UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 2)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): December 22, 2006 (November 13, 2006)
KENEXA CORPORATION
(Exact Name of Registrant as Specified in Charter)
Pennsylvania |
| 000-51358 |
| 23-3024013 I.R.S. Employer Identification Number |
650 East Swedesford Rd
Wayne, PA 19087
(Address of Principal Executive Offices) (Zip Code)
Registrant’s telephone number, including area code: (610) 971-9171
N/A
(Former Name or Former Address, if Changed Since Last Report)
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):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o 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
On November 17, 2006, Kenexa Corporation (“Kenexa”) filed with the Securities and Exchange Commission a Current Report on Form 8-K (the “Initial 8-K Report”) announcing the completion on November 13, 2006 of its acquisition of BrassRing LLC, a Delaware limited liability company (“BRLLC”), and BrassRing Inc., a Delaware corporation (“BRINC” and, together with BRLLC, “Brass Ring”), pursuant to the terms of that certain Equity Purchase Agreement and Plan of Merger dated as of October 6, 2006 (the “Acquisition Agreement”) by and among the Company, Technology, Birmingham Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Kenexa Technology (“Acquisition Sub”), BRLLC, BRINC, Gannett Satellite Information Network, Inc., a Delaware corporation (“Gannett”), BRLLC Holdings Inc., a Delaware corporation (“Post”), Tribune National Marketing Company, a Delaware corporation (“Tribune”; collectively, Gannett, Post and Tribune are the “Selling Members”), Accel VI L.P., a Delaware limited partnership, Accel Internet Fund II, L.P., a Delaware limited partnership, Accel Keiretsu VI L.P., a Delaware limited partnership, Accel Investors ‘98 L.P., a Delaware limited partnership, Accel VI-S L.P., a Delaware limited partnership, Accel Investors ‘98-S L.P., a Delaware limited partnership, and James W. Breyer (collectively, the “Accel Parties”), and Gerald M. Rosberg solely as the representative of the Selling Members and the Accel Parties. BrassRing, a leading provider of talent management solutions, combines innovative technology, consulting, and outsourcing with recruitment expertise to build successful workforces to meet the specific needs of its clients.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired.
BrassRing LLC.
· Attached as Exhibit 99.1 hereto are the consolidated balance sheets of BrassRing as of September 30, 2006 and December 31, 2005 and the related consolidated statements of operations, stockholders’ equity and cash flows for the nine months ended September 30, 2006 (unaudited) and each of the three years in the period ended December 31, 2005 and the related notes to consolidated financial statements.
(b) Pro Forma Financial Information.
Attached hereto is the:
· Kenexa Corporation and Subsidiaries Pro Forma Consolidated Financial Statement (unaudited)
· Pro Forma Consolidated balance sheets as of September 30, 2006 (unaudited)
· Pro Forma Consolidated statements of operations for the nine months ended September 30, 2006 and year ended December 31, 2005 (unaudited)
· Notes to Pro Forma Consolidated financial statements (unaudited)
The unaudited pro forma condensed combined financial information is presented for informational purposes only. The pro forma data is not necessarily indicative of what Kenexa’s financial position or results of operations actually would have been had Kenexa completed the acquisition at the dates indicated.
2
In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company.
(c) Exhibits
Exhibit 23.1—Consent of PricewaterhouseCoopers LLP
Exhibit 99.1—BrassRing LLC.: Consolidated Financial Statements and Report of Independent Auditors
· Consolidated Financial Statements:
· Consolidated Balance sheets as of December 31, 2005 and December 31, 2004
· Consolidated Statements of operations for the years ended December 31, 2005, 2004 and 2003
· Consolidated Statements of stockholders’ equity for the years ended December 31, 2005, 2004 and 2003
· Consolidated Statements of cash flows for the years ended December 31, 2005, 2004 and 2003
· Notes to Consolidated Financial Statements
· Consolidated Balance sheets as of September 30, 2006 and December 31, 2005 (unaudited)
· Consolidated Statements of operations for the nine months ended September 30, 2006 (unaudited) and September 30, 2005
· Consolidated Statements of cash flows for the nine months ended September 30, 2006 (unaudited) and September 30, 2005
· Notes to Consolidated Financial Statements (unaudited)
3
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.
