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LAWSON SOFTWARE, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(unaudited)
On September 30, 2003, Lawson Software, Inc. ("Lawson") acquired Closedloop Solutions, Inc. ("Closedloop") for $4.24 million in cash, through a merger between Closedloop and Circle Acquisition, Inc., a wholly owned subsidiary of Lawson. Closedloop provides collaborative budgeting, planning and forecasting solutions using real-time, transactional functionality. The acquired assets consist of tangible assets, software applications, technologies and intangibles. The tangible assets acquired from Closedloop were used in its business of developing and providing software applications. Lawson intends to continue to use the acquired assets in the same capacity.
The unaudited pro forma condensed combined balance sheet is presented as if the transaction had taken place on May 31, 2003. The unaudited pro forma condensed combined statement of operations is presented to reflect the acquisition of Closedloop as if it had occurred as of June 1, 2002. The unaudited pro forma condensed combined financial information is based on the historical financial statements of Lawson and Closedloop, giving effect to the transaction under the purchase method of accounting and the assumptions and adjustments in the accompanying notes to the unaudited pro forma condensed combined financial statements.
The combining companies have different year-ends for reporting purposes. Lawson has a fiscal year-end of May 31; whereas, Closedloop had a fiscal year-end of October 31. The unaudited pro forma condensed combined financial statements as of and for the fiscal year-ended May 31, 2003, include Closedloop's unaudited financial statements as of and for the twelve months ended May 31, 2003.
The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of Lawson included in Lawson's Form 10-K for the year ended May 31, 2003 filed with the Securities and Exchange Commission and the historical financial statements of Closedloop, included herein.
The acquisition was accounted for using the purchase method of accounting and, accordingly, the assets acquired have been recorded at their fair values as of the date of the acquisition. These amounts have been recorded based upon preliminary estimates as of May 31, 2003. The unaudited pro forma financial data are based on the assumptions and adjustments available at the time of the filing of this Form 8-K/A, as described in the accompanying notes, which Lawson believes are reasonable. The fair value of the consideration will be allocated to the net assets acquired based upon the fair values of such net assets at the effective date of the acquisition. The unaudited condensed combined pro forma statement of operations does not purport to represent what Lawson's results of operations actually would have been if the events described above had occurred as of the dates indicated or what Lawson's results will be for any future periods. The unaudited condensed combined pro forma financial statements are based upon assumptions, estimates and adjustments that Lawson believes are reasonable and are intended for informational purposes only. The future consolidated financial position and results of operations will differ, perhaps significantly, from the pro forma amounts reflected herein because of a variety of factors, including access to additional information and changes in values not currently identified. Further adjustments to the acquired assets will be reflected as a change in goodwill.
The pro forma adjustments do not reflect any operating efficiencies and related cost savings that could result with respect to the combined companies. The pro forma adjustments do not include any adjustments to historical revenue for any future price or product offering changes nor any adjustments to selling, marketing or any other expenses for any future operating changes.
