Exhibit 9.1
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements give effect to the September 18, 2007 sale of VSK. The unaudited pro forma condensed consolidated balance sheet and statements of operations filed with this report are presented for illustrative purposes only. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2007 has been prepared to reflect the sale of VSK as if such sale had taken place on such date, and is not necessarily indicative of the financial position of the Company had the sale occurred on that date. The unaudited pro forma condensed consolidated results of operations for the six months ended June 30, 2007 and 2006, and the years ended December 31, 2006, 2005 and 2004, have been prepared assuming that the transaction occurred on January 1, 2006 and are not necessarily indicative of the results of operations for future periods or the results that actually would have been realized had we sold VSK as of those dates. The unaudited pro forma financial statements, including notes thereto, should be read in conjunction with the historical financial statements of the Company included in our Form 10-K for the year ended December 31, 2006 and the unaudited financial statements filed in our Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007.
The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
June 30, 2007 | ||||||||||||
Historical | VSK Disposition | Pro Forma | ||||||||||
ASSETS | ||||||||||||
Current Assets | ||||||||||||
Cash and cash equivalents | $ | 6,159 | $ | 41,841 | (1) (2) | $ | 48,000 | |||||
Restricted cash | 6,091 | — | 6,091 | |||||||||
Accounts receivable, net | 15,524 | (8,866 | )(2) | 6,658 | ||||||||
Costs and accrued earnings on uncompleted contracts | 15,652 | — | 15,652 | |||||||||
Inventories, net | 25,237 | (1,854 | )(2) | 23,383 | ||||||||
Prepaid and other current assets | 3,778 | (1,163 | )(2) | 2,615 | ||||||||
Assets held for sale | 3,422 | — | 3,422 | |||||||||
Total current assets | 75,863 | 29,958 | 105,821 | |||||||||
Property, Plant and Equipment, net | 31,837 | (4,709 | )(2) | 27,128 | ||||||||
Other Assets | ||||||||||||
Intangible assets, net | 9,048 | (40 | )(2) | 9,008 | ||||||||
Goodwill | 16,335 | (5,008 | )(2) | 11,327 | ||||||||
Deferred tax asset | — | 12,015 | (5) | |||||||||
(12,015 | )(3) | — | ||||||||||
Other assets | 145 | (27 | )(2) | 118 | ||||||||
Total other assets | 25,528 | (5,075 | ) | 20,453 | ||||||||
TOTAL ASSETS | $ | 133,228 | $ | 20,174 | $ | 153,402 | ||||||
CURRENT LIABILITIES | ||||||||||||
Bank overdraft facility | $ | 9,057 | $ | — | $ | 9,057 | ||||||
Current maturities of long-term debt | 9,216 | (182 | )(2) | 9,034 | ||||||||
Accounts payable | 16,722 | (3,673 | )(2) | 13,049 | ||||||||
Accrued liabilities | 16,934 | (944 | )(2) | 15,990 | ||||||||
Deferred revenue | 1,347 | (1,347 | )(2) | — | ||||||||
Customer deposits | 12,061 | (37 | )(2) | 12,024 | ||||||||
Foreign exchange contracts | 8 | (8 | )(2) | — | ||||||||
Income taxes | 4,097 | (743 | )(2) | 3,354 | ||||||||
Liabilities held for sale | 2,443 | — | 2,443 | |||||||||
Total current liabilities | 71,885 | (6,934 | ) | 64,951 | ||||||||
LONG TERM OBLIGATIONS | ||||||||||||
Long-term debt, less current maturities and unamortized discount | 3,496 | (204 | )(2) | 3,292 | ||||||||
Senior secured convertible notes | 32,607 | — | 32,607 | |||||||||
Deferred tax liability, non-current | 15 | (15 | )(2) | — | ||||||||
Derivative instrument | 294 | — | 294 | |||||||||
Other long-term liabilities | 576 | — | 576 | |||||||||
Total long-term obligations | 36,988 | (219 | ) | 36,769 | ||||||||
TOTAL LIABILITIES | 108,873 | (7,153 | ) | 101,720 | ||||||||
CONTINGENCIES AND COMMITMENTS | ||||||||||||
STOCKHOLDERS’ EQUITY | ||||||||||||
Preferred stock, no par value; authorized 1,000,000 shares; none issued | — | — | ||||||||||
Common stock, par value, $.10 per share; authorized 30,000,000 shares; issued and outstanding, 7,800,912 at June 30, 2007 | 780 | — | 780 | |||||||||
Capital in excess of par value | 53,428 | — | 53,428 | |||||||||
Retained deficits | (48,640 | ) | 12,015 | (5) | ||||||||
19,029 | (3) | (17,596 | ) | |||||||||
Accumulated other comprehensive income | 18,787 | (3,717 | )(2) | 15,070 | ||||||||
Total stockholders’ equity | 24,355 | 27,327 | 51,682 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 133,228 | $ | 20,174 | $ | 153,402 | ||||||
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data.
