EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements give
effect to CMGI's divestiture of all its equity and debt ownership interests in
Engage on September 9, 2002. The unaudited pro forma condensed statements of
operations for the nine months ended April 30, 2002 and the year ended July 31,
2001 give effect to the divestiture of the Engage business, as if it had
occurred on August 1, 2000. The pro forma condensed statement of operations for
the nine months ended April 30, 2002 is based on historical results of
operations of CMGI for the nine months ended April 30, 2002 (which include the
results of operations of the Engage business for the nine months ended April 30,
2002). The pro forma condensed statement of operations for the twelve months
ended July 31, 2001 is based on historical results of operations of CMGI for the
twelve months ended July 31, 2001 (which include the results of operations of
the Engage business for the twelve months ended July 31, 2001). The following
unaudited pro forma financial information, consisting of the pro forma condensed
statements of operations and the pro forma condensed balance sheet and the
accompanying notes, should be read in conjunction with and are qualified by the
historical annual and quarterly financial statements and notes of CMGI.
The pro forma financial information is presented for illustrative purposes
only and is not necessarily indicative of the future results of operations of
the company after the divestiture of the Engage business, or of the results of
operations of the company that would have actually occurred had the divestiture
of the Engage business been effected as of the dates described above.
Unaudited Pro Forma Condensed Balance Sheet
April 30, 2002
(In thousands)
Pro-Forma Pro-Forma
CMGI Engage Adjustments As Adjusted
---------- ---------- ------------- ------------
Assets
Cash and cash equivalents $ 328,903 $ (20,421) $ 2,500 (A) $ 310,982
Trading securities 114,974 114,974
Other current assets 197,878 (7,299) 1,157 (B) 192,016
280 (C)
---------- --------- -------- ----------
Total current assets 641,755 (27,720) 3,937 617,972
Property and equipment, net 135,049 (4,518) 130,531
Goodwill and other intangible assets, net 271,718 (39,416) 232,302
Other non-current assets 109,593 56,551 (57,947) (D) 108,197
---------- --------- -------- ----------
Total assets $1,158,115 $ (15,103) $(54,010) $1,089,002
========== ========= ======== ==========
Liabilities and Stockholders' Equity
Accrued expenses $ 149,996 $ (12,237) $ 137,759
Notes payable 114,974 114,974
Other current liabilities 151,101 (7,684) 1,157 (B) 143,154
280 (C)
(1,700) (E)
---------- --------- -------- ----------
Total current liabilities 416,071 (19,921) (263) 395,887
Other long term liabilities 136,712 (539) 136,173
Stockholders' equity (deficit): 605,332 5,357 (57,947) (D) 556,942
2,500 (A)
1,700 (E)
---------- --------- -------- ----------
Total liabilities and stockholders' equity $1,158,115 $ (15,103) $(54,010) $1,089,002
========== ========= ========= ==========
CMGI, Inc.
Pro Forma Condensed Statement of Operations
For the nine months ended April 30, 2002
Engage Pro Forma Pro Forma
CMGI (8/1 - 4/30) Adjustments as Adjusted
---------- ------------ ----------- -----------
Net revenues $ 599,842 $ (22,498) $ 963 (F) $ 582,134
3,827 (G)
Operating expenses:
Cost of revenues 530,299 (13,061) 1,227 (H) 522,292
3,827 (I)
Research and development 46,483 (7,990) 38,493
Selling 113,978 (12,212) 101,766
General and administrative 122,395 (10,342) 112,053
Amortization of intangible assets and stock-based
compensation 193,209 (24,253) 168,956
Impairment of Long-Lived Assets 47,353 47,353
Restructuring 13,951 (11,513) 882 (J) 6,077
2,757 (K)
---------- --------- ------- ---------
Total operating expenses 1,067,668 (79,371) 8,693 996,990
---------- --------- ------- ---------
Operating income (loss) (467,826) 56,873 (3,903) (414,856)
Other income (expense):
Interest income (expense), net 9,444 (308) 9,136
Equity in losses of affiliates (15,396) - (15,396)
Minority interest 37,594 (14,193) 23,401
Non-operating gains (losses), net (34,125) (34,125)
---------- --------- ------- ---------
(2,483) (14,501) - (16,984)
---------- --------- ------- ---------
Income (loss) from continuing operations before income taxes (470,309) 42,372 (3,903) (431,840)
Income tax expense (benefit) (2,421) - (2,421)
---------- --------- ------- ---------
Income (loss) from continuing operations (before
extraordinary items) (467,888) 42,372 (3,903) (429,419)
Preferred stock accretion and amortization of discount (2,301) (2,301)
---------- --------- ------- ---------
Income (loss) from continuing operations available to common
stockholders $ (470,189) $ 42,372 $(3,903) $(431,720)
========== ========= ======= =========
Basic and diluted (loss) per share from continuing operations $ (1.25) $ (1.15)
========== =========
Weighted average shares used in computing basic and
diluted (loss) per share from continuing operations 375,603 375,603
========== =========
CMGI, Inc.
