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EXHIBIT 99.3
UNAUDITED PRO FORMA FINANCIAL INFORMATION
-----------------------------------------
The Unaudited Pro Forma Combined Condensed Consolidated Balance Sheet as of
March 31, 2000 (the "Pro Forma Balance Sheet") and Unaudited Pro Forma Combined
Condensed Consolidated Statements of Operations (the "Pro Forma Statements of
Operations" and together with the Pro Forma Balance Sheet, the "Pro Forma
Financial Statements") for the fiscal year ended December 31, 1999 and the three
month period ended March 31, 2000 have been prepared to illustrate the estimated
effect of the Company's acquisition of Rittenhouse Paper Company (the
"Acquisition") and $35 million of borrowings incurred by the Company in
connection with the Acquisition. The Pro Forma Statements of Operations reflect
adjustments as if the Acquisition had occurred on January 1, 1999. The Pro Forma
Balance Sheet reflects adjustments as if the Acquisition had occurred on
March 31, 2000.
The Acquisition has been accounted for using the purchase method of accounting.
Accordingly, assets acquired and liabilities assumed have been recorded at their
estimated fair values, which are subject to further adjustment. The final
allocation of the purchase price for the Acquisition may differ materially from
the allocations set forth in the Pro Forma Financial Statements presented herein
due to several contingencies that could impact the final purchase price. These
contingencies include a contingent payment of up to $6 million if certain
financial targets are achieved for the year ending December 31, 2000.
The pro forma adjustments are based upon available information and assumptions
that management believes are reasonable. The Pro Forma Financial Statements do
not purport to present the financial position or results of operations of the
Company had the Acquisition occurred on the dates specified, nor are they
necessarily indicative of the results of operations that may be achieved in the
future. The Pro Forma Statements of Operations do not reflect any adjustments
for synergies that management expects to realize commencing upon consummation of
the acquisition. No assurances can be made as to the amount of cost savings or
revenue enhancements, if any, that actually will be realized.
The Pro Forma Financial Statements are based on certain assumptions and
adjustments described in the Notes to Pro Forma Financial Statements and should
be read in conjunction therewith and with the Consolidated Financial Statements
and related notes of the Company included in its Annual Report on Form 10-K for
the fiscal year ended December 31, 1999 and in its Form 10-Q for the quarter
ended March 31, 2000 and the historical financial statements of Rittenhouse
which are included as Exhibit 99.2 to this Form 8-K/A.
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UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
-----------------------------------------------------------------
(In thousands)
<TABLE>
<CAPTION>
MARCH 31, 2000
---------------------------------------------------------------------
Pro Forma Pro Forma
Nashua Rittenhouse Adjustments Balance
------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
------
Cash and cash equivalents $ 24,574 $ 1,684 $ (23,543)(A) $ 2,715
Restricted cash 5,361 -- -- 5,361
Accounts receivable 16,539 14,425 -- 30,964
Inventories:
Materials and supplies 7,304 7,513 -- 14,817
Work in process 4,101 266 -- 4,367
Finished goods 5,806 7,873 -- 13,679
--------- --------- --------- ---------
17,211 15,652 -- 32,863
Other current assets 11,315 1,382 -- 12,697
--------- --------- --------- ---------
Total current assets 75,000 33,143 (23,543) 84,600
--------- --------- --------- ---------
Plant and equipment 77,510 21,197 (6,873)(C) 91,834
Accumulated depreciation (37,571) (14,923) 14,923(C) (37,571)
--------- --------- --------- ---------
39,939 6,274 8,050 54,263
Other assets 16,876 472 1,158(D)(E)(F) 18,506
Goodwill -- -- 28,694(B) 28,694
Net non-current assets of discontinued operations 756 -- -- 756
--------- --------- --------- ---------
Total assets $ 132,571 $ 39,889 $ 14,359 $ 186,819
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current maturities of long-term debt $ 511 $ 14,316 $ (14,316)(D)(H) $ 511
Accounts payable 11,070 9,411 -- 20,481
Accrued expenses 28,756 2,167 7,077(D)(G) 38,000
Income tax payable 2,295 297 -- 2,592
--------- --------- --------- ---------
Total current liabilities 42,632 26,191 (7,239) 61,584
--------- --------- --------- ---------
Long-term debt 383 -- 35,072(H) 35,455
Other long-term liabilities 12,889 1,539 (1,315)(D) 13,113
--------- --------- --------- ---------
Total long-term liabilities 13,272 1,539 33,757 48,568
--------- --------- --------- ---------
Shareholders'/Members' Equity:
Common stock and additional capital 22,098 -- -- 22,098
Retained earnings 69,491 -- -- 69,491
Members' equity -- 12,159 (12,159)(I) --
Treasury stock, at cost (14,922) -- -- (14,922)
--------- --------- --------- ---------
76,667 12,159 (12,159) 76,667
--------- --------- --------- ---------
Total liabilities and shareholders' equity $ 132,571 $ 39,889 $ 14,359 $ 186,819
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of the combined condensed
consolidated financial statements.
