Attached files
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8-K/A - FORM 8-K/A - Vangent, Inc. | c06288e8vkza.htm |
EX-99.1 - EXHIBIT 99.1 - Vangent, Inc. | c06288exv99w1.htm |
EX-23.1 - EXHIBIT 23.1 - Vangent, Inc. | c06288exv23w1.htm |
Exhibit 99.2
Vangent Inc.
Pro Forma Condensed Combined Financial Information (Unaudited)
Pro Forma Condensed Combined Financial Information (Unaudited)
The following unaudited pro forma condensed combined balance sheet data as of December 31,
2009, and the unaudited pro forma condensed combined statements of operations data for the year
ended December 31, 2009, and for the six months ended July 3, 2010, are derived from the
consolidated financial statements of Vangent and Buccaneer and give effect to the Acquisition. The
unaudited pro forma condensed combined balance sheet data are presented as if the Acquisition had
occurred as of December 31, 2009, and the unaudited pro forma condensed combined statements of
operations data are presented as if the Acquisition had occurred on January 1, 2009.
The Acquisition has been accounted for under the acquisition method of accounting, under which
the total purchase consideration is allocated to assets acquired and liabilities assumed based on
their estimated fair values. The excess of the purchase price over the amounts assigned to tangible
or intangible assets acquired and liabilities assumed is recognized as goodwill.
The unaudited pro forma condensed combined financial information has been prepared for
illustrative purposes only and does not purport to reflect the results the combined company may
achieve in future periods or the results that would have been obtained had Vangent and Buccaneer
been a combined company during the periods presented. The unaudited pro forma condensed combined
financial information does not include the effects of any operating efficiencies or cost savings
that may be achieved or acquisition and integration expenses.
The unaudited pro forma condensed combined financial information, including the notes thereto,
should be read in conjunction with (i) the consolidated financial statements of Vangent included in
its annual report on Form 10-K for the year ended December 31, 2009, and its quarterly report on
Form 10-Q for the three months ended July 3, 2010, and (ii) the consolidated financial statements
of Buccaneer included as Exhibit 99.1 to this current report on Form 8-K/A (amending the current
report on Form 8-K filed by Vangent on September 21, 2010).
1
Vangent, Inc.
Pro Forma Condensed Combined Balance Sheets Data (Unaudited)
December 31, 2009
(in thousands)
Pro Forma Condensed Combined Balance Sheets Data (Unaudited)
December 31, 2009
(in thousands)
Pro Forma | ||||||||||||||||
Vangent, Inc. | Buccaneer | Adjustments | Combined | |||||||||||||
Assets |
||||||||||||||||
Current assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 44,638 | $ | 803 | $ | 16,000 | (a) | |||||||||
(64,099 | )(b) | $ | (2,658 | ) | ||||||||||||
Trade receivables, net |
109,846 | 17,850 | | 127,696 | ||||||||||||
Prepaid expenses and other assets |
10,353 | 169 | | 10,522 | ||||||||||||
Assets of discontinued operations |
15,036 | | | 15,036 | ||||||||||||
Total current assets |
179,873 | 18,822 | (48,099 | ) | 150,596 | |||||||||||
Property and equipment, net |
25,124 | 7,371 | (5,187 | )(c) | 27,308 | |||||||||||
Intangible assets, net |
