EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial statements are based upon the historical financial statements of Open Text and Hummingbird Ltd after giving effect to Open Text’s acquisition of all of the issued and outstanding shares of Hummingbird on October 2, 2006 and Open Text’s incurrence of debt used to finance the acquisition.
The unaudited pro forma condensed consolidated balance sheet as of September 30, 2006 is presented as if both the acquisition of Hummingbird and the incurrence of debt used to finance the acquisition occurred on September 30, 2006. The unaudited pro forma condensed consolidated statements of income for the three months ended September 30, 2006 and the fiscal year ended June 30, 2006 are presented as if the acquisition of Hummingbird and borrowings related thereto had taken place on July 1, 2005 and were carried forward through to September 30, 2006 and June 30, 2006, respectively.
The preliminary allocation of the purchase price of the Hummingbird acquisition (the “preliminary PPA”) used in these unaudited pro forma condensed consolidated financial statements is based upon Open Text’s preliminary estimates, and during both the finalization of this allocation and upon its final completion, Open Text expects to make additional adjustments to the preliminary PPA. Differences between the preliminary PPA and final allocations could have a material impact on Open Text’s proforma results of operations. The Company expects to finalize this purchase price allocation on or before September 30, 2007. Actual allocations will be based on final appraisals of fair value of, among other things, identifiable intangible assets and tax-related assets and liabilities.
The unaudited pro forma condensed consolidated financial statements do not include the effect of the restructuring of certain pre-merger operational activities of Open Text and Hummingbird hereinafter referred to as the “Open Text exit plan” and the “Hummingbird exit plan”, respectively, other than liabilities recorded under note (H) to the unaudited pro forma condensed consolidated balance sheet. Liabilities relating to the Open Text exit plan will be recorded as expenses in Open Text’s statement of income as these expenses are incurred, whereas liabilities relating to the Hummingbird exit plan will be recorded by the Company as part of the costs of acquisition of Hummingbird. Open Text expects to be able to quantify the impacts of both the liabilities relating to the Open Text exit plan substantially on or before December 31, 2006 and the Hummingbird exit plan on or before September 30, 2007. Such restructuring liabilities, once fully determined, may be material and may include, inter alia, additional costs for employee severance, costs of vacating fully or partially abandoned excess real estate facilities and costs to exit or terminate duplicative activities. Also, the Company is currently conducting an assessment to identify any material pre-acquisition contingencies. If material pre-acquisition contingencies are identified during the remainder of the preliminary PPA period, the Company will attempt to determine the fair value thereof and include them within the preliminary PPA. Additionally, the company is in the process of assessing the value of in-process research and development costs (“IPR&D”) as of the date of the acquisition and expects to complete such assessment before the end of the preliminary PPA period. IPR&D costs, in this context, represent incomplete Hummingbird research and development projects that had not reached technological feasibility and had no alternative future use as of the date of acquisition. Although IPR&D costs are not included within these unaudited pro forma condensed consolidated financial statements, any IPR&D costs identified during the remainder of the preliminary PPA period will be expensed in Open Text’s consolidated financial statements as an expense of the period.
The unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only and are not intended to represent or be indicative of the consolidated results of operations or financial position of Open Text that would have been reported had the acquisition of Hummingbird and the incurrence of debt related thereto been completed as of the dates presented, and should not be taken as representative of the future results of operations or financial position of the Company. The unaudited pro forma condensed consolidated financial statements do not reflect the impacts of any potential operational efficiencies, cost savings or economies of scale that Open Text may achieve with respect to the combined operations of Open Text and Hummingbird and do not include any non-recurring charges or credits directly attributable to the acquisition.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes contained in Open Text’s Annual Report on Form 10-K for its fiscal year ended June 30, 2006 and Quarterly Reports on Form 10-Q for its quarters ended September 30, 2006 and December 31, 2006 Hummingbird’s previously filed Annual Reports on Form 40-F and Quarterly Reports on Form 6-K and any amendments, if applicable and Hummingbird’s historical financial statements filed herein.
