Exhibit 99.3
Allscripts Healthcare Solutions, Inc.
Unaudited Pro Forma Combined Abbreviated Financial Information
We derived the following unaudited pro forma combined abbreviated financial information by applying pro forma adjustments attributable to the acquisition of the Enterprise Information Solutions (“EIS”) Business division (the “EIS Business”) of McKesson Corporation (“McKesson”) to our historical condensed consolidated financial statements and the combined abbreviated financial statements of the EIS Business included elsewhere in this Form 8-K/A. The unaudited pro forma combined abbreviated balance sheet gives pro forma effect to the acquisition of the EIS business as if it had occurred on June 30, 2017. The unaudited pro forma combined abbreviated statements of operations for the year ended December 31, 2016 and the interim six-month period ended June 30, 2017, give effect to the acquisition of the EIS Business as if it had occurred on January 1, 2016. The EIS Business historical amounts used in the unaudited pro forma combined abbreviated statement of operations for the six months ended June 30, 2017 represents the combined total of the EIS Business results for its fourth fiscal quarter ended March 31, 2017 and its first fiscal quarter ended June 30, 2017.
We also acquired the provider/patient engagement solutions business of NantHealth, Inc. (the “NantHealth business”) on August 25, 2017, Netsmart, Inc. (“Netsmart”) on April 19, 2016 and HealthMEDX, LLC (“HealthMEDX”) on October 27, 2016. The unaudited pro forma combined abbreviated statement of operations for the year ended December 31, 2016 gives effect to (i) the NantHealth business acquisition as if it had occurred on January 1, 2016 and (ii) the Netsmart and HealthMEDX acquisitions as if they had occurred on January 1, 2015, by applying pro forma adjustments attributable to these acquisitions to our historical condensed consolidated financial statements and the historical financial statements of these businesses. The unaudited pro forma combined abbreviated statement of operations for the interim six-month period ended June 30, 2017 includes pro forma adjustments attributable NantHealth business acquisition as if it had occurred on January 1, 2016 and does not include pro forma adjustments attributable to the Netsmart and HealthMEDX acquisitions since the historical results of both Netsmart and HealthMEDX are included in the consolidated historical results of Allscripts for the entire period.
We describe the assumptions underlying the pro forma adjustments in the accompanying notes to unaudited pro forma combined abbreviated financial information, which should be read in conjunction with the unaudited pro forma combined abbreviated financial information. The unaudited pro forma combined abbreviated financial information is for illustrative and informational purposes only and should not be considered indicative of the results that would have been achieved had the transactions been consummated on the dates or for the periods indicated and do not purport to represent consolidated balance sheet data or statement of operations data or other financial data as of any future date or any future period.
The unaudited pro forma combined abbreviated financial information should be read in conjunction with our historical consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2016 and our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017. The unaudited pro forma combined abbreviated financial information should also be read in conjunction with (i) the audited historical combined abbreviated financial statements of the EIS Business for the years ended March 31, 2017 and March 31, 2016, and the interim historical unaudited condensed combined abbreviated financial statements of the EIS Business for the three month interim periods ended on June 30, 2017 and June 30, 2016, included elsewhere in this Form 8-K/A, (ii) the audited historical combined abbreviated financial statements of the NantHealth business for the 52 weeks ended on January 1, 2017 and the interim historical unaudited combined abbreviated financial statements of the NantHealth business for the 26 week interim periods ended on July 2, 2017 and July 3, 2016, included in our Current Report on Form 8-K/A filed with the Securities and Exchange Commission (“SEC”) on November 9, 2017, (iii) the audited historical consolidated financial statements of Netsmart as of and for the three years ended December 31, 2015 and the interim historical unaudited consolidated financial statements of Netsmart as of and for the three months ended March 31, 2016, included in our Current Report on Form 8-K/A filed with the SEC on July 5, 2016, and (iv) the audited historical financial statements of HealthMEDX as of and for the year ended December 31, 2015, the interim historical unaudited financial statements of HealthMEDX as of and for the three and nine months ended September 30, 2016 and 2015 and the pro forma disclosure for the Netsmart and HealthMEDX acquisitions, included in our Current Report on Form 8-K/A filed with the SEC on January 11, 2017.
Allscripts Healthcare Solutions, Inc.
