Exhibit 99.2
IRIS INTERNATIONAL, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED COMBINED CONSOLIDATED
PRO FORMA FINANCIAL INFORMATION
UNAUDITED CONDENSED COMBINED CONSOLIDATED
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed combined consolidated balance sheet as of June 30, 2010 gives effect to the acquisition of AlliedPath, Inc. (“AlliedPath”) by IRIS International, Inc. (the “Company”) effective July 28, 2010, as if it had occurred on June 30, 2010. The following unaudited pro forma condensed combined consolidated statements of operations for the year ended December 31, 2009 and the six months ended June 30, 2010 give effect to the acquisition of AlliedPath by the Company as if it had occurred on January 1, 2009. The Company’s condensed consolidated statement of operations information for the year ended December 31, 2009 was derived from the consolidated statement of operations included in its 2009 Annual Report on Form 10-K. The Company’s condensed consolidated statement of operations information for the six months ended June 30, 2010 was derived from its Quarterly Report on Form 10-Q for the six months ended June 30, 2010. AlliedPath’s statement of operations information for the year ended December 31, 2009 was derived from the audited statement of operations of AlliedPath included in Exhibit 99.1 to this Current Report on Form 8-K. AlliedPath’s statements of operations information for the six months ended June 30, 2010 were derived from the unaudited statement of operations of AlliedPath included in Exhibit 99.1 to this Current Report on Form 8-K.
The unaudited pro forma condensed combined consolidated financial information has been prepared by the Company’s management for illustrative purposes only and is not necessarily indicative of the condensed consolidated financial position or the results of operations in future periods or the results that actually would have been realized had the Company and Allied Path been a combined company during the specified periods. The pro forma adjustments are based upon assumptions that the Company’s management believes are reasonable. The pro forma adjustments are based on the information available at the time of the preparation of the unaudited pro forma condensed combined consolidated financial statements. These statements, including any notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical consolidated financial statements of the Company included in its Annual Report on Form 10-K for the year ended December 31, 2009 and Quarterly Report on Form 10-Q for the six months ended June 30, 2010 filed with the Securities and Exchange Commission.
UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET
(In thousands, except per share data)
As of June 30, 2010
(In thousands, except per share data)
As of June 30, 2010
Historical | Historical | Pro Forma | Pro Forma | |||||||||||||
IRIS | Allied Path | Adjustments | Combined | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 37,026 | $ | 172 | $ | (4,178 | ) (a) | $ | 33,020 | |||||||
Account Receivable, net | 18,127 | 14 | 18,141 | |||||||||||||
Inventories, net | 13,107 | 13,107 | ||||||||||||||
Prepaid expenses and other current assets | 1,807 | 35 | (2 | ) (a) | 1,840 | |||||||||||
Investment in sales-type leases, current portion | 3,499 | 3,499 | ||||||||||||||
Note receivable | 450 | (450 | ) | 0 | ||||||||||||
Deferred tax asset | 4,238 | 46 | (d) | 4,284 | ||||||||||||
Total Current Assets | 78,254 | 221 | (4,584 | ) | 73,891 | |||||||||||
Property and equipment, at cost, net | 9,357 | 532 | 9,889 | |||||||||||||
Goodwill | 2,450 | 1,176 | (d) | 3,626 | ||||||||||||
Core Technology, net | 1,410 | 3,090 | (d) | 4,500 | ||||||||||||