Kenexa Corporation | ||
|
| |
Date: December 22, 2006 | By: | /s/ DONALD F. VOLK |
|
| Donald F. Volk |
|
| Chief Financial Officer |
4
Index to Unaudited Pro Forma Consolidated Financial Statements
P-1
Kenexa Corporation and Subsidiaries
Pro Forma Consolidated Financial Statements
(Unaudited)
The unaudited pro forma consolidated balance sheet of the Company as of September 30, 2006, has been prepared as if the Company’s acquisition of BrassRing had been consummated on September 30, 2006. The unaudited pro forma consolidated income statement for the year ended December 31, 2005 and nine months ended September 30, 2006, is presented as if the Company’s acquisition of BrassRing had occurred on January 1, 2005.
The pro forma consolidated financial statements do not purport to represent what the Company’s financial position or results of operations would have been assuming the completion of the Company’s acquisition of BrassRing had occurred on January 1, 2005, nor do they purport to project the Company’s financial position or results of operations at any future date or for any future period.
These pro forma consolidated financial statements should be read in conjunction with:
(a) the Company’s form 10-K for the period ended December 31, 2005 filed on February 22, 2006.
(b) the Company’s Form 8-K filed on October 10, 2006.
P-2
Kenexa Corporation and Subsidiaries
Pro forma Consolidated Balance Sheets (unaudited)
As of September 30, 2006
(in thousands)
|
| BrassRing, LLC |
| Kenexa |
| Pro forma |
| F/N |
| Pro forma |
| ||||
AssetsAssets |
|
|
|
|
|
|
|
|
|
|
| ||||
Current Assets |
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalents |
| $ | 10,512 |
| $ | 83,109 |
| $ | (50,000 | ) | (C) |
| $ | 43,621 |
|
Accounts receivable, net of allowance for doubtful accounts |
| 6,668 |
| 16,237 |
|
|
|
|
| 22,905 |
| ||||
Unbilled receivables |
| — |
| 1,945 |
|
|
|
|
| 1,945 |
| ||||
Deferred income taxes |
| — |
| 6,628 |
| 7,038 |
| (C) |
| 13,666 |
| ||||
Prepaid expenses and other current assets |
| 1,785 |
| 2,459 |
|
|
|
|
| 4,244 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total current assets |
| 18,965 |
| 110,378 |
| (42,962 | ) | (C) |
| 86,381 |
| ||||
Property and equipment, net of accumulated depreciation |
| 2,318 |
| 5,900 |
|
|
|
|
| 8,218 |
| ||||
Software, net of accumulated depreciation |
| — |
| 2,324 |
|
|
|
|
| 2,324 |
| ||||
Goodwill |
| 20,483 |
| 48,826 |
| 75,173 |
| (C) |
| 144,482 |
| ||||
Intangible assets, net of accumulated amortization |
| — |
| 1,973 |
| 3,490 |
| (C) |
| 5,463 |
| ||||
Deferred financing costs, net of accumulated amortization |
| — |
| 98 |
|
|
|
|
| 98 |
| ||||
Other assets |
| 521 |
| 932 |
|
|
|
|
| 1,453 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total assets |
| $ | 42,287 |
| $ | 170,431 |
| $ | 35,701 |
|
|
| $ | 248,419 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Liabilities and Shareholders’ Deficiency |
|
|
|
|
|
|
|
|
|
|
| ||||
Current liabilities |
|
|
|
|
|
|
|
|
|
|
| ||||
Notes payable, current |
| $ | — |
| $ | 479 |
| $ | — |
|
|
| $ | 479 |
|
Line of credit |
| — |
| — |
| 65,000 |
| (C) |
| 65,000 |
| ||||
Accounts payable |
| 4,295 |
| 3,520 |
| — |
|
|
| 7,815 |
| ||||
Commissions payable |
| — |
| 1,137 |
| — |
|
|
| 1,137 |
| ||||
Accrued compensation and benefits |
| — |
| 6,224 |
| — |
|
|
| 6,224 |
| ||||
Other accrued liabilities |
| — |
| 3,543 |
| — |
|
|
| 3,543 |
| ||||
Deferred revenue |
| 8,182 |
| 18,759 |
| — |
|
|
| 26,941 |
| ||||
Deferred taxes |
| 22 |
| — |
| — |
|
|
| 22 |
| ||||
Capital lease obligations |
| — |
| 228 |
| — |
|
|
| 228 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total current liabilities |
| 12,499 |
