Attached files
file | filename |
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8-K - FORM 8-K - ROBBINS & MYERS, INC. | l41545e8vk.htm |
EX-99.4 - EX-99.4 - ROBBINS & MYERS, INC. | l41545exv99w4.htm |
EX-99.3 - EX-99.3 - ROBBINS & MYERS, INC. | l41545exv99w3.htm |
EX-23.1 - EX-23.1 - ROBBINS & MYERS, INC. | l41545exv23w1.htm |
EX-99.1 - EX-99.1 - ROBBINS & MYERS, INC. | l41545exv99w1.htm |
EX-99.2 - EX-99.2 - ROBBINS & MYERS, INC. | l41545exv99w2.htm |
Exhibit 99.5
ROBBINS &
MYERS AND T-3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
The following unaudited pro forma condensed combined financial
statements and related notes combine the historical consolidated
balance sheets and results of operations of Robbins &
Myers, Inc. (Robbins & Myers) and T-3 Energy
Services, Inc. (T-3). The unaudited pro forma condensed combined
balance sheet gives effect to the merger as if it had occurred
on November 30, 2010 and combines Robbins &
Myers November 30, 2010 unaudited consolidated balance
sheet with
T-3s
September 30, 2010 unaudited consolidated balance sheet.
The unaudited pro forma condensed combined statement of income
for the fiscal year ended August 31, 2010 gives effect to
the merger as if it had occurred on September 1, 2009, the
first day of Robbins & Myers 2010 fiscal year
and combines Robbins & Myers audited
consolidated statement of income for the fiscal year ended
August 31, 2010 with T-3s unaudited consolidated
statements of income for the four fiscal quarters ended
September 30, 2010. The unaudited pro forma condensed combined statement of income for the three month period
ended November 30, 2010, also gives effect to the merger as if it had occurred on September 1, 2009 and combines
Robbins & Myers unaudited consolidated statement of income for the three months ended November 30, 2010
with T-3s unaudited consolidated statement of income for the
three month period ended September 30, 2010.
Prior to completion of the merger on January 10, 2011,
T-3s fiscal year end was
December 31.
The historical consolidated financial information of
Robbins & Myers and T-3 has been adjusted in the
unaudited pro forma condensed combined financial statements to
give effect to pro forma events that are (1) directly
attributable to the merger, (2) factually supportable, and
(3) with respect to the statements of income, expected to
have a continuing impact on the combined results. The unaudited
pro forma condensed combined financial information should be
read in conjunction with the accompanying notes to the unaudited
pro forma condensed combined financial statements. In addition,
the unaudited pro forma condensed combined financial information
was based on and should be read in conjunction with the
following historical consolidated financial statements and
accompanying notes of Robbins & Myers and T-3 for the
applicable periods:
| Separate historical consolidated financial statements of Robbins & Myers as of and for the year ended August 31, 2010 and the related notes included in Robbins & Myers Annual Report on Form 10-K/A for the year ended August 31, 2010, for the retrospective application of accounting standards adopted by Robbins & Myers in 2010; | |
| Separate historical consolidated financial statements of Robbins & Myers as of and for the three months ended November 30, 2010 and the related notes included in Robbins & Myers Quarterly Report on Form 10-Q for the period ended November 30, 2010; | |
| Separate historical consolidated financial statements of T-3 as of and for the year ended December 31, 2009 and the related notes included in T-3s Annual Report on Form 10-K for the year ended December 31, 2009; and | |
| Separate historical consolidated financial statements of T-3 as of and for the nine months ended September 30, 2010 and the related notes included in T-3s Quarterly Report on Form 10-Q for the period ended September 30, 2010. |
The unaudited pro forma condensed combined financial information
has been presented for illustrative purposes only and is not
intended to represent or be indicative of what the combined
companys financial position or results of operations
actually would have been had the merger been completed as of the
dates indicated. In addition, the unaudited pro forma condensed
combined financial information does not purport to project the
future financial position or operating results of the combined
company. There were no material transactions between
Robbins & Myers and T-3 during the periods presented
in the unaudited pro forma condensed combined financial
statements that would need to be eliminated.
The unaudited pro forma condensed combined financial information
has been prepared using the acquisition method of accounting
under existing GAAP standards, which are subject to change and
interpretation. Robbins & Myers has been treated as
the acquirer in the merger for accounting purposes. The
acquisition accounting is dependent upon certain valuations and
other studies that have yet to commence or progress to a stage
where there is sufficient information for a definitive
measurement. Robbins & Myers intends to commence the
valuations and other studies rapidly upon completion of the
merger and will finalize the purchase price allocation as soon
as practicable within the measurement period in accordance with
ASC 805 Business Combinations, but in no
event later than one year following the acquisition date. The
assets and liabilities of T-3 have been measured based on
various preliminary estimates using assumptions that
Robbins & Myers believes are reasonable based on
information that is currently available. Under the HSR Act and
1
other relevant laws and regulations, before the closing of the
merger, there were significant limitations regarding what
Robbins & Myers could learn about T-3. Accordingly, the
pro forma adjustments are preliminary and have been made solely
for the purpose of providing unaudited pro forma condensed
combined financial statements prepared in accordance with the
rules and regulations of the Securities and Exchange Commission.
Differences between these preliminary estimates and the final
acquisition accounting will occur and these differences could
have a material impact on the accompanying unaudited pro forma
condensed combined financial statements and the combined
companys future results of operations and financial
position.
