THE FAIRCHILD CORPORATION PRO FORMA CONDENSED SEPARATED FINANCIAL STATEMENTS (UNAUDITED) The Following unaudited pro forma condensed separated balance sheet as of December 31, 1995, and the pro forma condensed separated consolidated statements of earnings for the year ended June 30, 1995 and the six months ended December 31, 1995, give effect to the Company's disposition of the D-M-E Company ("DME"). The pro forma information is based on the historical financial statements of the Company and DME giving effect to the transaction and assumptions and adjustments specified in the accompanying notes to the pro forma financial statements. The unaudited pro forma statements of the Company are not necessarily indicative of the results or financial position that actually would have occurred if the disposition of DME had been in effect since July 1, 1994 and July 1, 1995, nor are they necessarily indicative of future results or financial position of the Company. The pro forma financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's June 30, 1995 Form 10-K. THE FAIRCHILD CORPORATION PRO FORMA CONDENSED SEPARATED BALANCE SHEET December 31, 1995 (in thousands) Historical Pro Forma --------------------- ----------------------- ASSETS TFC DME Adjustments TFC - ------ ---------- ---------- ------------ --------- Cash $ 42,967 $ $ 74,000 (1) (74,000)(2) $ 42,967 Accounts receivable 70,241 70,241 Notes receivable-current 171,377 (1) 171,377 Inventories 78,449 78,449 Prepaid expenses and other current assets 27,092 27,092 Net current assets of discontinued operations 34,609 (34,166) 443 ---------- ---------- --------- --------- Total Current Assets 253,358 (34,166) 171,377 390,569 Property, plant and equipment 228,239 228,239 Accumulated depreciation (98,970) (98,970) Net noncurrent assets of discontinued operations 85,577 (85,528) 49 Investment in affiliates 70,904 70,904 Goodwill 152,184 152,184 Other assets 137,405 137,405 ---------- ---------- --------- --------- Total Assets $ 828,697 $(119,694) $171,377 $880,380 ========== ========== ========= ========= LIABILITIES - ----------- Bank notes payable and current maturities of long term debt $ 100,288 $ $(67,303)(2) $ 32,985 Accounts payable 32,323 32,323 Other accrued liabilities 75,816 7,341 (1) 83,157 Accrued income tax 41,420 (1) 41,420 ---------- ---------- --------- --------- Total Current Liabilities 208,427 -- (18,542) 189,885 Long-term debt, less current maturities 448,642 (6,697)(2) 441,945 Other long-term liabilities 86,873 86,873 Noncurrent income taxes 38,981 38,981 Redeemable preferred stock 15,311 15,311 ---------- ---------- --------- --------- Total Liabilities 798,234 -- (25,239) 772,995 Stockholders' equity: Common stock 2,242 (3,826) 3,826 (1) 2,242 Treasury stock (51,719) (51,719) Paid-in capital 67,445 (100,084) 100,084 (1) 67,445 Retained earnings 9,344 (15,784) 15,784 (1) 76,922 (1) 86,386 Cumulative translation adjustment 3,151 3,151 ---------- ---------- --------- --------- Total Stockholders' Equity 30,463 (119,694) 196,616 107,385 Total Liabilities and Stockholders' Equity $ 828,697 $(119,694) $171,377 $880,380 ========== ========== ========= ========= See Notes to Pro Forma Condensed Separated Financial Statements. THE FAIRCHILD CORPORATION PRO FORMA CONDENSED SEPARATED STATEMENT OF EARNINGS For the year ended June 30, 1995 (in thousands, except per share data) Historical Pro Forma --------------------- ----------------------- TFC DME Adjustments TFC Revenue: ---------- ---------- ----------- --------- Sales $ 546,323 $(167,769) $378,554 Other income, net 656 396 1,052 ---------- ---------- --------- --------- 546,979 (167,373) -- 379,606 Cost and expenses: Cost of sales 419,290 (110,152) 309,138 Selling, general and administrative 107,226 (30,208) 77,018 Research and development 4,100 (1,114) 2,986 Amortization of goodwill 6,157 (1,637) 4,520 ---------- ---------- --------- --------- 536,773 (143,111) -- 393,662 Operating income (loss) 10,206 (24,262) -- (14,056) Interest expense 71,159 (60) (6,463)(3) 64,636 Interest income (3,389) 18 (13,710)(3) (17,081) ---------- ---------- --------- --------- Net interest expense 67,770 (42) (20,173) 47,555 Investment income, net 5,705 5,705 Equity in earnings of affiliates 2,369 (762) 1,607 Minority interest (2,449) 156 (2,293) ---------- ---------- --------- --------- Earnings (loss) from continuing operations before taxes (51,939) (24,826) 20,173 (56,592) Income tax provision (benefit) (18,019) (10,410) 7,061 (21,368) ---------- ---------- --------- --------- Earnings (loss) from