Pro Forma Condensed Statement of Operations
For the Twelve Months ended July 31, 2001
Pro Forma Pro Forma
CMGI Engage Adjustments as Adjusted
----------- ------------ ------------ -----------
Net revenues $ 1,237,702 $ (110,702) $ 942 (L) $ 1,134,244
6,302 (M)
Operating expenses:
Cost of revenues 1,131,778 (80,484) 1,804 (N) 1,059,400
6,302 (O)
Research and development 158,960 (35,693) 123,267
In-process research and development 1,462 (700) 762
Selling 393,658 (85,640) 308,018
General and administrative 281,105 (42,954) 238,151
Amortization of intangible assets and stock-based
compensation 1,558,164 (369,023) 1,189,141
Impairment of Long-Lived Assets 3,363,317 (925,252) 2,438,065
Restructuring 217,219 (30,894) 1,176 (P) 187,501
----------- ----------- ------- -----------
Total operating expenses 7,105,663 (1,570,640) 9,282 5,544,305
----------- ----------- ------- -----------
Operating income (loss) (5,867,961) 1,459,938 (2,038) (4,410,061)
Other income (expense):
Interest income (expense), net 5,978 (3,892) 2,086
Equity in losses of affiliates (45,661) - (45,661)
Minority interest 526,623 (286,428) 240,195
Non-operating gains (losses), net (291,303) (120,901) (412,204)
----------- ----------- ------- -----------
195,637 (411,221) - (215,584)
----------- ----------- ------- -----------
Income (loss) from continuing operations before income taxes (5,672,324) 1,048,717 (2,038) (4,625,645)
Income tax expense (benefit) (184,404) 145,379 (39,025)
----------- ----------- ------- -----------
Income (loss) from continuing operations (5,487,920) 903,338 (2,038) (4,586,620)
Preferred stock accretion and amortization of discount (7,499) - (7,499)
----------- ----------- ------- -----------
Income (loss) from continuing operations available to
common stockholders $(5,495,419) $ 903,338 $(2,038) $(4,594,119)
=========== =========== ======= ===========
Basic and diluted (loss) per share from continuing
operations $ (16.67) $ (13.94)
=========== ===========
Weighted average shares used in computing basic and
diluted (loss) per share from continuing operations 329,623 329,623
=========== ===========
NOTES TO THE UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
Pro Forma Adjustments and Assumptions:
The pro forma information herein gives effect to the following divestiture:
On September 9, 2002, CMGI divested all of its equity and debt ownership
interests in Engage. Under the terms of the Transaction Agreement, dated as of
September 9, 2002, by and among CMGI, CMGI (UK) Limited and Engage (the
"Transaction Agreement"), CMGI transferred to Engage approximately 148.4 million
shares of common stock of Engage held by CMGI, representing approximately 76% of
the issued and outstanding shares of Engage, and cancelled approximately $60
million of debt, including all convertible debt, owed to CMGI by Engage. In
consideration of the equity transfer and debt cancellation, Engage, among other
things, (i) paid to CMGI $2.5 million in cash, (ii) agreed to pay to CMGI up to
an additional $6.0 million, comprised of a senior secured promissory note due in
September 2006 and earnout payments commencing in fiscal year 2004, and (iii)
issued to CMGI a warrant for the purchase of up to 9.9% of the issued and
outstanding shares of Engage Common Stock, at an exercise price of $.048 per
share. The amount of consideration was determined as a result of arms-length
negotiations between the parties.