151,860 | | 25,792 | (d) | 177,652 | |||||||||||
Goodwill |
268,212 | | 27,935 | (d) | 296,147 | |||||||||||
Deferred debt financing costs and other |
8,433 | 151 | | 8,584 | ||||||||||||
Assets of discontinued operations |
6,727 | | | 6,727 | ||||||||||||
Total assets |
$ | 640,229 | $ | 26,344 | $ | 441 | $ | 667,014 | ||||||||
Liabilities and Stockholders Equity |
||||||||||||||||
Current liabilities: |
||||||||||||||||
Current portion of long-term debt |
$ | 13,534 | $ | 4,580 | $ | 16,000 | (a) | |||||||||
(1,795 | )(c) | $ | 32,319 | |||||||||||||
Accounts payable and accrued liabilities |
62,402 | 6,518 | | 68,920 | ||||||||||||
Fair value of liability derivatives, current portion |
2,447 | | | 2,447 | ||||||||||||
Accrued interest payable |
8,186 | | | 8,186 | ||||||||||||
Deferred tax liability |
5,628 | | | 5,628 | ||||||||||||
Deferred revenue |
3,976 | 755 | | 4,731 | ||||||||||||
Liabilities of discontinued operations |
7,521 | | | 7,521 | ||||||||||||
Total current liabilities |
103,694 | 11,853 | 14,205 | 129,752 | ||||||||||||
Long-term debt, net of current portion |
406,832 | 632 | (632 | )(c) | 406,832 | |||||||||||
Other long-term liabilities |
7,194 | | | 7,194 | ||||||||||||
Deferred tax liability |
12,144 | | | 12,144 | ||||||||||||
Liabilities of discontinued operations |
502 | | | 502 | ||||||||||||
Total liabilities |
530,366 | 12,485 | 13,573 | 556,424 | ||||||||||||
Stockholders equity: |
||||||||||||||||
Common stock |
| 26 | (26 | ) | | |||||||||||
Additional paid-in capital |
207,376 | | | 207,376 | ||||||||||||
Accumulated other comprehensive loss |
(14,949 | ) | | | (14,949 | ) | ||||||||||
Retained earnings (accumulated deficit) |
(82,564 | ) | 13,575 | (13,575 | ) | (82,564 | ) | |||||||||
109,863 | 13,601 | (13,601 | ) | 109,863 | ||||||||||||
Noncontrolling interest |
| 258 | 469 | 727 | ||||||||||||
Total stockholders equity |
109,863 | 13,859 | (13,132 | ) | 110,590 | |||||||||||
Total liabilities and stockholders equity |
$ | 640,229 | $ | 26,344 | $ | 441 | $ | 667,014 | ||||||||
See notes to unaudited pro forma condensed combined financial information.
2
Vangent, Inc.
Pro Forma Condensed Combined Statements of Operations Data (Unaudited)
Year Ended December 31, 2009
(in thousands)
Pro Forma Condensed Combined Statements of Operations Data (Unaudited)
Year Ended December 31, 2009
(in thousands)
Pro Forma | ||||||||||||||||
Vangent, Inc. | Buccaneer | Adjustments | Combined | |||||||||||||
Revenue |
$ | 583,986 | $ | 64,818 | $ | (1,013 | )(e) | $ | 647,791 | |||||||
Cost of revenue |
490,500 | 57,216 | (1,013 | )(e) | ||||||||||||
5,952 | (f) | 552,655 | ||||||||||||||
Gross profit |
93,486 | 7,602 | (5,952 | ) | 95,136 | |||||||||||
Selling, general and administrative expenses |
58,390 | 2,008 | | 60,398 | ||||||||||||
Impairment charges for goodwill and intangibles |
11,227 | | | 11,227 | ||||||||||||
Operating income |
23,869 | 5,594 | (5,952 | ) | 23,511 | |||||||||||
Interest expense, net |
34,289 | 216 | 546 | (g) | 35,051 | |||||||||||
Loss from continuing operations before income
taxes |
(10,420 | ) | 5,378 | (6,498 | ) | (11,540 | ) | |||||||||
Provision (benefit) for income taxes |
6,794 | | (448 | )(h) | 6,346 | |||||||||||
Income (loss) from continuing operations |
$ | (17,214 | ) | $ | 5,378 | $ | (6,050 | ) | $ | (17,886 | ) | |||||
See notes to unaudited pro forma condensed combined financial information.
3
Vangent, Inc.