The unaudited pro forma combined financial information does not
reflect any cost savings, operating synergies or revenue
enhancements that the combined company may achieve as a result
of the merger or the costs to combine the operations of
Robbins & Myers and T-3 or the costs necessary to
achieve these cost savings, operating synergies and revenue
enhancements.
2
ROBBINS &
MYERS AND T-3
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR
THE TWELVE MONTHS ENDED AUGUST 31, 2010
Robbins & |
Pro Forma |
Pro Forma |
||||||||||||||||||
Myers | T-3 | Reclassifications | Adjustments | Combined | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Sales
|
$ | 584,694 | 199,963 | $ | (36 | )(A) | $ | 784,621 | ||||||||||||
Cost of sales
|
387,746 | 130,108 | (1,667 | )(B) | $ | 467 | (D) | 516,654 | ||||||||||||
Gross profit
|
196,948 | 69,855 | 1,631 | (467 | ) | 267,967 | ||||||||||||||
Selling, general and administrative expenses
|
143,306 | 52,641 | 1,255 | (A)(B)(C) | 7,400 | (E) | 204,602 | |||||||||||||
Equity (income) expense
|
(1,246 | ) | (1,246 | ) | ||||||||||||||||
Other expense (income)
|
2,764 | 2,764 | ||||||||||||||||||
Income before interest, income taxes and noncontrolling interest
|
50,878 | 18,460 | 376 | (7,867 | ) | 61,847 | ||||||||||||||
Interest (income) expense, net
|
195 | 669 | (25 | )(C) | 848 | (F) | 1,687 | |||||||||||||
Other (income)
|
(401 | ) | 401 | (C) | ||||||||||||||||
Income before income taxes and noncontrolling interest
|
50,683 | 18,192 | (8,715 | ) | 60,160 | |||||||||||||||
Income tax expense
|
16,536 | 5,047 | (3,312 | )(G) | 18,271 | |||||||||||||||
Net income including noncontrolling interest
|
34,147 | 13,145 | (5,403 | ) | 41,889 | |||||||||||||||
Less: Net income attributable to noncontrolling interest
|
950 | 950 | ||||||||||||||||||
Net income from continuing controlling operations
|
$ | 33,197 | $ | 13,145 | $ | (5,403 | ) | $ | 40,939 | |||||||||||
Net income per share from continuing controlling operations:
|
||||||||||||||||||||
Basic
|
$ | 1.01 | $ | 1.01 | $ | 0.91 | ||||||||||||||
Diluted
|
$ | 1.01 | $ | 1.00 | $ | 0.90 | ||||||||||||||
Weighted average common shares outstanding:
|
||||||||||||||||||||
Basic
|
32,924 | 12,984 | 44,875 | (H) | ||||||||||||||||
Diluted
|
33,004 | 13,140 | 45,330 | (H) | ||||||||||||||||
See the accompanying notes to unaudited pro forma condensed
combined financial statements which are integral part of these
statements. The pro forma reclassifications and adjustments are
explained in Notes 6 and 7.
3
ROBBINS &
MYERS AND T-3
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR
THE THREE MONTHS ENDED NOVEMBER 30, 2010
Robbins & |
Pro Forma |
Pro Forma |
||||||||||||||||||
Myers | T-3 | Reclassifications | Adjustments | Combined | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
Sales
|
$ | 163,949 | $ | 54,091 | $ | (13 | )(A) | $ | 218,027 | |||||||||||
Cost of sales
|
101,778 | 35,505 | (514 | )(B) | $ | 117 | (D) | 136,886 | ||||||||||||
Gross profit
|
62,171 | 18,586 | 501 | (117 | ) | 81,141 | ||||||||||||||
Selling, general and administrative expenses
|
37,975 | 13,122 | 385 | (A)(B)(C) | 1,850 | (E) | 53,332 | |||||||||||||
Equity (income) expense
|
(437 | ) | (437 | ) | ||||||||||||||||
Income before interest, income taxes and noncontrolling interest
|
24,196 | 5,901 | 116 | (1,967 | ) | 28,246 | ||||||||||||||
Interest (income) expense, net
|
(25 | ) | 147 | (5 | )(C) | 212 | (F) | 329 | ||||||||||||
Other (income)
|
(121 | ) | 121 | (C) | ||||||||||||||||
Income before income taxes and noncontrolling interest
|
24,221 | 5,875 | (2,179 | ) | 27,917 | |||||||||||||||
Income tax expense
|
9,129 | 1,393 | (828 | )(G) | 9,694 | |||||||||||||||
Net income including noncontrolling interest
|
15,092 | 4,482 | (1,351 | ) | 18,223 | |||||||||||||||
Less: Net income attributable to noncontrolling interest
|
396 | 396 | ||||||||||||||||||
Net income from continuing controlling operations
|
$ | 14,696 | $ | 4,482 | $ | (1,351 | ) | $ | 17,827 | |||||||||||
Net income per share from continuing controlling operations:
|
||||||||||||||||||||
Basic
|
$ | 0.45 | $ | 0.34 | $ | 0.40 | ||||||||||||||
Diluted
|
$ | 0.44 | $ | 0.34 | $ | 0.39 | ||||||||||||||
Weighted average common shares outstanding:
|
||||||||||||||||||||
Basic
|
32,971 | 13,136 | 44,922 | (H) | ||||||||||||||||
Diluted
|
33,087 | 13,255 | 45,443 | (H) | ||||||||||||||||
See the accompanying notes to unaudited pro forma condensed
combined financial statements which are integral part of these
statements. The pro forma reclassifications and adjustments are
explained in Notes 6 and 7.
