Exhibit 99.5
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
a) Reflects the net effect of the transactions discussed in notes (b), (c)
and (d) below.
b) Reflects total payment of approximately $606 million for 603,000 shares of
Janus common stock from Mr. Bailey and one other minority stockholder of
Janus. Of the $606 million, approximately $7.1 million reflects the
increase in Stilwell's ownership percentage of Janus (from approximately
84.1% actual at March 31, 2001 to 90.3%) and resulting decline in minority
ownership. The remaining $598.9 million that Stilwell paid for the Janus
shares represents intangible assets and goodwill pursuant to the purchase
method of accounting. For purposes of these pro forma financial statements,
it was assumed that 50% of the excess cost over tangible net assets
represents identifiable intangible assets. The intangible assets and
goodwill assumed to be recorded in connection with the acquisition do not
qualify for amortization under applicable tax rules and therefore, no
related tax benefit is associated with the amortization of these items.
Pursuant to Statement of Financial Accounting Standards No. 109 "Accounting
for Income Taxes" ("FAS 109"), goodwill of $114.5 million associated with
deferred income taxes was recorded (utilizing an estimated effective income
tax rate of 38.25%) only for the assumed specifically identifiable
intangible assets based on the difference between the book and tax bases
on the date of acquisition. The intangibles and goodwill are assumed to be
amortized over 20 years, representing an estimated weighted average of
periods over which such assets would be amortized.
In addition, the Financial Accounting Standards Board recently adopted
Statement of Financial Accounting Standards No. 142 "Goodwill and Other
Intangible Assets" ("FAS 142"), which establishes new standards for
recording and amortizing goodwill and identifiable intangible assets. All
of the provisions of FAS 142 are required to be applied in fiscal years
beginning after December 15, 2001 to all goodwill and other intangible
assets recognized in an entity's statement of financial position at that
date, regardless of when those assets were initially recognized. The
adoption by Stilwell of FAS 142 - expected to occur on January 1, 2002 -
will impact the amount of amortization expense recorded in the Statement of
Income.
c) Reflects the payment of an estimated $15.5 million (from the gross cash
proceeds discussed in note (d)) in various debt issue costs related to the
financing, including payments of fees to the underwriter, accountants,
attorneys and other professionals. Pursuant to generally accepted
accounting principles, these debt issue costs will be capitalized and
amortized using the effective yield method over one year, representing the
first point in time at which a holder of the convertible debt security may
put the security to Stilwell.
d) Reflects completion of the offering of the convertible debt securities
on March 31, 2001 and the receipt of estimated gross
proceeds of $690 million.
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF INCOME
e) Reflects the amortization of $948.3 million in intangible assets and
goodwill resulting from i) Stilwell's acquisition of the Janus common stock
from Mr. Bailey and the other Janus minority stockholder as discussed in
note (b) above; and ii) the purchase of 199,042 shares from other minority
stockholders in March 2001. Assuming the transactions occurred on January
1, 2000, estimated additional amortization expense for the year ended
December 31, 2000 and three months ended March 31, 2001 would total $47.4
million and $11.4 million, respectively. See Note (h) for information
regarding the tax impact.
f) For purposes of these pro forma financial statements, the convertible debt
securities are assumed to have a 1% yield on the $690 million original
issue price over a 30-year period, resulting in approximately $6.9 million
and $1.7 million of interest expense during the year ended December 31,
2000 and the three months ended March 31, 2001, respectively. Additionally,
interest expense reflects the amortization of debt issue costs incurred to
complete the financing - see note (c) above - which results in additional
interest expense of $15.5 million in 2000.
Approximately $3.9 million of interest expense recorded during the three
months ended March 31, 2001 associated with the purchase of shares from Mr.
Bailey was eliminated assuming that the acquisition occurred on January 1,
2000.
g) Assuming these transactions occurred on January 1, 2000, Stilwell would
have used $200.0 million of its existing cash to help fund these
acquisitions. Using an assumed cash interest rate of 4.5%, Stilwell would
have forfeited the opportunity to earn approximately $9.0 million and $1.9
million in interest income for the year ended December 31, 2000 and three
months ended March 31, 2001, respectively. See consideration of the tax
effects on this interest in (h) below.
Note that for purposes of these pro forma financial statements, it was
assumed that the excess proceeds received in connection with the
convertible debt security offering completed on April 25, 2001 (i.e.,
proceeds that were not used to purchase the 600,000 shares of Janus common
stock and to pay associated interest to Mr. Bailey) were not used to fund
the acquisition of the 202,042 shares of Janus common stock purchased from
other minority stockholders.
h) Reflects the income tax effect - using an estimated effective income tax
rate of 38.25% - resulting from the amortization of debt issue costs
discussed in note (c) above, the interest associated with the convertible
debt securities as discussed in note (f) above and reduced interest income
as discussed in note (g) above.
As discussed in note (b) above, concurrent with the amortization of the
goodwill recorded for the deferred taxes under FAS 109, deferred income
taxes are reduced to reflect the reversal of a portion of the temporary
difference.
i) As a result of the Stilwell's acquisition of the 802,042 shares of Janus
common stock, Stilwell's ownership percentage of Janus would increase from
approximately 82.0% as of March 15, 2001 to approximately 90.3%. Assuming
the acquisitions occurred on January 1, 2000, Stilwell would have recorded
an additional $59.5 million and $9.5 million in net income (as a result of
reduced minority interest), representing approximately 8.3% of Janus's net
income for the year ended December 31, 2000 and three months ended March
31, 2001, respectively.
j) Diluted earnings per share excludes 15,965,754 million shares related to
the convertible debt securities, because it has been assumed that the
conversion conditions have not been met.