0000803014-12-000024.txt : 20121106 0000803014-12-000024.hdr.sgml : 20121106 20121106161047 ACCESSION NUMBER: 0000803014-12-000024 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20121031 ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20121106 DATE AS OF CHANGE: 20121106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMVERSE TECHNOLOGY INC/NY/ CENTRAL INDEX KEY: 0000803014 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 133238402 STATE OF INCORPORATION: NY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-35303 FILM NUMBER: 121183353 BUSINESS ADDRESS: STREET 1: 810 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 212-739-1000 MAIL ADDRESS: STREET 1: 810 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 8-K 1 cnsdisposition1-31x128kdoc.htm 8-K CNS Disposition 1-31-12 8k doc


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):
October 31, 2012

COMVERSE TECHNOLOGY, INC.
 
(Exact name of registrant as specified in its charter)

NEW YORK
001-35303
13-3238402
 
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification No.)

810 Seventh Avenue
New York, New York
10019

(Address of Principal Executive Offices)
(Zip Code)

Registrant's telephone number, including area code: (212) 739-1000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))













Item 2.01      Completion of Acquisition or Disposition of Assets  

Comverse Technology, Inc. ("CTI", and together with its subsidiaries, the “Company”) previously disclosed that it completed the pro rata distribution of 100% of the outstanding shares of common stock of Comverse, Inc. (“Comverse”) to CTI's shareholders on October 31, 2012 (the "share distribution").  Comverse is now an independent public company trading under the symbol “CNSI” on the NASDAQ Stock Market.  On October 31, 2012, CTI's shareholders of record as of 5 p.m. EDT on October 22, 2012 (the “Record Date”) received one share of Comverse common stock for every ten shares of CTI's common stock held as of the Record Date. 

The unaudited pro forma financial information of the Company giving effect to the share distribution, and the related notes thereto, are attached hereto as Exhibit 99.1.


Item 9.01.    Financial Statements and Exhibits

(b) Pro forma financial information
Unaudited pro forma financial information of the Company required by Article 11 of Regulation S-X is attached hereto as Exhibit 99.1 and is incorporated by reference herein.
(d)
Exhibits.
    
 
99.1

Unaudited pro forma consolidated balance sheet of the Company as of July 31, 2012 and unaudited pro forma consolidated statements of operations of the Company for the six months ended July 31, 2012 and 2011 and the fiscal years ended January 31, 2012, 2011 and 2010.
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 hereunto duly authorized.
 
 
 
 
 
 
 
 
 
COMVERSE TECHNOLOGY, INC.
 
 
 
 
November 6, 2012
By:
 
/s/ Joel E. Legon
 
 
 
Joel E. Legon
 
 
 
Senior Vice President, Interim Chief Financial Officer



 EX-99.1 2 cnsdisposition1-31x12exibi.htm EXHIBIT CNS Disposition 1-31-12 Exibit 99.1


