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EX-99.1 - CONSOLIDATED FINANCIAL STATEMENTS OF CYTIVA - TALEO CORPdex991.htm
EX-23.1 - CONSENT OF DALE MATHESON CARR-HILTON LABONTE LLP. - TALEO CORPdex231.htm
8-K/A - FORM 8-K AMENDMENT NO. 1 - TALEO CORPd8ka.htm

Exhibit 99.2

Pro Forma Financial Information

On April 1, 2011, Taleo Corporation (“the Company”) completed the acquisition of Cytiva Software Inc. (“Cytiva”) pursuant to the Acquisition Agreement for Plan of Arrangement (the “Acquisition Agreement”) dated January 31, 2011.

The unaudited pro forma condensed combined balance sheet as of December 31, 2010 and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2010, are based on the historical financial statements of the Company and Cytiva after giving effect to the Company’s acquisition of Cytiva on April 1, 2011, and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements.

The unaudited pro forma combined condensed balance sheet is presented as if the acquisition of Cytiva had occurred on December 31, 2010. The unaudited pro forma combined condensed statements of operations are presented as if the acquisition of Cytiva had occurred on January 1, 2010.

The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based upon preliminary estimates. These preliminary estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the valuations of certain tangible and intangible assets acquired and liabilities assumed in connection with its acquisition of Cytiva.

The unaudited pro forma combined condensed financial statements, including the notes thereto, do not reflect any potential cost savings or other synergies that could result from the Acquisition Agreement. The unaudited pro forma combined condensed financial statements are presented for illustrative purposes only and are not necessarily indicative of the combined financial position or results of operations for future periods or the results that would have been achieved if the Acquisition Agreement had been consummated on the date indicated.

The unaudited pro forma condensed combined financial statements do not include the effects of any future restructuring activities that pertain to the restructuring of our operations to improve the cost efficiencies in our merged operations. In accordance with the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations, acquired company restructuring activities initiated by us must be accounted for separately from the business combination in accordance with ASC 420, Exit or Disposal Cost Obligations. Any future restructuring expenses may be material and may include costs for severance, costs of vacating facilities and costs to exit or terminate other duplicative activities. Future restructuring expenses are expected to be incurred over the remainder of fiscal 2011 and will be recorded as operating expenses in the period that these expenses are incurred.

The unaudited pro forma combined condensed financial information should be read in conjunction with the historical consolidated financial statements and notes thereto of the Company and other financial information pertaining to the Company contained in its Annual Report on Form 10-K for the year ended December 31, 2010, which was filed with the SEC on February 28, 2011 and Cytiva’s historical financial statements for the year ended December 31, 2010 included as Exhibit 99.1 in this Current Report on Form 8–K/A.


TALEO CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

As of December 31, 2010

(in thousands, except share and per share data)

 

     Historical                    
     Taleo     Cytiva     Pro Forma
Adjustments
    Notes     Pro Forma
Combined
 

ASSETS

          

Current assets:

          

Cash and cash equivalents

   $ 141,588      $ 832      $ (12,314     (1)      $ 130,106   

Restricted cash

     8        —          —            8   

Accounts receivable, net

     58,120        233        —            58,353   

Prepaid expenses and other current assets

     18,065        330        —            18,395   

Investment credits receivable

     6,034        —          —            6,034   
                                  

Total current assets

     223,815        1,395        (12,314       212,896   
                                  

Property and equipment, net

     26,552        100        —            26,652   

Restricted cash

     210        —          —            210   

Goodwill

     206,418        —          6,972        (2)        213,390   

Intangible assets, net

     59,478        —          8,500        (2)        67,978   

Other assets

     7,363        89        —            7,452   
                                  

Total assets

   $ 523,836      $ 1,584      $ 3,158        $ 528,578   
                                  

LIABILITIES AND STOCKHOLDERS’ EQUITY

          

Current liabilities:

          

Accounts payable and accrued liabilities

   $ 36,377      $ 592      $ 277        (3)      $ 37,246   

Deferred revenue and customer deposits

     99,396        2,455        (904     (4)        100,947   

Capital lease obligations, short-term

     105        —          —            105   

Current portion of convertible debenture

     —          1,042        (1,042     (5)        —     

Other current liabilities

     —          339        (74     (5)        265   
                                  

Total current liabilities

     135,878        4,428        (1,743       138,563   
                                  

Long-term deferred revenue

     10,156        176        (150     (4)        10,182   

Other liabilities

     9,241        —          —            9,241   

Capital lease obligations, long-term

     46        —          —            46   
                                  

Total liabilities

     155,321        4,604        (1,893       158,032   
                                  

Stockholders’ equity:

