Attached files
file | filename |
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8-K/A - FORM 8-K/A - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418e8vkza.htm |
EX-99.3 - EXHIBIT 99.3 - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418exv99w3.htm |
EX-99.2 - EXHIBIT 99.2 - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418exv99w2.htm |
EX-99.4 - EXHIBIT 99.4 - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418exv99w4.htm |
EX-23.1 - EXHIBIT 23.1 - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418exv23w1.htm |
EX-23.2 - EXHIBIT 23.2 - GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC. | c13418exv23w2.htm |
Exhibit 99.5
GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.
Unaudited Pro Forma Condensed Consolidating Financial Statements
(amounts in thousands)
Unaudited Pro Forma Condensed Consolidating Financial Statements
(amounts in thousands)
On December 18, 2010, Global Defense Technology & Systems, Inc. (GTEC or the Company) acquired
100% of the outstanding membership interests in Signature Government Solutions, LLC (SGS) for
$53,201, which includes a $701 working capital adjustment. The acquisition was funded with GTECs
senior revolving credit facility. Out of the purchase price due at closing, $5,250 was placed into
escrow to be used if necessary to satisfy certain indemnification obligations of the seller.
On October 1, 2010, GTEC acquired 100% of the outstanding stock of Zytel Corporation (Zytel) for
$27,447, which includes a $647 working capital adjustment. The acquisition was funded with $8,558
of cash on-hand and $18,889 from GTECs senior revolving credit facility. Out of the purchase
price due at closing, $4,530 was placed into escrow to be used if necessary to satisfy certain
indemnification obligations of the selling stockholder.
The acquisitions have been accounted for as business combinations under FASB ASC 805, and the
purchase prices were allocated to SGS and Zytels assets and liabilities based on their fair
values at the date of each acquisition, with the excess allocated to goodwill.
The unaudited pro forma condensed consolidating balance sheet presents the financial position of
the Company as if the acquisitions of SGS and Zytel occurred on September 30, 2010. The unaudited
pro forma condensed consolidating statements of operations for the nine months ended September 30,
2010 and year ended December 31, 2009 have been prepared as if the acquisitions occurred on January
1, 2009.
The unaudited pro forma condensed consolidating financial statements, which have been prepared in
accordance with rules prescribed by Article 11 of Regulation S-X, are provided for informational
purposes only and are not necessarily indicative of the past or future results of the operations or
financial position of the Company.
This information should be read in conjunction with the previously filed Current Report on Form 8-K
filed with the Securities and Exchange Commission on December 21, 2010, the previously filed
historical condensed financial statements and accompanying notes of the Company contained in its
Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and its Quarterly Report on
Form 10-Q for the fiscal quarter ended September 30, 2010 and the historical financial statements
and accompanying notes of SGS included in this report on Form 8-K/A.
Page 1
GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2010
(amounts in thousands, except share and per share data)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2010
(amounts in thousands, except share and per share data)
SGS | Zytel | Pro Forma | ||||||||||||||||||||||||||||||
GTEC | SGS | Zytel | Adjustments | Adjustments | Combined | |||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||
Current assets |
||||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 8,558 | $ | 579 | $ | 1,441 | $ | (579 | ) | A | $ | (9,999 | ) | A | $ | | ||||||||||||||||
Accounts receivable, net |
49,798 | 6,557 | 2,675 | | | 59,030 | ||||||||||||||||||||||||||
Employee notes receivable |
| 135 | | | | 135 | ||||||||||||||||||||||||||
Due from affiliates |
381 | 2,677 | | | | 3,058 | ||||||||||||||||||||||||||
Prepaid expenses and other current assets |
1,454 | 31 | 23 | | | 1,508 | ||||||||||||||||||||||||||
Deferred tax assets |
651 | | 3 | | | 654 | ||||||||||||||||||||||||||
Income taxes receivable |
1,082 | | 156 | | | 1,238 | ||||||||||||||||||||||||||
Total current assets |
61,924 | 9,979 | 4,298 | (579 | ) | (9,999 | ) | 65,623 | ||||||||||||||||||||||||
Property and equipment, net |
3,560 | 88 | | | | 3,648 | ||||||||||||||||||||||||||
Intangible assets, net |
18,418 | | | 9,150 | B | 4,550 | C | 32,118 | ||||||||||||||||||||||||
