Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated balance sheet as of October 1, 2005 is based on the assumption that the acquisition of Unilin had occurred as of that date. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2004 and the unaudited pro forma condensed consolidated statement of operations for the nine months ended October 1, 2005 are based on the consolidated financial statements of Mohawk and Unilin as if the acquisition of Unilin had occurred on January 1, 2004, after giving effect to the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed consolidated financial data.
The unaudited pro forma condensed consolidated balance sheet as of October 1, 2005 has been derived from Mohawk’s unaudited consolidated balance sheet as of October 1, 2005 and Unilin’s audited consolidated balance sheet as of October 30, 2005. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2004 has been derived from Mohawk’s audited consolidated statement of operations for the year ended December 31, 2004, and Unilin’s audited consolidated statement of operations for the year ended December 31, 2004. The unaudited pro forma condensed consolidated statement of operations for the nine months ended October 1, 2005 has been derived from Mohawk’s unaudited consolidated statement of operations for the nine months ended October 1, 2005, and Unilin’s audited consolidated statement of operations for the ten months ended October 30, 2005. Unilin’s unaudited results for January 2005 have been excluded from its ten-month results to present an unaudited nine month comparative period. As Unilin’s results are affected by seasonality, Unilin’s unaudited results for the nine-month period ended October 30, 2005 included in the unaudited pro forma condensed consolidated statements of operations are different than those for the nine-month period ended October 1, 2005. The unaudited pro forma condensed consolidated statements of operations exclude non-recurring items in the period subsequent to the transactions, which are directly attributable to the Unilin acquisition.
The unaudited pro forma condensed consolidated financial data are based on preliminary estimates and assumptions set forth in the notes to such information. Pro forma adjustments are necessary to reflect the estimated purchase price, the new debt structure and purchase accounting adjustments based on preliminary estimates of the fair values of Unilin’s assets and liabilities. Pro forma adjustments are also necessary to reflect amortization expense, interest expense and the income tax effect related to the pro forma adjustments.
The allocation of purchase price is preliminary and is based on management’s estimates of the fair value of the net assets acquired and liabilities assumed. The final purchase price allocation will be completed after asset and liability valuations are finalized. Any final adjustments may change the allocation of purchase price which could affect the fair value assigned to the assets and liabilities and could result in a change to the unaudited pro forma condensed consolidated financial data.
The unaudited pro forma condensed consolidated financial data has been derived from, and should be read in conjunction with the consolidated historical financial statements of Mohawk and Unilin, including the notes thereto. The pro forma adjustments, as described in the notes to the unaudited pro forma condensed consolidated financial data, are based on currently available information and certain adjustments that we believe are reasonable. They are not necessarily indicative of our consolidated financial position or results of operations that would have occurred had the transactions taken place on the dates indicated, nor are they necessarily indicative of future consolidated financial position or results of operations.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of October 1, 2005
(In thousands)
Mohawk (a) Industries | Unilin (b) Holdings NV | Pro Forma (c) Adjustments | Mohawk & Unilin Pro Forma Combined | ||||||||||
ASSETS | |||||||||||||
Current assets: | |||||||||||||
Cash and cash equivalents | $ | — | $ | 165,709 | $ | — | $ | 165,710 | |||||
Receivables | 811,628 | 189,577 | — | 1,001,205 | |||||||||
Inventories | 1,089,970 | 103,740 | 34,305 | (d) | 1,228,015 | ||||||||
Other current assets | 44,160 | 38,421 | — | 82,580 | |||||||||
Deferred income taxes | 55,311 | 6,237 | — | 61,548 | |||||||||
Total current assets | 2,001,069 | 503,684 | 34,305 | 2,539,058 | |||||||||
Property, plant and equipment, net | 995,205 | 592,151 | 180,727 | (e) | 1,768,082 | ||||||||
Goodwill | 1,378,849 | 18,630 | 1,242,323 | (f) | 2,639,802 | ||||||||
Other intangible assets | 319,644 | 16,416 | 866,467 | (g) | 1,202,528 | ||||||||
Other assets | 13,007 | 890 | — | 13,897 | |||||||||
$ | 4,707,774 | $ | 1,131,771 | $ | 2,323,822 | $ | 8,163,367 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||
Current liabilities: | |||||||||||||
Current portion of long-term debt | $ | 68,679 | $ | 52,132 | $ | 1,500,000 | (h) | $ | 1,620,811 | ||||
Accounts payable and accrued expenses | 776,199 | 225,485 | 36,113 | (i)(j) | 1,037,797 | ||||||||
Total current liabilities | 844,878 | 277,617 | 1,536,113 | 2,658,608 | |||||||||
Deferred income taxes | 191,761 | 117,876 | 298,467 | (j) | 608,104 | ||||||||
Long-term debt, less current portion | 700,000 | 32,027 | 1,187,924 | (h) | 1,919,951 | ||||||||
Other long-term liabilities | 29,373 | 5,569 | — | 34,942 | |||||||||
Total liabilities | 1,766,012 | 433,089 | 3,022,504 | 5,221,605 | |||||||||
Total stockholders’ equity | 2,941,762 | 698,682 | (698,682 | )(k) | 2,941,762 | ||||||||
$ | 4,707,774 | $ | 1,131,771 | $ | 2,323,822 | $ | 8,163,367 | ||||||
See accompanying notes to Unaudited Pro Forma
Condensed Consolidated Balance Sheet.
