EX-99.3 3 a66066a1ex99-3.txt EXHIBIT 99.3 1 EXHIBIT 99.3 SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION The Company, through a wholly-owned subsidiary, offered to purchase all outstanding Class A Voting Common Shares and Class B Non-Voting Common Shares (collectively, the "FastLane Shares") of FastLane Technologies Inc., in exchange for 1,125,262 shares of Quest common stock valued at $60.3 million (based on the September 11, 2000 closing market price of $53.63 per share), a cash payment of $33.5 million, assumption of stock options valued at $6.6 million, and the assumption of net assets estimated to be $5.0 million at December 31, 1999 and net liabilities estimated to be $1.2 million at June 30, 2000. Transaction costs are estimated at $0.5 million. The following table sets out certain consolidated financial information for Quest and FastLane as well as certain pro forma consolidated financial information for Quest after giving effect to the offer and certain other adjustments. The unaudited pro forma adjustments are based upon currently available information and upon certain assumptions that management of Quest believes are reasonable under the circumstances. The following unaudited pro forma consolidated balance sheet as of June 30, 2000 includes the unaudited consolidated balance sheet of FastLane and assumes that the acquisition had occurred on June 30, 2000. The unaudited pro forma consolidated statement of operations for the six months ended June 30, 2000 includes the unaudited statement of operations of FastLane for the six months ended June 30, 2000, and assumes that the acquisition occurred on January 1, 1999. The unaudited pro forma consolidated statement of operations for the year ended December 31, 1999 includes the statement of operations of FastLane for the year December 31, 1999, and assumes that the acquisition occurred on January 1, 1999. The FastLane balance sheet at June 30, 2000 was translated from Canadian dollars to U.S. dollars at the exchange rate at June 30, 2000 of 0.6739. The FastLane statement of operations for the six months ended June 30, 2000 was translated from Canadian dollars to U.S. dollars at the six-month average exchange rate of 0.68199. The FastLane statement of operations for the twelve months ended December 31, 1999 was translated from Canadian dollars to U.S. dollars at the twelve-month average exchange rate of 0.6731. The exchange rates used to translate the combined unaudited pro forma amounts from Canadian to U.S. dollars are solely for the convenience of the reader. Certain FastLane historical financial statement amounts have been reclassified to pro forma presentation to comply with U.S. GAAP. In addition, an adjustment was made to FastLane's historical financial statements to recognize the value of technology acquired from an affiliate in accordance with U.S. GAAP. The information presented below assumes all the FastLane Shares are tendered to the offer, Quest takes up and pays for such FastLane Shares and all Exchangeable Shares are exchanged for shares of Quest Common Stock. The unaudited pro forma consolidated financial information does not reflect any cost savings or other synergies which may result from the transaction and is not necessarily indicative of future results of operations or financial position. Additionally, the unaudited pro forma consolidated financial information excludes non-recurring charges directly attributable to the transaction which will be charged to operations in the quarter in which the transaction is consummated. The unaudited pro forma consolidated financial information is presented on the basis of U.S. GAAP. The acquisition will be accounted for using the purchase method of accounting. Accordingly, the cost to acquire FastLane will be allocated to the assets acquired and liabilities assumed according to their estimated fair values as of the date of acquisition after giving effect to the purchase price adjustments required by the offer. The allocation is dependent upon certain 1 2 valuations and other studies that have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the purchase allocation adjustments made in connection with the preparation of the unaudited pro