Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8-K/A - CRAWFORD UNITED Corp | crawa20200309_8ka.htm |
| EX-99.1 - EXHIBIT 99.1 - CRAWFORD UNITED Corp | ex_176461.htm |
| EX-23 - EXHIBIT 23 - CRAWFORD UNITED Corp | ex_176638.htm |
Exhibit 99.2
CRAWFORD UNITED CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED COMBINED FINANCIAL INFORMATION
On January 2, 2020, Crawford United Acquisition Company LLC, a wholly owned subsidiary of Crawford United Corporation (the “Company”), completed the acquisition of substantially all the assets MPI Products, Inc. (dba Marine Products International), an Ohio corporation and supplier of marine hose and marine accessories to boat builders and distributors (the “Seller”), pursuant to an Asset Purchase Agreement entered into as of January 1, 2020 by and among the Company, the Seller, the seller parties named therein (the “Seller Parties”) and the Seller Parties’ representative named therein. The following unaudited pro forma consolidated combined financial statements give effect to the acquisition of certain assets and certain assumed liabilities of MPI Products, Inc.
The acquisition will be a business combination accounting for in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. Accordingly, for accounting purposes, the fair value of the assets received and liabilities assumed will be recorded on the balance sheet. The difference between the purchase price and fair value of the assets acquired, net of liabilities assumed, will be recorded as goodwill and other intangible assets. The intangible assets, other than goodwill, will be amortized to expense over their estimated useful lives. Goodwill is of an indefinite life and will not be amortized but will be tested at least annually for impairment.
Acquisition-related transaction costs (i.e. advisory, legal, accounting, valuation and other professional or consulting fees) are not included as a component of consideration transferred but are accounting for as expenses in the periods in which the costs are incurred and the services are received.
The unaudited pro forma consolidated combined balance sheet as of December 31, 2019 and unaudited pro forma consolidated combined statements of operations for the year ended December 31, 2019 give effect to the transaction as if the acquisition was consummated January 1, 2019.
The unaudited pro forma consolidated combined financial information should be read together with the Company’s historical financial statements, which are included in the Company’s latest annual report on Form 10-K and MPI Products, Inc. historical information, included herein.
INDEX
Page
|
Unaudited Pro Forma Consolidated Combined Balance Sheet as of December 31, 2019 |
1 |
|
Unaudited Pro Forma Consolidated Combined Statement of Operations for the Year Ended December 31, 2019 |
3 |
|
CRAWFORD UNITED CORPORATION AND SUBSIDIARIES |
||||||||||
|
UNAUDITED PRO FORMA CONSOLIDATED COMBINED BALANCE SHEET |
|
ASSETS |
|
Crawford United |
Crawford United |
||||||||||||||||
|
Corporation |
MPI |
Corporation |
|||||||||||||||
|
12/31/2019 |
12/31/2019 |
Pro Forma |
12/31/2019 |
||||||||||||||
|
Audited |
Audited |
Adjustments |
Combined |
||||||||||||||
|
CURRENT ASSETS: |
|||||||||||||||||
|
Cash and cash equivalents |
$ | 2,232,499 | $ | 1,479,829 | $ | (1,479,829 | ) | (c) | $ | 2,232,499 | |||||||
|
Accounts receivable-less allowance for doubtful accounts |
14,001,795 | 771,088 | - | 14,772,883 | |||||||||||||
|
Contract assets |
2,422,379 | - | - | 2,422,379 | |||||||||||||
|
Inventories-less allowance for obsolete inventory |
7,678,690 | 3,009,903 | - | 10,688,593 | |||||||||||||
|
Prepaid Expenses and other current assets |
703,002 | 171,359 | (136,079 | ) | (c) | 738,282 | |||||||||||
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Total Current Assets |
27,038,365 | 5,432,179 | (1,615,908 | ) | 30,854,636 | ||||||||||||
|
PROPERTY, PLANT AND EQUIPMENT |
16,016,325 | 287,555 | (241,697 | ) | (a) | 16,062,183 | |||||||||||
|
Less accumulated depreciation |
3,622,153 | 241,697 | (241,697 | ) | (a) | 3,622,153 | |||||||||||
|
Property, Plant and Equipment, Net |
12,394,172 | 45,858 | - | 12,440,030 | |||||||||||||
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Operating right of use assets, net |
9,224,840 | - | - | 9,224,840 | |||||||||||||
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OTHER ASSETS: |
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Goodwill |
9,791,745 | - | 1,591,002 | (c) | 11,382,747 | ||||||||||||
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Intangibles, net of accumulated amortization |
3,950,838 | - | 4,400,000 | (b), (c) | 8,350,838 | ||||||||||||
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Other non-current assets |
88,046 | 18,591 | - | 106,637 | |||||||||||||
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Total Non-Current Other Assets |
13,830,629 | 18,591 | 5,991,002 | 19,840,222 | |||||||||||||
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Total Assets |
$ | 62,488,006 | $ | 5,496,628 | $ | 4,375,094 | $ | 72,359,728 | |||||||||
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See accompanying notes to unaudited pro forma consolidated combined financial statements. |
