Exhibit 99.1
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS OF COMVERSE TECHNOLOGY, INC.
The following unaudited pro forma consolidated financial statements give effect to the share distribution and related transactions described below, based on assumptions and adjustments set forth in the accompanying notes.
CTI's unaudited pro forma consolidated financial statements presented below consist of an unaudited pro forma consolidated balance sheet as of July 31, 2012 and unaudited pro forma consolidated statements of operations for the six months ended July 31, 2012 and 2011 and the fiscal years ended January 31, 2012, 2011 and 2010. The following unaudited pro forma consolidated financial statements should be read in conjunction with CTI's historical consolidated financial statements and accompanying notes included in CTI's Quarterly Report on Form 10-Q for the quarterly period ended July 31, 2012 (the '"Quarterly Report") filed with the Securities and Exchange Commission (the "SEC") on September 10, 2012, CTI's Annual Report on Form 10-K for the fiscal year ended January 31, 2012 filed with the SEC on April 2, 2012, CTI's Current Report on Form 8-K filed with the SEC on October 19, 2012 (the "October 19 Form 8-K") and historical combined financial statements of Comverse Inc. ("Comverse"), Starhome B.V. ("Starhome") and Exalink Ltd., included in the Preliminary Information Statement filed as Exhibit 99.1 to the Registration Statement on Form 10 filed by Comverse with the SEC on October 10, 2012. CTI's historical consolidated statement of operations information presented for the fiscal years ended January 31, 2012, 2011 and 2010 has been recast to reflect the results of operations of Starhome, a former majority-owned subsidiary of CTI, as discontinued operations due the sale of Starhome to third party unaffiliated purchasers, which was completed on October 19, 2012, and is derived from the unaudited consolidated statements of operations included in the October 19 Form 8-K.
The unaudited pro forma consolidated financial statements have been derived from CTI's historical consolidated financial statements and Comverse's historical combined financial statements, and are not intended to represent a complete presentation of CTI's and Comverse's financial condition or results of operations had the share distribution and related transactions occurred as of that date and for the periods presented. In addition, they are provided for illustrative and informational purposes only and are not necessarily indicative of CTI's or Comverse's future financial condition or results of operations. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable, that reflect the expected impacts of events directly attributable to the share distribution and related transactions, and that are factually supportable and for purposes of the statements of operations, are expected to have a continuing impact. However, such adjustments may change materially from the information presented.
The unaudited pro forma consolidated balance sheet as of July 31, 2012 has been prepared as if the share distribution and related transactions occurred on July 31, 2012. The unaudited pro forma consolidated statements of operations for the six months ended July 31, 2012 and 2011 and the fiscal years ended January 31, 2012, 2011 and 2010 have been prepared as if the share distribution and related transactions had occurred as of February 1, 2009.
The unaudited pro forma consolidated financial statements give effect to the following significant transactions:
| |
| • | the elimination of the operations of Comverse; |
| |
| • | cash and asset capital contributions to Comverse by CTI; |
| |
| • | the settlement of borrowings under notes payable by Comverse to CTI through a capital contribution to Comverse by CTI; and |
| |
| • | estimated transaction costs associated with the share distribution. |
The Company does not expect to record any stock-based compensation expense in connection with the treatment of outstanding share-based awards in connection with the share distribution.
