Glenayre Technologies, Inc and Subsidiaries Unaudited Pro Forma
Combined Statement of Operations For the six months ended June 30,
2005 (In thousands, except per share amounts) Universal Pro
Glenayre Manufac- Forma Technologies, turing & Adjust- Consoli-
Inc. Logistics ments Notes dated Revenues $60,676 $163,450
$(47,403)(a) $176,723 Cost of Revenues 34,146 97,925 (2,548)(b)
129,522 GROSS MARGIN 26,530 65,525 (44,855) 47,200 OPERATING
EXPENSES: Selling, general and administrative expense 19,085 17,420
2,083 (c) 38,588 Research and development expense 6,982 - - 6,982
Advertising expense - - - - Amortization of intangible assets 566 -
2,903 (d) 3,469 Other operating expenses 15 - - 15 Total Operating
Expenses 26,648 17,420 4,986 49,054 OPERATING INCOME (LOSS) (118)
48,105 (49,841) (1,853) OTHER INCOME (EXPENSE): Interest income
1,101 259 - 1,360 Interest expense (512) (143) (1,758)(e) (2,413)
Gains (losses) on disposal of assets, net (1) (39) - (40) Other
income (1,005) 1,399 - 394 Total Other Income (expense) (417) 1,476
(1,758) (699) INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES (535) 49,581 (51,599) (2,553) Provision (benefit) for
income taxes 163 12,207 (12,207)(g) 163 INCOME (LOSS) FROM
CONTINUING OPERATIONS $(698) $37,374 $(39,392) $(2,716) INCOME
(LOSS) PER WEIGHTED AVERAGE COMMON SHARE: Income (loss) from
continuing operations $(0.01) $0.56 $(0.59) $(0.04) INCOME (LOSS)
PER COMMON SHARE - ASSUMING DILUTION: Income (loss) from continuing
operations $(0.01) $0.56 $(0.59) $(0.04) Depreciation expense
included in Income (Loss) from continuing operations: $2,022 $5,546
$- $7,568 See notes to unaudited pro forma condensed combined
statement of operations Glenayre Technologies, Inc and Subsidiaries
Unaudited Pro Forma Combined Statement of Operations For the year
ended December 31, 2004 (In thousands, except per share amounts)
Universal Pro Glenayre Manufac- Forma Technologies, turing &
Adjust- Consoli- Inc. Logistics ments Notes dated Revenues $50,575
$403,103 $(122,728)(a) $330,950 Cost of Revenues 25,857 250,164
(20,643)(b) 255,377 GROSS MARGIN 24,718 152,939 (102,085) 75,572
OPERATING EXPENSES: Selling, general and administrative expense
19,886 32,756 5,888 (c) 58,530 Research and development expense
13,374 - - 13,374 Advertising expense 556 - - 556 Amortization of
intangible assets - - 6,805 (d) 6,805 Other operating expenses 172
- - 172 Total Operating Expenses 33,987 32,756 12,692 79,436
OPERATING INCOME (LOSS) (9,269) 120,183 (114,777) (3,864) OTHER
INCOME (EXPENSE): Interest income 1,203 714 - 1,917 Interest
expense (228) (953) (4,966)(e) (6,147) Gains (losses) on disposal
of assets, net 84 - - 84 Other income 15 (2,800) 2,880 (f) 95 Total
Other Income (expense) 1,074 (3,039) (2,086) (4,051) INCOME (LOSS)
FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (8,195) 117,144
(116,863) (7,915) Provision (benefit) for income taxes (55) 50,832
(49,157)(g) 1,620 INCOME (LOSS) FROM CONTINUING OPERATIONS $(8,140)
$66,312 $(67,706) $(9,535) INCOME (LOSS) PER WEIGHTED AVERAGE
COMMON SHARE: Income (loss) from continuing operations $(0.12)
$1.00 $(1.02) $(0.14) INCOME (LOSS) PER COMMON SHARE - ASSUMING
DILUTION: Income (loss) from continuing operations $(0.12) $1.00
$(1.02) $(0.14) Depreciation expense included in Income (Loss) from
continuing operations: $1,783 $20,165 $(3,354) $18,594 See notes to
unaudited pro forma condensed combined statement of operations
Glenayre Technologies, Inc. Summary Schedule of Non-GAAP Financial
Data (In thousands) Unaudited The following summary of financial
data shows the reconciliation of pro forma income (loss) from
continuing operations, as determined in accordance with accounting
principles generally accepted in the United States (GAAP), to pro
forma income (loss) from continuing operations before one-time
gains and charges and earnings before interest, taxes, depreciation
and amortization from continuing operations before one-time gains
and charges. EBITDA is income (loss) from continuing operations,
excluding one-time gains and charges, before net interest income,
income taxes and depreciation and amortization and is presented
because the Company believes that such information is commonly used
in both the telecommunications industry and the entertainment
industry as one measure of a company's operating performance.
