Exhibit 9.1
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial statements give effect to the October 1, 2008 sale of GMS. 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, 2008 has been prepared to reflect the sale of GMS 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, 2008 and the year ended December 31, 2007, have been prepared assuming that the transaction occurred on January 1, 2007 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 GMS 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, 2007 and the unaudited financial statements filed in our Form 10-Q for the quarters ended March 31, 2008 and June 30, 2008.
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The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
June 30, 2008 | |||||||||||||
ASSETS | Historical | GMS Disposition | Pro Forma | ||||||||||
Current Assets | |||||||||||||
Cash and cash equivalents | $ | 13,023 | $ | 17,708 | (1) (6) | $ | 30,731 | ||||||
Restricted cash | 8,687 | - | 8,687 | ||||||||||
Accounts receivable, net | 16,283 | (1,327 | ) | (2) | 14,956 | ||||||||
Costs and accrued earnings on uncompleted contracts | 67,432 | - | 67,432 | ||||||||||
Inventories, net | 32,571 | (3,276 | ) | (2) | 29,295 | ||||||||
Prepaid and other current assets | 8,725 | (212 | ) | (2) | 8,513 | ||||||||
Total current assets | 146,721 | 12,893 | 159,614 | ||||||||||
Property, Plant and Equipment, net | 24,592 | (431 | ) | (2) | 24,161 | ||||||||
Other Assets | |||||||||||||
Intangible assets, net | 7,454 | (6,971 | ) | (2) | 483 | ||||||||
Goodwill | 9,932 | (6,437 | ) | (2) | 3,495 | ||||||||
Other assets | 263 | - | 263 | ||||||||||
Total other assets | 17,649 | (13,408 | ) | 4,241 | |||||||||
TOTAL ASSETS | $ | 188,962 | $ | (946 | ) | $ | 188,016 | ||||||
CURRENT LIABILITIES | |||||||||||||
Current maturities of senior secured convertible notes | $ | 19,426 | $ | - | (6) | $ | 19,426 | ||||||
Bank overdraft facility | 18,143 | - | 18,143 | ||||||||||
Current maturities of long-term debt | 5,025 | (3,311 | ) | (5) | 1,714 | ||||||||
Accounts payable | 20,144 | (307 | ) | (2) | 19,837 | ||||||||
Accrued liabilities | 22,394 | (297 | ) | (2) | 22,097 | ||||||||
Belgium social security | 5,919 | - | 5,919 | ||||||||||
Customer deposits | 37,765 | (185 | ) | (2) | 37,580 | ||||||||
Foreign exchange contracts | 149 | - | 149 | ||||||||||
Income taxes | 4,259 | 75 | (3) | 4,334 | |||||||||
Total current liabilities | 133,224 | (4,025 | ) | 129,199 | |||||||||
LONG TERM OBLIGATIONS | |||||||||||||
Long-term debt, less current maturities and unamortized discount | 8,802 | - | 8,802 | ||||||||||
Derivative instrument | 195 | - | 195 | ||||||||||
Other long-term liabilities | 720 | - | 720 | ||||||||||
Total long-term obligations | 9,717 | - | 9,717 | ||||||||||
TOTAL LIABILITIES | 142,941 | (4,025 | ) | 138,916 | |||||||||
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, 8,024,851 at June 30, 2008 and 8,013,161 at December 31, 2006 | 802 | - | 802 | ||||||||||
Capital in excess of par value | 55,623 | - | 55,623 | ||||||||||
Retained deficits | (30,298 | ) | 3,079 | (3) | (27,219 | ) | |||||||
Accumulated other comprehensive income | 19,894 | - | 19,894 | ||||||||||
Total stockholders' equity | 46,021 | 3,079 | 49,100 | ||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 188,962 | $ | (946 | ) | $ | 188,016 |
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data. |
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The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
Six months ended June 30, 2008 | |||||||||||||
Historical | GMS Disposition | Pro Forma | |||||||||||
Revenues | $ | 76,375 | (5,658 | ) | (4 | ) | $ | 70,717 | |||||
Cost and expenses | |||||||||||||
Cost of sales | 58,406 | (1,812 | ) | (4 | ) | 56,594 | |||||||
Selling and administrative | 13,280 | (1,673 | ) | (4 | ) | 11,607 | |||||||
Research and development | 2,270 | (886 | ) | (4 | ) | 1,384 | |||||||
Operating income (loss) | 2,419 | (1,287 | ) | 1,132 | |||||||||
Other income (expenses) | |||||||||||||
Interest income | 426 | (16 | ) | (4 | ) | 410 | |||||||
Interest expense | (4,245 | ) | 184 | (5 | ) | (4,061 | ) | ||||||
Net loss on fair value of senior convertible notes and warrants | (527 | ) | - | (527 | ) | ||||||||
Other-net | (110 | ) | (7 | ) | (4 | ) | (117 | ) | |||||
(4,456 | ) | 161 | (4,295 | ) | |||||||||
Loss from continuing operations before income taxes | (2,037 | ) | (1,126 | ) | (3,163 | ) | |||||||
Income tax expense | 323 | (1 | ) | (4 | ) | 322 | |||||||
Loss from continuing operations | (2,360 | ) | (1,125 | ) | (3,485 | ) | |||||||
Income (loss) from discontinued operations, net of tax | |||||||||||||
Gain on sale of subsidiaries | 113 | - | 113 | ||||||||||
Loss from discontinued operations | (142 | ) | - | (142 | ) | ||||||||
(29 | ) | - | (29 | ) | |||||||||
NET LOSS | $ | (2,389 | ) | (1,125 | ) | (3,514 | ) | ||||||
Loss per share - basic and diluted: | |||||||||||||
Net loss from continuing operations | $ | (0.29 | ) | (0.44 | ) | ||||||||
Net loss from discontinued operations | - | - | |||||||||||
Total loss per share - basic and diluted | $ | (0.29 | ) | (0.44 | ) | ||||||||
Weighted average number of common shares: | |||||||||||||
