EXHIBIT 99.2
SILVERSTREAM SOFTWARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
MARCH 31, DECEMBER 31,
2002 2001
----------- ------------
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents ......................... $ 111,235 $ 87,932
Marketable securities ............................. 7,016 45,790
Accounts receivable; net of allowances of $1,881
at March 31, 2002 and $2,038 at December 31, 2001 10,231 9,513
Other receivables ................................. 665 454
Prepaid expenses .................................. 2,884 2,296
--------- ---------
Total current assets ........................... 132,031 145,985
Furniture, equipment and leasehold improvements, net 9,252 10,525
Intangibles, net .................................... 43,770 42,755
--------- ---------
Total assets ................................... $ 185,053 $ 199,265
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable .................................. $ 7,470 $ 4,106
Accrued expenses .................................. 7,784 11,111
Deferred revenue .................................. 5,414 5,737
Current portion of long-term debt and obligations
under capital leases ............................ 146 208
--------- ---------
Total current liabilities ...................... 20,814 21,162
Stockholders' equity:
Common stock ...................................... 22 22
Additional paid-in capital ........................ 374,845 374,543
Deferred compensation ............................. (7,427) (8,200)
Accumulated deficit ............................... (202,201) (187,710)
Other accumulated comprehensive loss .............. (969) (521)
Notes receivable from stockholders ................ (31) (31)
--------- ---------
Total stockholders' equity ..................... 164,239 178,103
--------- ---------
Total liabilities and stockholders' equity ..... $ 185,053 $ 199,265
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SILVERSTREAM SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
-----------------------
2002 2001
-------- --------
Revenue:
Software license ..................................... $ 6,110 $ 9,616
Services ............................................. 4,042 13,333
-------- --------
Total revenue ................................ 10,152 22,949
Cost of revenue:
Software license ..................................... 107 142
Services (excluding compensation charges of $280
in the three months ended March 31, 2002 and 2001,
respectively) ..................................... 5,154 15,698
-------- --------
Total cost of revenue ........................ 5,261 15,840
-------- --------
Gross profit ........................................... 4,891 7,109
Operating expenses:
Sales and marketing (excluding compensation
charges $37 in the three months ended
March 31, 2002 and 2001, respectively) ............. 8,932 13,902
Research and development (excluding compensation
charges of $446 in the three months ended March 31, 4,799 4,945
2002 and 2001, respectively)
General and administrative (excluding compensation
charges $10 in the three months ended March 31, 2002 2,895 4,306
and 2001, respectively)
Compensation charge for issuance of stock options .... 773 773
Special charges ..................................... 2,437 --
Amortization of goodwill ............................. -- 4,731
-------- --------
Total operating expenses ..................... 19,836 28,657
-------- --------
Loss from operations ................................... (14,945) (21,548)
Other income, net ...................................... 454 2,532
-------- --------
Net loss ............................................... $(14,491) $(19,016)
======== ========
Basic and diluted net loss per share ................... $ (0.65) $ (0.89)
======== ========
Weighted-average common shares used in computing basic
and diluted net loss per share ....................... 22,375 21,309
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SILVERSTREAM SOFTWARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
-------------------------
2002 2001
--------- --------
OPERATING ACTIVITIES
Net loss ............................................ $ (14,491) $(19,016)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ..................... 1,306 5,804
Provision for allowances on accounts receivable ... (157) 556
Compensation charge for issuance of stock options . 773 773
Non-cash special charges .......................... 74 --
Changes in operating assets and liabilities:
Accounts receivable ............................. (561) (1,742)
Other receivables ............................... (211) (813)
Prepaid expenses ................................ (588) (720)
Other assets .................................... -- 9
Accounts payable and accrued expenses ........... 37 (3,004)
Deferred revenue ................................ (323) 199
--------- --------
Net cash used in operating activities ............... (14,141) (17,954)
--------- --------
INVESTING ACTIVITIES
Purchase of businesses, net of cash acquired ........ (1,015) (4,015)
Purchase of furniture and equipment ................. (107) (1,632)
Sale of available-for-sale securities ............... 38,774 21,635
--------- --------
Net cash provided by investing activities ........... 37,652 15,988
--------- --------
FINANCING ACTIVITIES
Net proceeds from issuance of common stock .......... 302 980
Repayment of long-term debt ......................... (62) (113)
--------- --------
Net cash provided by financing activities ........... 240 867
--------- --------
Effects of exchange rate on cash and cash equivalents (448) (56)
Net increase (decrease) in cash and cash equivalents 23,303 (1,155)
Cash and cash equivalents at beginning of period .... 87,932 86,481
--------- --------
Cash and cash equivalents at end of period .......... $ 111,235 $ 85,326
========= ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SILVERSTREAM SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
The unaudited condensed consolidated financial statements include the accounts
of SilverStream Software, Inc. and its subsidiaries located in North America,
Europe and Asia, all of which are directly or indirectly owned except for
SilverStream Software GmbH, which, pursuant to the requirements of Swiss law,
has issued 1,000 shares out of the 20,000 shares issued and outstanding to a
Swiss attorney in trust for the benefit of SilverStream Software, Inc. All
intercompany accounts and transactions have been eliminated in consolidation.