The following unaudited pro forma consolidated financial statements do not give pro forma effect to the previously disclosed proposed merger of CTI into Verint Systems Inc. (the "Verint Merger") and the following related transactions:
| |
| • | the contribution of $25.0 million by CTI to Comverse upon completion of the Verint Merger by placing such funds in escrow to support indemnification claims to the extent made against Comverse by Verint; |
| |
| • | Verint Merger related estimated transaction costs, primarily related to financial advisory, accounting, tax, consulting and legal fees, which will be paid by CTI. The total estimated merger related transaction costs are $17.4 million, of which $1.4 million were incurred during the six months ended July 31, 2012; and |
| |
| • | a $2.2 payment made in September 2012 to settle CTI's convertible debt obligations. |
Unaudited Pro Forma Consolidated Balance Sheet as of July 31, 2012
|
| | | | | | | | | | | | | | | | | |
| | Historical | | Distribution of Comverse | a | Pro forma Adjustments | | Note | | Pro forma as Adjusted |
| | (In thousands, except share and per share data) |
| ASSETS | | | | | | | | | |
| Current assets: | | | | | | | | | |
Cash and cash equivalents (1) | $ | 415,153 |
| | $ | (116,320 | ) | | $ | (38,500 | ) | | b | | $ | 260,333 |
|
| Restricted cash and bank time deposits | 39,372 |
| | (28,622 | ) | | — |
| | | | 10,750 |
|
| Accounts receivable, net | 315,758 |
| | (148,142 | ) | | — |
| | | | 167,616 |
|
| Inventories | 40,426 |
| | (30,426 | ) | | — |
| | | | 10,000 |
|
| Deferred cost of revenue | 38,909 |
| | (34,455 | ) | | — |
| | | | 4,454 |
|
| Deferred income taxes | 22,849 |
| | (9,964 | ) | | — |
| | j | | 12,885 |
|
| Prepaid expenses and other current assets | 80,787 |
| | (37,582 | ) | | (861 | ) | | c | |
|
|
| | | | | | (4,115 | ) | | d | |
|
|
| | | | | | 4,038 |
| | j | | 42,267 |
|
| Receivables from affiliates | — |
| | (2,414 | ) | | 2,414 |
| | c | | — |
|
| Current assets of discontinued operations | 43,357 |
| | (43,357 | ) | | — |
| | | | — |
|
| Total current assets | 996,611 |
| | (451,282 | ) | | (37,024 | ) | | | | 508,305 |
|
| Property and equipment, net | 74,855 |
| | (41,270 | ) | | (1,443 | ) | | e | | 32,142 |
|
| Goodwill | 1,045,923 |
| | (155,450 | ) | | — |
| | | | 890,473 |
|
| Intangible assets, net | 176,855 |
| | (13,957 | ) | | — |
| | | | 162,898 |
|
| Deferred cost of revenue | 101,629 |
| | (93,377 | ) | | — |
| | | | 8,252 |
|
| Deferred income taxes | 17,871 |
| | (9,414 | ) | | — |
| | j | | 8,457 |
|
| Other assets | 94,067 |
| | (61,397 | ) | | (785 | ) | | f | |
|
|
| | | | | | (388 | ) | | d | | 31,497 |
|
| Noncurrent assets of discontinued operations | 8,826 |
| | (8,826 | ) | | — |
| | | | — |
|
| Total assets | $ | 2,516,637 |
| | $ | (834,973 | ) | | $ | (39,640 | ) | | | | $ | 1,642,024 |
|
| LIABILITIES AND EQUITY | | | | | | | | | |
| Current liabilities: | | | | | | | | | |
| Accounts payable and accrued expenses | $ | 340,064 |
| | $ | (171,998 | ) | | $ | 9,873 |
| | g | |
|
|
| | | | | | 900 |
| | h | | |
| | | | | | (32 | ) | | d | | |
| | | | | | (1,197 | ) | | i | | 177,610 |
|
| Convertible debt obligations | 2,195 |
| | — |
| | — |
| | | | 2,195 |
|
| Deferred revenue | 487,747 |
| | (341,584 | ) | | — |
| | | | 146,163 |
|
| Deferred income taxes | 12,164 |
| | (8,755 | ) | | — |
| | j | | 3,409 |
|
| Bank loans | 6,292 |
| | — |
| | — |
| | | | 6,292 |
|
| Income taxes payable | 7,246 |
| | (2,570 | ) | | — |
| | j | | 4,676 |
|
| Other current liabilities | 53,129 |
| | — |
| | (251 | ) | | d | |
|
|
| | | | | | (49 | ) | | i | | 52,829 |
|
| Payable to affiliate | — |
| | — |
| | 1,553 |
| | c | | 1,553 |
|
