EXHIBIT 99.2
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PARAGON TECHNOLOGIES, INC.
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UNAUDITED PRO FORMA FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
PARAGON TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2005
(IN THOUSANDS)
Historical
Consolidated Pro Forma Pro Forma
3/31/2005 Adjustments Consolidated
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Assets
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Current assets:
Cash and cash equivalents $ 4,118 19,515 (A) 23,633
Receivables 5,862 (4,330) (B) 1,532
Costs and estimated earnings in excess
of xxxxxxxx 1,040 (583) (B) 457
Inventories 1,627 (1,207) (B) 420
Deferred income tax benefits 897 (291) (B) 606
Prepaid expenses and other current assets 589 (346) (B) 243
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Total current assets 14,133 12,758 26,891
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Property, plant and equipment, at cost 3,949 (2,906) (B) 1,043
Less: accumulated depreciation 2,677 (1,834) (B) 843
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Net property, plant and equipment 1,272 (1,072) (B) 200
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Deferred income tax benefits - 258 (C) 258
Goodwill 17,657 (17,657) (B) -
Other assets 10 10
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Total assets $33,072 (5,713) 27,359
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PARAGON TECHNOLOGIES, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2005
(IN THOUSANDS)
Historical
Consolidated Pro Forma Pro Forma
3/31/2005 Adjustments Consolidated
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Liabilities and Stockholders' Equity
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Current liabilities:
Accounts payable $ 2,535 (1,331) (B) 1,204
Customers' deposits and xxxxxxxx in
excess of costs and estimated earnings 2,256 (1,141) (B) 1,115
Accrued salaries, wages, and commissions 411 (262) (B) 149
Income taxes payable 44 44
Accrued product warranty 595 (187) (B) 408
Deferred gain on sale-leaseback 165 165
Accrued other liabilities 981 (1) (B) 980
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Total current liabilities 6,987 (2,922) 4,065
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Long-term liabilities:
Deferred gain on sale-leaseback 316 316
Deferred income taxes payable 2,253 (2,253) (B)(C) -
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Total long-term liabilities 2,569 (2,253) 316
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Stockholders' equity:
Common stock 4,267 4,267
Additional paid-in capital 8,008 8,008
Retained earnings 11,241 (538) (D) 10,703
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Total stockholders' equity 23,516 (538) 22,978
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Total liabilities and
stockholders' equity $33,072 (5,713) 27,359
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NOTES:
(A) To reflect the estimated net cash proceeds of approximately $23,055,000
(subject to working capital adjustments) less approximately $900,000 in
professional fees and transaction expenses and $2,000,000 in estimated
income taxes associated with the sale of certain assets and liabilities
of Ermanco.
(B) To reflect the sale of certain assets and liabilities of Ermanco.
(C) To reclass long-term deferred income tax benefits of $258,000 from
long-term deferred income taxes payable.
(D) To reflect the estimated after-tax loss for financial statement
purposes on the sale of certain assets and liabilities of Ermanco. Due
to the fact that there is a final working capital adjustment, the final
gain or loss on the transaction has not yet been determined.
PARAGON TECHNOLOGIES, INC.
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The following selected unaudited pro forma consolidated statements of
operations data gives effect to the sale of certain assets and liabilities of
Ermanco as if the transaction occurred at the beginning of the 2004 fiscal year
and at the beginning of the 2005 fiscal year. The pro forma data presented below
should be read in conjunction with the Company's financial statements previously
filed with the U.S. Securities and Exchange Commission and pro forma
consolidated financial information and accompanying assumptions previously
included elsewhere herein. Such data is not necessarily indicative of the
results of operations that would have been achieved had the transaction
described above occurred on the date indicated or that may be expected to occur
in the future as a result of such transaction.
Paragon Technologies, Inc. Paragon Technologies, Inc.
Unaudited Pro Forma Consolidated Unaudited Pro Forma Consolidated
Statement Of Operations Statement Of Operations
For The Year Ended December 31, 2004 For The Three Months Ended March 31, 2005
(In Thousands, Except Share And Per Share Data) (In Thousands, Except Share And Per Share Data)
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Historical (1) Pro Forma Historical (1) Pro Forma
Consolidated Pro Forma Consolidated Consolidated Pro Forma Consolidated
12/31/2004 Adjustments Results 3/31/2005 Adjustments Results
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Net sales $ 42,255 (30,553) (E) 11,702 $ 10,308 (6,442) (E) 3,866
Cost of sales 31,277 (23,462) (E) 7,815 7,696 (4,923) (E) 2,773
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Gross profit on sales 10,978 (7,091) (E) 3,887 2,612 (1,519) (E) 1,093
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Selling, general and
administrative expenses 8,703 (4,546) (E) 4,157 2,329 (1,292) (E) 1,037
Product development costs 314 (138) (E) 176 43 (39) (E) 4
Interest expense 4 4 1 1
Interest income (76) (390) (F) (466) (13) (98) (F) (111)
Other income, net (183) 80 (E) (103) (55) 15 (E) (40)
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8,762 (4,994) 3,768 2,305 (1,414) 891
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Earnings before income taxes 2,216 (2,097) 119 307 (105) 202
Income tax expense 743 (697) (G) 46 113 (35) (G) 78
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Net earnings $ 1,473 (1,400) 73 $ 194 (70) 124
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Basic earnings per share $ .34 .02 $ .05 .03
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Diluted earnings per share $ .34 .02 $ .04 .03
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Weighted average shares outstanding 4,278,065 4,278,065 4,266,323 4,266,323
Dilutive effect of stock options 72,232 72,232 47,425 47,425
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Weighted average shares outstanding
assuming dilution 4,350,297 4,350,297 4,313,748 4,313,748
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NOTES:
(1) The following sale of certain assets and liabilities of Ermanco adjustments
reflect results of operations as if the sale of certain assets and
liabilities of Ermanco, which was completed on August 5, 2005, had occurred
on January 1, 2004 and January 1, 2005. The results of operations are
derived from the Company's historical statement of operations for the year
ended December 31, 2004 and the Company's historical statement of
operations for the three months ended March 31, 2005.
(E) To reflect the elimination of Ermanco's statement of operations
activities.
(F) To reflect an increase in interest income due to the availability of
additional cash of approximately $19,500,000 from the sale of certain
assets and liabilities of Ermanco.
(G) To reflect the adjustment to record income tax expense at an effective
rate of 38.62%.
