This excerpt taken from the LTEC 8-K filed Aug 1, 2005.
UNAUDITED PRO FORMA CONDENSED
The following unaudited pro forma condensed combined financial statements give effect to the transaction between LOUD Technologies Inc., a Washington corporation and St. Louis Music, Inc., a Missouri corporation using the purchase method of accounting for the business combination.
A $40 million revolving short-term demand credit facility was provided to SLM Merger Corp. to finance the acquisition of St. Louis Music and for future working capital. Sun Capital Partners III QP, LP has guaranteed $29 million of this credit facility and the remaining $11 million is limited to a percentage of eligible accounts receivable and inventory of St. Louis Music. LOUD intends to refinance its existing credit facilities (including the SLM Merger facility) and to extinguish Sun Capital Partners III QPs guarantee.
The purchase of St. Louis Music was initially reported on a Current Report on Form 8-K filed on March 7, 2005, and is being amended hereby to include the financial statements required by Item 9.01.
The transaction will be accounted for as an acquisition of St. Louis Music by LOUD under the purchase method of accounting in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations. Under the purchase method of accounting, the total purchase price is allocated to the net tangible and intangible assets acquired by LOUD in connection with the transaction, based on their fair values as of the completion of the transaction. The excess cost over the net tangible and identifiable intangible assets is allocated to goodwill.
The unaudited pro forma condensed combined financial statements present the acquisition of St. Louis Music under the purchase method of accounting, which reflects the allocation of the purchase price to the assets acquired and liabilities assumed based on their estimated fair value at the time of the merger. The unaudited pro forma condensed combined financial statements reflect the preliminary purchase price allocation based on LOUDs estimate of the fair value of the assets acquired and liabilities assumed. The preliminary purchase price allocation is subject to finalization of the valuation of intangible assets, other assets acquired and liabilities assumed.
The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2004 and the three months ended March 31, 2005 gives effect to the transaction as if it had occurred on January 1, 2004.
The accompanying unaudited pro forma condensed combined financial statements are presented in accordance with Article 11 of Regulation S-X. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the proposed transaction had been consummated on January 1, 2004, nor is it necessarily indicative of future operating results or financial position.
The pro forma adjustments are based upon information and assumptions available at the time of the filing of this Form 8-K/A and result in a preliminary allocation of the purchase price based on estimates of the fair value of the assets acquired and liabilities assumed. The unaudited pro forma statements do not reflect synergies expected from the combination of the two entities. The unaudited pro forma condensed combined financial statements and the accompanying notes thereto of LOUD and St. Louis Music should be read in conjunction with and are qualified by the
historical financial statements and notes thereto of LOUD and St. Louis Music. LOUDs historical financial statements are included in LOUDs Annual Report on Form 10-K for the year ended December 31, 2004 and LOUDs Quarterly Report on Form 10-Q for the three months ended March 31, 2005. St. Louis Musics historical financial statements and related notes thereto are attached as Exhibit 99.1 to this Form 8-K/A.
We cannot assure you that LOUD will not incur charges in excess of those included in the pro forma total consideration related to the transactions or that management will be successful in its efforts to integrate the operations of the companies.