EX-99.1 2 eh1900206_ex9901.htm EXHIBIT 99.1
EXHIBIT 99.1
 
NUANCE COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On February 1, 2019, we completed the previously announced sale of our Document Imaging division (the "Business") to Project Leopard AcquireCo Limited (the “Buyer”), an affiliate of Kofax, Inc. The net proceeds received at the closing for the Business were approximately $390 million, after estimated transaction and tax expenses, subject to post-closing finalization of those adjustments as set forth in the Sale Agreement dated November 11, 2018, between us and the Buyer. In addition, pursuant to the call notice we issued on February 1, 2019, we are committed to use $300 million of the net proceeds to redeem our 5.375% Senior Notes due 2020 (the "5.375% Senior Notes").

The following unaudited pro forma condensed consolidated financial statements are based on our historical financial statements included within the Company's Annual Report on Form 10-K for fiscal year 2018, as adjusted to give effect to the disposition of the Business. The unaudited pro forma condensed statements of operations for fiscal years 2018, 2017, and 2016 give effect to the disposition of the Business as if it had occurred on October 1, 2016. Additionally, the unaudited pro forma condensed statements of operations for fiscal year 2018 gives effect to the repayment of the 5.375% Senior Notes as if it had occurred on October 1, 2017. The unaudited pro forma condensed balance sheet as of September 30, 2018 gives effect to the disposition of the Business and the redemption of the 5.375% Senior Notes as if they had occurred on September 30, 2018. The unaudited pro forma condensed consolidated financial information does not reflect nonrecurring charges resulting from this disposition (such as proceeds from our transition service agreement and gain or loss recognized from the disposition), or future transactions that are not directly attributable to the disposition (such as restructuring activities and the realization of operating costs reductions).

The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not purport to indicate the financial condition or results of operations of future periods or the financial condition for results of operations that actually would have been realized had the disposition occurred on the date or for the periods presented. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable under the circumstances. The unaudited pro forma condensed consolidated financial statement should be read in conjunction with the Company's historical financial statements and notes included in the Company's Annual Report on Form 10-K for fiscal year 2018.

Our actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to the following factors:
 
—
The pro forma adjustments are estimated based on the operating structure of the Business during each of the historical periods presented, which may differ from the operating structure at the closing;
—
We did not track the assets and liabilities of the Business historically. The pro forma adjustments are based on our estimates of the assets, liabilities and employees related to the Business in each historical period presented, which may differ from the assets, liabilities and employees assumed by the Buyer at the closing;
—
The adjustments to the unaudited pro forma results of operations reflect our estimates of operating costs and expenses that we consider directly related to the Business for each historical period, which may differ from the actual amounts eliminated after the disposition; and
—
The estimated net proceeds are subject to certain customary post-closing adjustments.

NUANCE COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2018

 
    Pro Forma Adjustments  
    As Reported    
Removal of
Imaging balance sheet items (A)
    
Use of proceeds
paid at the
closing (B) 
      
Pro Forma
Amounts
  
    (In thousands)  
ASSETS 
                                
Current assets: 
                                
Cash and cash equivalents
  
$
315,963
    
$
—
    
$
90,000
    
$
405,963
  
Marketable securities
      135,579        —                135,579  
Accounts receivable, net
      378,832        (30,959 )               347,873  
Prepaid expenses and other current assets
      98,257        (3,443 )               94,814  
Total current assets
      928,631      
(34,402
 )     
90,000
        984,229  
 
                                
Marketable securities
      21,932        —                21,932  
Land, building and equipment, net
      155,894        (2,442 )               153,452  
Goodwill
      3,504,457        (257,352 )               3,247,105  
Intangible assets, net 
      549,508        (99,507 )               450,001  
Other assets
      141,957        (196 )               141,761  
Total assets 
   $   5,302,379     $   (393,899 )    $   90,000     $   4,998,480  
                                 
LIABILITIES AND STOCKHOLDERS' EQUITY 
                                
                                 
Current liabilities: 
                                
Current portion of long-term debt 
   $   —     $  —     $  —     $  —  
Contingent and deferred acquisition payments 
      14,211        —                14,211  
Accounts payable, accrued expenses and other current liabilities 
      366,160        (15,909 )       —        350,251  
Deferred revenue 
      383,793        (53,104 )               330,689  
Total current liabilities 
      764,164        (69,013 )       —        695,151  
                                 
Long-term debt 
      2,185,361        —        (300,000 )       1,885,361  
Deferred revenue, net of current portion 
      489,177        (54,861 )               434,316  
Other liabilities 
      146,181        (2,657 )       —        143,524  
Total liabilities 
      3,584,883        (126,531 )       (300,000 )       3,158,352  
                                 
Stockholders' equity 
      1,717,496        (267,368 )       390,000        1,840,128  
Total liabilities and stockholders' equity 
   $  5,302,379     $   (393,899 )    $   90,000     $   4,998,480  
 

See accompanying notes.
NUANCE COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the fiscal year ended September 30, 2018
 
 
   
As Reported
    
Removal of Income
    
Pro Forma
  
   
Fiscal Year 2018
    
Statement Items (C)
    
