Exhibit 99.2
Pro Forma Financial Information
On April 19, 2001, GEO sold to ONDEO Nalco Company (Nalco) certain assets of its
Paper Chemicals business for $8,500 in cash plus the assumption by Nalco of
certain liabilities associated with the Paper Chemicals business.
On May 31, 2001 GEO Specialty Chemicals purchased specific assets of Hercules
for approximately $92,200, plus the assumption of specified liabilities.
The accompanying Pro Forma financial information presents the Pro Forma effects
of the above terminations as of March 31, 2001 and for the three months ended
March 31, 2001 and the year ended December 13, 2000, as if the transactions had
occurred as of the beginning of the periods.
Unaudited Pro Forma Condensed Balance Sheet
March 31, 2001
(In thousands)
Hercules
GEO Peroxy Pro Forma Pro Forma
Historical Historical Adjustments Combined
-------------- -------------- ------------- --------------
ASSETS
Current assets
Cash and cash equivalents $ 11,746 $ - $ 8,487 (E) $ 28,733
8,500 (F)
16,987
Accounts receivable 32,250 5,600 (3,390) (F) 34,460
Inventory 17,051 5,765 (484) (F) 22,332
Prepaid expenses and other current assets 1,856 - 100 (E) 1,956
Deferred taxes 1,103 162 (162) (C) 1,103
-------------- -------------- ------------- --------------
Total current assets 64,006 11,527 88,584
Property and equipment, net 93,846 12,552 8,771 (B) 113,517
(1,652) (F)
-------------
7,119
Other assets
Intangible assets, net 5,093 - 4,400 (D) 9,493
Goodwill, net 32,798 - 60,365 (A) 93,163
Deferred taxes - 314 (314) (C) -
Other 176 54 230
-------------- -------------- --------------
Total other assets 38,067 368 102,886
-------------- -------------- --------------
Total assets $ 195,919 $ 24,447 $ 304,987
============== ============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 18,032 $ 2,097 $ (2,097) (C) $ 18,032
Income taxes payable 3,951 - 3,951
Accrued expenses and other current liabilities 6,450 2,442 (2,442) (C) 7,817
343 (F)
1,024 (A)
-------------
(1,075)
------------------------------- --------------
Total current liabilities 28,433 4,539 29,800
Revolving line-of-credit 10,000 - 10,000
Senior subordinated notes 120,000 - 120,000
Long-term debt - - 105,000 (A) 105,000
Other long-term liabilities 5,401 2,586 (2,516) (C) 5,471
Deferred taxes 3,102 1,780 (1,780) (C) 3,102
-------------- -------------- --------------
Total other liabilities 138,503 4,366 243,573
Shareholders' equity
Class A voting common stock - - -
Class B nonvoting common stock - - -
Additional paid-in-capital 20,901 - 20,901
Retained earnings 9,901 - 2,631 (F) 12,532
Accumulated other comprehensive loss (1,819) 321 (321) (A) (1,819)
Business unit equity - 15,221 (15,221) (A) -
-------------- -------------- --------------
Total equity 28,983 15,542 31,614
-------------- -------------- --------------
Total liabilities and equity $ 195,919 $ 24,447 $ 304,987
============== ============== ==============
Notes to Pro Forma Condensed
March 31, 2001 Balance Sheet
----------------------------
(In thousands)
(A) Reflects the effects of GEO acquiring certain United States and European
Peroxides Business Unit assets, net of certain liabilities, of Hercules as
if the acquisition had occurred on March 31, 2001. GEO acquired the assets
with 100% leveraged financing via a $105,000 long-term loan. Goodwill in the
amount of $60,400 was recorded, which represents the difference between the
total consideration of $93,000 and the estimated fair market value of
Hercules' net assets acquired of $32,600.
(B) Reflects the step-up of Peroxy property and equipment to fair market value.
(C) Reflects liabilities retained by Hercules.
(D) Reflects financing related fees incurred in financing the purchase of
Peroxy.
(E) Reflects excess cash from long-term loan after payment of consideration for
net assets and financing costs.
