Exhibit 99.2
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with the historical consolidated financial statements and notes thereto of Polycom, Inc. (“the Company”) included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “Commission”) March 1, 2002, and the Company’s September 30, 2002 unaudited quarterly consolidated financial statements included on the Company’s Quarterly Report on Form 10-Q filed with the Commission November 14, 2002.
The unaudited pro forma condensed consolidated financial statements have been prepared to give effect to the sale of the Company’s assets relating to its network access product line (the “Sale”) as of and for the periods presented. The unaudited pro forma condensed consolidated balance sheet shows the Company’s condensed consolidated balance sheet as of September 30, 2002, giving effect to the Sale as if it had occurred on September 30, 2002. The unaudited pro forma condensed consolidated statements of operations show the Company’s historical results for the year ended December 31, 2001, and the nine months ended September 30, 2002, giving effect to the Sale as if it had occurred at January 1, 2001 and 2002, respectively.
The unaudited pro forma condensed consolidated information is presented for illustrative purpose only and is not necessarily indicative of the operating results or financial position that would have occurred if the Sale had been consummated at the beginning of the earliest period presented, nor is it necessarily indicative of future operating results or financial position. The pro forma adjustments are based upon information and assumptions available at the time of filing of this report.
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POLYCOM, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2002
(in thousands)
| | As Reported | | Pro Forma Adjustments | | | | Pro Forma Adjusted | |
| | | | | | | | | |
Assets | | | | | | | | | |
Current assets: | | | | | | | | | |
Cash and cash equivalents | | $ | 181,911 | | $ | 1,000 | | (a) | | $ | 182,911 | |
Short-term investments | | 43,805 | | — | | | | 43,805 | |
Trade receivables, net | | 74,450 | | — | | | | 74,450 | |
Inventories | | 37,942 | | (3,664 | ) | (b) | | 34,278 | |
Deferred taxes | | 52,639 | | (77 | ) | (a) | | 52,562 | |
Prepaid expenses and other current assets | | 17,202 | | 250 | | (a) | | 21,116 | |
| | | | 3,664 | | (b) | | | |
Total current assets | | 407,949 | | 1,173 | | | | 409,122 | |
Property and equipment, net | | 28,336 | | (760 | ) | (a) | | 27,576 | |
Long-term investments | | 279,759 | | — | | | | 279,759 | |
Goodwill | | 301,126 | | — | | | | 301,126 | |
Purchased intangibles, net | | 37,225 | | — | | | | 37,225 | |
Deferred taxes | | 20,138 | | (47 | ) | (a) | | 20,091 | |
Other assets | | 4,832 | | — | | | | 4,832 | |
Total assets | | $ | 1,079,365 | | $ | 366 | | | | $ | 1,079,731 | |
| | | | | | | | | |
Liabilities and Stockholders’ Equity | | | | | | | | | |
Current liabilities: | | | | | | | | | |
Accounts payable | | $ | 33,408 | | $ | 228 | | (a) | | $ | 33,636 | |
Accrued payroll and related liabilities | | 9,390 | | — | | | | 9,390 | |
Taxes payable | | 30,044 | | — | | | | 30,044 | |
Deferred revenue | | 17,133 | | — | | | | 17,133 | |
Other accrued liabilities | | 43,204 | | (79 | ) | (a) | | 43,125 | |
Total current liabilities | | 133,179 | | 149 | | | | 133,328 | |
Long-term liabilities | | 38,281 | | — | | | | 38,281 | |
Total liabilities | | 171,460 | | 149 | | | | 171,609 | |
Stockholders’ equity: | | | | | | | | | |
Preferred stock | | — | | — | | | | — | |
Common stock | | 51 | | — | | | | 51 | |
Additional paid-in capital | | 887,887 | | — | | | | 887,887 | |
Cumulative other comprehensive income | | 2,399 | | — | | | | 2,399 | |
Unearned stock-based compensation | | (803 | ) | — | | | | (803 | ) |
Treasury stock, at cost | | (19,995 | ) | — | | | | (19,995 | ) |
Retained earnings | | 38,366 | | 217 | | (a) | | 38,583 | |
Total stockholders’ equity | | 907,905 | | 217 | | | | 908,122 | |
Total liabilities and stockholders’ equity | | $ | 1,079,365 | | $ | 366 | | | | $ | 1,079,731 | |
The accompanying notes are an integral part of these unaudited pro forma condensed
consolidated financial statements.
