Exhibit 99.3
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS AND UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
The following unaudited pro forma combined balance sheet as of March 31, 2010 and the unaudited pro forma combined statement of operations for the year ended March 31, 2010 give effect to Mesa Laboratories, Inc.’s (“Mesa”) acquisition of all the issued and outstanding shares of common stock of SGM Biotech, Inc. and the purchase of real estate held by SGM’s affiliate, Surreal, LLC, (“SGM”) effective April 27, 2010, including the related pro forma adjustments described in the notes thereto.
The unaudited pro forma balance sheet has been prepared as if the transaction was recorded on Mesa’s books as of March 31, 2010. The unaudited pro forma combined statement of operation has been prepared as if the proposed transaction occurred on the first day of the fiscal year presented. These pro forma statements are not necessarily indicative of the results of operations or the financial position as they may be in the future or as they might have been had the transaction become effective on the above mentioned date.
The historical data for Mesa as of and for the fiscal year ended March 31, 2010 has been derived from the audited financial statements of Mesa. The historical data for SGM and affiliate as of March 31, 2010 has been derived from the unaudited consolidated financial statements for SGM and affiliate. The historical data for the twelve months ended March 31, 2010 was derived from the audited financial statement of Mesa for the twelve months ended March 31, 2010, and the audited consolidated financial statements of SGM and affiliate for the twelve months ended December 31, 2009.
The unaudited pro forma combined statements of operations and the unaudited pro forma combined balance sheets should be read in conjunction with the separate historical financial statements and notes thereto of Mesa Laboratories, Inc. and SGM Biotech, Inc. and affiliate.
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UNAUDITED PRO FORMA COMBINED BALANCE SHEET
March 31, 2010
| | Mesa
Laboratories,
Inc. | | SGM Biotech
Inc. and
Affiliate | | Subtotal
Pro Forma
Combined | | Pro Forma
Adjustments | | Pro Forma
Combined | |
Assets | | | | | | | | | | | |
Current assets | | | | | | | | | | | |
Cash and cash equivalents | | $ | 10,471,000 | | $ | 794,000 | | $ | 11,265,000 | | $ | (1) (794,000 | ) | $ | 842,000 | |
| | | | | | | | (2) (12,000,000 | ) | | |
| | | | | | | | (3) 4,521,000 | | | |
| | | | | | | | (4) (2,150,000 | ) | | |
| | | | | | | | | | | |
Accounts receivable, net | | 4,421,000 | | 1,113,000 | | 5,534,000 | | | | 5,534,000 | |
Other current receivables | | 5,000 | | | | 5,000 | | | | 5,000 | |
Inventories, net | | 4,820,000 | | 706,000 | | 5,526,000 | | | | 5,526,000 | |
Prepaid expenses and other current assets | | 381,000 | | 8,000 | | 389,000 | | | | 389,000 | |
Deferred income taxes | | 376,000 | | 45,000 | | 421,000 | | | | 421,000 | |
| | | | | | | | | | | |
Total current assets | | 20,474,000 | | 2,666,000 | | 23,140,000 | | (10,423,000 | ) | 12,717,000 | |
| | | | | | | | | | | |
Non-current assets | | | | | | | | | | | |
Property, plant and equipment | | 4,239,000 | | 1,746,000 | | 5,985,000 | | (1) (60,000 | ) | 7,489,000 | |
| | | | | | | | (2) 541,000 | | | |
| | | | | | | | (4) 1,023,000 | | | |
Deferred financing costs | | | | | | — | | | | — | |
Other long term receivables | | | | 45,000 | | 45,000 | | | | 45,000 | |
Goodwill | | 6,265,000 | | | | 6,265,000 | | (2) 6,258,000 | | 12,523,000 | |
Other intangible assets, net | | 2,661,000 | | | | 2,661,000 | | (2) 5,610,000 | | 8,271,000 | |
| | | | | | | | | | | |
Total non-current assets | | 13,165,000 | | 1,791,000 | | 14,956,000 | | 13,372,000 | | 28,328,000 | |
| | | | | | | | | | | |
Total assets | | $ | 33,639,000 | | $ | 4,457,000 | | $ | 38,096,000 | | $ | 2,949,000 | | $ | 41,045,000 | |
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UNAUDITED PRO FORMA COMBINED BALANCE SHEET
March 31, 2010
| | Mesa
Laboratories,