continuing operations $ (33,920) $ (14,416) $ 13,113 $(35,223) ========== ========== ========= ========= Earnings (loss) per share: Loss from continuing operations $ (2.11) $ (2.19) ========== ========= Weighted average number of shares outstanding 16,103 16,103 ========== ========= See Notes to Pro Forma Condensed Separated Financial Statements. THE FAIRCHILD CORPORATION PRO FORMA CONDENSED SEPARATED STATEMENT OF EARNINGS For the six months ended December 31, 1995 (in thousands, except per share data) Historical Pro Forma --------------------- ----------------------- TFC DME Adjustments TFC Revenue: ---------- ---------- ----------- --------- Sales $ 211,376 $ (*) $211,376 Other income, net 136 136 ---------- ---------- --------- --------- 211,512 -- -- 211,512 Cost and expenses: Cost of sales 162,141 162,141 Selling, general and administrative 41,274 41,274 Research and development 44 44 Amortization of goodwill 2,378 2,378 Restructuring 285 285 ---------- ---------- --------- --------- 206,122 -- -- 206,122 Operating income (loss) 5,390 -- -- 5,390 Interest expense 36,047 (3,232)(3) 32,815 Interest income (1,279) (6,855)(3) (8,134) ---------- ---------- --------- --------- Net interest expense 34,768 -- (10,087) 24,681 Investment income, net 1,912 1,912 Equity in earnings of affiliates 1,889 1,889 Minority interest (1,085) (1,085) ---------- ---------- --------- --------- Earnings (loss) from continuing operations before taxes (26,662) -- 10,087 (16,575) Income tax provision (benefit) (9,951) 3,530 (6,421) ---------- ---------- --------- --------- Earnings (loss) from continuing operations $ (16,711) $ -- $ 6,556 $(10,155) ========== ========== ========= ========= Earnings (loss) per share: Loss from continuing operations $ (1.04) $ (0.64) ========== ========= Weighted average number of shares outstanding 16,122 16,122 ========== ========= * - Results of DME were included as part of earnings from discontinued operations for the six months ended December 31, 1995. See Notes to Pro Forma Condensed Separated Financial Statements. THE FAIRCHILD CORPORATION NOTES TO PRO FORMA CONDENSED SEPARATED FINANCIAL STATEMENTS On February 22, 1996, the Company completed the sale of DME to Cincinnati Milacron for $74,000,000 in cash and $171,377,000 in 8% promissory notes which mature one year following the closing of the sale. The pro forma financial statements separate (i) the assets and liabilities of DME from the Company's consolidated balance sheets at December 31, 1995, and (ii) the results of operations of DME from the Company's consolidated statement of earnings for the year ended June 30, 1995 and six months ended December 31, 1995. In separating the entities, the following pro forma adjustments have been made. (1) Reflects the sale of certain assets and liabilities of DME in exchange for cash and notes receivable, reduced by accrued expenses (incentive compensation, legal, audit and other associated fees) incurred for the disposition as follows: December 31, 1995 ------------ Cash $ 74,000,000 Notes receivable 171,377,000 Other accrued expenses (7,341,000) ------------ Net proceeds received 238,036,000 Carrying value of net assets sold 119,694,000 ------------ Nonrecurring gain before taxes 118,342,000 Taxes payable (35% statutory tax rate) 41,420,000 ------------ Net gain on sale $ 76,922,000 ============ (2) Cash received was immediately used to reduce bank loans(with interest rates of approximately 8.73% in fiscal 1995) as follows: December 31, 1995 Bank notes payable and current maturities ------------ of debt $ 67,303,000 Long-term debt, less current maturities 6,697,000 ------------ Total $ 74,000,000 ============ (3) For purposes of presenting the pro forma condensed separated statement of earnings, the following adjustments (which are expected to be recurring) have been made: Six Months Ended Year Ended December 31, June 30, 1995 1995 Increase (decrease) in earnings: ----------- ----------- Interest expense from revised debt structures (see Note 2) $ 3,232,000 $ 6,463,000 Interest income from notes receivable 6,855,000 13,710,000 Tax effects of the above adjustments (3,530,000) (7,061,000) ----------- ----------- Net adjustments $ 6,556,000 $13,113,000 =========== =========== (4) The pro forma statement of earnings has not been adjusted for non-recurring credits or charges that are expected to be incurred within the ensuing year. Such non-recurring items omitted from the pro forma statement of earnings represents the gain, net of tax, on the sale of DME of $76,922,000. See Note 1.