Exhibit 99.4
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA BALANCE SHEET (Unaudited)
The following pro forma balance sheet (unaudited) adjusts the historical consolidated balance sheet of Aeroflex Incorporated and subsidiaries as of June 30, 2003 for the effects of the acquisition of MCE Technologies, Inc. The acquisition has been accounted for under the purchase method of accounting.
The pro forma balance sheet gives effect to the acquisition described in Item 2 of the Form 8-K filed on September 3, 2003, as if it had occurred on June 30, 2003. The balance sheet should be read in conjunction with the notes to the pro forma financial statements.
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA BALANCE SHEET (UNAUDITED)
REFLECTING THE ACQUISITION OF MCE TECHNOLOGIES, INC.
JUNE 30, 2003
(In thousands, except per share amounts)
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| Historical |
| Acquisition |
| Pro Forma |
| Pro Forma |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 51,307 |
| $ | 250 |
| $ | (3,800 | ) | $ | 47,757 |
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Accounts receivable, net |
| 65,243 |
| 8,056 |
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| 73,299 |
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Inventories |
| 74,738 |
| 8,485 |
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| 83,223 |
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Deferred income taxes |
| 14,394 |
| 1,284 |
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| 15,678 |
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Prepaid expenses and other current assets |
| 5,556 |
| 835 |
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| 6,391 |
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Total current assets |
| 211,238 |
| 18,910 |
| (3,800 | ) | 226,348 |
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Property, plant and equipment, net |
| 69,080 |
| 10,148 |
| — |
| 79,228 |
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Intangible assets with definite lives, net |
| 15,111 |
| 6,263 |
| 6,207 |
| 27,581 |
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Goodwill |
| 22,449 |
| 12,102 |
| 33,685 |
| 68,236 |
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Deferred incomes taxes |
| 1,002 |
| — |
| (1,002 | ) | — |
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Other assets |
| 11,736 |
| 35 |
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| 11,771 |
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Total assets |
| $ | 330,616 |
| $ | 47,458 |
| $ | 35,090 |
| $ | 413,164 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
| $ | 1,879 |
| $ | 1,800 |
| $ | (1,535 | ) | $ | 2,144 |
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Accounts payable |
| 19,694 |
| 2,726 |
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| 22,420 |
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Advance payments by customers |
| 2,826 |
| 2,958 |
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| 5,784 |
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Accrued expenses and other current liabilities |
| 25,283 |
| 4,234 |
| 1,350 |
| 30,867 |
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Total current liabilities |
| 49,682 |
| 11,718 |
| (185 | ) | 61,215 |
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Long-term debt |
| 10,956 |
| 16,702 |
| 3,310 |
| 30,968 |
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Other long-term liabilities |
| 11,563 |
| 5,053 |
| 406 |
| 17,022 |
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Warrants |
| — |
| 8,195 |
| (8,195 | ) | — |
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Redeemable preferred stock |
| — |
| 4,326 |
| (4,326 | ) | — |
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Stockholders’ equity: |
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MCE equity |
| — |
| 1,464 |
| (1,464 | ) | — |
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Common stock, par value $.10 per share; authorized 110,000 shares; issued 60,122,000 shares |
| 6,012 |
| — |
| 582 |
| 6,594 |
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Additional paid-in capital |
| 222,943 |
| — |
| 45,382 |
| 268,325 |
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Accumulated other comprehensive income |
| 3,816 |
| — |
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| 3,816 |
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Retained earnings |
| 25,658 |
| — |
| (420 | ) | 25,238 |
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Less: Treasury stock, at cost (4 shares) |
| (14 | ) | — |
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| (14 | ) | ||||
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| 258,415 |
| 1,464 |
| 44,080 |
| 303,959 |
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Total liabilities and stockholders’ equity |
| $ | 330,616 |
| $ | 47,458 |
| $ | 35,090 |
| $ | 413,164 |
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(1) (2) See notes to pro forma financial statements.
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS (Unaudited)
The following pro forma statement of operations (unaudited) adjusts the historical consolidated statement of operations of Aeroflex Incorporated and subsidiaries for the year ended June 30, 2003 for the effects of the acquisition of MCE Technologies, Inc. (“MCE”) on September 3, 2003. The acquisition of MCE was accounted for under the purchase method of accounting. The pro forma statement of operations gives effect to the acquisition described in Item 2 of the Form 8-K filed on September 3, 2003, as if it had occurred on July 1, 2002.
MCE’s fiscal year end was December 31. For purposes of this pro forma statement of operations, MCE’s results of operations for the twelve months ended June 30, 2003 have been used.
