1
UNAUDITED PRO FORMA CONDENSED COMBINED
CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements
reflect adjustments to the historical consolidated balance sheets and statements
of operations of Eclipsys and TSI to give effect to the Merger, using the
pooling-of-interests method of accounting for business combinations, and to
certain other acquisitions by Eclipsys and TSI as discussed below.
The unaudited pro forma condensed combined statements of operations for the
years ended December 31, 1995, 1996 and 1997 and for the nine months ended
September 30, 1998 assume the Merger was effected on January 1, 1995. Eclipsys'
December 31 fiscal year end consolidated financial statements have been combined
with TSI's September 30 fiscal year end consolidated financial statements.
Eclipsys' unaudited consolidated financial statements for the nine months ended
September 30 have been combined with TSI's unaudited consolidated financial
statements for the nine months ended June 30.
The unaudited pro forma combined condensed financial information of
Eclipsys for the year ended December 31, 1997 and the nine months ended
September 30, 1998 includes adjustments to give effect to:
- the Alltel Acquisition
- the SDK Acquisition
- the Emtek Acquisition
- the return by AIS to Eclipsys for cancellation of 11,000 shares of
Redeemable Preferred Stock in return for extinguishing claims against
AIS related to the Alltel Acquisition (the "AIS Settlement")
- the MSA Buyout
- the issuance of shares of Convertible Preferred Stock for total
consideration of $9.0 million in February 1998 (the "1998 Preferred
Stock Issuance") and the use of the proceeds therefrom to repay $9.0
million under the Term Loan
- the scheduled repayment in April 1998 (the "SDK Partial Repayment") of
$4.0 million of principal and accrued interest of the $7.6 million of
SDK Notes
- the January 1998 scheduled $2.0 million payment to AIS under the MSA
- borrowings under the Revolver to fund the MSA Buyout and the Simione
Investment
- the conversion of Eclipsys' Convertible Preferred Stock in connection
with the Eclipsys IPO
- the Eclipsys IPO and the use of a portion of the proceeds therefrom to
repay the outstanding balance under the Revolver and the remaining
outstanding balance under the SDK Notes and to redeem the remaining
Redeemable Preferred Stock with a face value of $34.5 million
The unaudited pro forma condensed combined balance sheet at September 30,
1998 reflects the Eclipsys September 30, 1998 balance sheet combined with the
TSI June 30, 1998 balance sheet, adjusted for the HealthVISION Acquisition and
to conform to the Eclipsys financial presentation.
Eclipsys acquired Alltel effective January 24, 1997 for an aggregate
purchase price of $201.5 million, including liabilities assumed of $58.4 million
and after giving effect to the cancellation of 4,500 shares of Redeemable
Preferred Stock held by Alltel related to an October 1997 settlement of certain
matters related to the acquisition. Consideration paid consisted of $104.8
million in cash, 15,500 shares of Redeemable Preferred Stock valued at
approximately $10.3 million, 2,077,497 shares of Convertible Preferred Stock
valued at approximately $26.1 million, deferred payments due under the MSA over
four years valued at $9.5 million and transaction costs of approximately $2.0
million.
Eclipsys acquired SDK effective June 26, 1997 for an aggregate purchase
price of $16.5 million, including 499,997 shares of Eclipsys Voting Common Stock
valued at approximately $3.2 million, $2.2 million in cash, the SDK Notes
aggregating $7.6 million and assumed liabilities of approximately $3.5 million.
Eclipsys acquired Emtek effective January 30, 1998 for an aggregate
purchase price of approximately $11.7 million, including 1,000,000 shares of
Eclipsys Voting Common Stock valued at $9.1 million and
60
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liabilities assumed of approximately $12.3 million. In addition, Motorola agreed
to pay Eclipsys $9.6 million in cash for working capital purposes.
