Exhibit 99.3
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma combined consolidated financial
statements present the effect of the acquisition of the ENI business by MKS
Instruments, Inc. ("MKS") to be accounted for as a purchase. The unaudited pro
forma combined consolidated balance sheet presents the combined consolidated
financial position of MKS and ENI as of December 31, 2001 assuming that the
proposed acquisition had occurred as of that date. Such pro forma information is
based upon the historical consolidated balance sheet of MKS as of December 31,
2001, and the historical combined balance sheet of the ENI business as of
September 30, 2001. The unaudited pro forma combined consolidated statement of
operations for the year ended December 31, 2001 gives effect to the acquisition
by MKS of the ENI business as if the acquisition had occurred at the beginning
of the period presented and includes the ENI business' combined statement of
operations for the year ended September 30, 2001 with that of MKS' consolidated
statement of operations for the year ended December 31, 2001.
Unaudited pro forma combined consolidated financial information is
presented for illustrative purposes only and is not necessarily indicative of
the financial position or results of operations that would have actually been
reported had the acquisition occurred at the beginning of the period presented,
nor is it necessarily indicative of future financial position or results of
operations. These unaudited pro forma combined consolidated financial statements
are based upon the respective historical financial statements of MKS and the ENI
business, as adjusted, and do not incorporate, nor do they assume, any benefits
from cost savings or synergies of operations of the combined company.
UNAUDITED PRO FORMA COMBINED
CONSOLIDATED BALANCE SHEET
As of December 31, 2001
------------------------------------------------------
Historical
------------------------- Pro Forma Pro Forma
MKS ENI Adjustments Combined
--------- --------- ----------- --------
(in thousands)
ASSETS
Current assets:
Cash and cash equivalents ........................ $ 120,869 $ 2,452 $ (952)A $122,369
Short-term investments ........................... 16,625 -- -- 16,625
Trade accounts receivable, net ................... 35,778 8,139 -- 43,917
Inventories ...................................... 56,954 22,723 10 B 79,687
Deferred tax assets .............................. 16,426 5,478 -- 21,904
Other current assets ............................. 16,353 842 -- 17,195
--------- --------- --------- --------
Total current assets ................................... 263,005 39,634 (942) 301,697
Property, plant and equipment, net ..................... 69,634 19,737 -- 89,371
Goodwill, net .......................................... 31,114 45,992 (45,992)A 238,641
207,527 B
Acquired intangible assets, net ........................ 21,171 -- 34,600 B 55,771
Long-term investments .................................. 11,029 -- -- 11,029
Other assets ........................................... 15,236 1,967 (593)C 16,610
--------- --------- --------- --------
Total assets ........................................... 411,189 107,330 194,600 713,119
========= ========= ========= ========
LIABILITIES, STOCKHOLDERS' EQUITY AND
DIVISIONAL CONTROL
Current liabilities:
Short-term borrowings ............................ 9,238 -- -- 9,238
Current portion of long-term debt ................ 5,074 -- -- 5,074
Current portion of capital lease obligations ..... 503 -- -- 503
Accounts payable ................................. 9,668 4,012 -- 13,680
Accounts payable - related party, net ............ -- 199 -- 199
Deposits received from customers for product sales -- 484 -- 484
Accrued compensation ............................. 6,116 2,013 -- 8,129
Other accrued expenses ........................... 15,551 8,507 5,046 B 29,104
Income taxes payable ............................. -- 6,448 -- 6,448
Deferred tax liability ........................... -- 35 -- 35
--------- --------- --------- --------
Total current liabilities .............................. 46,150 21,698 5,046 72,894
Long-term debt ......................................... 10,916 5,000 15,916
Long-term portion of capital lease obligations ......... 341 -- 341
Deferred tax liability ................................. -- 792 13,840 B 14,632
Other liabilities ...................................... 911 390 -- 1,301
Commitments and contingencies ..........................
Stockholders' equity and divisional control ............
