Kenexa (KNXA) 8-K/A Index to Consolidated Financial Statements

Exhibit 99.3

Index to Unaudited Pro Forma Consolidating Financial Information

	Page
Kenexa Corporation and Subsidiaries Pro Forma Consolidating Financial Statements (unaudited)		P-2
Pro Forma Consolidating Balance Sheet as of September 30, 2010 (unaudited)		P-3
Pro Forma Consolidating Statement of Operations for the nine months ended September  30, 2010 (unaudited)		P-4
Pro Forma Consolidating Statement of Operations for the year ended December 31, 2009 (unaudited)		P-5
Notes to Pro Forma Consolidating Financial Statements (unaudited)		P-6

P-1

Kenexa Corporation and Subsidiaries

Pro Forma Consolidating Financial Statements

(Unaudited)

The unaudited pro forma consolidating balance sheet of the Company as of September 30, 2010, has been prepared as if the Company’s acquisition of Salary.com had been consummated on September 30, 2010. The unaudited pro forma consolidating statements of operations for the year ended December 31, 2009 and nine months ended September 30, 2010, are presented as if the Company’s acquisition of Salary.com had occurred on January 1, 2009.

The pro forma consolidating 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 Salary.com, 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 consolidating financial statements should be read in conjunction with:

(a) the Company’s Form 10-K for the period ended December 31, 2009 filed on March 16, 2010

(b) the Company’s Form 8-K filed on October 1, 2010.

P-2

Kenexa Corporation and Subsidiaries

Pro Forma Consolidating Balance Sheet

As of September 30, 2010

(In thousands)

(Unaudited)

	Salary.com (A)			Kenexa (B)			Pro Forma Adjustments			F/N		Pro Forma
	(unaudited)			(unaudited)
Assets
Current Assets
Cash and cash equivalents	$	6,619		$	90,430		$	(78,376	)		C	$	18,673
Accounts receivable, net of allowance for doubtful accounts		6,308			34,918								41,226
Unbilled receivables		—			5,128								5,128
Income tax receivable		—			273								273
Deferred income taxes		—			6,319								6,319
Prepaid expenses and other current assets		1,620			10,813								12,433
Total Current Assets		14,547			147,881			(78,376	)				84,052
Property and equipment, net of accumulated depreciation		962			18,542								19,504
Software, net of accumulated amortization		82			21,060								21,142
Goodwill		13,078			5,997			16,073			C		35,148
Intangible assets, net of accumulated amortization		6,422			8,602			56,278			C		71,302
Deferred income taxes, non-current		—			36,686								36,686
Deferred financing costs, net of accumulated amortization		—			81								81
Other long-term assets		1,333			9,975								11,308
Total assets	$	36,424		$	248,824		$	(6,025	)			$	279,223
Liabilities and Shareholders’ Equity
Current liabilities
Line of credit	$	2,525		$	—							$	2,525
Accounts payable		4,214			9,352								13,566
Notes payable, current		—			5								5
Commissions payable		—			2,047								2,047
Accrued compensation and benefits		3,656			6,387								10,043
Other accrued liabilities		4,491			7,042								11,533
Deferred revenue		31,833			58,708			(17,733	)		C		72,808
Capital lease obligations		—			229								229
Total current liabilities		46,719			83,770			(17,733	)				112,756
Capital lease obligations, less current portion		—			107								107
Revolving credit loan		—			25,000								25,000
Deferred income taxes		1,636			530			(238	)		C		1,928
Other non-current liabilities		15			1,892								1,907
Total liabilities		48,370			111,299			(17,971	)				141,698
Commitments and Contingencies
Temporary Equity
Noncontrolling interest		—			2,546								2,546
Shareholders’ (Deficit) Equity
Preferred stock		—			—								—
Common stock		2			227			(2	)		D		227
Additional paid-in-capital		103,269			278,656			(103,269	)		D		278,656
Accumulated deficit		(114,383	)		(139,795	)		114,383			D		(139,795	)
Accumulated other comprehensive loss		(834	)		(4,109	)		834			D		(4,109	)
Total shareholders’ (deficit) equity		(11,946	)		134,979			11,946					134,979
Total liabilities and shareholders’ equity	$	36,424		$	248,824		$	(6,025	)			$	279,223

