $ | 13,336 | |||||
Prepaid and other |
Prepaid Expenses and Other | 1,819 | ||||||
Building |
Property, plant, and equipment, net | 14,294 | ||||||
Machinery and equipment |
Property, plant, and equipment, net | 7,186 | ||||||
Office Equipment, including IT software |
Property, plant, and equipment, net | 4,671 | ||||||
Leasehold improvements |
Property, plant, and equipment, net | 1,376 | ||||||
Transportation equipment |
Property, plant, and equipment, net | 176 | ||||||
Less - accumulated depreciation and amortization |
Property, plant, and equipment, net | (9,990) | ||||||
Land |
Property, plant, and equipment, net | 300 | ||||||
Construction in progress |
Property, plant, and equipment, net | 423 | ||||||
Other intangible assets, net |
Other intangibles, net | 120,041 | ||||||
Deposits |
Other assets | 373 | ||||||
Current portion of capital lease obligation |
Current portion financing lease liability | 450 | ||||||
Line of credit |
Current portion of long-term debt | 902 | ||||||
Accounts payable |
Trade accounts payable | 5,451 | ||||||
Customer deposits |
Accrued liabilities | 3,079 | ||||||
Accrued compensation and benefits |
Accrued liabilities | 3,231 | ||||||
Other accrued liabilities |
Accrued liabilities | 3,308 | ||||||
Deferred tax liabilities, net |
Other non-current liabilities | 28,324 | ||||||
Term loan, less current portion, net of deferred financing costs |
Term loan and revolving credit facility | 60,965 | ||||||
Capital lease obligation, less current portion |
Financing lease liability | 12,118 |
6
Retained earnings |
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Retained earnings | 5,127 | |||||
Additional paid-in capital |
Additional paid-in-capital | 141,748 | ||||||
Accumulated other comprehensive loss |
Accumulated other comprehensive loss | (31) |
Statement of Operations for the Twelve Months Ended March 31, 2020
Presentation in Dorners Financial Statements | Presentation in Pro Forma Condensed Combined Financial Information |
Amount (in thousands) | ||||||
Net Sales |
Net sales | $ | 82,094 | |||||
Cost of sales |
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Cost of products sold | 43,289 | |||||
Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
General and administrative | 11,597 | ||||||
Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Research and development expenses | 1,536 | ||||||
Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Selling | 14,738 | ||||||
Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Amortization of intangibles | 8,033 | ||||||
Interest expense, net |
Interest and debt expense | 6,675 | ||||||
Acquisition Costs |
General and administrative | 282 | ||||||
Other expense, net |
Other (income) expense, net | (88) | ||||||
Other expense, net |
Foreign currency exchange loss (gain), net | (38) | ||||||
Current |
Income tax expense | (112) | ||||||
Deferred |
Income tax expense | (267) |
Statement of Operations for the Nine Months Ended December 31, 2020
Presentation in Dorners Financial Statements | Presentation in Pro Forma Condensed Combined Financial Information |
Amount (in thousands) | ||||||
Net Sales |
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Net sales | $ | 78,091 | ||||
Cost of sales |
Cost of products sold | 38,371 | ||||||
Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
General and administrative | 8,708 | ||||||
Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Research and development expenses | 923 | ||||||
Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Selling | 12,728 | ||||||
Selling and marketing, engineering and administrative expenses, including amortization of intangibles |
Amortization of intangibles | 6,025 | ||||||
Interest expense, net |
Interest and debt expense | 4,387 | ||||||
Other expense, net |
Other (income) expense, net | (51) | ||||||
Other expense, net |
Foreign currency exchange loss (gain), net | 425 | ||||||
Current |
Income tax expense | 3,057 | ||||||
Deferred |
Income tax expense | (1,699) |
Note 3 Conforming Accounting Policies
The accounting policies used in the preparation of the unaudited pro forma condensed combined financial information are those set out in CMCOs consolidated financial statements. Based on the procedures performed to date, the accounting policies of Dorner are similar in all material respects to CMCOs accounting policies, with the exception of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) (Topic 842) and ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (Topic 606), which Dorner had not yet been
7
required to adopt as a private company, as well as accounting for reserves on accounts receivable and warranties, accounting for slow-moving inventory, and accounting for inventory capitalization. The impacts have been described in Note 5 to the unaudited pro forma condensed combined financial information. There were no material differences to historical Dorner revenue recognition upon adoption of Topic 606.
