EX-99.2 4 proformafinancialstatements.htm PRO FORMA FINANCIAL STATEMENTS LISTED IN ITEM 9.01(B) ABOVE Pro Forma Financial Statements listed in Item 9.01(b) above
Exhibit 99.2
Ventiv Health, Inc.

PRO FORMA FINANCIAL INFORMATION

 
On October 5, 2005, Ventiv Health, Inc. (“Ventiv”) completed the acquisition (the “Acquisition”) of all of the outstanding capital stock of inChord Communications, Inc. (“inChord”). The transaction was consummated pursuant to a definitive agreement dated September 6, 2005 (the “Acquisition Agreement”). Prior to the execution of the Acquisition Agreement, there were no material relationships between the Ventiv and inChord or its shareholders.
 
 
The closing consideration for the acquired capital stock consisted of promissory notes in an aggregate principal amount of $193.8 million (the “Purchase Price Notes”), exclusive of direct acquisition costs and fair market value adjustment of Common Stock. The Purchase Price Notes were repaid in accordance with their terms on October 7, 2005 by the delivery to the former shareholders of inChord of $177.2 million in cash, which includes a working capital adjustment of $8.8 million as well as the cancellation (by way of offset against amounts due under the Purchase Price Notes) of $4.1 million in indebtedness owing by certain of such shareholders to inChord. These former inChord shareholders also received 500,496 unregistered shares (fair market value of $24.975 per share) of Ventiv Common Stock, par value $0.001 per share. In addition to the closing consideration, the purchase price for the capital stock includes an earn-out provision pursuant to which inChord’s former shareholders will become entitled to additional consideration, which may be material, if inChord achieves specified financial targets during 2005 through 2007. A portion of this additional consideration may, at Ventiv’s option, be satisfied by the issuance of unregistered shares of Common Stock.
 
 
Because the selected unaudited pro forma condensed consolidated financial information is based upon inChord’s operating results during the period when inChord was not under the control, influence or management of Ventiv, the information presented may not be indicative of the results for the year ended December 31, 2004 or the nine months ended September 30, 2005 that would have actually occurred had the transaction been completed as of January 1, 2004, nor is it indicative of our future financial or operating results of the combined entity.
 

The unaudited pro forma condensed consolidated financial information is based on certain assumptions and adjustments described in the notes to the unaudited pro forma condensed consolidated financial information included in this report and should be read in conjunction with the audited historical consolidated financial statements and accompanying disclosures contained in Ventiv’s December 31, 2004 consolidated financial statements and notes thereto included on Form 10-K and unaudited Form 10-Q.



UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2005
(in thousands, except share amounts)

   
Ventiv
 
inChord
 
Pro Forma
     
Pro Forma
 
   
Historical
 
Historical
 
Adjustments
     
Combined
 
           
(see Note 2)
         
ASSETS
                     
Current assets:
                               
Cash and equivalents
 
$
52,054
   
7,438
   
(10,931
)
 (a)
 
 
48,561
 
Restricted cash
   
3,838
   
58
   
--
         
3,896
 
Accounts receivable, net
   
76,797
   
32,937
   
--
         
109,734
 
Unbilled services
   
35,382
   
14,002
   
--
         
49,384
 
Prepaid expenses and other current assets
   
3,930
   
5,187
   
--
         
9,117
 
Current deferred tax assets
   
13,271
   
--
   
--
         
13,271
 
Total current assets
   
185,272
   
59,622
   
(10,931
)
       
233,963
 
Property and equipment, net
   
35,403
   
2,684
   
--
         
38,087
 
Equity Investments
   
--
   
5,209
   
(228
)
 (c)
 
 
4,981
 
Goodwill
   
73,640
   
1,330
   
(1,330
)
 (d)
 
 
159,891
 
                 
86,251
   (a)
 
     
Other intangibles, net
   
24,252
   
102
   
(102
)
 (d)
 
 
118,592
 
                 
94,340
   (a)
 
     
Deferred taxes and other assets
   
9,261
   
555
   
2,500
   (a)
 
 
12,316
 
Total assets
 
$
327,828
 
$
69,502
 
$
170,500
       
$
567,830
 
                                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                               
Current liabilities:
                               
Current portion of capital lease obligations
 
$
10,985
   
--
   
--
       
$
10,985
 
Current portion of long-term debt
   
--
   
--
   
1,726
   (a)
 
 
1,726
 
Accrued payroll, accounts payable and accrued expenses
   
44,507
   
20,663
   
(1,423
)
 (f)
 
 
63,747
 
Current income tax liabilities
   
14,308
   
--
   
--
         
14,308
 
Client advances and unearned revenue
   
6,102
   
24,323
   
--
         
30,425
 
Total current liabilities
   
75,902
   
44,986
   
303
         
121,191
 
Capital lease obligations, excluding current portion
   
18,936
   
--
   
--
         
18,936
 
Long-term debt, excluding current portion
   
--
   
--
   
173,274
   (a)
 