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CRAWFORD UNITED CORPORATION AND SUBSIDIARIES |
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UNAUDITED PRO FORMA CONSOLIDATED COMBINED BALANCE SHEET |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Crawford United |
Crawford United |
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Corporation |
MPI |
Corporation |
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12/31/2019 |
12/31/2019 |
Pro Forma |
12/31/2019 |
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|
Audited |
Audited |
Adjustments |
Combined |
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CURRENT LIABILITIES: |
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|
Notes payable - current |
$ | 2,749,459 | $ | - | $ | - | $ | 2,749,459 | |||||||||
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Bank debt - current |
1,333,333 | - | - | 1,333,333 | |||||||||||||
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Leases payable |
850,664 | - | - | 850,664 | |||||||||||||
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Accounts payable |
6,071,522 | 818,145 | (818,145 | ) | (c) | 6,071,522 | |||||||||||
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Unearned revenue |
1,998,578 | - | - | 1,998,578 | |||||||||||||
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Accrued expenses |
3,281,445 | 58,414 | 413,308 | (c) | 3,753,167 | ||||||||||||
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Total Current Liabilities |
16,285,001 | 876,559 | (404,837 | ) | 16,756,723 | ||||||||||||
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LONG-TERM LIABILITIES: |
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Notes payable |
7,676,697 | - | - | 7,676,697 | |||||||||||||
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Bank debt |
6,376,594 | - | 9,400,000 | (c) | 15,776,594 | ||||||||||||
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Leases payable |
8,513,448 | - | - | 8,513,448 | |||||||||||||
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Deferred income taxes |
2,207,734 | - | - | 2,207,734 | |||||||||||||
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Total Long-Term Liabilities |
24,774,473 | - | 9,400,000 | 34,174,473 | |||||||||||||
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TOTAL LIABILITIES |
41,059,474 | 876,559 | 8,995,169 | 50,931,196 | |||||||||||||
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STOCKHOLDERS' EQUITY |
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Preferred 1,000,000 shares authorized, no shares outstanding |
- | - | - | - | |||||||||||||
| Common shares - no par value | |||||||||||||||||
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Class A 10,000,000 shares authorized, 2,553,503 shares issued |
3,599,806 | 1,000 | (1,000 | ) | (g) | 3,599,806 | |||||||||||
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Class B 2,500,000 shares authorized, 954,283 shares issued |
1,465,522 | . | - | 1,465,522 | |||||||||||||
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Contributed capital |
1,741,901 | - | - | 1,741,901 | |||||||||||||
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Treasury shares |
(1,905,780 | ) | (1,905,780 | ) | |||||||||||||
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Class A - 37,208 shares |
- | - | - | - | |||||||||||||
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Class B - 182,435 shares |
- | - | - | - | |||||||||||||
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Retained earnings |
16,527,083 | 4,619,069 | (4,619,069 | ) | (g) | 16,527,083 | |||||||||||
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Total Stockholders' Equity |
21,428,532 | 4,620,069 | (4,620,069 | ) | 21,428,532 | ||||||||||||
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Total Liabilities and Stockholders' Equity |
$ | 62,488,006 | $ | 5,496,628 | $ | 4,375,094 | $ | 72,359,728 | |||||||||
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See accompanying notes to unaudited pro forma consolidated combined financial statements. |
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CRAWFORD UNITED CORPORATION AND SUBSIDIARIES |
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UNAUDITED PRO FORMA CONSOLIDATED COMBINED STATEMENT OF INCOME |
|
FOR THE TWELVE MONTHS ENDED |
|
Crawford United |
Crawford United |
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Corporation |
MPI |
Corporation |
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12/31/2019 |
12/31/2019 |
Pro Forma |
12/31/2019 |
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|
Audited |
Audited |
Adjustments |
Combined |
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Total Sales |
$ | 89,698,527 | $ | 17,198,986 | $ | - | $ | 106,897,513 | |||||||||
|
Cost of Sales |
70,123,892 | 11,946,243 | $ | 82,070,135 | |||||||||||||
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Gross Profit |
19,574,635 | 5,252,743 | $ | 24,827,378 | |||||||||||||
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Operating Expenses: |
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Product Development |
- | - | - | - | |||||||||||||
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Selling, General and Administrative Expenses |