(F) Reflects the effects of GEO selling the paper chemicals customer list and
non-production assets to Nalco for $8,500 as if the divestiture had occurred
on March 31, 2001.
Unaudited Pro Forma Condensed Statement of Income
For the three months ended March 31, 2001
(In thousands)
GEO Peroxy Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- ---------
Net sales $ 50,534 $ 10,597 $ (1,845) (EE) $ 59,286
Cost of sales 36,214 7,014 90 (BB) 43,082
---------- ---------- ---------
147 (DD)
(383) (EE)
-----------
(146)
Gross profit 14,320 3,583 (1,699) 16,204
Selling, general, and administrative
expenses 5,844 1,269 (779) (AA) 6,464
---------- ---------- ---------
273 (CC)
1,106 (DD)
(1,249) (EE)
-----------
(649)
Income from operations 8,476 2,314 (1,050) 9,740
Other expense
Net interest expense (3,409) (101) (2,458) (FF) (5,968)
Other (100) (2) (102)
---------- ---------- ----------- ---------
Income before taxes 4,967 2,211 (3,508) 3,670
Provision for income taxes 2,170 840 (1,471) 1,539
---------- ---------- ----------- ---------
Net income $ 2,797 $ 1,371 $ (2,037) $ 2,131
========== ========== =========== =========
Notes to Pro Forma Condensed
Income Statement for the three month period ended March 31, 2001
----------------------------------------------------------------
(In thousands)
(AA) Reflects the elimination of the following from the historical operating
results of Peroxy:
. Allocated corporate indirect selling, general, and administrative
expenses of $558 of corporate allocated indirect costs and $221 of
divisional operations indirect costs.
(BB) Reflects adjustments to the operating results of Peroxy for estimated
incremental costs that would have been incurred by GEO had Peroxy been
managed by GEO during the year:
. Elimination of soil and groundwater contamination costs for Peroxy's
Virginia plant of $11. Hercules has retained the obligation for these
costs.
. Elimination of a pension plan benefit of $101 created by the over funded
status of Hercules pension plans.
(CC) Reflects adjustments to the operating results of Peroxy for estimated
incremental costs that would have been incurred by GEO had Peroxy been
managed by GEO during the year:
. Increase of $40 in insurance costs to increase coverage levels to GEO
existing levels.
. Incremental costs of $233 estimated by GEO for research and development
and selling, and general, and administration costs.
(DD) Reflects depreciation and amortization for the fair value of assets
purchased (excluding current assets) in conjunction with the Peroxy
acquisition. Additional depreciation and amortization for the period is
calculated as follows:
- ------------------------------------------------------------------------------------------------------
Years Fair Value Depreciation/
----- ---------- ---------------
(in thousands) Amortization
--------------
(in thousands)
- ------------------------------------------------------------------------------------------------------
Land N/A $ 300
- ------------------------------------------------------------------------------------------------------
Land improvements 20 394 $ 5
- ------------------------------------------------------------------------------------------------------
Buildings 40 1,918 12
- ------------------------------------------------------------------------------------------------------
Machinery and equipment 12 18,354 382
- ------------------------------------------------------------------------------------------------------
Office, computer, and laboratory
equipment 6-10 209 7
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Excess cost over fair value 15 59,163 986
- ------------------------------------------------------------------------------------------------------
Intangible assets 7 4,400 157
------
- ------------------------------------------------------------------------------------------------------
1,549
- ------------------------------------------------------------------------------------------------------
Less: depreciation and
amortization included in
historical Peroxy financial
statements (296)
------
- ------------------------------------------------------------------------------------------------------
Pro forma adjustment for
depreciation and amortization $1,253
======
- ------------------------------------------------------------------------------------------------------
(EE) Reflects gross margin on sales of paper chemicals and reduction in
selling, general, and administrative expenses for GEO operations divested
to Nalco subsequent to March 31, 2001.
(FF) Reflects interest expense on a pro forma basis for interest costs
associated with proceeds from new long-term debt sourced primarily to
acquire Peroxy. Interest was computed assuming an average annual interest
rate of 8.85%.
