Exhibit 99.1
UNITED ONLINE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Overview
On August 11, 2015, Classmates Media Corporation (“Seller”), a Delaware corporation and wholly-owned subsidiary of United Online, Inc., a Delaware corporation (“United Online”), completed the sale of all of the stock of its wholly-owned subsidiary, Classmates, Inc., a Washington corporation (“Classmates”), to Intelius Holdings, Inc., a Delaware corporation (“Purchaser”), pursuant to the Stock Purchase Agreement, dated as of and entered into on August 11, 2015, by and among Purchaser, United Online and Seller. The purchase price received for the domestic Classmates business was approximately $30,000,000 in cash, subject to a post-closing working capital adjustment. In connection with the closing of the transaction, the parties have entered into a transition services agreement, pursuant to which Classmates will pay Seller to provide, among other things, certain accounting, information technology and sales services for a limited period of time after the closing of the transaction.
Basis of Presentation
The unaudited pro forma condensed consolidated financial statements reflect adjustments to United Online’s historical financial results in connection with the sale of Classmates. The following unaudited pro forma condensed consolidated financial statements should be read in conjunction with United Online’s historical consolidated financial statements and accompanying notes.
The unaudited pro forma condensed consolidated statements of operations give effect to the sale of Classmates as if it occurred on January 1, 2012. The unaudited pro forma condensed consolidated balance sheet gives effect to the sale of Classmates as if it occurred as of June 30, 2015, United Online’s latest balance sheet date. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements.
The pro forma adjustments are based on available information and assumptions that United Online’s management believes are (a) directly attributable to the sale, (b) are factually supportable and (c) with respect to the statements of operations, have continuing impact on the consolidated results. The pro forma adjustments may differ from those that will be calculated to report United Online’s discontinued operations in United Online’s future filings. The unaudited pro forma condensed consolidated financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what United Online’s results of operations or balance sheet would have been had the sale of Classmates occurred on the dates indicated. The unaudited pro forma condensed consolidated financial information also should not be considered representative of United Online’s future results of operations or financial position.
UNITED ONLINE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2015
(in thousands, except per share amounts)
| | United Online
Historical | | Pro Forma
Adjustments (1) | | Pro Forma
United Online (1) | |
Revenues | | $ | 99,971 | | $ | (25,768 | )(a) | $ | 74,203 | |
Operating expenses: | | | | | | | |
Cost of revenues | | 34,148 | | (4,494 | )(a) | 29,654 | |
Sales and marketing | | 24,559 | | (10,047 | )(a) | 14,512 | |
Technology and development | | 13,156 | | (4,924 | )(a) | 8,232 | |
General and administrative | | 23,244 | | (3,360 | )(a) | 19,805 | |
| | | | (79 | )(b) | | |
Amortization of intangible assets | | 1,007 | | (801 | )(a) | 206 | |
Restructuring and other exit costs | | 967 | | (3 | )(a) | 964 | |
Total operating expenses | | 97,081 | | (23,708 | ) | 73,373 | |
Operating income | | 2,890 | | (2,060 | ) | 830 | |
Interest income | | 181 | | — | | 181 | |
Other income, net | | 70 | | — | | 70 | |
Income before income taxes | | 3,141 | | (2,060 | ) | 1,081 | |
Provision for income taxes | | 1,643 | | 36 | (c) | 1,679 | |
Income (loss) from continuing operations | | $ | 1,498 | | $ | (2,096 | ) | $ | (598 | ) |
Income allocated to participating securities | | (66 | ) | 66 | | — | |
Income (loss) from continuing operations attributable to common stockholders | | $ | 1,432 | | $ | (2,030 | ) | $ | (598 | ) |
Basic income (loss) from continuing operations per common share | | $ | 0.10 | | | | $ | (0.04 | ) |
Shares used to calculate basic income (loss) from continuing operations per common share | | 14,547 | | | | 14,547 | |
Diluted income (loss) from continuing operations per common share | | $ | 0.10 | | | | $ | (0.04 | ) |
Shares used to calculate diluted income (loss) from continuing operations per common share | | 14,645 | | | | 14,547 | |
(1) United Online pro forma results include costs that were historically allocated to Classmates for services provided by United Online. United Online will continue to provide similar services for a limited time in connection with a transition services agreement.