Unaudited Pro Forma Combined Abbreviated Balance Sheet
As of June 30, 2017
(In thousands)
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| EIS Business Pro Forma Adjustments |
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| ||||||
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| Pro Forma Allscripts and NantHealth Combined {a} |
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| EIS Business Historical {b} |
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| Discontinued Operations |
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| Other |
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| Pro Forma Allscripts, NantHealth and EIS Combined |
| |||||
ASSETS |
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Current assets: |
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 87,445 |
|
| $ | 1,065 |
|
|
|
|
|
|
|
|
|
| $ | 88,510 |
|
Accounts receivable, net |
|
| 420,947 |
|
|
| 93,758 |
|
|
| (9,789 | ) |
|
|
|
|
|
| 504,916 |
|
Prepaid expenses and other current assets |
|
| 115,357 |
|
|
| 20,028 |
|
|
| (4,944 | ) |
|
|
|
|
|
| 130,441 |
|
Total current assets |
|
| 623,749 |
|
|
| 114,851 |
|
|
| (14,733 | ) |
|
|
|
|
|
| 723,867 |
|
Available for sale marketable securities |
|
| 0 |
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|
|
|
|
|
|
|
|
|
|
|
|
|
| - |
|
Fixed assets and capitalized software development costs, net |
|
| 360,938 |
|
|
| 22,113 |
|
|
| (726 | ) |
|
| (10,897 | ) | {d} |
| 371,428 |
|
Intangible assets, net |
|
| 711,350 |
|
|
| 3,167 |
|
|
|
|
|
|
| 143,033 |
| {e} |
| 857,550 |
|
Goodwill |
|
| 1,958,377 |
|
|
| 124,000 |
|
|
| (6,285 | ) |
|
| (97,712 | ) | {f} |
| 1,978,380 |
|
Deferred Taxes and other assets |
|
| 139,078 |
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|
| 1,763 |
|
|
|
|
|
|
|
|
|
|
| 140,841 |
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Total assets |
| $ | 3,793,492 |
|
| $ | 265,894 |
|
| $ | (21,744 | ) |
| $ | 34,424 |
|
| $ | 4,072,066 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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|
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|
|
|
|
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Accounts payable |
| $ | 114,950 |
|
| $ | 2,048 |
|
| $ | (7 | ) |
|
|
|
|
| $ | 116,991 |
|
Accrued expenses |
|
| 138,771 |
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|
| 36,270 |
|
|
| (11,683 | ) |
|
|
|
|
|
| 163,358 |
|
Deferred revenue |
|
| 393,942 |
|
|
| 215,970 |
|
|
| (39,189 | ) |
|
| (97,874 | ) | {g} |
| 472,849 |
|
Current maturities of long-term debt and capital lease obligations |
|
| 32,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 32,446 |
|
Total current liabilities |
|
| 680,109 |
|
|
| 254,288 |
|
|
| (50,879 | ) |
|
| (97,874 | ) |
|
| 785,644 |
|
Long-term debt and capital lease obligations |
|
| 1,314,083 |
|
|
|
|
|
|
|
|
|
|
| 169,070 |
| {c} |
| 1,483,153 |
|
Deferred revenue |
|
| 21,434 |
|
|
| 5,215 |
|
|
| (205 | ) |
|
| (3,487 | ) | {g} |
| 22,957 |
|
Deferred Taxes and other liabilities |
|
| 203,554 |
|
|
| 6,610 |
|
|
| (4,287 | ) |
|
| 123 |
| {h} |
| 206,000 |
|
Total liabilities |
|
| 2,219,180 |
|
|
| 266,113 |
|
|
| (55,371 | ) |
|
| 67,832 |
|
|
| 2,497,754 |
|
Redeemable convertible non-controlling interest - Netsmart |
|
| 409,610 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 409,610 |
|
Stockholders’ equity |
|
| 1,164,702 |
|
|
|
|
|
|
|
|
|
|
| - |
|
|
| 1,164,702 |
|
Net assets acquired and liabilities assumed |
|
| 0 |
|
|
| (219 | ) |
|
| 33,627 |
|
|
| (33,408 | ) | {i} |
| - |
|
Total liabilities and stockholders’ equity |
| $ | 3,793,492 |
|
| $ | 265,894 |
|
| $ | (21,744 | ) |
| $ | 34,424 |
|
| $ | 4,072,066 |
|
See Notes to Unaudited Pro Forma Combined Abbreviated Financial Information
2
Allscripts Healthcare Solutions, Inc.