The unaudited pro forma combined condensed financial information of TSI for
the year ended September 30, 1997 and the nine months ended June 30, 1998
includes adjustments to give effect to the HealthVISION Acquisition. On December
3, 1998, TSI completed its acquisition of the remaining 80.5% of HealthVISION
not already owned by TSI for cash in the amount of $25.6 million, plus an
earn-out of up to $10.8 million if specified milestones are met. The acquisition
will be accounted for under the purchase method of accounting, reflecting an
estimated aggregate purchase price, including TSI's initial 1997 investment, of
$40.7 million, which includes $6.4 million previously paid by TSI and $9.3
million of assumed liabilities, net of cash acquired. The results of operations
of HealthVISION will be included in TSI's financial statements from the date of
acquisition.
The pro forma and pro forma combined adjustments are based upon available
information and certain assumptions that Eclipsys and TSI believes are
reasonable under the circumstances. The unaudited pro forma combined condensed
financial information should be read in conjunction with the historical
financial statements of Eclipsys, TSI, Alltel, SDK and HealthVISION and the
respective notes thereto, "Management's Discussion and Analysis of Financial
Condition and Results of Operations of Eclipsys" and the other financial
information included herein. The unaudited pro forma combined condensed
financial information is provided for information purposes only and does not
purport to be indicative of the results which would have been obtained had the
Merger been completed on the date indicated or which may be expected to occur in
the future.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
PRO FORMA PRO FORMA
ECLIPSYS(1) TSI(2)(3) ADJUSTMENTS COMBINED
----------- ----------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Revenues:
Systems and services............................ $-- $27,386 2$7,386
Costs and expenses:
Cost of systems and services revenues........... -- 7,471 7,471
Marketing and sales............................. -- 3,967 3,967
Research and development........................ -- 2,724 2,724
General and administrative...................... -- 2,299 2,299
Depreciation and amortization................... -- 1,379 1,379
--- ------- -----
Total costs and expenses................ -- 17,840 17,840
--- ------- -----
Income from operations............................ -- 9,546 9,546
Interest income, net.............................. -- (429) (429)
--- ------- -----
Income before income tax provision.............. -- 9,975 9,975
Income tax provision.............................. -- (4,349) (4,349)
--- ------- -----
Net income........................................ -- 5,626 5,626
Net income available to common stockholders....... $-- $ 5,626 $5,626
=== ======= =====
Net income available to common stockholders per
share:
Basic........................................... $-- $ 0.19 $0.36
Diluted......................................... $-- $ 0.19 $0.36
Weighted average common shares outstanding:
Basic........................................... -- 30,060 15,781(4)
Diluted......................................... -- 30,060 15,781(4)
- ---------------
(1) Eclipsys was formed in December 1995 and commenced operations in 1996.
Accordingly, the Unaudited Pro Forma Condensed Combined Statement of
Operations only reflects the operating results of TSI.
(2) Reflects the operations of TSI for the fiscal year ended September 30, 1995.
(3) The statement of operations data for TSI reflects the reclassification of
certain costs and expenses, principally depreciation and amortization, to
conform to the presentation of Eclipsys' consolidated statement of
operations.
(4) Gives effect to the conversion in the Merger of TSI common share equivalents
into Eclipsys common share equivalents based on the 0.525 Exchange Ratio.