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
UNITED ONLINE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
(in thousands, except per share amounts)
| | United Online
Historical | | Pro Forma
Adjustments (1) | | Pro Forma
United Online (1) | |
Revenues | | $ | 217,245 | | $ | (52,416 | )(a) | $ | 164,829 | |
Operating expenses: | | | | | | | |
Cost of revenues | | 70,871 | | (9,769 | )(a) | 61,102 | |
Sales and marketing | | 51,190 | | (19,160 | )(a) | 32,030 | |
Technology and development | | 27,818 | | (10,599 | )(a) | 17,219 | |
General and administrative | | 63,802 | | (15,375 | )(a) | 48,386 | |
| | | | (41 | )(b) | | |
Amortization of intangible assets | | 5,625 | | (5,203 | )(a) | 422 | |
Restructuring and other exit costs | | 3,558 | | (502 | )(a) | 3,056 | |
Total operating expenses | | 222,864 | | (60,649 | ) | 162,215 | |
Operating income (loss) | | (5,619 | ) | 8,233 | | 2,614 | |
Interest income | | 389 | | — | | 389 | |
Other income, net | | 506 | | (1 | )(a) | 505 | |
Income (loss) before income taxes | | (4,724 | ) | 8,232 | | 3,508 | |
Provision for income taxes | | 773 | | 69 | (c) | 842 | |
Income (loss) from continuing operations | | $ | (5,497 | ) | $ | 8,163 | | $ | 2,666 | |
Income allocated to participating securities | | — | | (167 | ) | (167 | ) |
Income (loss) from continuing operations attributable to common stockholders | | $ | (5,497 | ) | $ | 7,996 | | $ | 2,499 | |
Basic income (loss) from continuing operations per common share | | $ | (0.39 | ) | | | $ | 0.18 | |
Shares used to calculate basic income (loss) from continuing operations per common share | | 14,115 | | | | 14,115 | |
Diluted income (loss) from continuing operations per common share | | $ | (0.39 | ) | | | $ | 0.18 | |
Shares used to calculate diluted income (loss) from continuing operations per common share | | 14,115 | | | | 14,119 | |
(1) United Online pro forma results include costs that were historically allocated to Classmates for services provided by United Online. United Online will continue to provide similar services for a limited time in connection with a transition services agreement.
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
UNITED ONLINE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2013
(in thousands, except per share amounts)
| | United Online
Historical | | Pro Forma
Adjustments (1) | | Pro Forma
United Online (1) | |
Revenues | | $ | 233,614 | | $ | (57,694 | )(a) | $ | 175,920 | |
Operating expenses: | | | | | | | |
Cost of revenues | | 75,480 | | (13,443 | )(a) | 62,037 | |
Sales and marketing | | 57,066 | | (18,639 | )(a) | 38,427 | |
Technology and development | | 31,708 | | (13,402 | )(a) | 18,306 | |
General and administrative | | 67,049 | | (8,540 | )(a) | 58,509 | |
Amortization of intangible assets | | 5,433 | | (5,034 | )(a) | 399 | |
Contingent consideration - fair value adjustment | | (5,124 | ) | 5,124 | (a) | — | |
Restructuring and other exit costs | | 2,501 | | (1,308 | )(a) | 1,193 | |
Impairment of goodwill, intangible assets and long-lived assets | | 55,440 | | (17,683 | )(a) | 37,757 | |
Total operating expenses | | 289,553 | | (72,925 | ) | 216,628 | |
Operating loss | | (55,939 | ) | 15,231 | | (40,708 | ) |
Interest income | | 261 | | — | | 261 | |
Interest expense | | (12 | ) | — | | (12 | ) |
Other income, net | | 215 | | (2 | )(a) | 213 | |