CMCO is not aware of any other material differences between the accounting policies of the two companies that would continue to exist subsequent to the application of acquisition accounting. Following the consummation of the Acquisition, CMCO has begun to conduct, but has not yet completed, a more detailed review of Dorners accounting policies in an effort to determine if differences in accounting policies require further reclassification of Dorners results of operations or reclassification of assets or liabilities to conform to CMCOs accounting policies and classifications. As a result, CMCO may identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the unaudited pro forma condensed combined financial information.
Note 4 - Estimated Purchase Consideration and Preliminary Purchase Price Allocation
The estimated consideration transferred in the Acquisition is $486 million of cash, which includes the extinguishment of existing Dorner debt of $61.8 million and the payment of $8.9 million of Dorner transaction expenses at transaction close.
The table below represents an estimated preliminary purchase price allocation based on estimates, assumptions, valuations, and other analyses based on Dorners balance sheet as of December 31, 2020. The total preliminary estimated purchase consideration is allocated to the tangible and intangible assets and liabilities of Dorner based on their estimated fair values as if the Acquisition had occurred on December 31, 2020, which is the assumed Acquisition date for purposes of the unaudited pro forma condensed combined balance sheet. Other than the items specifically noted below, Dorners assets and liabilities are presented at their respective carrying amounts (as adjusted for accounting policy alignment) and should be treated as preliminary values. Based on the information available as of the time of the preparation of this unaudited pro forma condensed combined financial information, CMCO believes that these carrying values approximate fair values. CMCO has not completed the final allocation of the purchase price for the Acquisition to Dorners assets and liabilities; such final allocation will be completed within one year. Therefore, the acquired assets and liabilities are reflected at their preliminarily estimated fair values with the excess consideration recorded as goodwill. The final valuation could result in a material difference from the amounts shown.
The following table summarizes the preliminary purchase price as if the Acquisition occurred on December 31, 2020
(dollars in thousands) | ||||||
Amounts | ||||||
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Total Consideration Paid |
$ | 486,272 | ||||
Book value of net assets acquired at December 31, 2020 |
208,711 | |||||
Adjusted for: |
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Accounting policy alignment (1) |
2,980 | |||||
Elimination of existing goodwill & intangible assets |
(207,877) | |||||
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Adjusted book value of net assets acquired |
3,814 | |||||
Adjustments to: |
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Inventories |
3,231 | |||||
Property, plant and equipment, net |
3,649 | |||||
Other intangibles, net |
193,000 | |||||
Goodwill |
301,667 | |||||
Other non-current liabilities |
(19,089) | |||||
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8
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Reconciliation to consideration transferred |
$ | 486,272 | ||||
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(1) | Accounting policy alignment includes impact of adopting Topic 842, as well as accounting for reserves on accounts receivable and warranties, accounting for slow-moving inventory, and accounting for inventory capitalization. Refer to Note 5 for further disclosure. |
Note 5 - Transaction Accounting Adjustments
Pro Forma Transaction Accounting Adjustments to the unaudited pro forma condensed combined balance sheet
5(a) Reflects adjustments to cash and cash equivalents to record the acquisition of Dorner and the payment of transaction costs in connection with the Acquisition.
(dollars in thousands) | ||||
Acquisition of Dorner |
$ | (486,272) | ||
CMCO transaction costs |
(10,813) | |||
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Net Cash outflow |
$ | (497,085) | ||
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|
|
5(b) Trade accounts receivables, less allowance for doubtful accounts was reduced by $0.18 million in order to align Dorners historical accounting policy with that of CMCO.
5(c) Reflects the adjustments to inventories to record the accounting policy alignments for slow-moving inventory and inventory capitalization. Also reflects the step-up of acquired Dorner inventory (as adjusted for the accounting policy changes) to fair value.