Fiscal Year 2018
  
Revenues:
  
(In thousands, except per share amounts)
  
Professional services and hosting
  
$
  1,049,448    
$
  (3,726 )   
$
  1,045,722  
Product and licensing
    
684,230
      
(140,211
 )    
544,019
  
Maintenance and support
    
317,983
      
(65,426
 )    
252,557
  
Total revenues
    
2,051,661
      
(209,363
 )    
1,842,298
  
Cost of revenues:
                        
Professional services and hosting
    
681,516
      
(3,138
 )    
678,378
  
Product and licensing
    
77,086
      
(20,287
 )    
56,799
  
Maintenance and support
    
58,095
      
(18,771
 )    
39,324
  
Amortization of intangible assets
    
56,873
      
(5,987
 )    
50,886
  
Total cost of revenues
    
873,570
      
(48,183
 )    
825,387
  
Gross profit
    
1,178,091
      
(161,180
 )    
1,016,911
  
Operating expenses:
                        
Research and development
    
305,323
      
(26,588
 )    
278,735
  
Sales and marketing
    
388,305
      
(76,593
 )    
311,712
  
General and administrative
    
229,774
      
(3,890
 )    
225,884
  
Amortization of intangible assets
    
91,093
      
(17,096
 )    
73,997
  
Acquisition-related costs, net
    
16,101
      
(8
 )    
16,093
  
Restructuring and other charges, net
    
63,498
      
(6,472
 )    
57,026
  
Impairment of goodwill and other intangible assets
    
170,941
      
—
      
170,941
  
Total operating expenses
    
1,265,035
      
(130,647
 )    
1,134,388
  
(Loss) income from operations
    
(86,944
 )    
(30,533
 )    
(117,477
 )
Other income (expense):
                        
Interest income
    
9,327
      
—
      
9,327
  
Interest expense
    
(137,253
 )    
16,125
      
(121,128
 )
Other expense, net
    
(1,865
 )    
44
      
(1,821
 )
(Loss) income before income taxes
    
(216,735
 )    
(14,364
 )    
(231,099
 )
(Benefit) provision for income taxes
    
(56,807
 )    
(5,513
 )    
(62,320
 )
Net loss
  
$
  (159,928 )   
$
  (8,851 )   
$
  (168,779 ) 
Net loss per share:
                        
Basic
   $   (0.55 )         
$
  (0.58 ) 
Diluted
   $   (0.55 )         
$
  (0.58 ) 
Weighted average common shares outstanding:
                  
Basic
    
291,318
              
291,318
  
Diluted
    
291,318
              
291,318
  
 

See accompanying notes.
NUANCE COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the fiscal year ended September 30, 2017
 

   
As Reported
    
Removal of Income
    
Pro Forma
  
   
Fiscal Year 2017
    
Statement Items (C)
    
Fiscal Year 2017
  
Revenues:
  
(In thousands, except per share amounts)
  
Professional services and hosting
  
$
  976,893    
$
  (10,327 )   
$
  966,566  
Product and licensing
    
635,391
      
(141,480
 )    
493,911
  
Maintenance and support
    
327,078
      
(59,380
 )    
267,698
  
Total revenues
    
1,939,362
      
(211,187
 )    
1,728,175
  
Cost of revenues:
                        
Professional services and hosting
    
660,849
      
(6,250
 )    
654,599
  
Product and licensing
    
74,004
      
(19,900
 )    
54,104
  
Maintenance and support
    
54,094
      
(16,851
 )    
37,243
  
Amortization of intangible assets
    
64,853
      
(6,961
 )    
57,892
  
Total cost of revenues
    
853,800
      
(49,962
 )    
803,838
  
Gross profit
    
1,085,562
      
(161,225
 )    
924,337
  
Operating expenses:
                        
Research and development
    
266,097
      
(26,172
 )    
239,925
  
Sales and marketing
    
398,130
      
(73,760
 )    
324,370
  
General and administrative
    
166,677
      
(3,612
 )    
163,065
  
Amortization of intangible assets
    
113,895
      
(21,056
 )    
92,839
  
Acquisition-related costs, net
    
27,740
      
(32
 )    
27,708
  
Restructuring and other charges, net
    
61,054
      
(1,131
 )    
59,923
  
Impairment of goodwill and other intangible assets
    
—
      
—
      
—
  
Total operating expenses
    
1,033,593
      
(125,763
 )    
907,830
  
(Loss) income from operations
    
51,969
      
(35,462
 )    
16,507
  
Other income (expense):
                        
Interest income
    
6,922
      
—
      
6,922
  
Interest expense
    
(156,889
 )    
—
      
(156,889
 )
Other expense, net
    
(21,017
 )    
(193
 )    
(21,210
 )
(Loss) income before income taxes
    
(119,015
 )    
(35,655
 )    
(154,670
 )
(Benefit) provision for income taxes
    
31,981
      
(8,310
 )    
23,671
  
Net loss
  
$
  (150,996 )   
$
  (27,345 )   
$
  (178,341 ) 
Net loss per share:
                        
