1
EXHIBIT 99.2
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
are based on the historical consolidated financial statements of Modtech and
SPI, combined, and are adjusted to give effect to the mergers. In addition, pro
forma adjustments have been made, as discussed below, for the acquisitions
consummated by SPI prior to the mergers (the "Pre-Mergers Acquisitions").
Certain reclassifications have been made to the historical financial statements
to conform with this pro forma presentation. These statements should be read in
conjunction with such historical financial statements and notes thereto, which
are included elsewhere in this Joint Proxy Statement/Prospectus. See "Where You
Can Find More Information."
The unaudited pro forma combined condensed statements of income for the
year ended December 31, 1997 and for the nine months ended September 30, 1998
present the results for Modtech and SPI as if the Mergers and Pre-Mergers
Acquisitions had occurred at the beginning of each period presented. The
accompanying unaudited pro forma combined condensed balance sheet as of
September 30, 1998 gives effect to the mergers as of that date.
The pro forma adjustments are based upon preliminary estimates, information
currently available and certain assumptions that management believes are
reasonable under the circumstances. Holdings' actual consolidated financial
statements will reflect the effects of the mergers on and after the Closing Date
rather than the dates indicated above. The unaudited pro forma combined
condensed financial statements neither purport to represent what the combined
results of operations or financial condition actually would have been had the
mergers, in fact, occurred on the assumed dates, nor to project the combined
results of operations and financial position for any future period.
The SPI Merger will be accounted for by the purchase method and, therefore,
assets and liabilities of SPI will be recorded at their fair values. The excess
of the purchase cost over the fair value of net assets acquired on the Closing
Date will be recorded as goodwill. The cost to acquire SPI will be allocated to
the assets acquired and the liabilities assumed according to their estimated
fair values as of the date of acquisition. The allocation is dependent upon
certain valuations and other studies that have not yet progressed to a stage
where there is sufficient information to make a definitive allocation.
Accordingly, the purchase allocation adjustments made in connection with the
preparation of the unaudited pro forma combined condensed financial information
are preliminary, and have been made solely for the purpose of preparing such
unaudited pro forma combined financial information; however, no material effect
on the statements of operations is anticipated. The final value of the purchase
price and its allocation may differ, perhaps significantly, from the amounts
included in these pro forma statements.
Goodwill arises when an acquirer pays more for a business than the fair
value of the tangible and separately measurable intangible net assets. General
accepted accounting principles ("GAAP") requires that this and all other
intangible assets be amortized over the period benefitted. Management has
determined that period to be no less than 40 years, based on its determination
that the anticipated future cash flows associated with the intangible assets
recognized in the SPI Merger will be sufficient to recover those assets over a
40-year period.
If management were not to separately recognize a material intangible asset
having a benefit period less than 40 years, or were not to give effect to
shorter benefit period of factors giving rise to a material portion of the
goodwill, earnings reported in periods immediately following the acquisition
would be overstated. In later years, the Company would be burdened by a
continuing charge against earnings without the associated benefit to income
value by management in arriving at the consideration paid for the business.
Earnings in later years also could be significantly affected if management
determined then that the remaining balance of goodwill was impaired.
1
2
The conversion of Modtech Common Stock into Holdings Common Stock and
Series A Preferred Stock will be treated as a reorganization with no change in
the recorded amount of Modtech's assets and liabilities.
At the Closing Date, each issued and outstanding share of SPI Common Stock
and SPI Preferred Stock will be converted into the right to receive 1.8785
shares of Holdings Common Stock. Each SPI stockholder may elect to receive
$49.4097 per share of SPI Common Stock and SPI Preferred Stock instead of shares
of Holdings Common Stock and elections will be adjusted, if necessary, to ensure
that 164,735 shares of SPI Common Stock and SPI Preferred Stock are converted
into $8,076,133 in cash.