The unaudited pro forma condensed financial statements exclude the effects
of the senior secured promissory note and earnout payments from Engage. The
earnout payments are based on a percentage of Engage's earnings before interest,
taxes, depreciation, and amortization (EBITDA) commencing in fiscal year 2004.
At the time of the transaction the Engage business was not profitable. No
assurances can be made that Engage will achieve sufficient profitability in the
future in order for Engage to meet its obligations under the earnout provisions,
or have the cash resources at the maturity date of the note to satisfy its
obligations thereunder.
(A) The pro forma adjustment represents the $2.5 million in cash
consideration paid by Engage to CMGI as part of the consideration for
the equity transfer and debt cancellation.
(B) The pro forma adjustment reflects amounts due to CMGI and its
majority-owned companies from Engage as of April 30, 2002.
(C) The pro forma adjustment represents security deposits paid to CMGI
from Engage in connection with certain ongoing rent and employee
benefits arrangements.
(D) The pro forma adjustment represents CMGI's cancellation of a net
amount of approximately $55.4 million in debt (outstanding balance as
of April 30, 2002), including all convertible debt, owed to CMGI by
Engage. See Note A.
(E) The pro forma adjustment reflects the elimination of the minority
interest in Engage from CMGI's consolidated balance sheet.
(F) The pro forma adjustment eliminates the effect of Engage revenues
earned from transactions with CMGI and its majority-owned companies
during the nine months ended April 30, 2002.
(G) The pro forma adjustment reflects revenues earned by CMGI's
majority-owned companies from transactions with Engage during the nine
months ended April 30, 2002.
(H) The pro forma adjustment reflects the cost of services received by
CMGI and its majority-owned companies in connection with business
transactions with Engage during the nine months ended April 30, 2002.
(I) The pro forma adjustment reflects CMGI's majority-owned companies'
cost of sales related to transactions with Engage during the nine
months ended April 30, 2002.
(J) The pro forma adjustment reflects incremental operating costs to CMGI
as a direct result of the transaction with Engage. As part of the
transaction, CMGI and Engage renegotiated the terms of their sublease
arrangement, which resulted in a reduction in Engage's future sublease
obligations to CMGI.
(K) The pro forma adjustment eliminates the effect of a restructuring
charge recorded by Engage during the nine months ended April 30, 2002.
The restructuring charge relates to vacant space that Engage had
subleased from CMGI. This restructuring charge is reflected in the
standalone operating results of Engage, but has not been reflected in
the CMGI consolidated results of operations as the charge was
eliminated in consolidation.
(L) The pro forma adjustment eliminates the effect of Engage revenues
earned from transactions with CMGI and its majority-owned companies
during the twelve months ended July 31, 2001.
(M) The pro forma adjustment reflects revenues earned by CMGI's
majority-owned companies from transactions with Engage during the
twelve months ended July 31, 2001.
(N) The pro forma adjustment reflects the cost of services received by
CMGI and its majority-owned companies in connection with business
transactions with Engage during the twelve months ended July 31, 2001.
(O) The pro forma adjustment reflects CMGI's majority-owned companies'
cost of sales related to transactions with Engage during the twelve
months ended July 31, 2001.
(P) The pro forma adjustment reflects incremental operating costs to CMGI
as a direct result of the transaction with Engage. As part of the
transaction, CMGI and Engage renegotiated the terms of their sublease
arrangement, which resulted in a reduction in Engage's future sublease
obligations to CMGI.