Goodwill |
24,373 | | | 35,802 | D | 22,106 | E | 82,281 | ||||||||||||||||||||||||
Deferred tax assets |
5,965 | | | | | 5,965 | ||||||||||||||||||||||||||
Indemnification asset |
| | | | 1,686 | F | 1,686 | |||||||||||||||||||||||||
Other assets |
412 | 19 | | | | 431 | ||||||||||||||||||||||||||
Total assets |
$ | 114,652 | $ | 10,086 | $ | 4,298 | $ | 44,373 | $ | 18,343 | $ | 191,752 | ||||||||||||||||||||
Liabilities and Stockholders Equity |
||||||||||||||||||||||||||||||||
Current liabilities |
||||||||||||||||||||||||||||||||
Accounts payable |
$ | 14,576 | $ | 98 | $ | | $ | | $ | | $ | 14,674 | ||||||||||||||||||||
Accrued expenses |
7,964 | 1,739 | 1,687 | 362 | G | 464 | G | 12,216 | ||||||||||||||||||||||||
Liability for uncertain tax positions |
| | 1,100 | | 586 | F | 1,686 | |||||||||||||||||||||||||
Advance payments on contracts |
336 | | | | | 336 | ||||||||||||||||||||||||||
Total current liabilities |
22,876 | 1,837 | 2,787 | 362 | 1,050 | 28,912 | ||||||||||||||||||||||||||
Deferred rent |
305 | | | | | 305 | ||||||||||||||||||||||||||
Deferred tax liabilities |
| | | | 1,820 | H | 1,820 | |||||||||||||||||||||||||
Bank loans, net of current |
| | | 52,622 | I | 17,448 | I | 70,070 | ||||||||||||||||||||||||
Total liabilities |
23,181 | 1,837 | 2,787 | 52,984 | 20,318 | 101,107 | ||||||||||||||||||||||||||
Stockholders Equity |
||||||||||||||||||||||||||||||||
Common stock, par value $0.01 per share, 90,000,000
shares authorized and 9,089,666
shares issued and outstanding |
91 | | | | | |||||||||||||||||||||||||||
91 | ||||||||||||||||||||||||||||||||
Additional paid-in capital |
89,127 | | | | | 89,127 | ||||||||||||||||||||||||||
Members equity |
| 8,249 | | (8,249 | ) | J | | | ||||||||||||||||||||||||
Retained earnings (accumulated deficit) |
2,253 | | 1,511 | (362 | ) | J | (1,975 | ) | J | 1,427 | ||||||||||||||||||||||
Total stockholders equity |
91,471 | 8,249 | 1,511 | (8,611 | ) | (1,975 | ) | 90,645 | ||||||||||||||||||||||||
Total liabilities and stockholders equity |
$ | 114,652 | $ | 10,086 | $ | 4,298 | $ | 44,373 | $ | 18,343 | $ | 191,752 | ||||||||||||||||||||
Page 2
GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.
Notes to Unaudited Pro Forma Condensed Consolidating Financial Statements
(amounts in thousands)
(amounts in thousands)
A | This adjustment reflects the assumed cash paid by the Company representing the purchase price of the acquisition from cash on hand. The total Zytel purchase price of $27,447 includes a $26,800 initial purchase price and a $647 working capital adjustment, collectively paid to the Zytel shareholder. The total SGS purchase price of $53,201 includes a $52,500 initial purchase price and a $701 working capital adjustment, collectively paid to the owner of SGS. | |
B | For the SGS acquisition, customer relationships consisted of acquired contracts that have had a history of renewal upon recompete and were valued based upon the estimated future cash flows after the contracts future recompete date. A fifteen year useful life was estimated based upon an analysis of renewal history for each contract. Contract backlog was valued and a one year useful life was estimated based on signed agreements representing expected future revenue. The fair values were estimated using Level 3 assumptions. | |
This adjustment reflects the identified intangible assets valuation for SGS as follows: |
Acquired Intangible Assets | Estimated Useful Life | Estimated Fair Value | ||||||
Customer relationships |
15 years | $ | 8,700 | |||||
Contract backlog |
1 year | 450 | ||||||
$ | 9,150 | |||||||
C | For the Zytel acquisition, customer relationships consisted of acquired contracts that have had a history of renewal upon recompete and were valued based upon the estimated future cash flows after the contracts future recompete date. A fifteen year useful life was estimated based upon an analysis of renewal history for each contract. Contract backlog was valued and a one year useful life was estimated based on signed agreements representing expected future revenue. A trade name for Zytel was valued based on the equivalent costs associated with developing it or paying royalties for its use and was estimated to have a one year life. The fair values were estimated using Level 3 assumptions. | |
This adjustment reflects the identified intangible assets valuation for Zytel as follows: |
Acquired Intangible Assets | Estimated Useful Life | Estimated Fair Value | ||||||
Customer relationships |
15 years | $ | 4,300 | |||||
Contract backlog |
1 year | 200 | ||||||
Trade name |
1 year | 50 | ||||||
$ | 4,550 | |||||||
Page 3
GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.
