EX-99.2 3 ex99_2.htm EXHIBIT 99.2 ex99_2.htm
Exhibit 99.2

COMPUWARE CORPORATION AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

On October 31, 2014, Compuware Corporation (the “Company”) completed its distribution of its shares in Covisint Corporation (“Covisint”).

The accompanying unaudited pro forma consolidated financial statements of Compuware Corporation and its subsidiaries (collectively, the “Company”, Compuware”, “we”, “our” and “us”) were derived from the Company’s historical consolidated financial statements and contain the required unaudited pro forma condensed consolidated balance sheet of the Company as of June 30, 2014, and the unaudited pro forma consolidated statements of operations for the fiscal years ended March 31, 2012, 2013 and 2014 and for the three months ended June 30, 2014.

In connection with the distribution, we intend to proportionately adjust the exercise prices of outstanding options to purchase shares of the Company to maintain the aggregate intrinsic value of such options as of the date of the distribution, pursuant to the terms of these awards. The adjustment will result in the reduction of the per share exercise price of each Option by an amount equal to the product of the Covisint share value (determined by averaging the daily volume weighted average trading price of Covisint on October 30th, October 31st, November 3rd and November 4th), multiplied by the distribution ratio of 0.14025466 (the “Exercise Price Reduction”). The actual Exercise Price Reduction will not be determined until after the NASDAQ market close on November 4th. As a result of this modification, we expect to record additional stock compensation expense related to these awards during the three months ending December 31, 2014 for vested awards and over the remaining vesting period for unvested awards. We do not expect these charges to have a material impact on our financial position, results of operations or cash flows and these charges are not reflected in the Pro Forma Consolidated Financial Statements presented herein.

The following unaudited pro forma consolidated financial statements are furnished for informational purposes only and do not purport to reflect the Company’s financial position and results of operations had the disposition occurred on the date as indicated above. Further, these financial statements are not necessarily indicative of the Company’s future financial position and future results of operations and should be read in conjunction with the accompanying notes and with the historical consolidated financial statements of the Company and related notes thereto included in its Annual Report on Form 10-K for the year ended March 31, 2014 and its Quarterly Report on Form 10-Q for the three months ended June 30, 2014, both filed with the Securities and Exchange Commission. The unaudited pro forma consolidated statements of operations give effect to the disposition by removing the results of the Covisint subsidiary as if the disposition had occurred as of April 1, 2011 and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma consolidated financial information. The unaudited pro forma condensed consolidated balance sheet reflects the disposition of Covisint as if it had occurred on June 30, 2014. The pro forma adjustments are based on the best information available and assumptions that management believes are factually supportable.

 
 
 
 
 
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2014
(Unaudited, In Thousands)
 
ASSETS
  
As Reported
    
Pro Forma Adjustments
    
Pro Forma
  
   
 
    
(a)
    
(c)
    
 
  
CURRENT ASSETS:
                        
Cash and cash equivalents
   $ 275,514     $ (43,129 )   $       $ 232,385  
Accounts receivable, net
     288,031       (18,732 )           269,299  
Deferred tax asset, net
     36,770       (1,431 )           35,339  
Income taxes refundable
     4,519       -             4,519  
Prepaid expenses and other current assets
     27,629       (6,277 ) (b)           21,352  
Total current assets
     632,463       (69,569 )     -       562,894  
                                 
PROPERTY AND EQUIPMENT, LESS ACCUMULATED
                                
DEPRECIATION AND AMORTIZATION
     283,107       (4,940 )             278,167  
                                 
CAPITALIZED SOFTWARE AND OTHER
                                
INTANGIBLE ASSETS, NET
     96,868       (21,329 )             75,539  
                                 
ACCOUNTS RECEIVABLE
     165,010       -               165,010  
                                 
GOODWILL
     647,445       (25,385 )             622,060  
                                 
DEFERRED TAX ASSET, NET
     16,582       (127 )     (2,444 )     14,011  
                                 
OTHER ASSETS
     24,613       (6,350 )             18,263  
                                 
TOTAL ASSETS
   $ 1,866,088     $ (127,700 )   $ (2,444 )   $ 1,735,944  
                                 
LIABILITIES AND SHAREHOLDERS' EQUITY
                                
                                 
CURRENT LIABILITIES:
                                
