Exhibit 99.3
REXALL SUNDOWN, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
On January 7, 2000, Rexall Sundown, Inc. (the "Company") completed its
previously announced purchase (the "Transaction") of privately-held MET-Rx
Nutrition, Inc. ("MET-Rx"), a leader in the sports nutrition and bar categories.
The unaudited pro forma combined financial statements of the Company are
presented to show how the Company and MET-Rx might have looked if they had been
combined for the periods presented. The pro forma information is based on, and
should be read together with, the historical financial statements for the
Company and MET-Rx. Certain amounts in the unaudited pro forma combined
financial statements have been reclassified to conform to the fiscal year 2000
basis presentation. The pro forma financial information was prepared using
assumptions described below and in the related notes thereto.
The pro forma income statement was prepared as if the transaction took
place on September 1, 1998 and the pro forma balance sheet was prepared as if
the transaction took place on November 30, 1999. As a result of the transaction,
MET-Rx's December fiscal year end will be adjusted to conform to the Company's
August 31 fiscal year end. For pro forma purposes, the Company's results for the
twelve months ended August 31, 1999 were combined with MET-Rx's results for the
twelve months ended August 31, 1999 and the Company's results for the three
months ended November 30, 1999 were combined with MET-Rx's results for the three
months ended November 30, 1999. The attached financial statements give pro forma
effect to (i) the borrowing of approximately $95.0 million to fund the
transaction and (ii) the preliminary allocation of the purchase price to the net
assets of MET-Rx. The pro forma financial statements have not been adjusted for
certain operating efficiencies that may be realized as a result of the
transaction.
Subsequent to the transaction, the Company may incur certain charges
and expenses outside of the guidance of Emerging Issues Task Force ("EITF") No.
95-3, "Recognition of Liabilities in Connection with a Purchase Business
Combination," related to restructuring and integrating the operations of the
Company and MET-Rx. The objective of such plan will be to enhance productivity
and efficiency of the combined companies by reducing duplicate functions and
overhead costs. The nature of any such charges and expenses may include
provisions for severance and related costs and other charges identified in
connection with the assessment and plan development. Such costs are expected to
approximate $3.0 million for fiscal year 2000. The unaudited pro forma combined
financial statements do not reflect such provisions nor do they include certain
cost savings or operating synergies that may result from the transaction, as
such amounts are not currently determinable.
The unaudited pro forma combined financial statements are provided for
illustrative purposes only. They do not purport to represent what Rexall
Sundown's results of operations and financial position would have been had the
transaction actually occurred as of the dates indicated, and they do not purport
to project Rexall Sundown's future results of operations or financial position.
1
Exhibit 99.3
REXALL SUNDOWN, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
(Amounts in thousands, except share data)
November 30, 1999
----------------------------------------------------------------------
Historical Historical
Rexall Sundown MET-Rx(A) Adjustments Pro Forma
-------------- --------- ----------- ---------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 18,568 $ 1,837 (15,986) (B)
(1,337) (C) $ 3,082
Trade accounts receivable, net 64,563 12,022 76,585
Inventory 113,668 11,256 124,924
Prepaid expenses and other
current assets 20,264 1,150 21,414
Net current assets of
discontinued operations 4,076 -- 4,076
------------ ---------- -----------
Total current assets 221,139 26,265 230,081
Property, plant and
equipment, net 68,769 1,789 (1,340) (D) 69,218
Excess of cost over fair value
of assets acquired -- -- 98,302 (D) 98,302
Other assets 15,376 581 1,337 (C) 17,294
------------ ---------- -----------
Total assets $ 305,284 $ 28,635 $ 414,895
============ ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,079 $ 8,357 37,436
Accrued expenses and
other current liabilities 32,954 2,604 3,556 (D) 39,114
Short-term debt -- 1,938 (1,938) (E) --
------------ ---------- -----------
Total current liabilities 62,033 12,899 76,550
Long-term debt -- 29,108 (29,108) (E)
95,000 (B) 95,000
Other liabilities 568 94 662
------------ ---------- -----------
Total liabilities 62,601 42,101 172,212
------------ ---------- -----------
Shareholders' equity:
Preferred stock -- 23 (23) (F) --
Common stock 644 10 (10) (F) 644
Capital in excess of par value 138,195 26,844 (26,844) (F) 138,195
Retained earnings 103,701 (40,343) 40,343 (F) 103,701
Accumulated other comprehensive
income 143 -- 143
------------ ---------- -----------
Total shareholders' equity 242,683 (13,466) 242,683
------------ ---------- -----------
Total liabilities and
shareholders' equity $ 305,284 $ 28,635 $ 414,895
============ ========== ===========
See accompanying notes to the unaudited pro forma condensed combined financial
data
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Exhibit 99.3
REXALL SUNDOWN, INC.