Basic and diluted | 8,017,418 | 8,017,418 |
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data. |
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The Allied Defense Group, Inc.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Thousands of Dollars, except per share and share data)
Year ended December 31, 2007 | |||||||||||||
Historical | GMS Disposition | Pro Forma | |||||||||||
Revenues | $ | 55,618 | (9,945 | ) | (4 | ) | $ | 45,673 | |||||
Cost and expenses | |||||||||||||
Cost of sales | 49,949 | (2,881 | ) | (4 | ) | 47,068 | |||||||
Selling and administrative | 27,387 | (3,008 | ) | (4 | ) | 24,379 | |||||||
Research and development | 4,106 | (1,645 | ) | (4 | ) | 2,461 | |||||||
Operating income (loss) | (25,824 | ) | (2,411 | ) | (28,235 | ) | |||||||
Other income (expenses) | |||||||||||||
Interest income | 728 | (20 | ) | (4 | ) | 708 | |||||||
Interest expense | (11,588 | ) | 697 | (5 | ) | (10,891 | ) | ||||||
Net loss on fair value of senior convertible notes and warrants | (6,663 | ) | - | (6,663 | ) | ||||||||
Other-net | (550 | ) | (3 | ) | (4 | ) | (553 | ) | |||||
(18,073 | ) | 674 | (17,399 | ) | |||||||||
Loss from continuing operations before income taxes | (43,897 | ) | (1,737 | ) | (45,634 | ) | |||||||
Income tax expense | 4 | (1 | ) | (4 | ) | 3 | |||||||
Income (Loss) from continuing operations | (43,901 | ) | (1,736 | ) | (45,637 | ) | |||||||
Income (loss) from discontinued operations, net of tax | |||||||||||||
Gain on sale of subsidiaries | 29,314 | - | 29,314 | ||||||||||
Loss from discontinued operations | (6,691 | ) | - | (6,691 | ) | ||||||||
22,623 | - | 22,623 | |||||||||||
NET LOSS | $ | (21,278 | ) | $ | (1,736 | ) | (23,014 | ) | |||||
Loss per share - basic and diluted: | |||||||||||||
Net loss from continuing operations | $ | (6.06 | ) | (6.30 | ) | ||||||||
Net loss from discontinued operations | 3.12 | 3.12 | |||||||||||
Total loss per share - basic and diluted | $ | (2.94 | ) | (3.18 | ) | ||||||||
Weighted average number of common shares: | |||||||||||||
Basic and diluted | 7,244,983 | 7,244,983 |
The accompanying notes are an integral part of this unaudited pro forma condensed consolidated financial data. |
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The Allied Defense Group, Inc.
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 Global Microwave Systems, Inc. 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, 2008, in the unaudited pro forma condensed consolidated balance sheet. The Company’s historical amounts represent the Company’s consolidated balance sheet and statements of operations derived from our Annual report on Form 10-K for the year ended December 31, 2007 and quarterly report on Form 10-Q for the period ended June 30, 2008.
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 GMS, as follows: |
Gross cash proceeds^ | $ | 26,000 | ||
Funds held in escrow | (2,500 | ) | ||
Repayment of GMS acquisition promissory note, including all accrued and unpaid interest | (3,392 | ) | ||
Investment banker, legal, accounting and other transaction costs, including management incentives | (2,400 | ) | ||
Net cash received | $ | 17,708 |
^ - Total gross cash proceeds of $26,000 is subject to a final working capital adjustment which will be made within 60 days of closing. |
(2) | To remove the assets and liabilities of GMS at June 30, 2008. |
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The Allied Defense Group, Inc. |
Unaudited Pro Forma Condensed Consolidated Financial Data |
(Thousands of Dollars) |
(3) | To record the estimated gain on the sale of GMS, as follows: |
Net cash received | $ | 17,708 | ||
Plus: repayment of acquisition promissory note | 3,392 | |||
Net proceeds received in sale of GMS | 21,100 | |||
Net assets sold | (17,865 | ) | ||
Expenses associated with repayment of the promissory note* | (81 | ) | ||
Gain before income taxes | 3,154 | |||
Income taxes | (75 | ) | ||
Net gain+ | $ | 3,079 |
+ - The Asset Purchase Agreement requires a total of $2,500 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 disposal of GMS. |
*- Expenses associated with the repayment include $39 of unamortized discount on the note and accrued interest of $42. | |
(4) | To remove revenue and expenses of GMS for the six months ended June 30, 2008 and the year ended December 31, 2007. |
(5) | To record the repayment of the GMS acquisition promissory note in the principal amount of $3,350 less the associated unamortized discount of $39 at June 30, 2008. |
(6) | The pro forma financial statements do not reflect a potential partial redemption of the senior secured convertible notes. The note holders have the right to elect for the Company to use a portion of the net proceeds of the GMS sale to redeem a portion of the notes. The Company anticipates a maximum potential payment of $10,908 which, if elected, would thereby reduce pro forma cash and cash equivalents as well as pro forma current maturities of senior convertible notes by this amount. In addition, pro forma interest expense for the six months ended June 30, 2008 and for the year ended December 31, 2007 would be reduced by $898 and $1,416, respectively. |
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