EXHIBIT 99.3
J.D. EDWARDS & COMPANY
UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
On November 16, 2001, J.D. Edwards & Company completed its acquisition of
YOUcentric, Inc., a Charlotte, N.C. provider of Java-based customer relationship
management (CRM) software. Under the terms of the Agreement and Plan of
Reorganization, J.D. Edwards acquired all of the issued and outstanding capital
stock of YOUcentric, in exchange for $95.4 million of consideration, paid with a
combination of 7.7 million J.D. Edwards' shares of common stock and $6.0 million
in cash. In addition, certain vested and unvested options to purchase YOUcentric
capital stock outstanding at the time of the acquisition under YOUcentric's
stock option plans were assumed by J.D. Edwards. The fair value of the assumed
options was $2.8 million. Pursuant to the agreement, YOUcentric became a
wholly-owned subsidiary of J.D. Edwards. The acquisition is accounted for as a
purchase and, accordingly, the total purchase price of YOUcentric is allocated
to the acquired assets, including goodwill and other intangible assets, and
liabilities at their fair values as of November 16, 2001. J.D. Edwards'
consolidated statement of operations will not include any revenue or expense
related to YOUcentric prior to November 16, 2001. The acquisition is expected to
be accretive to earnings in fiscal 2002.
The Agreement and Plan of Reorganization includes an escrow arrangement, and
J.D. Edwards may claim reimbursement of certain losses, up to $10 million,
through the escrow fund. These pro forma financial statements have been prepared
on the basis of the full purchase price being paid, including the amount in the
escrow fund.
The unaudited pro forma combined condensed consolidated balance sheet as of July
31, 2001 gives effect to the acquisition as if it had occurred on July 31, 2001,
combining the historical consolidated balance sheet of J.D. Edwards as of July
31, 2001 and the historical consolidated balance sheet of YOUcentric as of
September 30, 2001.
The combining companies have different year-ends for reporting purposes.
YOUcentric maintained its accounting records on a calendar basis, ending on
December 31, and J.D. Edwards maintains its accounting records on a fiscal
basis, ending on October 31. The unaudited pro forma combined condensed
consolidated statements of operations for the twelve months ended October 31,
2000 and the nine months ended July 31, 2001 gives effect to the acquisition as
if it had occurred on November 1, 1999, combining the historical consolidated
statements of operations of J.D. Edwards for the fiscal year ended October 31,
2000 and the nine months ended July 31, 2001, respectively, with the historical
consolidated statements of operations of YOUcentric for the fiscal year ended
December 31, 2000 and the nine months ended September 30, 2001, respectively.
The unaudited pro forma combined condensed consolidated financial information
has been prepared and should be read in conjunction with the historical
consolidated financial statements and the related notes thereto of J.D. Edwards,
the "Management Discussion and Analysis of Financial Condition and Results of
Operations," included in J.D. Edwards Form 10-K for the year ended October 31,
2000, the Quarterly Report on Form 10-Q as of July 31, 2001 filed with the
Securities and Exchange Commission, and the financial statements and related
notes thereto of YOUcentric, Inc., for the fiscal years ended December 31, 1999
and 2000 and the nine-months ended September 30, 2001, included herein in this
Current Report on Form 8-K.
The pro forma adjustments do not reflect any operating efficiencies and cost
savings that may be achieved with respect to the combined entity. The pro forma
adjustments do not include any adjustments to historical revenue for any future
price changes nor any adjustments to selling, marketing or any other expenses
for any future operating changes.
The following unaudited pro forma combined condensed consolidated financial
information has been prepared to give effect to the acquisition, accounted for
using the purchase method of accounting. This financial information reflects
certain assumptions and estimates deemed probable by management regarding the
acquisition based upon the assets and liabilities acquired. These estimates and
assumptions are preliminary have been made solely for purposes of developing
this pro forma information. Unaudited pro forma combined condensed consolidated
financial information is presented for illustrative
purposes only and is not necessarily indicative of the results that actually
would have been realized had the entities been a single entity during this
period. Additionally, the future consolidated financial position and results of
operations will differ, perhaps significantly, from the pro forma amounts
reflected herein because of a variety of factors, including access to additional
information, changes in values not currently identified and changes in operating
results, which could result in adjustment to among other items identifiable
assets and goodwill. The total estimated purchase cost of the acquisition has
been allocated, to assets and liabilities using an independent appraisal of
their estimated fair value with the excess cost over the net assets acquired
allocated to goodwill. The purchase price allocation is preliminary and a final
determination of required purchase accounting adjustments will be made upon the
completion of a final analysis of the total purchase cost and the fair value of
the assets and liabilities assumed.
