Exhibit 99.3
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed statement of
financial position as of March 31, 2007 and the unaudited pro forma combined
condensed statements of operations for the year ended December 31, 2006 and the
three months ended March 31, 2007, and the accompanying notes thereto, have been
prepared to illustrate the effects of the Bairnco acquisition (the
"Acquisition"), including the financing of the Acquisition, on the historical
financial position and results of operations of WHX Corporation (the "Company").
The unaudited pro forma combined condensed balance sheet gives effect to
the Acquisition as if it had occurred on March 31, 2007. The unaudited pro forma
combined condensed statements of income give effect to the Acquisition as if it
had occurred on January 1, 2006. The unaudited pro forma combined condensed
financial information is presented for informational purposes only and does not
purport to represent the Company's financial condition had the Acquisition
occurred as of the respective dates indicated above. In addition, the unaudited
pro forma combined condensed financial information does not purport to project
the Company's future financial position or operating results as of any future
date or for any future period.
The unaudited pro forma combined condensed financial information has been
derived by the application of pro forma adjustments to the Company's unaudited
and audited historical consolidated financial statements. The pro forma
adjustments and certain assumptions underlying these adjustments, using the
purchase method of accounting, are described in the accompanying notes. The pro
forma adjustments are based on preliminary estimates, available information and
certain assumptions that we believe are reasonable and may be revised as
additional information becomes available. These pro forma adjustments do not
include any cost savings from synergies or costs of integration that may occur
as a result of the Acquisition.
This information should be read in conjunction with (i) the accompanying
notes to the unaudited pro forma combined condensed financial statements, (ii)
the Company's historical audited financial statements as of and for the years
ended December 31, 2006 and 2005 included in its Annual Report on Form 10-K for
the year ended December 31, 2006, (iii) the historical unaudited financial
statements as of March 31, 2007 and for the three months ended March 31, 2007
and 2006 included in the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2007, and (iv) the financial statements of
Bairnco Corporation included in this Current Report on Form 8-K/A.
1
WHX Corporation and Subsidiaries
Unaudited Pro Forma Combined Condensed Balance Sheet
as of March 31, 2007
(in thousands)
Proforma
WHX Corp Bairnco Adjustments combined
------------- ------------- --------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 3,540 $ 1,606 $ 5,146
Trade receivables - net 71,321 33,904 105,225
Inventories 54,944 35,633 90,577
Deferred income taxes 339 3,501 (84)(c) 3,756
Assets held for sale 185 -- 185
Other current assets 5,503 4,105 9,608
--------- --------- --------- ---------
Total current assets 135,832 78,749 (84) 214,497
Property, plant and equipment at cost, less
accumulated depreciation and amortization 76,345 40,840 117,185
Goodwill and other intangibles, net 68,217 20,839 25,561 (c) 114,617
Other non-current assets 15,841 3,324 19,165
--------- --------- --------- ---------
$ 296,235 $ 143,752 $ 25,477 $ 465,464
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current Liabilities:
Trade payables $ 41,796 $ 14,692 $ 56,488
Accrued environmental liability 6,109 -- 6,109
Accrued liabilities 33,299 11,988 5,677 (c) 50,964
Accrued interest expense - related party 13,649 -- 13,649
Current portion of long-term debt 4,666 1,219 5,885
Short-term debt 51,879 7,303 62 (a) 59,244
Deferred income taxes 123 -- 123
--------- --------- --------- ---------
Total current liabilities 151,521 35,202 5,739 192,462
Long-term debt 67,627 18,550 86,177
Long-term debt - related party 89,627 -- 101,391 (a) 191,018
Accrued pension liability 49,195 -- 49,195
Other employee benefit liabilities 8,699 -- 8,699
Deferred income taxes 2,933 4,260 7,193
Other liabilities -- 4,087 4,087
--------- --------- --------- ---------
369,602 62,099 107,130 538,831
--------- --------- --------- ---------
Stockholders' (Deficit) Equity:
Preferred stock- $.10 par value; authorized 5,000
shares; issued and outstanding -0- shares -- -- -- --
Common stock - $.01 par value; authorized 40,000
shares; issued and outstanding 10,000 shares 100 118 (118)(b) 100
Warrants 1,287 -- -- 1,287
Unearned compensation -- (441) 441 (b) --
Accumulated other comprehensive loss (47,178) (1,631) 1,631 (b) (47,178)
Additional paid-in capital 394,308 53,168 (53,168)(b) 394,308
Retained earnings/(accumulated deficit) (421,884) 69,137 (69,137)(b) (421,884)
Treasury stock -- (38,698) 38,698 (b) --
--------- --------- --------- ---------
Total stockholders' deficit (73,367) 81,653 (81,653) (73,367)
--------- --------- --------- ---------
$ 296,235 $ 143,752 $ 25,477 $ 465,464
========= ========= ========= =========
See accompanying notes to proforma financial statements.