4
ROBBINS &
MYERS AND T-3
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS
OF NOVEMBER 30, 2010
Robbins & |
Pro Forma |
Pro Forma |
||||||||||||||||||
Myers | T-3 | Reclassifications | Adjustments | Combined | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
ASSETS
|
||||||||||||||||||||
Current Assets:
|
||||||||||||||||||||
Cash and cash equivalents
|
$ | 144,209 | $ | 6,720 | $ | (113,275 | )(I) | $ | 37,654 | |||||||||||
Accounts receivable
|
123,687 | 38,159 | 161,846 | |||||||||||||||||
Inventories
|
112,453 | 68,945 | 18,000 | (J) | 199,398 | |||||||||||||||
Other current assets
|
7,521 | 4,259 | 11,780 | |||||||||||||||||
Deferred taxes
|
14,290 | 3,660 | 17,950 | |||||||||||||||||
Total Current Assets
|
402,160 | 121,743 | (95,275 | ) | 428,628 | |||||||||||||||
Goodwill
|
265,651 | 88,871 | 298,312 | (L) | 652,834 | |||||||||||||||
Other Intangible Assets
|
3,765 | 30,260 | 86,000 | (M) | 120,025 | |||||||||||||||
Deferred Taxes
|
34,589 | 26 | 34,615 | |||||||||||||||||
Other Assets
|
9,568 | 6,103 | (475 | )(N) | 15,196 | |||||||||||||||
Property, Plant and Equipment
|
126,776 | 49,755 | 7,000 | (K) | 183,531 | |||||||||||||||
$ | 842,509 | $ | 296,758 | $ | 295,562 | $ | 1,434,829 | |||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||
Current Liabilities:
|
||||||||||||||||||||
Accounts payable
|
$ | 66,249 | $ | 17,642 | $ | $ | 83,891 | |||||||||||||
Accrued expenses
|
88,032 | 13,382 | 101,414 | |||||||||||||||||
Deferred taxes
|
3,797 | 3,797 | ||||||||||||||||||
Current portion of long-term debt
|
140 | 140 | ||||||||||||||||||
Total Current Liabilities
|
158,218 | 31,024 | 189,242 | |||||||||||||||||
Long-Term Debt, Less Current Portion
|
98 | 98 | ||||||||||||||||||
Deferred Taxes
|
42,738 | 8,692 | 42,000 | (O) | 93,430 | |||||||||||||||
Other Long-Term Liabilities
|
131,583 | 746 | 132,329 | |||||||||||||||||
Shareholders Equity:
|
||||||||||||||||||||
Common stock-without par value:
|
||||||||||||||||||||
Common Stock
|
154,184 | 13 | 516,570 | (P) | 670,767 | |||||||||||||||
Warrants
|
17 | 258 | (P) | 275 | ||||||||||||||||
Additional paid-in capital
|
188,260 | (188,260 | )(Q) | |||||||||||||||||
Retained earnings
|
385,489 | 66,044 | (73,044 | )(R) | 378,489 | |||||||||||||||
Accumulated other comprehensive (loss) income:
|
||||||||||||||||||||
Foreign currency translation
|
(97 | ) | 1,962 | (1,962 | )(Q) | (97 | ) | |||||||||||||
Pension liability
|
(45,267 | ) | (45,267 | ) | ||||||||||||||||
Total
|
(45,364 | ) | 1,962 | (1,962 | ) | (45,364 | ) | |||||||||||||
Total Controlling Equity
|
494,309 | 256,296 | 253,562 | 1,004,167 | ||||||||||||||||
Noncontrolling Interest
|
15,563 | 15,563 | ||||||||||||||||||
Total Equity
|
509,872 | 256,296 | 253,562 | 1,019,730 | ||||||||||||||||
$ | 842,509 | $ | 296,758 | $ | 295,562 | $ | 1,434,829 | |||||||||||||
See the accompanying notes to unaudited pro forma condensed
combined financial statements which are an integral part of
these statements. The pro forma adjustments are explained in
Note 8.
5
ROBBINS &
MYERS AND T-3
NOTES TO
THE UNAUDITED PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS
1. | Description of Transaction: |
On January 10, 2011, Robbins & Myers completed its
acquisition of T-3 by means of a merger pursuant to the terms of
an Agreement and Plan of Merger, dated October 6, 2010 (the
Merger Agreement), and T-3 became a wholly-owned
subsidiary of Robbins & Myers. Upon completion of the merger, each
share of T-3 Common Stock issued and outstanding immediately
prior to the completion of the merger was converted into the
right to receive 0.894 Common Shares of Robbins &
Myers, plus $7.95 in cash, without interest, with cash also paid
in lieu of fractional shares. Based on the closing price of
Robbins & Myers Common Shares on January 7,
2011, the consideration received by
T-3 shareholders in the merger had a value of approximately
$44.76 per T-3 share, or approximately $623 million in
the aggregate. The transaction is expected to qualify as a
reorganization within the meaning of
Section 368(a) of the Code.
Upon completion of the merger, each outstanding option to
purchase T-3 Common Stock was fully vested and
converted pursuant to the Merger Agreement into an option to
acquire Robbins & Myers Common Shares on the same
terms and conditions as were in effect immediately prior to the
completion of the merger. The number of shares of
Robbins & Myers Common Shares subject to each
converted T-3 stock option was determined by multiplying the
number of shares of T-3 Common Stock subject to such option
immediately prior to the completion of the merger by 1.192, and
rounding down to the nearest whole share. The exercise price per
share of each converted T-3 stock option was determined by
dividing the per share exercise price of such option by 1.192,
and rounding up to the nearest whole cent (each option, as so
adjusted, an adjusted option). The fair value of the
adjusted options will be recorded as part of the purchase
consideration transferred, as detailed in Note 4, Estimate
of Consideration Expected to be Transferred.
