Exhibit 99.2
COMPUWARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On October 31, 2014, Compuware Corporation (the “Company”) completed its distribution of its shares in Covisint Corporation (“Covisint”).
The accompanying unaudited pro forma consolidated financial statements of Compuware Corporation and its subsidiaries (collectively, the “Company”, Compuware”, “we”, “our” and “us”) were derived from the Company’s historical consolidated financial statements and contain the required unaudited pro forma condensed consolidated balance sheet of the Company as of June 30, 2014, and the unaudited pro forma consolidated statements of operations for the fiscal years ended March 31, 2012, 2013 and 2014 and for the three months ended June 30, 2014.
In connection with the distribution, we intend to proportionately adjust the exercise prices of outstanding options to purchase shares of the Company to maintain the aggregate intrinsic value of such options as of the date of the distribution, pursuant to the terms of these awards. The adjustment will result in the reduction of the per share exercise price of each Option by an amount equal to the product of the Covisint share value (determined by averaging the daily volume weighted average trading price of Covisint on October 30th, October 31st, November 3rd and November 4th), multiplied by the distribution ratio of 0.14025466 (the “Exercise Price Reduction”). The actual Exercise Price Reduction will not be determined until after the NASDAQ market close on November 4th. As a result of this modification, we expect to record additional stock compensation expense related to these awards during the three months ending December 31, 2014 for vested awards and over the remaining vesting period for unvested awards. We do not expect these charges to have a material impact on our financial position, results of operations or cash flows and these charges are not reflected in the Pro Forma Consolidated Financial Statements presented herein.
The following unaudited pro forma consolidated financial statements are furnished for informational purposes only and do not purport to reflect the Company’s financial position and results of operations had the disposition occurred on the date as indicated above. Further, these financial statements are not necessarily indicative of the Company’s future financial position and future results of operations and should be read in conjunction with the accompanying notes and with the historical consolidated financial statements of the Company and related notes thereto included in its Annual Report on Form 10-K for the year ended March 31, 2014 and its Quarterly Report on Form 10-Q for the three months ended June 30, 2014, both filed with the Securities and Exchange Commission. The unaudited pro forma consolidated statements of operations give effect to the disposition by removing the results of the Covisint subsidiary as if the disposition had occurred as of April 1, 2011 and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma consolidated financial information. The unaudited pro forma condensed consolidated balance sheet reflects the disposition of Covisint as if it had occurred on June 30, 2014. The pro forma adjustments are based on the best information available and assumptions that management believes are factually supportable.
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2014
(Unaudited, In Thousands)
ASSETS | As Reported | Pro Forma Adjustments | Pro Forma | |||||||||||||
(a) | (c) | |||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash and cash equivalents | $ | 275,514 | $ | (43,129 | ) | $ | $ | 232,385 | ||||||||
Accounts receivable, net | 288,031 | (18,732 | ) | 269,299 | ||||||||||||
Deferred tax asset, net | 36,770 | (1,431 | ) | 35,339 | ||||||||||||
Income taxes refundable | 4,519 | - | 4,519 | |||||||||||||
Prepaid expenses and other current assets | 27,629 | (6,277 | ) (b) | 21,352 | ||||||||||||
Total current assets | 632,463 | (69,569 | ) | - | 562,894 | |||||||||||
PROPERTY AND EQUIPMENT, LESS ACCUMULATED | ||||||||||||||||
DEPRECIATION AND AMORTIZATION | 283,107 | (4,940 | ) | 278,167 | ||||||||||||
CAPITALIZED SOFTWARE AND OTHER | ||||||||||||||||
INTANGIBLE ASSETS, NET | 96,868 | (21,329 | ) | 75,539 | ||||||||||||
ACCOUNTS RECEIVABLE | 165,010 | - | 165,010 | |||||||||||||
GOODWILL | 647,445 | (25,385 | ) | 622,060 | ||||||||||||
DEFERRED TAX ASSET, NET | 16,582 | (127 | ) | (2,444 | ) | 14,011 | ||||||||||
OTHER ASSETS | 24,613 | (6,350 | ) | 18,263 | ||||||||||||
TOTAL ASSETS | $ | 1,866,088 | $ | (127,700 | ) | $ | (2,444 | ) | $ | 1,735,944 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Accounts payable | $ | 14,133 | $ | (3,963 | ) | $ | $ | 10,170 | ||||||||
Accrued expenses | 75,448 | (697 | ) (b) | 74,751 | ||||||||||||
Income taxes payable | 16,249 | (41 | ) | 40,450 | 56,658 | |||||||||||
Deferred revenue | 354,683 | (14,807 | ) | 339,876 | ||||||||||||
Total current liabilities | 460,513 | (19,508 | ) | 40,450 | 481,455 | |||||||||||
DEFERRED REVENUE | 274,482 | (9,119 | ) | 265,363 | ||||||||||||
ACCRUED EXPENSES | 19,927 | (56 | ) | 19,871 | ||||||||||||
DEFERRED TAX LIABILITY, NET | 33,857 | 1,140 | 34,997 | |||||||||||||
Total liabilities | 788,779 | (27,543 | ) | 40,450 | 801,686 | |||||||||||
SHAREHOLDERS' EQUITY: | ||||||||||||||||
Compuware shareholders' equity | 1,061,362 | (84,210 | ) | (42,894 | ) | 934,258 | ||||||||||
Non-controlling interest | 15,947 | (15,947 | ) | - | ||||||||||||
Total shareholders' equity | 1,077,309 | (100,157 | ) | (42,894 | ) | 934,258 | ||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 1,866,088 | $ | (127,700 | ) | $ | (2,444 | ) | $ | 1,735,944 |
See notes to consolidated financial statements.