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
(Amounts in thousands, except share and per share data)
Year Ended August 31, 1999
--------------------------------------------------------------------------------
Historical Historical
Rexall Sundown MET-Rx(A) Adjustments Pro Forma
-------------- --------- ----------- ---------
Net sales $ 584,689 $ 93,455 $ 678,144
Cost of sales 258,777 51,487 310,264
------------ ------------ ------------
Gross profit 325,912 41,968 367,880
Selling, general and
administrative expenses 232,575 33,365 3,932 (G) 269,872
------------ ------------ ------------ ------------
Operating income 93,337 8,603 (3,932) 98,008
Other income (expense):
Interest income 2,534 14 (748) (H) 1,800
Interest expense (327) (2,204) 2,204 (I)
(6,029) (J) (6,356)
Other income (expense) 231 357 (446) (C) 142
------------ ------------ ------------ ------------
Income before income tax provision 95,775 6,770 (8,951) 93,594
Income tax provision/(benefit) 35,713 2,208 (1,857) (K) 36,064
------------ ------------ ------------ ------------
Net income $ 60,062 $ 4,562 $ (7,094) $ 57,530
============ ============ ============ ============
Net income per common share:
Basic $ 0.89 $ 0.86
Diluted $ 0.88 $ 0.84
Weighted average common
shares outstanding
Basic 67,212,007 67,212,007
Diluted 68,563,625 68,563,625
See accompanying notes to the unaudited pro forma condensed combined financial
data
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Exhibit 99.3
REXALL SUNDOWN, INC.
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
(Amounts in thousands, except share and per share data)
Three Months Ended November 30, 1999
---------------------------------------------------------------------------------
Historical Historical
Rexall Sundown MET-Rx(A) Adjustments Pro Forma
-------------- --------- ----------- ---------
Net sales $ 142,098 $ 23,884 $ 165,982
Cost of sales 62,465 13,173 75,638
------------ ------------ ------------
Gross profit 79,633 10,711 90,344
Selling, general and
administrative expenses 61,383 9,845 983 (G) 72,211
------------ ------------ ------------ ------------
Operating income 18,250 866 (983) 18,133
Other income (expense):
Interest income 118 2 (118) (H) 2
Interest expense (75) (718) 718 (I)
(1,726) (J) (1,801)
Other income (expense) 445 (1,616) (111) (C) (1,282)
------------ ------------ ------------ ------------
Income before income tax provision 18,738 (1,466) (2,220) 15,052
Income tax provision/(benefit) 7,045 (586) (458) (K) 6,001
------------ ------------ ------------ ------------
Net income/(loss) $ 11,693 $ (880) $ (1,762) $ 9,051
============ ============ ============ ============
Net income per common share:
Basic $ 0.18 $ 0.14
Diluted $ 0.18 $ 0.14
Weighted average common
shares outstanding
Basic 64,434,033 64,434,033
Diluted 65,122,815 65,122,815
See accompanying notes to the unaudited pro forma condensed combined financial
data
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Exhibit 99.3
REXALL SUNDOWN, INC.