Notes to Unaudited Pro Forma Condensed Consolidating Financial Statements
(amounts in thousands)
(amounts in thousands)
D | This adjustment reflects the recognition of goodwill as a result of the SGS acquisition. The goodwill adjustment is detailed below and is calculated as the excess of purchase price over the estimated fair value of the net assets acquired. Goodwill will not be amortized but will be subject to annual impairment tests. |
Amounts | ||||
Purchase price |
$ | 53,201 | ||
Less: |
||||
Net assets acquired |
8,249 | |||
Identified intangible assets |
9,150 | |||
Goodwill |
$ | 35,802 |
E | This adjustment reflects the recognition of goodwill as a result of the Zytel acquisition. The goodwill adjustment is detailed below and is calculated as the excess of purchase price over the estimated fair value of the net assets acquired. Goodwill will not be amortized but will be subject to annual impairment tests. |
Amounts | ||||
Purchase price |
$ | 27,447 | ||
Less: |
||||
Net assets acquired |
2,611 | |||
Identified intangible assets |
4,550 | |||
Deferred tax liabilities |
(1,820 | ) | ||
Goodwill |
$ | 22,106 |
F | This adjustment relates to a tax indemnification from the Zytel seller for IRS related issues for the prior years. The Company is indemnified up to $1,850 and has recorded an asset equal to the uncertain tax position. At September 30, 2010, this balance totaled $1,686 and includes interest and penalties through the date of acquisition. The Company will record interest expense in Other Expense that will be equally offset by an increase in the indemnification asset that will be recorded in Other Income. The indemnification asset is backed by cash held in escrow. | |
G | This adjustment reflects the transaction costs incurred by GTEC in connection with the respective acquisition. The adjustment was recorded to Accrued expenses and Retained earnings. | |
H | This adjustment reflects the increase in deferred tax liabilities recognized upon consummation of the respective acquisition arising from the allocation of the purchase price to identifiable intangible assets. | |
I | This adjustment reflects the assumed loan borrowings in conjunction with the respective acquisition. | |
J | This adjustment reflects the elimination of retained earnings and Members equity prior to the respective acquisition and the recognition of transaction costs as mentioned above. |
Page 4
GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010
(amounts in thousands, except share and per share data)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010
(amounts in thousands, except share and per share data)
SGS | Zytel | Pro Forma | ||||||||||||||||||||||||||||||
GTEC | SGS | Zytel | Adjustments | Adjustments | Combined | |||||||||||||||||||||||||||
Revenue |
$ | 150,494 | $ | 26,946 | $ | 13,414 | $ | | $ | | $ | 190,854 | ||||||||||||||||||||
Operating costs and expenses |
||||||||||||||||||||||||||||||||
Cost of revenue |
123,945 | 18,275 | 10,183 | | (531 | ) | K | 151,872 | ||||||||||||||||||||||||
Selling, general and administrative expenses |
15,973 | 5,985 | 2,348 | | (469 | ) | K | 23,837 | ||||||||||||||||||||||||
Amortization of intangible assets |
2,850 | | | 435 | L | 215 | L | 3,500 | ||||||||||||||||||||||||
Total operating costs and expenses |
142,768 | 24,260 | 12,531 | 435 | (785 | ) | 179,209 | |||||||||||||||||||||||||
Operating income |
7,726 | 2,686 | 883 | (435 | ) | 785 | 11,645 | |||||||||||||||||||||||||
Other income (expense) |
||||||||||||||||||||||||||||||||
Interest income |
11 | | | | | 11 | ||||||||||||||||||||||||||
Interest expense |
(101 | ) | | (38 | ) | (1,381 | ) | M | (458 | ) | M | (1,978 | ) | |||||||||||||||||||
Other income (expense) |
| (9 | ) | 11 | | | 2 | |||||||||||||||||||||||||
Income before income taxes |
7,636 | 2,677 | 856 | (1,816 | ) | 327 | 9,680 | |||||||||||||||||||||||||
Provision for income taxes |
(2,466 | ) | | (399 | ) | (344 | ) | N | (131 | ) | N | (3,340 | ) | |||||||||||||||||||
Net income |
$ | 5,170 | $ | 2,677 | $ | 457 | $ | (2,161 | ) | $ | 196 | $ | 6,340 | |||||||||||||||||||
Earnings per share |
||||||||||||||||||||||||||||||||
Basic |
$ | 0.57 | $ | 0.70 | ||||||||||||||||||||||||||||
Diluted |
$ | 0.56 | $ | 0.69 | ||||||||||||||||||||||||||||
Weighted average common shares outstanding |
||||||||||||||||||||||||||||||||
Basic |
9,037,087 | 9,037,087 | ||||||||||||||||||||||||||||||
Diluted |
9,157,737 | 9,157,737 |
Page 5
GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.
