EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On June 19, 2003, the Company announced that it had signed a definitive
agreement to acquire IDS, a privately held company based in Foster City, CA. The
acquisition subsequently completed on September 24, 2003. IDS developed and
licensed yield management software applications and services dedicated to the
semiconductor industry to enable customers to track and identify areas for yield
improvement. The acquisition of IDS will provide the Company's customers with
greater capabilities for managing product yield improvement through the use of
the acquired technology and services. Under the amended terms of the agreement,
PDF acquired all outstanding shares of IDS in consideration for $23.0 million in
cash, issuance of 2,000,000 shares of the Company's common stock valued at $25.0
million, the assumption of all outstanding stock options valued at $1.7 million
and transaction costs of $1.3 million, resulting in an aggregate purchase price
of $51.0 million. The fair value of the Company's common stock was determined
based on the average closing price per share of the Company's common stock over
a 5-day period beginning two trading days before and ending two trading days
after the amended terms of the acquisition were agreed to and announced
(September 3, 2003). The fair value of the options assumed were calculated as of
September 24, 2003 based on the Black-Scholes options pricing model. The
acquisition was accounted for using the purchase method of accounting and
accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based on their estimated fair values on the acquisition
date, with the excess purchase price allocated to goodwill.
The following unaudited pro forma condensed combined financial
statements are presented for illustrative purposes only and are not necessarily
indicative of the combined financial position or results of operations for
future periods or the financial position or results of operations that actually
would have been realized had PDF and IDS been a combined company during the
specified periods. The unaudited pro forma condensed combined financial
statements, including the related notes, are qualified in their entirety by
reference to, and should be read in conjunction with, the historical condensed
consolidated financial statements and related notes of PDF, included in its Form
10-K and Form 10-Q, most recently filed with the Securities and Exchange
Commission on March 26, 2003 and August 14, 2003, respectively, and the
historical consolidated financial statements and related notes of IDS, included
elsewhere in this Form 8-K/A.
The following unaudited pro forma condensed combined financial
statements give effect to the merger between PDF and IDS using the purchase
method of accounting. The unaudited pro forma condensed combined financial
statements are based on the respective historical financial statements of PDF
and IDS. The pro forma adjustments are based on management's estimates and
independent valuation of the value of the tangible and intangible assets
acquired.
The unaudited pro forma condensed combined balance sheet assumes the
merger took place on June 30, 2003 and the unaudited pro forma condensed
combined statements of operations assumes the acquisition took place at the
beginning of the periods presented. The unaudited pro forma condensed combined
statement of operations for the year ended December 31, 2002, combines PDF's
statement of operations for the year ended December 31, 2002 with the statement
of operations of IDS for its fiscal year ended September 30, 2002. The unaudited
pro forma condensed combined statement of operations for the six months ended
June 30, 2003, combines PDF's statement of operations for the six months ended
June 30, 2003 with the statement of operations of IDS for the six months ended
March 31, 2003. As a result of the difference in fiscal year ends of PDF and
IDS, the operating results of IDS for the three months ended June 30, 2003, have
not been included within the pro forma statements of operations presented below.