Basic
   $  (0.52 )         
$
  (0.62 ) 
Diluted
   $  (0.52 )         
$
  (0.62 ) 
Weighted average common shares outstanding:
                  
Basic
    
289,348
              
289,348
  
Diluted
    
289,348
              
289,348
  


See accompanying notes.
NUANCE COMMUNICATIONS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the fiscal year ended September 30, 2016
 
   
As Reported
    
Removal of Income
    
Pro Forma
  
   
Fiscal Year 2016
    
Statement Items (C)
    
Fiscal Year 2016
  
Revenues:
  
(In thousands, except per share amounts)
  
Professional services and hosting
   $  955,329     $  (5,699 )    $  949,630  
Product and licensing
    
669,227
      
(167,114
 )    
502,113
  
Maintenance and support
    
324,347
      
(55,763
 )    
268,584
  
Total revenues
    
1,948,903
      
(228,576
 )    
1,720,327
  
Cost of revenues:
                        
Professional services and hosting
    
626,168
      
(5,108
 )    
621,060
  
Product and licensing
    
86,379
      
(24,795
 )    
61,584
  
Maintenance and support
    
54,077
      
(16,084
 )    
37,993
  
Amortization of intangible assets
    
62,876
      
(8,617
 )    
54,259
  
Total cost of revenues
    
829,500
      
(54,604
 )    
774,896
  
Gross profit
    
1,119,403
      
(173,972
 )    
945,431
  
Operating expenses:
                        
Research and development
    
271,130
      
(24,304
 )    
246,826
  
Sales and marketing
    
390,866
      
(71,295
 )    
319,571
  
General and administrative
    
168,473
      
(4,138
 )    
164,335
  
Amortization of intangible assets
    
108,021
      
(22,498
 )    
85,523
  
Acquisition-related costs, net
    
17,166
      
(343
 )    
16,823
  
Restructuring and other charges, net
    
25,224
      
(1,019
 )    
24,205
  
Impairment of goodwill and other intangible assets
    
—
      
—
      
—
  
Total operating expenses
    
980,880
      
(123,597
 )    
857,283
  
(Loss) income from operations
    
138,523
      
(50,375
 )    
88,148
  
Other income (expense):
                        
Interest income
    
4,438
      
—
      
4,438
  
Interest expense
    
(132,732
 )    
—
      
(132,732
 )
Other expense, net
    
(8,490
 )    
163
      
(8,327
 )
(Loss) income before income taxes
    
1,739
      
(50,212
 )    
(48,473
 )
(Benefit) provision for income taxes
    
14,197
      
(3,967
 )    
10,230
  
Net loss
   $  (12,458 )    $  (46,245 )    $  (58,703 ) 
Net loss per share:
                        
Basic
   $  (0.04 )          $  (0.20 ) 
Diluted
   $  (0.04 )          $  (0.20 ) 
Weighted average common shares outstanding:
                  
Basic
    
292,129
              
292,129
  
Diluted
    
292,129
              
292,129
  
 

See accompanying notes.

NUANCE COMMUNICATIONS, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The unaudited pro forma condensed consolidated financial statements are based on our historical financial statements included within our Annual Report on Form 10-K for fiscal year 2018, as adjusted to give effect to the disposition of the Business. The unaudited pro forma condensed statements of operations for fiscal years 2018, 2017, and 2016 give effect to the disposition of the Business as if it had occurred on October 1, 2016. Additionally, the unaudited pro forma condensed statements of operations for fiscal year 2018 gives effect to the repayment of the 5.375% Senior Notes as if it had occurred on October 1, 2017. The unaudited pro forma condensed balance sheet as of September 30, 2018 gives effect to the disposition of the Business and the repayment of 5.375% Senior Notes as if they had occurred on September 30, 2018.

The unaudited pro forma condensed consolidated financial statements have been prepared in accordance with Article 11 of Regulation S-X and, in the opinion of management, reflect all necessary adjustments that are: (i) directly attributable to the disposition; (ii) factually supportable; and (iii) with respect to the unaudited pro forma condensed consolidated statements of operations, expected to have a continuing impact on the results of the Company.

Note 2. Pro Forma Adjustments

Adjustments to the pro forma condensed consolidated balance sheet:

(A) Removal of the assets and liabilities of the Business from the consolidated balance sheet as of September 30, 2018.
(B) Reflects receipt of net proceeds of approximately $390 million, after estimated transaction and tax expenses, subject to post-closing finalization of those adjustments as set forth in the Sale Agreement. Pursuant to the call notice issued on February 1, 2019, we are committed to use $300 million of the net proceeds to redeem the 5.375% Senior Notes.
Adjustments to the pro forma consolidated statements of operations:

(C) The pro forma adjustments for each of fiscal years 2018, 2017 and 2016 reflect the removal of the estimated revenue, costs and direct expenses of the Business and the related tax effects. The pro forma adjustments for fiscal year 2018 also reflect the reduction of interest expense had we redeemed the remaining $300 million of the 5.375% Senior Notes on October 1, 2017.

The pro forma adjustments above do not reflect the income taxes related to the disposition as we are still in the process of estimating the resulting tax impact.