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(A) Income statement amounts reflect MET-Rx's results for the twelve months
ended August 31, 1999 and the three months ended November 30, 1999. For
balance sheet purposes, the Company's balance sheet at November 30,
1999 was combined with MET-Rx's balance sheet at November 30, 1999.
(B) The total purchase price of the Transaction was $110,986, which was
financed by borrowings of $95,000 under the Company's new $175,000
unsecured senior credit facility and its available cash. The senior
credit facility, which is guaranteed by the Company's domestic
subsidiaries and is subject to compliance with certain financial
covenants and ratios, is comprised of a $145,000 three-year revolving
credit facility and a $30,000 364 day facility. The credit facility
currently bears interest at LIBOR plus 1.125%, which will adjust
quarterly based on calculations of the Company's debt to earnings
before interest, taxes, depreciation and amortization ("EBITDA") ratio.
(C) Represents loan fees related to the Company's senior credit facility,
which will be amortized over the term of the credit facility.
(D) The preliminary allocation of the purchase price to the fair value of
the net assets acquired is as follows:
Purchase price $ 110,986
MET-Rx Cash $ 1,837
Accounts receivable 12,022
Inventory 11,256
Prepaid expenses 1,150
Property, plant & equipment 1,789
Other assets 581
Accounts payable (8,357)
Accrued expenses (2,604)
Other liabilities (94)
MET-Rx net assets acquired 17,580
----------
Subtotal 93,406
Adjustments:
Property, plant & equipment (1,340)
EITF 95-3 liabilities incurred
as a result of the Transaction (3,556)
Total fair value adjustments (4,896)
----------
Excess of cost over fair value of assets acquired $ 98,302
==========
In accordance with EITF No. 95-3, the Company recognized
liabilities assumed in the Transaction with regard to the plan
to exit certain leased facilities of MET-Rx and the related
severance and relocation costs of certain employees of MET-Rx.
These costs are included in the allocation of the acquisition
cost in accordance with Accounting Principles Board ("ABP")
Opinion No. 16, "Business Combinations."
(E) Represents the elimination of MET-Rx's outstanding indebtedness, which
was refinanced in connection with the Transaction.
(F) Represents the elimination of MET-Rx's historical capital structure.
(G) Amount represents the amortization of the excess of cost over fair
value of assets acquired amortized over a 25-year period.
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Exhibit 99.3
REXALL SUNDOWN, INC.
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(H) Amount represents a decrease in interest income due to the reduction in
the available cash balance, as a result of the Transaction and the loan
fees related to the Company's senior credit facility, as discussed in
footnotes (B) and (C), respectively.
(I) Amount represents the reversal of interest expense incurred by MET-Rx
for the twelve months ended August 31, 1999 and the three months ended
November 30, 1999 as the underlying debt related to such interest
expense was repaid as a result of the Transaction.
(J) Amount represents interest expense incurred on the $95,000 of debt,
which the Company obtained to finance the Transaction. Interest expense
for the twelve months ended August 31, 1999 and the three months ended
November 30, 1999 was calculated as follows:
Twelve Months Ended Three Months Ended
August 31, 1999 November 30, 1999
------------------- -------------------
Outstanding debt $95,000 $95,000
Estimated interest rate x 6.35% x 7.27%
-------- -------
Calculated interest expense $ 6,029 $ 1,726
======== =======
As noted in footnote (B) above, the senior credit facility bears
interest at a quarterly variable rate based on LIBOR. A one-eighth of a
percent increase in interest rates would increase interest expense by
approximately $119 and $30 for the twelve months ended August 31, 1999
and the three months ended November 30, 1999, respectively.
(K) Amount represents the net tax benefit of the change in interest expense
and interest income as discussed in footnotes (H), (I) and (J) and the
amortization of loan fees as discussed in footnote (C).
6