Unaudited Pro Forma Combined Abbreviated Statement of Operations
For the Year ended December 31, 2016
(In thousands, except per share data)
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| EIS Business Pro Forma Adjustments |
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| ||||||
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| Pro Forma Allscripts, Netsmart, HealthMEDX and NantHealth Combined |
|
| EIS Business Historical {b} |
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| Discontinued Operations |
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| Other |
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| Pro Forma Allscripts, Netsmart, HealthMEDX, NantHealth and EIS Combined |
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Revenue |
| $ | 1,660,308 |
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| $ | 564,322 |
|
| $ | (112,242 | ) |
| $ | (83,985 | ) | {g} | $ | 2,028,403 |
|
Costs and expenses: |
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|
|
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|
|
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|
|
|
|
|
|
|
|
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Cost of revenue |
|
| 937,482 |
|
|
| 251,550 |
|
|
| (23,311 | ) |
|
| 2,988 |
| {e} |
| 1,168,709 |
|
Selling, general and administrative expenses |
|
| 469,177 |
|
|
| 85,550 |
|
|
| (17,005 | ) |
|
| 6,104 |
| {e} |
| 543,826 |
|
Research and development |
|
| 210,553 |
|
|
| 145,576 |
|
|
| (17,180 | ) |
|
|
|
|
|
| 338,949 |
|
Total costs and expenses |
|
| 1,617,212 |
|
|
| 482,676 |
|
|
| (57,496 | ) |
|
| 9,092 |
|
|
| 2,051,484 |
|
Income (loss) from operations |
|
| 43,096 |
|
|
| 81,646 |
|
|
| (54,746 | ) |
|
| (93,077 | ) |
|
| (23,081 | ) |
Interest expense |
|
| (83,206 | ) |
|
|
|
|
|
|
|
|
|
| (5,853 | ) | {k} |
| (89,059 | ) |
Goodwill impairment loss |
|
| (51,062 | ) |
|
| (290,000 | ) |
|
|
|
|
|
|
|
|
|
| (341,062 | ) |
Other (loss) income, net |
|
| (3,757 | ) |
|
| 285 |
|
|
| (2,113 | ) |
|
|
|
|
|
| (5,585 | ) |
(Loss) income before income taxes |
|
| (94,929 | ) |
|
| (208,069 | ) |
|
| (56,859 | ) |
|
| (98,930 | ) |
|
| (458,787 | ) |
Income tax benefit (provision) |
|
| 5,980 |
|
|
|
|
|
|
|
|
|
|
| 39,572 |
| {l} |
| 45,552 |
|
Net income (loss) |
|
| (88,949 | ) |
|
| (208,069 | ) |
|
| (56,859 | ) |
|
| (59,358 | ) |
|
| (413,235 | ) |
Net income attributable to non-controlling interest |
|
| (146 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (146 | ) |
Accretion of redemption preference on redeemable convertible non-controlling interest - Netsmart |
|
| (45,173 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (45,173 | ) |
Net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders |
| $ | (134,268 | ) |
| $ | (208,069 | ) |
| $ | (56,859 | ) |
| $ | (59,358 | ) |
| $ | (458,554 | ) |
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Loss per share - basic attributable to Allscripts Healthcare Solutions, Inc. stockholders |
| $ | (0.72 | ) |
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|
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|
|
|
|
|
| $ | (2.46 | ) |
Loss per share - diluted attributable to Allscripts Healthcare Solutions, Inc. stockholders |
| $ | (0.72 | ) |
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|
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| $ | (2.46 | ) |
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Weighted-average shares outstanding: |
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|
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Basic |
|
| 186,188 |
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|
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|
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|
|
| 186,188 |
|
Diluted |
|
| 186,188 |
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|
|
|
|
|
|
|
|
|
|
| 186,188 |
|
See Notes to Unaudited Pro Forma Combined Abbreviated Financial Information
3
Allscripts Healthcare Solutions, Inc.