Exhibit 99.1
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF COMVERSE TECHNOLOGY, INC.
The following unaudited pro forma consolidated financial statements give effect to the share distribution and related transactions described below, based on assumptions and adjustments set forth in the accompanying notes.
CTI's unaudited pro forma consolidated financial statements presented below consist of an unaudited pro forma consolidated balance sheet as of July 31, 2012 and unaudited pro forma consolidated statements of operations for the six months ended July 31, 2012 and 2011 and the fiscal years ended January 31, 2012, 2011 and 2010. The following unaudited pro forma consolidated financial statements should be read in conjunction with CTI's historical consolidated financial statements and accompanying notes included in CTI's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2012 (the '"Quarterly Report") filed with the Securities and Exchange Commission (the "SEC") on September 10, 2012, CTI's Annual Report on Form 10-K for the fiscal year ended January 31, 2012 filed with the SEC on April 2, 2012, CTI's Current Report on Form 8-K filed with the SEC on October 19, 2012 (the "October 19 Form 8-K") and historical combined financial statements of Comverse Inc. ("Comverse"), Starhome B.V. ("Starhome") and Exalink Ltd., included in the Preliminary Information Statement filed as Exhibit 99.1 to the Registration Statement on Form 10 filed by Comverse with the SEC on October 10, 2012. CTI's historical consolidated statement of operations information presented for the fiscal years ended January 31, 2012, 2011 and 2010 has been recast to reflect the results of operations of Starhome, a former majority-owned subsidiary of CTI, as discontinued operations due the sale of Starhome to third party unaffiliated purchasers, which was completed on October 19, 2012,  and is derived from the unaudited consolidated statements of operations included in the October 19 Form 8-K.
The unaudited pro forma consolidated financial statements have been derived from CTI's historical consolidated financial statements and Comverse's historical combined financial statements, and are not intended to represent a complete presentation of CTI's and Comverse's financial condition or results of operations had the share distribution and related transactions occurred as of that date and for the periods presented. In addition, they are provided for illustrative and informational purposes only and are not necessarily indicative of CTI's or Comverse's future financial condition or results of operations. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable, that reflect the expected impacts of events directly attributable to the share distribution and related transactions, and that are factually supportable and for purposes of the statements of operations, are expected to have a continuing impact. However, such adjustments may change materially from the information presented.
The unaudited pro forma consolidated balance sheet as of July 31, 2012 has been prepared as if the share distribution and related transactions occurred on July 31, 2012. The unaudited pro forma consolidated statements of operations for the six months ended July 31, 2012 and 2011 and the fiscal years ended January 31, 2012, 2011 and 2010 have been prepared as if the share distribution and related transactions had occurred as of February 1, 2009.
The unaudited pro forma consolidated financial statements give effect to the following significant transactions:
•
the elimination of the operations of Comverse;
•
cash and asset capital contributions to Comverse by CTI;
•
the settlement of borrowings under notes payable by Comverse to CTI through a capital contribution to Comverse by CTI; and
•
estimated transaction costs associated with the share distribution.

The Company does not expect to record any stock-based compensation expense in connection with the treatment of outstanding share-based awards in connection with the share distribution.
The following unaudited pro forma consolidated financial statements do not give pro forma effect to the previously disclosed proposed merger of CTI into Verint Systems Inc. (the "Verint Merger") and the following related transactions:
•
the contribution of $25.0 million by CTI to Comverse upon completion of the Verint Merger by placing such funds in escrow to support indemnification claims to the extent made against Comverse by Verint;
•
Verint Merger related estimated transaction costs, primarily related to financial advisory, accounting, tax, consulting and legal fees, which will be paid by CTI. The total estimated merger related transaction costs are $17.4 million, of which $1.4 million were incurred during the six months ended July 31, 2012; and
•
a $2.2 payment made in September 2012 to settle CTI's convertible debt obligations.



1





Unaudited Pro Forma Consolidated Balance Sheet as of July 31, 2012
 
Historical
 
Distribution of Comverse
a
Pro forma Adjustments
 
Note
 
Pro forma as Adjusted
 
(In thousands, except share and per share data)
ASSETS
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents (1)
$
415,153

 
$
(116,320
)
 
$
(38,500
)
 
b
 
$
260,333

Restricted cash and bank time deposits
39,372

 
(28,622
)
 
—

 
 
 
10,750

Accounts receivable, net
315,758

 
(148,142
)
 
—

 
 
 
167,616

Inventories
40,426

 
(30,426
)
 
—

 
 
 
10,000

Deferred cost of revenue
38,909

 
(34,455
)
 
—

 
 
 
4,454

Deferred income taxes
22,849

 
(9,964
)
 
—

 
j
 
12,885

Prepaid expenses and other current assets
80,787

 
(37,582
)
 
(861
)
 
c
 


 
 
 
 
 
(4,115
)
 
d
 


 
 
 
 
 
4,038

 
j
 
42,267

Receivables from affiliates
—

 
(2,414
)
 
2,414

 
c
 
—

Current assets of discontinued operations
43,357

 
(43,357
)
 
—

 
 
 
—

Total current assets
996,611

 
(451,282
)
 
(37,024
)
 
 
 
508,305

Property and equipment, net
74,855

 
(41,270
)
 
(1,443
)
 
e
 
32,142

Goodwill
1,045,923

 
(155,450
)
 
—

 
 
 
890,473

Intangible assets, net
176,855

 
(13,957
)
 
—

 
 
