Contract
Exhibit
99.4
On March
31, 2008, AZZ incorporated entered into an Asset Purchase Agreement to acquire
substantially all of the assets AAA Industries, Inc. The purchase price of the
transaction was approximately $81.5 million, subject to adjustment as more fully
described in the Asset Purchase Agreement filed on Form 8-K on April 2, 2008.
The purchased assets included six galvanizing plants (three plants located in
Illinois, one plant located in Indiana, one plant located in Minnesota and one
plant located in Oklahoma) and related equipment and supplies.
The
following is a condensed balance sheet showing the fair values of the assets
acquired and the liabilities assumed as of the date of acquisition:
|
Current
Assets
|
$ | 18,086 | ||
|
Property
and Equipment
|
$ | 32,934 | ||
|
Intangible
Assets
|
$ | 16,070 | ||
|
Goodwill
|
$ | 15,574 | ||
|
Total
Assets
|
$ | 82,664 | ||
|
Current
Liabilities
|
$ | (1,193 | ) | |
|
Net
Assets Acquired
|
$ | 81,471 |
Of the
$16.1 million of intangible assets acquired, $1.8 million, $1.2 million and
$13.1 million were assigned to non-compete agreements, trade names and
customer relationships, respectively. These intangible assets are being
amortized and have a weighted average life of 13.8 years. Goodwill of $15.6
million arising from the acquisition will be allocated to the Galvanizing
Services Segment and will be deductible for income tax purposes.
The
following pro forma information is based on the assumption the acquisition took
place on March 1, 2007 for the income statement. The pro forma Condensed Balance
Sheet is as of February 29, 2008, based upon AAA Galvanizing, Inc. historical
balance sheet as of March 31, 2008.
1
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of
2/29/08
|
AZZ
Historical
|
AAA
Historical
|
Pro
Forma
Adjustments
|
Combined
Pro
Forma
|
|||||||||||||||
|
ASSETS
|
||||||||||||||||||
|
CURRENT
ASSETS
|
||||||||||||||||||
|
CASH
AND CASH EQUIVALENTS
|
$ | 2,226,941 | $ | (868,089 | ) | $ | 19,397,249 | (1) | $ | 20,756,101 | ||||||||
|
ACCOUNTS
RECEIVABLE (NET OF ALLOWANCE)
|
38,901,577 | 7,959,334 | - | 46,860,911 | ||||||||||||||
|
INVENTORIES
|
43,426,468 | 11,155,674 | (1,128,742 | ) | (2) | 53,453,400 | ||||||||||||
|
REVENUE
IN EXCESS OF BILLINGS ON
|
||||||||||||||||||
|
UNCOMPLETED
CONTRACTS
|
13,044,076 | - | - | 13,044,076 | ||||||||||||||
|
DEFERRED
INCOME TAXES
|
4,391,398 | - | - | 4,391,398 | ||||||||||||||
|
PREPAID
EXPENSES AND OTHER
|
1,004,383 | 99,537 | - | 1,103,920 | ||||||||||||||
|
TOTAL
CURRENT ASSETS
|
102,994,843 | 18,346,456 | 18,268,507 | 139,609,806 | ||||||||||||||
|
PROPERTY,
PLANT AND EQUIPMENT (NET)
|
48,284,910 | 33,543,641 | 271,878 | (3) | 81,218,862 | |||||||||||||
|
GOODWILL
|
40,962,104 | - | 15,573,941 | (4) | 56,536,045 | |||||||||||||
|
OTHER
ASSETS (NET OF ACCUMULATED AMORTIZATION)
|
1,077,423 | 856,624 | 15,213,376 | (5) | 17,147,423 | |||||||||||||
|
TOTAL
ASSETS
|
$ | 193,319,280 | $ | 52,746,721 | $ | 49,327,702 | $ | 294,512,136 | ||||||||||
|
LIABILITIES
AND SHAREHOLDER'S EQUITY
|
||||||||||||||||||
|
CURRENT
LIABILITIES
|
||||||||||||||||||
|
ACCOUNTS
PAYABLE
|
$ | 16,035,932 | $ | 553,481 | $ | - | $ | 16,589,413 | ||||||||||
|
INCOME
TAX PAYABLE
|
706,966 | - | - | 706,966 | ||||||||||||||
|
ACCRUED
SALARIES & WAGES
|
4,919,804 | 271,000 | - | 5,190,804 | ||||||||||||||
|
OTHER
ACCRUED LIABILITIES
|
10,285,285 | 11,334,123 | (10,965,748 | ) | 10,653,660 | |||||||||||||
|
CUSTOMER
ADVANCE PAYMENT
|
2,115,330 | - | - | 2,115,330 | ||||||||||||||
|
BILLINGS
IN EXCESS OF REVENUE ON
|
- | |||||||||||||||||
|
UNCOMPLETED
CONTRACTS
|
3,798,179 | - | - | 3,798,179 | ||||||||||||||
|
COMPENSATION
EXPENSE RELATED TO SARS
|
4,834,325 | - | - | 4,834,325 | ||||||||||||||
|
TOTAL
CURRENT LIABILITIES
|
42,695,821 | 12,158,604 | (10,965,748 | ) | 43,888,677 | |||||||||||||
|
LONG
TERM DEBT DUE AFTER ONE YEAR
|
- | 24,416,151 | 75,583,849 |
(6)
|
100,000,000 | |||||||||||||
|
DEFERRED
INCOME TAXES
|
4,466,834 | - | - | 4,466,834 | ||||||||||||||
|
SHAREHOLDERS'
EQUITY
|
||||||||||||||||||
|
COMMON
STOCK, $1 PAR VALUE
|
||||||||||||||||||
|
SHARES
AUTHORIZED-25,000,000
|
||||||||||||||||||
|
SHARES
ISSUED 12,609,160
|
12,609,160 | 16,171,966 | (16,171,966 | ) | (7) | 12,609,160 | ||||||||||||
|
CAPITAL
IN EXCESS OF PAR VALUE
|
16,369,938 | - | - | 16,369,938 | ||||||||||||||
|
RETAINED
EARNINGS
|
119,549,115 | - | - | 119,549,115 | ||||||||||||||
|
LESS COMMON STOCK HELD IN TREASURY ( 480,188 AND 954,996 SHARES
AT COST RESPECTIVELY)
|
(2,371,588 | ) | - | - | (2,371,588 | ) | ||||||||||||
|
TOTAL SHAREHOLDERS' EQUITY
|
146,156,625 | 16,171,966 | (16,171,966 | ) | 146,156,625 | |||||||||||||
|
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY
|
$ | 193,319,280 | $ | 52,746,721 | $ | 48,446,135 | $ | 294,512,136 | ||||||||||
|
|
(1)
|
Excess
cash from $100,000,000.00 Senior Notes secured for the purchase of AAA
Galvanizing, Inc.