Unaudited Pro Forma Condensed Statement of Income
For the year ended December 31, 2000
(In thousands)
GE0 Peroxy Pro Forma Pro Forma
Historical Historical Adjustments Combined
------------ ------------ ------------- -----------
Net sales $188,216 $ 43,760 $ (6,845) (DD) $ 225,131
Cost of sales 138,952 25,859 363 (BB) 164,067
-------- -------- ---------
587 (DD)
(1,694) (EE)
---------
(744)
Gross profit 49,264 17,901 (6,101) 61,064
Selling, general, and administrative
expenses 24,542 7,037 (4,909) (AA) 26,803
-------- -------- ---------
1,094 (CC)
4,581 (DD)
(5,542) (EE)
---------
(4,776)
Income from operations 24,722 10,864 (1,325) 34,261
Other expense
Net interest expense (14,806) (449) (9,975) (FF) (25,230)
Other (1,348) (27) - (1,375)
-------- -------- --------- ---------
Income before taxes 8,568 10,388 (11,300) 7,656
Provision for income taxes 3,484 3,984 (4,452) 3,016
-------- -------- --------- ---------
Net income $ 5,084 $ 6,404 $ (6,848) $ 4,640
======== ======== ========= =========
Notes to Proforma Condensed
Income Statement for the year ended December 31, 2000
----------------------------------------------------
(in thousands)
(AA) Reflects the elimination of the following from the historical operating
results of Peroxy:
. Allocated corporate indirect selling, general, and administrative
expenses of $2,648 of corporate allocated indirect costs and $2,047 of
divisional operations indirect costs.
. Amortization of management information software costs of $214 as GEO did
not acquire rights to such software.
(BB) Reflects adjustments to the operating results of Peroxy for estimated
incremental costs that would have been incurred by GEO had Peroxy been
managed by GEO during the year:
. Elimination of soil and groundwater contamination costs for Peroxy's
Virginia plant of $44. Hercules has retained the obligation for these
costs.
. Elimination of a pension plan benefit of $407 created by the over funded
status of Hercules pension plans.
(CC) Reflects adjustments to the operating results of Peroxy for estimated
incremental costs that would have been incurred by GEO had Peroxy been
managed by GEO during the year:
. Increase of $161 in insurance costs to increase coverage levels to GEO
existing levels.
. Incremental costs of $933 estimated by GEO for research and development
and selling, and general, and administration costs.
(DD) Reflects depreciation and amortization for the fair value of assets
purchased (excluding current assets) in conjunction with the Peroxy
acquisition. Additional depreciation and amortization for the period is
calculated as follows:
----------------------------------------------------------------------------------------------
Years Fair Value Depreciation/
----- ---------- -------------
(in thousands) Amortization
------------
(in thousands)
----------------------------------------------------------------------------------------------
Land N/A $ 300
----------------------------------------------------------------------------------------------
Land improvements 20 394 $ 20
----------------------------------------------------------------------------------------------
Buildings 40 1,918 48
----------------------------------------------------------------------------------------------
Machinery and equipment 12 18,354 1,529
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------
Office, computer, and laboratory
equipment 6-10 209 28
----------------------------------------------------------------------------------------------
Excess cost over fair value 15 59,163 3,944
----------------------------------------------------------------------------------------------
Intangible assets 7 4,400 629
-------
----------------------------------------------------------------------------------------------
6,198
----------------------------------------------------------------------------------------------
Less: depreciation and
amortization included in
historical Peroxy financial
statements (1,030)
-------
----------------------------------------------------------------------------------------------
Pro forma adjustment for
depreciation and amortization $ 5,168
=======
----------------------------------------------------------------------------------------------
(EE) Reflects gross margin on sales of paper chemicals and reduction in
selling, general, and administrative expenses for GEO operations divested
to Nalco subsequent to December 31, 2000.
(FF) Reflects interest expense on a pro forma basis for interest costs
associated with proceeds from new long-term debt sourced primarily to
acquire Peroxy. Interest was computed assuming an average annual interest
rate of 9.5%.