P-3

Kenexa Corporation and Subsidiaries

Pro Forma Consolidating Statement of Operations

For the nine months ended September 30, 2010

(In thousands, except share and per share data)

(Unaudited)

	Salary.com (A)			Kenexa (B)			Pro Forma Adjustments			F/N		Pro Forma
Revenues:
Subscription	$	28,239		$	109,136							$	137,375
Other		2,184			26,177								28,361
Total revenues		30,423			135,313								165,736
Cost of revenues		7,919			46,828			(936	)		C		53,811
Gross profit		22,504			88,485			936					111,925
Operating expenses:
Sales and marketing		16,921			32,540			(2,385	)		C		47,076
General and administrative		15,786			32,542			(8,033	)		C/F		40,295
Research and development		8,100			7,693			(1,775	)		C		14,018
Depreciation and amortization		3,781			12,457			8,175			D		24,413
Goodwill impairment charge		5,599			—								5,599
Restructuring charge		6,653			—								6,653
Total operating expenses		56,840			85,232			(4,018	)				138,054
(Loss) income from operations		(34,336	)		3,253			4,954					(26,129	)
Interest income (expense)		—			355			(844	)		E		(489	)
Loss on change in fair market value of investments including ARS and put option, net and sale of municipal bonds		—			(379	)							(379	)
Other expense		(248	)		—								(248	)
(Loss) income before income tax		(34,584	)		3,229			4,110					(27,245	)
Income tax expense		(123	)		(906	)							(1,029	)
Net (loss) income	$	(34,707	)	$	2,323		$	4,110				$	(28,274	)
Income allocated to noncontrolling interests		—			(406	)							(406	)
Accretion associated with variable interest entity		—			(809	)							(809	)
Discontinued operations		545			—								545
Net (loss) income allocable to common shareholders	$	(34,162	)	$	1,108		$	4,110				$	(28,944	)
Basic net income (loss) per share				$	0.05							$	(1.28	)
Weighted average shares used to compute net income (loss) allocable to common shareholders per share – basic					22,603,323								22,603,323
Diluted net income (loss) per share				$	0.05							$	(1.31	)
Weighted average shares used to compute net income (loss) allocable to common shareholders per share – diluted					23,098,070								23,098,070

P-4

Kenexa Corporation and Subsidiaries

Pro Forma Consolidating Statement of Operations

For the year ended December 31, 2009

(In thousands, except share and per share data)

(Unaudited)

	Salary.com (A)			Kenexa (B)			Pro Forma Adjustments			F/N		Pro Forma
Revenues:
Subscription	$	43,021		$	133,854								176,875
Other		3,146			23,815								26,961
Total revenues		46,167			157,669								203,836
Cost of revenues		13,244			53,371			(1,271	)		C		65,344
Gross profit		32,923			104,298			1,271					138,492
Operating expenses:
Sales and marketing		22,235			35,182			(2,535	)		C		54,882
General and administrative		13,514			40,801			(4,415	)		C/F		49,900
Research and development		9,654			9,757			(1,358	)		C		18,053
Depreciation and amortization		6,412			14,264			9,502			D		30,178
Goodwill impairment charge		—			33,329								33,329
Restructuring charge		3,312			—								3,312
Total operating expenses		55,127			133,333			1,194					189,654
Loss from operations		(22,204	)		(29,035	)		77					(51,162	)
Interest expense		—			(44	)		(1,125	)		E		(1,169	)
Loss on change in fair market value of investments including ARS and put option, net and sale of municipal bonds		—			(12	)							(12	)
Other expense		(297	)		—								(297	)
Loss before income tax		(22,501	)		(29,091	)		(1,048	)				(52,640	)
Income tax expense		(98	)		(1,927	)							(2,025	)
Net loss	$	(22,599	)	$	(31,018	)	$	(1,048	)			$	(54,665	)
Income allocated to noncontrolling interests		—			(61	)							(61	)
Net loss allocable to common shareholders	$	(22,599	)	$	(31,079	)	$	(1,048	)			$	(54,726	)
Basic and diluted net loss per share				$	(1.38	)						$	(2.43	)
Weighted average shares used to compute net loss allocable to common shareholders per share – basic and diluted					22,532,719								22,532,719