Accounts payable
   $ 14,133     $ (3,963 )   $       $ 10,170  
Accrued expenses
     75,448       (697 ) (b)             74,751  
Income taxes payable
     16,249       (41 )     40,450       56,658  
Deferred revenue
     354,683       (14,807 )             339,876  
Total current liabilities
     460,513       (19,508 )     40,450       481,455  
                                 
DEFERRED REVENUE
     274,482       (9,119 )             265,363  
                                 
ACCRUED EXPENSES
     19,927       (56 )             19,871  
                                 
DEFERRED TAX LIABILITY, NET
     33,857       1,140               34,997  
Total liabilities
     788,779       (27,543 )     40,450       801,686  
                                 
SHAREHOLDERS' EQUITY:
                                
Compuware shareholders' equity
     1,061,362       (84,210 )     (42,894 )     934,258  
Non-controlling interest
     15,947       (15,947 )             -  
Total shareholders' equity
     1,077,309       (100,157 )     (42,894 )     934,258  
                                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
   $ 1,866,088     $ (127,700 )   $ (2,444 )   $ 1,735,944  
 
See notes to consolidated financial statements.

 
 
 
 
 
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Statement of Operations
Year Ended March 31, 2012
(Unaudited, In Thousands, Except Per Share Data)

   
As Reported
    
Results of
Operations of
Divested
Business
    
Pro Forma
  
REVENUES:
        
(d)
        
Software license fees
   $ 195,751     $ -     $ 195,751  
Maintenance fees
     380,968       -       380,968  
Subscription fees
     76,246       -       76,246  
Services fees
     36,795       -       36,795  
Application services fees
     73,731       (73,731 )     -  
                         
Total revenues
     763,491       (73,731 )     689,760  
                         
OPERATING EXPENSES:
                        
Cost of software license fees
     16,391       -       16,391  
Cost of maintenance fees
     34,715       -       34,715  
Cost of subscription fees
     29,102       -       29,102  
Cost of services
     36,276       -       36,276  
Cost of application services
     72,384       (72,384 )     -  
Technology development and support
     94,233       (1,420 )     92,813  
Sales and marketing
     242,211       -       242,211  
Administrative and general
     154,366       (3,897 )     150,469  
Restructuring costs
     -       -       -  
                         
Total operating expenses
     679,678       (77,701 )     601,977  
                         
INCOME FROM CONTINUING OPERATIONS
     83,813       3,970       87,783  
                         
OTHER INCOME, NET
     1,633       -       1,633  
                         
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
                        
TAX PROVISION
     85,446       3,970       89,416  
                         
INCOME TAX PROVISION - CONTINUING OPERATIONS
     22,005       1,830       23,835  
                         
                         
INCOME FROM CONTINUING OPERATIONS, NET OF TAX
   $ 63,441     $ 2,140     $ 65,581  
                         
                         
                         
EARNINGS PER SHARE BASED ON CONTINUING OPERATIONS
                        
Basic earnings per share
   $ 0.29             $ 0.30  
Diluted earnings per share
   $ 0.29             $ 0.29  

See notes to consolidated financial statements.

 
 
 
 
 
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Statement of Operations
Year Ended March 31, 2013
(Unaudited, In Thousands, Except Per Share Data)

   
As Reported
    
Results of
Operations of
Divested
Business
    
Pro Forma
  
REVENUES:
        
(d)
        
Software license fees
   $ 159,093     $ -     $ 159,093  
Maintenance fees
     361,359       -       361,359  
Subscription fees
     79,862       -       79,862  
Services fees
     32,896       -       32,896  
Application services fees
     90,694       (90,694 )     -  
                         
Total revenues
     723,904       (90,694 )     633,210  
                         
OPERATING EXPENSES:
                        