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UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
---------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000
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Pro Forma Pro Forma
(In thousands, except per share data) Nashua Rittenhouse Adjustments Balance
------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 44,010 $ 30,695 $ -- $ 74,705
Cost of products sold 35,088 23,056 (126)(4)(5) 58,018
-------- -------- -------- --------
Gross margin 8,922 7,639 126 16,687
-------- -------- -------- --------
Research, selling, distribution and
administrative expenses 10,039 7,000 240(4)(5) 17,279
Pension settlement income (18,606) -- -- (18,606)
Restructuring and other unusual charges 1,452 -- -- 1,452
Equity in loss of unconsolidated joint ventures 4 -- -- 4
Interest expense 201 285 477(5)(7) 963
Interest income (421) (2) 404(6) (19)
Other income -- (29) -- (29)
-------- -------- -------- --------
Income from continuing operations before
income tax provision 16,253 385 (995) 15,643
Income tax provision 6,412 17 (248)(8) 6,181
-------- -------- -------- --------
Net income $ 9,841 $ 368 $ (747) $ 9,462
======== ======== ======== ========
Basic earnings per share:
Net income per common share $ 1.75 $ 1.68
======== ========
Average common shares 5,639 5,639
======== ========
Diluted earnings per share:
Net income per common share assuming dilution $ 1.74 $ 1.67
======== ========
Average common and potential common shares 5,655 5,655
======== ========
</TABLE>
The accompanying notes are an integral part of the combined condensed
consolidated financial statements.
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UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED
---------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------
<TABLE>
<CAPTION>
Year Ended December 31, 1999
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Pro Forma Pro Forma
(In thousands, except per share data) Nashua Rittenhouse Adjustments Balance
------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 170,844 $ 139,106 $ -- $ 309,950
Cost of products sold 129,872 106,030 (412)(4)(5) 235,490
--------- --------- --------- ---------
Gross margin 40,972 33,076 412 74,460
--------- --------- --------- ---------
Research, selling, distribution and
administrative expenses 39,747 30,269 813(4)(5) 70,829
Restructuring and other unusual income (1,300) -- -- (1,300)
Equity in loss of unconsolidated joint ventures 320 -- -- 320
Interest expense 743 1,194 1,948(5)(7) 3,885
Interest income (1,421) -- 1,342(6) (79)
Other income -- (30) -- (30)
--------- --------- --------- ---------
Income from continuing operations before
income tax provision 2,883 1,643 (3,691) 835
Income tax provision 3,303 103 (910)(8) 2,496
--------- --------- --------- ---------
Income (loss) from continuing operations $ (420) $ 1,540 $ (2,781) $ (1,661)
========= ========= ========= =========
Basic earnings per share:
Income (loss) from continuing operations
per common share $ (.07) $ (.29)
========= =========
Average common shares 5,718 5,718
========= =========
Diluted earnings per share:
Income (loss) from continuing operations
per common share assuming dilution $ (.07) $ (.29)
========= =========
Average common and potential common shares 5,718 5,718
========= =========
</TABLE>
The accompanying notes are an integral part of the combined condensed
consolidated financial statements.
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NOTES TO PRO FORMA FINANCIAL STATEMENTS
---------------------------------------
(1) BASIS OF PRESENTATION
The Acquisition has been accounted for using the purchase method of
accounting. Accordingly, assets acquired and liabilities assumed have been
recorded at their estimated fair values, which are subject to further
adjustment, based upon appraisals and other analyses, with appropriate
recognition given to the effect of the Company's borrowing rates and income
taxes. The final allocation of the purchase price for the Acquisition may
differ materially from the allocations set forth in the Pro Forma Financial
Statements presented herein due to several contingencies that could impact
the final purchase price. These contingencies include a contingent payment
of up to $6 million if certain financial targets are achieved for the year
ending December 31, 2000.
The Pro Forma Statements of Operations reflect adjustments as if the
acquisition of Rittenhouse had occurred on January 1, 1999. The Pro Forma
Balance Sheet reflects adjustments as if the Acquisition had occurred on
March 31, 2000.
Certain reclassifications have been made to the historical balance sheet
and statements of operations of Rittenhouse to conform to the Company's
presentation.