 
162,898

Deferred cost of revenue
101,629

 
(93,377
)
 
—

 
 
 
8,252

Deferred income taxes
17,871

 
(9,414
)
 
—

 
j
 
8,457

Other assets
94,067

 
(61,397
)
 
(785
)
 
f
 


 
 
 
 
 
(388
)
 
d
 
31,497

Noncurrent assets of discontinued operations
8,826

 
(8,826
)
 
—

 
 
 
—

Total assets
$
2,516,637

 
$
(834,973
)
 
$
(39,640
)
 
 
 
$
1,642,024

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
$
340,064

 
$
(171,998
)
 
$
9,873

 
g
 


 
 
 
 
 
900

 
h
 
 
 
 
 
 
 
(32
)
 
d
 
 
 
 
 
 
 
(1,197
)
 
i
 
177,610

Convertible debt obligations
2,195

 
—

 
—

 
 
 
2,195

Deferred revenue
487,747

 
(341,584
)
 
—

 
 
 
146,163

Deferred income taxes
12,164

 
(8,755
)
 
—

 
j
 
3,409

Bank loans
6,292

 
—

 
—

 
 
 
6,292

Income taxes payable
7,246

 
(2,570
)
 
—

 
j
 
4,676

Other current liabilities
53,129

 
—

 
(251
)
 
d
 


 
 
 
 
 
(49
)
 
i
 
52,829

Payable to affiliate
—

 
—

 
1,553

 
c
 
1,553

Current liabilities of discontinued operations
28,003

 
(28,003
)
 
—

 
 
 
—

Total current liabilities
936,840

 
(552,910
)
 
10,797

 
 
 
394,727

Bank loans
587,675

 
—

 
—

 
 
 
587,675

Deferred revenue
172,517

 
(155,844
)
 
—

 
 
 
16,673

Deferred income taxes
91,640

 
(43,467
)
 
—

 
j
 
48,173

Notes payable to CTI
—

 
(18,286
)
 
18,286

 
k
 
—

Other long-term liabilities
186,494

 
(142,042
)
 
(1,116
)
 
f
 


 
 
 
 
 
(1,260
)
 
j
 
42,076


2




Noncurrent liabilities of discontinued operations
4,816

 
(4,816
)
 
—

 
 
 
—

Total liabilities
1,979,982

 
(917,365
)
 
26,707

 
 
 
1,089,324

Commitments and contingencies
 
 
 
 
 
 
 
 
 
Equity:
 
 
 
 
 
 
 
 
 
Comverse Technology, Inc. shareholders’ equity:
 
 
 
 
 
 
 
 
 
Common stock, $0.10 par value - authorized, 600,000,000 shares issued 220,565,694 shares; outstanding 214,229,956, on historical and pro forma basis
22,057

 
—

 
—

 
 
 
22,057

Treasury stock, at cost
(9,641
)
 
—

 
—

 
 
 
(9,641
)
Additional paid-in capital
2,213,262

 
—

 
117,320

 
l
 


 
 
 
 
 
(38,500
)
 
b
 
 
 
 
 
 
 
(1,443
)
 
e
 
 
 
 
 
 
 
331

 
f
 
 
 
 
 
 
 
1,246

 
i
 
 
 
 
 
 
 
(18,286
)
 
k
 
 
 
 
 
 
 
(4,220
)
 
d
 
 
 
 
 
 
 
5,298

 
j
 
2,275,008

Net investment of CTI
 
 
117,320

 
(117,320
)
 
l
 
—

Accumulated deficit
(1,819,848
)
 
—

 
(9,873
)
 
g
 


 
 
 
 
 
(900
)
 
h
 
(1,830,621
)
Accumulated other comprehensive income (loss)
2,730

 
(26,788
)
 
 
 
 
 
(24,058
)
Total Comverse Technology, Inc. shareholders’ equity
408,560

 
90,532

 
(66,347
)
 
 
 
432,745

Noncontrolling interest
128,095

 
(8,140
)
 
 
 
 
 
119,955

Total equity
536,655

 
82,392

 
(66,347
)
 
 
 
552,700

Total liabilities and equity
$
2,516,637

 
$
(834,973
)
 
$
(39,640
)
 
 
 
$
1,642,024

(1) Includes $173.3 million of cash and cash equivalents held by Verint as of July 31, 2012. Under its credit agreement, Verint is precluded from paying cash dividends to its shareholders, including CTI.


