| Current liabilities of discontinued operations | 28,003 |
| | (28,003 | ) | | — |
| | | | — |
|
| Total current liabilities | 936,840 |
| | (552,910 | ) | | 10,797 |
| | | | 394,727 |
|
| Bank loans | 587,675 |
| | — |
| | — |
| | | | 587,675 |
|
| Deferred revenue | 172,517 |
| | (155,844 | ) | | — |
| | | | 16,673 |
|
| Deferred income taxes | 91,640 |
| | (43,467 | ) | | — |
| | j | | 48,173 |
|
| Notes payable to CTI | — |
| | (18,286 | ) | | 18,286 |
| | k | | — |
|
| Other long-term liabilities | 186,494 |
| | (142,042 | ) | | (1,116 | ) | | f | |
|
|
| | | | | | (1,260 | ) | | j | | 42,076 |
|
|
| | | | | | | | | | | | | | | | | |
| Noncurrent liabilities of discontinued operations | 4,816 |
| | (4,816 | ) | | — |
| | | | — |
|
| Total liabilities | 1,979,982 |
| | (917,365 | ) | | 26,707 |
| | | | 1,089,324 |
|
| Commitments and contingencies | | | | | | | | | |
| Equity: | | | | | | | | | |
| Comverse Technology, Inc. shareholders’ equity: | | | | | | | | | |
| Common stock, $0.10 par value - authorized, 600,000,000 shares issued 220,565,694 shares; outstanding 214,229,956, on historical and pro forma basis | 22,057 |
| | — |
| | — |
| | | | 22,057 |
|
| Treasury stock, at cost | (9,641 | ) | | — |
| | — |
| | | | (9,641 | ) |
| Additional paid-in capital | 2,213,262 |
| | — |
| | 117,320 |
| | l | |
|
|
| | | | | | (38,500 | ) | | b | | |
| | | | | | (1,443 | ) | | e | | |
| | | | | | 331 |
| | f | | |
| | | | | | 1,246 |
| | i | | |
| | | | | | (18,286 | ) | | k | | |
| | | | | | (4,220 | ) | | d | | |
| | | | | | 5,298 |
| | j | | 2,275,008 |
|
| Net investment of CTI | | | 117,320 |
| | (117,320 | ) | | l | | — |
|
| Accumulated deficit | (1,819,848 | ) | | — |
| | (9,873 | ) | | g | |
|
|
| | | | | | (900 | ) | | h | | (1,830,621 | ) |
| Accumulated other comprehensive income (loss) | 2,730 |
| | (26,788 | ) | | | | | | (24,058 | ) |
| Total Comverse Technology, Inc. shareholders’ equity | 408,560 |
| | 90,532 |
| | (66,347 | ) | | | | 432,745 |
|
| Noncontrolling interest | 128,095 |
| | (8,140 | ) | | | | | | 119,955 |
|
| Total equity | 536,655 |
| | 82,392 |
| | (66,347 | ) | | | | 552,700 |
|
| Total liabilities and equity | $ | 2,516,637 |
| | $ | (834,973 | ) | | $ | (39,640 | ) | | | | $ | 1,642,024 |
|
(1) Includes $173.3 million of cash and cash equivalents held by Verint as of July 31, 2012. Under its credit agreement, Verint is precluded from paying cash dividends to its shareholders, including CTI.
Unaudited Pro Forma Consolidated Statement of Operations for the Six Months Ended July 31, 2012
|
| | | | | | | | | | | | | | | | | |
| | Historical | | Distribution of Comverse | a | Pro forma Adjustments | | Note | | Pro forma as Adjusted |
| | (In thousands, except per share and per share data) |
| Revenue: | | | | | | | | | |
| Product revenue | $ | 293,528 |
| | $ | (99,539 | ) | | $ | — |
| | | | $ | 193,989 |
|
| Service revenue | 424,509 |
| | (209,437 | ) | | — |
| | | | 215,072 |
|
| Total revenue | 718,037 |
| | (308,976 | ) | | — |
| | | | 409,061 |
|
| Costs and expenses: | | | | | | | | | |
| Product costs | 126,635 |
| | (51,933 | ) | | — |
| | | | 74,702 |
|
| Service costs | 216,274 |
| | (146,668 | ) | | — |
| | | | 69,606 |
|
| Research and development, net | 97,462 |
| | (38,864 | ) | | — |
| | | | 58,598 |
|
| Selling, general and administrative | 268,558 |
| | (74,327 | ) | | (10,071 | ) | | m | |
|
| | | | | | (98 | ) | | o | | 184,062 |
|
| Other operating expenses: | | | | | | | | | |
| Restructuring charges | 1,107 |
| | (1,107 | ) | | — |
| | | | — |
|
| Total costs and expenses | 710,036 |
| | (312,899 | ) | | (10,169 | ) | |
| | 386,968 |
|
| Income from operations | 8,001 |
| | 3,923 |
| | 10,169 |
| |
| | 22,093 |