The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
Six months ended June 30, 2007 | ||||||||||||
Historical | VSK Disposition | Pro Forma | ||||||||||
Revenues | $ | 34,505 | $ | (16,694 | )(4) | $ | 17,811 | |||||
Cost and expenses | ||||||||||||
Cost of sales | 32,769 | (9,435 | )(4) | 23,334 | ||||||||
Selling and administrative | 18,998 | (3,952 | )(4) | 15,046 | ||||||||
Research and development | 3,680 | (1,653 | )(4) | 2,027 | ||||||||
Operating loss | (20,942 | ) | (1,654 | ) | (22,596 | ) | ||||||
Other income (expenses) | ||||||||||||
Interest income | 420 | (103 | )(4) | 317 | ||||||||
Interest expense | (8,286 | ) | 80 | (4) | (8,206 | ) | ||||||
Net (loss) gain on fair value of senior convertible notes and warrants | (7,766 | ) | — | (7,766 | ) | |||||||
Other-net | 9 | (140 | )(4) | (131 | ) | |||||||
(15,623 | ) | (163 | ) | (15,786 | ) | |||||||
Loss from continuing operations before income taxes | (36,565 | ) | (1,817 | ) | (38,382 | ) | ||||||
Income tax expense | 779 | (761 | )(4) | 18 | ||||||||
Loss from continuing operations | (37,344 | ) | (1,056 | ) | (38,400 | ) | ||||||
Discontinued operations, net of tax | (4,665 | ) | — | (4,665 | ) | |||||||
NET LOSS | $ | (42,009 | ) | $ | (1,056 | ) | $ | (43,065 | ) | |||
Loss per share — basic and diluted: | ||||||||||||
Net loss from continuing operations | $ | (5.74 | ) | $ | (5.90 | ) | ||||||
Net loss from discontinued operations | (0.72 | ) | (0.71 | ) | ||||||||
Total loss per share — basic and diluted | $ | (6.46 | ) | $ | (6.61 | ) | ||||||
Weighted average number of common shares: | ||||||||||||
Basic | 6,510,211 | 6,510,211 | ||||||||||
Diluted | 6,510,211 | 6,510,211 |
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data.
The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
Year ended December 31, 2006 | ||||||||||||
Historical | VSK Disposition | Pro Forma | ||||||||||
Revenues | $ | 121,680 | $ | (31,130 | )(4) | $ | 90,550 | |||||
Cost and expenses | ||||||||||||
Cost of sales | 102,903 | (17,647 | )(4) | 85,256 | ||||||||
Selling and administrative | 34,520 | (7,061 | )(4) | 27,459 | ||||||||
Research and development | 7,919 | (2,928 | )(4) | 4,991 | ||||||||
Operating loss | (23,662 | ) | (3,494 | ) | (27,156 | ) | ||||||
Other income (expenses) | ||||||||||||
Interest income | 1,050 | (183 | )(4) | 867 | ||||||||
Interest expense | (9,015 | ) | 132 | (4) | (8,883 | ) | ||||||
Net gain on fair value of senior convertible notes and warrants | 1,901 | — | 1,901 | |||||||||
Other-net | 1,967 | (231 | )(4) | 1,736 | ||||||||
(4,097 | ) | (282 | ) | (4,379 | ) | |||||||
Loss from continuing operations before income taxes | (27,759 | ) | (3,776 | ) | (31,535 | ) | ||||||
Income tax expense | 12,598 | (1,258 | )(4) | 11,340 | ||||||||
Loss from continuing operations | (40,357 | ) | (2,518 | ) | (42,875 | ) | ||||||
Discontinued operations, net of tax | (740 | ) | — | (740 | ) | |||||||
NET LOSS | $ | (41,097 | ) | $ | (2,518 | ) | $ | (43,615 | ) | |||
Loss per share — basic and diluted: | ||||||||||||
Net loss from continuing operations | $ | (6.66 | ) | $ | (7.07 | ) | ||||||
Net loss from discontinued operations | (0.12 | ) | (0.12 | ) | ||||||||
Total loss per share — basic and diluted | $ | (6.78 | ) | $ | (7.19 | ) | ||||||
Weighted average number of common shares: | ||||||||||||
Basic | 6,065,732 | 6,065,732 | ||||||||||
Diluted | 6,065,732 | 6,065,732 |
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data.