At the Closing Date, each issued and outstanding share of Modtech Common
Stock will be converted into the right to receive $3.7293 and 0.8508 shares of
Holdings Common Stock. The total cash to be received by Modtech stockholders
will equal $39,923,472. Modtech stockholders will have the right to elect to
receive 388,939 shares of Holdings Series A Preferred Stock in place of Holdings
Common Stock at the same 0.8508 exchange ratio for up to 3.94% of their Modtech
Common Stock. To the extent Modtech stockholders do not elect to receive 388,939
of Holdings Series A Preferred Stock, two Modtech stockholders, Proactive
Partners, L.P. and Lagunitas Partners, will accept such shares pro rata between
them. The number of shares of Holdings Series A Preferred Stock may be adjusted
upward or downward in order to meet the minimum requirements of Section 351 of
the Internal Revenue Code.
The total value of the common stock and stock options in the SPI Merger to
be received by SPI stockholders in the SPI Merger was determined using the
average closing price of Modtech Common Stock on the Nasdaq National Market for
the five-day trading period before and after September 28, 1998. The total
purchase price, including estimated transaction costs, was $105,648,000.
2
3
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(AMOUNTS IN THOUSANDS)
ASSETS
HISTORICAL
------------------ PRO FORMA PRO FORMA
MODTECH SPI NOTES ADJUSTMENTS COMBINED
------- ------- ------- ----------- ---------
Current assets:
Cash and cash equivalents...... $30,450 $ 341 (B) $(25,748) $ 5,043
Contracts receivable, net...... 19,827 5,995 25,822
Costs in excess of billings.... 13,738 -- 13,738
Inventories.................... 2,828 4,405 7,233
Due from affiliates............ 694 -- 694
Deferred tax asset............. 2,094 135 (C) (135) 2,094
Other current assets........... 402 407 809
------- ------- -------- --------
Total current
assets............ 70,033 11,283 (25,883) 55,433
Property and equipment, net.... 12,221 2,087 14,308
Other assets:
Deferred tax asset........... 99 62 (C) (62) 99
Other assets................. 134 3,753 (D,E) 1,445 5,332
Costs in excess of net assets
of business acquired,
net....................... -- 33,773 (F,G) 92,945 126,718
------- ------- -------- --------
$82,487 $50,958 $ 68,445 $201,890
======= ======= ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities............... $13,834 $ 4,755 (H) $ 750 $ 19,339
Billings in excess of
costs..................... 6,402 -- 6,402
Revolving credit facility.... -- 2,724 (I,J) 13,276 16,000
Current portion of long-term
debt...................... -- 4,914 (J,K) 1,086 6,000
------- ------- -------- --------
Total current
liabilities....... 20,236 12,393 15,112 47,741
Long-term debt................. -- 24,860 (J,K) 14,140 39,000
------- ------- -------- --------
Total liabilities.... 20,236 37,253 29,252 86,741
------- ------- -------- --------
Stockholders' equity:
Common stock................. 100 6 (L,M) 40 146
Preferred stock.............. -- 10,106 (L,M) (10,102) 4
Additional paid-in capital... 39,573 -- (A,M,N) 52,848 92,421
Retained earnings............ 22,578 3,593 (L) (3,593) 22,578
------- ------- -------- --------
Total stockholders'
equity............ 62,251 13,705 39,193 115,149
$82,487 $50,958 $ 68,445 $201,890
======= ======= ======== ========
See the accompanying notes to the unaudited pro forma combined condensed
financial statements.
3
4
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL PRO FORMA PRO FORMA PRO FORMA
MODTECH SPI NOTES ADJUSTMENTS COMBINED NOTES
---------- --------- ----------- ----------- --------- -----
Net sales................... $134,050 $80,497 $ $ 214,547
Cost of goods sold.......... 107,367 65,321 172,688
-------- ------- ------- ---------
Gross profit......... 26,683 15,176 -- 41,859
-------- ------- ------- ---------
Selling, general and
administrative expenses... 5,156 7,324 (F,G) 2,324 14,804
-------- ------- ------- ---------
Income from
operations........ 21,527 7,852 (2,324) 27,055
Interest expense, net....... (908) (4,041) (D,E,J,O,P) (809) (5,758)
Other income................ 92 195 287
-------- ------- ------- ---------
Income before income
taxes............. 20,711 4,006 (3,133) 21,584
Income tax expense.......... 7,703 1,950 (Q) (324) 9,329
-------- ------- ------- ---------
Net income........... $ 13,008 $ 2,056 $(2,809) $ 12,255
======== ======= ======= =========
Basic earnings per share.... $ 1.47 $ 0.96 (R)
======== =========
Number of shares used in
computing basic earnings
per share................. 8,854 12,622 (R)
======== =========
Diluted earnings per
share..................... $ 1.31 $ 0.83 (S)
======== =========
Number of shares used in
computing diluted earnings
per share................. 9,898 14,845 (S)
======== =========
See the accompanying notes to the unaudited pro forma combined condensed
financial statements.
