Exhibit 99.2
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements
("financial statements") give effect to the completed acquisition of all
outstanding common shares of MTE Corporation ("MTE"), by SL Industries, Inc.
(the "Company"). On October 31, 2006, the Company completed the acquisition of
MTE. The total purchase price for common stock of MTE was $15,503,000.
The unaudited pro forma balance sheet gives effect to the acquisition as
if it had occurred on September 30, 2006. The unaudited pro forma combined
balance sheet combines the Company's September 30, 2006 balance sheet with that
of MTE's for the same period ending and reflects the purchase price of
$15,503,000 for common stock and an estimated $321,000 in transaction related
costs and certain pre-acquisition contingencies.
The acquisition was funded by bank borrowings from the Company's Revolving
Credit Facility. The unaudited pro forma combined statements of operations for
the year ended December 31, 2005 combines the historical results of the Company
for the year ended December 31, 2005 and the historical results of MTE for the
twelve months ended October 31, 2005, as if the acquisitions had occurred on
January 1, 2005. The unaudited pro forma combined statements of operations for
the nine months ended September 30, 2006 combines the historical results of the
Company with that of MTE, as if the acquisition had occurred on January 1, 2006.
The unaudited pro forma combined financial statements presented are based
on the assumptions and adjustments described in the accompanying notes. The
unaudited pro forma combined statements of operations are presented for
illustrative purposes and do not purport to represent what the Company's results
of operations or financial position actually would have been if the events
described above had occurred as of the dates indicated or what such results
would be for any future periods. The unaudited pro forma combined financial
statements, and the accompanying notes, should be read in conjunction with the
historical financial statements and related notes in the Company's annual report
on Form 10-K and quarterly reports on Form 10-Q and with MTE's historical
financial statements and related notes included in this Form 8-K/A.
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SL Industries, Inc.
Pro Forma Combined Balance Sheet
September 30, 2006
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SL Industries MTE Adjustments Pro Forma
------------- -------- -------------- -------------
ASSETS
Current assets:
Cash and equivalents $ - $ 737 $ 0 $ 737
Receivables, net 27,715 2,780 0 30,495
Note receivable 1,125 0 0 1,125
Inventories, net 22,238 2,462 0 24,700
Other current assets 6,100 853 0 6,953
--------- -------- -------------- -------------
Total current assets 57,178 6,832 0 64,010
--------- -------- -------------- -------------
Property, plant & equipment, net 12,572 303 0 12,875
Goodwill, net 13,759 0 10,297 (A) 24,056
Other intangible assets, net 3,401 17 (17)(D) 3,401
Other assets and deferred charges 7,726 0 0 - 7,726
--------- -------- -------------- -------------
Total assets $ 94,636 $ 7,152 $ 10,280 $ 112,068
--------- -------- -------------- -------------
LIABILITIES
Current liabilities:
Accounts payable 14,876 402 0 15,278
Accrued taxes 1,445 898 0 - 2,343
Accrued payroll and related costs 6,743 167 75 (E) 6,985
Other accrued liabilities 5,917 66 0 - 5,983
--------- -------- -------------- -------------
Total current liabilities 28,981 1,533 75 30,589
--------- -------- -------------- -------------
Debt, less current portion 9,453 15,824 (C) 25,277
Deferred compensation and supplemental retirement benefits 2,961 0 0 2,961
Other liabilities 1,361 0 0 1,361
--------- -------- -------------- -------------
Total liabilities $ 42,756 $ 1,533 $ 15,899 $ 60,188
--------- -------- -------------- -------------
SHAREHOLDERS' EQUITY
Common stock $ 42,407 $ 13 $ (13) - $ 42,407
Accumulated other comprehensive income (39) 0 0 - (39)
Retained earnings (Accumulated deficit) 29,537 7,606 (7,606) - 29,537
Treasury stock at cost, 2,359,000 (20,025) (2,000) 2,000 - (20,025)
--------- -------- -------------- -------------
Total shareholders' equity $ 51,880 $ 5,619 $ (5,619)(B) $ 51,880
--------- -------- -------------- -------------
Total liabilities and shareholders' equity $ 94,636 $ 7,152 $ 10,280 $ 112,068
========= ======== ============== =============
The accompanying notes are an integral part of the Pro Forma Financial
Statements.
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SL Industries, Inc.
Pro Forma Combined Statement Of Operations
For The Nine Months Ended September 30, 2006
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SL
Industries MTE Adjustments Pro Forma
---------- -------- ----------- ---------
Net sales $ 127,564 $ 12,536 $ - $ 140,100
---------- -------- ------- ---------
Cost of sales 85,946 7,638 0 93,584
Engineering & product development 9,147 422 0 9,569
Selling, general and administrative 22,852 2,483 0 25,335
Depreciation and amortization 1,803 62 0 1,865
---------- -------- ------- ---------
Total cost and expenses 119,748 10,605 0 130,353
Income (loss) from operations
7,816 1,931 - 9,747
Other income (expense):
Interest expense (452) 0 (858) (F) (1,310)
Other, net (36) 18 0 (18)
---------- -------- ------- ---------
Income (loss) from continuing operations before income taxes 7,328 1,949 (858) 8,419
Income tax provision (benefit) 2,182 741 (292) (H) 2,631
---------- -------- ------- ---------
Income (loss) from continuing operations $ 5,146 $ 1,208 $ (567) $ 5,788
Basic net income (loss) per common share $ 0.91 $ 1.03
Diluted net income (loss) per common share $ 0.88 $ 0.99
Weighted shares outstanding - basic 5,628 5,628
Weighted shares outstanding - diluted 5,819 5,819
The accompanying notes are an integral part of the Pro Forma Financial
Statements.