Accordingly, the following table is being provided to present the operating
results for the three months ended June 30, 2003, of IDS:
(IN THOUSANDS)
Revenues $ 1,608
Costs and expenses 3,034
Net loss (1,426)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2003
(IN THOUSANDS)
JUNE 30, 2003
----------------------
HISTORICAL PRO FORMA
---------------------- --------------------------
PDF IDS ADJUSTMENTS COMBINED
--------- --------- ----------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 67,073 $ 34 $ (22,962) (1) $ 44,145
Accounts receivable, net of allowances 6,584 917 - 7,501
Prepaid expenses and other current assets 5,006 122 - 5,128
--------- --------- --------- ---------
Total current assets 78,663 1,073 (22,962) 56,774
Property and equipment, net 3,453 301 - 3,754
Goodwill 662 - 38,894 (1) 39,556
Intangible assets, net 4,195 - 21,260 (1) 25,455
Other assets 1,815 197 (112) (4) 1,900
--------- --------- --------- ---------
Total assets $ 88,788 $ 1,571 $ 37,080 $ 127,439
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,370 $ 402 $ - $ 1,772
Accrued compensation and related benefits 1,910 722 - 2,632
Other accrued liabilities 1,364 81 451 (4) 1,896
Other liabilities 1,500 - 1,288 (5) 2,788
Taxes payable 686 (238) - 448
Deferred revenues 2,163 4,305 (3,029) (4) 3,439
Billings in excess of recognized revenue 274 - - 274
Current portion of long-term debt 17 - - 17
--------- --------- --------- ---------
Total current liabilities 9,284 5,272 (1,290) 13,266
Deferred tax liabilities 753 - 8,708 (3) 9,461
Other long-term liabilities 55 - - 55
--------- --------- --------- ---------
Total liabilities 10,092 5,272 7,418 22,782
--------- --------- --------- ---------
Common stock 3 16 (15) (1) 3
Additional paid-in-capital 100,641 6,212 21,468 (1) 128,322
Deferred stock-based compensation (545) (425) (495) (1) (1,465)
Notes receivable from stockholders (4,614) (3,051) 3,051 (1) (4,614)
Accumulated deficit (16,855) (6,453) 5,653 (1) (17,655)
Cumulative other comprehensive income 66 - - 66
--------- --------- --------- ---------
Total stockholders' equity 78,696 (3,701) 29,662 104,657
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 88,788 $ 1,571 $ 37,080 $ 127,439
========= ========= ========= =========
See notes to unaudited pro forma condensed combined financial statements.
PDF SOLUTIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS SIX MONTHS
ENDED JUNE 30, ENDED MARCH 31,
2003 2003
-------------- --------------- ------------------------
HISTORICAL PRO FORMA
------------------------------- ------------------------
PDF IDS ADJUSTMENTS COMBINED
-------------- --------------- ----------- --------
Revenues $ 19,157 $ 2,976 $ - $ 22,133
Costs and expenses:
Cost of revenues
Direct costs of revenues 6,958 239 - 7,197
Amortization of acquired core
technology 165 - 2,100 (2) 2,265
Research and development 8,785 1,862 - 10,647
Selling, general and administrative 5,532 1,093 - 6,625
Stock-based compensation amortization 978 - 469 (6) 1,447
Amortization of other acquired
intangible assets - - 820 (2) 820
-------- -------- -------- --------
Total costs and expenses 22,418 3,194 3,389 29,001
-------- -------- -------- --------
Loss from operations (3,261) (218) (3,389) (6,868)
Interest and other income, net 720 (14) (172) (7) 534
-------- -------- -------- --------
Loss before taxes (2,541) (232) (3,561) (6,334)
Tax benefit (531) (62) (1,168) (3) (1,761)
-------- -------- -------- --------
Net Loss $ (2,010) $ (170) $ (2,393) $ (4,573)
======== ======== ======== ========
Net loss per share:
Basic and diluted $ (0.09) $ (0.19)
======== ========
Weighted average common shares:
Basic and diluted 22,551 2,000 24,551
======== ======== ========
See notes to unaudited pro forma condensed combined financial statements.