J.D. EDWARDS & COMPANY
PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
HISTORICAL PRO FORMA
YOUCENTRIC AS
J.D. EDWARDS OF SEPTEMBER RECLASSIFICATIONS
AS OF JULY 31, 30, AND
2001 2001 ADJUSTMENTS REF. COMBINED
-------------- --------------- ----------------- ----- ---------
Current assets:
Cash and cash equivalents............................... $156,814 $4,298 $ (6,000) (b) $152,412
(2,700) (c)
Short-term marketable securities and other investments.. 11,779 6,711 -- 18,490
Accounts receivable, net................................ 230,944 3,797 -- 234,741
Other current assets.................................... 36,436 1,303 -- 37,739
------ ----- ------
Total current assets............................... 435,973 16,109 443,382
Long-term investments in marketable securities............ 65,114 -- -- 65,114
Certificate of deposit (restricted)....................... -- 1,341 -- 1,341
Property and equipment, net............................... 74,319 3,911 (129) (d) 78,101
Software costs, net....................................... 70,377 -- 8,000 (e) 78,377
Other assets, net......................................... 28,741 -- 200 (e) 97,607
68,666 (f)
$674,524 $21,361 $763,922
======== ======= ========
Current liabilities:
Current maturities of capital lease obligations......... $-- $113 $ (113) (g) $--
Accounts payable and accrued liabilities................ 183,324 5,309 113 (g) 190,697
1,951 (c) --
Unearned revenue and customer deposits.................. 174,125 4,132 (2,439) (h) 175,818
------- ----- -------
Total current liabilities.......................... 357,449 9,554 366,515
Unearned revenue, net of current portion, and other....... 7,886 410 -- 8,296
----- --- -----
Total liabilities.................................. 365,335 9,964 374,811
Commitments and contingencies
Common shares subject to repurchase, at redemption amount. 25,899 -- -- 25,899
Redeemable convertible preferred stock.................... -- 75,555 (75,555) (i) --
Stockholders' equity:
Preferred stock......................................... -- -- -- --
Common stock............................................ 114 33 (33) (i) 122
8 (m)
Additional paid-in capital.............................. 416,620 27,743 (27,743) (i) 503,233
86,613 (i)
Treasury stock, at cost................................. (45,342) -- -- (45,342)
Deferred compensation................................... (39) -- (2,099) (j) (2,138)
Accumulated deficit..................................... (75,069) (91,934) 91,934 (i) (79,669)
(4,600) (k)
Accumulated other comprehensive loss.................... (12,994) -- -- (12,994)
------- -- -------
Total stockholders' equity (deficit)............... 283,290 (64,158) 363,212
------- ------- -------
$674,524 $21,361 $763,922
======== ======= ========
</Table>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Consolidated Balance Sheet and Statement of Operations.