P-5

Kenexa Corporation

Notes to Pro Forma Consolidating Financial Statements

(Unaudited)

Notes to Pro Forma Consolidating Balance Sheet as of September 30, 2010

(A) To reflect the historical balance sheet of Salary.com as of September 30, 2010.

(B) To reflect the historical balance sheet of the Company as of September 30, 2010.

(C) To record the consideration of $78.4 million for the purchase of Salary.com, financed through borrowings under our credit facility for $25.0 million and $53.4 through existing cash. 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 fair value determination is allocated as follows and is for illustrative purposes only

Description	Amount			Amortization period
Assets Acquired
Cash and cash equivalents	$	6,619
Accounts receivable		6,308
Prepaid expenses and other current assets		1,620
Fixed assets		1,044
Other assets		1,333
Trademark/Trade name, Service Marks & Domain Name		1,400			3 years
Customer lists		40,000			12 years
Software		4,100			3 years
Content		17,200			3 years
Goodwill		29,151			Indefinite
Less: Liabilities Assumed
Line of credit		(2,525	)
Accounts payable		(4,214	)
Accrued compensation		(3,656	)
Accrued other liabilities		(4,491	)
Deferred Revenue		(14,100	)
Deferred federal income taxes		(1,398	)
Other noncurrent liabilities		(15	)
Total fair value of the acquisition	$	78,376

(D) To eliminate Salary.com’s shareholders’ deficit as of September 30, 2010

P-6

Kenexa Corporation

Notes to Pro Forma Consolidating Financial Statements (continued)

(Unaudited)

Notes to Pro Forma Consolidating Statement of Operations for the nine months ended September 30, 2010.

(A)	To reflect the consolidated historical statement of operations of Salary.com for the nine months ended September 30, 2010.
(B)	To reflect the consolidated historical statement of operations of the Company for the nine months ended September 30, 2010, as reported.
(C)	To reflect reduced staff expense including salaries, employer 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 three to twelve years. The amortization is subject to revision based upon the completion of the purchase price allocation study.
(E)	To reflect the Company’s borrowings under the Credit Agreement at LIBOR plus 225 basis points or the Base Rate, as defined, plus 125 basis points. Interest on LIBOR borrowings is calculated on an actual/360 day basis and is payable the earlier of quarterly or on the last day of each interest period. The base interest rate at September 30, 2010 was 4.5%.
(F)	To reflect professional fee expenses of approximately $1.5 million and reduced outside board of director fees and CEO transition and separation fees of approximately $0.9 million and $2.1 million, respectively.

Notes to Pro Forma Consolidating Statement of Operations for the year ended December 31, 2009.

(A)	To reflect the consolidated historical statement of operations of Salary.com for the twelve months ended December 31, 2009.
(B)	To reflect the consolidated historical statement of operations of the Company for the year ended December 31, 2009, as reported.
(C)	To reflect reduced staff expense including salaries, employer 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 three to twelve years. The amortization is subject to revision based upon the completion of the purchase price allocation study.
(E)	To reflect the Company’s borrowings under the Credit Agreement at LIBOR plus 225 basis points or the Base Rate, as defined, plus 125 basis points. Interest on LIBOR borrowings is calculated on an actual/360 day basis and is payable the earlier of quarterly or on the last day of each interest period. The base interest rate at September 30, 2010 was 4.5%.
(F)	To reflect professional fee expenses of approximately $1.5 million and reduced outside board of director fees of approximately $0.5 million.

P-7