|
|
|
(2)
|
Inventory
adjusted to market costs as compared to FIFO inventory cost
basis.
|
|
|
(3)
|
Property,
plant, and equipment adjusted to fair value per independent
appraisal.
|
|
|
(4)
|
Goodwill
resulting from purchase price
accounting.
|
|
|
(5)
|
Other
assets include intangibles for non-compete agreements, trade name, and
customer relationships in the amounts of $1.8 million, $1.2 million and
$13.1 million respectfully.
|
|
|
(6)
|
Senior
notes secured for the purchase of AAA Galvanizing, Inc.
|
| (7) | Elimination entries required for liabilities and equity not acquired. |
2
|
AZZ
incorporated
|
||||||||||||||||||
|
UNAUDITED
PROFORMA CONDENSED INCOME STATEMENTS
|
||||||||||||||||||
|
TWELVE
MONTHS ENDED
|
||||||||||||||||||
|
AZZ
|
AAA
|
Proforma
|
Combined
|
|||||||||||||||
|
2/29/08
|
2/29/08
|
Adjustments
|
||||||||||||||||
|
(AUDITED)
|
HISTORICAL
|
|||||||||||||||||
|
NET
SALES
|
$ | 320,193,104 | $ | 58,185,987 | $ | - | $ | 378,379,091 | ||||||||||
|
COSTS
AND EXPENSES
|
||||||||||||||||||
|
COST
OF SALES
|
239,651,058 | 48,168,203 | 1,579,323 | (1) | 289,398,584 | |||||||||||||
|
SELLING,
GENERAL AND ADMINISTRATIVE
|
36,261,642 | (1,743,305 | ) | (2) | 34,518,337 | |||||||||||||
|
INTEREST
EXPENSE
|
1,494,731 | 1,956,580 | 4,283,420 | (3) | 7,734,731 | |||||||||||||
|
NET
(GAIN) LOSS ON SALE OF PROPERTY, PLANT
AND EQUIPMENT
|
32,211 | - | - | 32,211 | ||||||||||||||
|
OTHER
(INCOME)
|
(1,079,431 | ) | (90,000 | ) | - | (1,169,431 | ) | |||||||||||
| 276,360,211 | 50,034,783 | 4,119,438 | 330,514,432 | |||||||||||||||
|
INCOME
BEFORE INCOME TAXES
|
43,832,893 | 8,151,204 | (4,119,438 | ) | 47,864,659 | |||||||||||||
|
INCOME
TAX EXPENSE
|
16,145,304 | 180,452 | 1,304,599 | (4) | 17,630,355 | |||||||||||||
|
NET
INCOME
|
$ | 27,687,589 | $ | 7,970,752 | $ | (5,424,037 | ) | $ | 30,234,304 | |||||||||
|
EARNINGS
PER COMMON SHARE
|
||||||||||||||||||
|
BASIC
EARNINGS PER SHARE
|
$ | 2.30 | $ | 2.52 | ||||||||||||||
|
DILUTED
EARNINGS PER SHARE
|
$ | 2.26 | $ | 2.47 | ||||||||||||||
|
WEIGHTED
AVERAGE COMMON SHARES
|
$ | 12,012,789 | 12,012,789 | |||||||||||||||
| WEIGHTED AVERAGE COMMON SHARES AND POTENTIALLY DILUTIVE COMMON SHARES | $ | 12,227,212 | $ | 12,227,212 | ||||||||||||||
|
|
(1)
|
Additional
depreciation and amortization expense in the amount of $1.6 million
was included due to the revaluation of fixed assets and intangibles asset
appraisals to fair value per independent appraisers
report.
|
|
|
(2)
|
Selling
and General and Administrative costs were reduced to reflect Compensation
expense that will not be continued.
|
|
|
(3)
|
Interest
expense was increased to reflect additional debt through Senior Notes to
purchase AAA Galvanizing, Inc.
|
|
|
(4)
|
Income
taxes were increased to reflect the combined effective tax rates after
completion of the acquisition.
|
3