Unaudited Pro Forma Combined Abbreviated Statement of Operations
For the Six Months ended June 30, 2017
(In thousands, except per share data)
|
|
|
|
|
|
|
|
| EIS Business Pro Forma Adjustments |
|
|
|
|
| ||||||
|
| Pro Forma Allscripts, Netsmart, HealthMEDX and NantHealth Combined |
|
| EIS Business Historical {b} |
|
| Discontinued Operations |
|
| Other |
|
| Pro Forma Allscripts, Netsmart, HealthMEDX, NantHealth and EIS Combined |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Revenue |
| $ | 844,866 |
|
| $ | 247,838 |
|
| $ | (45,777 | ) |
| $ | (2,992 | ) | {g} | $ | 1,043,935 |
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue |
|
| 484,251 |
|
|
| 104,838 |
|
|
| (10,317 | ) |
|
| 1,913 |
| {e} |
| 580,685 |
|
Selling, general and administrative expenses |
|
| 245,218 |
|
|
| 38,551 |
|
|
| (6,174 | ) |
|
| 3,052 |
| {e} |
| 280,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (470 | ) | {j} |
|
|
|
Research and development |
|
| 103,468 |
|
|
| 59,895 |
|
|
| (3,387 | ) |
|
|
|
|
|
| 159,976 |
|
Total costs and expenses |
|
| 832,937 |
|
|
| 203,284 |
|
|
| (19,878 | ) |
|
| 4,496 |
|
|
| 1,020,839 |
|
Income from operations |
|
| 11,929 |
|
|
| 44,554 |
|
|
| (25,899 | ) |
|
| (7,488 | ) |
|
| 23,097 |
|
Interest expense |
|
| (40,470 | ) |
|
|
|
|
|
|
|
|
|
| (1,415 | ) | {k} |
| (41,885 | ) |
Impairment of long-term investments |
|
| (144,590 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (144,590 | ) |
Other (loss) income, net |
|
| 1,653 |
|
|
| 493 |
|
|
| (970 | ) |
|
|
|
|
|
| 1,176 |
|
(Loss) income before income taxes |
|
| (171,478 | ) |
|
| 45,047 |
|
|
| (26,869 | ) |
|
| (8,903 | ) |
|
| (162,203 | ) |
Income tax benefit (provision) |
|
| (1,552 | ) |
|
|
|
|
|
|
|
|
|
| 3,561 |
| {l} |
| 2,009 |
|
Net income (loss) |
|
| (173,030 | ) |
|
| 45,047 |
|
|
| (26,869 | ) |
|
| (5,342 | ) |
|
| (160,194 | ) |
Net income attributable to non-controlling interest |
|
| (189 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (189 | ) |
Accretion of redemption preference on redeemable convertible non-controlling interest - Netsmart |
|
| (21,925 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (21,925 | ) |
Net loss attributable to Allscripts Healthcare Solutions, Inc. stockholders |
| $ | (195,144 | ) |
| $ | 45,047 |
|
| $ | (26,869 | ) |
| $ | (5,342 | ) |
| $ | (182,308 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share - basic attributable to Allscripts Healthcare Solutions, Inc. stockholders |
| $ | (1.08 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (1.01 | ) |
Loss per share - diluted attributable to Allscripts Healthcare Solutions, Inc. stockholders |
| $ | (1.08 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | (1.01 | ) |
|
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|
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|
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Weighted-average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
| 181,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 181,193 |
|
Diluted |
|
| 181,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 181,193 |
|
See Notes to Unaudited Pro Forma Combined Abbreviated Financial Information
4
Allscripts Healthcare Solutions, Inc.
Notes to Unaudited Pro Forma Combined Abbreviated Financial Information
(In thousands)
1. Basis of Pro Forma Presentation
The pro forma presentation herein is based on Allscripts unaudited pro forma combined abbreviated financial information included in the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on November 9, 2017 and furnished herewith as Exhibit 99.4, which contained pro forma information regarding our acquisitions of the provider/patient engagement solutions business of NantHealth, Inc. (the “NantHealth business”) on August 25, 2017, Netsmart, Inc. (“Netsmart”) on April 19, 2016 and HealthMEDX, LLC (“HealthMEDX”) on October 27, 2016. Such pro forma information has been adjusted in the unaudited pro forma combined abbreviated financial information to give effect to pro forma events that are (1) directly attributable to the EIS Business acquisition, (2) factually supportable, and (3) with respect to the pro forma combined abbreviated statements of operations, expected to have a continuing impact on the combined results following the acquisitions. Each of the terms “we,” “us,” “our” or “Allscripts” as used herein refers collectively to Allscripts Healthcare Solutions, Inc. and its wholly-owned subsidiaries and controlled affiliates, unless otherwise stated.