3




Unaudited Pro Forma Consolidated Statement of Operations for the Six Months Ended July 31, 2012
 
Historical
 
Distribution of Comverse
a
Pro forma Adjustments
 
Note
 
Pro forma as Adjusted
 
(In thousands, except per share and per share data)
Revenue:
 
 
 
 
 
 
 
 
 
   Product revenue
$
293,528

 
$
(99,539
)
 
$
—

 
 
 
$
193,989

   Service revenue
424,509

 
(209,437
)
 
—

 
 
 
215,072

Total revenue
718,037

 
(308,976
)
 
—

 
 
 
409,061

Costs and expenses:
 
 
 
 
 
 
 
 
 
   Product costs
126,635

 
(51,933
)
 
—

 
 
 
74,702

   Service costs
216,274

 
(146,668
)
 
—

 
 
 
69,606

Research and development, net
97,462

 
(38,864
)
 
—

 
 
 
58,598

Selling, general and administrative
268,558

 
(74,327
)
 
(10,071
)
 
m
 

 
 
 
 
 
(98
)
 
o
 
184,062

Other operating expenses:
 
 
 
 
 
 
 
 
 
   Restructuring charges
1,107

 
(1,107
)
 
—

 
 
 
—

Total costs and expenses
710,036

 
(312,899
)
 
(10,169
)
 

 
386,968

Income from operations
8,001

 
3,923

 
10,169

 

 
22,093

   Interest income
705

 
(443
)
 
—

 
 
 
262

   Interest expense
(15,798
)
 
376

 
—

 
 
 
(15,422
)
Interest expense on notes payable to CTI
—

 
250

 
(250
)
 
p
 
—

   Other income, net
(3,439
)
 
3,896

 
—

 
 
 
457

(Loss) income before income tax provision
(10,531
)
 
8,002

 
9,919

 

 
7,390

Income tax provision
(29,348
)
 
13,006

 
412

 
q
 
(15,930
)
Net loss from continuing operations
$
(39,879
)
 
$
21,008

 
$
10,331

 

 
$
(8,540
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
   Basic and Diluted
218,983,165

 
 
 
 
 
r
 
218,983,165

Loss per share:
 
 
 
 
 
 
 
 
 
   Basic
$
(0.25
)
 
 
 
 
 
s
 
$
(0.13
)
   Diluted
(0.25
)
 
 
 
 
 
t
 
(0.13
)



















4




Unaudited Pro Forma Consolidated Statement of Operations for the Six Months Ended July 31, 2011
 
Historical
 
Distribution of Comverse
a
Pro forma Adjustments
 
Note
 
Pro forma as Adjusted
 
(In thousands, except per share and per share data)
Revenue:
 
 
 
 
 
 
 
 
 
   Product revenue
$
298,330

 
$
(114,629
)
 
—

 
 
 
$
183,701

   Service revenue
418,780

 
(231,190
)
 
—

 
 
 
187,590

Total revenue
717,110

 
(345,819
)
 
—

 
 
 
371,291

Costs and expenses:
 
 
 
 
 
 
 
 
 
   Product costs
119,649

 
(58,569
)
 
—

 
 
 
61,080

   Service costs
226,326

 
(162,948
)
 
—

 
 
 
63,378

   Research and development, net
101,893

 
(48,717
)
 
—

 
 
 
53,176

   Selling, general and administrative
281,346

 
(77,443
)
 
(126
)
 
o
 
203,777

Other operating expenses:
 
 
 
 
 
 
 
 
 
   Restructuring charges
13,050

 
(13,050
)
 
—

 
 
 
—

Total costs and expenses
742,264

 
(360,727
)
 
(126
)
 

 
381,411

Loss from operations
(25,154
)
 
14,908

 
126

 

 
(10,120
)
   Interest income
2,607

 
(883
)
 
—

 
 
 
1,724

   Interest expense
(17,133
)
 
471

 
—

 
 
