EX-99.2 4 0004.txt UNAUDITED PRO FORMA FINANCIALS Exhibit 99.2 EDGEWATER TECHNOLOGY, INC. - FORM 8-K UNAUDITED PRO FORMA FINANCIAL STATEMENTS INTRODUCTION Edgewater Technology, Inc. ("Edgewater" or the "Company"), formerly known as StaffMark Inc., provides human resource and business solutions through five specialty platforms: IntelliMark information technology staffing and solutions; Robert Walters finance/accounting staffing services; ClinForce clinical trials support services; Strategic Legal Resources legal staffing and Edgewater Technology, an e-business consulting firm. The Company recognizes revenues upon the performance of services. The Company generally compensates its associates and consultants only for hours actually worked; therefore, wages of the associates and consultants are a variable cost that increase or decrease as revenues increase or decrease. However, certain of the Company's professional and information technology consultants are full-time, salaried employees. Cost of services primarily consists of wages paid to associates, payroll taxes, workers' compensation and other related employee benefits. Selling, general and administrative expenses are comprised primarily of administrative salaries, benefits, marketing, rent and recruitment expenses. On June 29, 2000, the Company pursuant to a Purchase Agreement dated as of May 16, 2000 by and between the Company and Stephens Group, Inc., an Arkansas corporation (the "Buyer"), sold all of its subsidiaries and the assets and liabilities of its Commercial Services Segment (the "Commercial Division") to affiliate entities of the Buyer (the "Transaction"). As consideration, the Company received gross proceeds payable in cash in the amount of $190.1 million. As part of the Transaction, the Company sold the name "StaffMark" as that was the name used by the Commercial Division. On June 29, 2000, the Company changed its name from "StaffMark, Inc." to "Edgewater Technology, Inc." The following unaudited pro forma consolidated statements of income set forth the results of operations for the twelve months ended December 31, 1999 and for the three months ended March 31, 2000 as if the disposition of the Commercial Division had occurred at the beginning of fiscal 1999. The unaudited pro forma consolidated balance sheet sets forth the financial position as of March 31, 2000, as if the disposition had occurred as of that date. The pro forma results of operations are not necessarily indicative of future operations or the actual results that would have occurred had the sale of the Commercial Division been consummated at the beginning of fiscal 1999. These statements should be read in conjunction with the accompanying notes herein and the historical consolidated financial statements and related notes of the Company included in its 1999 Annual Report of Form 10-K and Quarterly Report on Form 10-Q for the three months ended March 31, 2000. Edgewater Technology, Inc. Unaudited Pro Forma Combined Balance Sheet As of March 31, 2000
(In Thousands) Edgewater Pro Forma Technology, Inc. Adjustments Pro Forma ------------------ ----------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 228 $ 6,717 (a) $ 6,945 190,100 (c) (185,053)(d) (5,047)(e) Accounts receivable, net 186,837 (84,565)(a) 102,272 Prepaid expenses and other 18,471 (3,407)(a) 15,064 Deferred Income Taxes 5,992 (4,906)(a) 1,086 ---------- --------- ---------- Total current assets 211,528 (86,161) 125,367 PROPERTY AND EQUIPMENT, net 30,055 (18,135)(a) 11,920 INTANGIBLE ASSETS, net 433,222 (133,206)(a) 300,016 OTHER ASSETS 2,700 (507)(a) 2,193 ---------- --------- ---------- $ 677,505 $(238,009) $ 439,496 ========== ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and other accrued liabilities $ 35,390 $ (3,891)(b) $ 31,499 Payroll and related liabilities 34,807 (19,028)(b) 15,779 Reserve for workers' compensation claims 9,915 (9,795)(b) 120 Income taxes payable 9,675 2,026 (f) 11,701 ---------- --------- ---------- Total current liabilities 89,787 (30,688) 59,099 LONG-TERM DEBT 288,268 (185,053)(d) 103,215 OTHER LONG-TERM LIABILITIES 101 - 101 DEFERRED INCOME TAXES 9,049 (1,820)(b) 321 (6,908)(f) STOCKHOLDERS' EQUITY: Common stock 294 - 294 Paid-in capital 216,759 - 216,759 Retained earnings 78,406 (13,540)(g) 64,866 Accumulated other comprehensive income (5,159) - (5,159) ---------- --------- ---------- Total stockholders' equity 290,300 (13,540) 276,760 ---------- --------- ---------- Total Liabilities and Stockholders' Equity $ 677,505 $(238,009) $ 439,496 ========== ========= ==========
EDGEWATER TECHNOLOGY, INC. NOTES TO UNAUDITED PRO FORMA BALANCE SHEET AS OF MARCH 31, 2000 (a) Represents the assets of the Commercial Division that were sold by Edgewater and assumed by the Buyer as a result of the Transaction. (b) Represents the liabilities of the Commercial Division that were sold by Edgewater and assumed by the Buyer as a result of the Transaction. (c) Records the proceeds received by Edgewater for the sale of the Commercial Division. (d) Records the repayment of debt obligations with proceeds from the Transaction. (e) Records the payment of transaction fees associated with the Transaction. (f) Records the income tax obligation that resulted from the tax gain and the tax benefit that resulted from the book loss on sale of the Commercial Division. (g) Records the book loss on sale of the Commercial Division.