Open Text Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 2006
(In thousands of U.S. Dollars)
Open Text | Hummingbird | Pro Forma Adjustments | Pro Forma Combined | ||||||||||||||
ASSETS | |||||||||||||||||
Current assets: | |||||||||||||||||
Cash and cash equivalents | $ | 111,224 | $ | 88,287 | $ | (89,651 | ) | (A) | $ | 109,860 | |||||||
Accounts receivable—net of allowance for doubtful accounts | 76,668 | 60,323 | 501 | (B) | 137,492 | ||||||||||||
Income taxes recoverable | 12,788 | — | 12,788 | ||||||||||||||
Prepaid expenses and other current assets | 7,752 | 6,743 | (2,937 | ) | (B) | 11,558 | |||||||||||
Deferred tax assets | 15,083 | 5,050 | — | 20,133 | |||||||||||||
Total current assets | 223,515 | 160,403 | (92,087 | ) | 291,831 | ||||||||||||
Investments in marketable securities | 21,127 | — | (21,127 | ) | (C) | — | |||||||||||
Capital assets | 39,746 | 10,033 | 2,159 | (D) | 51,938 | ||||||||||||
Goodwill | 233,965 | 165,563 | 105,676 | (E) | 505,204 | ||||||||||||
Deferred tax assets | 47,010 | 1,147 | — | 48,157 | |||||||||||||
Acquired intangible assets | 94,753 | 32,854 | 266,146 | (F) | 393,753 | ||||||||||||
Other assets | 5,276 | 1,320 | (28 | ) | (G) | 6,568 | |||||||||||
$ | 665,392 | $ | 371,320 | $ | 260,739 | $ | 1,297,451 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||
Current liabilities: | |||||||||||||||||
Accounts payable and accrued liabilities | $ | 56,352 | $ | 36,133 | $ | 32,160 | (H) | $ | 124,645 | ||||||||
Current portion of long-term debt | 408 | — | 3,900 | (I) | 4,308 | ||||||||||||
Deferred revenues | 71,334 | 76,373 | (18,992 | ) | (J) | 128,715 | |||||||||||
Current taxes payable | — | 14,973 | — | 14,973 | |||||||||||||
Deferred tax liabilities | 12,616 | — | — | 12,616 | |||||||||||||
Total current liabilities | 140,710 | 127,479 | 17,068 | 285,257 | |||||||||||||
Long-term liabilities: | |||||||||||||||||
Accrued liabilities | 19,162 | — | — | 19,162 | |||||||||||||
Long-term debt | 12,802 | — | 386,100 | (I) | 398,902 | ||||||||||||
Deferred revenues | 3,966 | — | — | 3,966 | |||||||||||||
Deferred tax liabilities | 16,611 | 4,016 | 96,000 | (K) | 116,627 | ||||||||||||
Other long-term liabilities | — | 1,109 | — | 1,109 | |||||||||||||
Total long-term liabilities | 52,541 | 5,125 | 482,100 | 539,766 | |||||||||||||
Minority interest | 6,025 | — | — | 6,025 | |||||||||||||
Shareholders’ equity: | |||||||||||||||||
Share capital | 415,079 | 170,739 | (170,739 | ) | (L) | 415,079 | |||||||||||
Additional paid in capital | 29,838 | 5,128 | (4,841 | ) | (L) | 30,125 | |||||||||||
Accumulated comprehensive income | 41,023 | 1,577 | (1,577 | ) | (L) | 41,023 | |||||||||||
Retained earnings (accumulated deficit) | (19,824 | ) | 61,272 | (61,272 | ) | (L) | (19,824 | ) | |||||||||
Total shareholders’ equity | 466,116 | 238,716 | (238,429 | ) | 466,403 | ||||||||||||
$ | 665,392 | $ | 371,320 | $ | 260,739 | $ | 1,297,451 | ||||||||||
See accompanying notes to the pro forma condensed consolidated financial statements.