All T-3 restricted shares that did not become fully vested upon
execution of the Merger Agreement became fully vested and
converted into the merger consideration in connection with the
merger in the same manner as all other shares of T-3 Common
Stock.
2. | Basis of Presentation: |
The merger will be accounted for under the acquisition method of
accounting in accordance with ASC Topic 805, Business
Combinations (ASC 805).
Robbins & Myers will account for the transaction by
using Robbins & Myers historical information and
accounting policies and adding the assets and liabilities of T-3
as of the completion date of the merger at their respective fair
values. Pursuant to ASC 805, under the acquisition method,
the total estimated purchase price (consideration transferred)
as described in Note 4, Estimate of Consideration Expected
to be Transferred, will be measured at the closing date of the
merger using the market price of Robbins & Myers
Common Shares at that time. The assets and liabilities of T-3
have been measured based on various preliminary
6
ROBBINS &
MYERS AND T-3
NOTES TO
THE UNAUDITED PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS (Continued)
estimates using assumptions that Robbins & Myers
management believes are reasonable utilizing information
currently available. Use of different estimates and judgments
could yield materially different results. Because of antitrust
regulations, there were limitations on the types of information
that could be exchanged between Robbins & Myers and T-3
prior to completion of the merger. Until the merger was completed,
Robbins & Myers could not have complete access to all
relevant information.
The process for estimating the fair values of identifiable
intangible assets and certain tangible assets requires the use
of significant estimates and assumptions, including estimating
future cash flows and developing appropriate discount rates. The
excess of the purchase price (consideration transferred) over
the estimated amounts of identifiable assets and liabilities of
T-3 as of the effective date of the merger will be allocated to
goodwill in accordance with ASC 805. The purchase price
allocation is subject to finalization of Robbins &
Myers analysis of the fair value of the assets and
liabilities of T-3 as of the effective date of the merger.
Accordingly, the purchase price allocation in the unaudited pro
forma condensed combined financial statements is preliminary and
will be adjusted upon completion of the final valuation. Such
adjustments could be material.
For purposes of measuring the estimated fair value of the assets
acquired and liabilities assumed as reflected in the unaudited
pro forma condensed combined financial statements,
Robbins & Myers used the guidance in ASC Topic 820,
Fair Value Measurement and Disclosure
(ASC 820), which established a framework for
measuring fair values. ASC 820 defines fair value as the
price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market
participants at the measurement date (an exit price). Market
participants are assumed to be buyers and sellers in the
principal (most advantageous) market for the asset or liability.
Additionally, under ASC 820, fair value measurements for an
asset assume the highest and best use of that asset by market
participants. As a result, Robbins & Myers may be
required to value assets of T-3 at fair value measures that do
not reflect Robbins & Myers intended use of
those assets. Use of different estimates and judgments could
yield different results.
Under ASC 805, acquisition-related transaction costs (e.g.,
investment banker, advisory, legal, valuation, and other
professional fees) and certain acquisition restructuring and
related charges are not included as a component of consideration
transferred but are required to be expensed as incurred. The
unaudited pro forma condensed combined balance sheet reflects
the $7.0 million of anticipated acquisition-related
transaction costs of both companies as a reduction of cash with
a corresponding decrease in retained earnings. These costs are
not presented in the unaudited pro forma condensed combined
statement of income because they will not have a continuing
impact on the combined results.
The unaudited pro forma condensed combined financial statements
do not reflect the expected realization of $9.0 million in
annual cost savings by the end of Robbins & Myers 2012
fiscal year. These savings are expected from selling, general
and administrative functions, procurement of materials and
freight, as well as distribution and plant facility
consolidation. Although Robbins & Myers management
expects that costs savings will result from the merger, there
can be no assurance that these cost savings will be achieved.
The unaudited pro forma condensed combined financial statements
do not reflect estimated restructuring and integration charges
associated with the expected cost savings, which are estimated
to be approximately $7.0 million over the period from the
date of the closing through the end of Robbins & Myers
2012 fiscal year, with the vast majority expected to be
recognized in earnings in Robbins & Myers fiscal year
ending August 31, 2011. Such restructuring and integration
charges will be expensed in the appropriate accounting periods
following the completion of the merger in accordance with
applicable GAAP standards (ASC 420, Exit or Disposal
Cost Obligations).
7
ROBBINS &
MYERS AND T-3
NOTES TO
THE UNAUDITED PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS (Continued)
3. | Accounting Policies: |
Upon completion of the merger, Robbins & Myers will
perform a detailed review of T-3s accounting policies. As
a result of that review, Robbins & Myers may identify
differences between the accounting policies of the two companies
that, when conformed, could have a material impact on the
consolidated financial statements of the combined company.
