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Previous: STEINWAY MUSICAL INSTRUMENTS INC, 8-K, EX-99.2, 2000-11-09 |
Next: ASSOCIATED ESTATES REALTY CORP, 10-Q, 2000-11-09 |
<PAGE>
EXHIBIT 99.3
STEINWAY MUSICAL INSTRUMENTS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Effective September 15, 2000, Steinway Musical Instruments, Inc. ("SMI"),
through its wholly-owned subsidiary, The Selmer Company, Inc. ("Selmer"),
completed the acquisition of United Musical Instruments Holdings, Inc. ("UMI").
The acquisition of UMI was accounted for as a purchase. The aggregate purchase
price approximated $84.0 million, including the assumption of approximately
$57.0 million of debt. The purchase price has been allocated to UMI's assets and
liabilities based on their relative fair values as of the closing date.
The following unaudited pro forma condensed combined financial statements
are based on the respective historical consolidated financial statements and the
notes thereto of SMI and UMI. For consistency of presentation, the six month
period ended July 1, 2000 for SMI has been described as June 30, 2000. The
unaudited pro forma condensed combined balance sheet assumes that the
acquisition took place on June 30, 2000. The unaudited pro forma condensed
combined statements of operations assume that the acquisition took place on
January 1, 1999.
The unaudited pro forma condensed combined financial statements are based
on the estimates and assumptions set forth in the notes to such statements. The
pro forma adjustments made in connection with the development of the pro forma
information are preliminary and have been made solely for the purposes of
developing such pro forma information. Although management does not expect that
the final allocation will be materially different from these estimates, there
can be no assurances that such differences, if any, will not be material. The
unaudited pro forma condensed combined financial statements do not purport to be
indicative of future results or the results that would have occurred had the
acquisition taken place at the beginning of the periods presented.
These unaudited pro forma condensed combined financial statements should be
read in conjunction with the historical consolidated financial statements and
related notes thereto of SMI included in SMI's Form 10-K for the year ended
December 31, 1999, and quarterly report on Form 10-Q for the quarter ended July
1, 2000 and the financial statements of UMI included elsewhere in this report.
<PAGE>
STEINWAY MUSICAL INSTRUMENTS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2000
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Historical
----------------------- Pro Forma
SMI UMI Adjustments Combined
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash $ 4,273 $ 649 $ $ 4,922
Accounts receivable 75,645 40,521 (1,500)(1) 114,666
Inventories 107,336 29,520 10,400 (1) 147,256
Prepaid expenses 3,399 119 3,518
Deferred tax assets 5,951 (3,471)(1) 2,480
--------- -------- -------- ---------
Total current assets 196,604 70,809 5,429 272,842
Property, plant and equipment, net 90,046 9,828 9,500 (1) 109,374
Other assets, net 11,677 727 1,301 (1) 13,705
Deferred financing costs 4,070 3,800 (3) 7,870
Cost in excess of fair value of
net assets acquired, net 29,867 29,867
--------- -------- -------- ---------
TOTAL ASSETS $ 332,264 $ 81,364 $ 20,030 $ 433,658
========= ======== ======== =========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Notes payable and current
portion of long term debt $ 8,980 $ 28,893 $(28,893)(2) $ 8,980
Accounts payable 6,600 4,122 10,722
Other current liabilities 28,802 4,986 (507)(4) 33,281
--------- -------- -------- ---------
Total current liabilities 44,382 38,001 (29,400) 52,983
Long-term debt 149,570 26,127 61,593 (2) 237,290
Deferred tax liabilities 20,342 1,565 3,705 (1) 25,612
Non-current pension liabilities 11,961 596 12,557
--------- -------- -------- ---------
Total liabilities 226,255 66,289 35,898 328,442
--------- -------- -------- ---------
Stockholders' equity:
Common stock 9 1 (1) 9
Additional paid in capital 71,229 71,229
Retained earnings 58,208 14,740 (15,533)(5) 57,415
Accumulated other
comprehensive income (9,485) 334 (334) (9,485)
Treasury stock, at cost (13,952) (13,952)
--------- -------- -------- ---------
Total stockholders' equity 106,009 15,075 (15,868) 105,216
--------- -------- -------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 332,264 $ 81,364 $ 20,030 $ 433,658
========= ======== ======== =========
</TABLE>
<PAGE>
STEINWAY MUSICAL INSTRUMENTS, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(In Thousands Except Share and Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Historical
