1
PRT GROUP INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma condensed consolidated financial
statements of PRT Group Inc. and Subsidiaries (the "Company") give effect to the
acquisition on April 15, 1998 of the Institute for Software Process Improvement,
Inc. ("ISPI") for approximately $2.7 million in cash. The unaudited pro forma
condensed consolidated statement of operations also give effect to the
acquisition of (i) all of the issued and outstanding capital stock of Computer
Management Resources, Inc. ("CMR") for cash of $2,864,000, a $2,000,000
promissory note and 119,181 shares of the Company's Common Stock valued as $12
per share on July 1, 1997 and (ii) substantially all the assets of Advanced
Computer Technologies ("ACT") for $13.1 million in cash on January 31, 1998.
The pro forma information is based on the historical financial statements of
the Company, ISPI, CMR and ACT giving effect to the aforementioned acquisitions
under the purchase method of accounting and the assumptions and adjustments in
the accompanying notes to the pro forma condensed consolidated financial
statements.
The allocation of the ISPI purchase price has not been finally
determined. Accordingly, the accounts reflected in the pro forma condensed
consolidated financial statements may differ from the amounts that would have
been determined if the final purchase price allocation had been known.
The unaudited pro forma condensed consolidated statements of operations
for the year ended December 31, 1997 and the three months ended March 31, 1998
give effect to the ISPI, CMR and ACT acquisitions as if they had occurred on
January 1, 1997. The unaudited pro forma condensed consolidated balance sheet
as of March 31, 1998 gives effect to the acquisition of ISPI as if it had been
consummated on March 31, 1998. The Company's historical March 31, 1998 balance
sheet includes CMR and ACT.
The pro forma condensed consolidated financial statements have been
prepared by the Company's management. The pro forma condensed consolidated
financial statements may not be indicative of the results that actually would
have occurred if the acquisitions had been consummated on the dates indicated or
which may be achieved in the future. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes of ISPI included herein and the consolidated
financial statements and notes of PRT Group Inc. included in the Company's
Annual Report on Form 10K for the year ended December 31, 1997.
2
PRT GROUP INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1997
($ IN THOUSANDS)
Company CMR ACT
Year Ended Six Months Ended Year Ended
Dec. 31, 1997 June 30, 1997 Adjustments Proforma Dec. 31, 1997
------------- ---------------- ----------- -------- -------------
Revenues 59,816 4,265 - 64,081 13,751
Cost of Revenues 40,898 3,185 - 44,083 9,222
------------- --------------- ----------- -------- -------------
Gross Profit 18,918 1,080 - 19,998 4,529
Selling, general and administrative expenses 19,332 1,350 153 (a) 20,835 4,018
------------- --------------- ----------- -------- -------------
Income (loss) from operations (414) (270) (153) (837) 511
Other income (expenses):
Interest Expense (577) (4) (97)(b) (678) (12)
Interest Income 613 3 - 616 -
------------- --------------- ----------- -------- -------------
Income (loss) before income taxes (378) (271) (250) (899) 499
Income tax expense (benefit) 175 (110) (149)(c) (84) 4
------------- --------------- ----------- -------- -------------
Net Income (loss) (553) (161) (101) (815) 495
============= =============== =========== ======== =============
Basic net loss per share (0.04)
=============
Weighted Average number
of shares used in
computing basic net
loss per share 14,728,087
=============
ISPI
Year Ended
Adjustments Proforma Dec. 31, 1997 Adjustments Proforma
----------- --------- ------------- ----------- -----------
Revenues - 77,832 2,310 - 80,142
Cost of Revenues - 53,305 1,341 - 54,646
----------- --------- ------------- ----------- ------------
Gross Profit 24,527 969 - 25,496
Selling, general and administrative expenses 596 (a) 25,449 651 126 (a) 26,226
----------- --------- ------------- ----------- ------------
Income (loss) from operations (596) (922) 318 (126) (730)
Other income (expenses):
Interest Expense - (690) (30) - (720)
Interest Income - 616 - - 616
----------- --------- ------------- ----------- ------------
Income (loss) before income taxes (596) (996) 288 (126) (834)
Income tax expense (benefit) (49)(c) (129) 3 (52)(c) (178)
----------- --------- ------------- ----------- ------------
Net Income (loss) (547) (867) 285 (74) (656)
=========== ========= ============= =========== ============