Edgewater Technology, Inc. Unaudited Pro Forma Combined Statement of Income for the Three Months Ended March 31, 2000 (In Thousands, Except Per Share Data) Disposition Related Adjustments ------------------------------------------------- Edgewater Commercial Pro Forma Total Technology, Inc. Division (a) Adjustments Adjustments Pro Forma ---------------- ---------------- --------------- --------------- ------------- SERVICE REVENUES $ 294,285 $ 154,113 $ - $ 154,113 $ 140,172 COST OF SERVICES 221,268 121,681 44(b) 121,725 99,543 ---------------- ---------------- --------------- --------------- ------------- Gross profit 73,017 32,432 (44) 32,388 40,629 OPERATING EXPENSES: Selling, general and administrative 58,655 23,528 2,201(b) 25,729 32,926 Depreciation and amortization 6,586 1,780 - 1,780 4,806 ---------------- ---------------- --------------- --------------- ------------- Operating income 7,776 7,124 (2,245) 4,879 2,897 ---------------- ---------------- --------------- --------------- ------------- OTHER INCOME (EXPENSE): Interest expense (5,444) - (3,447)(c) (3,447) (1,997) Other, net 503 (72) - (72) 575 ---------------- ---------------- --------------- --------------- ------------- INCOME BEFORE INCOME TAXES 2,835 7,052 (5,692) 1,360 1,475 INCOME TAX PROVISION 904 2,249 (1,815)(d) 434 470 ---------------- ---------------- --------------- --------------- ------------- Net income (loss) $ 1,931 $ 4,803 $ (3,877) $ 926 $ 1,005 ================ ================ =============== =============== ============= NET INCOME PER COMMON SHARE BASIC $ 0.07 $ 0.03 ================ ============= DILUTED $ 0.07 $ 0.03 ================ ============= WEIGHTED AVERAGE SHARES OUTSTANDING BASIC 29,461 29,461 ================ ============= DILUTED 29,676 29,676 ================ =============
EDGEWATER TECHNOLOGY, INC. NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2000 (a) Represents the unaudited financial results of the Commercial Division, which was sold in the Transaction. (b) Represents an allocation of Edgewater's corporate costs that relate to the Commercial Division. (c) Adjustment to reflect a reduction in interest expense that results from using the Transaction proceeds to repay debt obligations. (d) Records the provision for federal and state income taxes at an effective combined tax rate of approximately 31.9%. Edgewater Technology, Inc. Unaudited Pro Forma Combined Statement of Income for the Twelve Months Ended December 31, 1999
(In Thousands, Except Per Share Data) Disposition Related Adjustments --------------------------------------------------- Edgewater Commercial Pro Forma Total Technology, Inc. Division (a) Adjustments Adjustments Pro Forma ----------------- --------------- ------------ ------------ ----------- SERVICE REVENUES $ 1,220,852 $ 608,807 $ - $ 608,807 $ 612,045 COST OF SERVICES 918,574 480,683 (1,603) (b) 479,080 439,494 ----------------- --------------- ------------ ------------ ----------- Gross profit 302,278 128,124 1,603 129,727 172,551 OPERATING EXPENSES: Selling, general and administrative 214,824 85,468 7,475 (b) 92,943 121,881 Depreciation and amortization 21,448 6,964 - 6,964 14,484 Non-recurring charges 2,153 - - - 2,153 ----------------- --------------- ------------ ------------ ----------- Operating income 63,853 35,692 (5,872) 29,820 34,033 ----------------- --------------- ------------ ------------ ----------- OTHER INCOME (EXPENSE): Interest expense (17,419) - (12,084) (c) (12,084) (5,335) Other, net (227) - - - (227) ----------------- --------------- ------------ ------------ ----------- INCOME BEFORE INCOME TAXES 46,207 35,692 (17,956) 17,736 28,471 INCOME TAX PROVISION 15,994 12,354 (6,215) (d) 6,139 9,855 ----------------- --------------- ------------ ------------ ----------- Net income (loss) $ 30,213 $ 23,338 $ (11,741) $ 11,597 $ 18,616 ================= =============== ============ ============ =========== NET INCOME PER COMMON SHARE BASIC $ 1.03 $ 0.64 ================= =========== DILUTED $ 1.02 $ 0.63 ================= =========== WEIGHTED AVERAGE SHARES OUTSTANDING BASIC 29,280 29,280 ================= =========== DILUTED 29,526 29,526 ================= ===========
EDGEWATER TECHNOLOGY, INC. NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999 (a) Represents the unaudited financial results of the Commercial Division, which was sold in the Transaction. (b) Represents an allocation of Edgewater's corporate costs that relate to the Commercial Division. (c) Adjustment to reflect a reduction in interest expense that results from using the Transaction proceeds to repay debt obligations. (d) Records the provision for federal and state income taxes at an effective combined tax rate of 34.6%.