EX-99.2 5 c70717aexv99w2.txt PRO FORMA FINANCIAL INFORMATION EXHIBIT 99.2 PRO FORMA FINANCIAL INFORMATION UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma consolidated financial statements give effect to the NetSchools acquisition using the purchase method of accounting. The following unaudited pro forma condensed consolidated balance sheet of the combined entity as of April 30, 2002 gives effect to the NetSchools acquisition as if it was completed on April 30, 2002. The following unaudited pro forma consolidated statements of earnings for the year ended October 31, 2001 and for the six months ended April 30, 2002 give effect to the NetSchools acquisition as if it was completed on November 1, 2000. We present the unaudited pro forma consolidated financial statements for illustrative purposes only and they are not necessarily indicative of our financial position or results of operations that would have actually been reported had the acquisition occurred as of the dates indicated, nor are they necessarily indicative of our financial position or results of operations on a consolidated basis in the future. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in thousands)
APRIL 30, 2002 ------------------------------------------------------------- (1) (2) PRO FORMA -------------------------------- PLATO NETSCHOOLS ADJUSTMENTS RESULTS ------------- ------------- -------------- ------------- ASSETS Current assets: Cash and cash equivalents $ 59,122 $ 164 $ (6,000) (3) $ 50,943 (2,343) (4) Accounts receivable, net 25,803 700 - 26,503 Prepaid expenses and other current assets 1,296 2,289 - 3,585 Deferred income taxes 2,468 - - 2,468 ------------- ------------- -------------- ------------- Total current assets 88,689 3,153 (8,343) 83,499 Equipment and leasehold improvements, net 4,116 935 - 5,051 Product development costs, net 11,274 - - 11,274 Deferred income taxes, net 7,926 - (2,613) (3) 5,313 Goodwill, net 16,171 - 23,799 (3) 39,970 Identified intangible assets, net 3,122 - 6,700 (3) 9,822 Other assets 3,173 136 - 3,309 ------------- ------------- -------------- ------------- Total assets $ 134,471 $ 4,224 $ 19,543 $ 158,238 ============= ============= ============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 248 $ 10,854 $ (8,440) (5) $ 319 (2,343) (4) Accounts payable 1,486 2,470 - 3,956 Accrued employee salaries and benefits 4,182 816 - 4,998 Accrued liabilities 2,757 831 700 (3) 3,448 (6) 7,736 Deferred revenue 9,601 3,864 - 13,465 ------------- ------------- -------------- ------------- Total current liabilities 18,274 18,835 (6,635) 30,474 Long-term debt 590 69 - 659 Deferred revenue 1,398 - - 1,398 Other liabilities 36 - - 36 ------------- ------------- -------------- ------------- Total liabilities 20,298 18,904 (6,635) 32,567 ------------- ------------- -------------- ------------- Redeemable convertible preferred stock - 89,843 (89,843) (5) - Stockholders' equity: Common stock 110,362 2,128 (2,128) (5) 10,528 (3) 970 (3) 121,860 Retained earnings 4,726 (106,651) 106,651 (5) 4,726 Accumulated other comprehensive loss (915) - - (915) ------------- ------------- -------------- ------------- Total stockholders' equity 114,173 (104,523) 116,021 125,671 ------------- ------------- -------------- ------------- Total liabilities and stockholders' equity $ 134,471 $ 4,224 $ 19,543 $ 158,238 ============= ============= ============== =============
See notes to unaudited pro forma condensed consolidated balance sheet 15 NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Dollars in thousands) (1) Amounts are derived from our unaudited historical balance sheet at April 30, 2002. (2) Amounts are derived from the unaudited historical balance sheet of NetSchools at April 30, 2002. (3) We acquired all the outstanding shares of NetSchools for $6,000 in cash, 800,000 shares of our common stock, 200,000 warrants to purchase shares of our common stock, assumed liabilities and transaction expenses, and additional consideration of up to approximately $6,000, contingent on the NetSchools product and services revenues generated through October 2004. The purchase price consisted of the following components: Common stock issued $ 10,528 Cash paid 6,000 Direct acquisition costs 700 Liabilities assumed 10,464 Accrual of additional liabilities (see note (6)) 3,448 Common stock warrants issued 970 -------- $ 32,110 ========
The allocation of the total purchase price was as follows: Estimated fair value of tangible assets acquired $ 4,224 Estimated fair value of identified intangible assets 6,700 Goodwill 23,799 Deferred tax liabilities (2,613) -------- $ 32,110 ========
The NetSchools acquisition will be accounted for under SFAS 141 using the purchase method of accounting. Acquired assets and liabilities are recorded at their estimated fair values on the acquisition date. An independent appraisal firm performed the valuation of identified intangible assets, which consist of a customer list, tradename and acquired technology. Goodwill and identified intangible assets are subject to the provisions of SFAS 142. Goodwill and identified intangible assets with indefinite lives will not be amortized and will be reviewed for impairment on an annual basis. Identified intangible assets with definite lives will be amortized over five to seven years. 16 (4) Bank note payable was paid off concurrent with the acquisition. (5) Elimination of NetSchools notes payable, mandatorily redeemable convertible preferred stock and stockholders' equity accounts. The notes payable and mandatorily redeemable convertible preferred stock was converted to capital stock immediately prior to the acquisition. (6) Accrual of additional liabilities, primarily for separation benefits and lease termination costs. 17 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (Dollars and number of shares in thousands)