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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
PRO FORMA PRO FORMA
ECLIPSYS TSI(1) ADJUSTMENTS COMBINED
-------- ----------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Revenues:
Systems and services....................... $ -- $34,269 $34,269
Costs and expenses:
Cost of systems and services revenues...... -- 9,313 9,313
Marketing and sales........................ 770 4,424 5,194
Research and development................... 1,704 3,192 4,896
General and administrative................. 603 2,315 2,918
Compensation charge........................ -- 3,024 3,024
Depreciation and amortization.............. 32 1,443 1,475
------- ------- -------
Total costs and expenses.............. 3,109 23,711 26,820
------- ------- -------
Income (loss) from operations................... (3,109) 10,558 7,449
Interest expense (income), net.................. (156) (53) (209)
------- ------- -------
Income (loss) before income tax
provision................................ (2,953) 10,611 7,658
Income tax provision............................ -- (4,324) (4,324)
------- ------- -------
Income (loss) before extraordinary item......... (2,953) 6,287 3,334
Extraordinary item:
Loss on early extinguishment of debt, net
of taxes................................. -- (2,149) (2,149)
------- ------- -------
Net income (loss)............................... (2,953) 4,138 1,185
Dividends on Series A non-voting preferred
stock......................................... -- (593) (593)
------- ------- -------
Income (loss) available to common
stockholders.................................. $(2,953) $ 3,545 $ 592
======= ======= =======
Income (loss) before extraordinary item
available to common stockholders per share(2):
Basic...................................... $ (0.98) $ 0.43 $ 0.28
Diluted.................................... $ (0.98) $ 0.35 $ 0.24
Net income (loss) per common share:
Basic...................................... $ (0.98) $ 0.27 $ 0.06
Diluted.................................... $ (0.98) $ 0.22 $ 0.05
Weighted average common shares outstanding:
Basic...................................... 3,022 13,214 9,959(3)
Diluted.................................... 3,022 16,137 11,494(3)
- ---------------
(1) Represents the historical results of operations of TSI for the fiscal year
ended September 30, 1996 and reflects the reclassification of certain costs
and expenses, principally depreciation and amortization, to conform to the
presentation of Eclipsys' consolidated statement of operations.
(2) TSI and Pro Forma Combined information represents income before
extraordinary item after reflecting accretion of $593,000 of dividends on
TSI non-voting preferred stock.
(3) Gives effect to the conversion in the Merger of TSI common share equivalents
into Eclipsys common share equivalents based on the 0.525 Exchange Ratio.
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UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
ECLIPSYS
---------------------------------------------------------------------
ACQUISITION
AND OTHER ECLIPSYS
ECLIPSYS ALLTEL(1) SDK(2) EMTEK(3) ADJUSTMENTS PRO FORMA TSI(4)
---------- --------- ------ -------- ----------- --------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Revenues:
Systems and services............. $ 89,722 $ 6,064 $3,037 $14,274 $113,097 $44,565
Hardware......................... 4,355 122 486 8,464 13,427 --
--------- ------- ------ -------- -------- -------
Total revenues............. 94,077 6,186 3,523 22,738 126,524 44,565
--------- ------- ------ -------- -------- -------
Costs and expenses:
Cost of systems and services
revenues....................... 77,083 4,277 2,193 11,459 $ 341(7) 95,353 11,834
Cost of hardware revenues........ 2,953 104 340 7,394 10,791 --
Marketing and sales.............. 13,662 660 336 6,235 20,893 6,805
Research and development......... 15,714 794 -- 12,804 29,312 3,725
General and administrative....... 5,672 621 992 6,671 13,956 3,829
Depreciation and amortization.... 9,710 568 -- 904 703(7) 11,885 1,632
Write off of in-process research
and development(9)............. 99,189 -- -- -- (99,189) -- 6,293
--------- ------- ------ -------- -------- -------