 
(16,662
)
   Interest expense on note payable to CTI
—

 
182

 
(182
)
 
p
 
—

   Loss on extinguishment of debt
(8,136
)
 
—

 
—

 
 
 
(8,136
)
   Other income, net
11,980

 
2,556

 
—

 
 
 
14,536

Loss before income tax provision
(35,836
)
 
17,234

 
(56
)
 

 
(18,658
)
Income tax provision
(56,902
)
 
40,119

 
—

 
q
 
(16,783
)
Net loss from continuing operations
$
(92,738
)
 
$
57,353

 
$
(56
)
 

 
$
(35,441
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
   Basic and Diluted
205,892,853

 
 
 
 
 
r
 
205,892,853

Loss per share:
 
 
 
 
 
 
 
 
 
   Basic
$
(0.49
)
 
 
 
 
 
s
 
$
(0.21
)
   Diluted
(0.49
)
 
 
 
 
 
t
 
(0.21
)


















5




Unaudited Pro Forma Consolidated Statement of Operations for the Fiscal Year Ended January 31, 2012
 
Historical
 
Distribution of Comverse
a
Pro forma Adjustments
 
Note
 
Pro forma as Adjusted
 
(In thousands, except per share and per share data)
Revenue:
 
 
 
 
 
 
 
 
 
   Product revenue
$
666,851

 
$
(276,459
)
 
$
—

 
 
 
$
390,392

   Service revenue
886,954

 
(494,698
)
 
—

 
 
 
392,256

Total revenue
1,553,805

 
(771,157
)
 
—

 
 
 
782,648

Costs and expenses:
 
 
 
 
 
 
 
 
 
   Product costs
274,474

 
(136,024
)
 
—

 
 
 
138,450

   Service costs
462,754

 
(332,843
)
 
—

 
 
 
129,911

Research and development, net
205,239

 
(94,238
)
 
—

 
 
 
111,001

Selling, general and administrative
566,587

 
(160,417
)
 
(202
)
 
o
 
405,968

Other operating expenses:
 
 
 
 
 
 
 
 
—

   Litigation settlements
4,880

 
—

 
—

 
 
 
4,880

   Restructuring charges
20,728

 
(20,728
)
 
—

 
 
 
—

Total other operating expenses
25,608

 
(20,728
)
 
—

 

 
4,880

Total costs and expenses
1,534,662

 
(744,250
)
 
(202
)
 

 
790,210

Income (loss) from operations
19,143

 
(26,907
)
 
202

 

 
(7,562
)
   Interest income
4,174

 
(1,755
)
 
—

 
 
 
2,419

   Interest expense
(33,332
)
 
953

 
—

 
 
 
(32,379
)
Interest expense on note payable to CTI
—

 
409

 
(409
)
 
p
 
—

Loss on extinguishment of debt
(8,136
)
 
—

 
—

 
 
 
(8,136
)
   Other income, net
21,630

 
7,192

 
—

 
 
 
28,822

Income (loss) before income tax provision
3,479

 
(20,108
)
 
(207
)
 

 
(16,836
)
Income tax provision
(42,259
)
 
22,538

 
—

 
q
 
(19,721
)
Net loss from continuing operations
$
(38,780
)
 
$
2,430

 
$
(207
)
 

 
$
(36,557
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
   Basic and Diluted
208,301,686

 
 
 
 
 
r
 
208,301,686

Loss per share:
 
 
 
 
 
 
 
 
 
   Basic
$
(0.31
)
 
 
 
 
 
s
 
$
(0.30
)
   Diluted
(0.31
)
 
 
 
 
 
t
 
(0.30
)


















6




Unaudited Pro Forma Consolidated Statement of Operations for the Fiscal Year Ended January 31, 2011
 
Historical
 
Distribution of Comverse
a
Pro forma Adjustments
 
Note
 
Pro forma as Adjusted
 
(In thousands, except per share and per share data)
Revenue:
 
 
 
 
 
 
 
 
 
   Product revenue
$
676,066

 
$
(300,902
)
 
$
—

 
 
 
$
375,164

   Service revenue
913,569

 
(561,934
)
 
—

 
 
 
351,635

Total revenue
1,589,635

 
(862,836
)
 
—

 
 
 
726,799

Costs and expenses:
 