|
| Interest income | 705 |
| | (443 | ) | | — |
| | | | 262 |
|
| Interest expense | (15,798 | ) | | 376 |
| | — |
| | | | (15,422 | ) |
| Interest expense on notes payable to CTI | — |
| | 250 |
| | (250 | ) | | p | | — |
|
| Other income, net | (3,439 | ) | | 3,896 |
| | — |
| | | | 457 |
|
| (Loss) income before income tax provision | (10,531 | ) | | 8,002 |
| | 9,919 |
| |
| | 7,390 |
|
| Income tax provision | (29,348 | ) | | 13,006 |
| | 412 |
| | q | | (15,930 | ) |
| Net loss from continuing operations | $ | (39,879 | ) | | $ | 21,008 |
| | $ | 10,331 |
| |
| | $ | (8,540 | ) |
| Weighted average common shares outstanding: | | | | | | | | | |
| Basic and Diluted | 218,983,165 |
| | | | | | r | | 218,983,165 |
|
| Loss per share: | | | | | | | | | |
| Basic | $ | (0.25 | ) | | | | | | s | | $ | (0.13 | ) |
| Diluted | (0.25 | ) | | | | | | t | | (0.13 | ) |
Unaudited Pro Forma Consolidated Statement of Operations for the Six Months Ended July 31, 2011
|
| | | | | | | | | | | | | | | | | |
| | Historical | | Distribution of Comverse | a | Pro forma Adjustments | | Note | | Pro forma as Adjusted |
| | (In thousands, except per share and per share data) |
| Revenue: | | | | | | | | | |
| Product revenue | $ | 298,330 |
| | $ | (114,629 | ) | | — |
| | | | $ | 183,701 |
|
| Service revenue | 418,780 |
| | (231,190 | ) | | — |
| | | | 187,590 |
|
| Total revenue | 717,110 |
| | (345,819 | ) | | — |
| | | | 371,291 |
|
| Costs and expenses: | | | | | | | | | |
| Product costs | 119,649 |
| | (58,569 | ) | | — |
| | | | 61,080 |
|
| Service costs | 226,326 |
| | (162,948 | ) | | — |
| | | | 63,378 |
|
| Research and development, net | 101,893 |
| | (48,717 | ) | | — |
| | | | 53,176 |
|
| Selling, general and administrative | 281,346 |
| | (77,443 | ) | | (126 | ) | | o | | 203,777 |
|
| Other operating expenses: | | | | | | | | | |
| Restructuring charges | 13,050 |
| | (13,050 | ) | | — |
| | | | — |
|
| Total costs and expenses | 742,264 |
| | (360,727 | ) | | (126 | ) | |
| | 381,411 |
|
| Loss from operations | (25,154 | ) | | 14,908 |
| | 126 |
| |
| | (10,120 | ) |
| Interest income | 2,607 |
| | (883 | ) | | — |
| | | | 1,724 |
|
| Interest expense | (17,133 | ) | | 471 |
| | — |
| | | | (16,662 | ) |
| Interest expense on note payable to CTI | — |
| | 182 |
| | (182 | ) | | p | | — |
|
| Loss on extinguishment of debt | (8,136 | ) | | — |
| | — |
| | | | (8,136 | ) |
| Other income, net | 11,980 |
| | 2,556 |
| | — |
| | | | 14,536 |
|
| Loss before income tax provision | (35,836 | ) | | 17,234 |
| | (56 | ) | |
| | (18,658 | ) |
| Income tax provision | (56,902 | ) | | 40,119 |
| | — |
| | q | | (16,783 | ) |
| Net loss from continuing operations | $ | (92,738 | ) | | $ | 57,353 |
| | $ | (56 | ) | |
| | $ | (35,441 | ) |
| Weighted average common shares outstanding: | | | | | | | | | |
| Basic and Diluted | 205,892,853 |
| | | | | | r | | 205,892,853 |
|
| Loss per share: | | | | | | | | | |
| Basic | $ | (0.49 | ) | | | | | | s | | $ | (0.21 | ) |
| Diluted | (0.49 | ) | | | | | | t | | (0.21 | ) |
Unaudited Pro Forma Consolidated Statement of Operations for the Fiscal Year Ended January 31, 2012
|
| | | | | | | | | | | | | | | | | |
| | Historical | | Distribution of Comverse | a | Pro forma Adjustments | | Note | | Pro forma as Adjusted |
| | (In thousands, except per share and per share data) |
| Revenue: | | | | | | | | | |
| Product revenue | $ | 666,851 |
| | $ | (276,459 | ) | | $ | — |
| | | | $ | 390,392 |
|
| Service revenue | 886,954 |
| | (494,698 | ) | | — |
| | | | 392,256 |
|
| Total revenue | 1,553,805 |
| | (771,157 | ) | | — |
| | | | 782,648 |
|
| Costs and expenses: | | | | | | | | | |
| Product costs | 274,474 |