The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
Six months ended June 30, 2006 | ||||||||||||
Historical | VSK Disposition | Pro Forma | ||||||||||
Revenues | $ | 64,765 | $ | (14,343 | )(4) | $ | 50,422 | |||||
Cost and expenses | ||||||||||||
Cost of sales | 50,503 | (8,119 | )(4) | 42,384 | ||||||||
Selling and administrative | 17,345 | (3,619 | )(4) | 13,726 | ||||||||
Research and development | 3,409 | (1,500 | )(4) | 1,909 | ||||||||
Operating loss | (6,492 | ) | (1,105 | ) | (7,597 | ) | ||||||
Other income (expenses) | ||||||||||||
Interest income | 286 | (78 | )(4) | 208 | ||||||||
Interest expense | (3,715 | ) | 61 | (4) | (3,654 | ) | ||||||
Net (loss) gain on fair value of senior convertible notes and warrants | 1,014 | — | 1,014 | |||||||||
Other-net | 959 | (85 | )(4) | 874 | ||||||||
(1,456 | ) | (102 | ) | (1,558 | ) | |||||||
Loss from continuing operations before income taxes | (7,948 | ) | (1,207 | ) | (9,155 | ) | ||||||
Income tax expense (benefit) | — | (1,084 | )(4) | (1,084 | ) | |||||||
Loss from continuing operations | (7,948 | ) | (123 | ) | (8,071 | ) | ||||||
Discontinued operations, net of tax | (796 | ) | — | (796 | ) | |||||||
NET LOSS | $ | (8,744 | ) | $ | (123 | ) | $ | (8,867 | ) | |||
Loss per share — basic and diluted: | ||||||||||||
Net loss from continuing operations | $ | (1.32 | ) | $ | (1.34 | ) | ||||||
Net loss from discontinued operations | (0.13 | ) | (0.13 | ) | ||||||||
Total loss per share — basic and diluted | $ | (1.45 | ) | $ | (1.47 | ) | ||||||
Weighted average number of common shares: | ||||||||||||
Basic | 6,029,251 | 6,029,251 | ||||||||||
Diluted | 6,029,251 | 6,029,251 |
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data.
The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
Year ended December 31, 2005 | |||||||||||||
Historical | VSK Disposition | Pro Forma | |||||||||||
Revenues | $ | 106,198 | $ | (30,761 | ) | (4) | $ | 75,437 | |||||
Cost and expenses | |||||||||||||
Cost of sales | 89,917 | (16,480 | ) | (4) | 73,437 | ||||||||
Selling and administrative | 32,085 | (6,570 | ) | (4) | 25,515 | ||||||||
Research and development | 6,752 | (2,682 | ) | (4) | 4,070 | ||||||||
Operating loss | (22,556 | ) | (5,029 | ) | (27,585 | ) | |||||||
Other income (expenses) | |||||||||||||
Interest income | 557 | (209 | ) | (4) | 348 | ||||||||
Interest expense | (2,563 | ) | 79 | (4) | (2,484 | ) | |||||||
Other—net | (1,970 | ) | (258 | ) | (4) | (2,228 | ) | ||||||
(3,976 | ) | (388 | ) | (4,364 | ) | ||||||||
Loss from continuing operations before income taxes and cumulative effect of accounting change | (26,532 | ) | (5,417 | ) | (31,949 | ) | |||||||
Income tax expense (benefit) | (35 | ) | (2,001 | ) | (4) | (2,036 | ) | ||||||
Loss from continuing operations before cumulative effect of accounting change | (26,497 | ) | (3,416 | ) | (29,913 | ) | |||||||
Discontinued operations, net of tax | (7,130 | ) | — | (7,130 | ) | ||||||||
Cumulative effect of accounting change, net of tax benefit of $2,726 | (5,293 | ) | — | (5,293 | ) | ||||||||
NET LOSS | $ | (38,920 | ) | $ | (3,416 | ) | $ | (42,336 | ) | ||||
Loss per share — basic and diluted: | |||||||||||||
Net loss from continuing operations before cumulative effect of accounting change | $ | (4.60 | ) | $ | (5.20 | ) | |||||||
Net loss from discontinued operations | (1.24 | ) | (1.24 | ) | |||||||||
Cumulative effect of accounting change, net of income taxes | (0.92 | ) | (0.92 | ) | |||||||||
Total loss per share — basic and diluted | $ | (6.76 | ) | $ | (7.36 | ) | |||||||
Weighted average number of common shares: | |||||||||||||
Basic | 5,754,951 | 5,754,951 | |||||||||||
Diluted | 5,754,951 | 5,754,951 |
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data.