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
(a) | Unaudited Condensed Consolidated Balance Sheet for Mohawk, as reported in the Company’s quarterly report on Form 10-Q for the period ended October 1, 2005. |
(b) | Derived from Unilin’s audited balance sheet as of October 30, 2005. Amounts converted at a convenience exchange rate of 1.207 USD to 1 EURO, the approximate rate of exchange on October 30, 2005. |
(c) | The total estimated consideration as shown in the table below is allocated to the assets and liabilities of Unilin as if the transactions had occurred on October 1, 2005. The allocation set forth below is preliminary. The unaudited pro forma condensed combined financial information assumes that the historical values of Unilin’s current assets, current liabilities and property plant and equipment approximate fair value, except as adjusted, pending the final valuations and other financial information. |
The allocation of the purchase price to acquired intangible assets is subject to the finalization of independent appraisals. The actual amounts recorded when the independent appraisals are completed may differ materially from the preliminary amounts presented below.
Total purchase price: | ||||
Cash consideration (€2,227,500 converted using an exchange rate of 1.207) | $ | 2,687,924 | ||
Assumption of Unilin debt | 84,159 | |||
Acquisition related costs | 24,134 | |||
$ | 2,796,217 | |||
Preliminary allocation of purchase price reflecting the transaction: | ||||
Estimated adjustments to reflect assets and liabilities at fair value: | ||||
Historical value of assets acquired, excluding $18.6 million of pre-acquisition goodwill, as of October 30, 2005 | $ | 1,113,141 | ||
Historical value of liabilities assumed | (433,089 | ) | ||
Inventory valuation | 34,305 | |||
Current deferred tax recognized on inventory valuation | (11,979 | ) | ||
Incremental deferred tax liability on identified fixed assets | (51,655 | ) | ||
Incremental value of property plant and equipment | 180,727 | |||
Incremental identified intangible assets | 866,467 | |||
Incremental deferred tax liability on identified intangible assets | (246,812 | ) | ||
Assumption of Unilin debt | 84,159 | |||
Goodwill acquired (including $18.6 million of pre-acquisition goodwill) | 1,260,953 | |||
$ | 2,796,217 |
(d) | Estimated valuation adjustment related to acquired profit in inventory. |
(e) | Preliminary value of incremental property, plant and equipment with the associated transaction. |
(f) | Preliminary value of incremental goodwill associated with the transaction. |
(g) | Preliminary value of incremental intangible assets acquired in the transaction. |
(h) | Additional debt incurred related to the transaction. |
(i) | Preliminary adjustment to the purchase price for additional acquisition costs. |
(j) | Preliminary value of incremental deferred income taxes. |
(k) | Elimination of Unilin Holdings NV’s equity. |
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2004
(In thousands, except share and per share data)
Mohawk (a) Industries | Unilin (b) Holdings NV | Pro Forma Adjustments | Mohawk & Unilin Pro Forma Combined | |||||||||||
Net sales | $ | 5,880,372 | $ | 993,486 | $ | — | $ | 6,873,858 | ||||||
Cost of sales | 4,259,531 | 623,500 | 1,403 | (c)(d) | 4,884,434 | |||||||||
Gross profit | 1,620,841 | 369,986 | (1,403 | ) | 1,989,424 | |||||||||
Selling, general and administrative expenses | 985,251 | 132,147 | 73,428 | (d)(e) | 1,190,826 | |||||||||
Operating income | 635,590 | 237,839 | (74,830 | ) | 798,599 | |||||||||
Interest expense | 53,392 | 3,427 | 120,669 | (g) | 177,488 | |||||||||
Other expense (income) | 4,809 | (2,170 | ) | — | 2,639 | |||||||||
58,201 | 1,257 | 120,669 | 180,127 | |||||||||||
Earnings before income taxes | 577,389 | 236,582 | (195,499 | ) | 618,472 | |||||||||
Income taxes | 208,767 | 90,272 | (61,507 | )(h) | 237,532 | |||||||||
Net earnings | $ | 368,622 | $ | 146,310 | $ | (133,992 | ) | $ | 380,940 | |||||
Basic earnings per share | $ | 5.53 | $ | 5.71 | ||||||||||