Preferred Stock .................................. -- -- -- --
Common Stock ..................................... 113 -- -- 113
Additional paid-in capital ....................... 285,252 -- 261,264 B 546,516
Retained earnings ................................ 68,160 -- (6,100)D 62,060
Divisional equity ................................ 80,341 (80,341)E --
Accumulated other comprehensive loss ............. (654) (891) 891 E (654)
--------- --------- --------- --------
Total stockholders' equity and divisional control ...... 352,871 79,450 175,714 608,035
--------- --------- --------- --------
Total liabilities, stockholders' equity and
divisional control ............................... $ 411,189 $ 107,330 $ 194,600 $713,119
========= ========= ========= ========
UNAUDITED PRO FORMA COMBINED CONSOLIDATED
STATEMENT OF OPERATIONS
For the Year Ended December 31, 2001
------------------------------------------------
Historical
---------------------- Pro Forma Pro Forma
MKS ENI Adjustments Combined
--------- --------- ----------- --------
(in thousands)
Net sales ...................................................... $ 286,808 $ 105,616 -- 392,424
Cost of sales .................................................. 201,225 68,306 63 F 269,594
--------- --------- -------- ---------
Gross profit ................................................... 85,583 37,310 (63) 122,830
Research and development ....................................... 37,964 13,879 33 F 51,876
Selling, general and administrative ............................ 70,185 14,301 16 F 84,208
(294)C
Amortization of goodwill and acquired intangibles .............. 11,026 1,251 (1,251)G 16,705
5,679 D
Goodwill impairment charge ..................................... 3,720 -- -- 3,720
Merger expenses ................................................ 7,708 -- -- 7,708
Purchase of in-process research and development ................ 2,340 -- -- 2,340
--------- --------- -------- ---------
Income (loss) from operations .................................. (47,360) 7,879 (4,246) (43,727)
Interest income (expense), net ................................. 3,683 17 -- 3,700
Other income (expense), net .................................... (2,379) (756) -- (3,135)
--------- --------- -------- ---------
Income (loss) before income taxes .............................. (46,056) 7,140 (4,246) (43,162)
Provision for income taxes (benefit) ........................... (15,013) 3,074 (2,132)H (14,071)
--------- --------- -------- ---------
Net income (loss) .............................................. $ (31,043) $ 4,066 $ (2,114) $ (29,091)
========= ========= ======== =========
Net income (loss) per share:
Basic .................................................... $ (0.83) $ -- $ (0.59)
Diluted .................................................. $ (0.83) $ -- $ (0.59)
Weighted average common shares outstanding:
Basic .................................................... 37,493 -- 12,000 B 49,493
Diluted .................................................. 37,493 -- 12,000 B 49,493
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
(TABLES IN THOUSANDS)
1. BASIS OF PRESENTATION
On January 31, 2002, MKS completed its acquisition of the ENI Business of
Emerson Electric Co. ("Emerson"), pursuant to an Agreement and Plan of Merger
with respect to the acquisition of the ENI Business dated October 30, 2001 (the
"Acquisition Agreement") between the Company and Emerson. The Company issued an
aggregate of 12.0 million shares of its common stock to Emerson, in exchange for
the businesses and assets of ENI. The acquisition has been accounted for under
the purchase method.
The reasons for the acquisition of ENI business was based upon the ability
to offer higher value and more highly integrated application solutions by
combining ENI's solid-state power conversion technology with the Company's core
competency in plasma and reactive gas solutions.
The value of the MKS common stock was approximately $21.7720 per share
based on the average closing price of MKS' common stock for the five-day period
including the date of the announcement of the signing of the merger agreement
and the two days preceding and succeeding such date.
The purchase consideration is as follows:
Common stock.................................... $261,264
Estimated transaction expenses.................. 5,046
--------
$266,310
========
The preliminary allocation of the purchase price using balances as of
September 30, 2001 is summarized below:
Accounts receivable ............................ $ 8,139
Inventories .................................... 22,733
Property and equipment ......................... 19,737
Developed technology ........................... 30,100
Patents ........................................ 2,400
Customer relationships.......................... 2,100
In-process research and development............. 6,100
Goodwill ....................................... 207,527
Other net liabilities .......................... (18,686)
Deferred tax liability ......................... (13,840)
---------
$ 266,310
=========
The $6.1 million amount allocated to in-process research and development
represents the purchased in-process technology for projects that had not yet
reached technological feasibility and had no future alternative use. Based on
preliminary assessments, the value of these projects was determined by
estimating the resulting net cash flows from the sale of the products resulting
from the completion of the projects, reduced by the portion of the revenue
attributable to developed technology and the percentage of completion of the
project. The resulting cash flows were then discounted back to their present
value at appropriate discount rates.
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL
STATEMENTS -- (CONTINUED)
The nature of the efforts to develop the purchased in-process research and
development into commercially viable products principally relates to the
completion of planning, designing, prototyping and testing activities that are
necessary to establish that the product can be produced to meet its design
specification including function, features and technical performance
requirements. The resulting net cash flows from such products are based on
estimates of revenue, cost of revenue, research and development costs, sales and
marketing costs, and income taxes from such projects.
The amounts allocated to in-process research and development will be
charged to the statement of operations in the first quarter of fiscal 2002.
Goodwill represents the excess of purchase price over the fair value of the
underlying net identifiable assets. The deferred tax assets and liabilities
relate to differences between book and tax bases of acquired assets and
liabilities assumed.
2. PRO FORMA ADJUSTMENTS
A. Reflects the elimination of certain excluded assets and liabilities
under the terms of the acquisition.
B. Reflects the acquisition of the ENI business based on the purchase
price described in Note 1.
C. Reflects the elimination of the ENI business' historical patent
amortization and accumulated net balance.
D. Reflects amortization of developed technology, patents and customer
relationships over their estimated useful lives ranging from six to
eight years as if the acquisition occurred at the beginning of each
period presented. The $6.1 million amount allocated to in-process
research and development has not been included in the unaudited pro
forma combined consolidated statement of operations as it is
nonrecurring, but is included as a reduction in retained earnings in
the unaudited combined consolidated balance sheet. This amount will be
expensed in the first quarter of fiscal 2002.
E. Reflects the elimination of historical divisional control amounts of
the ENI business.
F. Additional depreciation from changing the estimated useful life of the
ENI Rochester building from 40 to 30 years.
G. Reflects the elimination of the ENI business' historical amortization
of goodwill.
H. Represents pro forma combined consolidated benefit for income taxes at
a rate of 32.6% of loss from operations before income taxes for the
year ended December 31, 2001 based on MKS' historical rate for the
year ended December 31, 2001.