Cost of software license fees
     18,986       -       18,986  
Cost of maintenance fees
     31,621       -       31,621  
Cost of subscription fees
     30,264       -       30,264  
Cost of services
     31,777       -       31,777  
Cost of application services
     83,298       (83,298 )     -  
Technology development and support
     95,356       (1,420 )     93,936  
Sales and marketing
     220,714       -       220,714  
Administrative and general
     153,733       (4,519 )     149,214  
Restructuring costs
     15,751       (34 )     15,717  
                         
Total operating expenses
     681,500       (89,271 )     592,229  
                         
INCOME FROM CONTINUING OPERATIONS
     42,404       (1,423 )     40,981  
                         
OTHER INCOME (EXPENSE), NET
     (1,170 )     -       (1,170 )
                         
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
                        
TAX PROVISION
     41,234       (1,423 )     39,811  
                         
INCOME TAX PROVISION - CONTINUING OPERATIONS
     15,917       1,139       17,056  
                         
                         
INCOME FROM CONTINUING OPERATIONS, NET OF TAX
   $ 25,317     $ (2,562 )   $ 22,755  
                         
                         
EARNINGS PER SHARE BASED ON CONTINUING OPERATIONS
                        
Basic earnings per share
   $ 0.12             $ 0.11  
Diluted earnings per share
   $ 0.12             $ 0.10  

See notes to consolidated financial statements.

 
 
 
 

COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Statement of Operations
Year Ended March 31, 2014
(Unaudited, In Thousands, Except Per Share Data)

   
As Reported
    
Results of
Operations of
Divested
Business
    
Pro Forma
  
REVENUES:
        
(d)
        
Software license fees
   $ 159,197     $ -     $ 159,197  
Maintenance fees
     353,374       -       353,374  
Subscription fees
     80,857       -       80,857  
Services fees
     30,193       -       30,193  
Application services fees
     97,135       (97,135 )     -  
                         
Total revenues
     720,756       (97,135 )     623,621  
                         
OPERATING EXPENSES:
                        
Cost of software license fees
     20,310       -       20,310  
Cost of maintenance fees
     28,387       -       28,387  
Cost of subscription fees
     32,406       -       32,406  
Cost of services
     25,662       -       25,662  
Cost of application services
     117,155       (117,155 )     -  
Technology development and support
     86,181       (1,522 )     84,659  
Sales and marketing
     216,115       -       216,115  
Administrative and general
     134,695       (7,273 )     127,422  
Restructuring costs
     11,990       (399 )     11,591  
                         
Total operating expenses
     672,901       (126,349 )     546,552  
                         
INCOME FROM CONTINUING OPERATIONS
     47,855       29,214       77,069  
                         
OTHER INCOME, NET
     3,288       (23 )     3,265  
                         
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME
                        
TAX PROVISION
     51,143       29,191       80,334  
                         
INCOME TAX PROVISION - CONTINUING OPERATIONS
     12,944       11,466       24,410  
                         
                         
INCOME FROM CONTINUING OPERATIONS
                        
INCLUDING NON-CONTROLLING INTEREST
     38,199       17,725       55,924  
                         
Less: Net loss attributable to the non-controlling interest in
                        
Covisint Corporation
     (3,458 )     3,458       -  
                         
INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO
                        
COMPUWARE CORPORATION, NET OF TAX
   $ 41,657     $ 14,267     $ 55,924  
                         
EARNINGS PER SHARE BASED ON CONTINUING OPERATIONS
                        
ATTRIBUTABLE TO COMPUWARE CORPORATION
                        
Basic earnings per share
   $ 0.19             $ 0.26  
Diluted earnings per share
   $ 0.19             $ 0.25  
                         
Dividends declared per common share
   $ 0.50             $ 0.50  

See notes to consolidated financial statements.