LAWSON SOFTWARE, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEETS
May 31, 2003
(unaudited)
(in thousands)
| Lawson(a) | Closedloop(b) | Pro Forma Adjustments | Pro Forma Combined | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
ASSETS | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 153,071 | $ | 1,367 | $ | (4,239 | )(c) | $ | 150,069 | ||||||
(130 | )(c) | ||||||||||||||
Marketable securities | 102,266 | — | — | 102,266 | |||||||||||
Trade accounts receivable, net | 62,433 | 41 | — | 62,474 | |||||||||||
Deferred income taxes | 14,373 | — | 153 | (d) | 14,526 | ||||||||||
Prepaid expenses and other assets | 19,749 | 104 | — | 19,853 | |||||||||||
Total current assets | 351,892 | 1,512 | (4,216 | ) | 349,188 | ||||||||||
Long-term marketable securities | 5,175 | — | — | 5,175 | |||||||||||
Property and equipment, net | 21,364 | 739 | (655 | )(e) | 21,448 | ||||||||||
Goodwill | 31,410 | — | 999 | (f) | 32,409 | ||||||||||
Other intangible assets, net | 12,533 | — | 3,100 | (f) | 15,633 | ||||||||||
Deferred income taxes | 8,620 | — | — | 8,620 | |||||||||||
Other assets | 1,215 | 835 | — | 2,050 | |||||||||||
Total assets | $ | 432,209 | $ | 3,086 | $ | (772 | ) | $ | 434,523 | ||||||
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY | |||||||||||||||
Current liabilities: | |||||||||||||||
Current portion of long-term debt | $ | 896 | $ | 349 | $ | — | $ | 1,245 | |||||||
Accounts payable | 13,407 | 77 | — | 13,484 | |||||||||||
Accrued compensation and benefits | 23,480 | 545 | 301 | (g) | 24,326 | ||||||||||
Other accrued liabilities | 14,209 | 117 | 350 | (g) | 14,676 | ||||||||||
Deferred revenue and customer deposits | 86,642 | 1,578 | (1,030 | )(h) | 87,190 | ||||||||||
Total current liabilities | 138,634 | 2,666 | (379 | ) | 140,921 | ||||||||||
Long-term debt, less current portion | 255 | 27 | — | 282 | |||||||||||
Other long-term liabilities | 3,921 | — | — | 3,921 | |||||||||||
Total liabilities | 142,810 | 2,693 | (379 | ) | 145,124 | ||||||||||
Commitments and contingencies | |||||||||||||||
Preferred stock | — | 27,322 | (27,322 | )(i) | — | ||||||||||
Stockholders' equity: | |||||||||||||||
Common stock | 1,058 | 5 | (5 | )(i) | 1,058 | ||||||||||
Additional paid-in capital | 309,637 | 674 | (674 | )(i) | 309,637 | ||||||||||
Treasury stock, at cost | (28,824 | ) | — | — | (28,824 | ) | |||||||||
Deferred stock-based compensation | (3,117 | ) | — | — | (3,117 | ) | |||||||||
Retained earnings (deficit) | 9,480 | (27,608 | ) | 27,608 | (i) | 9,480 | |||||||||
Accumulated other comprehensive income | 1,165 | — | — | 1,165 | |||||||||||
Total stockholders' equity | 289,399 | (26,929 | ) | 26,929 | 289,399 | ||||||||||
Total liabilities and stockholders' equity | $ | 432,209 | $ | 3,086 | $ | (772 | ) | $ | 434,523 | ||||||
See accompanying notes to pro forma financial information
LAWSON SOFTWARE, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended May 31, 2003
(unaudited)
(in thousands, except share and per share data)
| Year Ended May 31, 2003 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Lawson(a) | Closedloop(b) | Pro Forma Adjustments | Pro Forma Combined | |||||||||
Revenues: | |||||||||||||
License fees | $ | 77,614 | 1,131 | — | $ | 78,745 | |||||||
Services | 266,704 | 956 | — | 267,660 | |||||||||
Total revenues | 344,318 | 2,087 | — | 346,405 | |||||||||
Cost of revenues: | |||||||||||||
Cost of license fees | 14,367 | 730 | 625 | (j) | 15,722 | ||||||||
Cost of services | 141,717 | 1,053 | — | 142,770 | |||||||||
Total cost of revenues | 156,084 | 1,783 | 625 | 158,492 | |||||||||
Gross profit | 188,234 | 304 | (625 | ) | 187,913 | ||||||||
Operating expenses: | |||||||||||||
Research and development | 59,115 | 3,449 | — | 62,564 | |||||||||
Sales and marketing | 102,963 | 2,126 | — | 105,089 | |||||||||
General and administrative | 29,972 | 1,473 | — | 31,445 | |||||||||
Other general expenses | — | — | — | — | |||||||||
Restructuring charge | 6,035 | — | — | 6,035 | |||||||||
Amortization of acquired intangibles | 877 | — | 121 | (j) | 998 | ||||||||
Total operating expenses | 198,962 | 7,048 | 121 | 206,131 | |||||||||
Operating (loss) | (10,728 | ) | (6,744 | ) | (746 | ) | (18,218 | ) | |||||
Other income (expense): | |||||||||||||
Interest income | 4,591 | 28 | (60 | )(k) | 4,559 | ||||||||