SilverStream Software, Inc. and its subsidiaries are collectively referred to as
the "Company" or "SilverStream."
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States for interim financial information and accordingly, they do not
include all financial information and disclosures required for complete
financial statements pursuant to accounting principles generally accepted in the
United States. In the opinion of management, these financial statements include
all adjustments necessary for a fair presentation of the results of operations
for the interim periods reported and of the financial condition of the Company
as of the date of the interim balance sheet. The results of operations for the
interim periods are not necessarily indicative of the results to be expected for
the full year.
SilverStream provides software products and services that enable organizations
to more effectively conduct business using the Web. By providing software
products and services for building, deploying and managing Web-based
applications, SilverStream allows companies to deliver applications that have
the breadth, depth and richness customers and trading partners expect. The
Company's software products and services leverage the power of standards such as
Java and XML to unify relevant information and services for its customers,
partners and employees while enabling businesses to leverage prior technology
investments.
EARNINGS PER SHARE
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standard (SFAS) No. 128, "Earnings per Share." SFAS 128
requires calculation and presentation of basic and diluted earnings per share.
Basic earnings per share is calculated based on the weighted average number of
common shares outstanding and excludes any dilutive effects of warrants, stock
options, common stock subject to repurchase or other types of securities.
Diluted earnings per share is calculated based on the weighted average number of
common shares outstanding and the dilutive effect of warrants, stock options,
and related securities calculated using the treasury stock method. Dilutive
securities are excluded from the diluted earnings per share calculation if their
effect is anti-dilutive.
The following table sets forth the computation of basic and diluted loss per
share:
THREE MONTHS ENDED
MARCH 31,
-----------------------
2002 2001
-------- --------
Numerator:
Net Loss .................... $(14,491) $(19,016)
======== ========
Denominator:
Weighted average common
shares outstanding .......... 22,398 21,375
Weighted average common
shares subject to repurchase (23) (66)
-------- --------
Denominator for basic and
diluted loss per share ........ 22,375 21,309
======== ========
Basic and diluted net
loss per share .............. $ (0.65) $ (0.89)
======== ========
The Company has excluded all outstanding stock options and shares subject to
repurchase by the Company from the calculation of loss per share because all
such securities are anti-dilutive for all periods presented. Shares subject to
repurchase by the Company will be included in the computation of earnings per
share when the Company's option to repurchase these shares expires.
COMPREHENSIVE LOSS
Total comprehensive loss was $14.9 million for the three months ended March 31,
2002 compared with $19.1 million for the three months ended March 31, 2001.
Accumulated other comprehensive loss consisted of adjustments for foreign
currency translation losses in the amount of $448,000 for the three months ended
March 31, 2002 compared with $56,000 for the three months ended March 31, 2001.
SPECIAL CHARGES
During the first quarter of 2002, the Company recorded a special charge of $2.4
million in connection with the restructuring of its operations; specifically,
$1.7 million related to a workforce reduction of approximately 115 employees,
$626,000 related to office closures (of which $130,000 represented costs in
connection with exiting leased office space in Australia and Europe, such as
costs to refit such space for sublease tenants and real estate broker fees for
the identification of sublease tenants) net of estimated sublease income and
$74,000 related to the write-down of assets which became impaired as a result of
the restructuring.