Weighted-average common shares outstanding | 66,682 | 66,682 | ||||||||||||
Diluted earnings per share | $ | 5.46 | $ | 5.64 | ||||||||||
Weighted-average common and dilutive potential common shares outstanding | 67,557 | 67,557 | ||||||||||||
See accompanying notes to Unaudited Pro Forma
Condensed Consolidated Statement of Operations.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Nine Months Ended October 1, 2005
(In thousands, except share and per share data)
Mohawk (a) Industries | Unilin (b) Holdings NV | Pro Forma Adjustments | Mohawk & Unilin Pro Forma Combined | ||||||||||||
Net sales | $ | 4,815,548 | $ | 858,118 | $ | — | $ | 5,673,666 | |||||||
Cost of sales | 3,547,469 | 559,763 | — | (c) | 4,107,232 | ||||||||||
Gross profit | 1,268,079 | 298,355 | — | 1,566,434 | |||||||||||
Selling, general and administrative expenses | 806,144 | 105,300 | 54,578 | (e)(f) | 966,022 | ||||||||||
Operating income | 461,935 | 193,055 | (54,578 | ) | 600,412 | ||||||||||
Interest expense | 35,166 | (609 | ) | 90,502 | (g) | 125,059 | |||||||||
Other expense (income) | 2,526 | (19,722 | ) | — | (17,196 | ) | |||||||||
37,692 | (20,331 | ) | 90,502 | 107,863 | |||||||||||
Earnings before income taxes | 424,243 | 213,386 | (145,079 | ) | 492,550 | ||||||||||
Income taxes | 151,760 | 77,932 | (45,778 | )(h) | 183,914 | ||||||||||
Net earnings | $ | 272,483 | $ | 135,454 | $ | (99,301 | ) | $ | 308,636 | ||||||
Basic earnings per share | $ | 4.08 | $ | 4.62 | |||||||||||
Weighted-average common shares outstanding | 66,827 | 66,827 | |||||||||||||
Diluted earnings per share | $ | 4.03 | $ | 4.57 | |||||||||||
Weighted-average common and dilutive potential common shares outstanding | 67,572 | 67,572 | |||||||||||||
See accompanying notes to Unaudited Pro Forma
Condensed Consolidated Statement of Operations.
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
a. | Consolidated statement of operations for Mohawk, as reported in the Company’s Annual report on Form 10-K for the year ended December 31, 2004 and the Form 10-Q report for the nine months ended October 1, 2005. |
b. | Audited consolidated statement of operations for Unilin for the year ended December 30, 2004 and the unaudited 9 month period ended October 30, 2005. Amounts are shown in U.S. Dollars based on a convenience conversion rate of 1.207 USD to 1 EURO. The results for January 2005 have been excluded to present an unaudited nine month comparative period. |
c. | Excludes a nonrecurring $34.3 million fair value adjustment applied to Unilin’s acquired inventory. |
d. | Represents an adjustment to record incremental depreciation, of $1.7 million for the year ended December 31, 2004, related to property plant and equipment based on the fair values. There was no pro forma depreciation adjustment for the 9 month period ended October 1, 2005. Such property plant and equipment is being depreciated using the straight line method over varying periods, the average of which is 10 years. |
e. | Includes an increase in amortization expense, of $73.1 million and $54.6 million for the year ended December 31, 2004 and the nine month period ended October 1, 2005, to present projected amortization of identified intangibles. Intangible assets acquired included trade names, patents and customer relationships. Trade names have been assigned indefinite lives. Customer relationships have been assigned a 7 year life and patents have been assigned lives of between 12 and 16 years. |
f. | Excludes a $6.0 million adjustment related to non-recurring transaction costs incurred in Unilin’s historical financial statements. |
g. | Represents increased interest expense associated with the borrowings incurred in connection with the transaction. The annual effect of a 0.125 percent change in the expected interest rate on the approximately $2.7 billion of variable rate debt to be refinanced in connection with the transactions is approximately $3.2 million. |
h. | Represents the income tax benefit associated with the adjustments described herein. |