4
5
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL PRO FORMA PRO FORMA PRO FORMA
MODTECH SPI NOTES ADJUSTMENTS COMBINED NOTES
---------- --------- ----------- ----------- --------- -----
Net sales....................... $113,119 $62,541 $ $175,660
Cost of goods sold.............. 87,083 51,462 138,545
-------- ------- ------- --------
Gross profit............. 26,036 11,079 -- 37,115
-------- ------- ------- --------
Selling, general and
administrative expenses....... 3,843 5,351 (F,G) 1,743 10,937
-------- ------- ------- --------
Income from operations... 22,193 5,728 (1,743) 26,178
Interest income (expense),
net........................... 694 (2,907) (D,E,J,O,P) (741) (2,954)
Other income.................... 18 38 56
-------- ------- ------- --------
Income before income
taxes................. 22,905 2,859 (2,484) 23,280
Income taxes.................... 8,511 1,370 (Q) (296) 9,585
-------- ------- ------- --------
Net income............... $ 14,394 $ 1,489 $(2,188) $ 13,695
======== ======= ======= ========
Basic earnings per share........ $ 1.46 $ 1.08 (R)
======== ========
Number of shares used in
computing basic earnings per
share......................... 9,871 12,622 (R)
======== ========
Diluted earnings per share...... $ 1.31 $ 0.92 (S)
======== ========
Number of shares used in
computing diluted earnings per
share......................... 11,000 14,845 (S)
======== ========
See the accompanying notes to the unaudited pro forma combined condensed
financial statements.
5
6
NOTES TO THE UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
A. The unaudited pro forma combined condensed balance sheet has been prepared to
reflect the acquisition of SPI for an estimated aggregate purchase price,
including estimated transaction costs, of $105,648,000, which is subject to
adjustment and is summarized as follows:
Modtech Holdings Common Stock offered hereby............. $ 87,627,000
Fair value of stock options offered hereby............... 5,195,000
Cash paid to SPI stockholders............................ 8,076,000
Estimated acquisition costs.............................. 4,750,000
------------
Total.......................................... $105,648,000
============
B. To record net cash distribution resulting from the following transactions:
Gross proceeds from New Term Loan........................ $ 45,000,000
Gross proceeds from New Revolving Credit facility........ 16,000,000
Cash paid to SPI Stockholders............................ (8,076,000)
Cash distribution to Modtech Stockholders................ (39,924,000)
Retirement of SPI Indebtedness........................... (32,498,000)
Payment of Estimated Debt Issuance Costs................. (2,250,000)
Payment of Estimated Merger Costs........................ (4,000,000)
------------
Net cash distribution............................... $(25,748,000)
============
C. To eliminate current deferred tax assets of $135,000 and non-current deferred
tax assets of $62,000 not available to the Company.
D. To eliminate unamortized SPI debt issuance costs of $805,000 and the related
amortization expense of debt issuance costs of $170,000 and $128,000 for the
year ended December 31, 1997 and the nine months ended September 30, 1998,
respectively.
E. To record (i) estimated debt issuance costs of $2,250,000 to be amortized
over the term of the New Term Loan and (ii) amortization of debt issuance costs
of $450,000 and $338,000 for the fiscal year ended December 31, 1997 and the
nine months ended September 30, 1998, respectively.