The pro forma statement of operations does not purport to be indicative of the operating results that would have been achieved had the acquisition been effected on the date indicated, is not necessarily indicative of future operating results and should not be used as a forecast of future operations. This statement should be read in conjunction with the notes to the pro forma financial statements.
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
REFLECTING THE ACQUISITION OF MCE TECHNOLOGIES, INC.
YEAR ENDED JUNE 30, 2003
(In thousands, except per share amounts)
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| Historical |
| Acquisition |
| Pro Forma |
| Pro Forma |
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Sales |
| $ | 291,780 |
| $ | 59,196 |
| $ | (673 | ) | $ | 350,303 |
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Cost of sales |
| 178,524 |
| 37,410 |
| (673 | ) | 215,261 |
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Gross profit |
| 113,256 |
| 21,786 |
| — |
| 135,042 |
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Selling, general and administrative costs |
| 68,459 |
| 15,177 |
| 800 |
| 84,436 |
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Research and development costs |
| 31,102 |
| 5,306 |
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| 36,408 |
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Operating income |
| 13,695 |
| 1,303 |
| (800 | ) | 14,198 |
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Other expense (income) |
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Interest expense |
| 1,389 |
| 2,109 |
| (1,130 | ) | 2,368 |
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Other income, net |
| (577 | ) | (3,414 | ) | 3,491 |
| (500 | ) | ||||
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Total other expense (income) |
| 812 |
| (1,305 | ) | 2,361 |
| 1,868 |
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Income from continuing operations before income taxes |
| 12,883 |
| 2,608 |
| (3,161 | ) | 12,330 |
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Provision for income taxes |
| 4,350 |
| 16 |
| 86 |
| 4,452 |
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Income from continuing operations |
| $ | 8,533 |
| $ | 2,592 |
| $ | (3,247 | ) | $ | 7,878 |
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Income from continuing operations per common share |
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Basic |
| $ | .14 |
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| $ | .12 |
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Diluted |
| $ | .14 |
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| $ | .12 |
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Weighted average number of common shares outstanding |
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Basic |
| 60,193 |
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| 66,015 |
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Diluted |
| 60,753 |
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| 66,666 |
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(3) See notes to pro forma financial statements.
AEROFLEX INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA FINANCIAL STATEMENTS (Unaudited)
A. BASIS OF PRESENTATION
The accompanying pro forma financial statements (unaudited) present the financial position and results of operations of Aeroflex Incorporated and subsidiaries (“ARX”) giving effect to the acquisition of MCE Technologies, Inc. (“MCE”). The acquisition of MCE by ARX was accounted for as a purchase and accordingly, the purchase price was allocated to the assets and liabilities of MCE based on their fair values at September 3, 2003 (the date of acquisition).
For the purpose of the pro forma balance sheet and the pro forma statement of operations, it is assumed that the acquisition occurred on June 30, 2003 and July 1, 2002, respectively. In order to provide comparability to the corresponding historical period, the pro forma statement of operations for the year ended June 30, 2003 does not include a one-time charge of $420,000 which was recorded upon acquisition to reflect the write-off of the purchase price allocated to acquired in-process research and development.
B. PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
The pro forma financial statements of ARX give effect to the following pro forma adjustments and assumptions:
1. |
| To record the acquisition of MCE stock by ARX as described in Item 2 on Form 8-K filed on September 3, 2003. |
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2. |
| To record the a) purchase price of $70 million consisting of (i) $46 million of ARX stock and options paid for the acquisition of MCE stock, (ii) $22.8 million used to pay off MCE’s indebtedness and warrants and redeem MCE’s preferred stock and (iii) $1.4 million of acquisition costs, from ARX’s revolving credit borrowings and available cash and cash equivalents, b) elimination of MCE’s equity accounts, c) allocation of the purchase price to the fair value of the assets acquired and liabilities assumed, including, for purposes of the pro forma balance sheet, the aforementioned $420,000 write-off of the fair value of the acquired in-process research and development and d) current and deferred tax liabilities related to c) above. |
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3. |
| To record a) elimination of intercompany sales and cost of sales b) amortization based on estimated average remaining lives of assets (8 years for intangibles) and adjustment to fair value of assets acquired, c) reversal of MCE interest expense, d) interest expense on ARX debt incurred and interest income forgone due to the use of available cash and cash equivalents to discharge MCE’s obligations e) elimination of warrant expense (income) for the change in fair value of warrants that were retired in the acquistion, and (f) the tax effect of b), c), (d), and (e). |