Exhibit 99.2
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
The following pro forma condensed consolidated balance sheet (unaudited) adjusts the historical consolidated balance sheet of Aeroflex Incorporated and subsidiaries as of March 31, 2005 for the effects of the acquisition of the SPG division of UbiNetics Holdings Limited. 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 May 26, 2005, as if it had occurred on March 31, 2005. The balance sheet should be read in conjunction with the notes to the pro forma financial statements.
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
REFLECTING THE ACQUISITION OF THE SPG DIVISION OF UBINETICS HOLDINGS LIMITED (“SPG”)
March 31, 2005
(In thousands, except per share amounts)
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| Historical |
| SPG (1) |
| Pro Forma |
| Pro Forma |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
| $ | 8,186 |
| $ | 3,390 |
| $ | (8,000 | ) | $ | 3,576 |
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Marketable securities |
| 117,788 |
| — |
| (79,000 | ) | 38,788 |
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Accounts receivable, net |
| 90,110 |
| 5,703 |
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|
| 95,813 |
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Inventories |
| 112,361 |
| 1,887 |
| 95 |
| 114,343 |
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Deferred income taxes |
| 18,223 |
| — |
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| 18,223 |
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Prepaid expenses and other current assets |
| 8,180 |
| — |
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| 8,180 |
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Total current assets |
| 354,848 |
| 10,980 |
| (86,905 | ) | 278,923 |
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Property, plant and equipment, net |
| 75,007 |
| 1,877 |
| 669 |
| 77,553 |
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Intangible assets with definite lives, net |
| 36,434 |
| 1,375 |
| 21,202 |
| 59,011 |
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Goodwill |
| 85,329 |
| — |
| 60,541 |
| 145,870 |
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Deferred income taxes |
| — |
| — |
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| — |
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Other assets |
| 14,965 |
| — |
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| 14,965 |
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Total assets |
| $ | 566,583 |
| $ | 14,232 |
| $ | (4,493 | ) | $ | 576,322 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Current portion of long-term debt |
| $ | 660 |
| $ | — |
| $ |
| $ | 660 |
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Accounts payable |
| 28,663 |
| 5,026 |
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| 33,689 |
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Advance payments by customers |
| 11,333 |
| — |
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| 11,333 |
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Accrued expenses and other current liabilities |
| 43,305 |
| — |
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| 43,305 |
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Total current liabilities |
| 83,961 |
| 5,026 |
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| 88,987 |
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Long-term debt |
| 4,607 |
| — |
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| 4,607 |
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Deferred income taxes |
| 9,878 |
| — |
| 6,590 |
| 16,468 |
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Other long-term liabilities |
| 18,587 |
| 923 |
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| 19,510 |
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Stockholders’ equity: |
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Common stock, par value $.10 per share; authorized |
| 7,462 |
| — |
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| 7,462 |
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Additional paid-in capital |
| 372,772 |
| — |
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| 372,772 |
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Accumulated other comprehensive income |
| 16,614 |
| — |
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| 16,614 |
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Retained earnings |
| 52,716 |
| 8,283 |
| (11,083 | ) | 49,916 |
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Less: Treasury stock, at cost (4 shares) |
| (14 | ) | — |
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| (14 | ) | ||||
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| 449,550 |
| 8,283 |
| (11,083 | ) | 446,750 |
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Total liabilities and stockholders’ equity |
| $ | 566,583 |
| $ | 14,232 |
| $ | (4,493 | ) | $ | 576,322 |
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(1) (2) See accompanying notes to pro forma condensed consolidated financial statements.
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA STATEMENTS OF OPERATIONS (Unaudited)
The following pro forma statements of operations (unaudited) adjust the historical consolidated statements of operations of Aeroflex Incorporated and subsidiaries for the nine months ended March 31 2005 and the year ended June 30, 2004 for the effects of the acquisition of the SPG division of UbiNetics Holdings Limited (“SPG”) on May 23, 2005. The acquisition of SPG was accounted for under the purchase method of accounting. The pro forma statements of operations give effect to the acquisition described in Item 2 of the Form 8-K filed on May 26, 2005, as if it had occurred on July 1, 2003.
The pro forma statements of operations do not purport to be indicative of the operating results that would have been achieved had the acquisition been effected on the date indicated, are not necessarily indicative of future operating results and should not be used as a forecast of future operations. These statements should be read in conjunction with the notes to the pro forma financial statements.