 
 
 
 
 
 
 
 
   Product costs
258,187

 
(138,378
)
 
1,274

 
n
 
121,083

   Service costs
452,771

 
(335,510
)
 
—

 
 
 
117,261

Research and development, net
245,342

 
(148,817
)
 
—

 
 
 
96,525

Selling, general and administrative
673,512

 
(187,078
)
 
(253
)
 
o
 
486,181

Other operating expenses:
 
 
 
 
 
 
 
 

Impairment of goodwill and other intangible assets
(17,500
)
 
—

 
—

 
 
 
(17,500
)
   Restructuring charges
29,934

 
(29,934
)
 
—

 
 
 
—

Total other operating expenses
12,434

 
(29,934
)
 
—

 

 
(17,500
)
Total costs and expenses
1,642,246

 
(839,717
)
 
1,021

 

 
803,550

Loss from operations
(52,611
)
 
(23,119
)
 
(1,021
)
 

 
(76,751
)
   Interest income
4,093

 
(1,717
)
 
—

 
 
 
2,376

   Interest expense
(30,813
)
 
900

 
—

 
 
 
(29,913
)
Interest expense on note payable to CTI
—

 
19

 
(19
)
 
p
 
—

   Other income, net
5,974

 
3,645

 
—

 
 
 
9,619

Loss before income tax (provision) benefit
(73,357
)
 
(20,272
)
 
(1,040
)
 

 
(94,669
)
Income tax (provision) benefit
(36,932
)
 
55,828

 
—

 
q
 
18,896

Net loss from continuing operations
$
(110,289
)
 
$
35,556

 
$
(1,040
)
 

 
$
(75,773
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
   Basic and Diluted
205,162,720

 
 
 
 
 
r
 
205,162,720

Loss per share:
 
 
 
 
 
 
 
 
 
   Basic
$
(0.62
)
 
 
 
 
 
s
 
$
(0.45
)
   Diluted
(0.62
)
 
 
 
 
 
t
 
(0.45
)




















7




Unaudited Pro Forma Consolidated Statement of Operations for the Fiscal Year Ended January 31, 2010
 
Historical
 
Distribution of Comverse
d
Pro forma Adjustments
 
Note
 
Pro forma as Adjusted
 
(In thousands, except per share and per share data)
Revenue:
 
 
 
 
 
 
 
 
 
   Product revenue
$
618,749

 
$
(244,417
)
 
$
(60
)
 
n
 
$
374,272

   Service revenue
879,731

 
(550,370
)
 
—

 
 
 
329,361

Total revenue
1,498,480

 
(794,787
)
 
(60
)
 
 
 
703,633

Costs and expenses:
 
 
 
 
 
 
 
 
 
   Product costs
245,579

 
(117,412
)
 
2,814

 
n
 
130,981

   Service costs
464,674

 
(355,720
)
 
—

 
 
 
108,954

Research and development, net
259,746

 
(175,949
)
 
—

 
 
 
83,797

Selling, general and administrative
704,815

 
(226,040
)
 
(149
)
 
o
 
478,626

Other operating expenses:
 
 
 
 
 
 
 
 
 
Impairment of goodwill and other intangible assets
3,356

 
(3,356
)
 
—

 
 
 
—

   Restructuring charges
15,413

 
(15,272
)
 
—

 
 
 
141

Total other operating expenses
18,769

 
(18,628
)
 
—

 

 
141

Total costs and expenses
1,693,583

 
(893,749
)
 
2,665

 

 
802,499

Loss from operations
(195,103
)
 
98,962

 
(2,725
)
 

 
(98,866
)
   Interest income
7,043

 
(3,169
)
 
—

 
 
 
3,874

   Interest expense
(25,381
)
 
314

 
—

 
 
 
(25,067
)
Interest expense on note payable to CTI
—

 
(4,845
)
 
4,845

 
p
 
—

   Other (expense), net
(18,095
)
 
(476
)
 
—

 
 
 
(18,571
)
Loss before income tax benefit
(231,536
)
 
90,786

 
2,120

 

 
(138,630
)
Income tax benefit
7,297

 
59,423

 
—

 
q
 
66,720

Net loss from continuing operations
$
(224,239
)
 