POLYCOM, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
(in thousands, except per share data)
| | As reported | | Pro Forma Adjustments | | | | Pro Forma Adjusted | |
| | | | | | | | | |
Net revenues | | $ | 365,498 | | $ | (7,633 | ) | (c) | | $ | 357,865 | |
Cost of net revenues | | 160,476 | | (11,451 | ) | (c) | | 149,025 | |
Gross profit | | 205,022 | | 3,818 | | | | 208,840 | |
Operating expenses: | | | | | | | | | |
Sales and marketing | | 74,991 | | (1,559 | ) | (c) | | 73,432 | |
Research and development | | 57,786 | | (3,558 | ) | (c) | | 54,228 | |
General and administrative | | 23,093 | | — | | | | 23,093 | |
Acquisition-related costs | | 2,824 | | — | | | | 2,824 | |
Purchased in-process research and development | | 900 | | — | | | | 900 | |
Amortization of purchased intangibles | | 12,737 | | — | | | | 12,737 | |
Restructure costs | | 1,073 | | — | | | | 1,073 | |
Litigation settlement | | (257 | ) | — | | | | (257 | ) |
Total operating expenses | | 173,147 | | (5,117 | ) | | | 168,030 | |
Operating income | | 31,875 | | 8,935 | | | | 40,810 | |
Interest income, net | | 7,161 | | — | | | | 7,161 | |
Loss on strategic investments | | (7,010 | ) | — | | | | (7,010 | ) |
Other income, net of expense | | 560 | | — | | | | 560 | |
Income before provision for income taxes | | 32,586 | | 8,935 | | | | 41,521 | |
Provision for income taxes | | 8,961 | | 2,368 | | (d) | | 11,329 | |
Net income | | $ | 23,625 | | $ | 6,567 | | | | $ | 30,192 | |
| | | | | | | | | |
Basic net income per share | | $ | 0.24 | | | | | | $ | 0.30 | |
| | | | | | | | | |
Diluted net income per share | | $ | 0.23 | | | | | | $ | 0.30 | |
| | | | | | | | | |
Weighted average shares outstanding for basic net income per share | | 99,218 | | | | | | 99,218 | |
| | | | | | | | | |
Weighted average shares outstanding for diluted net income per share | | 100,793 | | | | | | 100,793 | |
The accompanying notes are an integral part of these unaudited pro forma condensed
consolidated financial statements.
POLYCOM, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2001
(in thousands, except per share data)
| | As Reported | | Pro Forma Adjustments | | | | Pro Forma Adjusted | |
| | | | | | | | | |
Net revenues | | $ | 383,189 | | $ | (16,358 | ) | (c) | | $ | 366,831 | |
Cost of net revenues | | 166,747 | | (21,502 | ) | (c) | | 145,245 | |
Gross profit | | 216,442 | | 5,144 | | | | 221,586 | |
Operating expenses: | | | | | | | | | |
Sales and marketing | | 74,653 | | (2,809 | ) | (c) | | 71,844 | |
Research and development | | 59,416 | | (7,085 | ) | (c) | | 52,331 | |
General and administrative | | 21,564 | | — | | | | 21,564 | |
Acquisition-related costs | | 24,077 | | — | | | | 24,077 | |
Purchased in-process research and development | | 52,642 | | — | | | | 52,642 | |
Amortization of goodwill and purchased intangibles | | 6,019 | | — | | | | 6,019 | |
Total operating expenses | | 238,371 | | (9,894 | ) | | | 228,477 | |
Operating loss | | (21,929 | ) | 15,038 | | | | (6,891 | ) |
Interest income, net | | 12,755 | | — | | | | 12,755 | |
Other investments adjustment | | (3,178 | ) | — | | | | (3,178 | ) |
Other expense, net of income | | (608 | ) | — | | | | (608 | ) |
Income (loss) before provision for income taxes | | (12,960 | ) | 15,038 | | | | 2,078 | |
Provision for income taxes | | 14,740 | | 5,639 | | (d) | | 20,379 | |
Net loss | | $ | (27,700 | ) | $ | 9,399 | | | | $ | (18,301 | ) |
| | | | | | | | | |
Basic net loss per share | | $ | (0.33 | ) | | | | | $ | (0.21 | ) |
| | | | | | | | | |
Diluted net loss per share | | $ | (0.33 | ) | | | | | $ | (0.21 | ) |
| | | | | | | | | |
Weighted average shares outstanding for basic net loss per share | | 85,123 | | | | | | 85,123 | |
| | | | | | | | | |
Weighted average shares outstanding for diluted net loss per share | | 85,123 | | | | | | 85,123 | |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
POLYCOM, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRO FORMA PRESENTATION
Effective January 28, 2003, the Company sold certain assets and liabilities relating to its network access product line (the “Sale”) for a sales price of $2.8 million net of $0.2 million in expenses relating to the sale. The Company will not recognize a gain on up to $1.75 million of the purchase price until payment is received, as this amount will be paid to Polycom quarterly based on ten percent of Verilink’s revenues related to the sale of NetEngine products. The disposition of this product line resulted in a gain of $0.6 million ($0.4 million after taxes) in January 2003. If the disposition had occurred on September 30, 2002, it would have resulted in a net gain, after taxes, of $0.2 million. The difference is due to the continuing depreciation of the network access fixed assets.
The assets related to the network access product line consisted of fixed assets and intellectual property.
2. PRO FORMA ADJUSTMENTS
(a) | To reflect the proceeds and expenses of the sale of the fixed assets relating to the network access product line, and the disposition of the assets as if the sale had occurred September 30, 2002, net of taxes at an assumed rate of 36.5%. |
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(b) | To reflect the reclassification of network access inventory as other assets. |
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(c) | To reflect elimination of the product revenue, costs and expenses related to the network access product line as if the acquisition had occurred January 1, 2001 and 2002, as applicable. |
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(d) | To reflect the elimination of income tax benefits on the losses of the product line sold at an assumed rate of 37.5% for the year ended December 31, 2001 and at an assumed rate of 26.5% for the nine months ended September 30, 2002. |
