Exhibit 99.2
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
On July 22, 2014, InvenSense International, Inc., a company formed under the laws of the Cayman Islands and a wholly-owned subsidiary of InvenSense, Inc. (the “Company”), completed its previously announced acquisition of all the outstanding shares of Movea SA, a company formed under the laws of France (“Movea”), pursuant to a Share Purchase Agreement (“Purchase Agreement”) with Movea, certain members of management of Movea and Movea shareholders. The Company paid $60.9 million in cash as consideration for the acquisition. An additional $13.0 million in cash will be payable contingent upon the achievement of certain milestones prior to the one year anniversary of the closing of the acquisition.
In addition, pursuant to the Purchase Agreement, the Company granted restricted stock units for shares of its common stock (each a “Movea Equity Award”) to certain Movea employees, having an aggregate value of $6.6 million. The Movea Equity Awards were granted on August 15, 2014 under the Company’s 2011 Stock Incentive Plan.
For the purpose of the unaudited pro forma combined condensed financial statements, the acquisition was assumed to have occurred as of April 1, 2013, with respect to the unaudited pro forma combined condensed statement of operations for the fiscal year ended March 30, 2014 and as of March 30, 2014 with respect to the unaudited pro forma combined condensed balance sheet. The pro forma adjustments are based upon available information and assumptions that the Company believes are reasonable.
The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based upon preliminary estimates. These preliminary estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as we finalize the valuations of the net tangible and intangible assets acquired and liabilities assumed in connection with our acquisition of Movea.
The acquisition has been accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805 - Business Combinations. Under the acquisition method of accounting, the total purchase consideration of the acquisition is allocated to the tangible assets and identifiable intangible assets and liabilities assumed based on their fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill. The purchase price allocation is based on estimates, assumptions, third party valuations and other studies which have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, purchase price allocation and adjustments reported herein will remain preliminary until the Company has all of the information necessary to finalize the allocation of the purchase price, and the final acquisition accounting adjustments could differ materially from the pro-forma adjustments presented herein. Any increase or decrease in the fair value of Movea’s tangible and identifiable intangible assets and liabilities, as compared to the information shown herein, would also change the portion of purchase price allocable to goodwill and could impact the operating results of the Company due to differences in amortization related to these assets and liabilities. The Company intends to complete the purchase price allocation within twelve months of the closing of the acquisition.
The unaudited pro forma combined condensed financial information has been provided to comply with the presentation of certain financial information relating to Movea in satisfaction of the requirements of Rule 3-05 of Regulation S-X, as required to be filed pursuant to Items 9.01(a) and 9.01(b) of Form 8-K. The unaudited pro forma combined condensed financial information is for informational purposes only and does not purport to represent what the Company’s actual results would have been if the acquisition had been completed as of the date indicated above, or that may be achieved in the future. The unaudited pro forma combined condensed statement of operations does not include the effects of any cost savings from operating efficiencies or synergies that may result from the acquisition.
The unaudited pro forma combined condensed financial statements, including the notes thereto, should be read in conjunction with the Company’s historical financial statements included in the Company’s annual report on Form 10-K for the year ended March 30, 2014, filed on May 29, 2014 with the SEC, as well as audited financial statements as of and for the year ended December 31, 2013 and related notes of Movea that are attached as Exhibit 99.1 to this Current Report on Form 8-K/A.