FOR THE YEAR ENDED OCTOBER 31, 2001 ------------------------------------------------------------- (1) (2) PRO FORMA -------------------------------- PLATO NETSCHOOLS ADJUSTMENTS RESULTS ------------- ------------- -------------- -------------- Revenues $ 70,107 $ 11,920 $ - $ 82,027 Cost of revenues 6,920 12,282 - 19,202 ------------- ------------- -------------- -------------- Gross profit 63,187 (362) - 62,825 ------------- ------------- -------------- -------------- Operating expenses: Selling, general and administrative 44,226 12,647 - 56,873 Product development and customer support 8,686 5,003 360 (3) 14,049 Goodwill and intangible amortization 2,112 - 766 (4) 2,878 Special charge 1,260 - - 1,260 ------------- ------------- -------------- -------------- Total operating expenses 56,284 17,650 1,126 75,060 ------------- ------------- -------------- -------------- Operating profit (loss) 6,903 (18,012) (1,126) (12,235) Interest expense (585) (1,152) - (1,737) Interest income 817 - - 817 Other expense (income), net (125) - - (125) ------------- ------------- -------------- -------------- Earnings (loss) before income taxes 7,010 (19,164) (1,126) (13,280) Income tax expense (benefit) 3,505 - (10,145) (5) (6,640) ------------- ------------- -------------- -------------- Net earnings (loss) $ 3,505 $(19,164) $ 9,019 $ (6,640) ============= ============= ============== ============== Earnings (loss) per share: Basic $ 0.26 $ (0.47) ============= ============== Diluted $ 0.24 $ (0.47) ============= ============== Weighted-average common shares outstanding: Basic 13,364 800 (6) 14,164 ============= ============== ============== Diluted 14,383 (219) (7) 14,164 ============= ============== ==============
See notes to unaudited pro forma consolidated statements of earnings 18 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS (Dollars and number of shares in thousands)
FOR THE SIX MONTHS ENDED APRIL 30, 2002 --------------------------------------------------------------- (1) (2) PRO FORMA -------------------------------- PLATO NETSCHOOLS ADJUSTMENTS RESULTS -------------- -------------- -------------- -------------- Revenues $ 31,259 $ 5,236 $ - $ 36,495 Cost of revenues 4,123 5,692 - 9,815 -------------- -------------- -------------- -------------- Gross profit 27,136 (456) - 26,680 -------------- -------------- -------------- -------------- Operating expenses: Selling, general and administrative 23,476 3,917 - 27,393 Product development and customer support 5,358 1,668 - 7,026 Goodwill and intangible amortization 362 - 383 (4) 745 -------------- -------------- -------------- -------------- Total operating expenses 29,196 5,585 383 35,164 -------------- -------------- -------------- -------------- Operating profit (loss) (2,060) (6,041) (383) (8,484) Interest expense (73) (587) - (660) Interest income 557 - - 557 Other expense (income), net (109) - (109) -------------- -------------- -------------- -------------- Earnings (loss) before income taxes (1,685) (6,628) (383) (8,696) Income tax expense (benefit) (625) - (2,600) (5) (3,225) -------------- -------------- -------------- -------------- Net earnings (loss) $ (1,060) $ (6,628) $ 2,217 $ (5,471) ============== ============== ============== ============== Earnings (loss) per share: Basic and diluted $ (0.06) $ (0.32) ============== ============== Weighted-average common shares outstanding: Basic and diluted 16,430 800 (6) 17,230 ============== ============== ==============
See notes to unaudited pro forma consolidated statements of earnings 19 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS (Dollars in thousands) (1) Amounts are derived from our audited historical statement of earnings for the year ended October 31, 2001 and from our unaudited historical statement of earnings for the six months ended April 30, 2002. (2) Amounts are derived from the audited historical statement of operations of NetSchools Corporation for the year ended December 31, 2001 and from the unaudited historical statement of operations for the six months ended April 30, 2002. The months of November and December 2001 are included in both the fiscal year and the interim period presented. Revenue and net loss for these two months were $1,144 and $(2,494), respectively. (3) Adjustment to reflect the write-off of in-process research and development costs. (4) Amortization of identified intangible assets with definite lives (five to seven years). (5) Adjustment to reflect our historical effective income tax rate on the pro forma earnings (loss) before income taxes. (6) Adjustment for the shares issued in this acquisition. (7) Adjustment for the shares issued in this acquisition and to remove the potential common shares which are antidilutive with the pro forma net loss. 20