----------------------- Pro Forma
SMI UMI Adjustments Combined
----------- ------- ----------- ----------
<S> <C> <C> <C> <C>
Sales $ 165,599 $33,930 $ $ 199,529
Cost of sales 114,061 22,763 208 (6) 137,032
----------- ------- ------- ----------
Gross profit 51,538 11,167 (208) 62,497
Operating expenses 28,907 6,755 61 (7) 35,723
----------- ------- ------- ----------
Income from operations 22,631 4,412 (269) 26,774
Interest expense, net 6,967 1,492 983 (8) 9,442
Other income, net (676) 19 (657)
----------- ------- ------- ----------
Other expense, net 6,291 1,511 983 8,785
Income before income taxes 16,340 2,901 (1,252) 17,989
Provision for income taxes 6,620 1,377 (488)(9) 7,509
----------- ------- ------- ----------
Net income $ 9,720 $ 1,524 $ (764) $ 10,480
=========== ======= ======= ==========
Net income per share:
Basic $ 1.09 $ 1.18
=========== ==========
Diluted $ 1.09 $ 1.18
=========== ==========
Weighted average shares:
Basic 8,915,569 8,915,569
=========== ==========
Diluted 8,915,589 8,915,589
=========== ==========
</TABLE>
<PAGE>
STEINWAY MUSICAL INSTRUMENTS, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(In Thousands Except Share and Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Historical
----------------------- Pro Forma
SMI UMI Adjustments Combined
----------- ------- ----------- ----------
<S> <C> <C> <C> <C>
Sales $ 304,636 $ 63,454 $ $ 368,090
Cost of sales 203,888 42,679 1,355 (6) 247,922
----------- -------- ------- ----------
Gross profit 100,748 20,775 (1,355) 120,168
Operating expenses 59,608 12,463 1,423 (7) 73,494
----------- -------- ------- ----------
Income from operations 41,140 8,312 (2,778) 46,674
Interest expense, net 13,276 2,228 2,048 (8) 17,552
Other income, net (1,881) (401) (2,282)
----------- -------- ------- ----------
Other expense, net 11,395 1,827 2,048 15,270
Income before income taxes 29,745 6,485 (4,826) 31,404
Provision for income taxes 12,400 2,494 (1,882)(9) 13,012
----------- -------- ------- ----------
Net income $ 17,345 $ 3,991 $(2,944) $ 18,392
=========== ======== ======= ==========
Net income per share:
Basic $ 1.88 $ 2.00
=========== ==========
Diluted $ 1.87 $ 1.98
=========== ==========
Weighted average shares:
Basic 9,213,145 9,213,145
=========== ==========
Diluted 9,277,798 9,277,798
=========== ==========
</TABLE>
<PAGE>
STEINWAY MUSICAL INSTRUMENTS, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(In Thousands)
(1) The acquisition of UMI has been accounted for as a purchase. The total
purchase cost will be allocated to UMI's assets and liabilities based on
their relative fair values as of the closing date.
<TABLE>
<S> <C>
Purchase cost of equity $ 27,200
Transaction costs 400
--------
Total purchase cost 27,600
Book value of net assets acquired 15,075
--------
Excess of purchase cost over net book value of assets acquired $ 12,525
========
Allocated to:
Inventory $ 10,400
Accounts Receivable (1,500)
Property, plant and equipment 9,500
Other assets 1,301
Current deferred income taxes (3,471)
Non-current deferred income taxes (3,705)
--------
Total $ 12,525
========
</TABLE>
(2) Reflects the repayment of UMI's existing debt with proceeds from the
Company's Second Amended and Restated Credit Agreement.
(3) Reflects deferred financing costs related to the acquisition.
(4) Reflects tax benefit associated with one-time expenses relating to the
acquisition at an incremental tax rate of 39%.
(5) Reflects adjustments to retained earnings as follows:
<TABLE>
<S> <C>
Elimination of UMI retained earnings $(14,740)
One-time acquisition related expenses, net of tax (793)
--------
$(15,533)
========
</TABLE>
<PAGE>
STEINWAY MUSICAL INSTRUMENTS, INC.
NOTES TO UNAUDITED PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended Six Months
December 31, Ended June 30,
1999 2000
------------ --------------
<S> <C> <C>
(6) Reflects an increase in cost of sales from:
Increased inventory values resulting from the
application of purchase accounting $ 125 $ --
Reversal of the LIFO adjustment for the year 813 --
Additional depreciation of buildings and equipment 417 208
------ ------
$1,355 $ 208
====== ======
(7) Reflects adjustments to operating expenses as follows:
Amortization of deferred financing costs $ 605 $ 303
One-time expenses relating to the acquisition 1,300 --
Management and director's fees of the previous
owner eliminated as a result of the acquisition (482) (242)
------ ------
Net adjustments $1,423 $ 61
====== ======
</TABLE>
(8) Reflects additional interest expense as a result of the acquisition.
(9) Reflects the tax effect of the pro forma adjustments at an incremental
tax rate of 39%.
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