INVENSENSE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(In thousands)
| | | | | | | | | | | | | | | | | | |
| | Historical | | | | | | | | | |
| | InvenSense March 30, 2014 | | | Movea March 30, 2014 | | | Pro Forma Adjustments | | | | | Pro Forma Combined | |
Assets | | | | | | | | | | | | | | | | | | |
Current assets: | | | | | | | | | | | | | | | | | | |
Cash and cash equivalents | | $ | 26,025 | | | $ | 663 | | | $ | (5,897 | ) | | a) | | $ | 20,791 | |
Short-term investments | | | 91,307 | | | | — | | | | (36,043 | ) | | a) | | | 55,264 | |
Accounts receivable | | | 39,009 | | | | 610 | | | | (59 | ) | | b) | | | 39,560 | |
Inventories | | | 73,032 | | | | 33 | | | | (33 | ) | | b) | | | 73,032 | |
Prepaid expenses and other current assets | | | 19,587 | | | | 3,575 | | | | — | | | | | | 23,162 | |
| | | | | | | | | | | | | | | | | | |
Total current assets | | | 248,960 | | | | 4,881 | | | | (42,032 | ) | | | | | 211,809 | |
Property and equipment, net | | | 25,239 | | | | 233 | | | | — | | | | | | 25,472 | |
Intangible assets, net | | | 35,360 | | | | — | | | | 7,200 | | | c) | | | 42,560 | |
Goodwill | | | 50,952 | | | | — | | | | 63,763 | | | d) | | | 114,715 | |
Long-term investments | | | 128,755 | | | | — | | | | (18,960 | ) | | a) | | | 109,795 | |
Other assets | | | 5,469 | | | | 617 | | | | — | | | b) | | | 6,086 | |
| | | | | | | | | | | | | | | | | | |
Total assets | | $ | 494,735 | | | $ | 5,731 | | | $ | 9,971 | | | | | $ | 510,437 | |
| | | | | | | | | | | | | | | | | | |
Liabilities and Stockholders Equity | | | | | | | | | | | | | | | | | | |
| | | | | |
Current liabilities: | | | | | | | | | | | | | | | | | | |
| | | | | |
Accounts payable | | $ | 18,964 | | | $ | 2,009 | | | $ | — | | | | | $ | 20,973 | |
Accrued liabilities | | | 14,985 | | | | 1,742 | | | | 9,018 | | | b), e) | | | 25,745 | |
| | | | | | | | | | | | | | | | | | |
Total current liabilities | | | 33,949 | | | | 3,751 | | | | 9,018 | | | | | | 46,718 | |
| | | | | |
Long-term debt | | | 135,583 | | | | 550 | | | | — | | | | | | 136,133 | |
Other long-term liabilities | | | 11,375 | | | | 2,383 | | | | — | | | | | | 13,758 | |
| | | | | | | | | | | | | | | | | | |
Total liabilities | | | 180,907 | | | | 6,684 | | | | 9,018 | | | | | | 196,609 | |
Commitments and contingencies | | | | | | | | | | | | | | | | | | |
Stockholders equity: | | | | | | | | | | | | | | | | | | |
Preferred stock | | | — | | | | — | | | | — | | | | | | — | |
Common stock | | | 215,958 | | | | 24,222 | | | | (24,222 | ) | | b) | | | 215,958 | |
Accumulated other comprehensive (loss) | | | (38 | ) | | | (490 | ) | | | 490 | | | b) | | | (38 | ) |
Retained earnings | | | 97,908 | | | | (24,685 | ) | | | 24,685 | | | b) | | | 97,908 | |
| | | | | | | | | | | | | | | | | | |
Total stockholders equity | | | 313,828 | | | | (953 | ) | | | 953 | | | b) | | | 313,828 | |
| | | | | | | | | | | | | | | | | | |
Total liabilities and stockholders equity | | $ | 494,735 | | | $ | 5,731 | | | $ | 9,971 | | | | | $ | 510,437 | |
| | | | | | | | | | | | | | | | | | |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
INVENSENSE, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
| | | | | | | | | | | | | | | | | | |
| | Historical | | | | | | | | | |
| | InvenSense March 30, 2014 | | | Movea March 30, 2014 | | | Pro Forma Adjustments | | | | | Pro Forma Combined | |
Net revenue | | $ | 252,533 | | | $ | 3,176 | | | $ | — | | | | | $ | 255,709 | |
Cost of revenue | | | 127,724 | | | | 28 | | | | 1,440 | | | f) | | | 129,192 | |
| | | | | | | | | | | | | | | | | | |
Gross profit | | | 124,809 | | | | 3,148 | | | | (1,440 | ) | | | | | 126,517 | |
| | | | | |
Operating expenses: | | | | | | | | | | | | | | | | | | |
Research and development | | | 48,431 | | | | 3,523 | | | | 1,021 | | | g) | | | 52,975 | |
Selling, general and administrative | | | 51,344 | | | | 6,406 | | | | 468 | | | g) | | | 58,218 | |
Litigation settlement | | | 15,000 | | | | — | | | | — | | | | | | 15,000 | |
| | | | | | | | | | | | | | | | | | |
Total operating expenses | | | 114,775 | | | | 9,929 | | | | 1,489 | | | | | | 126,193 | |
| | | | | | | | | | | | | | | | | | |
Income (loss) from operations | | | 10,034 | | | | (6,781 | ) | | | (2,929 | ) | | | | | 324 | |
Other income (expense), net: | | | | | | | — | | | | — | | | | | | — | |
Interest (expense) | | | (4,012 | ) | | | (78 | ) | | | — | | | | | | (4,090 | ) |
Other income, net | | | 167 | | | | (60 | ) | | | — | | | | | | 107 | |
| | | | | | | | | | | | | | | | | | |