Open Text Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Income
For the Three-Month Period Ended September 30, 2006
(In thousands of U.S. Dollars, except per share data)
Open Text | Hummingbird | Reclassifications | Pro Forma Adjustments | Pro Forma | |||||||||||||||||||
Revenues: | |||||||||||||||||||||||
License | $ | 28,825 | $ | 20,750 | $— | $ | — | $ | 49,575 | ||||||||||||||
Customer support | 48,288 | 31,540 | — | — | 79,828 | ||||||||||||||||||
Service | 24,042 | 7,010 | — | — | 31,052 | ||||||||||||||||||
Total revenues | 101,155 | 59,300 | — | — | 160,455 | ||||||||||||||||||
Cost of revenues: | |||||||||||||||||||||||
License | 2,800 | 324 | 1,314 | (M | ) | 4,438 | |||||||||||||||||
Customer support | 6,731 | — | 3,434 | (M | ) | 10,165 | |||||||||||||||||
Service | 19,862 | 10,379 | (534) | (M | ) | 29,707 | |||||||||||||||||
Amortization of acquired technology intangible assets | 4,846 | — | 3,193 | (M | ) | 2,493 | (N) | 10,532 | |||||||||||||||
Total cost of revenues | 34,239 | 10,703 | 7,407 | 2,493 | 54,842 | ||||||||||||||||||
Gross profit | 66,916 | 48,597 | (7,407) | (2,493 | ) | 105,613 | |||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Research and development | 14,179 | 13,144 | (1,574) | (M | ) | 25,749 | |||||||||||||||||
Sales and marketing | 24,557 | 36,665 | (3,251) | (M | ) | 57,971 | |||||||||||||||||
General and administrative | 12,267 | 25,779 | (2,216) | (M | ) | (375 | ) | (O) | 35,455 | ||||||||||||||
Depreciation | 2,992 | — | 832 | (M | ) | (98 | ) | (P) | 3,726 | ||||||||||||||
Amortization of acquired intangible assets | 2,382 | 4,890 | (3,193) | (M | ) | 3,296 | (N) | 7,375 | |||||||||||||||
Special charges | (468 | ) | 147 | 1,995 | (M | ) | 1,674 | ||||||||||||||||
Total operating expenses | 55,909 | 80,625 | (7,407) | 2,823 | 131,950 | ||||||||||||||||||
Income (loss) from operations | 11,007 | (32,028 | ) | — | (5,316 | ) | (26,337 | ) | |||||||||||||||
Other income (expense) | 373 | 970 | (839) | (M | ) | 504 | |||||||||||||||||
Interest income (expense), net | 392 | — | 839 | (M | ) | (7,864 | ) | (Q) | (6,633 | ) | |||||||||||||
Income (loss) before income taxes | 11,772 | (31,058 | ) | — | (13,180 | ) | (32,466 | ) | |||||||||||||||
Cumulative effect of Change in Accounting Principle | — | 1,369 | 1,369 | ||||||||||||||||||||
Provision for income taxes | 4,334 | 4,399 | (4,625 | ) | (R) | 4,108 | |||||||||||||||||
Income (loss) before minority interest | 7,438 | (36,826 | ) | — | (8,555 | ) | (37,943 | ) | |||||||||||||||
Minority interest | 137 | — | 137 | ||||||||||||||||||||
Net income (loss) for the year | $ | 7,301 | $ | (36,826 | ) | $— | $ | (8,555 | ) | $ | (38,080 | ) | |||||||||||
Net income per share—basic | $ | 0.15 | $ | (0.78 | ) | ||||||||||||||||||
Net income per share—diluted | $ | 0.15 | $ | (0.78 | ) | ||||||||||||||||||
Weighted average number of Common Shares outstanding: | |||||||||||||||||||||||
Basic | 48,975 | 48,975 | |||||||||||||||||||||
Diluted | 50,219 | 48,975 |
See accompanying notes to the pro forma condensed consolidated financial statements.