Pro Forma Condensed Combined Statements of Operations Data (Unaudited)
Six Months Ended July 3, 2010
(in thousands)
Pro Forma Condensed Combined Statements of Operations Data (Unaudited)
Six Months Ended July 3, 2010
(in thousands)
Pro Forma | ||||||||||||||||
Vangent, Inc. | Buccaneer | Adjustments | Combined | |||||||||||||
Revenue |
$ | 409,043 | $ | 55,773 | $ | (346 | )(e) | $ | 464,470 | |||||||
Cost of revenue |
340,685 | 49,081 | (346 | )(e) | ||||||||||||
2,645 | (f) | 392,065 | ||||||||||||||
Gross profit |
68,358 | 6,692 | (2,645 | ) | 72,405 | |||||||||||
Selling, general and administrative expenses |
34,806 | 2,151 | | 36,957 | ||||||||||||
Operating income |
33,552 | 4,541 | (2,645 | ) | 35,448 | |||||||||||
Interest expense, net |
15,598 | 10 | 201 | (g) | 15,809 | |||||||||||
Income from continuing operations before
income taxes |
17,954 | 4,531 | (2,846 | ) | 19,639 | |||||||||||
Provision for income taxes |
3,685 | | 674 | (h) | 4,359 | |||||||||||
Income from continuing operations |
$ | 14,269 | $ | 4,531 | $ | (3,520 | ) | $ | 15,280 | |||||||
See notes to unaudited pro forma condensed combined financial information.
4
Vangent Inc.
Notes to Pro Forma Condensed Combined Financial Information (Unaudited)
Notes to Pro Forma Condensed Combined Financial Information (Unaudited)
1. Acquisition of Buccaneer Computer Systems & Service, Inc.
On September 15, 2010, Vangent, Inc. (Vangent) completed the acquisition (Buccaneer
Acquisition) of Buccaneer Computer Systems & Service, Inc. (Buccaneer). Buccaneer is a leading
provider of IT services, infrastructure, secure data hosting and data analytics for the government
healthcare market.
Vangent acquired all outstanding shares of Buccaneer stock in exchange for aggregate
consideration of $64.1 million (the Merger Consideration). The Merger Consideration is subject to
adjustment based on working capital and other adjustments. Pursuant to the terms of the Buccaneer
Acquisition, $3.0 million of the Merger Consideration was placed in escrow to be used to satisfy
certain tax obligations of Buccaneer. The amount of the Merger Consideration paid at closing,
including the amount placed in escrow, was $60.0 million, of which $44.0 million was funded with
available cash of $44.0 million and $16.0 million was funded with a variable-rate borrowing drawn
on the senior secured revolving credit facility.
A wholly-owned consolidated subsidiary of Buccaneer that owns and leases real property to
Buccaneer was not included in the Buccaneer Acquisition. The capital stock of the subsidiary was
spun off as a dividend prior to closing.
The Buccaneer Acquisition has been accounted for under the acquisition method of accounting
which requires the total purchase consideration to be allocated to the assets acquired and
liabilities assumed based on estimates of fair value. The excess of the purchase consideration over
the amounts assigned to tangible or intangible assets acquired and liabilities assumed is
recognized as goodwill.
The preliminary allocation of the purchase price is based on the best information available
and is provisional pending, among other things, final agreement of the adjustment to the purchase
price based upon the level of net working capital transferred at closing and the finalization of
the valuation of assets and liabilities. During the measurement period (which is not to exceed one
year from the acquisition date), additional assets or liabilities may be recognized if new
information is obtained about facts and circumstances that existed as of the acquisition date that,
if known, would have resulted in the recognition of those assets or liabilities as of that date.
The preliminary purchase price allocation may be adjusted after obtaining additional information
regarding, among other things, asset valuations, liabilities assumed and revisions of previous
estimates.
A summary of the purchase consideration and a preliminary allocation of the purchase
consideration based on estimates of fair value for the assets acquired and the liabilities assumed
follows (in thousands) :
Purchase Consideration |
||||
Cash paid at closing |
$ | 60,000 | ||
Other adjustments, net |
4,099 | |||
$ | 64,099 | |||
Other purchase consideration adjustments, net, primarily represent an accrued acquisition
liability of $4,129 relating to the Companys election under Section 338(h) (10) of the Internal
Revenue Code, and the expected settlement of the working capital adjustment.
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Allocation of Purchase Consideration |
||||
Cash |
$ | 897 | ||
Accounts receivable |
18,736 | |||
Property and equipment |
2,262 | |||
Intangible assets |
25,792 | |||
Goodwill |
31,267 | |||
Other assets |
2,427 | |||
Less: Liabilities assumed |
(16,555 | ) | ||
Net assets acquired |
64,826 | |||
Less: Noncontrolling interest |
(727 | ) | ||
$ | 64,099 | |||
Allocation of Intangible Assets Acquired |
||||
Customer relationships (eight year life) |
$ | 23,809 | ||
Non-compete agreements (three year life) |
1,983 | |||
$ | 25,792 | |||
The fair value of the intangible asset for customer relationships is based on customer
contracts and relationships with existing customers and is expected to have an eight-year life.