4. | Estimate of Consideration Expected to be Transferred: |
The following is a preliminary estimate of consideration
expected to be transferred to effect the acquisition of T-3:
Number of shares of T-3 Common Stock outstanding as of
January 10, 2011
|
13,367,968 | |||
Multiplied by Robbins & Myers stock price as of
January 7, 2011 multiplied by the exchange ratio of 0.894
|
$ | 492,140,672 | ||
Add cash portion of merger consideration
|
106,275,346 | |||
$ | 598,416,018 | |||
Fair value of the vested and unvested stock options pertaining
to pre-merger service issued to replace existing grants at
closing(a)
|
24,442,298 | |||
Fair value of warrants issued to replace existing T-3
warrants
|
274,738 | |||
Estimate of consideration expected to be transferred(b)
|
$ | 623,133,054 | ||
(a) | Represents the fair value of T-3 stock options for pre-merger services. ASC 805 requires that the fair value of replacement awards attributable to pre-merger service be included in the consideration transferred. The fair value of the Robbins & Myers equivalent stock options was estimated as of January 7, 2011 to be $24.4 million using the Black-Scholes valuation model utilizing the assumptions noted below. |
Assumptions
used for the valuation of T-3 stock options:
Stock price
|
$41.18 | |
Post conversion strike price
|
$4.87 - $57.92 | |
Average expected volatility
|
50% | |
Dividend yield
|
0.4% | |
Average risk-free interest rate
|
2.65% | |
Average expected term
|
7.0 yrs | |
Black-Scholes average value per option
|
$25.33 |
The expected volatility of the Robbins & Myers stock price is based on two equally weighted components: the first component is the average historical volatility which is based on daily observations and a duration consistent with the expected life assumption; the second component is the market implied volatility of Robbins & Myers traded options. The average expected term of the option is based on historical employee stock option exercise behavior as well as the remaining contractual exercise term. The risk free interest rate is based on U.S. treasury securities with maturities equal to the expected life of the option. | ||
(b) | The estimated consideration transferred is reflected in these unaudited pro forma condensed combined financial statements. In accordance with ASC 805, the fair value of equity securities issued as part of the consideration transferred was measured on the closing date of the merger at the then-current market price and was $41.18 per share. |
8
ROBBINS &
MYERS AND T-3
NOTES TO
THE UNAUDITED PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS (Continued)
5. | Estimate of the Assets to be Acquired and Liabilities to be Assumed: |
The following is an estimate of the assets to be
acquired and the liabilities to be assumed by
Robbins & Myers in the merger, reconciled to the
estimate of consideration expected to be transferred:
(In thousands) | ||||
Net book value of net assets acquired
|
$ | 256,296 | ||
Less: T-3 historical intangible assets
|
(30,260 | ) | ||
Less: T-3 historical goodwill
|
(88,871 | ) | ||
Adjusted book value of net assets acquired
|
$ | 137,165 | ||
Adjustments to:
|
||||
Inventory
|
18,000 | |||
Property, plant and equipment
|
7,000 | |||
Identifiable intangible assets
|
116,260 | |||
Other assets
|
(475 | ) | ||
Long term deferred tax liabilities
|
(42,000 | ) | ||
Goodwill
|
387,183 | |||
Total adjustments
|
$ | 485,968 | ||
Estimate of consideration expected to be transferred
|
$ | 623,133 | ||
The following is a discussion of the adjustments made to
T-3s assets and liabilities in connection with the
preparation of these unaudited pro forma condensed combined
financial statements.
Inventory: As of the effective time of the
merger, inventories are required to be measured at fair value.
The adjustment to inventory is comprised of an
$18.0 million increase to adjust the inventory to fair
market value (inventory
step-up).
To estimate the required inventory
step-up
adjustment, Robbins & Myers utilized the T-3
disclosure of the elements of inventory in its third quarter
2010
Form 10-Q.
Additionally the
estimated selling prices and selling and distribution costs used
in determining the fair value were estimated using T-3
historical results and Robbins & Myers
experience with operating similar businesses. The ultimate
adjustment to the inventory may vary once more information is
available.
Property, plant and equipment: As of the
effective time of the merger, property, plant and equipment is
required to be measured at fair value, unless those assets are
classified as
held-for-sale
on the acquisition date. The acquired assets can include assets
that are not intended to be used or sold, or that are intended
to be used in a manner other than their highest and best use.
Robbins & Myers does not have sufficient information
at this time as to the specific types, nature, age, condition or
location of these assets nor does it know the appropriate
valuation premise, as the valuation premise requires a certain
level of knowledge about the assets being evaluated as well as a
profile of the associated market participants. All of these
elements can cause differences between fair value and net book
value. For purposes of these unaudited pro forma condensed
combined financial statements, Robbins & Myers
considered other comparable acquisition transactions and
estimated that the fair market adjustment to increase property,
plant and equipment would approximate
9
ROBBINS &
MYERS AND T-3
NOTES TO
THE UNAUDITED PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS (Continued)
$7.0 million. The estimate of fair value is preliminary and
subject to change and could vary materially from the actual
adjustment on the closing date. The estimated remaining useful
life of the underlying assets is estimated to range from 7 to
12 years.
Identifiable intangible assets: As of the
effective time of the merger, identifiable intangible assets are
required to be measured at fair value and these acquired assets
could include assets, that are not intended to be used or sold
or that are intended to be used in a manner other than their
highest and best use. For purposes of these unaudited pro forma
combined financial statements, it is assumed that all assets
will be used and that all assets will be used in a manner that
represents the highest and best use of those assets, but it is
not assumed that any market participant synergies will be
achieved. The consideration of synergies has been excluded
because they are not considered to be factually supportable,
which is a required condition for these pro forma adjustments.
The fair value of identifiable intangible assets is determined
primarily using the income approach, which requires
an estimate or forecast of all the expected future cash flows
either through the use of the royalty method or the excess
earnings method.