Open Text Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Income
For the Twelve-Month Period Ended June 30, 2006
(In thousands of U.S. Dollars, except per share data)
Open Text | Hummingbird | Reclassifications | Pro Forma Adjustments | Reclassifications and Pro Forma Combined | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||
License | $ | 122,520 | $ | 111,286 | — | — | $ | 233,806 | ||||||||||||||||
Customer support | 189,417 | 119,140 | — | — | 308,557 | |||||||||||||||||||
Service | 97,625 | 28,060 | — | — | 125,685 | |||||||||||||||||||
Total revenues | 409,562 | 258,486 | — | — | 668,048 | |||||||||||||||||||
Cost of revenues: | ||||||||||||||||||||||||
License | 11,196 | 8,295 | (4,753 | ) | (S) | — | 14,738 | |||||||||||||||||
Customer support | 31,482 | 13,076 | (S) | — | 44,558 | |||||||||||||||||||
Service | 79,610 | 23,420 | 7,524 | (S) | — | 110,554 | ||||||||||||||||||
Amortization of acquired technology intangible assets | 18,900 | — | 13,827 | (S) | 8,916 | (T) | 41,643 | |||||||||||||||||
Total cost of revenues | 141,188 | 31,715 | 29,674 | 8,916 | 211,493 | |||||||||||||||||||
Gross profit | 268,374 | 226,771 | (29,674 | ) | (8,916 | ) | 456,555 | |||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Research and development | 59,184 | 49,496 | (7,260 | ) | (S) | — | 101,420 | |||||||||||||||||
Sales and marketing | 104,419 | 116,729 | (1,569 | ) | (S) | — | 219,579 | |||||||||||||||||
General and administrative | 45,336 | 34,483 | (10,650 | ) | (S) | (875 | ) | (U) | 68,294 | |||||||||||||||
Depreciation | 11,103 | — | 3,632 | (S) | (391 | ) | (P) | 14,344 | ||||||||||||||||
Amortization of acquired intangible assets | 9,199 | 21,976 | (13,827 | ) | (S) | 11,822 | (T) | 29,170 | ||||||||||||||||
Special charges | 26,182 | 5,307 | — | — | 31,489 | |||||||||||||||||||
Total operating expenses | 255,423 | 227,991 | (29,674 | ) | 10,556 | 464,296 | ||||||||||||||||||
Income (loss) from operations | 12,951 | (1,220 | ) | — | (19,472 | ) | (7,741 | ) | ||||||||||||||||
Other income (expense) | (4,788 | ) | 3,687 | (3,044 | ) | (S) | (4,145 | ) | ||||||||||||||||
Interest income (expense), net | 1,487 | — | 3,044 | (S) | (27,425 | ) | (Q) | (22,894 | ) | |||||||||||||||
Income (loss) before income taxes | 9,650 | 2,467 | — | (46,897 | ) | (34,780 | ) | |||||||||||||||||
Provision for (recovery of) income taxes | 4,093 | (3,876 | ) | — | (16,623 | ) | (R) | (16,406 | ) | |||||||||||||||
Income (loss) before minority interest | 5,557 | 6,343 | — | (30,274 | ) | (18,374 | ) | |||||||||||||||||
Minority interest | 579 | — | — | — | 579 | |||||||||||||||||||
Net (loss) income for the year | $ | 4,978 | $ | 6,343 | $ | — | $ | (30,274 | ) | $ | (18,953 | ) | ||||||||||||
Net income per share—basic | $ | 0.10 | $ | (0.39 | ) | |||||||||||||||||||
Net income per share—diluted | $ | 0.10 | $ | (0.39 | ) | |||||||||||||||||||
Weighted average number of Common Shares outstanding: | ||||||||||||||||||||||||
Basic | 48,666 | 48,666 | ||||||||||||||||||||||
Diluted | 49,950 | 48,666 |
See accompanying notes to the pro forma condensed consolidated financial statements.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(in thousands of U.S. Dollars)
Note 1: Basis of Pro Forma Presentation
The unaudited pro forma condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission for the purposes of inclusion in Open Text’s Form 8-K/A prepared in connection with the acquisition of Hummingbird. These unaudited pro forma condensed consolidated financial statements reflect the impact of the acquisition of Hummingbird.
