EXHIBIT 99.3
ESSEX CORPORATION
AND PERFORMANCE GROUP, INC.
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
INTRODUCTION
Pursuant to an Asset Purchase Agreement dated as of June 3, 2004 by and among
Essex Corporation ("Essex" or "the Company"), Performance Group, Inc., a
Virginia corporation ("PGI"), and Xxxxxx Xxxx, sole Shareholder of PGI, Essex
acquired substantially all of the assets of PGI ("the Merger"). The merger
became effective as of June 25, 2004.
Pro forma financial information, prepared as if the transaction was consummated
on December 29, 2002 (the beginning of the Company's 52-week fiscal year), is
presented as follows.
1. Pro Forma Consolidated Statement of Operations for the Fiscal
Year Ended December 28, 2003 (unaudited)
2. Pro Forma Consolidated Statement of Operations for the six month
period ended June 27, 2004 (unaudited)
3. Notes to Pro Forma Financial Information (unaudited)
ESSEX CORPORATION
and PERFORMANCE GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FIFTY-TWO WEEK FISCAL YEAR ENDED
DECEMBER 28, 2003
UNAUDITED
Pro Forma
HISTORICAL Adjustments Pro Forma
ESSEX PGI TOTAL & Eliminations Adjusted Total
-------------- ------------- ------------- --------------- --------------
Revenues $ 16,286,210 $ 4,502,341 $ 20,788,551 $ - $ 20,788,551
Cost of goods sold and services provided (10,388,831) (3,347,101) (13,735,932) 492,000 E3 (13,243,932)
------------- ------------- ------------- ------------- -------------
Gross Margin 5,897,379 1,155,240 7,052,619 492,000 7,544,619
Selling, general and administrative expenses (4,905,475) (292,556) (5,198,031) (6,000) E1 (5,679,394)
(492,000) E3
16,637 E3
Research and development (403,051) - (403,051) - (403,051)
Amortization of other intangibles (380,608) - (380,608) (330,750) E1 (711,358)
------------- ------------- ------------- ------------- -------------
Operating Profit (Loss) 208,245 862,684 1,070,929 (320,113) 750,816
Interest (expense) income, net (68,653) 22,329 (46,324) (16,637) E3 (62,961)
------------- ------------- ------------- ------------- -------------
Income (Loss) Before Income Taxes 139,592 885,013 1,024,605 (336,750) 687,855
Provision for income taxes E2 - - - - -
------------- ------------- ------------- ------------- -------------
Net Income (Loss) $ 139,592 $ 885,013 $ 1,024,605 (336,750) $ 687,855
============= ============= ============= ============= =============
Basic Earnings Per Common Share $ 0.02 $ 0.08
============= =============
Diluted Earnings Per Common Share $ 0.01 $ 0.07
============= =============
Weighted Average Number of Essex Shares
Outstanding
Basic 8,706,498 8,706,498
Effect of dilution-
Stock Options 1,091,456 1,091,456
------------- -------------
Diluted 9,797,954 9,797,954
============= =============
The accompanying notes are an integral part of these statements.