(2) DESCRIPTION OF CONSIDERATION
The pro forma cost of the Acquisition has been allocated to assets acquired
and liabilities assumed at their estimated fair values as follows:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
Purchase of Rittenhouse stock and options $57,000
Purchase price adjustments (net) 6,814
Transaction costs 1,455
Estimated fair value of liabilities assumed and accrued acquisition liabilities:
Accounts payable 9,411
Accrued expenses 2,333
Other liabilities 224
Accrued acquisition liabilities 415
-------
Pro forma cost of the acquisition (a) 77,652
-------
Estimated fair value of acquired assets 48,958
-------
Excess of cost over estimated fair value of net assets acquired (b) $28,694
=======
Allocation of purchase price:
Cash $ 1,684
Accounts receivable 14,425
Inventories 15,652
Other current assets 1,382
Plant and equipment 14,324
Other assets 1,491
Goodwill 28,694
-------
$77,652
=======
</TABLE>
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(a) The Acquisition was funded through $35 million of borrowings under a
$55 million credit facility from Fleet Bank-NH and LaSalle Bank, which
consists of a $20 million term loan and a $35 million revolving credit
loan. The Company funded the remainder of the purchase price from its
cash reserves.
(b) The excess of cost over the estimated fair value of net assets
acquired was allocated to goodwill and will be amortized on a
straight-line basis over 20 years.
(3) BALANCE SHEET ADJUSTMENTS
The following adjustments have been made in preparation of the Pro Forma
Balance Sheet:
A. Reduction in Nashua cash used to finance the acquisition.
B. To record the excess of cost over estimated fair value of net assets
acquired.
C. To adjust Rittenhouse property, plant and equipment to fair values and
to record purchased real estate and equipment at its fair values (see
separate note on "Purchased Real Estate and Equipment").
D. Includes reductions for other assets not acquired and for debt,
accrued expenses and other liabilities not assumed.
E. Includes capitalized debt issuance costs related to new debt.
F. Includes deposits on new machinery and equipment acquired by
Rittenhouse from related partnerships prior to closing.
G. Includes accrued expenses related to purchase price adjustments due to
Rittenhouse shareholders, direct transaction costs and estimated
acquisition liabilities.
H. Includes increased borrowings used to finance the Acquisition.
I. Adjustment to eliminate Rittenhouse members' equity.
(4) PURCHASED REAL ESTATE AND EQUIPMENT
Prior to closing, Rittenhouse acquired real estate and equipment having
appraised values of $5,525,000 and $1,840,040, respectively, from related
partnerships. Prior to this transaction, these assets were leased to
Rittenhouse. The Pro Forma Statements of Operations have been adjusted to
eliminate related lease charges and reflect estimated pro forma
depreciation for these purchased assets. The Pro Forma Balance Sheet
includes purchased real estate and equipment at its estimated fair values.
(5) DEPRECIATION AND AMORTIZATION
The adjustments for estimated pro forma depreciation and amortization of
purchased assets and goodwill are based on their estimated fair values.
Property, plant and equipment is being depreciated on a straight-line basis
over estimated useful lives of 15 - 30 years for buildings and improvements
and 1 - 10 years for machinery and equipment. Goodwill is being amortized
on a straight-line basis over 20 years. Deferred financing costs directly
related to the financing of the Acquisition are being amortized over the
life of the fixed-term debt of 5 years.
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(6) INTEREST INCOME
The Acquisition was funded in part with the Company's existing cash and
cash equivalents. Accordingly, had the acquisition occurred on January 1,
1999, the Company would have earned lower interest income as a result of
the reduction in cash and cash equivalents.
The Pro Forma Statements of Operations give effect to the lower interest
income that would have been earned during the periods presented. Such
adjustments were based on the Company's actual weighted average yields on
its cash balances during those periods.
(7) INTEREST EXPENSE
In connection with the Acquisition, the Company borrowed $35 million under
its credit facility to fund a portion of the cash consideration.
The Pro Forma Statements of Operations give effect to the interest charges
that would have been incurred during the periods presented, assuming the
Company's borrowing rates under its term and revolving loans of 8.53% and
8.28%, respectively, at April 17, 2000. Annual interest expense would
change by approximately $44,000 for each 1/8% change in the interest rate.
(8) INCOME TAXES
The Pro Forma Statements of Operations have been adjusted to reflect the
amount of income taxes that would have been accrued had the Acquisition
taken place on January 1, 1999 based on the statutory rate in effect for
the periods shown. The excess of cost over the estimated fair value of net
assets acquired is not adjusted for deferred taxes.
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