6
7
F. To record (i) $126,718,000 for the excess of the consideration paid over the
preliminary estimate of the fair value of net liabilities assumed, to be
amortized over 40 years and (ii) to record goodwill amortization of $3,168,000
and $2,376,000 for the year ended December 31, 1997 and the nine months ended
September 30, 1998, respectively. The preliminary purchase price allocation of
the SPI acquisition is as follows:
Current assets.......................................... $ 11,147,000
Property, plant and equipment........................... 2,087,000
Other tangible assets................................... 189,000
Identifiable intangible assets.......................... 2,760,000
Current liabilities..................................... (4,755,000)
Current portion of long-term debt....................... (7,638,000)
Long-term debt.......................................... (24,860,000)
-------------
Net liabilities assumed............................ (21,070,000)
Total Estimated Aggregate Purchase Price...... (105,648,000)
Goodwill................................................ $ 126,718,000
=============
G. To eliminate $33,773,000 of goodwill previously recorded by SPI and the
related amortization expense of $844,000 and $633,000 for the year ended
December 31, 1997 and the nine months ended September 30, 1998, respectively.
H. To record the recognition of liabilities related to certain merger costs.
I. To record the assumed incurrence of $16,000,000 of indebtedness under a New
Revolving Credit Facility, with an assumed effective interest rate of 7.5%,
utilized to partially finance the cash portion of the Merger Consideration and
pay certain transaction costs.
J. To eliminate the $32,498,000 of SPI indebtedness, including $4,914,000
classified as current and $2,724,000 under the revolving credit facility, which
will be retired by Modtech, and to eliminate the related interest expense of
$4,046,000 and $2,900,000 for the year ended December 31, 1997 and the nine
months ended September 30, 1998.
K. To record the assumed incurrence of $45,000,000 of indebtedness, including
$6,000,000 classified as current under a New Term Loan, with an assumed
effective interest rate of 7.5%, utilized to partially finance the cash portion
of the Merger Consideration, retire SPI indebtedness and to pay certain related
transaction costs.
L. To eliminate the equity of SPI, which includes common stock of $6,000,
preferred stock of $10,106,000 and retained earnings of $3,593,000.
M. To reflect the equity adjustments necessary to reflect the acquisition of SPI
under the purchase method of accounting. Such adjustment had the effect of
increasing common stock by $46,000 to record the common stock par value and
increasing additional paid-in capital by $92,776,000 and preferred stock by
$4,000.
N. To record the repurchase of Modtech common stock for $39,924,000 cash in
connection with the Modtech Merger.
O. To record interest expense on borrowings under the New Term Loan of
$3,375,000 and $2,531,000 for the fiscal year ended December 31, 1997 and the
nine
7
8
months ended September 30, 1998, respectively, using an assumed effective
interest rate of 7.5%. A 0.125% increase/decrease in the estimated interest rate
incrementally increases/decreases income before income taxes by $56,000 and
$42,000 for the year ended December 31, 1997 and the nine months ended September
30, 1998, respectively.
P. To record interest expense on borrowings under the New Revolving Credit
Facility of $1,200,000 and $900,000 for the year ended December 31, 1997 and the
nine months ended September 30, 1998, respectively, using an assumed effective
interest rate of 7.5%. A 0.125% increase/decrease in the estimated interest rate
incrementally increases/decreases income before income taxes by $20,000 and
$15,000 for the year ended December 31, 1997 and the nine months ended September
30, 1998, respectively.
Q. To record the income tax effects of the pro forma adjustments at a pro forma
effective tax rate of 40%.
R. Basic shares include 8,034,334 common shares assumed issued to former Modtech
stockholders and 4,587,824 common shares assumed issued to former SPI
stockholders. Net income is reduced by preferred dividends of $104,000 and
$78,000 for the year ended December 31, 1997 and the nine months ended September
30, 1998, respectively.
S. Diluted shares include basic shares, preferred shares converted into common
shares on a one-to-one basis and exercise of stock options reduced by number of
shares purchased with proceeds.