Certain information and certain footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures provided herein are adequate to make the information presented not misleading.
The information concerning Open Text has been obtained from the audited consolidated financial statements of Open Text for the year ended June 30, 2006 and the unaudited condensed consolidated financial statements for the three months ended September 30, 2006. The information concerning Hummingbird has been obtained from the audited consolidated financial statements of Hummingbird for the years ended September 30, 2006 and 2005 and the unaudited condensed consolidated financial statements for the nine months ended June 30, 2006 and 2005.
The unaudited pro forma condensed consolidated financial statements are provided for information purposes only and do not purport to be indicative of the Company’s financial position or results of operations which would actually have been obtained had such transactions been completed as of the date or for the periods presented, or of the financial position or results of operations that may be obtained in the future.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(in thousands of U.S. Dollars)
Note 2: Purchase Price Allocation
On October 2, 2006, Open Text, through 6575064 Canada Inc., a wholly owned subsidiary of Open Text, acquired all of the issued and outstanding common shares of Hummingbird at a cash price of $27.85 per common share.
For the purpose of these unaudited pro forma condensed consolidated financial statements, the purchase price of Hummingbird has been allocated to the assets acquired and liabilities assumed based on their fair value at the date of acquisition. For certain assets and liabilities, the book values as of the balance sheet date have been determined to reflect fair values. The following table summarizes the components of the total purchase price of Hummingbird and the preliminary pro forma allocation:
Current assets (excluding cash acquired) | $ | 69,680 | ||
Non-current assets | 14,631 | |||
Intangible assets | 299,000 | |||
Goodwill | 271,239 | |||
Total assets acquired | 654,550 | |||
Liabilities assumed | (242,059 | ) | ||
Purchase price, net of cash acquired | $ | 412,491 | ||
The total purchase price of $412.5 million consists of net cash paid of $406.1 million (made up of cash paid of $494.4 million less cash acquired of $88.3 million) and direct acquisition costs of $6.4 million. A term loan of $390.0 million, obtained on October 2, 2006 from a Canadian chartered bank (the “term loan”), was used to partially finance this acquisition. The remainder of the purchase price was funded through the use of the Company’s existing cash resources.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(in thousands of U.S. dollars)
Note 3: Reclassifications and Pro Forma Adjustments
The following adjustments have been reflected in the unaudited pro forma condensed consolidated financial statements:
(A) | Represents, as of September 30, 2006, the impact on Open Text cash as of the closing of the acquisition as set forth below : |
Term Loan (see Note 2) | $ | 390,000 | (a) | |
Less : | ||||
Total cash paid including direct acquisition costs | 500,778 | |||
Less: Hummingbird shares purchased through prior open market purchases | (21,127 | ) | ||
Cash paid on date of consummation of acquisition | $ | 479,651 | (b) | |
Increase(Decrease) in Open Text cash | $ | (89,651 | ) (a)- (b) |
(B) | To record the fair value adjustment to current assets acquired. |
(C) | To eliminate the initial investment in Hummingbird by Open Text of $21.1 million, which equals the amount paid for |
Hummingbird shares acquired through open market purchases in June 2006.