AEROFLEX INCORPORATED AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
REFLECTING THE ACQUISITION OF THE SPG DIVISION OF UBINETICS HOLDINGS LIMITED (“SPG”)
NINE MONTHS ENDED MARCH 31, 2005
(In thousands, except per share amounts)
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| Pro Forma |
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| Historical |
| SPG |
| Adjustments(3) |
| Pro Forma |
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Sales |
| $ | 335,406 |
| $ | 29,192 |
| $ | — |
| $ | 364,598 |
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Cost of sales |
| 176,802 |
| 6,156 |
| — |
| 182,958 |
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Special charge (credit) |
| — |
| (9,049 | ) | — |
| (9,049 | ) | ||||
Gross profit |
| 158,604 |
| 32,085 |
| — |
| 190,689 |
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Selling, general and administrative costs |
| 81,597 |
| 6,276 |
| — |
| 87,873 |
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Research and development costs |
| 45,122 |
| 7,978 |
| 183 |
| 53,283 |
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Amortization of acquired intangibles |
| 6,164 |
| 1,028 |
| 2,751 |
| 9,943 |
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Operating income |
| 25,721 |
| 16,803 |
| (2,934 | ) | 39,590 |
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Other income (expense) |
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Interest expense |
| (738 | ) | — |
| — |
| (738 | ) | ||||
Other income, net |
| 1,371 |
| 26 |
| (1,048 | ) | 349 |
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Total other income (expense) |
| 633 |
| 26 |
| (1,048 | ) | (389 | ) | ||||
Income from continuing operations before income taxes |
| 26,354 |
| 16,829 |
| (3,982 | ) | 39,201 |
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Provision for income taxes |
| 9,947 |
| — |
| 3,774 |
| 13,721 |
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Income from continuing operations before non-recurring charges directly attributable to the transaction |
| $ | 16,407 |
| $ | 16,829 |
| $ | 7,756 |
| $ | 25,480 |
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Income from continuing operations per common share |
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Basic |
| $ | 0.22 |
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| $ | 0.34 |
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Diluted |
| $ | 0.22 |
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| $ | 0.34 |
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Weighted average number of common shares outstanding |
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Basic |
| 74,595 |
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| 74,595 |
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Diluted |
| 76,047 |
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| 76,047 |
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(3) See accompanying notes to pro forma condensed consolidated financial statements
AEROFLEX INCORPORATED
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
REFLECTING THE ACQUISITION OF THE SPG DIVISION OF UBINETICS HOLDINGS LIMITED (“SPG”)
YEAR ENDED JUNE 30, 2004
(In thousands, except per share amounts)
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| Pro Forma |
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| Historical |
| SPG |
| Adjustments(3) |
| Pro Forma |
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Sales |
| $ | 414,101 |
| $ | 21,473 |
| $ | — |
| $ | 435,574 |
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Cost of sales |
| 221,409 |
| 2,593 |
| — |
| 224,002 |
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Gross profit |
| 192,692 |
| 18,880 |
| — |
| 211,572 |
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Selling, general and administrative costs |
| 94,735 |
| 6,519 |
| — |
| 101,254 |
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Research and development costs |
| 49,972 |
| 15,165 |
| 318 |
| 65,455 |
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Amortization of acquired intangibles |
| 7,730 |
| 1,249 |
| 3,469 |
| 12,448 |
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Acquired in-process R&D |
| 4,220 |
| — |
| — |
| 4,220 |
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Operating income |
| 36,035 |
| (4,053 | ) | (3,787 | ) | 28,195 |
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Other income (expense) |
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Interest expense |
| (1,403 | ) | — |
| (1,250 | ) | (2,653 | ) | ||||
Other income (expense) |
| (1,711 | ) | 370 |
| (308 | ) | (1,649 | ) | ||||
Total other income (expense) |
| (3,114 | ) | 370 |
| (1,558 | ) | (4,302 | ) | ||||
Income from continuing operations before income taxes |
| 32,921 |
| (3,683 | ) | (5,345 | ) | 23,893 |
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Provision for income taxes |
| 12,457 |
| — |
| (2,830 | ) | 9,627 |
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Income from continuing operations before non-recurring charges directly attributable to the transaction |
| $ | 20,464 |
| $ | (3,683 | ) | $ | (2,515 | ) | $ | 14,266 |
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Income from continuing operations per common share |
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Basic |
| $ | 0.30 |
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| $ | .21 |
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Diluted |
| $ | 0.29 |
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| $ | .20 |
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Weighted average number of common shares outstanding |
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Basic |
| 67,917 |
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| 67,917 |
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Diluted |
| 69,931 |
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| 69,931 |
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(3) See accompanying notes to pro forma condensed consolidated 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 the SPG division of UbiNetics Holdings Limited (“SPG”). The acquisition of SPG by ARX was accounted for as a purchase and accordingly, the purchase price was allocated to the assets and liabilities of SPG based on their estimated fair values at May 23, 2005 (the date of acquisition). Adjustments to the purchase price allocation are expected to be finalized before May 2006, upon the receipt of an independent appraisal and the final determination of certain exit costs. Such adjustments are not expected to be material.
For the purpose of the pro forma balance sheet and the pro forma statements of operations, it is assumed that the acquisition occurred on March 31, 2005 and July 1, 2003, respectively. In order to provide comparability to the respective historical periods, the pro forma statements of operations for the nine months ended March 31, 2005 and the year ended June 30, 2004 do not include a one-time charge of $2,800,000 which was recorded upon acquisition to reflect the write-off of the purchase prices allocated to acquired in-process research and development. As the fiscal year end of SPG was December 31, the accompanying historical statement of operations data related to SPG for the nine months ended March 31, 2005, was derived from their historical results of operations for the year ended December 31, 2004, adding their results of operations for the three months ended March 31, 2005, and subtracting their results of operations for the six months ended June 30, 2004. SPG’s historical statement of operations data for the year ended June 30, 2004, was derived from their historical results of operations for the year ended December 31, 2003, adding their results of operations for the six months ended June 30, 2004, and subtracting their results of operations for the six months ended June 30, 2003.
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 SPG by ARX as described in Item 2.01 on Form 8-K filed on May 26, 2005.
2. To record the a) purchase price of $87 million, consisting of: i) $84 million for the acquisition of SPG and (ii) $3 million of acquisition costs, both from ARX’s available cash and proceeds from the sale of marketable securities; b) elimination of SPG’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 $2,800,000 write-off of the fair value of the acquired in-process research and development and d) deferred tax liabilities related to c) above.
3. To record a) depreciation and amortization based on estimated average remaining lives (average 4 years for intangibles) of assets and adjustments to fair value of assets acquired, b) interest expense on assumed ARX debt incurred and interest income forgone due to the use of available cash and marketable securities to acquire SPG and c) the tax effects of a) and b).