Amortization of the intangible asset for customer relationships is based on an accelerated method.
Amortization of the intangible asset for non-compete agreements is based on the straight-line
method. Amortization expense is included in cost of revenue.
Goodwill represents the excess of purchase consideration over the amounts assigned to tangible
and intangible assets acquired and liabilities assumed. As a result of the election under Section
338(h) (10) of the Internal Revenue Code, the amount allocated to intangible assets and goodwill
for tax purposes is expected to be tax deductible.
Buccaneer has a 70% ownership interest in Buccaneer Data Services, LLC, a joint venture that
provides computer technical and other consulting services to an agency of the U.S. government.
Buccaneer is entitled to a majority of the income and losses of the joint venture and has
determined that it is the primary beneficiary. The joint venture is fully consolidated in the
financial statements. Noncontrolling interest represents the remaining 30%.
2. Basis of Pro Forma Presentation
The unaudited pro forma condensed combined balance sheet data are presented as if the
Acquisition had occurred as of December 31, 2009. The unaudited pro forma condensed combined
statements of operations data are presented as if the Acquisition had occurred on January 1, 2009.
The unaudited pro forma results of operations data are derived from the consolidated financial
statements of Vangent and Buccaneer and reflect pro forma adjustments relating to the Buccaneer
Acquisition and associated borrowing that are of a recurring nature consisting of pro forma
amortization of intangible assets, primarily acquired customer relationships, and pro forma
interest expense on the associated borrowing. The unaudited pro forma results of operations data
are being furnished solely for informational purposes and are not intended to represent or be
indicative of the consolidated results of operations that the Company would have reported had
these transactions been completed as of the dates and for the periods presented, nor are they
necessarily indicative of future results.
6
3. Pro Forma Adjustments
The unaudited pro forma condensed combined financial information gives effect to fair value
adjustments attributed to the Buccaneer Acquisition and the related revolving credit borrowing of
$16.0 million by Vangent under its senior secured revolving credit facility. The purchase
consideration has been preliminarily allocated to the assets acquired and liabilities assumed based
on estimates of fair value.
The unaudited pro forma condensed combined financial statements do not include the effects of
any operating efficiencies or cost savings that may be achieved or acquisition and integration
expenses.
The pro forma adjustments to the unaudited condensed combined pro forma balance sheet data as
of December 31, 2009 follow:
(a) | Revolving credit borrowing of $16.0 million under Vangents senior secured credit facility used to fund a portion of the total purchase consideration paid at closing. | ||
(b) | Record purchase consideration of $64.1 million paid or to be paid by Vangent. | ||
(c) | Remove building fixed assets and related mortgage debt of a wholly-owned consolidated subsidiary of Buccaneer that owns and leases real property to Buccaneer. Pursuant to the terms of the Buccaneer Acquisition, the capital stock of the subsidiary was spun off as a dividend prior to closing. | ||
(d) | Record the fair value of intangible assets acquired for customer relationships of $23.8 million and non-compete agreements of $2.0 million, and record goodwill of $27.9 million as of December 31, 2009. |
The pro forma adjustments to the unaudited pro forma condensed combined statements of
operations data for the year ended December 31, 2009, and for the six months ended July 3, 2010,
are of a recurring nature and follow:
(e) | Eliminate intercompany revenue and costs for subcontracting services provided by Buccaneer to Vangent. | ||
(f) | Record amortization expense for intangible assets acquired in the Buccaneer Acquisition based principally on an accelerated method. | ||
(g) | Record interest expense related to the revolving credit borrowing of $16.0 million under the senior secured credit facility used to fund a portion of the purchase consideration based on variable rates. | ||
(h) | The pro forma provision (benefit) for income taxes is based on the assumed transition of Buccaneer to taxable corporate status as a separate company and the tax effect of the pro forma adjustments. |
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