At this time, Robbins & Myers does not have sufficient
information as to the amount, timing and risk of cash flows for
the purposes of valuing the identifiable intangible assets. Some
of the more significant assumptions inherent in the development
of the intangible asset values, from the perspective of a market
participant, include: the amount and time of projected future
cash flows (including revenue, cost of sales, sales and
marketing expenses, and working capital/contributory asset
charges); the discount rate selected to measure the risks
inherent in the future cash flows; and the assessment of the
assets life cycle and the competitive trends impacting the
asset, as well as other factors. However, for purposes of these
unaudited pro forma condensed combined financial statements and
using publicly available information, such as historical product
revenues, T-3s cost structure, and certain other
high-level assumptions, the fair value of the identifiable
intangible assets and their weighted-average useful lives have
been estimated as follows:
Weighted |
||||||
Average |
||||||
Estimated |
||||||
Estimated |
Useful Life |
|||||
Fair Value | (Yrs.) | |||||
(In thousands) | ||||||
Tradenames (definite-lived)
|
$ | 8,000 | 5-15 | |||
Customer relationships
|
102,000 | 12 | ||||
Other intangible assets
|
6,260 | 10 | ||||
$ | 116,260 | |||||
The estimated impact of the amortization expense on operating
results of these identifiable intangible assets for the first
five years following the acquisition is as follows (in
thousands):
Year 1
|
Year 2 | Year 3 | Year 4 | Year 5 | Thereafter | |||||||||||||||||
$ | 9,700 | $ | 9,700 | $ | 9,700 | $ | 9,700 | $ | 9,700 | $ | 67,760 |
These preliminary estimates of fair value and estimated useful
life will likely be different from the final acquisition
accounting, and the differences could have a material impact on
the accompanying unaudited pro forma condensed combined
financial statements. A 20% change in the valuation of definite
lived intangible assets would cause a corresponding
$1.5 million increase or decrease in amortization during
the first year of the merger. Once Robbins & Myers has
full access to the specifics of T-3s intangible assets,
additional insight will be gained that could impact:
(i) the estimated total value assigned to intangible
assets,
and/or
(ii) the estimated weighted-average useful life of each
category of intangible assets. The estimated intangible asset
10
ROBBINS &
MYERS AND T-3
NOTES TO
THE UNAUDITED PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS (Continued)
values and their useful lives could be impacted by a variety of
factors that may become known to Robbins & Myers only
upon access to additional information
and/or by
changes in such factors that occurred prior to the effective
time of the merger.
Other assets: T-3 has $475,000 of unamortized
debt issuance costs which has been adjusted to zero in the
unaudited pro forma condensed combined financial statements
because there are no future economic benefits associated with
these assets. See Note 8, Adjustments to Unaudited Pro
Forma Condensed Combined Balance Sheet, Item N.
Other long term liabilities: As of the
effective time of the merger, adjustments will be made for
deferred taxes as part of the accounting for the acquisition.
The $42.0 million deferred tax adjustment included in long
term deferred tax liabilities above reflects the estimated
deferred tax liability impact of the acquisition on the balance
sheet, primarily related to estimated fair value adjustments for
acquired inventory, property, plant and equipment, and
intangibles. For purposes of these pro forma financial
statements, deferred taxes are provided at the combined 38%
U.S. federal statutory and estimated state income tax
rates. This rate does not reflect Robbins &
Myers effective tax rate, which includes other tax items,
such as foreign taxes, as well as other tax charges or benefits,
and does not take into account any historical or possible future
tax events that may impact the combined company. When
additional information becomes available, it is
likely the applicable income tax rate will change. See
Note 8, Adjustments to Unaudited Pro Forma Condensed
Combined Balance Sheet, Item O.
Contingencies: As of the effective time of the
merger, except as specifically precluded by GAAP, contingencies
are required to be measured at fair value, if the
acquisition-date fair value of the asset or liability arising
from a contingency can be determined. If the acquisition-date
fair value of the asset or liability cannot be determined, the
asset or liability would be recognized at the acquisition date
if both of the following criteria were met: (i) it is
probable that an asset existed or that a liability had been
incurred at the acquisition date, and (ii) the amount of
the asset or liability can be reasonably estimated. These
criteria are to be applied using the guidance in ASC Topic 405,
Contingencies (ASC 405). As disclosed in
T-3s Quarterly Report on
Form 10-Q
for the period ended September 30, 2010, T-3 is involved in product liability
claims, environmental matters and other legal proceedings.
However, Robbins & Myers does not have sufficient
information at this time to evaluate if the fair value of these
contingencies can be determined and, if determinable, to value
them under a fair value standard. This valuation effort would
require intimate knowledge of complex legal matters and
associated defense strategies, which could not occur prior to the
closing date. As required, T-3 currently accounts for these
contingencies under ASC Topic 405. Since T-3s management,
unlike Robbins & Myers management, had full and
complete access to relevant information about these
contingencies, Robbins & Myers believes that it has no
basis for modifying T-3s current application of these
standards. Therefore, for the purpose of these unaudited pro
forma condensed combined financial statements,
Robbins & Myers has not adjusted the T-3 book values
for contingencies. This assessment is preliminary and subject to
change.