 
173,274
 
Other non-current liabilities
   
4,510
   
7,856
   
(7,500
)
 (e)
 
 
4,866
 
Total liabilities
   
99,348
   
52,842
   
166,077
         
318,267
 
                                 
Minority interests
   
--
   
917
   
(902
)
 (c)
 
 
15
 
                                 
Stockholders' Equity:
                               
Common stock, $.001 par value
   
27
   
15,951
   
1
   (a)
 
 
28
 
                 
(15,951
)
 (b)
 
     
Treasury stock
    --     
(3,511
)
 
3,511
   (b)
 
 
--
 
Additional paid-in-capital
   
216,525
    --     
12,144
   (a)
 
 
228,669
 
Deferred compensation
   
(2,682
)
  --     
--
         
(2,682
)
Accumulated other comprehensive earnings
   
256
    --     
--
         
256
 
Retained earnings
   
14,354
   
3,303
   
(3,303
)
 (b)
 
 
23,277
 
                 
7,500
   (e)
 
     
                 
1,423
   (f)
 
     
Total stockholders' equity
   
228,480
   
15,743
   
5,325
 
       
249,548
 
Total liabilities and stockholders' equity
 
$
327,828
 
$
69,502
 
$
170,500
       
$
567,830
 

 
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
 
 

 



VENTIV HEALTH, INC.
 
For the Nine Months Ended September 30, 2005
 
(in thousands, except per share amounts)


 
   
 
Ventiv 
 
 
inChord
 
 
Pro Forma
 
 
 
 
 
Pro Forma
 
 
 
 
Historical 
 
 
Historical
 
 
Adjustments
 
 
 
 
 
Combined
 
Revenues
 
$
381,005
   
138,717
   
--
         
519,722
 
Operating expenses:
                               
Cost of services
   
291,236
   
57,027
   
46,962
   (k)
 
 
395,225
 
Selling, general and administrative expenses
   
48,082
   
77,133
   
(46,962
)
 (k)
 
 
70,876
 
                 
(7,500
)
 (e)
 
     
                 
(1,423
)
 (f)
 
     
                 
1,546
   (g)
 
     
Total operating expenses
   
339,318
   
134,160
   
(7,377
)
       
466,101
 
                                 
Operating earnings
   
41,687
   
4,557
   
7,377
         
53,621
 
                                 
Other (expenses) income
                               
Interest expense, net
   
(201
)
 
215
   
--
         
14
 
Total other (expenses) income
   
(201
)
 
215
   
--
         
14
 
                                 
Earnings from continuing operations before income taxes, minority interests and equity investments
   
41,486
   
4,772
   
7,377
         
53,635
 
Income tax provision
   
8,229
   
120
   
12,998
   (h)
 
 
21,347
 
Earnings from continuing operations before minority interests and equity investments
   
33,257
   
4,652
   
(5,621
)
       
32,288
 
Minority interest in CHS
   
--
   
(578
)
 
578
   (j)
 
 
--
 
Minority interest in TSP
   
--
   
(706
)
 
--
         
(706
)
Equity earnings in investments
   
--
   
79
   
--
         
79
 
Earnings from continuing operations
 
$
33,257
 
$
3,447
 
$
(5,043
)
     
$
31,661
 
                                 
                                 
Earnings per share from continuing operations:
                               
Basic
 
$
1.25
                   
$
1.17
 
Diluted
 
$
1.19
                   
$
1.12
 
Weighted average number of common shares outstanding:
                               
Basic
   
26,604
         
501
   (i)
 
 
27,105
 
Diluted
   
27,890
         
501
   (i)
 
 
28,391
 

 
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
 
 

 

 
 
 




UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
 
For the Year Ended December 31, 2004
 
(in thousands, except per share amounts)

   
Ventiv
 
inChord
 
Pro Forma
     
Pro Forma
 
   
Historical
 
Historical
 
Adjustments
     
Combined
 
Revenues
 
$352,184
 
$151,276
 
--
     
$503,460
 
Operating expenses:
                     
Cost of services
   
279,733
   
56,969
   
48,416
   (k)
 
 
385,118
 
Selling, general and administrative expenses
   
38,539
   
85,312
   
(48,416
)
 (k)
 
 
77,497
 
                 
2,062
   (g)
 
     
Restructuring
   
(264
)
       
--
         
(264
)
Total operating expenses
   
318,008
   
142,281
   
2,062
         
462,351
 
                                 
Operating earnings
   
34,176
   
8,995
   
(2,062
)
       
41,109
 
                                 
Other (expenses) income
                               
Interest expense, net
   
(244
)
 
176
   
--
         
(68
)
Total other (expenses) income
   
(244
)
 
176
   
--
         
(68
)
                                 
Earnings from continuing operations before income taxes,minority interests and equity investments
   
33,932
   
9,171
   
(2,062
)
       
41,041
 
Income tax provision (benefits)
   
3,802
   
(5
)
 
11,798
   (h)
 