PDF SOLUTIONS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED YEAR ENDED
DECEMBER 31, 2002 SEPTEMBER 30, 2002
----------------- ------------------ -------------------------
HISTORICAL PRO FORMA
----------------- ------------------ -------------------------
PDF IDS ADJUSTMENTS COMBINED
----------------- ------------------ ----------- --------
Revenues $ 43,724 $ 8,687 $ - $ 52,411
Costs and expenses:
Cost of revenues
Direct costs of revenues 14,986 336 - 15,322
Research and development 15,247 2,913 - 18,160
Amortization of acquired core
technology 164 - 4,200 (2) 4,364
Selling, general and administrative 10,188 1,526 - 11,714
Stock-based compensation amortization 2,711 - 686 (6) 3,397
Amortization of other acquired
intangible assets - - 1,640 (2) 1,640
-------- -------- -------- --------
Total costs and expenses 43,296 4,775 6,526 54,597
-------- -------- -------- --------
Income (loss) from operations 428 3,912 (6,526) (2,186)
Interest and other income, net 1,549 (203) (344) (7) 1,002
-------- -------- -------- --------
Income (loss) before taxes 1,977 3,709 (6,870) (1,184)
Tax provision (benefit) 1,453 250 (2,336) (3) (633)
-------- -------- -------- --------
Net income (loss) $ 524 $ 3,459 $ (4,534) $ (551)
======== ======== ======== ========
Net income (loss) per share:
Basic $ 0.02 $ (0.02)
======== ========
Diluted $ 0.02 $ (0.02)
======== ========
Weighted average common shares:
Basic 21,962 2,000 23,962
======== ======== ========
Diluted 23,199 763 23,962
======== ======== ========
See notes to unaudited pro forma condensed combined financial statements.
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial statements
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and certain footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
(GAAP) have been condensed or omitted pursuant to such rules and regulations.
However the Company believes that the disclosures are adequate to make the
information not misleading.
NOTE 2. PURCHASE PRICE ALLOCATION
In accordance with Statement of Financial Accounting Standards (SFAS)
No. 141, Business Combinations, the merger is accounted for as a purchase of IDS
by PDF. The purchase price has been allocated based upon the fair value of the
assets acquired and liabilities assumed as determined through an independent
valuation. The following table summarizes the components of the total purchase
price and the allocation (in thousands):
AMORTIZATION
ALLOCATION OF PURCHASE PRICE: LIFE (YRS). AMOUNT
----------------------------- ------------ --------
Fair value of tangible assets acquired $ 1,459
Brand name 4 2,000
Contract backlog 1 700
Backlog renewals 4 900
Customer relationships 4 800
Non-compete covenant 4 60
Core technology 4 16,800
In-process research and development* N/A 800
Goodwill N/A 38,894
Deferred tax liabilities (8,708)
Liabilities assumed (2,693)
--------
NET PURCHASE PRICE $ 51,012
========
* In-process research and development of $800,000 was expensed in the period in
which the acquisition was consummated. Accordingly the in-process research and
development is reflected in the pro forma condensed combined balance sheet as an
addition to accumulated deficit. The pro forma condensed combined statements of
operations do not include the in-process research and development of $800,000 as
it is considered a non-recurring charge.
NOTE 3. PRO FORMA ADJUSTMENTS
The following adjustments have been reflected in the unaudited pro
forma condensed combined financial statements:
(1) To record cash paid, common stock issued, and applicable purchase accounting
entries including intangible assets. Common stock issued and stock options
assumed in connection with the acquisition is based on the number of shares
issued in the actual transaction which closed on September 24, 2003.
(2) Adjustment to record the amortization of identifiable intangible assets
resulting from the allocation of the IDS purchase price. The pro forma
adjustment assumes that the identifiable intangibles will be amortized on a
straight-line basis over the following estimated lives (remaining intangibles
including goodwill will be tested for impairment):
Brand name 4 years
Contract backlog 1 year
Backlog renewals 4 years
Customer relationships 4 years
Non-compete covenant 4 years
Core technology 4 years
(3) To record deferred tax liabilities resulting from the basis difference in
acquired intangible assets and the related income tax effects.
(4) To adjust acquired assets and assumed liabilities to fair value.
(5) To record estimated transaction costs associated with the acquisition.
(6) Adjustment to record the estimated amortization of deferred stock-based
compensation associated with stock options assumed in connection with the
acquisition. The amortization of deferred stock-based compensation is based on
the accelerated vesting method as prescribed under Financial Accounting
Standards Board Interpretation No. 28.
(7) Adjustment to record reduction in estimated interest income earned on cash
and cash equivalents as result of paying cash proceeds of $23.0 million in
connection with the acquisition.