Loss before income taxes | | (55,475 | ) | 15,229 | | (40,246 | ) |
Provision for income taxes | | 46,011 | | 703 | (d) | 46,714 | |
Loss from continuing operations | | $ | (101,486 | ) | $ | 14,526 | | $ | (86,960 | ) |
Income allocated to participating securities | | (1,195 | ) | — | | (1,195 | ) |
Loss from continuing operations attributable to common stockholders | | $ | (102,681 | ) | $ | 14,526 | | $ | (88,155 | ) |
Basic loss from continuing operations per common share | | $ | (7.74 | ) | | | $ | (6.65 | ) |
Shares used to calculate basic loss from continuing operations per common share | | 13,261 | | | | 13,261 | |
Diluted loss from continuing operations per common share | | $ | (7.74 | ) | | | $ | (6.65 | ) |
Shares used to calculate diluted loss from continuing operations per common share | | 13,261 | | | | 13,261 | |
(1) United Online pro forma results include costs that were historically allocated to Classmates for services provided by United Online. United Online will continue to provide similar services for a limited time in connection with a transition services agreement.
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
UNITED ONLINE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2012
(in thousands, except per share amounts)
| | United Online
Historical | | Pro Forma
Adjustments (1) | | Pro Forma
United Online (1) | |
Revenues | | $ | 257,765 | | $ | (67,470 | )(a) | $ | 190,295 | |
Operating expenses: | | | | | | | |
Cost of revenues | | 78,229 | | (14,849 | )(a) | 63,380 | |
Sales and marketing | | 67,488 | | (24,757 | )(a) | 42,731 | |
Technology and development | | 32,944 | | (13,879 | )(a) | 19,065 | |
General and administrative | | 59,886 | | (11,413 | )(a) | 48,473 | |
Amortization of intangible assets | | 4,950 | | (4,447 | )(a) | 503 | |
Contingent consideration - fair value adjustment | | (836 | ) | 836 | (a) | — | |
Restructuring and other exit costs | | 91 | | 63 | (a) | 154 | |
Impairment of goodwill, intangible assets and long-lived assets | | 26,910 | | — | | 26,910 | |
Total operating expenses | | 269,662 | | (68,446 | ) | 201,216 | |
Operating loss | | (11,897 | ) | 976 | | (10,921 | ) |
Interest income | | 559 | | — | | 559 | |
Other income, net | | 258 | | — | | 258 | |
Loss before income taxes | | (11,080 | ) | 976 | | (10,104 | ) |
Provision for income taxes | | 943 | | 1,436 | (e) | 2,379 | |
Loss from continuing operations | | $ | (12,023 | ) | $ | (460 | ) | $ | (12,483 | ) |
Income allocated to participating securities | | (1,225 | ) | — | | (1,225 | ) |
Loss from continuing operations attributable to common stockholders | | $ | (13,248 | ) | $ | (460 | ) | $ | (13,708 | ) |
Basic loss from continuing operations per common share | | $ | (1.03 | ) | | | $ | (1.06 | ) |
Shares used to calculate basic loss from continuing operations per common share | | 12,924 | | | | 12,924 | |
Diluted loss from continuing operations per common share | | $ | (1.03 | ) | | | $ | (1.06 | ) |
Shares used to calculate diluted income (loss) from continuing operations per common share | | 12,924 | | | | 12,924 | |
(1) United Online pro forma results include costs that were historically allocated to Classmates for services provided by United Online. United Online will continue to provide similar services for a limited time in connection with a transition services agreement.