(dollars in thousands) | ||||
Adjustment to reflect accounting policy alignment of Inventory Reserves |
$ | (625) | ||
Adjustment to reflect accounting policy alignment of Inventory Capitalization |
69 | |||
Fair value step-up of acquired inventory |
3,114 | |||
|
|
| ||
Pro forma adjustment to Inventories |
$ | 2,558 | ||
|
|
|
5(d) Reflects the adjustments to property, plant, and equipment, net to record the acquisition of finance leases and the fair value step-up of acquired Dorner fixed assets.
(dollars in thousands) | ||||
Adjustment to reflect acquisition of finance leases |
$ | 6,609 | ||
Fair value step-up of acquired property, plant, and equipment, net |
3,649 | |||
|
|
|||
Pro forma adjustment to Property, Plant, and Equipment, net |
$ | 10,258 | ||
|
|
The following table displays the expected useful lives of material property, plant, and equipment acquired.
Estimated Useful Life (years) | ||
Building |
20 | |
Leasehold Improvements |
12 | |
Machinery & Equipment |
5 | |
Tooling |
3 | |
Furniture, Fixtures, and Equipment |
4 | |
Computer & Networking |
3 |
9
Computer Software |
3 | |
Transportation Equipment |
5 |
5(e) - Reflects adjustments to remove Dorners historical goodwill, and record estimated goodwill resulting from the Acquisition.
(dollars in thousands) | ||||
Goodwill resulting from the Acquisition |
$ | 301,755 | ||
Dorners historical goodwill |
(87,836) | |||
|
|
| ||
Pro forma adjustment to Goodwill |
$ | 213,919 | ||
|
|
|
5(f) - Reflects adjustments to record the preliminary estimated fair value of the identifiable intangible assets acquired, net of historical book value of Dorners intangibles prior to the Acquisition.
(dollars in thousands) | Amount | Estimated Useful Life (in years) |
||||||
Elimination of Dorners historical intangibles |
$ | (120,041) | ||||||
Fair value of acquired customer relationships |
140,000 | 16 | ||||||
Fair value of acquired technology portfolio |
45,000 | 14 | ||||||
Fair value of acquired trade name portfolio |
8,000 | 12 | ||||||
|
|
|
||||||
Pro forma adjustment to Other intangibles, net |
$ | 72,959 | ||||||
|
|
|
5(g) - Other assets increased by $0.51 million to record Dorners right of use assets for operating leases upon adoption of Topic 842.
5(h) Reflects adjustments to Accrued liabilities to record the acquisition of Dorners operating leases and the alignment of Dorners historical accounting policy for accounting for warranty reserves with that of CMCO.
(dollars in thousands) | ||||
Adjustment to reflect acquisition of operating leases |
$ | 356 | ||
Adjustment to reflect accounting policy alignment of Warranty Reserves |
78 | |||
|
|
| ||
Pro forma adjustment to Accrued liabilities |
$ | 434 | ||
|
|
|
5(i) Current portion of long-term debt decreased by $0.9 million to record the extinguishment of Dorners historical current portion of debt.
5(j) Current portion financing lease liability decreased by $0.075 million from the acquisition of finance leases.
5(k) - Term loan and revolving credit facility decreased by $61 million as a result of CMCOs extinguishment of Dorners existing debt on the Acquisition close date.
5(l) - Financing lease liability increased by $2.9 million from the acquisition of acquired finance leases.
5(m) Reflects adjustments to record the effect of Dorners adoption of Topic 842, the recognition of deferred tax liabilities in connection of the Acquisition, jurisdictional netting of deferred tax assets with deferred tax liabilities, and the write-off of deferred taxes associated with Dorners historical goodwill.
