Exhibit 99.2
Newmark International, Inc. and Pfleiderer Leasing USA, Inc.
Condensed Combined Balance Sheet
March 31, 2004 and December 31, 2003
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| | | (Unaudited) | | |
| | | March 31, 2004
| | December 31, 2003
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Assets | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash | | $ | 614,093 | | | $ | 1,563,039 | |
| Trade accounts receivable, net | | | 13,429,191 | | | | 14,060,824 | |
| Inventories | | | 13,677,000 | | | | 11,003,841 | |
| Deferred and recoverable income taxes | | | 1,636,481 | | | | 481,000 | |
| Prepaid expenses and other current assets | | | 702,523 | | | | 933,655 | |
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| Total current assets | | | 30,059,288 | | | | 28,042,359 | |
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| Property, plant and equipment, net | | | 27,505,616 | | | | 31,262,702 | |
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| Goodwill | | | 2,769,107 | | | | 2,769,107 | |
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| Total assets | | $ | 60,334,011 | | | $ | 62,074,168 | |
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Liabilities and stockholder’s equity | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Revolving credit agreements | | $ | 9,596,992 | | | $ | 8,000,000 | |
| Trade accounts payable | | | 4,551,212 | | | | 4,901,299 | |
| Income taxes payable | | | — | | | | 936,396 | |
| Accrued expenses | | | 1,700,718 | | | | 2,062,411 | |
| Current portion of long-term debt | | | 112,053 | | | | 108,589 | |
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| Total current liabilities | | | 15,960,975 | | | | 16,008,695 | |
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| Note payable to parent | | | 2,719,755 | | | | 2,826,662 | |
| Dividend payable to parent | | | 12,000,000 | | | | 12,000,000 | |
| Deferred income taxes | | | 3,421,394 | | | | 3,516,000 | |
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| Stockholder’s equity: | | | | | | | | |
| Common stock | | | 1,500 | | | | 1,500 | |
| Additional paid-in capital | | | 17,451,167 | | | | 17,451,167 | |
| Retained earnings | | | 8,779,220 | | | | 10,270,144 | |
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| Total stockholder’s equity | | | 26,231,887 | | | | 27,722,811 | |
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| Total liabilities and stockholder’s equity | | $ | 60,334,011 | | | $ | 62,074,168 | |
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See accompanying notes to condensed combined financial statements
Newmark International, Inc. and Pfleiderer Leasing USA, Inc.
Condensed Combined Statements of Income
Three months ended March 31, 2004 and 2003
(Unaudited)
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| | | March 31, 2004
| | March 31, 2003
|
| Net sales | | $ | 21,851,720 | | | $ | 20,881,800 | |
| Cost of sales | | | 17,305,038 | | | | 15,854,386 | |
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| Gross profit | | | 4,546,682 | | | | 5,027,414 | |
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| Impairment loss (note 5) | | | 4,124,408 | | | | — | |
| Selling, general and administrative expenses | | | 2,647,905 | | | | 2,756,381 | |
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| Operating income (loss) | | | (2,225,631 | ) | | | 2,271,033 | |
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| Other expenses (income): | | | | | | | | |
| Interest, net | | | 100,123 | | | | 302,781 | |
| Other, net | | | 19,241 | | | | (3,000 | ) |
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| | | | 119,364 | | | | 299,781 | |
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| Income (loss) before income taxes | | | (2,344,995 | ) | | | 1,971,252 | |
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| Income tax expense (benefit) | | | (854,071 | ) | | | 764,796 | |
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| Net income (loss) | | $ | (1,490,924 | ) | | $ | 1,206,456 | |
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See accompanying notes to condensed combined financial statements.
Newmark International, Inc. and Pfleiderer Leasing USA, Inc.