ESSEX CORPORATION
and PERFORMANCE GROUP, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED
JUNE 27, 2004
UNAUDITED
Pro Forma
HISTORICAL Adjustments Pro Forma
ESSEX PGI TOTAL & Eliminations Adjusted Total
-------------- ------------- ------------- --------------- --------------
Revenues:
Services and products $ 22,808,163 $ 2,630,606 $ 25,438,769 $ - $ 25,438,769
Purchased hardware 12,035,922 - 12,035,922 - 12,035,922
------------- ------------- ------------- ------------- -------------
Total 34,844,085 2,630,606 37,474,691 - 37,474,691
------------- ------------- ------------- ------------- -------------
Cost of goods sold and services provided
Services and products (17,203,129) (2,022,023) (19,225,152) 269,600 E3 (18,955,552)
Purchased hardware (11,838,197) - (11,838,197) - (11,838,197)
------------- ------------- ------------- ------------- -------------
Total (29,041,326) (2,022,023) (31,063,349) 269,600 (30,793,749)
------------- ------------- ------------- ------------- -------------
Gross Margin 5,802,759 608,583 6,411,342 269,600 6,680,942
Selling, general and administrative expenses (4,526,463) (113,931) (4,640,394) (3,000) E1 (4,905,494)
(269,600) E3
7,500 E3
Research and development (447,215) - (447,215) - (447,215)
Amortization of other intangibles (162,299) - (162,299) (165,375) E1 (327,674)
------------- ------------- ------------- ------------- -------------
Operating Profit (Loss) 666,782 494,652 1,161,434 (160,875) 1,000,559
Interest (expense) income, net 125,161 8,733 133,894 (7,500) E3 126,394
------------- ------------- ------------- ------------- -------------
Income (Loss) Before Income Taxes 791,943 503,385 1,295,328 (168,375) 1,126,953
Provision for income taxes E2 - - - - -
------------- ------------- ------------- ------------- -------------
Net Income (Loss) $ 791,943 $ 503,385 $ 1,295,328 (168,375) $ 1,126,953
============= ============= ============= ============= =============
Basic Earnings Per Common Share $ 0.05 $ 0.07
============= =============
Diluted Earnings Per Common Share $ 0.05 $ 0.07
============= =============
Weighted Average Number of Essex Shares Outstanding
Basic 15,045,973 15,045,973
Effect of dilution-
Stock Options 1,379,821 1,379,821
------------- -------------
Diluted 16,425,794 16,425,794
============= =============
The accompanying notes are an integral part of these statements.
ESSEX CORPORATION
AND
PERFORMANCE GROUP, INC.
NOTES TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Note A: Historical Information
The financial information shown for Essex Corporation (Company) represents the
information from the Company's Form 10-K for the fiscal year ended December 28,
2003 and from its Form 10-Q for the quarterly period ended June 27, 2004.
The financial information for Performance Group, Inc. (PGI) was derived from its
audited information for its 52 week periods ended December 26, 2003 and December
27, 2002 as well as unaudited internal financial information for the six month
period ended June 25, 2004.
Note B: Agreement to acquire Performance Group, Inc. (PGI)
Effective as of June 25, 2004, under an Asset Purchase Agreement between the
Company and PGI, substantially all of the assets of PGI were acquired by Essex.
Under the terms of the Agreement, the Company paid $5,792,000 in cash and
assumed $362,000 in liabilities. The Company also incurred approximately
$125,000 in outside expenses.
Note C: Common Stock
Essex common stock is no par value with 50 million shares authorized. For
historical purposes, there were 15,241,257 shares issued and outstanding at
December 28, 2003 and 15,116,329 at June 27, 2004. There were 9,797,954 and
16,425,794 diluted weighted average common shares outstanding during fiscal 2003
and in the first six months of 2004, respectively.
Note D: Pro Forma Consolidated Balance Sheet (Unaudited)
A pro forma consolidated balance sheet has not been prepared since the
transaction is reflected in the Company's balance sheet filed with its Form 10-Q
for the quarter ended June 27, 2004.
Note E: Pro Forma Consolidated Statements of Operations (Unaudited)
The Pro Forma Consolidated Statements of Operations have been prepared on the
basis of the following assumptions:
(1) Amortizable intangible assets of approximately $1,225,000 were primarily
related to contracts which have average lives of approximately 4.5 years
and intellectual property of $198,000 with a life of approximately 5 years.
Employment agreements with non compete covenants valued at $75,000 have
estimated lives of 4 years. Amortization is calculated on a straight-line
basis. Property and equipment amortization of the fair value adjustment of
$12,000 was $6,000 in 2003 and $3,000 in the first six months of 2004.
(2) No income tax expense has been recognized on the basis that the entities
will file a consolidated return. Essex has net operating loss carryforwards
which are expected to be available to offset taxable operating income
generated from this transaction. At this time, Essex fully adjusts its
deferred tax asset valuation account to eliminate the recognition of its
deferred tax asset.
ESSEX CORPORATION
AND
PERFORMANCE GROUP, INC.
NOTES TO PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
(3) The PGI statement of income was adjusted to reclassify certain PGI overhead
expenses to selling, general and administrative expenses ("SG&A") from cost
of goods sold and services provided. The Company also reclassified certain
other income from interest income to SG&A. These reclassifications were
made in order to conform to the Company's historical financial statement
presentation.