Inc. | | SGM Biotech
Inc. and
Affiliate | | Subtotal
Pro Forma
Combined | | Pro Forma
Adjustments | | Pro Forma
Combined | |
Liabilities and Stockholders’ (Deficit) Equity | | | | | | | | | | | |
Current liabilities | | | | | | | | | | | |
Accounts payable, trade | | $ | 480,000 | | $ | 278,000 | | $ | 758,000 | | | | $ | 758,000 | |
Accrued salaries and payroll taxes | | 1,190,000 | | 241,000 | | 1,431,000 | | | | 1,431,000 | |
Accrued warranty expense | | 30,000 | | | | 30,000 | | | | 30,000 | |
Due to Vibrac, LLC | | 100,000 | | | | 100,000 | | | | 100,000 | |
Current portion of long-term debt | | | | 338,000 | | 338,000 | | (2) (278,000 | ) | 1,000,000 | |
| | | | | | | | (3) 1,000,000 | | | |
| | | | | | | | (4) (60,000 | ) | | |
Current portion of capital lease obligation | | | | 19,000 | | 19,000 | | | | 19,000 | |
Other accrued liabilities | | 11,000 | | | | 11,000 | | | | 11,000 | |
Taxes payable | | 133,000 | | | | 133,000 | | | | 133,000 | |
| | | | | | | | | | | |
Total current liabilities | | 1,944,000 | | 876,000 | | 2,820,000 | | 662,000 | | 3,482,000 | |
Long-term debt, less current portion | | | | 1,067,000 | | 1,067,000 | | (3) 3,521,000 | | 3,521,000 | |
| | | | | | | | (4) (1,067,000 | ) | | |
Deferred income taxes | | 498,000 | | 163,000 | | 661,000 | | (2) 2,184,000 | | 2,845,000 | |
| | | | | | | | | | | |
Total liabilities | | 2,442,000 | | 2,106,000 | | 4,548,000 | | 5,300,000 | | 9,848,000 | |
| | | | | | | | | | | |
Stockholders’ equity | | | | | | | | | | | |
Common stock | | 4,883,000 | | — | | 4,883,000 | | | | 4,883,000 | |
Members’ equity | | | | 589,000 | | 589,000 | | (2) (589,000 | ) | — | |
Retained earnings | | 26,314,000 | | 1,762,000 | | 28,076,000 | | (1) (854,000 | ) | | |
| | | | | | | | (2) (908,000 | ) | 26,314,000 | |
| | | | | | | | | | | |
Total stockholders’ equity | | 31,197,000 | | 2,351,000 | | 33,548,000 | | (2,351,000 | ) | 31,197,000 | |
| | | | | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 33,639,000 | | $ | 4,457,000 | | $ | 38,096,000 | | $ | 2,949,000 | | $ | 41,045,000 | |
| | | | | | | | | | | | | | | | |
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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year Ended March 31, 2010
| | Mesa
Laboratories, Inc. | | SGM Biotech Inc. and
Affiliate | | Subtotal
Pro Forma
Combined | | Pro Forma
Adjustments | | Pro Forma
Combined | |
| | (March 31, 2010) | | (December 31, 2009) | | | | | | | |
| | | | | | | | | | | |
Sales | | $ | 21,929,000 | | $ | 6,230,000 | | $ | 28,159,000 | | | | $ | 28,159,000 | |
Cost of goods sold | | 8,735,000 | | 3,214,000 | | 11,949,000 | | | | 11,949,000 | |
| | | | | | | | | | | |
Gross margin | | 13,194,000 | | 3,016,000 | | 16,210,000 | | | | 16,210,000 | |
| | | | | | | | | | | |
Selling | | 2,616,000 | | 399,000 | | 3,015,000 | | | | 3,015,000 | |
General and administrative | | 2,541,000 | | 1,465,000 | | 4,006,000 | | (7) (34,000 | ) | 4,582,000 | |
| | | | | | | | (9) 610,000 | | | |
Research and development | | 669,000 | | 322,000 | | 991,000 | | | | 991,000 | |
| | | | | | | | | | | |
Total operating expenses | | 5,826,000 | | 2,186,000 | | 8,012,000 | | 576,000 | | 8,588,000 | |
| | | | | | | | | | | |
Income (loss) from operations | | 7,368,000 | | 830,000 | | 8,198,000 | | (576,000 | ) | 7,622,000 | |
Other income (expense) | | | | | | | | | | | |
Interest income (expense) | | 36,000 | | (98,000 | ) | (62,000 | ) | (5) (147,000 | ) | (111,000 | ) |
| | | | | | | | (6) 98,000 | | | |
Other income | | | | 3,000 | | 3,000 | | | | 3,000 | |
| | | | | | | | | | | |
Total other income (expense) | | 36,000 | | (95,000 | ) | (59,000 | ) | (49,000 | ) | (108,000 | ) |
| | | | | | | | | | | |
Net income (loss) before income taxes | | 7,404,000 | | 735,000 | | 8,139,000 | | (625,000 | ) | 7,514,000 | |
Income tax expense | | 2,635,000 | | 164,000 | | 2,799,000 | | (8) (222,000 | ) | 2,577,000 | |
| | | | | | | | | | | |
Net income | | $ | 4,769,000 | | $ | 571,000 | | $ | 5,340,000 | | $ | (539,000 | ) | $ | 4,937,000 | |
| | | | | | | | | | | |