Other income (expense), net | | | (3,845 | ) | | | (138 | ) | | | — | | | | | | (3,983 | ) |
| | | | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 6,189 | | | | (6,919 | ) | | | (2,929 | ) | | | | | (3,659 | ) |
| | | | | |
Income taxprovision | | | 70 | | | | — | | | | — | | | h) | | | 70 | |
| | | | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 6,119 | | | $ | (6,919 | ) | | $ | (2,929 | ) | | | | $ | (3,729 | ) |
| | | | | | | | | | | | | | | | | | |
Net income (loss) per share allocable to common stockholders | | | | | | | | | | | | | | | | | | |
Basic | | $ | 0.07 | | | | — | | | | | | | | | $ | (0.04 | ) |
Diluted | | $ | 0.07 | | | | — | | | | | | | | | $ | (0.04 | ) |
Weighted average shares outstanding used in computing net income(loss) per share allocable to common stockholders: | | | | | | | | | | | | | | | | | | |
Basic | | | 86,520 | | | | — | | | | | | | | | | 86,520 | |
Diluted | | | 89,928 | | | | — | | | | | | | | | | 86,520 | |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
INVENSENSE, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS
1. Description of Transaction
On July 22, 2014, InvenSense International, Inc., a company formed under the laws of the Cayman Islands and a wholly-owned subsidiary of InvenSense, Inc. (the “Company”), completed its previously announced acquisition of all the outstanding shares of Movea SA, a company formed under the laws of France (“Movea”), pursuant to a Share Purchase Agreement (“Purchase Agreement”) with Movea, certain members of management of Movea and Movea shareholders. The Company paid $60.9 million in cash as consideration for the acquisition. An additional $13.0 million in cash will be payable contingent upon the achievement of certain milestones prior to the one year anniversary of the closing of the acquisition.
In addition, pursuant to the Purchase Agreement, the Company granted restricted stock units for shares of its common stock (each a “Movea Equity Award”) to certain Movea employees, having an aggregate value of $6.6 million. The Movea Equity Awards were granted on August 15, 2014 under the Company’s 2011 Stock Incentive Plan.
The acquisition has been accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805 - Business Combinations. Under the acquisition method of accounting, the total purchase consideration of the acquisition is allocated to the tangible assets and identifiable intangible assets and liabilities assumed based on their fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill. The purchase price allocation is based on estimates, assumptions, third party valuations and other studies of the value of the acquired assets which have not progressed to a stage where there is sufficient information to make a definitive allocation. Accordingly, the purchase price allocation and adjustments reported herein will remain preliminary until the Company has all of the information necessary to finalize the allocation of the purchase price, and the final acquisition accounting adjustments could differ materially from the pro-forma adjustments presented herein. Any increase or decrease in the fair value of Movea’s tangible and identifiable intangible assets and liabilities, as compared to the information shown herein, would also change the portion of purchase price allocable to goodwill and could impact the operating results of the Company due to differences in amortization related to these assets and liabilities. The Company intends to complete the purchase price allocation within twelve months of the closing of the acquisition.
2. Basis of Pro Forma Presentation
The unaudited pro forma combined condensed balance sheet as of March 30, 2014 is based on the historical financial statements of the Company and Movea’s historical financial statements on U.S. generally accepted accounting principles, or GAAP and reflect adjustments resulting from the acquisition of Movea. The unaudited pro forma combined balance sheet as of March 30, 2014 is presented as if the acquisition had occurred on March 30, 2014.
The unaudited pro forma combined condensed statements of operations for the year ended March 30, 2014 are based on the historical financial statements of the Company and Movea’s historical financial statements on GAAP basis and reflect adjustments resulting from the acquisition of Movea. The unaudited pro forma combined condensed statements of operations for the year ended March 30, 2014 are presented as if the acquisition had occurred on April 1, 2013.