(dollars in thousands) | ||||
Adjustment to reflect acquisition of operating leases |
$ | 158 |
10
Adjustment to reflect increase in deferred tax liabilities from the Acquisition |
20,231 | |||
Adjustment to reclassify for jurisdictional netting of deferred taxes |
(27,080) | |||
Adjustment to write-off deferred tax liabilities related to Dorners historical goodwill |
(1,171) | |||
|
|
| ||
Pro forma adjustment to Other non-current liabilities |
$ | (7,862) | ||
|
|
|
5(n) - The following table presents the pro forma adjustments to shareholders equity:
(dollars in thousands) | ||||||||
Elimination of Dorners Additional paid-in-capital |
(141,748) | |||||||
Elimination of Dorner Accumulated other comprehensive income |
31 | |||||||
Elimination of Dorners Retained Earnings |
(5,127) | |||||||
CMCO transaction costs |
(10,813) | |||||||
|
|
|||||||
Pro forma adjustment to Retained earnings |
(15,940) | |||||||
|
|
| ||||||
Pro forma adjustment to Shareholders Equity |
$ | (157,657) | ||||||
|
|
|
Pro Forma Transaction Adjustments to the unaudited pro forma condensed combined statements of operations
5(o) - The following table presents the pro forma adjustments to cost of products sold:
Twelve Months Ended |
Nine Months Ended |
|||||||
(dollars in thousands) | March 31, 2020 | December 31, 2020 | ||||||
Fair value step-up of acquired inventory |
$ | 3,114 | $ | - | ||||
Incremental depreciation on acquired property, plant, and equipment, net |
628 | 471 | ||||||
|
|
|||||||
Pro forma adjustment to Cost of products sold |
$ | 3,742 | $ | 471 | ||||
|
|
5(p) - The following table presents the pro forma adjustments to general and administrative expenses:
Twelve Months Ended | ||||
(dollars in thousands) | March 31, 2020 | |||
CMCO transaction costs |
$ | 10,813 | ||
Dorner transaction costs |
8,903 | |||
|
|
|||
Pro forma adjustment to General and administrative |
$ | 19,716 | ||
|
|
5(q) - The following table presents the pro forma adjustments to amortization of intangibles:
Twelve Months Ended | Nine Months Ended | |||||||
(dollars in thousands) | March 31, 2020 | December 31, 2020 | ||||||
Pro forma amortization expense on acquired customer relationships |
$ | 8,750 | $ | 6,563 | ||||
Pro forma amortization expense on acquired technology portfolio |
3,214 | 2,411 | ||||||
Pro forma amortization expense on acquired trade name portfolio |
667 | 500 | ||||||
Historical amortization of intangibles |
(8,033) | (6,025) | ||||||
|
|
| ||||||
Pro forma adjustment to Amortization of intangibles |
$ | 4,598 | $ | 3,448 | ||||
|
|
|
11
5(r) - Reflects the income tax effect of the Transaction Accounting Adjustments calculated using a weighted average statutory rate of (25%).
Note 6 - Other Transaction Accounting Adjustments
Pro Forma Other Transaction Accounting Adjustments to the unaudited pro forma condensed combined balance sheet
6(a) The following table presents the pro forma Other Transaction Accounting Adjustments related to cash, which include (1) $650 million of cash received from the New Term Loan, $5 million of final original issuance discount, and $150 million received from the Equity Issuance (2) the repayment of the Existing Term Loan, (3) repayment of a portion of the New Term Loan, (4) the payment of issuance costs related to the New Term Loan and the New Revolver, (5) the payment of transaction bonuses, and (6) payment of the Equity Issuance costs.
(dollars in thousands) | ||||
Sources: |
||||
Cash received from New Term Loan |
$ | 650,000 | ||
Final original issuance discount |
(5,000) | |||
Cash received from Equity Issuance |
150,000 | |||
|
|
| ||
Total Sources |
795,000 | |||
Uses: |
||||
Repayment of Existing Term Loan |
(256,013) | |||
Cash to repay a portion of New Term Loan |
(150,000) | |||
Cash to pay New Term Loan issuance costs |
(12,308) | |||
Cash to pay New Revolver issuance costs |
(3,050) | |||
Payment of transaction bonuses |
(1,000) | |||
Cash to pay Equity Issuance costs |
(6,000) | |||
|
|
| ||
Total Uses |
(428,371) | |||
|
|
| ||
Net Cash Inflow |
$ | 366,629 | ||
|
|
|
6(b) The following table reflects the change in Other assets as a result of incremental deferred financing fees for the New Revolver and the write-off of fees related to the Existing Revolver.
(dollars in thousands) | ||||
Deferred financing fees - New Revolver |
$ | 3,050 | ||
Write-Off financing fees - Existing Revolver |
(862) | |||
|
|
| ||
Pro forma adjustment to Other Assets |
$ | 2,188 | ||
|
|
|
6(c) Reflects the payoff of the $4.5 million current portion of the Existing Term Loan.