EBITDA from continuing operations is not determined in accordance
with generally accepted accounting principles, it is not indicative
of cash provided by operating activities, should not be used as a
measure of operating income and cash flows from operations as
determined under GAAP, and should not be considered in isolation or
as an alternative to, or to be more meaningful than, measures of
performance determined in accordance with GAAP. EBITDA, as
calculated by the Company, may not be comparable to similarly
titled measures reported by other companies and could be misleading
unless all companies and analysts calculated EBITDA in the same
manner. Six Months Ended Year ended June 30, December 31 2005 2004
Pro forma income (loss) from continuing operations $(2,716)
$(9,535) Indirect acquisition and employment costs (1) 1,618 Patent
litigation settlement costs (2) 2,700 Pro Forma Income (loss) from
continuing operations before one-time gains and charges (1,098)
(6,835) Provision for income taxes 163 1,620 Loss on currency
translation (3) 1,300 Gain on currency swaps (262) Interest income,
net 1,053 4,230 Depreciation and amortization 11,037 25,399 EBITDA
from continuing operations before one-time gains and charges
$12,193 $24,414 EBITDA from continuing operations before one-time
gains and charges by segment Messaging business 3,383 (4,687) EDC
8,810 29,101 $12,193 $24,414 (1) In connection with the acquisition
of the CD/DVD manufacturing and distribution operations of
Universal Music Group, the company incurred certain indirect
acquisition costs and one-time employment related costs. (2)
Represents damages awarded to Phillip Jackson for a patent
infringement lawsuit. (3) As a result of a decline in the Euro
exchange rate. NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION The following pro forma adjustments are included in the
unaudited pro forma condensed combined statements of operations:
(a) To adjust revenues as follows: - Reduce revenue by
approximately $102 million for 2004 and $39 million for the six
months ended June 30, 2005 to reflect the pricing terms in the
supply agreements in effect immediately after the acquisition
transaction between Entertainment Distribution Company, LLC
("EDC"), a majority owned subsidiary of Glenayre, and Universal
Music Group; and - Eliminate freight revenue of approximately $20
million for 2004 and $8 million for the six months ended June 30,
2005 to reflect net revenue based on the terms of the new supply
agreements. (b) To adjust cost of revenues as follows: - Eliminate
freight of approximately $20 million for 2004 and $8 million for
the six months ended June 30, 2005 based on the terms of the new
supply agreements; and - Increase royalty expenses by approximately
$5 million for the six months ended June 30, 2005 to reflect the
royalty rates to be paid by EDC. (c) To adjust general and
administrative costs as follows: - Add certain corporate overhead
and compensation costs of $5 million for 2004 and $2.1 million for
the six months ended June 30, 2005 for incremental costs related to
new contracts to support the acquired business; - Eliminate pension
costs of approximately $1.6 million related to pension liabilities
not acquired, and certain other general and administrative costs of
$0.3 million incurred by businesses not acquired for 2004; and - To
eliminate certain non-recurring income of $2.9 million for 2004
generated by former business of UM&L that were not acquired (d)
To reflect additional amortization expenses related to intangible
assets acquired. The actual amortization amount is subject to
change based on the final valuation results. (e) To reflect
additional interest charges related to the new term loan of $46.5
million, the amortization of related deferred financing costs, and
accretion of deferred rebates to be paid to Universal Music Group,
pursuant to the asset and share purchase agreements. (f) To
eliminate loss of $2.9 million for 2004 related to sale of
buildings to other affiliates of Universal Music. (g) To adjust the
combined tax provision to reflect the tax effect of the pro forma
adjustments and the application of Glenayre's tax attributes to the
acquired business. The pro forma combined provision for income
taxes does not reflect the amounts that would have resulted had
Glenayre and UM&L filed consolidated income tax returns during
the periods presented. PRNewswire-FirstCall -- Aug. 15 DATASOURCE:
Glenayre Technologies, Inc. Web site: http://www.glenayre.com/
Company News On-Call: http://www.prnewswire.com/comp/111723.html
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