2
WHX Corporation and Subsidiaries
Unaudited Pro Forma Combined Condensed Statement of Operations
for the Twelve Months Ended December 31, 2006
(in thousands)
Proforma
WHX Corp Bairnco Adjustments combined
------------- ------------- --------------- -------------
Net sales $ 460,963 $ 178,828 $ -- $ 639,791
Cost of goods sold 376,389 125,278 -- 501,667
--------- --------- --------- ---------
Gross profit 84,574 53,550 -- 138,124
Selling, general and administrative expenses 63,551 47,484 600 (f) 111,635
Asset impairment charge 5,195 -- -- 5,195
Environmental remediation expense 2,909 -- -- 2,909
Restructuring charge 2,420 -- -- 2,420
Gain on disposal of assets (31) -- -- (31)
--------- --------- --------- ---------
Income from operations 10,530 6,066 (600) 15,996
--------- --------- --------- ---------
Other:
Interest expense 22,535 712 15,252(d) 38,499
Realized and unrealized loss on derivatives 7,993 -- -- 7,993
Other (income) expense 834 -- -- 834
--------- --------- --------- ---------
Income (loss) from continuing operations before taxes (20,832) 5,354 (15,852) (31,330)
Tax provision (benefit) 31 392 (203)(e) 220
--------- --------- --------- ---------
Income (loss) from continuing operations, net of tax (20,863) 4,962 (15,649) (31,550)
--------- --------- --------- ---------
Discontinued operations:
Loss from discontinued operations, net of tax (167) -- -- (167)
Gain on disposal, net of tax 2,880 -- -- 2,880
--------- --------- --------- ---------
Net income (loss) on discontinued operations, net of tax 2,713 -- -- 2,713
--------- --------- --------- ---------
Net income (loss) $ (18,150) $ 4,962 $ (15,649) $ (28,837)
========= ========= ========= =========
BASIC AND DILUTED PER SHARE OF COMMON STOCK
Income (loss) from continuing operations $ (2.09) $ (3.15)
Discontinued operations 0.27 0.27
--------- ---------
Net income (loss) per share applicable to common stock $ (1.82) $ (2.88)
--------- ---------
See accompanying notes to proforma financial statements.
3
WHX Corporation and Subsidiaries
Unaudited Pro Forma Combined Condensed Statement of Operations
for the Three Months Ended March 31, 2007
(in thousands)
Proforma
WHX Corp Bairnco Adjustments combined
------------- ------------- --------------- -------------
Net sales $ 117,837 $ 48,727 -- $ 166,564
Cost of goods sold 98,355 33,596 -- 131,951
--------- --------- --------- ---------
Gross profit 19,482 15,131 -- 34,613
Selling, general and administrative expenses 18,775 14,124 150 (f) 33,049
Loss on disposal of assets 130 -- -- 130
--------- --------- --------- ---------
Income from operations 577 1,007 (150) 1,434
--------- --------- --------- ---------
Other:
Interest expense 7,570 468 3,787 (d) 11,825
Realized and unrealized loss on derivatives 691 -- -- 691
Other (income) expense 140 -- -- 140
--------- --------- --------- ---------
Income (loss) before taxes (7,824) 539 (3,937) (11,222)
Tax provision (benefit) 709 194 (30)(e) 873
--------- --------- --------- ---------
Net income (loss) $ (8,533) $ 345 $ (3,907) $ (12,095)
========= ========= ========= =========
BASIC AND DILUTED PER SHARE OF COMMON STOCK
Net income (loss) per share applicable to common stock $ (0.85) $ (1.21)
========= =========
See accompanying notes to proforma financial statements.