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Statement of Operations
Year Ended March 31, 2012
(Unaudited, In Thousands, Except Per Share Data)
As Reported | Results of Operations of Divested Business | Pro Forma | ||||||||||
REVENUES: | (d) | |||||||||||
Software license fees | $ | 195,751 | $ | - | $ | 195,751 | ||||||
Maintenance fees | 380,968 | - | 380,968 | |||||||||
Subscription fees | 76,246 | - | 76,246 | |||||||||
Services fees | 36,795 | - | 36,795 | |||||||||
Application services fees | 73,731 | (73,731 | ) | - | ||||||||
Total revenues | 763,491 | (73,731 | ) | 689,760 | ||||||||
OPERATING EXPENSES: | ||||||||||||
Cost of software license fees | 16,391 | - | 16,391 | |||||||||
Cost of maintenance fees | 34,715 | - | 34,715 | |||||||||
Cost of subscription fees | 29,102 | - | 29,102 | |||||||||
Cost of services | 36,276 | - | 36,276 | |||||||||
Cost of application services | 72,384 | (72,384 | ) | - | ||||||||
Technology development and support | 94,233 | (1,420 | ) | 92,813 | ||||||||
Sales and marketing | 242,211 | - | 242,211 | |||||||||
Administrative and general | 154,366 | (3,897 | ) | 150,469 | ||||||||
Restructuring costs | - | - | - | |||||||||
Total operating expenses | 679,678 | (77,701 | ) | 601,977 | ||||||||
INCOME FROM CONTINUING OPERATIONS | 83,813 | 3,970 | 87,783 | |||||||||
OTHER INCOME, NET | 1,633 | - | 1,633 | |||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME | ||||||||||||
TAX PROVISION | 85,446 | 3,970 | 89,416 | |||||||||
INCOME TAX PROVISION - CONTINUING OPERATIONS | 22,005 | 1,830 | 23,835 | |||||||||
INCOME FROM CONTINUING OPERATIONS, NET OF TAX | $ | 63,441 | $ | 2,140 | $ | 65,581 | ||||||
EARNINGS PER SHARE BASED ON CONTINUING OPERATIONS | ||||||||||||
Basic earnings per share | $ | 0.29 | $ | 0.30 | ||||||||
Diluted earnings per share | $ | 0.29 | $ | 0.29 |
See notes to consolidated financial statements.