Condensed Combined Statements of Cash Flows
Three months ended March 31, 2004 and 2003
(Unaudited)
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| | | March 31, 2004
| | March 31, 2003
|
Operating activities | | | | | | | | |
| Net income (loss) | | $ | (1,490,924 | ) | | $ | 1,206,456 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization: | | | | | | | | |
| Property, plant and equipment | | | 973,979 | | | | 963,255 | |
| Deferred income taxes | | | (1,250,087 | ) | | | (13,504 | ) |
| Impairment loss | | | 4,124,408 | | | | — | |
| Loss on asset dispositions | | | 17,742 | | | | — | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Trade accounts receivable | | | 465,779 | | | | 669,379 | |
| Inventories | | | (4,217,709 | ) | | | (1,165,092 | ) |
| Prepaid and other current assets | | | 223,139 | | | | (37,375 | ) |
| Trade accounts payable | | | (23,836 | ) | | | 813,220 | |
| Income taxes payable | | | (936,396 | ) | | | (244,700 | ) |
| Other accrued liabilities | | | (178,031 | ) | | | (1,795,523 | ) |
| Due to parent | | | — | | | | 541,251 | |
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| Net cash flows from operating activities | | | (2,291,936 | ) | | | 937,367 | |
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Investing activities | | | | | | | | |
| Purchases of property, plant and equipment | | | (150,559 | ) | | | (907,973 | ) |
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| Net cash flows from investing activities | | | (150,559 | ) | | | (907,973 | ) |
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Financing activities | | | | | | | | |
| Net proceeds on revolving credit agreements | | | 1,596,992 | | | | 1,858,143 | |
| Principal payments on long-term debt | | | (103,443 | ) | | | — | |
| Principal payments under capital lease obligations | | | | | | | (5,025 | ) |
| Principal payments on note payable to parent | | | | | | | (91,935 | ) |
| Dividend payments | | | | | | | (8,000,000 | ) |
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| Net cash flows from financing activities | | | 1,493,549 | | | | (6,238,817 | ) |
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| Net (decrease) in cash | | | (948,946 | ) | | | (6,209,423 | ) |
| Cash at beginning of year | | | 1,563,039 | | | | 6,389,792 | |
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| Cash at end of year | | $ | 614,093 | | | $ | 180,369 | |
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Supplemental disclosures of cash flow information | | | | | | | | |
| Interest paid | | $ | 85,237 | | | $ | 310,692 | |
| Income taxes paid | | | 1,085,684 | | | | 1,023,000 | |
See accompanying notes to condensed combined financial statements.
Newmark International, Inc. and Pfleiderer Leasing USA, Inc.
Notes to Combined Financial Statements (continued)
1. Significant Accounting Policies
Condensed Combined Financial Statements
The condensed combined financial statements include the accounts of Newmark International, Inc. (Newmark) and its affiliate, Pfleiderer Leasing USA, Inc. (PLUSA), collectively referred to as the “Company.” All intercompany account balances and transactions primarily consisting of rental payments, deferred gain on sale-leaseback, and related tax effect, have been eliminated in combination.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These Condensed Consolidated Financial Statements should be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2003 audited financial statements. The accounting policies and methods of computation followed in these interim financial statements are the same as those followed in the financial statements for the year ended December 31, 2003. The results of operations for the periods ended March 31, 2004 and 2003, respectively, are not necessarily indicative of the operating results for the full year.
Stock-Based Compensation
The Company accounts for stock options granted by the parent, for the purchase of shares of the parent’s stock by employees of the Company, using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees(APB No. 25). Under this method, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the parent’s stock at the date of the grant over the amount an employee must pay to acquire the parent’s stock.
Had compensation for the Company employees’ participation in the parent’s stock option plan been accounted for using the fair value method prescribed in Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 123,Accounting for Stock-Based Compensation,pro-forma net income would have been as follows for the three months ended March 31, 2004 and 2003:
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| | | March 31, 2004
| | March 31, 2003
|
| Net income (loss), as reported | | $ | (1,490,824 | ) | | $ | 1,206,456 | |
| Add: Stock-based compensation cost, net of tax, included in the determination of net income as reported | | | — | | | | – | |
| Deduct: Stock-based compensation cost, net of tax, that would have been included in the determination of net income had the fair value method been used | | | (16,700 | ) | | | (16,700 | ) |
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| Pro-forma net income (loss) | | $ | (1,507,524 | ) | | $ | 1,189,756 | |
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Newmark International, Inc. and Pfleiderer Leasing USA, Inc.