4
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma combined condensed balance sheet is based on
historical balance sheets of WHX Corporation ("WHX" or "the Company") and
Bairnco Corporation ("Bairnco") and has been prepared to reflect the acquisition
of Bairnco by WHX (the "Acquisition") as if it had been consummated on March 31,
2007.
The unaudited pro forma combined condensed statements of operations
combine the results of operations of the Company for the year ended December 31,
2006 and the three months ended March 31, 2007 with the historical results of
Bairnco for the same periods. The unaudited pro forma combined condensed
statements of operations have been prepared to reflect the Acquisition as if it
had occurred on January 1, 2006.
The unaudited pro forma combined condensed financial information is
presented for informational purposes only and is not necessarily indicative of
the historical results that would have occurred had the Company and Bairnco been
combined during this time period or the future results that may be achieved
after the Acquisition. Additionally, the allocation of the purchase price
indicated herein is preliminary and subject to change.
There were no transactions between the Company and Bairnco during the
periods presented.
NOTE 2 - ACQUISITION OF BAIRNCO
On April 13, 2007, as a result of a tender offer (the "Offer") pursuant to
an Agreement and Plan of Merger dated February 23, 2007 between Steel Partners
II, L.P. ("Steel"), BZ Acquisition Corp. ("BZA"), and Bairnco, BZA acquired
approximately 88.9% of the outstanding common stock of Bairnco. WHX acquired
Steel's entire interest in BZA pursuant to a Stock Purchase Agreement dated
April 12, 2007, and accordingly, acquired control of Bairnco through its
ownership of BZA. The consideration for each share was $13.50 in cash. On April
24, 2007, BZA was merged with and into Bairnco with Bairnco continuing as the
surviving corporation as a wholly owned subsidiary of WHX.
In connection with the closing of the Offer, initial financing was
provided by Steel through two credit facilities. Steel extended to BZA bridge
loans in the principal amount of approximately $75.1 million, $1.4 million, and
$10.0 million (and may extend additional loans of approximately $3.6 million, up
to an aggregate total amount of borrowings of $90.0 million) pursuant to a loan
and security agreement (the "Bridge Loan Agreement") between BZA and Bairnco, as
borrowers, and Steel, as lender. In addition, Steel extended to WHX a $15.0
million subordinated loan, which is unsecured at the WHX level between WHX, as
borrower, and Steel, as lender. WHX contributed the $15.0 million proceeds of
the subordinated loan to BZA as a capital contribution.
SOURCES AND USES OF FUNDS
(in thousands)
Sources of Funds Date Issued Amount
- -------------------------------------------------------------------------------------------
Bridge Loan Tranche I (Initial Tender and Certain Fees) 4/17/2007 $ 75,090
Bridge Loan Tranche II 4/18/2007 $ 1,350
Bridge Loan Tranche III 4/20/2007 $ 9,952
--------
TOTAL BRIDGE LOAN $ 86,391
WHX Subordinated Loan $ 15,000
Increase in Revolving Credit Facility $ 62
--------
TOTAL SOURCES OF FUNDS $101,453
Uses of Funds Detail Amount
- -------------------------------------------------------------------------------------------
Purchase of shares 7,427,762 Shares $100,276
Fees and Expenses $ 1,177
--------
TOTAL USES OF FUNDS $101,453
5
Borrowings under the Bridge Loan Agreement bear (i) cash interest at a
rate per annum equal to the prime rate of JP Morgan Chase plus 1.75% and (ii)
pay-in-kind interest at a rate per annum equal to 4.5% for the first 90 days the
loan is outstanding and 5% (instead of 4.5%) for the balance of the term, each
as adjusted from time to time. The minimum aggregate interest rate on borrowings
under the Bridge Loan Agreement is 14.5% per annum for the first 90 days the
loan is outstanding, and 15% (instead of 14.5%) per annum for the balance of the
term, and the maximum aggregate interest rate on borrowings under the Bridge
Loan Agreement is 18% per annum. The cash interest rate and the pay-in-kind
interest rate may be adjusted from time to time, by agreement of Steel Partners
and Bairnco, so long as the aggregate interest rate remains the same. Interest
is payable monthly in arrears. The obligations under the Bridge Loan Agreement
are guaranteed by certain of Bairnco's subsidiaries and collateralized by a
junior lien on the assets of Bairnco and certain of its subsidiaries and capital
stock of certain of Bairnco's subsidiaries. Obligations under the Bridge Loan
Agreement will also be guaranteed by the Company on an unsecured basis. The
scheduled maturity date of the indebtedness under the Bridge Loan Agreement is
the earlier to occur of (i) June 30, 2008 and (ii) such time as Bairnco obtains
any replacement financing. Indebtedness under the Bridge Loan Agreement may be
prepaid without penalty or premium.