The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
Year ended December 31, 2004 | ||||||||||||
Historical | VSK Disposition | Pro Forma | ||||||||||
Revenues | $ | 139,766 | $ | (29,826 | )(4) | $ | 109,940 | |||||
Cost and expenses | ||||||||||||
Cost of sales | 102,161 | (15,166 | )(4) | 86,995 | ||||||||
Selling and administrative | 25,964 | (6,389 | )(4) | 19,575 | ||||||||
Research and development | 4,321 | (2,454 | )(4) | 1,867 | ||||||||
Operating income | 7,320 | (5,817 | ) | 1,503 | ||||||||
Other income (expenses) | ||||||||||||
Interest income | 527 | (230 | )(4) | 297 | ||||||||
Interest expense | (2,440 | ) | 47 | (4) | (2,393 | ) | ||||||
Other-net | (663 | ) | (137 | )(4) | (800 | ) | ||||||
(2,576 | ) | (320 | ) | (2,896 | ) | |||||||
Income (loss) from continuing operations before income taxes | 4,744 | (6,137 | ) | (1,393 | ) | |||||||
Income tax expense (benefit) | 1,720 | (2,195 | )(4) | (475 | ) | |||||||
Income (loss) from continuing operations | 3,024 | (3,942 | ) | (918 | ) | |||||||
Discontinued operations, net of tax | (1,654 | ) | — | (1,654 | ) | |||||||
NET INCOME (LOSS) | $ | 1,370 | $ | (3,942 | ) | $ | (2,572 | ) | ||||
Income (loss) per share — basic: | ||||||||||||
Net income (loss) from continuing operations | $ | 0.53 | $ | (0.16 | ) | |||||||
Net loss from discontinued operations | (0.30 | ) | (0.30 | ) | ||||||||
Total income (loss) per share — basic | $ | 0.25 | $ | (0.46 | ) | |||||||
Income (loss) per share — diluted: | ||||||||||||
Net income (loss) from continuing operations | $ | 0.53 | $ | (0.16 | ) | |||||||
Net loss from discontinued operations | (0.29 | ) | (0.30 | ) | ||||||||
Total income (loss) per share — diluted | $ | 0.24 | $ | (0.46 | ) | |||||||
Weighted average number of common shares: | ||||||||||||
Basic | 5,568,183 | 5,568,183 | ||||||||||
Diluted | 5,745,282 | 5,568,183 |
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data.
The Allied Defense Group, Inc.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars)
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars)
BASIS OF PRESENTATION
The accompanying unaudited pro forma condensed consolidated financial statements give effect to the pro forma adjustments necessary to reflect the disposition of VSK Electronics NV as if the disposition was effective for the periods presented in the unaudited pro forma condensed consolidated statements of operations and as of June 30, 2007, in the unaudited pro forma condensed consolidated balance sheet. The Company’s historical amounts represent the Company’s consolidated balance sheets and statements of operations derived from our Annual report on Form 10-K for the years ended December 31, 2006, 2005 and 2004 and quarterly reports on Forms 10-Q for the periods ended June 30, 2007 and 2006.
PRO FORMA ADJUSTMENTS
The unaudited pro forma condensed consolidated statements of operations and balance sheet reflect the effect of the following pro forma adjustments:
(1) | To record the net cash received upon the sale of VSK, as follows: |
Gross cash proceeds, including $62 related to working capital adjustments | $ | 49,066 | ||
Funds held in escrow | (2,760 | ) | ||
Investment banker, legal, accounting and other transaction costs, including management incentives | (2,968 | ) | ||
Net cash received | 43,338 | |||
Less: VSK’s cash balance at 6/30/2007 | (1,497 | ) | ||
Net proforma adjustment to cash | $ | 41,841 | ||
(2) | To remove the assets, liabilities and accumulated other comprehensive income of VSK at June 30, 2007. | |
(3) | To record the estimated gain on the sale of VSK, as follows: |
Net cash received | $ | 43,338 | ||
Net assets sold | (16,011 | ) | ||
Other comprehensive income related to VSK | 3,717 | |||
Gain before income taxes | 31,044 | |||
Income taxes* | (12,015 | ) | ||
Net gain † | $ | 19,029 | ||
* | - This income tax amount is not expected to be paid, as the gain from the sale of VSK was offset by existing net operating loss carryforwards. This $12,015 benefit will be reported as a reduction of the income tax provision for continuing operations. | |
† | - The Stock Purchase Agreement requires a total of $2,760 be held in escrow pending the resolution of certain contingencies. Such amounts have been excluded from the net pro forma gain calculation in the table above. If these contingencies are resolved in favor of the Company, the additional consideration received will serve to increase the Company’s gain on the sale of VSK. |
The Allied Defense Group, Inc.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars)
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of Dollars)
(4) | To remove revenue and expenses of VSK for the six months ended June 30, 2007 and 2006, and the years ended December 31, 2006, 2005 and 2004. | |
(5) | To reverse the valuation allowance recorded against the deferred tax benefit related to $35,338 of net operating loss carryforwards previously determined to expire unused. |