6(d) - Reflects adjustments to fund the Acquisition and repay the Existing Term Loan. The interest rate on the New Term Loan is determined by the Eurodollar rate plus an applicable margin. The change in the Companys borrowings are as follows:
(dollars in thousands) | ||||
Issuance of New Term Loan |
$ | 650,000 | ||
Final original issuance discount |
(5,000) |
12
Less New Term Loan issuance costs not written off |
(4,995) | |||||||
|
|
|||||||
Issuance of New Term Loan, net |
640,005 | |||||||
Repayment of Existing Term Loan (net of issuance costs) |
(245,092) | |||||||
Partial repayment of New Term Loan |
(150,000) | |||||||
|
|
|||||||
Pro forma adjustment to Term loan and revolving facility |
$ | 244,913 | ||||||
|
|
6(e) The following table presents the pro forma adjustments to shareholders equity, which include (1) the expected Equity Issuance of 3,301,147 shares of the Companys common stock, with an assumed share price of $45.44, net of $6 million of issuance costs, (2) payment of employee bonuses in connection with the Transaction, and (3) the write-off of deferred financing costs associated with the repayment of the Existing Term Loan, Existing Revolver, and the partial repayment of the New Term Loan.
(dollars in thousands) | ||||||||
Adjustment to Voting Common Stock |
$ | 33 | ||||||
Common stock issuance - APIC |
149,967 | |||||||
Fees related to Equity Issuance |
(6,000) | |||||||
|
|
|
||||||
Total adjustment to APIC from Equity Issuance |
143,967 | |||||||
Deferred financing costs on Existing Term Loan |
$ | (6,471) | ||||||
Deferred financing costs on Existing Revolver |
(862) | |||||||
Deferred financing fees on partial repayment of New Term Loan |
(7,313) | |||||||
Transaction bonuses |
(1,000) | |||||||
|
|
|
||||||
Total adjustment to Retained Earnings |
$ | (15,646) | ||||||
|
|
| ||||||
Pro forma adjustment to Shareholders equity |
$ | 128,354 | ||||||
|
|
|
A sensitivity analysis has been performed on the number of shares of the Companys common stock expected to be issued in the Equity Issuance. The analysis gives effect to a hypothetical $1.00 change in the share price of the Companys common stock in the Equity Issuance. A $1.00 change in the share price of the Companys common stock in the Equity Issuance would cause a corresponding increase or decrease to the number of shares issued of approximately 0.07 million.
Pro Forma Other Transaction Adjustments to the unaudited pro forma condensed combined statements of operations
6(f) Reflects the issuance of restricted stock units to key Dorner employees and payment of employee transaction bonuses in connection with the Acquisition.
Twelve Months Ended | Nine Months Ended | |||||||
(dollars in thousands) | March 31, 2020 | December 31, 2020 | ||||||
Compensation expense from issuance of restricted stock unit awards |
$ | 675 | $ | 506 | ||||
Transaction bonuses |
1,000 | |||||||
|
|
|||||||
Pro forma adjustment to General and administrative |
$ | 1,675 | $ | 506 | ||||
|
|
6(g) - Reflects the elimination of the Companys interest expense and amortization of deferred financing costs related to the repaid Existing Term Loan and records the interest expense and amortization of debt issuance costs on the New Term Loan in connection with the Acquisition. Interest rates are determined based on either a eurocurrency rate or base rate plus an applicable margin. An interest rate of 3.70% was assumed below.
13
Twelve Months Ended | Nine Months Ended | |||||||
(dollars in thousands) | March 31, 2020 | December 31, 2020 | ||||||
Pro forma interest on New Term Loan |
$ | 18,315 | $ | 13,736 | ||||
Pro forma amortization of New Term Loan and New Revolver financing costs |
1,438 | 1,079 | ||||||
|
|
|||||||
Pro forma interest and debt expense |
19,753 | 14,815 | ||||||
Historical CMCO interest and debt expense |
$ | (14,234) | $ | (9,192) | ||||
Historical Dorner interest and debt expense |
(6,675) | (4,387) | ||||||
|
|
|||||||
Historical interest and debt expense |
(20,909) | (13,579) | ||||||
|
|
|||||||
Pro forma adjustment to interest and debt expense |
$ | (1,155) | $ | 1,236 | ||||
|
|
A sensitivity analysis has been performed on interest expense to assess the effect a hypothetical 0.125% change in the interest rate related to the New Term Loan, which reflects a gross issuance of $650 million, debt issuance costs of $4.9 million, $5 million of final original issuance discount, repayment of the Existing Term Loan of $256 million, as well as immediate repayment of $150 million on the New Term Loan. A 0.125% change in interest rates would cause a corresponding increase or decrease to interest expense of approximately $0.62 million for the twelve months ended March 31, 2020 and $0.47 million for the nine months ended December 31, 2020.