J.D. EDWARDS & COMPANY
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
HISTORICAL PRO FORMA
TWELVE MONTHS ENDED
J.D. EDWARDS YOUCENTRIC RECLASSIFICATIONS
OCTOBER 31, DECEMBER 31, AND
2000 2000 ADJUSTMENTS REF COMBINED
------------- ------------- ---------------- ------ -----------
Revenue:
License fees........................................ $419,103 $-- $ 9,069 (g) $428,172
Software license, customization and implementations. -- 13,980 (13,980) (g) --
Services............................................ 581,962 3,473 4,911 (g) 590,346
------- ----- -------
Total revenue................................... 1,001,065 17,453 1,018,518
Costs and expenses:
Cost of revenues.................................... -- 6,058 (6,058) (g) --
Cost of license fees................................ 59,963 -- 253 (g) 60,216
Cost of services.................................... 366,081 -- 8,076 (g) 374,157
Sales and marketing................................. 367,050 15,013 5,649 (g) 387,712
General and administrative.......................... 97,556 10,431 5,759 (g) 113,746
Research and development............................ 116,866 5,621 6,474 (g) 128,961
Amortization and write-offs of acquired software, IPR&D,
and other intangibles.............................. 25,044 -- 2,733 (e) 27,777
-- -- 4,600 (k) 4,600
Stock based compensation............................ -- 20,153 (20,153) (g) --
Restructuring, other related charges and special charges 28,016 2,160 -- 30,176
------ ----- ------
Total costs and expenses........................ 1,060,576 59,436 1,127,345
Operating loss........................................ (59,511) (41,983) (108,827)
Other income (expense)................................ -- 1,001 (1,001) (g) --
Interest and dividend income........................ 14,980 -- 1,019 (g) 15,999
Gains on equity investments and product line........ 24,582 -- -- 24,582
Interest expense, foreign currency gains (losses) and
other, net......................................... (683) -- (18) (g) (701)
---- -- ----
Loss before income taxes.............................. (20,632) (40,982) (68,947)
Benefit from income taxes........................... (5,210) (49) -- (l) (5,161)
------ --- -------
Net loss.............................................. $(15,422) $(40,933) $(63,786)
======== ======== ========
Accretion for preferred stock redemption feature, preferred
stock dividends and offerings costs................. -- (6,833) 6,833 (i) --
Net loss attributable to common shareholders.......... $-- $(47,766) $(63,786)
=== ======== ========
Net loss per common share:
Basic and diluted................................... $(0.14) $ (2.98) $ (0.54)
====== ======= =======
Shares used in computing per share amounts:
Basic and diluted................................... 109,376 16,050 (8,367) (m) 117,059
</Table>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Consolidated Balance Sheet and Statement of Operations.
J.D. EDWARDS & COMPANY
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<Table>
<Caption>
HISTORICAL PRO FORMA
NINE MONTHS ENDED
J.D. EDWARDS YOUCENTRIC RECLASSIFICATIONS
JULY 31, SEPTEMBER AND
2001 30, 2001 ADJUSTMENTS REF COMBINED
------------ ---- --------- ---------------- ----- -----------
Revenue:
License fees.......................................... $194,996 $-- $ 3,936 (g) $198,932
Software license, customization and implementations... -- 10,459 (10,459) (g) --
Services.............................................. 443,556 4,143 6,523 (g) 454,222
------- ----- -------
Total revenue..................................... 638,552 14,602 653,154
Costs and expenses:
Cost of revenues...................................... -- 4,632 (4,632) (g) --
Cost of license fees.................................. 54,284 -- 86 (g) 54,370
Cost of services...................................... 246,218 -- 5,043 (g) 251,261
Sales and marketing................................... 224,664 11,742 2,941 (g) 239,347
General and administrative............................ 68,702 4,976 2,409 (g) 76,087
Research and development.............................. 74,243 6,043 1,054 (g) 81,340
Amortization and write-offs of acquired software and other
intangibles.......................................... 18,969 -- 2,050 (e) 21,019
Stock based compensation.............................. -- 6,901 (6,901) (g) --
Restructuring, other related charges, and special charges 24,226 1,851 -- 26,077
------ ----- ------
Total costs and expenses.......................... 711,306 36,145 749,501
Operating loss.......................................... (72,754) (21,543) (96,347)
Other income (expense).................................. -- 182 (182) (g) --
Interest and dividend income.......................... 11,147 -- 376 (g) 11,523
Losses on equity investments and product line......... (6,563) -- -- (6,563)
Interest expense, foreign currency gains (losses) and
other, net........................................... (1,783) -- (194) (g) (1,977)
------ -- ------
Loss before income taxes................................ (69,953) (21,361) (93,364)
Provision for income taxes............................ 127,794 -- -- (l) 127,794
------- -- -------
Net loss................................................ $(197,747) $(21,361) $(221,158)
========= ======== =========
Accretion for preferred stock redemption feature, preferred
stock dividends and offerings costs................... -- (780) 780 (i) --
Net loss attributable to common shareholders............ $-- $(22,141) $(221,158)
=== ======== =========
Net loss per common share:
Basic and diluted..................................... $(1.77) $(0.91) $(1.85)
====== ====== ======
Shares used in computing per share amounts:
Basic and diluted..................................... 111,712 24,386 (16,703) (m) 119,395
</Table>
See accompanying Notes to Unaudited Pro Forma Combined Condensed
Consolidated Balance Sheet and Statement of Operations.