License | 1,604 | (d) | 1,604 | |||||||||||||
Covenant not to compete | 100 | (d) | 100 | |||||||||||||
Software development costs, net | 2,587 | 2,587 | ||||||||||||||
Deferred tax asset | 1,898 | 1,220 | (d) | 3,118 | ||||||||||||
Investment in sales-type leases, non-current | 8,886 | 8,886 | ||||||||||||||
Other assets | 884 | 32 | 6 | (d) | 922 | |||||||||||
Total Assets | $ | 105,726 | $ | 785 | $ | 2,612 | $ | 109,123 | ||||||||
Liabilities and Stockholders’ Equity (Deficit) | ||||||||||||||||
Current Liabilities: | ||||||||||||||||
Accounts payable | $ | 7,516 | $ | 332 | $ | (186 | ) (a) | $ | 7,662 | |||||||
Accrued expenses | 6,468 | 630 | (565 | ) (a) | 6,533 | |||||||||||
Deferred service contract revenues, current portion | 3,027 | 3,027 | ||||||||||||||
Loans payable | 796 | (796 | ) (a) | (0 | ) | |||||||||||
Deferred tax liability | 88 | (d) | 88 | |||||||||||||
Total current liabilities | 17,011 | 1,758 | (1,459 | ) | 17,310 | |||||||||||
Deferred service contact revenues, non-current | 47 | 47 | ||||||||||||||
Capital lease obligations | 126 | 126 | ||||||||||||||
Other long term liabilities | 61 | 61 | ||||||||||||||
Earnout liability | 1,210 | (b) | 1,210 | |||||||||||||
Deferred tax liability | 1,701 | (d) | 1,701 | |||||||||||||
Total liabilities | 17,058 | 1,945 | 1,452 | 20,455 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Stockholders’ equity (deficit): | ||||||||||||||||
Common Stock | 182 | 1 | (1 | ) (a) | 182 | |||||||||||
Preferred stock | 1 | (1 | ) (a) | 0 | ||||||||||||
Additional paid-in-capital | 89,747 | 2,658 | (2,658 | ) (a) | 89,747 | |||||||||||
Other comprehensive income | 284 | 284 | ||||||||||||||
Accumulated deficit | (1,545 | ) | (3,820 | ) | 3,820 | (c) | (1,545 | ) | ||||||||
Total Stockholders’ equity (deficit) | 88,668 | (1,160 | ) | 1,160 | 88,668 | |||||||||||
Total liabilities and stockholders’ equity (deficit) | $ | 105,726 | $ | 785 | $ | 2,612 | $ | 109,123 | ||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(In thousands, except per share data)
For the Year Ended December 31, 2009 | ||||||||||||||||
Historical | Historical | Pro Forma | Pro Forma | |||||||||||||
IRIS | Allied Path | Adjustments | Combined | |||||||||||||
Revenues | $ | 92,566 | $ | 4 | $ | 92,570 | ||||||||||
Cost of goods | 43,901 | 94 | 43,995 | |||||||||||||
Gross profit (loss) | 48,665 | (90 | ) | 48,575 | ||||||||||||
Operating expenses | 40,854 | 2,185 | $ | 241 | (e) | 43,280 | ||||||||||
Operating income (loss) | 7,811 | (2,275 | ) | (241 | ) | 5,295 | ||||||||||
Other income(expense) | 894 | (3 | ) | (38 | ) (f) | 858 | ||||||||||
5 | (g) | |||||||||||||||
Income (loss) before provision of income taxes | 8,705 | (2,278 | ) | (274 | ) | (6,153 | ) | |||||||||
Provision for income taxes | 2,454 | (104 | )(h) | 2,350 | ||||||||||||
Net income (loss) | $ | 6,251 | $ | (2,278 | ) | $ | (170 | ) | $ | 3,803 | ||||||
Net income per share-basic | $ | 0.35 | $ | 0.21 | ||||||||||||
Net income per share-diluted | $ | 0.35 | $ | 0.21 | ||||||||||||
Weighted average common shares outstanding-basic | 17,727 | 17,727 | ||||||||||||||
Weighted average common shares outstanding-diluted | 17,874 | 17,874 |
See accompanying notes to unaudited pro forma condensed combined financial statements
For the Six Months Ended June 30, 2010 | ||||||||||||||||
Historical | Historical | Pro Forma | Pro Forma | |||||||||||||
IRIS | Allied Path | Adjustments | Combined | |||||||||||||
Revenues | $ | 52,668 | $ | 25 | $ | 52,693 | ||||||||||
Cost of goods | 24,919 | 257 | 25,176 | |||||||||||||
Gross profit (loss) | 27,749 | (232 | ) | 27,517 | ||||||||||||
Operating expenses | 25,089 | 987 | $ | 120 | (e) | 26,196 | ||||||||||
Operating income (loss) | 2,660 | (1,219 | ) | (120 | ) | 1,321 | ||||||||||