Total costs and expenses... 223,983 7,024 3,861 45,467 182,190 34,118
--------- ------- ------ -------- -------- -------
Income (loss) from operations...... (129,906) (838) (338) (22,729) (55,666) 10,447
Interest expense (income), net..... 1,154 379 (19) -- (1,683)(10) (169) (2,501)
Foreign currency transaction
loss............................. -- -- -- -- -- --
--------- ------- ------ -------- -------- -------
(131,060) (1,217) (319) (22,729) (55,497) 12,948
Income tax benefit (provision)..... -- 437 -- -- (437)(12) -- (7,629)
--------- ------- ------ -------- -------- -------
Net income (loss)(14).............. (131,060) (780) (319) (22,729) (55,497) 5,319
Dividends and accretion on
mandatorily redeemable preferred
stock............................ (5,850) -- -- -- 5,850 (15) -- --
Preferred stock conversion(17)..... (3,105) -- -- -- (3,105) --
--------- ------- ------ -------- -------- -------
Net income (loss) available to
common
stockholders..................... $(140,015) $ (780) $(319) $(22,729) $(58,602) $ 5,319
========= ======= ====== ======== ======== =======
Net income (loss) available to
common stockholders per share:
Basic............................ $ (39.73) $ (2.98) $ 0.31
Diluted.......................... $ (39.73) $ (2.98) $ 0.27
Weighted average common shares
outstanding:
Basic............................ 3,524 19,638 17,435
Diluted.......................... 3,524 19,638 19,977
HEALTH- PRO FORMA PRO FORMA
VISION(5) ADJUSTMENTS COMBINED
--------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Revenues:
Systems and services............. $ 8,607 $ (500)(6) $165,769
Hardware......................... 547 13,974
-------- --------
Total revenues............. 9,154 179,743
-------- --------
Costs and expenses:
Cost of systems and services
revenues....................... 4,814 10,990 (8) 122,991
Cost of hardware revenues........ 398 11,189
Marketing and sales.............. 4,498 32,196
Research and development......... 6,189 (5)(6) 39,221
General and administrative....... 1,907 19,692
Depreciation and amortization.... 1,612 15,129
Write off of in-process research
and development(9)............. -- 6,293
-------- --------
Total costs and expenses... 19,418 246,711
-------- --------
Income (loss) from operations...... (10,264) (66,968)
Interest expense (income), net..... 3 1,280 (11) (1,387)
Foreign currency transaction
loss............................. 10 10
-------- --------
(10,277) (65,591)
Income tax benefit (provision)..... (75) 7,704 (13) --
-------- --------
Net income (loss)(14).............. (10,352) (65,591)
Dividends and accretion on
mandatorily redeemable preferred
stock............................ (795) 795 (16)
Preferred stock conversion(17)..... -- (3,105)
-------- --------
Net income (loss) available to
common
stockholders..................... $(11,147) $(68,696)
======== ========
Net income (loss) available to
common stockholders per share:
Basic............................ $ (2.39)
Diluted.......................... $ (2.39)
Weighted average common shares
outstanding:
Basic............................ 28,791(18)
Diluted.......................... 28,791(18)
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- ---------------
(1) Represents the historical results of operations of Alltel for the period
from January 1, 1997 through January 23, 1997.
(2) Represents the historical results of operations of SDK from January 1,
1997 through June 26, 1997.
(3) Represents the historical results of operations of Emtek from January 1,
1997 through December 31, 1997.
(4) Represents the historical results of operations of TSI for the year ended
September 30, 1997 and reflects the reclassification of certain costs and
expenses, principally depreciation and amortization, to conform to the
presentation of Eclipsys' historical consolidated statement of operations.
(5) Represents the historical results of operations of HealthVISION for the
year ended December 31, 1997 and reflects the reclassification of certain
costs and expenses, principally depreciation and amortization, to conform
to the presentation of Eclipsys' historical consolidated statement of
operations.
(6) Represents the elimination of certain intercompany transactions between
TSI and HealthVISION.
