Exhibit 99.2
RADIANT SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Basis of Presentation
This unaudited pro forma combined balance sheet has been prepared as if the acquisition of Quest had taken place on December 31, 2007. The unaudited pro forma combined statement of earnings for the year ended December 31, 2007, has been prepared as if the acquisition had taken place on January 1, 2007. Radiant Systems, Inc. (“Radiant”) has a fiscal year end of December 31.
The unaudited pro forma combined financial statements have been prepared by Radiant based upon certain assumptions as disclosed in the accompanying footnotes. The unaudited pro forma combined financial statements presented herein are shown for illustrative purposes only and are not necessarily indicative of the financial position or future results of operations of Radiant, or of the financial position or results of operations of Radiant that would have actually occurred had the acquisition been in effect as of the date or for the period presented. Furthermore, the allocation of the purchase price is preliminary and subject to further revision.
The unaudited pro forma combined financial statements should be read in conjunction with Radiant’s separate historical financial statements and notes, the historical financial statements and notes of the operations of Quest contained elsewhere in this filing, and in conjunction with the related notes to these unaudited pro forma combined financial statements. In management’s opinion, all adjustments necessary to reflect the effect of this transaction have been made.
RADIANT SYSTEMS, INC.
Unaudited Pro Forma Combined Balance Sheet
As of December 31, 2007
(In Thousands)
| Historical Radiant (1) | Quest (2) | Pro Forma Adjustments (3) | Pro Forma Radiant | ||||||||||||
| ASSETS | |||||||||||||||
CURRENT ASSETS | |||||||||||||||
Cash and cash equivalents | $ | 29,940 | $ | 1,194 | — | $ | 31,134 | ||||||||
Accounts receivable, net of allowance for doubtful accounts | 43,057 | — | — | 43,057 | |||||||||||
Inventories, net | 30,494 | 1,498 | — | 31,992 | |||||||||||
Other current assets | 10,138 | 271 | — | 10,409 | |||||||||||
Total current assets | 113,629 | 2,963 | — | 116,592 | |||||||||||
PROPERTY AND EQUIPMENT, net | 14,184 | 472 | — | 14,656 | |||||||||||
SOFTWARE DEVELOPMENT COSTS, net | 7,231 | — | — | 7,231 | |||||||||||
GOODWILL | 62,386 | — | 26,590 | (c) | 88,976 | ||||||||||
INTANGIBLES, net | 20,650 | — | 28,300 | (c) | 48,950 | ||||||||||
OTHER LONG-TERM ASSETS, net | 3,879 | 218 | — | 4,097 | |||||||||||
| $ | 221,959 | $ | 3,653 | $ | 54,890 | $ | 280,502 | ||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||
CURRENT LIABILITIES | |||||||||||||||
Current portion of long-term debt and capital lease payments | $ | 8,420 | $ | — | $ | (2,672 | )(d) | $ | 5,748 | ||||||
Accounts payable | 21,317 | 788 | 1,300 | (a) | 23,405 | ||||||||||
Accrued liabilities | 18,427 | 273 | — | 18,700 | |||||||||||
Client deposits and unearned revenue | 13,745 | 2,074 | — | 15,819 | |||||||||||
Total current liabilities | 61,909 | 3,135 | (1,372 | ) | 63,672 | ||||||||||
LONG-TERM DEBT, LINE OF CREDIT AND CAPITAL LEASE PAYMENTS, net of current portion | 13,518 | — | 56,672 | 70,190 | |||||||||||
OTHER LONG-TERM LIABILITIES | 4,576 | 108 | — | 4,684 | |||||||||||
Total liabilities | 80,003 | 3,243 | 55,300 | 138,546 | |||||||||||
SHAREHOLDERS' EQUITY | — | — | — | ||||||||||||
PREFERRED STOCK, no par value; 5,000 shares authorized, none issued | — | — | — | — | |||||||||||
COMMON STOCK, no par value; 100,000 shares authorized, 31,930 shares issued and outstanding | — | — | — | — | |||||||||||
ADDITIONAL PAID-IN CAPITAL | 150,924 | — | — | 150,924 | |||||||||||
ACCUMULATED (DEFICIT) RETAINED EARNINGS | (10,711 | ) | 410 | (410 | )(b) | (10,711 | ) | ||||||||