 
 
 
 
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Statement of Operations
Three Months Ended June 30, 2014
(Unaudited, In Thousands, Except Per Share Data)
 
   
As Reported
    
Results of
Operations of
Divested
Business
    
Pro Forma
  
REVENUES:
        
(d)
        
Software license fees
   $ 26,687     $ -     $ 26,687  
Maintenance fees
     88,460       -       88,460  
Subscription fees
     19,362       -       19,362  
Services fees
     8,414       -       8,414  
Application services fees
     21,587       (21,587 )     -  
                         
Total revenues
     164,510       (21,587 )     142,923  
                         
OPERATING EXPENSES:
                        
Cost of software license fees
     4,995       -       4,995  
Cost of maintenance fees
     6,922       -       6,922  
Cost of subscription fees
     8,202       -       8,202  
Cost of services
     6,732       -       6,732  
Cost of application services
     30,902       (30,902 )     -  
Technology development and support
     19,952       (385 )     19,567  
Sales and marketing
     53,103       -       53,103  
Administrative and general
     34,013       (2,055 )     31,958  
Restructuring costs
     2,975       -       2,975  
                         
Total operating expenses
     167,796       (33,342 )     134,454  
                         
INCOME (LOSS) FROM CONTINUING OPERATIONS
     (3,286 )     11,755       8,469  
                         
OTHER INCOME, NET
     223       (22 )     201  
                         
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
                        
TAX PROVISION
     (3,063 )     11,733       8,670  
                         
INCOME TAX BENEFIT - CONTINUING OPERATIONS
     (1,707 )     4,366       2,659  
                         
INCOME (LOSS) FROM CONTINUING OPERATIONS INCLUDING
                        
NON-CONTROLLING INTEREST
     (1,356 )     7,367       6,011  
Less: Net loss attributable to the non-controlling interest in
                        
Covisint Corporation
     (1,408 )     1,408       -  
                         
INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO
                        
COMPUWARE CORPORATION, NET OF TAX
   $ 52     $ 5,959     $ 6,011  
                         
EARNINGS PER SHARE BASED ON CONTINUING OPERATIONS
                        
ATTRIBUTABLE TO COMPUWARE CORPORATION
                        
Basic earnings per share
   $ 0.00             $ 0.03  
Diluted earngings per share
   $ 0.00             $ 0.03  
                         
Dividends declared per common share
   $ 0.125             $ 0.125  

See notes to consolidated financial statements.

 
 
 

COMPUWARE CORPORATION AND SUBSIDIARIES

Notes to Unaudited Pro Forma Consolidated Financial Statements

 
(a)
The adjustment reflects the elimination of assets and liabilities attributable to Covisint including the non-controlling interest activity and balances attributable to the portion of the economic interest in Covisint that we did not own since Covisint’s IPO.

 
(b)
At June 30, 2014, amounts due to Covisint of $4.1 million were treated as intercompany balances which were eliminated in consolidation. The adjustment includes the balances due to Covisint primarily for cash received by the Company on behalf of Covisint and for amounts determined to be due to Covisint under our tax sharing agreement. These amounts are generally cash-settled during the subsequent quarter.

 
(c)
Records the Company’s estimated income tax liability ($40.5 million based on June 30, 2014 market value per share of Covisint common stock) on the distribution of Covisint stock to Compuware shareholders assuming the closing of Compuware’s Agreement and Plan of Merger with Project Copper Holdings, LLC and Project Copper Merger Corp., both affiliates of Thoma Bravo LLC, dated September 2, 2014. The final tax liability will depend upon the market value of Covisint common stock as of the spin date among other things.

As a result of the distribution of its remaining Covisint stock, the Company increased its valuation allowance related to the Brownfield Redevelopment tax credit carryforward deferred tax asset.

 
(d)
The results of operations of the divested business represent the operations of Covisint. Variances from Covisint’s stand-alone financial statements are primarily related to application of the accounting rules under generally accepted accounting principles in the United States for allocation of general and administrative costs to discontinued operations versus the amounts historically charged to Covisint, as well as, the impact of certain intercompany transactions which were not eliminated for Covisint’s stand-alone financial statements.