| 33,890 |
| 65,000 |
| (C) |
| 111,389 |
| ||||
Capital lease obligations, less current portion |
| — |
| 103 |
| — |
|
|
| 103 |
| ||||
Notes payable, less current portion |
| — |
| 153 |
| — |
|
|
| 153 |
| ||||
Deferred taxes |
| — |
| 606 |
|
|
|
|
| 606 |
| ||||
Other liabilities |
| 489 |
| 19 |
| — |
|
|
| 508 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total liabilities |
| 12,988 |
| 34,771 |
| 65,000 |
| (C) |
| 112,759 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Minority interest |
| 9,401 |
| — |
| (9,401 | ) | (D) |
| — |
| ||||
Shareholders’ deficiency |
|
|
|
|
|
|
|
|
|
|
| ||||
Member’s equity |
| 395,601 |
| — |
| (395,601 | ) | (D) |
| — |
| ||||
Common stock |
| — |
| 206 |
| — |
|
|
| 206 |
| ||||
Additional paid-in capital |
| — |
| 170,376 |
| — |
|
|
| 170,376 |
| ||||
Treasury stock |
| (8,500 | ) | — |
| 8,500 |
| (D) |
| — |
| ||||
Accumulated other comprehensive (loss) income |
| 19 |
| (257 | ) | (19 | ) | (D) |
| (257 | ) | ||||
Accumulated deficit |
| (367,222 | ) | (34,665 | ) | 367,222 |
| (D) |
| (34,665 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total shareholders’ (deficiency) equity |
| 19,898 |
| 135,660 |
| (19,898 | ) | (D) |
| 135,660 |
| ||||
Total liabilities and shareholders’ (deficiency) equity |
| $ | 42,287 |
| $ | 170,431 |
| $ | 35,701 |
| (D) |
| $ | 248,419 |
|
P-3
Kenexa Corporation and Subsidiaries
Pro forma Consolidated Statements of Operations (unaudited)
For the Nine months Ended September 30, 2006
(in thousands, except share and per share data)
|
| BrassRing, LLC |
| Kenexa |
| Pro forma |
| F/N |
| Pro forma |
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
| ||||
Subscription revenue |
| $ | 22,568 |
| $ | 60,725 |
| $ | — |
|
|
| $ | 83,293 |
|
Other revenue |
| 5,958 |
| 15,010 |
| — |
|
|
| 20,968 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenue |
| 28,526 |
| 75,735 |
| — |
|
|
| 104,261 |
| ||||
Cost of revenue (exclusive of depreciation, shown separately below) |
| 9,383 |
| 21,419 |
| — |
|
|
| 30,802 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
| 19,143 |
| 54,316 |
| — |
|
|
| 73,459 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| ||||
Sales and marketing |
| 9,973 |
| 17,436 |
| (2,908 | ) | (C) |
| 24,501 |
| ||||
General and administrative |
| 4,890 |
| 16,972 |
| (1,897 | ) | (C) |
| 19,965 |
| ||||
Research and development |
| 8,219 |
| 5,570 |
| (1,946 | ) | (C) |
| 11,843 |
| ||||
Depreciation and amortization |
| 1,218 |
| 2,362 |
| 105 |
| (D) |
| 3,685 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total operating expenses |
| 24,300 |
| 42,340 |
| (6,646 | ) |
|
| 59,994 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) from operations before income taxes and interest expense |
| (5,157 | ) | 11,976 |
| 6,646 |
|
|
| 13,465 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest (income) expense |
| (300 | ) | (1,566 | ) | — |
|
|
| (1,866 | ) | ||||
Minority interest |
| (1,023 | ) | — |
| 1,023 |
| (E) |
| — |
| ||||
Other income |
| (63 | ) | — |
| — |
|
|
| (63 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) from operations before income tax |
| (3,771 | ) | 13,542 |
| 5,623 |
|
|
| 15,394 |
| ||||
Income tax (benefit) expense on continuing operations |
| (21 | ) | 2,825 |
| — |
|
|
| 2,804 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before discontinued operations |
| (3,750 | ) | 10,717 |
| 5,623 |
|
|
| 12,590 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Discontinued operations |
| (33 | ) | — |
| — |
|
|
| (33 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss available to common shareholders |
| $ | (3,783 | ) | $ | 10,717 |
| $ | 5,623 |
|
|