Notes to Unaudited Pro Forma Condensed Consolidating Financial Statements
(amounts in thousands)
Notes to Unaudited Pro Forma Condensed Consolidating Financial Statements
(amounts in thousands)
K | These adjustments relate to transaction bonuses paid by the Zytel seller prior to closing. | |
L | This adjustment reflects the amortization of identified acquired intangible assets with finite useful lives based on the estimated fair value. | |
M | This adjustment reflects the interest expense for the funds borrowed for the acquisition of Zytel and SGS at the effective interest rate at the date of the SGS transaction of 3.5%. | |
N | This adjustment reflects the tax benefits of the adjustments mentioned above and the assumed tax expense on the taxable income generated by SGS at the Companys statutory tax rate of 40%. |
Page 6
GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009
(amounts in thousands, except share and per share data)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009
(amounts in thousands, except share and per share data)
SGS | Zytel | Pro Forma | ||||||||||||||||||||||||||||||
GTEC | SGS | Zytel | Adjustments | Adjustments | Combined | |||||||||||||||||||||||||||
Revenue |
$ | 212,845 | $ | 32,423 | $ | 15,236 | $ | | $ | | $ | 260,504 | ||||||||||||||||||||
Operating costs and expenses |
||||||||||||||||||||||||||||||||
Cost of revenue |
175,231 | 21,278 | 10,544 | | | 207,053 | ||||||||||||||||||||||||||
Selling, general and administrative expenses |
24,861 | 7,419 | 2,361 | | | 34,641 | ||||||||||||||||||||||||||
Amortization of intangible assets |
8,356 | | | 1,030 | O | 537 | O | 9,923 | ||||||||||||||||||||||||
Total operating costs and expenses |
208,448 | 28,697 | 12,905 | 1,030 | 537 | 251,617 | ||||||||||||||||||||||||||
Operating income |
4,397 | 3,726 | 2,331 | (1,030 | ) | (537 | ) | 8,887 | ||||||||||||||||||||||||
Other income (expense) |
||||||||||||||||||||||||||||||||
Interest income |
7 | | 3 | | | 10 | ||||||||||||||||||||||||||
Interest expense |
(1,849 | ) | | (143 | ) | (1,842 | ) | P | (611 | ) | P | (4,444 | ) | |||||||||||||||||||
Other income (expense) |
| (30 | ) | 4 | | | (26 | ) | ||||||||||||||||||||||||
Income before income taxes |
2,555 | 3,696 | 2,195 | (2,872 | ) | (1,147 | ) | 4,427 | ||||||||||||||||||||||||
Provision for income taxes |
(1,286 | ) | | (894 | ) | (330 | ) | Q | 459 | Q | (2,051 | ) | ||||||||||||||||||||
Net income |
$ | 1,269 | $ | 3,696 | $ | 1,301 | $ | (3,201 | ) | $ | (688 | ) | $ | 2,376 | ||||||||||||||||||
Earnings per share |
||||||||||||||||||||||||||||||||
Basic |
$ | 0.20 | $ | 0.37 | ||||||||||||||||||||||||||||
Diluted |
$ | 0.20 | $ | 0.37 | ||||||||||||||||||||||||||||
Weighted average common shares outstanding |
||||||||||||||||||||||||||||||||
Basic |
6,341,079 | 6,341,079 | ||||||||||||||||||||||||||||||
Diluted |
6,440,301 | 6,440,301 |
Page 7
GLOBAL DEFENSE TECHNOLOGY & SYSTEMS, INC.
Notes to Unaudited Pro Forma Condensed Consolidating Financial Statements
(amounts in thousands)
Notes to Unaudited Pro Forma Condensed Consolidating Financial Statements
(amounts in thousands)
O | This adjustment reflects the amortization of identified acquired intangible assets with finite useful lives based on the estimated fair value. | |
P | This adjustment reflects the interest expense for the funds borrowed for the acquisition of Zytel and SGS at the interest rate at the date of the SGS transaction of 3.5%. | |
Q | This adjustment reflects the tax benefits of the adjustments mentioned above, and the assumed tax expense on the taxable income generated by SGS at the Companys statutory tax rate of 40%. |
Page 8