Notes to Combined Financial Statements (continued)
2. Inventories
Inventories at March 31, 2004 and December 31, 2003 consist of the following:
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| | | March 31, 2004
| | December 31, 2003
|
| Finished goods | | $ | 5,246,771 | | | $ | 5,595,714 | |
| Work-in-progress | | | 3,532,901 | | | | 1,611,816 | |
| Raw materials and supplies | | | 4,897,328 | | | | 3,796,311 | |
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| | | $ | 13,677,000 | | | $ | 11,003,841 | |
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3. Dividends Payable to Parent
On December 19, 2001, the Company entered into a dividend agreement with its parent whereby any dividends declared subsequent to December 31, 2001 and prior to January 1, 2005 shall not be paid before January 1, 2005. At any time on or after January 1, 2005, the Company will pay such dividends within 30 days of receiving notice of demand for payment.
On December 20, 2001, the Company declared a $17,000,000 dividend payable to its parent of record as of December 28, 2001. Interest is payable quarterly at the rate of 5.25% per annum on the unpaid balance.
The Company and its parent amended the dividend agreement on December 31, 2002. The amendment provides that, upon written request from the parent, the Board of Directors of the Company shall determine whether to pay the requested dividend payment. If the Board of Directors of the Company determines that it has sufficient funds on hand or readily available to make the requested payment without compromising its ability to fund working capital requirements and planned capital investments, the Board of Directors may authorize the payment.
On December 31, 2002, the Company declared an $8,000,000 dividend payable to its parent of record as of December 31, 2002. In accordance with the provisions of the dividend agreement amendment, the Company paid this dividend on February 17, 2003.
On June 27, 2003, in accordance with the provisions of the dividend agreement amendment, the Company paid $5,000,000 of the $17,000,000 dividend declared on December 20, 2001, leaving $12,000,000 outstanding as of December 31, 2003. On April 16, 2004, the parent of the Company terminated this dividend agreement.
4. Related Party Transactions
From time to time, in the ordinary course of business, the Company conducts transactions with its parent. During the three months ended March 31, 2003, the Company purchased fixed assets of $663,458 from the parent. No fixed assets were purchased from the parent in the three months ended March 31, 2004. The Company recognized approximately $43,000 and $278,000 in interest expense on the dividend
Newmark International, Inc. and Pfleiderer Leasing USA, Inc.
Notes to Combined Financial Statements (continued)
payable to the parent and note payable to the parent during the three months ended March 31, 2004 and 2003, respectively.
5. Impairment Loss
On April 1, 2004, the Company sold its fiberglass pole business and assets to FRP Poles, Inc., a wholly-owned subsidiary of the parent company. The sales price consisted of cash proceeds of $1,040,000 plus assumption of all liabilities totaling approximately $1,800,000. Accordingly, an initial pre-tax loss of approximately $3,200,000 ($1,920,000 after-tax) plus an additional expense of $925,000 ($672,000 after-tax) is included in the condensed combined statement of income for the three months ended March 31, 2004.
6. Subsequent Event
On February 23, 2004, the parent entered into an agreement to sell 100% of the outstanding stock of both Newmark and PLUSA to Valmont Industries, Inc. (Valmont). The sale closed on April 16, 2004. Under the terms of the agreement, the Company and its parent executed a dividend termination agreement and the $12,000,000 dividend payable at March 31, 2004 was cancelled. The agreement also called for Valmont to retire at closing the $8,000,000 revolving credit agreement with a European bank and the promissory note to the parent. On April 16, 2004, Valmont repaid the outstanding balance on the revolving credit agreement of $8,000,000 and $2,829,948 related to the promissory note to the parent. The Company intends to rely on Valmont for working capital, capital expenditure and financing requirements.