| $ | 12,557 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares used to compute net income available to common shareholders per common share — basic |
|
|
| 19,626,010 |
|
|
|
|
| 19,626,010 |
| ||||
Basic income per share: |
|
|
| $ | 0.55 |
|
|
|
|
| $ | 0.64 |
| ||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares used to compute net income available to common shareholders per common share — diluted |
| — |
| 20,183,995 |
| — |
|
|
| 20,183,995 |
| ||||
Diluted income per share: |
| — |
| $ | 0.53 |
| — |
|
|
| $ | 0.62 |
| ||
P-4
Kenexa Corporation and Subsidiaries
Pro forma Consolidated Statements of Operations (unaudited)
For the Year Ended December 31, 2005
(in thousands, except share and per share data)
|
| BrassRing, LLC |
| Kenexa |
| Pro forma |
| F/N |
| Pro forma |
| ||||
Revenue |
|
|
|
|
|
|
|
|
|
|
| ||||
Subscription revenue |
| $ | 29,802 |
| $ | 50,974 |
| $ | — |
|
|
| $ | 80,776 |
|
Other revenue |
| 7,563 |
| 14,667 |
| — |
|
|
| 22,230 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total revenue |
| 37,365 |
| 65,641 |
| — |
|
|
| 103,006 |
| ||||
Cost of revenue (exclusive of depreciation, shown separately below) |
| 12,001 |
| 18,782 |
| — |
|
|
| 30,783 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Gross profit |
| 25,364 |
| 46,859 |
| — |
|
|
| 72,223 |
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
| ||||
Sales and marketing |
| 12,111 |
| 16,133 |
| (3,815 | ) | (C) |
| 24,429 |
| ||||
General and administrative |
| 6,229 |
| 15,116 |
| (2,624 | ) | (C) |
| 18,721 |
| ||||
Research and development |
| 11,571 |
| 3,986 |
| (2,634 | ) | (C) |
| 12,923 |
| ||||
Depreciation and amortization |
| 1,684 |
| 2,112 |
| 140 |
| (D) |
| 3,936 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Total operating expenses |
| 31,595 |
| 37,347 |
| (8,933 | ) |
|
| 60,009 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) from operations before income taxes and interest expense |
| (6,231 | ) | 9,512 |
| 8,933 |
|
|
| 12,214 |
| ||||
Interest (income) expense |
| (246 | ) | (566 | ) | — |
|
|
| (812 | ) | ||||
Minority interest |
| (832 | ) | — |
| 832 |
| (E) |
| — |
| ||||
Interest on mandatory redeemable shares |
| — |
| 3,396 |
| — |
|
|
| 3,396 |
| ||||
Other income |
| (244 | ) | — |
| — |
|
|
| (244 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) from operations before income tax |
| (4,909 | ) | 6,682 |
| 8,101 |
|
|
| 9,874 |
| ||||
Income tax (benefit) expense on continuing operations |
| 65 |
| 591 |
| — |
|
|
| 656 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Income (loss) before discontinued operations |
| (4,974 | ) | 6,091 |
| 8,101 |
|
|
| 9,218 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Discontinued operations |
| (49 | ) | — |
| — |
|
|
| (49 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Provision for (benefit from) income taxes |
| (425 | ) | — |
| — |
|
|
| (425 | ) | ||||
Accretion of Redeemable class B common shares and class C common shares |
| — |
| (41,488 | ) | — |
|
|
| (41,488 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss available to common shareholders |
| $ | (4,598 | ) | $ | (35,397 | ) | $ | 8,101 |
|
|
| $ | (31,894 | ) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average shares used to compute net loss available to common shareholders per common share — basic and diluted |
|
|
| 11,578,885 |
|
|
|
|
| 11,578,885 |
| ||||
Basic and diluted loss per share: |
|
|
| $ | (3.06 | ) |
|
|
|
| $ | (2.75 | ) | ||
P-5
Kenexa Corporation
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
Notes to Pro Forma Consolidated Balance Sheet as of September 30, 2006
(A) To reflect the historical balance sheet of BrassRing, LLC as of September 30, 2006.