$
150,209

 
$
2,120

 

 
$
(71,910
)
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
   Basic and Diluted
204,513,420

 
 
 
 
 
r
 
204,513,420

Loss per share:
 
 
 
 
 
 
 
 
 
   Basic
$
(1.14
)
 
 
 
 
 
s
 
$
(0.39
)
   Diluted
(1.14
)
 
 
 
 
 
t
 
(0.39
)
























8




Notes to Unaudited Pro Forma Consolidated Financial Statements
a.
Reflects the elimination of the historical results of operations, assets, liabilities and equity of Comverse. Although CTI allocates certain of its general corporate overhead expenses and professional fees to Comverse, those expenses are not included in the elimination of Comverse's historical results of operations, as it is not factually supportable that CTI would not have incurred the expenses allocated to Comverse, if the share distribution had occurred at the beginning of the periods presented for pro forma results of operations. In addition, the income tax benefit on the reported loss before income tax benefit has been adjusted to reflect the amounts allocable to CTI and Comverse on an intraperiod allocation basis.
b.
Reflects the cash contribution made by CTI to Comverse as part of the share distribution.
c.
Reflects amounts payable to Comverse by affiliates.
d.
Reflects the contribution to Comverse of assets and liabilities pertaining to CTI capital by CTI.
e.
Reflects the contribution to Comverse of property and equipment by CTI as part of the share distribution. The assets primarily consist of equipment, software and leasehold improvements of facilities.
f.
Reflects the transfer to Comverse of lease deposits and deferred lease liability from CTI as part of the share distribution.
g.
Reflects the of estimated transaction costs attributable to the share distribution that are factually supportable, primarily related to financial advisory, accounting, tax, consulting and legal fees, which will be paid by CTI. The total estimated transaction costs are $19.9 million, of which $10.1 million were incurred during the six months ended July 31, 2012.
h.
Reflects bonuses payable by CTI upon consummation of the share distribution.
i.
Reflects the assumption by Comverse of employee-related liabilities attributable to employees transferred to Comverse from CTI as part of the share distribution.
j.
Reflects the adjustment to tax assets and liabilities for the tax effect of the pro forma adjustments discussed above using the statutory tax rate in effect in the respective tax jurisdictions adjusted for the impact of non-deductible items and valuation allowances. Upon the share distribution, tax law allocations in conjunction with the Tax Disaffiliation Agreement between CTI and Comverse entered into in connection with the share distribution may result in changes to CTI's reported tax amounts.
k.
Reflects the settlement of borrowings under notes that were payable by Comverse to CTI through a capital contribution to Comverse by CTI as part of the share distribution.
l.
Reflects the reclassification of net investment of CTI in Comverse into additional paid-in capital.
m.
Reflects the elimination of transaction costs directly attributable to the share distribution that are non-recurring.
n.
Reflects adjustments to product revenue and product costs related to transactions with affiliates that were eliminated in CTI's consolidation.
o.
Reflects the depreciation of property and equipment that was contributed to Comverse by CTI as part of the share distribution.
p.
Reflects the elimination of interest expense on borrowings under notes that were payable by Comverse to CTI that settled through a capital contribution to Comverse by CTI as part of the share distribution.
q.
Reflects the tax effect of the pro forma adjustments discussed above using the statutory tax rate in effect in the respective tax jurisdictions adjusted for the impact of non-deductible items and the valuation allowances.
r.
The number of shares used to compute pro forma basic and diluted loss per share attributable to CTI's shareholders is based on the weighted average number of shares of CTI's common stock outstanding during the applicable fiscal period.
s.
Pro forma basic loss per share attributable to CTI's shareholders reflects the impact of noncontrolling interest.
t.
Pro forma diluted loss per share attributable to CTI's shareholders reflects the impact of noncontrolling interest. As a result of net loss, the diluted loss per share computation excludes contingently issuable shares of CTI's common stock issuable upon exercise of outstanding stock options or in settlement of other share-based awards granted under our equity-based compensation plans, because the effect would be antidilutive. The dilutive impact of subsidiary stock-based awards on CTI's reported net loss is recorded as an adjustment to net loss for the purposes of calculating loss per share.



9