(D) | Represents the fair value adjustment to capital assets. |
(E) | To record the goodwill related to the acquisition of Hummingbird and to eliminate the historical goodwill of Hummingbird. |
Elimination of Hummingbird historical goodwill | $ | (165,563 | ) | |
Goodwill from Hummingbird acquisition | 271,239 | |||
$ | 105,676 | |||
(F) | To record the intangible assets related to the acquisition of Hummingbird. |
Technology intangibles acquired | $ | 159,200 | ||
Customer intangibles acquired | 139,800 | |||
299,000 | ||||
Less existing Hummingbird intangible assets | (32,854 | ) | ||
$ | 266,146 | |||
(G) | To record the fair value adjustment to other assets acquired. |
(H) | To record the Company’s accruals of employee severance costs related to certain Hummingbird employees, costs of vacating certain Hummingbird real estate facilities and direct acquisition costs associated with the acquisition of Hummingbird. |
(I) | To record long term debt facility (term loan) obtained from a Canadian chartered bank in the amount of $390 million for a period of 7 years to finance a portion of the purchase price of the acquisition. |
(J) | To record the fair value adjustment to deferred revenue acquired based upon estimated costs and an appropriate profit margin to perform Hummingbird’s deferred maintenance contracts. |
(K) | To record adjustments to deferred tax liabilities related to identifiable intangible assets acquired and to eliminate deferred tax liabilities on Hummingbird’s historical intangible assets. |
(L) | To eliminate the shareholders’ equity of Hummingbird at the date of acquisition and record the fair value of Open Text stock options granted to Hummingbird employees in replacement of fully vested Hummingbird stock options. |
(M) | To adjust Hummingbird presentation to conform to Open Text’s presentation: |
Cost of revenues: | ||||
License | $ | 1,314 | ||
Customer support | 3,434 | |||
Service | (534 | ) | ||
Amortization of acquired technology intangible assets | 3,193 | |||
Total | 7,407 | |||
Operating expenses: | ||||
Research and development | (1,574 | ) | ||
Sales and marketing | (3,251 | ) | ||
General and administrative | (2,216 | ) | ||
Depreciation | 832 | |||
Amortization of acquired intangible assets | (3,193 | ) | ||
Special Charges | 1,995 | |||
Total operating expenses | (7,407 | ) | ||
Interest income | 839 | |||
Other income | (839 | ) | ||
Total | $ | — |
(N) | To adjust amortization relating to the identifiable intangible assets recorded at the time of the acquisition of Hummingbird and to eliminate Hummingbird’s historical amortization of acquired technology assets: |
Amortization of Acquired Technology Assets | ||||
Elimination of Hummingbird historical intangible asset amortization | $ | (3,193 | ) | |
Amortization of acquired intangible assets relating to Hummingbird acquisition | 5,686 | |||
$ | 2,493 | |||
Amortization of Acquired Customer Assets | ||||
Elimination of Hummingbird historical intangible asset amortization | $ | (1,697 | ) | |
Amortization of acquired intangible assets relating to Hummingbird acquisition | 4,993 | |||
$ | 3,296 |
The Company has estimated the useful lives of Acquired Customer Assets and Acquired Technology Assets to be seven years each. and are being amortized on a straight line basis.
(O) | To eliminate the historical amortization of Hummingbird share-based payments and to adjust amortization relating to Open Text options issued to Hummimgbird employees. These new options vest over a period of four years: |
Elimination of Hummingbird historical share-based payment amortization | $ | (465 | ) | |
Amortization of stock options issued to Hummingbird employees | 90 | |||
$ | (375 | ) |
(P) | To adjust depreciation expense on account of the adjustment to the fair value of capital assets. |
(Q) | To record an increase in interest expense resulting from the term loan used to finance a portion of the purchase price and the amortization of debt issuance costs relating to the new debt. The interest rate on the term loan is at LIBOR plus 2.5% for each of the applicable periods and the debt issuance costs are being amortized over seven years. |
(R) | To record the income tax impact of increased interest costs, reduced depreciation and increases amortization cost at an statutory tax rate of 36.12%. The proforma combined provision for income taxes does not reflect the amounts that would have resulted had Open Text and Hummingbird filed consolidated tax returns in the periods presented. |
(S) | To adjust Hummingbird presentation to conform to Open Text’s presentation: |
Cost of revenues: | ||||
License | $ | (4,753 | ) | |
Customer support | 13,076 | |||
Service | 7,524 | |||
Amortization of acquired technology intangible assets | 13,827 | |||
Total | 29,674 | |||
Operating expenses: | ||||
Research and development | (7,260 | ) | ||
Sales and marketing | (1,569 | ) | ||
General and administrative | (10,650 | ) | ||
Depreciation | 3,632 | |||
Amortization of acquired intangible assets | (13,827 | ) | ||
Special Charges | — | |||
Total operating expenses | (29,674 | ) | ||
Interest income | 3,044 | |||
Other income | (3,044 | ) | ||
Total | $ | — |
(T) | To adjust amortization relating to the identifiable intangible assets recorded at the time of the acquisition of Hummingbird and to eliminate Hummingbird’s historical amortization of acquired technology assets: |
Amortization of Acquired Technology Assets | ||||
Elimination of Hummingbird historical intangible asset amortization | $ | (13,827 | ) | |
Amortization of acquired intangible assets relating to Hummingbird acquisition | 22,743 | |||
$ | 8,916 | |||
Amortization of Acquired Customer Assets | ||||
Elimination of Hummingbird historical intangible asset amortization | $ | (8,149 | ) | |
Amortization of acquired intangible assets relating to Hummingbird acquisition | 19,971 | |||
$ | 11,822 |
The Company has estimated the useful lives of Acquired Customer Assets and Acquired Technology Assets to be seven years each and are being amortized on a straight line basis.