8
9
RECONCILIATION OF CERTAIN ADJUSTMENTS TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENT ADJUSTMENTS
BALANCE SHEET:
(1) Other assets: (D) $(805,000); (E) $2,250,000 = $1,445,000
(2) Costs in excess of net assets of business acquired, net: (G) $(33,773,000);
(F) $126,718,000 = $92,945,000
(3) Revolving credit facility: (I) $16,000,000; (J) $(2,724,000) = $13,276,000
(4) Current portion of long-term debt: (J) $(4,914,000); (K)
$6,000,000 = $1,086,000
(5) Long-term debt, less current portion: (J) $(24,860,000); (K) $39,000,000 =
$14,140,000
(6) Additional paid-in-capital: (A) $87,627,000; (M) $(46,000); (A) $5,195,000;
(N) $(39,924,000), (M) ($4,000) = $52,848,000
(7) Common stock: (L) $(6,000); (M) $46,000 = $40,000
(8) Preferred stock: (L) $(10,106,000); (M) $4,000 = $(10,102,000)
INCOME STATEMENT (YEAR ENDED DECEMBER 31, 1997):
(1) Selling, general and administrative expenses: (F) $3,168,000; (G)
$(844,000) = $2,324,000
(2) Interest expense, net: (D) $170,000; (E) $(450,000); (J) $4,046,000; (O)
$(3,375,000);
(P) $(1,200,000) = $(809,000)
INCOME STATEMENT (NINE MONTHS ENDED SEPTEMBER 30, 1998):
(1) Selling, general and administrative expenses: (F) $2,376,000; (G)
$(633,000) = $1,743,000
(2) Interest income (expense), net: (D) $128,000; (E) $(338,000); (J)
$2,900,000; (O) $(2,531,000); (P) $(900,000) = $(741,000)
9
10
SPI HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
------------------------------------------------------
SPI ACQUISITION
PREDECESSOR SPI AND NOTES PRO FORMA
1/1-3/27/97 3/28-12/31/97 OFFICE MASTER ROSEWOOD CONSOLIDATION (A,I) CONSOLIDATED
----------- ------------- ------------- -------- ------------- ----- ------------
Net sales............. $9,039 $31,255 $8,328 $31,875 $ -- $80,497
Cost of goods sold.... 6,490 23,792 7,466 26,482 1,091 (G) 65,321
------ ------- ------ ------- ------- -------
Gross profit........ 2,549 7,463 862 5,393 (1,091) 15,176
Selling, general and
administrative
expenses............ 611 1,837 819 2,704 (901) (G,H) 5,070
Management and
monitoring fees..... -- 168 -- -- -- 168
Depreciation and
amortization........ 19 1,230 17 98 722 (B,G) 2,086
------ ------- ------ ------- ------- -------
Income (loss) from
operations........ 1,919 4,228 26 2,591 (912) 7,852
Interest income
(expense), net...... 42 (1,051) (40) (35) (2,957) (C) (4,041)
Other income.......... 34 5 4 152 -- 195
------ ------- ------ ------- ------- -------
Income (loss) before
provision for
income taxes...... 1,995 3,182 (10) 2,708 (3,869) 4,006
Provision (benefit)
for income taxes.... 851 1,424 (3) 1,077 (1,399) (F) 1,950
------ ------- ------ ------- ------- -------
Net income
(loss)..... $1,144 $ 1,758 $ (7) $ 1,631 $(2,470) $ 2,056
====== ======= ====== ======= ======= =======
Basic earnings per
share............... (D) $ 0.90
=======
Number of shares used
in computing basic
earnings per
share............... (E) 2,296
=======
Diluted earnings per
share............... (D) $ 0.78
=======
Number of shares used
in computing diluted
earnings per
share............... (E) 2,643
=======
See notes on following page.
10
11
Notes:
(A) Acquisition adjustments assume the acquisitions occurred as of the
beginning of the period presented and the application of purchase
accounting to each of the acquisitions.
(B) Represents the purchase accounting impact of approximately $56,000, $75,000
and $556,000 for SPI, Office Master and Rosewood, respectively, primarily
for goodwill amortization, as well as approximately $118,000, $20,000, and
$100,000, for SPI, Office Master and Rosewood, respectively, for
amortization of covenants not to compete which were entered into in
connection with each such acquisition.
(C) Represents interest on the increased borrowings that financed a portion of
the purchase price of the acquisitions, and assumes payment of interest
only on indebtedness, with no reduction in principal during the period.
(D) Pro forma earnings per share is computed in accordance with SFAS No. 128.
See Note 2 to the SPI Consolidated Financial Statements.
(E) The weighted average number of shares includes actual weighted average
number of shares outstanding, as well as common stock equivalents resulting
from options and warrants outstanding (applicable to diluted amounts only).
(F) Represents an adjustment made to income tax provision as a result of the
pro forma adjustments in order to provide income tax expense at the
effective tax rate.