ACCUMLATED OTHER COMPREHENSIVE INCOME | 1,743 | — | — | 1,743 | |||||||||||
Total sharholders' equity (deficit) | 141,956 | 410 | (410 | ) | 141,956 | ||||||||||
| $ | 221,959 | $ | 3,653 | $ | 54,890 | $ | 280,502 | ||||||||
| Note 1. | Unaudited Pro Forma Combined Balance Sheet: The unaudited pro forma combined balance sheet gives effect to the acquisition as if these events had occurred as of December 31, 2007. |
| 1. | The amounts in this column are derived from the consolidated balance sheet of Radiant as of December 31, 2007 in the audited historical consolidated financial statements of Radiant Systems, Inc. |
| 2. | The amounts in this column are derived from the consolidated balance sheet of Quest Retail Technology Pty Ltd and its subsidiaries as of December 31, 2007 as reported in the audited historical consolidated financial statements of Quest included herein. The presentation of the audited financial statements is in accordance with International Financial Reporting Standards. These amounts would not have been significantly different under United States Generally Accepted Accounting Standards. Additionally, the amounts from the audited financial statements have been translated into United States Dollars from Australian Dollars based on the spot rate on December 31, 2007. Accounts receivable of approximately $3.7 million has been removed from the Quest balance sheet as they were not included in the asset purchase agreement and are non-recourse in nature. Accumulated retained earnings have also been adjusted accordingly. |
| 3. | Total consideration for the purchase of Quest was approximately $56 million and consisted of approximately $54 million in cash and the assumption of certain liabilities and direct expenses Radiant incurred related to the acquisition (a portion of which was capitalized on Radiant’s historical financial statements at December 31, 2007). |
| In addition, on January 2, 2008, Radiant entered into a Credit Agreement (as described in the Form 8-K filed on January 8, 2008). Upon the entering of such agreement, Radiant obtained cash of $75 million under this facility. These monies were used to extinguish a portion of Radiant’s outstanding debt under other facilities in addition to utilizing the cash for the purchase of Quest. |
| The pro forma adjustments in this column reflect the following: |
| (a) | Estimate of direct expenses incurred in connection with the acquisition of Quest by Radiant subsequent to December 31, 2007. |
| (b) | Adjustments to remove historical Quest stockholders’ equity. |
| (c) | Total consideration for the purchase of Quest was approximately $56 million and consisted of approximately $54 million in cash. The adjustment to goodwill represents a preliminary estimate of the excess of the purchase price over the fair value of the tangible and identifiable intangible assets of Quest. Based on preliminary information, the intangible assets acquired consist of reseller and direct customer relationships and contracts (ten year estimated useful life), developed technology (ten year estimated useful life) and trademarks (indefinite useful life). Radiant Systems, Inc. will complete a full valuation of the assets acquired. Upon completion of this valuation, the amounts ascribed to goodwill and intangible assets shown in the pro forma financial statements may change along with the estimated useful life of such intangible assets. Any such revision could have a significant impact on depreciation and amortization, interest expense and income taxes. |
| (d) | Credit agreement entered into by Radiant resulted in $75 million of cash. $19.2 million of this cash was utilized to payoff other debt facilities that were outstanding as of December 31, 2007. Total consideration for the purchase of Quest was approximately $56 million. |
RADIANT SYSTEMS, INC.