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Statement of Operations
Year Ended March 31, 2013
(Unaudited, In Thousands, Except Per Share Data)
As Reported | Results of Operations of Divested Business | Pro Forma | ||||||||||
REVENUES: | (d) | |||||||||||
Software license fees | $ | 159,093 | $ | - | $ | 159,093 | ||||||
Maintenance fees | 361,359 | - | 361,359 | |||||||||
Subscription fees | 79,862 | - | 79,862 | |||||||||
Services fees | 32,896 | - | 32,896 | |||||||||
Application services fees | 90,694 | (90,694 | ) | - | ||||||||
Total revenues | 723,904 | (90,694 | ) | 633,210 | ||||||||
OPERATING EXPENSES: | ||||||||||||
Cost of software license fees | 18,986 | - | 18,986 | |||||||||
Cost of maintenance fees | 31,621 | - | 31,621 | |||||||||
Cost of subscription fees | 30,264 | - | 30,264 | |||||||||
Cost of services | 31,777 | - | 31,777 | |||||||||
Cost of application services | 83,298 | (83,298 | ) | - | ||||||||
Technology development and support | 95,356 | (1,420 | ) | 93,936 | ||||||||
Sales and marketing | 220,714 | - | 220,714 | |||||||||
Administrative and general | 153,733 | (4,519 | ) | 149,214 | ||||||||
Restructuring costs | 15,751 | (34 | ) | 15,717 | ||||||||
Total operating expenses | 681,500 | (89,271 | ) | 592,229 | ||||||||
INCOME FROM CONTINUING OPERATIONS | 42,404 | (1,423 | ) | 40,981 | ||||||||
OTHER INCOME (EXPENSE), NET | (1,170 | ) | - | (1,170 | ) | |||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME | ||||||||||||
TAX PROVISION | 41,234 | (1,423 | ) | 39,811 | ||||||||
INCOME TAX PROVISION - CONTINUING OPERATIONS | 15,917 | 1,139 | 17,056 | |||||||||
INCOME FROM CONTINUING OPERATIONS, NET OF TAX | $ | 25,317 | $ | (2,562 | ) | $ | 22,755 | |||||
EARNINGS PER SHARE BASED ON CONTINUING OPERATIONS | ||||||||||||
Basic earnings per share | $ | 0.12 | $ | 0.11 | ||||||||
Diluted earnings per share | $ | 0.12 | $ | 0.10 |
See notes to consolidated financial statements.
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Statement of Operations
Year Ended March 31, 2014
(Unaudited, In Thousands, Except Per Share Data)
As Reported | Results of Operations of Divested Business | Pro Forma | ||||||||||
REVENUES: | (d) | |||||||||||
Software license fees | $ | 159,197 | $ | - | $ | 159,197 | ||||||
Maintenance fees | 353,374 | - | 353,374 | |||||||||
Subscription fees | 80,857 | - | 80,857 | |||||||||
Services fees | 30,193 | - | 30,193 | |||||||||
Application services fees | 97,135 | (97,135 | ) | - | ||||||||
Total revenues | 720,756 | (97,135 | ) | 623,621 | ||||||||
OPERATING EXPENSES: | ||||||||||||
Cost of software license fees | 20,310 | - | 20,310 | |||||||||
Cost of maintenance fees | 28,387 | - | 28,387 | |||||||||
Cost of subscription fees | 32,406 | - | 32,406 | |||||||||
Cost of services | 25,662 | - | 25,662 | |||||||||
Cost of application services | 117,155 | (117,155 | ) | - | ||||||||
Technology development and support | 86,181 | (1,522 | ) | 84,659 | ||||||||
Sales and marketing | 216,115 | - | 216,115 | |||||||||
Administrative and general | 134,695 | (7,273 | ) | 127,422 | ||||||||
Restructuring costs | 11,990 | (399 | ) | 11,591 | ||||||||
Total operating expenses | 672,901 | (126,349 | ) | 546,552 | ||||||||
INCOME FROM CONTINUING OPERATIONS | 47,855 | 29,214 | 77,069 | |||||||||
OTHER INCOME, NET | 3,288 | (23 | ) | 3,265 | ||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME | ||||||||||||
TAX PROVISION | 51,143 | 29,191 | 80,334 | |||||||||
INCOME TAX PROVISION - CONTINUING OPERATIONS | 12,944 | 11,466 | 24,410 | |||||||||
INCOME FROM CONTINUING OPERATIONS | ||||||||||||
INCLUDING NON-CONTROLLING INTEREST | 38,199 | 17,725 | 55,924 | |||||||||
Less: Net loss attributable to the non-controlling interest in | ||||||||||||
Covisint Corporation | (3,458 | ) | 3,458 | - | ||||||||
INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO | ||||||||||||
COMPUWARE CORPORATION, NET OF TAX | $ | 41,657 | $ | 14,267 | $ | 55,924 | ||||||
EARNINGS PER SHARE BASED ON CONTINUING OPERATIONS | ||||||||||||
ATTRIBUTABLE TO COMPUWARE CORPORATION | ||||||||||||
Basic earnings per share | $ | 0.19 | $ | 0.26 | ||||||||
Diluted earnings per share | $ | 0.19 | $ | 0.25 | ||||||||
Dividends declared per common share | $ | 0.50 | $ | 0.50 |
See notes to consolidated financial statements.