(G) Represents reclassification of certain salaries and production-related
depreciation expense totaling $888,000 and $203,000 respectively, from
operating expenses to cost of goods sold in order to conform with Modtech's
presentation.
(H) Represents elimination of non-recurring transaction-related expenses related
to the acquisition of SPI by management and an investor group.
(I) The pro forma adjustments do not reflect other anticipated reductions in
costs and expenses expected to result from the mergers. Such anticipated
savings would include but not be limited to, approximately $555,000 in
non-recurring compensation expense paid to former owners of acquired
entities.
11
12
SPI HOLDINGS, INC.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED INCOME STATEMENT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
-------------------------------------------- ACQUISITION
SPI OFFICE MASTER ROSEWOOD AND NOTES PRO FORMA
CONSOLIDATED 1/1-2/24/98 1/1-4/17/98 CONSOLIDATION (A,I) CONSOLIDATED
------------ ------------- ------------- ------------- ----- ------------
Net sales........................ $52,465 $1,206 $8,870 $ -- $62,541
Cost of goods sold............... 41,989 1,039 7,532 902 (G) 51,462
------- ------ ------ ------- -------
Gross profit............... 10,476 167 1,338 (902) 11,079
------- ------ ------ ------- -------
Selling, general and
administrative expenses........ 3,154 155 1,098 (1,205) (G,H) 3,202
Management and monitoring fees... 229 -- -- -- 229
Depreciation and amortization.... 1,840 -- 26 54 (B,G) 1,920
------- ------ ------ ------- -------
Income from operations..... 5,253 12 214 249 5,728
Interest income (expense), net... (2,150) 5 (61) (701) (C) (2,907)
Other income..................... 35 -- 3 -- 38
------- ------ ------ ------- -------
Income (loss) before provision
for income taxes............... 3,138 17 156 (452) 2,859
Provision (benefit) for income
taxes.......................... 1,466 (5) 64 (155) (F) 1,370
------- ------ ------ ------- -------
Net income................. $ 1,672 $ 22 $ 92 $ (297) $ 1,489
======= ====== ====== ======= =======
Pro forma earnings per share..... (D) $ 0.65
=======
Pro forma number of shares used
in computing earnings per
share.......................... (E) 2,296
=======
Pro forma diluted earnings per
share.......................... (D) $ 0.55
=======
Pro forma number of shares used
in computing diluted earnings
per share...................... (E) 2,722
=======
See notes on following page.
12
13
Notes:
(A) Acquisition adjustments assume the acquisitions occurred as of the
beginning of the period presented and the application of purchase
accounting to each of the acquisitions. The SPI historical consolidated
amounts include the operations of Office Master and Rosewood from the
respective dates of acquisitions.
(B) Represents the purchase accounting impact of approximately $11,000 and
$161,000, for Office Master and Rosewood, respectively, primarily for
goodwill amortization, as well as approximately $3,000 and $29,000 for
Office Master and Rosewood, respectively, for amortization of covenants not
to compete which were entered into in connection with the acquisitions.
(C) Represents interest on the increased borrowings that financed a portion of
the purchase price of the acquisitions, and assumes payment of interest
only on indebtedness, with no reduction in principal during the period.
(D) Pro forma earnings per share is computed in accordance with SFAS No. 128.
See Note 2 to the Consolidated Financial Statements.
(E) The weighted average number of shares includes actual weighted average
number of shares outstanding, as well as common stock equivalents resulting
from options and warrants outstanding (applicable to diluted amounts only).
(F) Represents an adjustment made to income tax provision as a result of the
pro forma adjustments. The effective tax rate reflects non-deductible
goodwill amortization arising from the acquisitions.
(G) Represents reclassification of certain salaries and production-related
depreciation expense, totaling $752,000 and $150,000, respectively, from
operating expense to cost of goods sold in order to conform with Modtech's
presentation of these items.
(H) Represents elimination of non-recurring transaction related expenses related
to the acquisition of Office Master and Rosewood by SPI.
(I) The pro forma adjustments do not reflect other anticipated reductions in
costs and expenses expected to result from the Office Master and Rosewood
acquisitions. Such anticipated savings would include, but not be limited
to, approximately $135,000 in non-recurring compensation expense paid to
former owners of acquired entities.
13