Unaudited Pro Forma Combined Statement of Earnings
For the Year Ended December 31, 2007
(In Thousands)
| Historical Radiant (1) | Quest (2) | Pro Forma Adjustments (3) | Pro Forma Radiant | |||||||||||||
REVENUES | ||||||||||||||||
System sales | $ | 145,322 | $ | 11,316 | $ | — | $ | 156,638 | ||||||||
Client support, maintenance and services | 107,876 | 3,786 | — | 111,662 | ||||||||||||
Total revenues | 253,198 | 15,102 | — | 268,300 | ||||||||||||
COST OF REVENUES | ||||||||||||||||
System sales | 76,547 | 5,003 | — | 81,550 | ||||||||||||
Client support, maintenance and services | 64,514 | 2,103 | — | 66,617 | ||||||||||||
Total cost of revenues | 141,061 | 7,106 | — | 148,167 | ||||||||||||
Gross profit | 112,137 | 7,996 | — | 120,133 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Product development | 23,437 | 550 | — | 23,987 | ||||||||||||
Sales and marketing | 28,851 | 1,132 | — | 29,983 | ||||||||||||
Depreciation of fixed assets | 4,147 | 69 | — | 4,216 | ||||||||||||
Amortization of intangible assets | 4,301 | — | 2,090 | (a) | 6,391 | |||||||||||
Other non-recurring gains and charges | 67 | — | — | 67 | ||||||||||||
General and administrative | 28,058 | 1,628 | — | 29,686 | ||||||||||||
Total operating expenses | 88,861 | 3,379 | 2,090 | 94,330 | ||||||||||||
Income from operations | 23,276 | 4,617 | (2,090 | ) | 25,803 | |||||||||||
OTHER (EXPENSE) INCOME | (2,611 | ) | 171 | (4,376 | )(b) | (6,816 | ) | |||||||||
INCOME FROM OPERATIONS BEFORE INCOME TAX PROVISION | 20,665 | 4,788 | (6,466 | ) | 18,987 | |||||||||||
INCOME TAX (PROVISION) BENEFIT | (8,822 | ) | (1,321 | ) | 2,337 | (7,806 | ) | |||||||||
NET INCOME | $ | 11,843 | $ | 3,467 | $ | (4,129 | ) | $ | 11,181 | |||||||
BASIC INCOME PER SHARE | $ | 0.38 | $ | 0.36 | ||||||||||||
DILUTED INCOME PER SHARE | $ | 0.36 | $ | 0.34 | ||||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING | ||||||||||||||||
Basic | 31,373 | 31,373 | ||||||||||||||
Diluted | 33,160 | 33,160 | ||||||||||||||
| Note 2. | Unaudited Pro Forma Combined Statement of Earnings: The unaudited pro forma combined statement of earnings gives effect to the acquisition as if these events had occurred as of January 1, 2007. |
| 1. | The amounts in this column represent the consolidated results of operations of Radiant Systems, Inc. for the year ended December 31, 2007, as reported in the historical consolidated financial statements of Radiant Systems, Inc. |
| 2. | The amounts in this column are derived from the consolidated statements of Quest Retail Technology Pty Ltd and its subsidiaries as of December 31, 2007 as reported in the audited historical consolidated financial statements of Quest and included herein. Certain reclassifications were made in order to conform to Radiant’s statement of earnings presentation. The presentation of the audited financial statements is in accordance with International Financial Reporting Standards. These amounts would not have been significantly different under United States Generally Accepted Accounting Standards. Additionally, the amounts from the audited financial statements have been translated into United States Dollars from Australian Dollars based on the average spot rate for the calendar year 2007. |
| 3. | The pro forma adjustments in this column reflect the following: |
| a. | The pro forma adjustment for amortization of intangible assets estimated at $2.1 million for December 31, 2007 is calculated by estimating the amount of amortization for the period using the estimated fair values and estimated useful lives for the following intangible assets: reseller and direct customer relationships and contracts (ten year estimated useful life) and developed technology (ten year estimated useful life). Radiant will complete a full valuation of the assets acquired. Upon completion of this valuation, the amounts ascribed to goodwill and intangible assets shown in the pro forma financial statements may change along with the estimated useful life of such intangible assets. Any such revision could have a significant impact on depreciation and amortization, interest expense and income taxes. |
| b. | The increase in interest expense is attributable to the credit agreement that Radiant entered into on January 2, 2008. Loans under the credit agreement bear interest at the prime rate plus one half of one percent plus an additional rate of interest that varies between 0.25% and 1.00% depending upon Radiant’s consolidated leverage ratio. |