| | (136,024 | ) | | — |
| | | | 138,450 |
|
| Service costs | 462,754 |
| | (332,843 | ) | | — |
| | | | 129,911 |
|
| Research and development, net | 205,239 |
| | (94,238 | ) | | — |
| | | | 111,001 |
|
| Selling, general and administrative | 566,587 |
| | (160,417 | ) | | (202 | ) | | o | | 405,968 |
|
| Other operating expenses: | | | | | | | | | — |
|
| Litigation settlements | 4,880 |
| | — |
| | — |
| | | | 4,880 |
|
| Restructuring charges | 20,728 |
| | (20,728 | ) | | — |
| | | | — |
|
| Total other operating expenses | 25,608 |
| | (20,728 | ) | | — |
| |
| | 4,880 |
|
| Total costs and expenses | 1,534,662 |
| | (744,250 | ) | | (202 | ) | |
| | 790,210 |
|
| Income (loss) from operations | 19,143 |
| | (26,907 | ) | | 202 |
| |
| | (7,562 | ) |
| Interest income | 4,174 |
| | (1,755 | ) | | — |
| | | | 2,419 |
|
| Interest expense | (33,332 | ) | | 953 |
| | — |
| | | | (32,379 | ) |
| Interest expense on note payable to CTI | — |
| | 409 |
| | (409 | ) | | p | | — |
|
| Loss on extinguishment of debt | (8,136 | ) | | — |
| | — |
| | | | (8,136 | ) |
| Other income, net | 21,630 |
| | 7,192 |
| | — |
| | | | 28,822 |
|
| Income (loss) before income tax provision | 3,479 |
| | (20,108 | ) | | (207 | ) | |
| | (16,836 | ) |
| Income tax provision | (42,259 | ) | | 22,538 |
| | — |
| | q | | (19,721 | ) |
| Net loss from continuing operations | $ | (38,780 | ) | | $ | 2,430 |
| | $ | (207 | ) | |
| | $ | (36,557 | ) |
| Weighted average common shares outstanding: | | | | | | | | | |
| Basic and Diluted | 208,301,686 |
| | | | | | r | | 208,301,686 |
|
| Loss per share: | | | | | | | | | |
| Basic | $ | (0.31 | ) | | | | | | s | | $ | (0.30 | ) |
| Diluted | (0.31 | ) | | | | | | t | | (0.30 | ) |
Unaudited Pro Forma Consolidated Statement of Operations for the Fiscal Year Ended January 31, 2011
|
| | | | | | | | | | | | | | | | | |
| | Historical | | Distribution of Comverse | a | Pro forma Adjustments | | Note | | Pro forma as Adjusted |
| | (In thousands, except per share and per share data) |
| Revenue: | | | | | | | | | |
| Product revenue | $ | 676,066 |
| | $ | (300,902 | ) | | $ | — |
| | | | $ | 375,164 |
|
| Service revenue | 913,569 |
| | (561,934 | ) | | — |
| | | | 351,635 |
|
| Total revenue | 1,589,635 |
| | (862,836 | ) | | — |
| | | | 726,799 |
|
| Costs and expenses: | | | | | | | | | |
| Product costs | 258,187 |
| | (138,378 | ) | | 1,274 |
| | n | | 121,083 |
|
| Service costs | 452,771 |
| | (335,510 | ) | | — |
| | | | 117,261 |
|
| Research and development, net | 245,342 |
| | (148,817 | ) | | — |
| | | | 96,525 |
|
| Selling, general and administrative | 673,512 |
| | (187,078 | ) | | (253 | ) | | o | | 486,181 |
|
| Other operating expenses: | | | | | | | | |
|
| Impairment of goodwill and other intangible assets | (17,500 | ) | | — |
| | — |
| | | | (17,500 | ) |
| Restructuring charges | 29,934 |
| | (29,934 | ) | | — |
| | | | — |
|
| Total other operating expenses | 12,434 |
| | (29,934 | ) | | — |
| |
| | (17,500 | ) |
| Total costs and expenses | 1,642,246 |
| | (839,717 | ) | | 1,021 |
| |
| | 803,550 |
|
| Loss from operations | (52,611 | ) | | (23,119 | ) | | (1,021 | ) | |
| | (76,751 | ) |
| Interest income | 4,093 |
| | (1,717 | ) | | — |
| | | | 2,376 |
|
| Interest expense | (30,813 | ) | | 900 |
| | — |
| | | | (29,913 | ) |
| Interest expense on note payable to CTI | — |
| | 19 |
| | (19 | ) | | p | | — |
|
| Other income, net | 5,974 |
| | 3,645 |
| | — |
| | | | 9,619 |
|
| Loss before income tax (provision) benefit | (73,357 | ) | | (20,272 | ) | | (1,040 | ) | |
| | (94,669 | ) |
| Income tax (provision) benefit | (36,932 | ) | | 55,828 |
| | — |
| | q | | 18,896 |
|
| Net loss from continuing operations | $ | (110,289 | ) | | $ | 35,556 |