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
UNITED ONLINE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2015
(in thousands)
| | United Online
Historical | | Pro Forma
Adjustments | | Pro Forma
United Online | |
Assets | | | | | | | |
Current assets: | | | | | | | |
Cash and cash equivalents | | $ | 75,010 | | $ | 29,507 | (f) | $ | 104,517 | |
Accounts receivable, net of allowance | | 12,062 | | (625 | )(a) | 11,437 | |
Inventories, net | | 5,989 | | (10 | )(a) | 5,979 | |
Deferred tax assets, net | | 232 | | (35 | )(a) | 197 | |
Other current assets | | 8,593 | | (1,407 | )(a) | 7,186 | |
Total current assets | | 101,886 | | 27,430 | | 129,316 | |
Property and equipment, net | | 22,698 | | (8,806 | )(a) | 13,892 | |
Deferred tax assets, net | | 1,435 | | — | | 1,435 | |
Goodwill | | 63,001 | | (16,636 | )(a) | 46,365 | |
Intangible assets, net | | 8,224 | | (7,683 | )(a) | 541 | |
Other assets | | 1,285 | | (197 | )(a) | 1,088 | |
Total assets | | $ | 198,529 | | $ | (5,892 | ) | $ | 192,637 | |
Liabilities and Stockholders’ Equity | | | | | | | |
Current liabilities: | | | | | | | |
Accounts payable | | $ | 11,210 | | $ | (1,850 | )(g) | $ | 9,360 | |
Accrued liabilities | | 18,920 | | (10,149 | )(a) | 8,771 | |
Member redemption liability | | 7,018 | | — | | 7,018 | |
Deferred revenue | | 31,858 | | (16,711 | )(a) | 15,147 | |
Deferred tax liabilities, net | | 34 | | 473 | (a) | 507 | |
Total current liabilities | | 69,040 | | (28,237 | ) | 40,803 | |
Member redemption liability | | 10,923 | | — | | 10,923 | |
Deferred revenue | | 2,041 | | (2,027 | )(a) | 14 | |
Deferred tax liabilities, net | | 1,715 | | (566 | )(a) | 1,149 | |
Other liabilities | | 7,395 | | (1,247 | )(a) | 6,148 | |
Total liabilities | | 91,114 | | (32,077 | ) | 59,037 | |
Commitments and contingencies | | | | | | | |
Stockholders’ equity: | | | | | | | |
Common stock | | 1 | | — | | 1 | |
Additional paid-in capital | | 219,789 | | — | | 219,789 | |
Accumulated other comprehensive loss | | (3,441 | ) | — | | (3,441 | ) |
Accumulated deficit | | (108,934 | ) | 26,185 | (h) | (82,749 | ) |
Total stockholders’ equity | | 107,415 | | 26,185 | | 133,600 | |
Total liabilities and total stockholders’ equity | | $ | 198,529 | | $ | (5,892 | ) | $ | 192,637 | |
See accompanying notes to the unaudited pro forma condensed consolidated financial statements.
UNITED ONLINE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma adjustments are included in the unaudited pro forma condensed consolidated statements of operations and/or the unaudited pro forma condensed consolidated balance sheet.
(a) Adjustments reflect the results of operations, assets, liabilities, and historical operating results included in the sale of Classmates.
(b) Adjustments reflect the elimination of non-recurring Classmates sales transaction-related costs that were directly related to the sale.
(c) Due to a full valuation allowance, the pro forma adjustments were not tax effected. The adjustments reflect minimum state taxes and the tax impact of discrete items.
(d) Adjustment reflects the tax effect of the pro forma adjustments at the applicable combined federal and state statutory income tax rates, excluding the impact of the goodwill impairment that is not deductible for tax purposes.
(e) Adjustment reflects the tax effect of the pro forma adjustments at the applicable combined federal and state statutory income tax rates.
(f) Adjustment reflects the approximately $30.0 million in cash received for the sale of Classmates, net of the cash and cash equivalents balance of Classmates.
(g) Adjustment reflects approximately $0.4 million in transaction-related costs directly related to the sale, net of the accounts payable balance of Classmates.
(h) Adjustment reflects the estimated after-tax effect on retained earnings from the sale, including the after-tax gain on the sale of Classmates.
