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Published: 2021-04-20 16:30:07 ET
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EX-99.3 5 d162720dex993.htm EX-99.3 EX-99.3

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 Company’s 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 Company’s existing term loan (the “Existing Term Loan”). In addition, the Company plans to raise $150 million through the issuance of shares of the Company’s 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 Company’s fiscal year ends on March 31st, while Dorner’s fiscal year ends on September 30th. As the Company’s fiscal year end differs by more than one quarter from Dorner’s 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 Company’s results of operations for its fiscal year ended March 31, 2020 and Dorner’s 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 Company’s results of operations for the nine months ended December 31, 2020 and Dorner’s 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 Company’s financial position as of December 31, 2020 and Dorner’s 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 Company’s 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 Company’s 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

 

                         

 

    Dorner

    (as adjusted)

    Note 2

                         

 

 

Transaction
Accounting
Adjustments

                             

 

Reference

 

                         

   

    Other

    Transaction

    Accounting

    Adjustments

                                     

 

Reference

 

                         

   

    Pro Forma
    Combined

                                     

ASSETS:

              

Current assets:

              

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  
  

 

 

 

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  
  

 

 

 

Total assets

     $ 1,147,386     $ 264,672     $ (224,136)           $ 368,817           $ 1,556,739  
  

 

 

 

              

LIABILITIES AND SHAREHOLDERS’ EQUITY:

              

Current liabilities:

              

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  
  

 

 

 

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  
  

 

 

 

Total liabilities

     650,062       117,828       (66,479)         240,463         941,874  

Shareholders’ equity:

              

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)  
  

 

 

 

Total shareholders’ equity

     497,324       146,844       (157,657)         128,354         614,865  
  

 

 

 

Total liabilities and shareholders’ equity

     $         1,147,386     $             264,672     $             (224,136)           $             368,817           $             1,556,739  
  

 

 

 

 

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

 

                         

 

    Dorner

    (as adjusted)

    Note 2

                           

 

 

    Transaction
    Accounting
    Adjustments

                             

 

Reference

 

                         

    

    Other

    Transaction
    Adjustments

                             

 

Reference

 

                         

    

      Pro forma    
      Combined     

                             

Net sales

     $             809,162       $ 82,094       $ -          $ -          $ 891,256    

Cost of products sold

     525,976       43,289       3,742       5(o)        -          573,007  
  

 

 

 

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  
  

 

 

 

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  
  

 

 

 

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  
  

 

 

 

Net income (loss)

     $ 59,672     $                 (3,551)     $                 (20,976)        $                 (11,374)        $                 23,771  
  

 

 

 

                

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  
                
  

 

 

 

             

 

 

 

Basic income per share

     $ 2.53                   $ 0.88  
  

 

 

 

             

 

 

 

                
  

 

 

 

             

 

 

 

Diluted income per share

     $ 2.50                   $ 0.88  
  

 

 

 

             

 

 

 

 

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

 

                         

 

    Dorner

    (as adjusted)

    Note 2

                             

 

 

Transaction
Accounting
Adjustments

                             

 

Reference

 

                         

    

    Other

    Transaction

    Accounting

    Adjustments

                             

 

Reference

 

                         

    

    Pro forma    
    Combined    

                          

Net sales

     $             463,407       $                 78,091       $ -          $ -          $             541,498    

Cost of products sold

     307,270       38,371       471       5(o)        -          346,112  
  

 

 

 

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  
  

 

 

 

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  
  

 

 

 

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)  
  

 

 

 

Net income (loss)

     $ (479)     $ 5,217     $                 (2,917)        $                 (1,306)        $ 515  
  

 

 

 

                

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  
                
  

 

 

 

             

 

 

 

Basic income per share

     $ (0.02)                 $ 0.02  
  

 

 

 

             

 

 

 

                
  

 

 

 

             

 

 

 

Diluted income per share

     $ (0.02)                 $ 0.02  
  

 

 

 

             

 

 

 

 

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 Company’s 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 Company’s 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 Dorner’s Financial Statements

 

    

 

  

Presentation in Pro Forma Condensed Combined
Financial Information

 

       

Amount

(in
    thousands)    

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

 

  

   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 Dorner’s Financial Statements        Presentation in Pro Forma Condensed Combined
Financial Information
       

Amount

    (in thousands)    

Net Sales

     Net sales       82,094  

Cost of sales

 

  

   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 Dorner’s Financial Statements        Presentation in Pro Forma Condensed Combined
Financial Information
       

Amount

    (in thousands)    

Net Sales

 

  

   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 CMCO’s consolidated financial statements. Based on the procedures performed to date, the accounting policies of Dorner are similar in all material respects to CMCO’s 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 Dorner’s accounting policies in an effort to determine if differences in accounting policies require further reclassification of Dorner’s results of operations or reclassification of assets or liabilities to conform to CMCO’s 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 Dorner’s 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, Dorner’s 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 Dorner’s 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              
 

 

 

Total Consideration Paid

    $       486,272  
   

Book value of net assets acquired at December 31, 2020

    208,711  

Adjusted for:

   

Accounting policy alignment (1)

    2,980  

Elimination of existing goodwill & intangible assets

    (207,877)  
 

 

 

Adjusted book value of net assets acquired

    3,814  

Adjustments to:

      

Inventories

    3,231  

Property, plant and equipment, net

    3,649  

Other intangibles, net

             193,000  

Goodwill

    301,667  

Other non-current liabilities

    (19,089)  
 

 

 

   

 

8


 

 

Reconciliation to consideration transferred

    $                 486,272  
 

 

 

  (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)  
  

 

 

 

Net Cash outflow

     $ (497,085)  
  

 

 

 

5(b) – Trade accounts receivables, less allowance for doubtful accounts was reduced by $0.18 million in order to align Dorner’s 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 Dorner’s historical goodwill, and record estimated goodwill resulting from the Acquisition.

 

  (dollars in thousands)     

Goodwill resulting from the Acquisition

     $ 301,755   

Dorner’s 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 Dorner’s intangibles prior to the Acquisition.

 

  (dollars in thousands)    Amount  

Estimated

Useful Life

(in years)

 

Elimination of Dorner’s 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 Dorner’s right of use assets for operating leases upon adoption of Topic 842.

5(h) – Reflects adjustments to Accrued liabilities to record the acquisition of Dorner’s operating leases and the alignment of Dorner’s 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 Dorner’s 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 CMCO’s extinguishment of Dorner’s 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 Dorner’s 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 Dorner’s 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 Dorner’s 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 Dorner’s Additional paid-in-capital

        (141,748)   

Elimination of Dorner Accumulated other comprehensive income

        31  

Elimination of Dorner’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s common stock in the Equity Issuance. A $1.00 change in the share price of the Company’s 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 Company’s 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 Company’s common stock in the Equity Issuance. A $1.00 increase or decrease in the share price of the Company’s 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