forma consolidated financial information are preliminary, and have been made solely for the purpose of preparing such unaudited pro forma consolidated financial information. On December 17, 1999 Quest, through a wholly-owned subsidiary, acquired all of the outstanding common stock and stock options of MBR Technologies, Inc. (MBR) in exchange for 186,942 shares of Quest common stock valued at $9.3 million, a cash payment of $1.3 million, and the assumption of net liabilities of $0.3 million. The acquisition was accounted for as a purchase and the result of MBR's operations were included in Quest's statement of operations from the date of acquisition. On January 7, 2000 Quest, through a wholly-owned subsidiary, acquired all of the outstanding common stock of Foglight Software, Inc. (Foglight) in exchange for 2,375,206 shares of Quest common stock valued at $104.2 million, cash payments of $0.4 million, the assumption of unvested Foglight stock options valued at $2.2 million, and the assumption of net liabilities of $4.1 million. The acquisition was accounted for as a purchase. The December 31, 1999 unaudited consolidated statement of operations reflects the pro forma results and related adjustments for the MBR and Foglight acquisitions as if the acquisitions had occurred on January 1, 1999. The balance sheet and statement of operations of Quest as of and for the six months ended June 30, 2000 includes the financial position and operations of Foglight and MBR. 2 3 QUEST SOFTWARE, INC. AND FASTLANE TECHNOLOGIES INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1999 ($USD in thousands, except for per share amounts)
MBR Technologies Foglight Quest For The Period Foglight and MBR Software January 1, 1999 to Software Pro Forma Total Dec 31, 1999 Dec 17, 1999 Dec 31, 1999 Adjustments Dec 31, 1999 ------------ ------------------ ------------ ----------- ------------ Revenues: Licenses $54,269 $ 380 $ 2,433 $ -- $ 57,082 Services 16,599 190 383 -- 17,172 ------- ------- ------- -------- -------- Total revenues 70,868 570 2,816 -- 74,254 Cost of revenues: Licenses 2,998 346 109 3,453 Services 4,195 195 207 -- 4,597 Amortization of purchased developed technology -- -- -- 2,550(1) 2,550 ------- ------- ------- -------- -------- Total cost of revenues 7,193 541 316 2,550 10,600 ------- ------- ------- -------- -------- Gross profit 63,675 29 2,500 (2,550) 63,654 Operating expenses: Sales and marketing 32,078 149 3,734 -- 35,961 Research and development 15,980 209 3,680 -- 19,869 General and administrative 9,906 524 1,233 -- 11,663 Other compensation costs and goodwill amortization 1,243 -- 409 22,826(1) 24,478 ------- ------- ------- -------- -------- Total operating expenses 59,207 882 9,056 22,826 91,971 ------- ------- ------- -------- -------- Income (loss) from operations 4,468 (853) (6,556) (25,376) (28,317) Other income, net 1,202 (31) (865) (87)(2) 219 ------- ------- ------- -------- -------- Income (loss) before income tax provision 5,670 (884) (7,421) (25,463) (28,098) Income tax provision (benefit) 2,273 1 1 (3,810)(3) (1,535) ------- ------- ------- -------- -------- Net income (loss) 3,397 (885) (7,422) (21,653) (26,563) Preferred dividends 590 -- 679 -- 1,269 ------- ------- ------- -------- -------- Net income (loss) applicable to common shareholders $ 2,807 $ (885) $(8,101) $(21,653) $(27,832) ======= ======= ======= ======== ======== Earnings per share: Basic $ 0.04 Diluted $ 0.03 Weighted average shares: Basic 75,354 2,562(4) Diluted 83,600 (5,684)(4) FastLane FastLane Combined Technologies Pro Forma Pro Forma Dec 31, 1999 Adjustments Dec 31, 1999 ------------ ----------- ------------ Revenues: Licenses $ 4,350 -- $ 61,432 Services 1,127 -- 18,299 -------- -------- --------- Total revenues 5,477 -- 79,731 Cost of revenues: Licenses 90 -- 3,543 Services 307 -- 4,904 Amortization of purchased developed technology 1,338 -- 3,888 -------- -------- --------- Total cost of revenues 1,735 -- 12,335 -------- -------- --------- Gross profit 3,742 -- 67,396 Operating expenses: Sales and marketing 8,075 -- 44,036 Research and development 2,549 -- 22,418 General and administrative 1,398 -- 13,061 Other compensation costs and goodwill amortization -- 21,860(1) 46,338 -------- -------- --------- Total operating expenses 12,022 21,860 125,853 -------- -------- --------- Income (loss) from operations (8,280) (21,860) (58,457) Other income, net 95 (314)(2) -- -------- -------- --------- Income (loss) before income tax provision (8,185) (22,174) (58,457) Income tax provision (benefit) -- (126)(3) (1,661) -------- -------- --------- Net income (loss) (8,185) (22,048) (56,796) Preferred dividends -- -- 1,269 -------- -------- --------- Net income (loss) applicable to common shareholders $ (8,185) $(22,048) $ (58,065) ======== ======== ========= Earnings per share: Basic $ (0.73) Diluted $ (0.73) Weighted average shares: Basic 1,125(4) 79,041 Diluted 1,125(4) 79,041
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1999 (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION) (1) To reflect the amortization of goodwill over five years on a straight-line basis, and workforce over three and one-half years on a straight-line basis ($20,601) and the amortization of purchased developed technology over two years on a straight-line basis ($2,550) for the Foglight transaction. For the MBR transaction, includes the amortization of goodwill for the period January 1, 1999 to December 17, 1999 of $2,225. Also includes the amortization of goodwill over five years on a straight-line basis ($19,179), and amortization of unearned compensation related to assumed options over two and one-half years ($2,681) for the FastLane transaction. (2) To reflect the decrease in interest income due to the use of cash in the acquisitions. (3) To adjust the income tax provision to reflect the estimated income tax benefits from the reduction of interest income. (4) To adjust for the 2,375,206 and 186,942 shares of Quest common stock issued in the acquisitions of Foglight and MBR, respectively, in the basic net income per share calculation and reduce the number of weighted average shares for the diluted net loss per share calculation. Also includes the adjustment for the 1,125,262 shares of Quest common stock issued in the acquisition of FastLane in the basic and diluted net loss per share calculation. 3 4 QUEST SOFTWARE, INC. AND FASTLANE TECHNOLOGIES INC. UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 30, 2000 ($USD, in thousands)
Quest FastLane Software Technologies Total June 30, 2000 June 30, 2000 June 30, 2000 ------------- ------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 83,290 $ 42 $ 83,332 Short-term marketable securities 40,163 -- 40,163 Accounts receivable, net 19,719 3,303 23,022 Prepaid expenses and other current assets 7,740 370 8,110 Deferred income taxes 5,499 -- 5,499 --------- -------- --------- Total current assets 156,411 3,715 160,126 Property and equipment, net 33,033 1,858 34,891 Long-term marketable securities 137,461 -- 137,461 Goodwill and purchased intangible assets, net 142,969 1,451 144,420 Deferred income taxes 415 -- 415 Other assets 4,365 -- 4,365 --------- -------- --------- Total assets $ 474,654 $ 7,024 $ 481,678 ========= ======== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,918 $ 2,277 $ 6,195 Accrued compensation 6,132 -- 6,132 Other accrued expenses 10,187 -- 10,187 Income taxes payable 1,903 -- 1,903 Current portion of long-term debt -- 1,547 1,547 Deferred support revenue 16,693 247 16,940 Deferred license revenue 8,495 989 9,484 --------- -------- --------- Total current liabilities 47,328 5,060 52,388 Long-term liabilities and other 3,148 3,203 6,351 Shareholders' equity: Common stock and additional paid in capital 465,616 17,770 483,386 Retained earnings (accumulated deficit) (8,231) (19,001) (27,232) Accumlated other comprehensive income (541) -- (541) Notes receivable from sale of common stock (2,602) (8) (2,610) Unearned compensation -- -- -- Capital distribution in excess of basis in common stock (30,064) -- (30,064) --------- -------- --------- Total shareholders' equity 424,178 (1,239) 422,939 --------- -------- --------- Total liabilities and shareholders' equity $ 474,654 $ 7,024 $ 481,678 ========= ======== =========