| | $ | (1,040 | ) | |
| | $ | (75,773 | ) |
| Weighted average common shares outstanding: | | | | | | | | | |
| Basic and Diluted | 205,162,720 |
| | | | | | r | | 205,162,720 |
|
| Loss per share: | | | | | | | | | |
| Basic | $ | (0.62 | ) | | | | | | s | | $ | (0.45 | ) |
| Diluted | (0.62 | ) | | | | | | t | | (0.45 | ) |
Unaudited Pro Forma Consolidated Statement of Operations for the Fiscal Year Ended January 31, 2010
|
| | | | | | | | | | | | | | | | | |
| | Historical | | Distribution of Comverse | d | Pro forma Adjustments | | Note | | Pro forma as Adjusted |
| | (In thousands, except per share and per share data) |
| Revenue: | | | | | | | | | |
| Product revenue | $ | 618,749 |
| | $ | (244,417 | ) | | $ | (60 | ) | | n | | $ | 374,272 |
|
| Service revenue | 879,731 |
| | (550,370 | ) | | — |
| | | | 329,361 |
|
| Total revenue | 1,498,480 |
| | (794,787 | ) | | (60 | ) | | | | 703,633 |
|
| Costs and expenses: | | | | | | | | | |
| Product costs | 245,579 |
| | (117,412 | ) | | 2,814 |
| | n | | 130,981 |
|
| Service costs | 464,674 |
| | (355,720 | ) | | — |
| | | | 108,954 |
|
| Research and development, net | 259,746 |
| | (175,949 | ) | | — |
| | | | 83,797 |
|
| Selling, general and administrative | 704,815 |
| | (226,040 | ) | | (149 | ) | | o | | 478,626 |
|
| Other operating expenses: | | | | | | | | | |
| Impairment of goodwill and other intangible assets | 3,356 |
| | (3,356 | ) | | — |
| | | | — |
|
| Restructuring charges | 15,413 |
| | (15,272 | ) | | — |
| | | | 141 |
|
| Total other operating expenses | 18,769 |
| | (18,628 | ) | | — |
| |
| | 141 |
|
| Total costs and expenses | 1,693,583 |
| | (893,749 | ) | | 2,665 |
| |
| | 802,499 |
|
| Loss from operations | (195,103 | ) | | 98,962 |
| | (2,725 | ) | |
| | (98,866 | ) |
| Interest income | 7,043 |
| | (3,169 | ) | | — |
| | | | 3,874 |
|
| Interest expense | (25,381 | ) | | 314 |
| | — |
| | | | (25,067 | ) |
| Interest expense on note payable to CTI | — |
| | (4,845 | ) | | 4,845 |
| | p | | — |
|
| Other (expense), net | (18,095 | ) | | (476 | ) | | — |
| | | | (18,571 | ) |
| Loss before income tax benefit | (231,536 | ) | | 90,786 |
| | 2,120 |
| |
| | (138,630 | ) |
| Income tax benefit | 7,297 |
| | 59,423 |
| | — |
| | q | | 66,720 |
|
| Net loss from continuing operations | $ | (224,239 | ) | | $ | 150,209 |
| | $ | 2,120 |
| |
| | $ | (71,910 | ) |
| Weighted average common shares outstanding: | | | | | | | | | |
| Basic and Diluted | 204,513,420 |
| | | | | | r | | 204,513,420 |
|
| Loss per share: | | | | | | | | | |
| Basic | $ | (1.14 | ) | | | | | | s | | $ | (0.39 | ) |
| Diluted | (1.14 | ) | | | | | | t | | (0.39 | ) |
Notes to Unaudited Pro Forma Consolidated Financial Statements
| |
| a. | Reflects the elimination of the historical results of operations, assets, liabilities and equity of Comverse. Although CTI allocates certain of its general corporate overhead expenses and professional fees to Comverse, those expenses are not included in the elimination of Comverse's historical results of operations, as it is not factually supportable that CTI would not have incurred the expenses allocated to Comverse, if the share distribution had occurred at the beginning of the periods presented for pro forma results of operations. In addition, the income tax benefit on the reported loss before income tax benefit has been adjusted to reflect the amounts allocable to CTI and Comverse on an intraperiod allocation basis. |
| |
| b. | Reflects the cash contribution made by CTI to Comverse as part of the share distribution. |
| |
| c. | Reflects amounts payable to Comverse by affiliates. |
| |
| d. | Reflects the contribution to Comverse of assets and liabilities pertaining to CTI capital by CTI. |