(7) Represents adjustments for amortization expense related to the Eclipsys
Acquisitions and the Alltel Renegotiation as if they had occurred January
1, 1997 as follows (in thousands):
ALLTEL SDK EMTEK TOTAL
------ ----- ------- -------
MSA............................................ $ 200 $ -- $ -- $ 200
Amortization of capitalized software reflected
in the historical accounts prior to the
Eclipsys Acquisitions........................ (377) (197) (1,794) (2,368)
Acquired technology.......................... 1,763 321 425 2,509
------ ----- ------- -------
$1,586 $ 124 $(1,369) $ 341
====== ===== ======= =======
Ongoing customer relationships................. $ 181 $ -- $ -- $ 181
Goodwill....................................... 66 456 -- 522
------ ----- ------- -------
$ 247 $ 456 $ -- $ 703
====== ===== ======= =======
The Eclipsys Acquisitions were accounted for using the purchase method of
accounting and accordingly the net assets acquired have been recorded at
estimated fair value on the date of acquisition and the historical
statement of operations data of Eclipsys reflect the results of operations
from these businesses from the date acquired. In connection with the
Eclipsys Acquisitions, Eclipsys acquired intangible assets as follows (in
thousands):
VALUE FIRST YEAR AMORTIZATION
------------------------- -------------------------
ALLTEL SDK EMTEK ALLTEL SDK EMTEK
------- ------ ------ -------- ----- ------
Acquired technology.............. $42,312 $3,205 $2,125 $21,156 $641 $425
Management and service
agreement...................... 9,543 -- -- 2,386 -- --
------- ------ ------ ------- ---- ----
$51,855 $3,205 $2,125 $23,542 $641 $425
======= ====== ====== ======= ==== ====
Ongoing customer relationships... $10,846 $ -- $ -- $ 2,169 $ -- $ --
Goodwill......................... 8,997 4,553 -- 788 911 --
------- ------ ------ ------- ---- ----
$19,843 $4,553 $ -- $ 2,957 $911 $ --
======= ====== ====== ======= ==== ====
The acquired technology costs are being amortized annually over three to
five years either on a straight line basis or, if greater, based on the
ratio that current revenues bear to total anticipated revenues
attributable to the applicable product. Ongoing customer relationships are
being amortized over five years. Goodwill is being amortized over five to
twelve years.
(8) Represents an adjustment to record amortization of acquired technology
recorded in connection with the HealthVISION Acquisition as if the
transaction had closed on October 1, 1996. In
65
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connection with this transaction, TSI will record an acquired technology
asset of $33.0 million. This asset will be amortized over its estimated
useful life of three years.
(9) In connection with the Alltel and SDK acquisitions, Eclipsys wrote-off
in-process research and development of $92.2 million and $7.0 million,
respectively, related to the appraised values of certain in-process
research and development acquired in these acquisitions. In connection
with TSI's acquisition of Vital Software, Inc., TSI wrote-off in-process
research and development of $6.3 million related to the appraised value of
certain in-process research and development acquired in this acquisition.
Based on the preliminary results of an appraisal, TSI anticipates
recording a $2.5 million write-off of in-process research and development
in conjunction with the HealthVISION Acquisition. TSI will record this
write-off in the period in which the transaction closes. The value of
in-process research and development was determined by estimating the costs
to develop the in-process projects into commercially viable products,
estimating the resulting net cash flows from such projects, and
discounting the net cash flows back to their present values. This
evaluation considered the inherent difficulties and uncertainties of
completing the development projects and the risks related to the viability
of and potential changes in future target markets.
The estimated costs to be incurred to complete the development of the
in-process research and development into commercially viable products is
$2.7 million.
(10) Includes adjustments to net interest expense to give effect to the
following (in thousands):
Interest income foregone on $2.2 million cash paid for
SDK Acquisition for the period from January 1, 1997
through June 25, 1997................................. $ 94
Additional interest expense on $20.6 million of
borrowings under the Revolver to fund the MSA Buyout,
SDK Partial Repayment and Simione Investment as if
they had occurred on January 1, 1997.................. 1,752
Additional interest expense on the SDK Notes as if they
had been issued on January 1, 1997.................... 360
Reduction of interest expense on $3.8 million of SDK
Notes as if the SDK Partial Repayment had occurred as
of January 1, 1997.................................... (360)
Reduction of interest expense as a result of the
elimination of the accretion of the discount recorded
in connection with the MSA as if MSA Buyout had
occurred as of January 1, 1997........................ (563)
Reduction of interest expense from the cancellation of
payables to AIS as if the Alltel Acquisition had
occurred as of January 1, 1997 (interest calculated on
average payables balance of $56.8 million at an annual
interest rate of 8%).................................. (379)
Reduction of interest expense on the Term Loan as if
the 1998 Preferred Stock Issuance had occurred as
January 1, 1997....................................... (850)
Repayment of a portion of the pro forma balance of the
Revolver as if it had occurred as of January 1,
1997.................................................. (1,377)
Repayment of the pro forma balance of the SDK Notes as
if it had occurred as of January 1, 1997.............. (360)
-------
$(1,683)
=======
(11) Represents an adjustment to reduce interest income of TSI as if the
HealthVISION Acquisition had occurred on October 1, 1996.