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SL Industries, Inc.
Pro Forma Combined Statement Of Operations
For The Year Ended December 31, 2005
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SL
Industries MTE Adjustments Pro Forma
---------- -------- ----------- ---------
Net sales $ 126,873 $ 13,675 $ - $140,548
---------- -------- ----------- ---------
Cost of sales 81,776 8,263 0 90,039
Engineering & product development 9,367 558 0 9,925
Selling, general and administrative 23,546 2,975 0 26,521
Depreciation and amortization 1,986 107 0 2,093
---------- -------- ----------- ---------
Total cost and expenses 116,675 11,903 0 128,578
Income (loss) from operations 10,198 1,772 - 11,970
Other income (expense):
Interest expense (522) (1) (334)(F) (857)
Other, net (269) 37 (424)(G) (656)
---------- -------- ----------- ---------
Income (loss) from continuing operations before income taxes 9,407 1,808 (758) 10,457
Income tax provision (benefit) 1,787 695 (258)(H) 2,224
---------- -------- ----------- ---------
Income (loss) from continuing operations $ 7,620 $ 1,113 $ (500) $ 8,233
Basic net income (loss) per common share $ 1.37 $ 1.48
Diluted net income (loss) per common share $ 1.33 $ 1.43
Weighted shares outstanding - basic 5,544 5,544
Weighted shares outstanding - diluted 5,738 5,738
The accompanying notes are an integral part of the Pro Forma Financial
Statements.
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(1) BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma combined balance sheet is based on historical
balance sheets of the Company and MTE and has been prepared to reflect the
acquisition as if it had been consummated on September 30, 2006.
The unaudited pro forma combined statement of operations combines the
results of operations of the Company for the nine months ended September 30,
2006 and for the year ended December 31, 2005 and the historical results of MTE
for the nine months ended September 30, 2006 and for the twelve months ended
October 31, 2005. The unaudited pro forma combined statement of operations has
been prepared to reflect the acquisition as if it had occurred at the beginning
of the fiscal years presented.
You should not rely on the unaudited pro forma combined financial
information as being indicative of the historical results that would have
occurred had the Company and MTE been combined during this time period or the
future results that may be achieved after the acquisition. Additionally, the
allocation of the purchase price indicated herein is preliminary and subject to
change.
MTE was a privately held company which designs and manufactures power
quality electromagnetic products used to protect equipment from power surges,
bring harmonics into compliance and improve the efficiency of variable speed
motor drives.
There were no transactions between the Company and MTE during the periods
presented.
(2) ACQUISITION OF MTE
The unaudited pro forma combined financial statements reflect an estimated
purchase price of approximately $15,824 for MTE, including acquisition related
costs and pre-acquisition contingencies.
The estimated acquisition related costs consist primarily of investment
banking, legal and accounting fees and other external costs. The estimated total
purchase price of MTE is as follows:
Common stock $15,503
Acquisition related cost / pre-acquisition contingencies 321
-------
$15,824
=======
The Company used cash resulting from borrowings under a revolving credit
facility for its acquisition of MTE of approximately $15,503. The remaining
costs are being paid with available cash and additional borrowing.
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(3) PURCHASE PRICE
Under the purchase method of accounting, the total estimated purchase
price, including the estimated fair value of obligations assumed, is allocated
to MTE's net tangible and identifiable intangible assets based on their
estimated fair values as of the acquisition date. The excess of the purchase
price over the net tangible and identifiable intangible assets is recorded as
goodwill. Based upon the estimated purchase price, the following represents the
preliminary allocation of the aggregate purchase price to the acquired net
assets of MTE.
Net tangible assets acquired $ 5,527
Goodwill 10,297
-------
Aggregate preliminary purchase price $15,824
=======
The allocation of assets is a preliminary estimate. A valuation of assets
is currently in process and being conducted by an independent third party
appraiser. Also the purchase price is subject to certain working capital
adjustments, which will not be finalized until January 2007.
Goodwill represents the excess of the purchase price over the fair value
of tangible and identifiable intangible assets acquired. The unaudited pro forma
combined statements of operations do not reflect any amortization of goodwill
acquired in the acquisition consistent with the guidance in Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
Also there is no amortization of intangibles in the unaudited pro forma combined
statements of operations since the valuation process is in preliminary stages.
(4) PRO FORMA NET INCOME PER SHARE
The pro forma basic and diluted net income per share is based on the
weighted average number of shares of the Company's common stock outstanding
during the period.
(5) PRO FORMA ADJUSTMENTS
The following is a description of the pro forma adjustments to the
unaudited pro forma combined balance sheets and statements of operations. These
adjustments are based on preliminary estimates, which are subject to change as
management finalizes its valuations and resulting purchase price allocations.
(A) To record goodwill at acquisition based on the aggregate preliminary
purchase price.
(B) Eliminate MTE's shareholders' equity accounts.
(C) To record the purchase of MTE with borrowings from the Company's
revolving credit facility.
(D) Remove intangible assets recorded on MTE's closing balance sheet.
(E) Record pre-acquisition contingency related to the acquisition.
(F) Account for interest expense on the debt to acquire MTE.
(G) Account for interest foregone on cash used to acquire MTE.
(H) To account for the tax effects of the pro forma adjustments at the
statutory rate.
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