(U) | To eliminate the historical amortization of Hummingbird share-based payments and to adjust amortization relating to Open Text options issued to Hummingbird employees. These new options vest over a period of four years: |
Elimination of Hummingbird historical share-based payment amortization | $ | (1,235 | ) | |
Amortization of stock options issued to Hummingbird employees | 360 | |||
$ | (875 | ) |
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(in thousands of U.S. Dollars)
Note 4 : Basis of Hummingbird Financial Statement Presentation within these Unaudited Pro Forma Condensed Consolidated Financial Statements
The information concerning Hummingbird has been obtained from the audited consolidated financial statements of Hummingbird for the years ended September 30, 2006 and 2005 and the unaudited condensed consolidated financial statements for the nine months ended June 30, 2006 and 2005.
Unaudited condensed consolidated statement of income for the three months ended September 30, 2006
The unaudited condensed consolidated statement of income for the three month period ended September 30, 2006 has been based upon the consolidated statements of income for the twelve month period ended September 30, 2006 and the nine month period ended June 30, 2006 as set forth in the table below
Twelve Months Ended September 30, 2006 | Nine Months Ended June 30, 2006 | Three Months Ended September 30, 2006 | ||||||||||
(See Exhibit 99.1) | Per published Form 6-K | |||||||||||
(A) | (B) | (A-B) | ||||||||||
Sales | $ | 251,562 | $ | 192,262 | $ | 59,300 | ||||||
Cost of sales | 34,844 | 24,141 | 10,703 | |||||||||
Gross profit | 216,718 | 168,121 | 48,597 | |||||||||
Expenses: | ||||||||||||
Sales and marketing | 123,306 | 86,641 | 36,665 | |||||||||
Research and development | 48,786 | 35,642 | 13,144 | |||||||||
General and administration | 33,786 | 22,938 | 10,848 | |||||||||
Restructuring charges | 2,277 | 2,130 | 147 | |||||||||
Other charges | 18,233 | 3,302 | 14,931 | |||||||||
Amortization of other intangible assets | 21,065 | 16,175 | 4,890 | |||||||||
In-process research and development expense | — | — | 0 | |||||||||
Total expenses | 247,453 | 166,828 | 80,625 | |||||||||
Operating income (loss) | (30,735 | ) | 1,293 | (32,028 | ) | |||||||
Interest and other income, net | 3,626 | 2,656 | 970 | |||||||||
Income (loss) before taxes | (27,109 | ) | 3,949 | (31,058 | ) | |||||||
Cumulative effect of change in accounting principle | 1,369 | — | 1,369 | |||||||||
Provision for (recovery of) income taxes | 982 | (3,417 | ) | 4,399 | ||||||||
Net income (loss) | ($ | 29,460 | ) | $ | 7,366 | ($ | 36,826 | ) | ||||
Unaudited condensed consolidated statement of income for the twelve month period ended June 30, 2006
The unaudited condensed consolidated statement of income for the twelve month period ended June 30, 2006 has been based upon the consolidated statements of income for the twelve month period ended September 30, 2006 and the nine month period ended June 30, 2006 and 2005 as set forth in the table below
Twelve Months Ended September 30, 2005 | Nine Months Ended June 30, 2005 | Three Months Ended September 30, 2005 | Nine Months Ended June 30, 2006 | Twelve Months Ended June 30, 2006 | ||||||||||||||||