 
15,595
 
Earnings from continuing operations before minority interests and equity investments
   
30,130
   
9,176
   
(13,860
)
       
25,446
 
Minority interest in CHS
   
--
   
(1,190
)
 
1,190
   (j)
 
 
--
 
Minority interest in TSP
   
--
   
(1,144
)
 
--
         
(1,144
)
Equity earnings in investments
   
--
   
158
   
--
         
158
 
Earnings from continuing operations
 
$
30,130
 
$
7,000
 
$
(12,670
)
     
$
24,460
 
                                 
                                 
Earnings per share from continuing operations:
                               
Basic
 
$
1.26
                   
$
1.00
 
Diluted
 
$
1.18
                   
$
0.94
 
Weighted average number of common shares outstanding:
                               
Basic
   
23,951
         
501
   (i)
 
 
24,452
 
Diluted
   
25,437
         
501
   (i)
 
 
25,938
 

 
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
 




VENTIV HEALTH, INC.
 
 

1.    Basis of Presentation

The unaudited pro forma condensed consolidated financial statements of Ventiv are based on the historical consolidated financial statements of Ventiv and inChord, and have been prepared to illustrate the effect of Ventiv’s acquisition of inChord. The unaudited pro forma condensed consolidated financial information has been prepared using the purchase method of accounting. The unaudited pro forma condensed consolidated balance sheet is presented as though the acquisition occurred on September 30, 2005.  The pro forma condensed consolidated statements of operations give effect to the acquisition of inChord as if it had occurred on January 1, 2004.


2.    Pro Forma Adjustments Related to the Acquisition

The following adjustments were applied to the historical consolidated financial statements of Ventiv and inChord to arrive at the unaudited pro forma condensed consolidated financial information:

(a)  For purposes of the pro forma condensed consolidated financial information, a summary of the purchase price consideration for the acquisition is as follows:
 
 
Purchase price consideration
 
Amount
(in thousands)
 
Cash
 
$
---
 
Stock issued
   
12,500
 
Fair market value adjustment of Common Stock                             (355)   
Long term debt
   
172,500
 
Working capital adjustment
   
8,767
 
Direct acquisition costs
   
2,164
 
Total
 
$
195,576
 

The following represents the allocation of the purchase price to the acquired assets of inChord. The allocation is based upon the estimated fair value of inChord’s assets and liabilities as of September 30, 2005. However, changes to the estimates of the fair values of inChord’s assets acquired and liabilities assumed may be necessary as additional information becomes available and a third-party valuation of certain intangible assets is finalized.
 

 
Preliminary allocation of purchase price
 
Amount
(in thousands)
 
Current assets
 $
59,622
 
Property and equipment, and other noncurrent assets
 
 3,239
 
Equity investments
   
4,981
 
Goodwill
   
86,251
 
Tradenames
   
67,540
 
Customer relationships
   
26,800
 
Liabilities assumed
   
(52,842
)
Minority interest
   
(15
)
Total
 $
 
195,576
 
 

Goodwill represents the excess of the purchase price over the fair value of tangible and identifiable intangible assets.  Deferred taxes and other assets proforma adjustments represent loan acquisition costs incurred as part of the Acquisition.

 
(b)
Represents the elimination of the historical stockholders’ equity accounts of inChord.
 
 
 
(c)
Represents the elimination of inChord’s Olde Worthington Road LLC investment, which was sold prior to the acquisition.
 
 
 
(d)
Represents the elimination of goodwill and other intangibles from inChord’s investments prior to the acquisition.
 
 
 
(e)
Represents one-time special bonus plan for designated inChord executives, based on financial targets achieved during 2005 through 2007.
 
 
 
(f)
Represents inChord buyout of all outstanding Stock Appreciation Rights units issued prior to the acquisition.
 
 
 
(g)
Represents the amortization of customer relationships associated with Ventiv’s acquisition of inChord. These intangible assets are amortized over their useful lives of thirteen years.
 
 
 
(h)
Represents pro-forma income tax expense as though inChord was taxed as a C-corporation at 39.8% for the nine months ended September 30, 2005 and at 38.0% for the year ended December 31, 2004. Prior to Ventiv’s acquisition, inChord was an S-corporation, in which case shareholders were taxed on their portion of inChord’s taxable income.
 
 
 
(i)
Represents the issuance of Ventiv common stock pursuant to the acquisition.
 
 
 
(j)
Reflects the purchase by inChord of 100 minority shares of CHS in exchange for shares of inChord giving inChord 100% ownership of CHS as of October 3, 2005.
 
 
 
(k)
Represents payroll and benefit costs allocation from selling, general and administrative expenses to cost of services. This allocation is to conform with Ventiv’s income statement presentation.
 

 

 

 



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
     
  VENTIV HEALTH, INC.
 
 
 
 
 
 
Date:  December 21, 2005 By:   /s/ John R. Emery
 
  Title:  Chief Financial Officer (Principal Accounting & Financial Officer)