9,063,969 | 4,154,306 | (256,884 | ) | (b), (d) | 12,961,391 | |||||||||||
| Operating Income | 10,510,666 | 1,098,437 | 256,884 | 11,865,987 | |||||||||||||
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Other (Income) and Expenses: |
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Interest charges |
1,056,843 | - | 211,500 | (e) | 1,268,343 | ||||||||||||
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Other (income) expense, net |
34,333 | 166,953 | (179,500 | ) | (d), (f) | 21,786 | |||||||||||
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Total Other (Income) and Expenses |
1,091,176 | 166,953 | 32,000 | 1,290,129 | |||||||||||||
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Income before Provision for Income Taxes |
9,419,490 | 931,484 | 224,884 | 10,575,858 | |||||||||||||
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Provision for Income Taxes |
2,439,627 | 18,590 | 270,502 | (h) | 2,728,719 | ||||||||||||
|
Net Income |
$ | 6,979,863 | $ | 912,894 | $ | (45,618 | ) | $ | 7,847,139 | ||||||||
|
Net Income Per Common Share - Basic |
$ | 2.45 | $ | 2.75 | |||||||||||||
|
Net Income Per Common Share - Diluted |
$ | 2.13 | $ | 2.39 | |||||||||||||
|
Weighted Average Shares of Common Stock Outstanding - Basic |
2,849,239 | - | 2,849,239 | ||||||||||||||
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Weighted Average Shares of Common Stock Outstanding - Diluted |
3,277,857 | - | 3,277,857 | ||||||||||||||
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See accompanying notes to unaudited pro forma consolidated combined financial statements. |
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CRAWFORD UNITED CORPORATION AND SUBSIDIARIES |
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION |
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DECEMBER 31, 2019 PRO FORMA ADJUSTMENTS |
|
(a) |
Reflects the adjustment to record the basis in the acquired property plant and equipment of MPI Products, Inc. (MPI) to the estimated fair value. |
|
Book value of Fixed Assets - Gross |
$ | 45,858 | ||
|
Accumulated Depreciation |
- | |||
|
Net Book Value - Fixed |
45,858 | |||
|
Fair Market Value of Fixed Assets |
45,858 | |||
|
Adjustment to Increase Fixed Assets |
$ | - |
|
(b) |
Reflects the adjustment of intangible assets acquired by the Company to their estimated fair values, and related amortization expense for the period. The following table summarized the estimated fair values of identifiable intangible assets and their estimated useful lives. |
|
Useful Life |
Amortization |
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|
Fair Value |
in Years |
Expense |
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Trademarks |
$ | 1,700,000 | 15 | $ | 56,667 | |||||||
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Customer Relationships |
2,700,000 | 12 | 112,500 | |||||||||
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Total Intangibles, Other than Goodwill |
$ | 4,400,000 | $ | 169,167 | ||||||||
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(c) |
Reflects adjustment to record goodwill associated with the acquisition as assets and assumption of liabilities as shown below: |
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Assets Acquired: |
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Current Assets |
$ | 3,816,271 | ||
|
Net Property and Equipment |
45,858 | |||
|
Intangible Assets |
4,400,000 | |||
|
Goodwill |
1,591,002 | |||
|
Non-Current Assets |
18,591 | |||
|
Total Assets Acquired |
$ | 9,871,722 | ||
|
Liabilities Assumed |
471,722 | |||
|
Net Assets Acquired |
$ | 9,400,000 |
|
(d) |
Reflects the elimination of historical auto related expenses. In addition, bonus expense in connection with transfer of automobiles to individuals and bonus expense in excess of bonus plan have been eliminated. |
|
Other Income (Expense) |
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|
Loss on sale of autos |
$ | 8,741 | ||
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SG&A |
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Depreciation related to company auto |
$ | 73,151 | ||
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Bonuses related to transfer of company autos |
$ | 302,900 | ||
|
Discretionary bonuses paid in excess of historical profit sharing plan |
50,000 | |||
|
Subtotal |
$ | 426,051 | ||
|
(e) |
Reflects the new debt incurred to finance the acquisition and related interest expense as shown below: |
|
Interest |
Interest |
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|
Debt |
Rate |
Expense |
||||||||||
|
Revolving Credit Facility |
9,400,000 | 4.5 | % | 211,500 | ||||||||
|
Total Debt |
$ | 9,400,000 | $ | 211,500 | ||||||||
|
(f) |
Represents the elimination of the management fee paid to North Coast Industries, a related party of MPI, as recorded in Other Income (Expense). |
|
Other Income (Expense) |
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Management fee |
(170,759 | ) | ||
|
Total adjustment |
(170,759 | ) | ||
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(g) |
Represents the elimination of the historical equity of MPI. |
|
(h) |
Reflects income tax expense at 25% effective tax rate. |