In addition, T-3 has recorded provisions for uncertain tax
positions, as disclosed in T-3s Annual Report on
Form 10-K
for the year ended December 31, 2009. Income
taxes are exceptions to both the recognition and fair value
measurement principles of ASC 805, as amended, and continue
to be accounted for under the guidance in ASC Topic 740,
Income Taxes (ASC 740). As such, the combined
company would continue to account for T-3s uncertain tax
positions using ASC 740. Robbins & Myers
currently has no basis for modifying T-3s current
application of these standards due to the fact it has not had
access to the underlying details and documentation which T-3
management considered in exercising its judgment to establish
the provisions for uncertain tax positions. Accordingly, for the
purpose of these unaudited pro forma condensed combined
financial statements, Robbins & Myers has not adjusted
the T-3 book value. This assessment is preliminary and subject
to change.
11
ROBBINS &
MYERS AND T-3
NOTES TO
THE UNAUDITED PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS (Continued)
Goodwill: Goodwill is calculated as the
difference between the acquisition date fair value of the
consideration expected to be transferred and the values assigned
to the identifiable assets acquired and liabilities assumed.
Goodwill is not amortized but rather is subject to impairment
testing, on at least an annual basis.
6. | Reclassifications: |
Certain reclassifications have been made to the historical
financial statements of T-3 to conform to Robbins &
Myers presentation as follows:
Item (A): Royalty income of $36,000 for the
twelve months ended August 31, 2010 and $13,000 for the three months
ended November 30, 2010 is
included with sales in T-3s historical consolidated
statements of income. This adjustment reclassifies these amounts to
selling, general and administrative expenses.
Item (B): Research and development expense of
$1,075,000 and engineering expense of $592,000 for the twelve
months ended August 31, 2010 and $364,000 and $150,000 for the three
months ended November 30, 2010 respectively, is included in
cost of goods sold in T-3s historical consolidated
statements of income. This adjustment reclassifies these amounts
to selling, general and administrative expenses.
Item (C): Other income of $401,000 for the
twelve months ended August 31, 2010 and $121,000 for the three months
ended November 30, 2010 is
separately reported in T-3s historical consolidated
statements of income. This adjustment reclassifies these amounts to
interest (income) expense ($25,000) and selling, general and
administrative expenses ($376,000) for the twelve months ended
August 31, 2010 and ($5,000) and ($116,000) for the three months
ended November 30, 2010, respectively.
7. | Adjustments to Unaudited Pro Forma Condensed Combined Statements of Income: |
Item (D): Adjustments to cost of sales is
comprised of the following (in thousands):
Twelve Months Ended | Three Months Ended | |||||||
August 31, 2010 | November 30, 2010 | |||||||
Depreciation on property, plant and equipment fair value adjustment(a) |
$ | 467 | $ | 117 | ||||
(a) | Reflects depreciation of the estimated fair value adjustment related to T-3s manufacturing property, plant and equipment over its estimated remaining useful life of approximately 10 years. See Note 8, Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet, Item K below. |
Item (E): Adjustments to selling, general and
administrative expenses are comprised of the following (in
thousands):
Twelve Months Ended | Three Months Ended | |||||||
August 31, 2010 | November 30, 2010 | |||||||
Intangible amortization, net of T-3 historical amortization(a) |
$ | 7,167 | $ | 1,792 | ||||
Depreciation on property, plant and equipment fair value adjustment(b) |
233 | 58 | ||||||
$ | 7,400 | $ | 1,850 | |||||
(a) | Reflects the incremental amortization of the fair value adjustment related to T-3s indentifiable intangible assets over their respective useful lives. See Note 8, Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet, Item M below, and Note 5 above. | |
(b) | Reflects depreciation of the estimated fair value adjustment related to T-3s non-manufacturing property, plant and equipment over its estimated remaining useful life of approximately 10 years. See Note 8, Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet, Item K below. |
Item (F): Adjustments to interest expense, net
of interest income, are comprised of the following (in
thousands):
Twelve Months Ended | Three Months Ended | |||||||
August 31, 2010 | November 30, 2010 | |||||||
Eliminated interest income due to
cash reduction related to cash
portion of purchase
consideration(a) |
$ | 848 | $ | 212 | ||||
(a) | This adjustment relates to interest income foregone on cash portion of purchase consideration using an assumed Robbins & Myers average interest income rate of .75%. |
12
ROBBINS &
MYERS AND T-3
NOTES TO
THE UNAUDITED PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS (Continued)
Item (G): Robbins & Myers has
assumed a combined 38% tax rate when estimating the tax impacts
of the pro forma adjustments, which represents the Federal
statutory and estimated state income tax rates in effect in the
United States during the periods presented in the unaudited pro
forma condensed combined financial statements.
Item (H): The following table summarizes the
computation of the unaudited pro forma combined weighted average
basic shares outstanding and weighted average dilutive shares
outstanding (in thousands):
Three Months | ||||||||
Twelve Months Ended | Ended | |||||||
August 31, 2010 | November 30, 2010 | |||||||
Historical Robbins & Myers weighted average common shares |
32,924 | 32,971 | ||||||
T-3 shares outstanding at January 10, 2011, converted at 0.894 exchange ratio |
11,951 | 11,951 | ||||||
Weighted average basic shares outstanding |
44,875 | 44,922 | ||||||
Historical Robbins & Myers weighted average diluted
options and restricted shares/units |
80 | 116 | ||||||
Historical T-3 weighted average diluted shares
outstanding converted at 0.894 exchange ratio |
89 | 119 | ||||||
Dilution caused by vesting T-3 options upon the approval
of the merger by T-3 stockholders |
286 | 286 | ||||||
Total dilutive shares outstanding |
45,330 | 45,443 | ||||||
8. | Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet: |
Item (I): Reflects adjustments to cash
relating to the following:
(In thousands) | ||||
Estimated cash portion of purchase consideration
|
$ | (106,275 | ) | |
Estimated acquisition-related transaction costs of
Robbins & Myers and T-3
|
(7,000 | ) | ||
$ | (113,275 | ) | ||
The estimated acquisition-related transaction costs of
Robbins & Myers and T-3 are considered non-recurring
on the combined operating results and as such are not included
in the unaudited pro forma condensed combined statement of
income.