Borrowings under the Subordinated Loan Agreement bear pay-in-kind interest
at a rate per annum equal to the prime rate of JP Morgan Chase plus 7.75%,
adjusted from time to time, with a minimum interest rate of 16% per annum and a
maximum interest rate of 19% per annum. Interest is payable monthly in arrears.
The obligations under the Subordinated Loan Agreement are guaranteed by Bairnco
and certain of its subsidiaries and collateralized by a junior lien on the
assets of Bairnco and certain of its subsidiaries and capital stock of certain
of Bairnco's subsidiaries. The indebtedness under the Subordinated Loan
Agreement will mature on the second anniversary of the issuance of the
subordinated loan and may be prepaid without penalty or premium.
The Loan Agreements contain customary representations, warranties,
covenants, events of default and indemnification provisions. Following the
Merger, (i) the indebtedness under the Bridge Loan Agreement and the related
security interests will be subordinated to the indebtedness and related security
interests granted under Bairnco's existing senior credit facility with Bank of
America, N.A., and (ii) the guarantees of the indebtedness under the
Subordinated Loan Agreement and the related security interests will be
subordinated to all indebtedness and security interests described in the
preceding clause (i).
On July 18, 2007, Bairnco completed the refinancing of: (i) all existing
indebtedness of Bairnco and its subsidiaries under its Senior Secured Credit
Facility dated as of November 9, 2006 with Bank of America, N.A., and (ii) a
portion of the existing indebtedness under the Bridge Loan Agreement pursuant to
which Steel made an $87.2 million term loan to Bairnco.
NOTE 3 - PURCHASE PRICE
Under the purchase method of accounting, the total estimated purchase
price, including the estimated fair value of obligations assumed, is allocated
to Bairnco's net tangible and identifiable intangible assets based on their
estimated fair values as of the acquisition date. The excess of the purchase
price over the net tangible and identifiable intangible assets is recorded as
goodwill. Management is being assisted with the valuation of assets and
liabilities acquired by a third party appraiser. The preliminary purchase price
allocation, subject to change pending completion of the final valuation and
analysis, is as follows:
Net tangible assets $ 54,276
Identifiable intangible assets 9,732
Goodwill 37,445
--------
Preliminary purchase price $101,453
========
NOTE 4 - PRO FORMA ADJUSTMENTS
The following pro forma adjustments are reflected in the unaudited pro forma
combined balance sheet and statements of operations:
(a) Reflects proceeds of new financing (the Bridge Loan and the Subordinated
Loan) to fund the purchase of shares pursuant to the Offer, and additional
borrowings on the revolving credit facility used to pay related expenses.
(b) Eliminates Bairnco's stockholders' equity accounts and common stock.
(c) Records the preliminary purchase price allocation. The preliminary
purchase price allocation is subject to change pending completion of the
final valuation and analysis.
(d) Records interest expense on the Bridge Loan and the Subordinated Loan, and
incremental interest expense on the Company's revolving credit facility,
which was used in order to pay certain acquisition-related expenses.
(e) Eliminates federal tax provision of Bairnco due to combined net operating
loss position.
(f) Records amortization of estimated acquired intangibles.
6