(12) Represents an adjustment to reduce the income tax benefit related to
Alltel for the period from January 1, 1997 through January 23, 1997 as if
the Alltel Acquisition had occurred on January 1, 1997.
(13) Represents an adjustment to eliminate the income tax provision as if the
HealthVISION Acquisition had occurred on October 1, 1996.
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(14) Eclipsys has not recorded any benefit for income taxes as management
believes at December 31, 1997 it is more likely than not that Eclipsys net
deferred tax assets will not be realized. Accordingly, Eclipsys has
recorded a valuation allowance against its total net deferred tax assets.
(15) Represents the reduction of $1.1 million in the dividends and accretion on
Eclipsys Redeemable Preferred Stock held by AIS after giving effect to the
AIS Settlement and the reduction of $4.7 million in the dividends and
accretion on the Redeemable Preferred Stock with a face value of $34.5
million as if the proceeds of the Eclipsys IPO were utilized to redeem
34,500 shares of the Redeemable Preferred Stock on January 1, 1997.
(16) Represents the reduction of $795,000 in the dividends and accretion on the
redeemable preferred stock of HealthVISION as if the HealthVISION
Acquisition had taken place on October 1, 1996.
(17) Represents a charge related to the January 1997 conversion of Series A
Convertible Preferred Stock to Series F Convertible Preferred Stock.
(18) Gives effect to the conversion in the Merger of TSI common share
equivalents into Eclipsys common share equivalents based on the 0.525
Exchange Ratio.
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UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
ECLIPSYS
-----------------------------------------------
ACQUISITION
AND OTHER ECLIPSYS HEALTH- PRO FORMA PRO FORMA
ECLIPSYS EMTEK(1) ADJUSTMENTS PRO FORMA TSI(2) VISION(3) ADJUSTMENTS COMBINED
-------- -------- ----------- --------- ------- --------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
Revenues:
Systems and
services............ $ 88,541 $ 705 $ 89,246 $33,946(4) $ 9,416 (675)(5) $131,933
Hardware.............. 9,202 275 9,477 -- -- 9,477
-------- ------- -------- ------- ------- --------
Total revenues.... 97,743 980 98,723 33,946 9,416 141,410
-------- ------- -------- ------- ------- --------
Costs and expenses:
Cost of systems
and services
revenues............ 53,196 744 (77)(6) 53,863 10,316 3,645 8,243(7) 76,067
Cost of hardware
revenues............ 7,825 245 8,070 -- -- 8,070
Marketing and sales... 13,945 580 14,525 5,911 3,251 23,687
Research and
development......... 19,267 738 20,005 4,273 4,951 (227)(5) 29,002
General and
administrative...... 4,580 276 4,856 2,505 2,027 9,388
Depreciation and
amortization........ 7,937 87 8,024 1,329 597 9,950
Write-off of MSA(8)... 7,193 -- (7,193) -- -- -- --
-------- ------- -------- ------- ------- --------
Total costs and
expenses........ 113,943 2,670 109,343 24,334 14,471 156,164
-------- ------- -------- ------- ------- --------
Income (loss) from
operations.............. (16,200) (1,690) (10,620) 9,612 (5,055) (14,754)
Interest expense (income),
net..................... 628 -- (379)(9) 249 (2,285) 176 953(10) (907)
Foreign currency
transaction loss........ -- -- -- -- 28 28
-------- ------- -------- ------- ------- --------
(16,828) (1,690) (10,869) 11,897 (5,259) (13,875)
Income tax benefit
(provision)............. -- -- -- (4,759) (87) 4,846(11) --
-------- ------- -------- ------- ------- --------
Net income (loss)(12)..... (16,828) (1,690) (10,869) 7,138 (5,346) (13,875)
Dividends and accretion on
mandatorily redeemable
preferred stock......... (10,928) -- 10,928(13) -- -- (621) 621(14) --
-------- ------- -------- ------- ------- --------
Net income (loss)
available to
common stockholders..... $(27,756) $(1,690) $(10,869) $ 7,138 $(5,967) $(13,875)
======== ======= ======== ======= ======= ========
Net income (loss)
available to common
stockholders per share:
Basic................. $ (3.41) $ (0.55) $ 0.39 $ (0.47)
Diluted............... $ (3.41) $ (0.55) $ 0.35 $ (0.47)
Weighted average common
shares outstanding:
Basic................. 8,133 19,805 18,153 29,335(15)
Diluted............... 8,133 19,805 20,459 29,335(15)
- ---------------
(1) Represents the historical results of operations of Emtek for the period
from January 1, 1998 through January 30, 1998.