Interest expense | (134 | ) | (382 | ) | — | (516 | ) | ||||||
Total other income (expense) | 4,457 | (354 | ) | (60 | ) | 4,043 | |||||||
(Loss) before income taxes | (6,271 | ) | (7,098 | ) | (806 | ) | (14,175 | ) | |||||
Income tax benefit | (2,446 | ) | — | (3,082 | )(l) | (5,528 | ) | ||||||
Net (loss) income | $ | (3,825 | ) | (7,098 | ) | 2,276 | $ | (8,647 | ) | ||||
Net (loss) per share: | |||||||||||||
Basic | $ | (0.04 | ) | $ | (0.09 | ) | |||||||
Diluted | $ | (0.04 | ) | $ | (0.09 | ) | |||||||
Shares used in computing net (loss) per share: | |||||||||||||
Basic | 98,164,818 | 98,164,818 | |||||||||||
Diluted | 98,164,818 | 98,164,818 | |||||||||||
See accompanying note to pro forma financial information
LAWSON SOFTWARE, INC.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(unaudited)
(in thousands)
1. Basis of Pro Forma Presentation
The unaudited pro forma condensed combined financial statements of Lawson have been prepared based on assumptions relating to the allocation of consideration paid to the assets and liabilities of Closedloop based on preliminary estimates. The actual allocation of the amount of the consideration may differ from that reflected in these unaudited pro forma condensed combined financial statements after a final valuation and other procedures have been completed. Below are tables of the estimated acquisition costs and estimated purchase price allocation.
Estimated acquisition price: | ||||||
Cash consideration paid | $ | 4,239 | ||||
Acquisition costs | 130 | |||||
Accrued facility closure and severance expenses | 651 | |||||
Total consideration | 5,020 | |||||
Less cash acquired | (1,367 | ) | ||||
Net consideration paid | $ | 3,653 | ||||
Estimated purchase price allocation: | ||||||
Tangible net assets (liabilities) acquired | $ | (446 | ) | |||
Intangible assets | 3,100 | |||||
Goodwill | 999 | |||||
Total | $ | 3,653 | ||||
2. Pro Forma Adjustments
- (a)
- Derived from Lawson's Form10-K filing as of and for the year-ended May 31, 2003.
- (b)
- Derived from Closedloop's unaudited financial statements as of and for the twelve months ended May 31, 2003.
- (c)
- To record the estimated cash consideration and direct acquisition costs relating to the acquisition.
- (d)
- To record additional deferred tax assets resulting from the acquisition. Lawson fully expects to realize the deferred tax assets given its historical and expected operating results.
- (e)
- To reduce Closedloop property and equipment to estimated fair value based on planned use.
- (f)
- To record estimated goodwill and identified intangible assets resulting from the acquisition. Estimated intangible assets include acquired technology of $2,500, customer list of $500 and a non-compete clause of $100.
- (g)
- To record accrued cost relating to facility closure of $350 and severance costs of $301.
- (h)
- To reduce Closedloop deferred revenue to estimated fair value in accordance with Emerging Task Force Issue No. 01-03, "Accounting in a Business Combination for Deferred Revenue of an Acquiree."
- (i)
- To eliminate the historical redeemable convertible preferred stock and stockholders' deficit of Closedloop.
- (j)
- To record the estimated amortization of identified intangibles resulting from the acquisition based on estimated lives of four years for acquired technology, seven years for the customer list and two years for the non-compete clause. Goodwill amortization is not recorded in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill and Other Intangible Assets".
- (k)
- To adjust for interest income lost at a weighted-average investment rate of 2% due to the cash paid, net of cash acquired, for the acquisition of Closedloop.
- (l)
- To adjust the income tax benefit relating to adjustments (j) and (k), and to reflect the assumed utilization of Closedloop's losses in Lawson's consolidated tax provision at Lawson's effective tax rate.
LAWSON SOFTWARE, INC. PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (unaudited)
LAWSON SOFTWARE, INC. PRO FORMA CONDENSED COMBINED BALANCE SHEETS May 31, 2003 (unaudited) (in thousands)
LAWSON SOFTWARE, INC. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS Year Ended May 31, 2003 (unaudited) (in thousands, except share and per share data)
LAWSON SOFTWARE, INC. NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (unaudited) (in thousands)