| |
| e. | Reflects the contribution to Comverse of property and equipment by CTI as part of the share distribution. The assets primarily consist of equipment, software and leasehold improvements of facilities. |
| |
| f. | Reflects the transfer to Comverse of lease deposits and deferred lease liability from CTI as part of the share distribution. |
| |
| g. | Reflects the of estimated transaction costs attributable to the share distribution that are factually supportable, primarily related to financial advisory, accounting, tax, consulting and legal fees, which will be paid by CTI. The total estimated transaction costs are $19.9 million, of which $10.1 million were incurred during the six months ended July 31, 2012. |
| |
| h. | Reflects bonuses payable by CTI upon consummation of the share distribution. |
| |
| i. | Reflects the assumption by Comverse of employee-related liabilities attributable to employees transferred to Comverse from CTI as part of the share distribution. |
| |
| j. | Reflects the adjustment to tax assets and liabilities for the tax effect of the pro forma adjustments discussed above using the statutory tax rate in effect in the respective tax jurisdictions adjusted for the impact of non-deductible items and valuation allowances. Upon the share distribution, tax law allocations in conjunction with the Tax Disaffiliation Agreement between CTI and Comverse entered into in connection with the share distribution may result in changes to CTI's reported tax amounts. |
| |
| k. | Reflects the settlement of borrowings under notes that were payable by Comverse to CTI through a capital contribution to Comverse by CTI as part of the share distribution. |
| |
| l. | Reflects the reclassification of net investment of CTI in Comverse into additional paid-in capital. |
| |
| m. | Reflects the elimination of transaction costs directly attributable to the share distribution that are non-recurring. |
| |
| n. | Reflects adjustments to product revenue and product costs related to transactions with affiliates that were eliminated in CTI's consolidation. |
| |
| o. | Reflects the depreciation of property and equipment that was contributed to Comverse by CTI as part of the share distribution. |
| |
| p. | Reflects the elimination of interest expense on borrowings under notes that were payable by Comverse to CTI that settled through a capital contribution to Comverse by CTI as part of the share distribution. |
| |
| q. | Reflects the tax effect of the pro forma adjustments discussed above using the statutory tax rate in effect in the respective tax jurisdictions adjusted for the impact of non-deductible items and the valuation allowances. |
| |
| r. | The number of shares used to compute pro forma basic and diluted loss per share attributable to CTI's shareholders is based on the weighted average number of shares of CTI's common stock outstanding during the applicable fiscal period. |
| |
| s. | Pro forma basic loss per share attributable to CTI's shareholders reflects the impact of noncontrolling interest. |
| |
| t. | Pro forma diluted loss per share attributable to CTI's shareholders reflects the impact of noncontrolling interest. As a result of net loss, the diluted loss per share computation excludes contingently issuable shares of CTI's common stock issuable upon exercise of outstanding stock options or in settlement of other share-based awards granted under our equity-based compensation plans, because the effect would be antidilutive. The dilutive impact of subsidiary stock-based awards on CTI's reported net loss is recorded as an adjustment to net loss for the purposes of calculating loss per share. |