(2) Represents the historical results of operations of TSI for the nine months
ended June 30, 1998 and reflects the reclassification of certain costs and
expenses, principally depreciation and amortization, to conform to the
presentation of Eclipsys' historical consolidated statement of operations.
(3) Represents the historical results of operations of HealthVISION for the
nine months ended September 30, 1998.
(4) AICPA Statement of Position 97-2 ("SOP 97-2"), "Software Revenue
Recognition," will be effective for TSI transactions beginning in the first
quarter of TSI's 1999 fiscal year. TSI is analyzing the impact of SOP 97-2,
which may cause a deferral of revenue. After the consummation of the
Merger, SOP 97-2 will be applied to TSI transactions beginning on January
1, 1998 in order to conform to Eclipsys' date of adoption of SOP 97-2. No
pro forma adjustment has been made to the pro forma combined statement of
operations to reflect the impact of adoption of SOP 97-2. See Note 2 of
Notes to Consolidated Financial Statements of TSI.
(5) Represents the elimination of certain intercompany transactions between TSI
and HealthVISION.
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(6) Represents adjustments for amortization expense related to the Emtek
Acquisition as if it had occurred January 1, 1997 as follows (in
thousands):
Amortization of capitalized software development costs
reflected in the historical accounts prior to
the Emtek Acquisition..................................... $(145)
Acquired technology......................................... 68
-----
Total.............................................. $ (77)
=====
(7) Represents an adjustment to record amortization of acquired technology
recorded in connection with the HealthVISION Acquisition as if the
transaction had closed on October 1, 1997.
(8) In connection with the MSA Buyout, Eclipsys recorded a charge of $7.2
million in 1998. See Note 13 of Notes to Eclipsys' Consolidated Financial
Statements. Adjustments represent the elimination of this non-recurring
charge.
(9) Includes adjustments to net interest expense to give effect to the
following (in thousands):
Additional interest expense on $18.6 million of borrowings
under the Revolver to fund the MSA Buyout, SDK Partial
Repayment and Simione Investment if they had occurred on
January 1, 1997........................................... $ 395
Reduction of interest expense on $3.8 million of SDK Notes
as if the SDK Partial Repayment had occurred on January 1,
1997...................................................... (90)
Reduction of interest expense as a result of the elimination
of the accretion of the discount recorded in connection
with the MSA as if the MSA Buyout had occurred as of
January 1, 1997........................................... (129)
Reduction of interest expense on the Term Loan as if the
1998 Preferred Stock Issuance had occurred as of January
1, 1997................................................... (70)
Reduction of interest expense as a result of the repayment
of the pro forma balance of the Revolver as if it had
occurred as of January 1, 1997............................ (395)
Reduction of interest expense as a result of the repayment
of the pro forma balance of the SDK Notes as if it had
occurred on January 1, 1997............................... (90)
-----
Total............................................. $(379)
=====
(10) Represents an adjustment to reduce interest income of TSI as if the
HealthVISION Acquisition had occurred on October 1, 1997.
(11) Represents an adjustment to reduce the income tax provision as if the
HealthVISION Acquisition had occurred on October 1, 1997.