J.D. EDWARDS & COMPANY
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET
AND STATEMENT OF OPERATIONS
(UNAUDITED)
The following pro forma adjustments and reclassifications have been reflected in
the unaudited pro forma combined condensed consolidated balance sheet and
statements of operations:
(a) The calculation of the purchase price for the assets and liabilities
acquired is presented below:
Calculation of the preliminary purchase price (in millions):
<Table>
Cash paid ............................................................. $ 6.0
Acquisition related expenses........................................... 2.8
Value of stock issued for YOUcentric issued share capital ............. 83.8
Stock options issued for YOUcentric stock options ..................... 2.8
-----------
Total purchase price............................................... $ 95.4
===========
</Table>
Under Statement of Financial Accounting Standard (SFAS) No. 141, "Business
Combinations," the total purchase price was allocated to YOUcentric's
assets and liabilities based on their estimated fair values. The total
purchase price was allocated to tangible assets and liabilities, and
intangible assets, including goodwill, software costs, in process research
and development (IPR&D), and employee non-compete agreements. The software
costs and employee non-compete agreements will be amortized over three
years. Goodwill as a result of the acquisition will be subject to an annual
impairment test and will not be amortized under SFAS No.
142, "Goodwill and Other Intangible Assets."
The fair value of the options assumed of $2.8 million, was determined using
a Black Scholes option pricing model with an expected life of 2.75 years,
expected volatility of 75%, and a risk free interest rate of 2.78%. These
options were converted into options to purchase an equivalent number of
shares of J.D. Edwards common stock based upon the acquisition share
exchange ratio.
Value of stock issued was calculated in accordance with Emerging Issues
Task Force (EITF) Issue No. 99-12, "Accounting for Formula Arrangements
under EITF Issue No. 95-19, "Determination of the Measurement Date for the
Market Price of Securities Issued in a Purchase Business Combination,""
which differs from the value as calculated in accordance with the Agreement
and Plan of Reorganization.
(b) Represents cash consideration paid to finance the acquisition of
YOUcentric.
(c) Represents cash paid and the remaining accrual for acquisition costs
related to transaction fees, legal fees, accounting fees, office
closure costs, severance, and other expenses related to the
acquisition.
(d) Represents adjustments to conform items to J.D. Edwards's accounting
policies for property and equipment.
(e) Specifically identified intangible assets include developed technology,
non-compete agreements with certain key employees, and IPR&D (see note
k for IPR&D discussion). The developed technology is included as
"Software costs, net" and non-compete agreements are included as "Other
assets, net" on the accompanying pro forma balance sheet.
J.D. Edwards retained an independent appraiser to assist with
determining the estimated fair values of the intangible assets assumed
in the acquisition. The valuations relied on methodologies that most
closely related the fair market value assignment with the economic
benefits provided by each asset and the risks associated with the
assets. In valuing the software costs, an income-based approach was
determined to best quantify the economic benefits and risks. The
economic benefits were quantified using projections of net cash flows
and the risks by applying an appropriate discount rate. The estimated
fair value assigned to software costs was $8.0 million and non-compete
agreements were $200,000.
The software costs and non-compete intangible assets are amortized over
estimated useful lives of three years, which amounted to $2.7 million
and $67,000, respectively, during fiscal 2000 and $2.0 million and
$52,000, respectively, for the nine months ended July 31, 2001.
Goodwill, as a result of the acquisition, will be subject to an annual
impairment test and will not be amortized under SFAS No. 142.
(f) Allocation of the preliminary purchase price.