The EIS Business acquisition is being accounted for under the acquisition method of accounting in accordance with Accounting Standards Codification Topic 805, Business Combinations. As the acquirer for accounting purposes, we have estimated the fair value of EIS Business’ assets acquired and liabilities assumed. The unaudited pro forma combined abbreviated financial information reflects our preliminary estimate of the allocation of the purchase price of the EIS Business, as described below, which is based on available information and certain assumptions which we believe are reasonable but are subject to change. The unaudited pro forma combined abbreviated financial information also reflects our preliminary estimates of the allocations of the purchase price of the NantHealth business and final estimates of the allocations of the purchase price of Netsmart and HealthMEDX. We are in the process of completing our assessment of fair values of the EIS Business’ identifiable tangible and intangible assets acquired, and liabilities assumed; therefore, the values set forth below relating to the allocation of the purchase price of the EIS Business are subject to adjustment during the measurement period for such activities as estimating the useful lives of long-lived assets and finite-lived intangibles and finalizing the valuation of certain tangible assets and liabilities. In our opinion, all adjustments that are necessary to fairly present the unaudited pro forma combined abbreviated financial information have been made.
The unaudited pro forma combined abbreviated financial information does not reflect any integration activities or cost savings from operating efficiencies, synergies, asset dispositions or other restructurings that could result or have resulted from the Netsmart, HealthMEDX, NantHealth business and EIS Business acquisitions.
2. Aggregate Purchase Price
The acquisition of the EIS Business was based on a total enterprise value of $185 million as shown in the table below. The net consideration paid was funded through incremental borrowings under Allscripts’ debt facilities.
| (In thousands) |
| ||
|
|
|
|
|
Aggregate purchase price |
| $ | 185,000 |
|
Add: Estimated net working capital surplus |
|
| 536 |
|
Less: Assumption of restructuring indebtedness |
|
| (16,466 | ) |
Net consideration paid in cash for the EIS Business |
| $ | 169,070 |
|
5
3. Preliminary Aggregate Purchase Price Allocation
We have performed a preliminary valuation analysis as of the acquisition date of October 2, 2017 of the fair value of the EIS business’ assets acquired and liabilities assumed. The following table summarizes the preliminary allocation of the purchase price as of the acquisition date:
|
| (In thousands) |
| |
|
|
|
|
|
Cash and cash equivalents |
| $ | 1,068 |
|
Accounts receivable, net |
|
| 68,234 |
|
Prepaid expenses and other current assets |
|
| 18,921 |
|
Fixed assets |
|
| 9,797 |
|
Intangible assets |
|
| 146,200 |
|
Goodwill |
|
| 27,459 |
|
Other assets |
|
| 1,602 |
|
Accounts payable and accrued expenses |
|
| (32,688 | ) |
Deferred revenue |
|
| (69,017 | ) |
Other liabilities |
|
| (2,506 | ) |
Net assets acquired |
| $ | 169,070 |
|
4. Discontinued Operations
Included in the historical amounts of the EIS Business in the unaudited pro forma combined abbreviated balance sheet and unaudited pro forma combined abbreviated statements of operations is amounts attributable to the portion of the EIS Business that we consider discontinued operations as of the acquisition date of October 2, 2017. The following table summarizes amounts attributable to discontinued operations as of June 30, 2017:
| June 30, 2017 |
| ||
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Accounts receivable, net |
| $ | 9,789 |
|
Prepaid expenses and other current assets |
|
| 4,944 |
|
Total current assets |
|
| 14,733 |
|
Fixed assets and capitalized software development costs, net |
|
| 726 |
|
Goodwill |
|
| 6,285 |
|
Total assets attributable to discontinued operations |
| $ | 21,744 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
| $ | 7 |
|
Accrued expenses |
|
| 11,683 |
|
Deferred revenue |
|
| 39,189 |
|
Total current liabilities |
|
| 50,879 |
|
Deferred revenue |
|
| 205 |
|
Deferred taxes and other liabilities |
|
| 4,287 |
|
Total liabilities attributable to discontinued operations |
|
| 55,371 |
|
Net assets acquired and liabilities assumed |
| $ | (33,627 | ) |
6
The following table summarizes amounts attributable to discontinued operations for the year ended December 31, 2016 and for the six months ended June 30, 2017:
For the Year ended December 31, 2016 |
|
| For the Six months ended June 30, 2017 |
| |||
Revenue | $ | 112,242 |
|
| $ | 45,777 |
|
Costs and expenses: |
|
|
|
|
|
|
|
Cost of revenue |
| 23,311 |
|
|
| 10,317 |
|
Selling, general and administrative expenses |
| 17,005 |
|
|
| 6,174 |
|