6(h) Reflects a loss from the extinguishment of the Existing Term Loan and New Term Loan, as well as a write-off of Existing Revolver deferred financing fees.
Twelve Months Ended | ||||
(dollars in thousands) | March 31, 2020 | |||
Write-Off financing fees - Existing Term Loan |
$ | 6,471 | ||
Write-Off financing fees - Existing Revolver |
862 | |||
Write-Off financing fees repay portion of New Term Loan |
7,313 | |||
|
|
|||
Pro forma adjustment to Cost of debt refinancing |
$ | 14,645 | ||
|
|
6(i) Reflects the income tax effect of the Other Transaction Adjustments calculated using a weighted average statutory rate of (25%).
6(j) Reflects the 3,301,147 shares of common stock of the Company expected to be issued in connection with the Equity Issuance and the vesting of the restricted stock units treated as post-Acquisition compensation expense.
Twelve Months Ended
|
Nine Months Ended |
|||||||
(dollars in thousands except for earnings per share figure) | March 31, 2020 | December 31, 2020 | ||||||
Pro Forma Net Income |
$ | 23,771 | $ | 515 | ||||
Pro Forma Basic EPS |
||||||||
Historical average basic shares outstanding |
23,619 | 23,871 | ||||||
Shares from Equity Issuance |
3,301 | 3,301 | ||||||
|
|
|||||||
Total average basic shares outstanding |
26,920 | 27,172 | ||||||
|
|
|||||||
Pro Forma Basic EPS |
0.88 | 0.02 | ||||||
|
|
14
Pro Forma Diluted EPS |
||||||||
Historical average basic shares outstanding |
23,855 | 23,871 | ||||||
Shares from Equity Issuance |
3,301 | 3,301 | ||||||
Dilutive impact of restricted stock units |
7 | 18 | ||||||
|
|
|
|
|
| |||
Total average dilutive shares outstanding |
27,163 | 27,190 | ||||||
|
|
|
|
|
| |||
Pro Forma Diluted EPS |
$ | 0.88 | $ | 0.02 | ||||
|
|
|
|
|
|
A sensitivity analysis has been performed on EPS to assess the effect a hypothetical $1.00 change in the share price of the Companys common stock in the Equity Issuance. A $1.00 increase or decrease in the share price of the Companys common stock in the Equity Issuance would cause an insignificant change to pro forma Basic EPS and Diluted EPS for the twelve months ended March 31, 2020 and for the nine months ended December 31, 2020.
Note 7 Nonrecurring adjustments
The following table reflects the adjustments related to non-recurring items within the pro forma condensed combined financial information. These non-recurring items were assumed to have occurred on April 1, 2019, the beginning of the twelve-month period ended March 31, 2020.
Nonrecurring Adjustments | ||||
Twelve Months Ended | ||||
(dollars in thousands) | March 31, 2020 | |||
CMCO Transaction Costs |
$ | (10,813) | ||
Dorner Transaction Costs |
(8,903) | |||
Transaction Bonuses |
(1,000) | |||
Fair value step-up of acquired inventory |
(3,114) | |||
Write-Off financing fees - Existing Term Loan |
(6,471) | |||
Write-Off financing fees - Existing Revolver |
(862) | |||
Write-Off financing fees - partial repayment of New Term Loan |
(7,313) | |||
|
|
| ||
Total Non-Recurring Adjustments |
(38,475) | |||
Income tax expense / (benefit) - assumed 25% statutory tax rate |
(9,655) | |||
|
|
| ||
Total Non-Recurring Adjustments, net of tax effects |
$ | (28,820) | ||
|
|
|
15