Per published Form 40-F | Per published Form 6-K | Per published Form 6-K | ||||||||||||||||||
(A) | (B) | ( C ) | (D) | (E) | ||||||||||||||||
(A-B) | (C+D) | |||||||||||||||||||
Sales | $ | 236,102 | $ | 169,878 | $ | 66,224 | $ | 192,262 | $ | 258,486 | ||||||||||
Cost of sales | 27,977 | 20,403 | 7,574 | 24,141 | 31,715 | |||||||||||||||
Gross profit | 208,125 | 149,475 | 58,650 | 168,121 | 226,771 | |||||||||||||||
Expenses: | ||||||||||||||||||||
Sales and marketing | 106,276 | 76,188 | 30,088 | 86,641 | 116,729 | |||||||||||||||
R&D | 46,392 | 34,137 | 12,255 | 35,642 | 47,897 | |||||||||||||||
G&A | 24,434 | 17,709 | 6,725 | 22,938 | 29,663 | |||||||||||||||
Restructuring charges | 10,031 | 6,854 | 3,177 | 2,130 | 5,307 | |||||||||||||||
Other charges | 9,660 | 8,142 | 1,518 | 3,302 | 4,820 | |||||||||||||||
Amortization of other intangible assets | 19,630 | 13,829 | 5,801 | 16,175 | 21,976 | |||||||||||||||
In-process research and development | 2,850 | 1,251 | 1,599 | — | 1,599 | |||||||||||||||
Total expenses | 219,273 | 158,110 | 61,163 | 166,828 | 227,991 | |||||||||||||||
Operating income | (11,148 | ) | (8,635 | ) | (2,513 | ) | 1,293 | (1,220 | ) | |||||||||||
Interest and other income, net | 3,127 | 2,096 | 1,031 | 2,656 | 3,687 | |||||||||||||||
Income (loss) before income taxes | (8,021 | ) | (6,539 | ) | (1,482 | ) | 3,949 | 2,467 | ||||||||||||
Recovery of income tax expense | (2,182 | ) | (1,723 | ) | (459 | ) | (3,417 | ) | (3,876 | ) | ||||||||||
Net income (loss) | $ | (5,839 | ) | $ | (4,816 | ) | $ | (1,023 | ) | $ | 7,366 | $ | 6,343 | |||||||
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
(in thousands of U.S. Dollars)
Note 5: Forward-Looking Statements
This document contains forward-looking statements that are based on a number of assumptions and estimates and that involve risks and uncertainties. All statements other than statements of historical fact are forward-looking statements. If any of these risks or uncertainties materialize or any of these assumptions prove incorrect, the actual results or performance of Open Text and its consolidated subsidiaries could differ materially from those expressed or implied by such forward-looking statements.
The risks, uncertainties and assumptions referred to above include the challenges of integration associated with the acquisitions or other planned acquisitions; the inability to achieve anticipated synergies; the costs associated with the acquisition; the inability to maintain revenues on a combined company basis; employee management issues; the timely development, production and acceptance of products and services; the challenge of managing asset levels and expenses; and the other risks that are described from time to time in Open Text’s Securities and Exchange Commission reports, including but not limited to Open Text’s Annual Report on Form 10-K for the fiscal year ended June 30, 2006 and the Quarterly Reports on Form 10-Q for the quarters ended September 30, 2006, and December 31, 2006.
Open Text assumes no obligation and does not intend to update these forward-looking statements.