Basic net loss per share (0.04)
============
Weighted Average number
of shares used in
computing basic net
loss per share 14,787,678
============
3
PRT GROUP INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
MARCH 31,1998
($ IN THOUSANDS)
Assets PRT ISPI ADJUSTMENTS PRO-FORMA
-------- ---- ------------- ---------
Current assets
Cash and equivalents 7,119 27 (2,700) 4,446
Marketable debt securities 14,622 - - 14,622
Accounts receivable , net 20,430 494 - 20,924
Prepaid expenses and other current assets 1,677 28 - 1,705
-------- ---- ------------- ---------
Total current assets 43,848 549 (2,700) 41,697
Fixed assets,net 9,726 37 (37) (d) 9,726
Goodwill, net 18,688 - 2,529 (d) 21,217
Other assets 532 - - 532
-------- ---- ------------- ---------
Total assets 72,794 586 (208) 73,172
======== ==== ============= =========
Current liabilities
Borrowings under line of credit - 247 - 247
Due to stockholders - 72 (72) (d) -
Accrued compensation 3,431 47 - 3,478
Accounts payable and other accrued expenses 5,872 84 - 5,956
Deferred income taxes 113 - - 113
Current portion of capital leases obligations 547 - - 547
Deferred revenue 1,107 - - 1,107
-------- ---- ------------- ---------
Total current liabilities 11,070 450 (72) 11,448
Note payable 1,000 - - 1,000
Deferred income taxes 44 - - 44
Capital lease obligations, net of current portion 734 - - 734
-------- ---- ------------- ---------
12,848 450 (72) 13,226
Stockholders' equity
Common stock 18 - - 18
Additional paid in capital 86,407 50 (50) 86,407
Retained earnings (deficit) (26,079) 86 (86) (26,079)
Treasury stock (400) - - (400)
-------- ---- ------------- ---------
Total stockholders' equity 59,946 136 (136) (d) 59,946
Total liabilities and stockholders' equity 72,794 586 (208) 73,172
======== ==== ============= =========
4
PRT GROUP INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
QUARTER ENDED MARCH 31,1998
(IN THOUSANDS)
MONTH ENDING
1/31/98
COMPANY ACT ISPI
HISTORICAL HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
-------------------------------------------------------------------------------
Revenues 18,852 1,347 487 - 20,686
Cost of Revenues 15,317 943 324 - 16,584
-------------------------------------------------------------------------------
Gross Profit 3,535 404 163 - 4,102
Selling, general and administrative expenses 8,701 449 175 82 (a) 9,407
-------------------------------------------------------------------------------
Income (loss) from operations (5,166) (45) (12) (82) (5,305)
Other income (expenses):
Interest Expense (284) - (7) - (291)
Interest Income 449 - - 449
-------------------------------------------------------------------------------
Income (loss) before income taxes (5,001) (45) (19) (82) (5,147)
Income tax expense (benefit) (775) (6) (3) (33)(c) (817)
-------------------------------------------------------------------------------
Net Income (loss) (4,226) (39) (16) (49) (4,330)
===============================================================================
Basic net loss per share (0.23) (0.24)
================ ============
Weighted Average number
of shares used in
computing basic net
loss per share 18,183,473 18,183,473
================ ============
5
PRT GROUP INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
For purposes of determining the pro forma effect of the acquisitions on
the Company's pro forma condensed consolidated statements of operations for the
year ended December 31, 1997 and the three months ended March 31, 1998 and the
pro forma condensed consolidated balance sheet as of March 31, 1998, the
following pro forma adjustments have been made (in thousands):
THREE MONTHS
YEAR ENDED ENDED
DEC. 31, 1997 MAR. 31, 1998
------------- --------------
(a) Increase in amortization from the increase in
goodwill amortized on a straight-line basis
over twenty years:
CMR $ 153
=========
ACT $ 596 $ 50
=========
ISPI $ 126 $ 32
========= -------
TOTAL $ 82
=======
(b) Increase in interest expense from issuance of
$2,000,000 promissory note
CMR $ 97
=========
(c) Adjustment of tax provision:
Adjustment to historical tax provision
(benefit) due to adjustments (a) and (b):
CMR $ (149)
=========
ACT $ (49) $ (20)
=========
ISPI $ (52) $ (13)
========= -------
TOTAL $ (33)
=======
(d) Cash paid for ISPI Acquisition $ 2,700
Net assets acquired 171
---------
Goodwill $ 2,529
=========
The historical net income per share is based on the weighted average
number of common shares outstanding during the respective periods. The pro forma
net loss per share gives effect to the issuance of 119,181 shares of the
Company's Common Stock as of January 1, 1997 in connection with the acquisition
of CMR.