The allocation of the preliminary purchase price to the net assets
acquired as of November 16, 2001 is presented below:
Allocation of the preliminary purchase price (in millions):
<Table>
Assets:
Fair value of YOUcentric's assets........................... $ 17.8
Goodwill........................................................ 72.1
Software costs.................................................. 8.0
Employee non-compete agreements................................. .2
Liabilities:
Fair value of YOUcentric's liabilities.......................... (9.4)
Stockholders' Equity:
Write-off of in-process research and development................ 4.6
Deferred stock based compensation related to unvested
options assumed............................................... 2.1
----------
Total purchase price.................................... $ 95.4
==========
</Table>
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets," which is effective for fiscal years beginning after
December 15, 2001. Certain provisions shall also be applied to
acquisitions initiated subsequent to June 30, 2001. SFAS No. 142
supersedes Accounting Principles Board Opinion No. 17 "Intangible
Assets," and requires, among other things, the discontinuance of
amortization related to goodwill and indefinite lived intangible
assets. These assets will then be subject to an impairment test at
least annually. In addition, the standard includes provisions for the
reclassification of certain existing recognized intangibles as
goodwill, reassessment of the useful lives of existing recognized
intangibles, and reclassification of certain intangibles out of
previously reported goodwill.
The goodwill shown on the July 31, 2001 pro forma combined condensed
consolidated balance sheet amounting to $68.7 million differs from the
above purchase price allocation due to additional losses incurred and
fair market value adjustments as of the close date of November 16,
2001.
(g) Represents reclassifications to conform YOUcentric financial statements
to J.D. Edwards presentation.
(h) Represents an adjustment to record the fair value based upon the
remaining contractual performance obligations associated with existing
customer contracts.
(i) Represents the elimination of YOUcentric's redeemable convertible
preferred stock, historical equity, and related dividend and offering
costs.
(j) Represents the intrinsic value of YOUcentric unvested options assumed
by J.D. Edwards, which will be amortized over the expected life of
three years.
(k) IPR&D consists of those products that are not yet proven to be
technologically feasible but have been developed to a point where there
is value associated with them in relation to potential future revenue.
Because technological feasibility
was not yet proven and no alternative future uses are believed to exist
for the in-process technologies, the assigned value was expensed
immediately upon the closing dates of the acquisition.
The preliminary value of $4.6 million assigned to acquired IPR&D was
determined by identifying research projects in areas for which
technological feasibility has not been established and there is no
alternative future use. The fair value of acquired IPR&D include
revisions to the YOUrelate Platform V4.X, High Tech Application V4.5,
High Tech Application V5.0, and FinServ Application V4.5. The value was
determined by a hypothetical royalty receipts method, a variation of
the discounted cash flow method. Using this method, a hypothetical
royalty rate was applied to the after-tax cash flows of the IPR&D
application projects that leverage Platform V4.X. A royalty rate
ranging from 5 to 20 percent was used to discount the cash flows
varying in relation to the increased reliance on Platform V4.X and
decreased reliance on the Core Technology. The estimated net free cash
flows generated by the products over a 3-year period were discounted at
rates ranging from 35 to 60 percent in relation to the stage of
completion and the technical risks associated with achieving
technological feasibility. The net cash flows for such projects were
based on management's estimates of revenue, expenses, asset
requirements, and the royalty rate to core technology.
(l) No tax adjustment was made related to the YOUcentric acquisition since
J.D. Edwards provided a valuation allowance to fully offset its
deferred tax assets as of July 31, 2001. The valuation allowance was
recorded after considering a number of factors, including our
cumulative operating losses in fiscal 1999, 2000, and 2001. Based upon
the weight of both positive and negative evidence regarding the
recoverability of deferred tax assets, J.D. Edwards concluded that a
valuation allowance was required to fully offset the net deferred tax
assets, as it is more likely than not that the deferred tax assets will
not be realized.
(m) Represents the adjustment to outstanding shares for the shares of J.D.
Edwards common stock issued as part of the acquisition. There were
7,683,031 shares of J.D. Edwards common stock (par value $0.001 per
share) issued, which were valued at $10.91 per share.
*****