Net income per share (basic) | | $ | 1.49 | | | | | | | | $ | 1.55 | |
| | | | | | | | | | | |
Net income per share (diluted) | | $ | 1.45 | | | | | | | | $ | 1.50 | |
| | | | | | | | | | | |
Shares outstanding — basic | | 3,194,000 | | | | | | | | 3,194,000 | |
| | | | | | | | | | | |
Shares outstanding — diluted | | 3,293,000 | | | | | | | | 3,293,000 | |
| | | | | | | | | | | | | | | | |
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Notes to Unaudited Pro Forma Combined Financial Statements
The following notes and adjustments are related to Mesa Laboratories, Inc.’s acquisition of certain assets of SGM Biotech, Inc.
(1) To remove assets which were excluded from the acquisition of SGM Biotech, Inc.
(2) To reflect the consideration paid which included $11,722,000 paid in cash to the sellers and the pay-off of seller debt of $278,000, and to reflect the purchase price allocation to the assets acquired and liabilities assumed based upon their estimated fair values as follows:
Assets Acquired | | | |
| | | |
Current assets | | $ | 1,872,000 | |
Property and equipment | | 1,100,000 | |
Intangible assets | | 5,610,000 | |
Goodwill | | 6,258,000 | |
Other long-term assets | | 45,000 | |
| | 14,885,000 | |
Liabilities Assumed | | | |
| | | |
Current liabilities | | 538,000 | |
Deferred tax liability | | 2,347,000 | |
| | 2,885,000 | |
Net assets acquired | | $ | 12,000,000 | |
The purchase price allocation is preliminary based upon management’s best estimates and is subject to adjustment once a final valuation and other relevant information are received to finalize the purchase price allocation.
The acquisition also resulted in timing differences being created due to the fair value allocated to property and equipment and intangibles exceeding the tax basis inherited from acquiring the stock of SGM Biotech, Inc. Additional financial reporting basis of approximately $6,151,000 was recorded which gave rise to additional deferred tax liabilities of approximately $2,184,000 as a result of the transaction.
(3) To reflect debt incurred by Mesa Laboratories, Inc. to finance the acquisition of SGM Biotech, Inc. and Affiliate, which included revolving lines of credit totaling $4,521,000.
(4) To reflect the acquisition of real property from an affiliate of SGM Biotech, Inc. for $2,150,000 which was the estimated fair value of the assets. In connection with the transaction Mesa paid cash to the sellers of $1,023,000 and paid off the mortgage loan on the property which totaled $1,127,000.
(5) To reflect interest expense on debt incurred to acquire SGM Biotech, Inc. and Affiliate based upon the variable rate of prime minus 1% with a minimum rate of 3.25%. Interest was calculated at a rate of 3.25% which was the prevailing rate at the time of the transaction.
(6) To eliminate interest expense on shareholder notes and the mortgage payable that was paid off when SGM Biotech, Inc. was acquired
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(7) To eliminate SGM acquisition costs recorded on the historical financial statements of Mesa Laboratories, Inc.
(8) Pro forma income tax adjustment at a 35.5% effective tax rate which reflects Mesa Laboratories effective combined state and federal tax rate.
(9) To record depreciation of property, plant and equipment and amortization of intangible assets acquired in the acquisition. Property, plant and equipment is depreciated over 5 years based upon management assessment of the remaining useful economic life of the related acquired assets, Intangible assets consist of non-compete agreements, tradenames, customer relationships and patents. Estimated lives are 5 years for non-compete agreements based upon the term of the agreement, 8.5 years for customer relationships which is the estimated life of the asset based upon the future expected cash flows using prior historical experience for customer retention, 14 years for patents which is the remaining legal life and indefinitely for tradenames resulting in no amortization of this asset for financial reporting purposes.
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