Combined Pro Forma Pro Forma Adjustments June 30, 2000 ----------- ------------- ASSETS Current assets: Cash and cash equivalents $ (33,965)(1) $ 49,367 Short-term marketable securities 40,163 Accounts receivable, net 23,022 Prepaid expenses and other current assets 8,110 Deferred income taxes 5,499 --------- --------- Total current assets (33,965) 126,161 Property and equipment, net 34,891 Long-term marketable securities 137,461 Goodwill and purchased intangible assets, net 102,104(1) 246,524 Deferred income taxes 415 Other assets 4,365 --------- --------- Total assets $ 68,139 $ 549,817 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 6,195 Accrued compensation 6,132 Other accrued expenses 10,187 Income taxes payable 1,903 Current portion of long-term debt 1,547 Deferred support revenue 16,940 Deferred license revenue 9,484 --------- --------- Total current liabilities -- 52,388 Long-term liabilities and other 6,351 Shareholders' equity: Common stock and additional paid in capital 55,841(1) 539,227 Retained earnings (accumulated deficit) 19,001(1) (8,231) Accumlated other comprehensive income (541) Notes receivable from sale of common stock (2,610) Unearned compensation (6,703)(1) (6,703) Capital distribution in excess of basis in common stock (30,064) --------- --------- Total shareholders' equity 68,139 491,078 --------- --------- Total liabilities and shareholders' equity $ 68,139 $ 549,817 ========= =========
4 5 QUEST SOFTWARE, INC. AND FASTLANE TECHNOLOGIES INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 ($USD in thousands, except for per share amounts)
Quest FastLane Combined Software Technologies Total Pro Forma Pro Forma June 30, 2000 June 30, 2000 June 30, 2000 Adjustments June 30, 2000 ------------- ------------- ------------- ----------- ------------- Revenues: Licenses $ 50,423 $ 3,697 $ 54,120 $ 54,120 Services 14,956 1,128 16,084 16,084 -------- ------- -------- -------- -------- Total revenues 65,379 4,825 70,204 -- 70,204 Cost of revenues: Licenses 1,505 78 1,583 1,583 Services 4,122 553 4,675 4,675 Amortization of purchased developed technology 1,758 678 2,436 2,436 -------- ------- -------- -------- -------- Total cost of revenues 7,385 1,309 8,694 -- 8,694 -------- ------- -------- -------- -------- Gross profit 57,994 3,516 61,510 -- 61,510 Operating expenses: Sales and marketing 30,876 6,240 37,116 37,116 Research and development 16,702 2,180 18,882 18,882 General and administrative 6,732 1,271 8,003 8,003 Other compensation costs and goodwill amortization 15,409 -- 15,409 11,551(2) 26,960 -------- ------- -------- -------- -------- Total operating expenses 69,719 9,691 79,410 11,551 90,961 -------- ------- -------- -------- -------- Loss from operations (11,725) (6,175) (17,900) (11,551) (29,451) Other income, net 4,644 -- 4,644 (831)(3) 3,813 -------- ------- -------- -------- -------- Loss before income tax provision (7,081) (6,175) (13,256) (12,382) (25,638) Income tax provision (benefit) 3,013 -- 3,013 (332)(4) 2,681 -------- ------- -------- -------- -------- Net loss $(10,094) $(6,175) $(16,269) $(12,050) $(28,319) ======== ======= ======== ======== ======== Earnings per share: Basic $ (0.12) $ (0.34) Diluted $ (0.12) $ (0.34) Weighted average shares: Basic 83,351 1,125(5) 84,476 Diluted 83,351 1,125(5) 84,476
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2000 (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION) (1) To reflect the elimination of FastLane's equity accounts and the allocation of the purchase price of $102,104 to goodwill. The allocation may change once the audit of FastLane's closing balance sheet is completed and other valuation information is received. Also reflects the recording of the assumed unvested options at intrinsic value of $6,703. (2) To reflect the amortization of goodwill over five years on a straight-line basis ($10,210) and amortization of unearned compensation related to the intrinsic value of assumed unvested options over two and one-half years ($1,341). (3) To reflect the decrease in interest income due to the use of cash in the acquisition at a 4.75% annual yield. (4) To adjust the income tax provision to reflect the estimated income tax benefits from the reduction of interest income. (5) To adjust for the 1,125,262 shares of Quest common stock issued in the acquisition in the basic and diluted net loss per share calculation. 5