(B) To reflect the historical balance sheet of the Company as of September 30, 2006.
(C) To record the consideration of $115 million for the purchase of BrassRing, LLC financed through existing cash and debt. These amounts represent adjustments related to the acquisition under the purchase method of accounting. The total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed based upon management’s best estimate of their fair value with excess cost over the net tangible and intangible assets acquired allocated to goodwill and identified intangible assets as presented below.
The preliminary estimated purchase price is allocated as follows and is for illustrative purposes only
Description |
| Amount |
| Amortization period |
| |
Assets Acquired |
|
|
|
|
| |
Cash and Short-term Investments |
| $ | 10,730 |
|
|
|
Accounts Receviable |
| 6,286 |
|
|
| |
Prepaid Expenses and other Current Assets |
| 1,664 |
|
|
| |
Property & Equipment |
| 2,204 |
|
|
| |
Other Assets |
| 521 |
|
|
| |
Trademark/Tradename, Service Marks & Domain Name |
| 400 |
| Indeterminable |
| |
Customer Lists |
| 3,090 |
| 22 years |
| |
Net Operating Losses |
| 7,038 |
| 3 years |
| |
Goodwill |
| 95,590 |
| Indeterminable |
| |
|
|
|
|
|
| |
Less: Liabilities Assumed |
|
|
|
|
| |
Notes Payable |
| — |
|
|
| |
Capital Lease Obligations |
| — |
|
|
| |
Accounts Payable and Accrued Expenses |
| 4,258 |
|
|
| |
Deferred Federal Income taxes |
| 21 |
|
|
| |
Other Liabilities |
| — |
|
|
| |
Deferred Revenue |
| 8,244 |
|
|
| |
|
|
|
|
|
| |
Total Cash Purchase Price |
| $ | 115,000 |
|
|
|
(D) To eliminate Brassring LLC’s Member’s equity and minority interest as of September 30, 2006.
P-6
Notes to Pro Forma Consolidated Statements of Operations for the nine months ended September 30, 2006.
(A) To reflect the historical statement of operations of BrassRing, LLC as of September 30, 2006.
(B) To reflect the consolidated historical statement of operations of the Company as of September 30, 2006.
(C) To reflect reduced staff expense including salaries, taxes, bonus, and fringe benefits. The Company notified employees of their termination on the acquisition date and entered into severance agreements with such employees that state the termination benefit.
(D) To reflect the amortization of intangible assets (per the allocation of the estimated purchase price) that would have been recorded in the period, using a useful life of twenty two years. The amortization is subject to revision based upon the completion of the purchase price allocation study.
(E) To eliminate the activity associated with BrassRing’s minority interest for the nine months ended September 30, 2006.
Notes to Pro Forma Consolidated Statements of Operations for the year ended December 31, 2005.
(A) To reflect the historical statement of operations of BrassRing, LLC as of December 31, 2005.
(B) To reflect the consolidated historical statement of operations of the Company as of December 31, 2005.
(C) To reflect reduced staff expense including salaries, taxes, bonus, and fringe benefits. The Company notified employees of their termination on the acquisition date and entered into severance agreements with such employees that state the termination benefit.
(D) To reflect the amortization of intangible assets (per the allocation of the estimated purchase price) that would have been recorded in the period, using a useful life of twenty two years. The amortization is subject to revision based upon the completion of the purchase price allocation study.
(E) To eliminate the activity associated with BrassRing’s minority interest for the year ended December 31, 2005.
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