(12) Eclipsys has not recorded any benefit for income taxes as management
believes, based on evidence available at December 31, 1997 and September
30, 1998, it is more likely than not that Eclipsys' net deferred tax assets
will not be realized. Accordingly, Eclipsys has recorded a valuation
against its total net deferred tax asset.
(13) Represents the reduction of $ 181,000 in the dividends and accretion on
Redeemable Preferred Stock held by AIS after giving effect to the AIS
Settlement as if it had occurred on January 1, 1997 and the reduction of
$10.8 million in the dividends and accretion on the Redeemable Preferred
Stock with a face value of $34.5 million as if the proceeds of the Eclipsys
IPO were utilized to redeem 34,500 shares of the Redeemable Preferred Stock
on January 1, 1998.
(14) Represents the reduction of $621,000 in the dividends and accretion on the
redeemable preferred stock of HealthVISION as if the HealthVISION
Acquisition had taken place on October 1, 1997.
(15) Gives effect to the conversion in the Merger of TSI common share
equivalents into Eclipsys common share equivalents based on the 0.525
Exchange Ratio.
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11
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
ADJUSTMENTS FOR
SEPTEMBER 30, JUNE 30, THE
1998 1998 HEALTHVISION ADJUSTMENTS PRO FORMA
ECLIPSYS TSI ACQUISITION(1) FOR THE MERGER COMBINED
------------- -------- ---------------- -------------- ---------
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents.......... $ 12,309 $65,179 $(25,038) $ 52,450
Accounts receivable, net........... 40,443 19,662 3,696 63,801
Inventory.......................... 539 -- 539
Other current assets............... 9,757 1,179 802 11,738
Deferred income taxes.............. 853 853
--------- ------- ---------
Total current assets............ 63,048 86,873 129,381
--------- ------- ---------
Property and equipment, net.......... 10,530 1,638 770 12,938
Capitalized software development
costs, net......................... 4,277 1,410 5,687
Acquired technology, net............. 18,798 1,219 32,970 52,987
Intangible assets, net............... 15,559 674 (400) 15,833
Other assets......................... 9,479 6,000 (6,000) 9,479
--------- ------- ---------
$ 121,691 $97,814 $ 226,305
========= ======= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Accounts payable................... $ -- $ 1,334 $ 401 $(1,735)(2) $ --
Accrued liabilities................ -- 3,717 750 (4,467)(2) --
Income taxes payable............... -- 2,871 2,871
Deferred revenue................... 39,211 7,676 6,660 53,547
Other current liabilities.......... 32,411 -- 1,442 6,202(2) 40,055
--------- ------- ---------
Total current liabilities....... 71,622 15,598 96,473
--------- ------- ---------
Deferred revenue..................... 7,789 -- 7,789
Other long-term liabilities.......... 3,713 -- 3,713
Deferred income taxes................ -- 496 496
--------- ------- ---------
Total liabilities............... 83,124 16,094 108,471
--------- ------- ---------
Shareholders' equity:
Common stock, voting............... 193 179 (92)(3) 280
Common stock, non-voting........... 9 4 (4)(3) 9
Non-voting common stock warrant.... -- 395 395
Additional paid-in capital......... 189,341 47,778 96(3) 237,215
Unearned compensation.............. (196) -- (196)
Retained earnings
(accumulated deficit)........... (150,841) 33,364 (2,453) (119,930)
Accumulated other comprehensive
income.......................... 61 -- 61
--------- ------- ---------
Total shareholders' equity...... 38,567 81,720 117,834
--------- ------- ---------
Total liabilities and
shareholders' equity.......... $ 121,691 $97,814 $ 226,305
========= ======= =========
- ---------------
(1) Represents an entry to record the HealthVISION Acquisition as of June 30,
1998.
(2) Represents adjustments to reclassify accounts payable and accrued
liabilities as other current liabilities in order to conform TSI's financial
presentation to that of Eclipsys.
(3) Represents an adjustment to reflect the issuance of approximately 9.6
million shares in connection with the Merger.
70