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Statement of Operations
Three Months Ended June 30, 2014
(Unaudited, In Thousands, Except Per Share Data)
As Reported | Results of Operations of Divested Business | Pro Forma | ||||||||||
REVENUES: | (d) | |||||||||||
Software license fees | $ | 26,687 | $ | - | $ | 26,687 | ||||||
Maintenance fees | 88,460 | - | 88,460 | |||||||||
Subscription fees | 19,362 | - | 19,362 | |||||||||
Services fees | 8,414 | - | 8,414 | |||||||||
Application services fees | 21,587 | (21,587 | ) | - | ||||||||
Total revenues | 164,510 | (21,587 | ) | 142,923 | ||||||||
OPERATING EXPENSES: | ||||||||||||
Cost of software license fees | 4,995 | - | 4,995 | |||||||||
Cost of maintenance fees | 6,922 | - | 6,922 | |||||||||
Cost of subscription fees | 8,202 | - | 8,202 | |||||||||
Cost of services | 6,732 | - | 6,732 | |||||||||
Cost of application services | 30,902 | (30,902 | ) | - | ||||||||
Technology development and support | 19,952 | (385 | ) | 19,567 | ||||||||
Sales and marketing | 53,103 | - | 53,103 | |||||||||
Administrative and general | 34,013 | (2,055 | ) | 31,958 | ||||||||
Restructuring costs | 2,975 | - | 2,975 | |||||||||
Total operating expenses | 167,796 | (33,342 | ) | 134,454 | ||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS | (3,286 | ) | 11,755 | 8,469 | ||||||||
OTHER INCOME, NET | 223 | (22 | ) | 201 | ||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME | ||||||||||||
TAX PROVISION | (3,063 | ) | 11,733 | 8,670 | ||||||||
INCOME TAX BENEFIT - CONTINUING OPERATIONS | (1,707 | ) | 4,366 | 2,659 | ||||||||
INCOME (LOSS) FROM CONTINUING OPERATIONS INCLUDING | ||||||||||||
NON-CONTROLLING INTEREST | (1,356 | ) | 7,367 | 6,011 | ||||||||
Less: Net loss attributable to the non-controlling interest in | ||||||||||||
Covisint Corporation | (1,408 | ) | 1,408 | - | ||||||||
INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO | ||||||||||||
COMPUWARE CORPORATION, NET OF TAX | $ | 52 | $ | 5,959 | $ | 6,011 | ||||||
EARNINGS PER SHARE BASED ON CONTINUING OPERATIONS | ||||||||||||
ATTRIBUTABLE TO COMPUWARE CORPORATION | ||||||||||||
Basic earnings per share | $ | 0.00 | $ | 0.03 | ||||||||
Diluted earngings per share | $ | 0.00 | $ | 0.03 | ||||||||
Dividends declared per common share | $ | 0.125 | $ | 0.125 |
See notes to consolidated financial statements.
COMPUWARE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Pro Forma Consolidated Financial Statements
(a) | The adjustment reflects the elimination of assets and liabilities attributable to Covisint including the non-controlling interest activity and balances attributable to the portion of the economic interest in Covisint that we did not own since Covisint’s IPO. |
(b) | At June 30, 2014, amounts due to Covisint of $4.1 million were treated as intercompany balances which were eliminated in consolidation. The adjustment includes the balances due to Covisint primarily for cash received by the Company on behalf of Covisint and for amounts determined to be due to Covisint under our tax sharing agreement. These amounts are generally cash-settled during the subsequent quarter. |
(c) | Records the Company’s estimated income tax liability ($40.5 million based on June 30, 2014 market value per share of Covisint common stock) on the distribution of Covisint stock to Compuware shareholders assuming the closing of Compuware’s Agreement and Plan of Merger with Project Copper Holdings, LLC and Project Copper Merger Corp., both affiliates of Thoma Bravo LLC, dated September 2, 2014. The final tax liability will depend upon the market value of Covisint common stock as of the spin date among other things. |
As a result of the distribution of its remaining Covisint stock, the Company increased its valuation allowance related to the Brownfield Redevelopment tax credit carryforward deferred tax asset.
(d) | The results of operations of the divested business represent the operations of Covisint. Variances from Covisint’s stand-alone financial statements are primarily related to application of the accounting rules under generally accepted accounting principles in the United States for allocation of general and administrative costs to discontinued operations versus the amounts historically charged to Covisint, as well as, the impact of certain intercompany transactions which were not eliminated for Covisint’s stand-alone financial statements. |