Other income(expense) | (162 | ) | (40 | ) | (19 | ) (f) | (183 | ) | ||||||||
38 | (g) | |||||||||||||||
Income (loss) before provision of income taxes | 2,498 | (1,259 | ) | (101 | ) | 1,138 | ||||||||||
Provision for income taxes | 832 | (38 | ) (h) | 794 | ||||||||||||
Net income (loss) | $ | 1,666 | $ | (1,259 | ) | (63 | ) | $ | 344 | |||||||
Net income per share-basic | $ | 0.09 | $ | 0.02 | ||||||||||||
Net income per share-diluted | $ | 0.09 | $ | 0.02 | ||||||||||||
Weighted average common shares outstanding-basic | 17,959 | 17,959 | ||||||||||||||
Weighted average common shares outstanding-diluted | 18,079 | 18,079 |
See accompanying notes to unaudited pro forma condensed combined financial statements.
IRIS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED COMBINED CONSOLIDATED PRO FORMA
FINANCIAL INFORMATION (UNAUDITED)
NOTES TO UNAUDITED CONDENSED COMBINED CONSOLIDATED PRO FORMA
FINANCIAL INFORMATION (UNAUDITED)
1. Transaction
On July 28, 2010, we acquired AlliedPath, Inc. (“AlliedPath”), a molecular diagnostics company. Pursuant to the terms of a Merger Agreement dated July 26, 2010 we acquired all the issued and outstanding stock of AlliedPath for an amount in cash equal to $4.7 million less certain indebtedness existing at the closing, with an additional earn-out of up to $1.3 million subject to the achievement of specific sales and earnings targets through December 2013. We did not assume any outstanding options or warrants of AlliedPath in connection with the acquisition.
The allocation of the purchase price to the fair values of the assets acquired and liabilities assumed as if the transaction had occurred as of June 30, 2010 is presented below (in thousands). The purchase price allocations and pro forma adjustments below are based on preliminary estimates, available information and certain assumptions, and maybe revised as additional information becomes available.
Current assets | $ | 221 | ||
Fixed assets | 532 | |||
Existing technology | 3,090 | |||
CLIA License | 1,604 | |||
Customer relationships | 6 | |||
Non-compete agreements | 100 | |||
Goodwill | 1,062 | |||
Other assets | 32 | |||
Current liabilities | (156 | ) | ||
Lease obligations | (178 | ) | ||
Other liabilities | (63 | ) | ||
Deferred tax liability, net | (410 | ) | ||
Total purchase price | $ | 5,840 | ||
Acquired property and equipment are being depreciated on a straight-line basis with estimated remaining lives ranging from 1 year to 5 years. Intangible assets except the CLIA license are being amortized on a straight-line basis with estimated remaining lives ranging from 3 to 15 years reflecting the expected future value. The CLIA license is considered to have an indefinite life. The purchase was structured as a stock purchase therefore the value assigned to the existing technology, CLIA license, customers relationships, non-compete agreements and goodwill is not deductible for tax purposes.
2. Pro Forma Adjustments
The pro forma adjustments included in the unaudited pro forma condensed combined consolidated financial statements are as follows:
(a) | To reflect payment of cash portion of purchase price. | ||
(b) | To reflect fair value of the earn out portion of the purchase price | ||
(c) | To eliminate stockholder deficit of AlliedPath | ||
(d) | To record adjustments for fair value of assets and liabilities acquired | ||
(e) | To record amortization of intangible assets acquired | ||
(f) | To record accretion of discount on earnout portion of purchase price | ||
(g) | To eliminate interest expense on notes paid off | ||
(h) | To record income tax effect of pro forma adjustments using company’s effective combined federal and state tax rate |