Research and development |
| 17,180 |
|
|
| 3,387 |
|
Total costs and expenses |
| 57,496 |
|
|
| 19,878 |
|
Income (loss) from operations |
| 54,746 |
|
|
| 25,899 |
|
Other (loss) income, net |
| 2,113 |
|
|
| 970 |
|
Income (loss) before income taxes |
| 56,859 |
|
|
| 26,869 |
|
Income tax benefit (provision) |
|
|
|
|
|
|
|
Net income (loss) | $ | 56,859 |
|
| $ | 26,869 |
|
5. Pro Forma Adjustments
| (a) | Represents Allscripts unaudited pro forma combined abbreviated financial information included in the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on November 9, 2017 and furnished herewith as Exhibit 99.4, which contained pro forma information regarding our acquisitions of the provider/patient engagement solutions business of NantHealth, Inc. (the “NantHealth business”) on August 25, 2017, Netsmart, Inc. (“Netsmart”) on April 19, 2016 and HealthMEDX, LLC (“HealthMEDX”) on October 27, 2016. |
| (b) | The EIS business’ fiscal year ends on March 31st. Therefore, the EIS Business historical amounts used in the unaudited pro forma combined abbreviated statement of operations for the year ended December 31, 2016 represents the EIS Business results for its fiscal year ended March 31, 2017. The EIS Business historical amounts used in the unaudited pro forma combined abbreviated statement of operations for the six months ended June 30, 2017 represents the combined total of the EIS Business results for its fourth fiscal quarter ended March 31, 2017 and its first fiscal quarter ended June 30, 2017. |
| (c) | Represents the incremental borrowings on Allscripts’ senior secured credit facility directly attributable to the acquisition of the EIS Business. |
| (d) | Adjustment to write-off capitalized software development costs as part of the preliminary allocation of the EIS Business’ purchase price. The write-off of the amortization of capitalized software development costs is included in the intangible asset amortization pro forma adjustment. |
7
|
| Estimated Fair Value |
|
| Estimated Useful Life in Years |
| Year ended December 31, 2016 Amortization Expense |
|
| Six Months ended June 30, 2017 Amortization Expense |
| |||
Technology |
| $ | 59,400 |
|
| 7 years |
| $ | 8,486 |
|
| $ | 4,243 |
|
Product Trademarks |
|
| 4,100 |
|
| 7 years |
|
| 586 |
|
|
| 293 |
|
Customer Relationships |
|
| 82,700 |
|
| 11 years |
|
| 7,518 |
|
|
| 3,759 |
|
Total |
| $ | 146,200 |
|
|
|
| $ | 16,590 |
|
| $ | 8,295 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Historical amortization expense - Technology |
|
| (5,498 | ) |
|
| (2,330 | ) | ||||||
Less: Historical amortization expense - Customer Relationships and Other |
|
| (2,000 | ) |
|
| (1,000 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma adjustments to amortization expense - Technology |
| $ | 2,988 |
|
| $ | 1,913 |
| ||||||
Pro forma adjustments to amortization expense - Customer Relationships and Product Trademarks |
| $ | 6,104 |
|
| $ | 3,052 |
| ||||||
| (f) | Reflects adjustment to remove the EIS Business’ historical goodwill and record goodwill associated with the EIS Business acquisition in the amount of $20 million. This goodwill amount is different from the goodwill amount shown in Note 3 above of $27 million, since it is based on the assumption that the EIS Business acquisition occurred on June 30, 2017 for purposes of the pro forma combined abbreviated balance sheet presentation. |
| (g) | Represents the estimated adjustments to decrease the assumed deferred revenue obligations to fair value and related amortization of such adjustments. The fair value was determined based on the estimated costs to fulfill the remaining performance obligations plus a normal profit margin. After the acquisitions, this adjustment will have a continuing impact and will reduce revenue related to the assumed performance obligations as these obligations are satisfied. |
| (h) | Represents the unfavorable lease liability related to one of the acquired real estate leases with a remaining contract term of 2 years. |
| (i) | Represents the elimination of the historical difference between the net assets acquired and liabilities assumed of the EIS Business. |
| (j) | Adjustment to reflect transaction-related costs incurred in connection with the EIS Business acquisition. |
| (k) | Represents the incremental interest expense resulting from the new debt incurred to finance the EIS Business acquisition and related increase in the interest rate margin on the entire Allscripts senior secured credit facility. Additionally, a 0.125% change in variable interest rates would result in approximately $0.7 million and $0.3 million change in interest expense for the year ended December 31, 2016 and the six months ended June 30, 2017, respectively. |
| (l) | Reflects the income tax effect of pro forma adjustments based on the estimated blended federal and state statutory rate of 40%. |
8