During the second and third quarters of 2001, the Company recorded aggregate
special charges of $11.8 million. Of these charges, approximately $9.7 million
related to the restructuring of the Company's operations; specifically, $3.6
million related to a workforce reduction of approximately 255 employees
(primarily consulting employees), $4.9 million related to office closures (of
which $687,000 represented costs in connection with exiting leased office space
in the United States and Europe, such as costs to refit such space for sublease
tenants and real estate broker fees for the identification of sublease tenants)
net of estimated sublease income and $1.2 million related to the write-down of
assets which became impaired as a result of the restructurings. In addition, the
Company wrote-off a $2.1 million equity investment which the Company considered
to be permanently impaired.
OFFICE
CLOSURES AND
COSTS TO EXIT
TERMINATION LEASED OFFICE ASSET
BENEFITS SPACE WRITE-DOWNS TOTAL
----------- ------------- ----------- --------
2002 charge ............. $ 1,792 $ 571 $ 74 $ 2,437
2001 charges ............ $ 3,577 $ 4,867 $ 3,326 $ 11,770
Cash expenditures ....... (4,374) (1,089) -- (5,463)
Non cash charges ........ -- -- (3,400) (3,400)
Change in estimate ...... -- (1,112) -- (1,112)
------- ------- ------- --------
Balance at March 31, 2002 $ 995 $ 3,237 $ -- $ 4,232
------- ------- ------- --------
Future cash outlays for termination benefits are anticipated to be completed by
the second quarter of fiscal 2002, while future cash outlays for office closures
will continue through June 2006.
During the fourth quarter of 2001, the Company determined that the costs to
close certain non-profitable offices would be lower than original estimates,
resulting in a change in estimate of $1.1 million.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In the first quarter of 2001, the Company adopted SFAS No. 133, "Accounting for
Derivatives and Hedging Activities" as amended by SFAS No. 137 and SFAS No. 138,
which establishes accounting and reporting standards for derivative instruments,
including derivative instruments imbedded in other contracts (collectively
referred to as derivatives), and for hedging activities. The adoption of SFAS
No. 133 did not have a material impact on the Company's financial position or
results of operations.
In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No.
142, "Goodwill and Other Intangible Assets." SFAS No. 141 eliminates the
pooling-of-interests method of accounting for business combinations, except for
qualifying business combinations, and further clarifies the criteria to
recognize intangible assets separately from goodwill. SFAS No. 142 eliminates
the amortization of goodwill and indefinite lived intangible assets and requires
periodic review for impairment. The adoption of SFAS No. 141 in July of 2001 and
SFAS No. 142 in January of 2002 did not have a material impact on the Company's
financial position or results of operations.
The following table sets forth a reconciliation of reported net loss to adjusted
net loss:
THREE MONTHS ENDED
MARCH 31,
-----------------------
2002 2001
-------- --------
Reported net loss ............... $(14,491) $(19,016)
Add back: goodwill amortization . -- 4,731
-------- --------
Adjusted net loss ............... $(14,491) $(14,285)
======== ========
The following table sets forth a reconciliation of reported net loss per share
to adjusted net loss per share:
THREE MONTHS ENDED
MARCH 31,
--------------------
2002 2001
-------- --------
Reported net loss per share ..... $ (0.65) $ (0.89)
Add back: goodwill amortization . -- 0.22
-------- --------
Adjusted net loss per share ..... $ (0.67) $ (0.65)
======== ========
The change in the carrying amount of goodwill during the first quarter of 2002
is as follows:
GOODWILL
--------
Balance at December 31, 2001 ..... $42,755
Contingent consideration paid to
owner's of acquired businesses ... 1,015
-------
Balance at March 31, 2002 ........ $43,770
=======
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to
be Disposed of" and provides a single accounting model for long-lived assets to
be disposed of. The adoption of SFAS No. 144 did not have a material impact on
the Company's financial position or results of operations.