Item (J): To adjust acquired inventory to an
estimate of fair value. In the periods following consummation of
the merger, Robbins & Myers cost of sales will
reflect the increased valuation of T-3s inventory as the
acquired inventory is sold, which for purposes of these
unaudited pro forma condensed combined financial statements is
assumed will occur within the first year post-acquisition. This
is considered a non-recurring adjustment with no continuing
impact on the combined operating results and as such is not
included in the unaudited pro forma condensed combined statement
of income.
Item (K): To adjust for the estimated
difference between the book value and the fair value of net
property, plant and equipment. The pro forma adjustment to
T-3s property, plant and equipment of $7.0 million to
increase the historical net book value, was derived based on
adjustments recorded in similar acquisitions of other companies
with assets similar to T-3.
13
ROBBINS &
MYERS AND T-3
NOTES TO
THE UNAUDITED PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS (Continued)
Item (L): Reflects adjustment to goodwill as
follows:
(In thousands) | ||||
Estimated transaction goodwill
|
$ | 387,183 | ||
Eliminate T-3s historical goodwill
|
(88,871 | ) | ||
$ | 298,312 | |||
Item (M): As of the effective time of the
merger, identifiable intangible assets are required to be
measured at fair value. For purposes of these unaudited pro
forma condensed combined financial statements, it is assumed
that all assets will be used in the operations of the combined
business and that all assets will be used in a manner that
represents the highest and best use of those assets. The pro
forma adjustments to intangible assets have the impact of
recording the estimated fair value of intangible assets at the
merger date, and eliminating the T-3 historical intangible
assets.
Fair Value | Elimination | Adjustment | ||||||||||
(In thousands) | ||||||||||||
To record the estimated fair value of the following identifiable
intangible assets:
|
||||||||||||
Tradenames-estimated 5 to l5 year useful life
|
$ | 8,000 | ||||||||||
Customer relationships-estimated 12 year useful life
|
102,000 | |||||||||||
Other intangible assets-estimated 10 year useful life
|
6,260 | |||||||||||
$ | 116,260 | $ | (30,260 | ) | $ | 86,000 | ||||||
Item (N): The adjustment to other assets
represents the write off of T-3s unamortized debt issuance
costs of $475,000 because there are no future economic benefits
associated with these assets. These adjustments are considered
non-recurring adjustments with no continuing impact on the
combined operating results and as such are not included in the
unaudited pro forma condensed combined statement of income.
Item (O): The adjustment to deferred tax
liabilities represents the estimated deferred income tax
liability based on a combined U.S. federal statutory and
estimated state tax rate of 38% multiplied by the fair value
adjustments made to assets acquired and liabilities assumed,
excluding goodwill as noted below. For purposes of these
unaudited pro forma condensed combined financial statements, a
combined U.S. federal statutory and tax rate of 38% has
been used for all periods presented. This rate does not reflect
Robbins & Myers effective tax rate, which
includes other tax items such as foreign taxes as well as other
tax charges or benefits, and does not take into account any
historical or possible future tax events that may impact the
combined company. When additional
information becomes available, it is likely the applicable
income tax rate will change. The adjustment reflects the
following:
(In thousands) | ||||
Establish deferred tax liabilities (assets) for the following:
|
||||
Net increase in the basis of identified acquired intangible
assets(a)
|
$ | 32,680 | ||
Increase in the basis of inventory
|
6,840 | |||
Increase in the basis of property, plant and equipment
|
2,660 | |||
Reduction in debt issuance costs
|
(180 | ) | ||
$ | 42,000 | |||
(a) | Net of T-3s historical intangible assets, see Note 8, Item M. |
14
ROBBINS &
MYERS AND T-3
NOTES TO
THE UNAUDITED PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS (Continued)
Item (P): The adjustment to common shares
reflects adjustments for the merger consideration, at par, and
to eliminate T-3s historical common stock, at par, and warrants as
follows:
(In thousands) | ||||
Issuance of Robbins & Myers common shares based on
exchange ratio of 0.894 shares for each share of T-3 common
stock
|
$ | 516,583 | ||
Eliminate T-3s historical common stock
|
(13 | ) | ||
$ | 516,570 | |||
(In thousands) | ||||
Fair Value of T-3 Warrants based upon coversion to R&M Warrants
|
$ | 275 | ||
Eliminate T-3s historical warrants
|
(17 | ) | ||
$ | 258 | |||
Item (Q): The adjustment eliminates the
historical T-3 equity accounts.
Item (R): Reflects adjustments to retained
earnings for the following:
(In thousands) | ||||
Eliminate T-3s historical retained earnings
|
$ | (66,044 | ) | |
To record estimated non-recurring cost for acquisition related
transaction costs
|
(7,000 | ) | ||
$ | (73,044 | ) | ||
The estimated acquisition-related transaction costs of
Robbins & Myers and T-3 are considered non-recurring
adjustments with no continuing impact on the combined operating
results and as such are not included in the unaudited pro forma
condensed combined statement of income.
15