The unaudited pro forma condensed combined financial statements are not intended to represent or be indicative of our consolidated results of operations or financial position that would have been reported had the Movea acquisition been completed as of the dates presented, and should not be taken as a representation of our future consolidated results of operations or financial position. The unaudited pro forma condensed combined financial statements do not reflect any operating efficiencies and associated cost savings that we may achieve with respect to the combined companies.
3. Preliminary Purchase Price and Estimated Purchase Price Allocation
A summary of the estimated purchase price allocation to the fair value of assets acquired and liabilities assumed is as follows (in thousands):
| | | | |
Cash consideration | | $ | 60,900 | |
Contingent consideration | | | 8,400 | |
| | | | |
| | | 69,300 | |
| | | | |
| |
Preliminary allocation of purchase price as of July 22, 2014: | | | | |
Current assets | | $ | 3,082 | |
Fixed assets | | | 209 | |
Other non-current assets | | | 592 | |
Developed technology | | | 7,200 | |
Goodwill | | | 65,776 | |
Current liabilities | | | (4,862 | ) |
Long-tern liabilities | | | (2,697 | ) |
| | | | |
Total preliminary purchase price | | $ | 69,300 | |
| | | | |
The purchase price includes contingent consideration of $8 million payable in cash to Movea shareholders upon a design win with a major smartphone manufacturer within 1 year of closing date, and $5 million payable in cash to Movea shareholders upon a specific product development milestone by December 2014. The fair value of the contingent consideration ($8.4 million) was derived from a probability weighted earn-out model of future contingent payments. The valuation of the contingent consideration was based on a collaborative effort of the Company’s engineering and finance departments, and third party valuation experts.
The following table represents the estimated useful lives of developed technology:
| | | | | | | | |
| | Estimated Fair Value (in thousands) | | | Estimated Useful Life | |
Developed technology | | $ | 7,200 | | | | 5.00 | |
| | | | | | | | |
| | $ | 7,200 | | | | | |
| | | | | | | | |
The fair value of developed technology was determined using a cost approach which includes an estimate of time and expenses required to recreate the intangible asset. The fair value of developed technology was capitalized as of the acquisition date and will be amortized using a straight-line method to cost of revenue over the estimated useful life of 5 years.
4. Movea Financial Statements
The historical financial statements of Movea, as presented in the unaudited condensed pro forma financial statements, were derived from financial statements prepared in accordance with the generally accepted accounting principles in France. As a result, certain adjustments were made to Movea’s unaudited balance sheet as of March 30, 2014 and unaudited statement of operations for the twelve months ended March 30, 2014 in order to conform to the generally accepted accounting principles in the United States. Such adjustments primarily affected revenue and stock-based compensation expense, resulting in a $0.4 million adjustment to revenue and approximately $1.0 million adjustment to operating expenses related to stock-based compensation expenses. In addition, $1.9 million of R&D subsidies (other operating income under French GAAP) and $1.4 million of R&D tax credit (Income tax under French GAAP) were reclassified as reductions to Movea’s operating expenses for the twelve months ended March 30, 2014.
5. Pro Forma Adjustments
The historical financial information has been adjusted to give the effect to pro forma events that are 1) directly attributable to the acquisition, 2) factually supportable, and 3) with respect to the statement of operations, expected to have continued impact on the combined results of the companies. The following pro forma adjustments are included in the unaudited pro forma combined condensed financial statements.
a) | To record cash used in the acquisition of Movea. The Company sold approximately $36.0 million of short-term investments and approximately $19.0 million of long-term investments to raise part of the cash used in the acquisition of Movea. |
b) | To record adjustments to the carrying values of assets acquired and liabilities assumed from Movea to reflect their fair values. |
c) | To record fair value of acquired intangible assets (developed technology). |
d) | To record goodwill, which is measured as the excess of the purchase price over the fair value of net assets acquired from Movea. |
e) | To record fair value of the contingent consideration of $8.4 million. |
f) | To record amortization expense related to acquired intangible assets. |
g) | To record stock-based compensation expense related to restricted stock units awarded to employees of Movea. The RSUs have a fair value of approximately $6.6 million and the related expense is recognized on a straight-line basis over a 5 year requisite service period. |
h) | The tax effect of the pro forma adjustments is not material since Movea has net operating losses. |