          

Common Stock and additional paid-in capital

     442,515        3,734        (3,734     (6)        442,515   

Preferred Equity

     —          615        (615     (6)        —     

Accumulated deficit

     (76,609     (7,650     9,681        (6), (7)        (74,578

Treasury stock

     (776     —          —            (776

Accumulated other comprehensive income

     3,385        281        (281     (6)        3,385   
                                  

Total stockholders’ equity

     368,515        (3,020     5,051          370,546   
                                  

Total liabilities and stockholders’ equity

   $ 523,836      $ 1,584      $ 3,158        $ 528,578   
                                  

See accompanying Notes to Pro Forma Combined Condensed Consolidated Financial Statements.


TALEO CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2010

(in thousands, except per share data)

 

     Historical                    
     Taleo     Cytiva     Pro forma
Adjustments
    Notes     Pro forma
Combined
 

Total revenue

     237,275        5,842        —            243,117   

Total cost of revenue

     78,436        2,818        75        (8)        81,329   
                                  

Gross profit (loss)

     158,839        3,024        (75       161,788   
                                  

Operating expenses:

          

Sales and marketing

     77,721        1,548        3,059        (8)        82,328   

Research and development

     43,431        1,111        14        (8)        44,556   

General and administrative

     43,834        1,384        (1,139     (8)        44,079   
                                  

Total operating expenses

     164,986        4,043        1,934          170,963   
                                  

Operating loss

     (6,147     (1,019     (2,009       (9,175
                                  

Other income (expense):

          

Interest income

     482        6        (25     (9)        463   

Interest expense

     (106     (176     176        (10)        (106

Other income (expense)

     885        —          —            885   
                                  

Total other income (expense), net

     1,261        (170     151          1,242   
                                  

Income (loss) before provision for income taxes

     (4,886     (1,189     (1,858       (7,933

Provision for (benefit from) income taxes

     (5,306     134        (2,644     (11)        (7,816
                                  

Net income (loss) from continuing operations

   $ 420      $ (1,323   $ 786        $ (117
                                  

Net income (loss) from continuing operations per share attributable to Class A common stockholders — basic

   $ 0.01            $ (0.00
                      

Net income (loss) from continuing operations per share attributable to Class A common stockholders — diluted

   $ 0.01            $ (0.00
                      

Weighted-average Class A common shares — basic

     39,685              39,685   
                      

Weighted-average Class A common shares — diluted

     40,915              39,685   
                      

See accompanying Notes to Pro Forma Combined Condensed Consolidated Financial Statements.


Notes to the Unaudited Pro Forma Combined Condensed Financial Statements

NOTE 1. BASIS OF PRO FORMA PRESENTATION

The unaudited pro forma combined condensed financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.

Cytiva’s historical financial statements for the year ended December 31, 2010 were denominated in Canadian dollars. The Company used the month-end exchange rate to remeasure the currency translation on the balance sheet and also used the average exchange rates of the twelve month period presented to remeasure the currency translation on the statements of operations. The Canadian dollar has been translated into the United States dollar at the rate of 0.9998 to the dollar for the balance sheet. For the twelve month statement of operations, the Canadian dollar amounts have been translated into the United States dollar at the rate of 0.9637.

The Company accounts for business combinations pursuant to ASC 805. In accordance with ASC 805, the Company recognizes separately from goodwill, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in an acquiree, generally at the acquisition date fair value as defined by ASC 820, Fair Value Measurements and Disclosures. Goodwill as of the acquisition date is measured as the excess of consideration transferred, which is also generally measured at fair value, and the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed.

The Company has made significant assumptions and estimates in determining the preliminary estimated purchase price and the preliminary allocation of the estimated purchase price in the unaudited pro forma condensed combined financial statements. These preliminary estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the valuation of certain tangible and intangible assets acquired and liabilities assumed in connection with the acquisition. These changes could result in material variances between the Company’s future financial results and the amounts presented in these unaudited pro forma combined condensed financial statements, including variances in fair values recorded, as well as expenses and cash flows associated with these items.

The unaudited pro forma combined condensed financial statements are not intended to represent or be indicative of the Company’s consolidated results of operations or financial position that would have been reported had the Cytiva acquisition been completed as of the dates presented, and should not be taken as a representation of the Company’s future consolidated results of operations or financial position. The unaudited pro forma combined condensed financial statements do not reflect any operating efficiencies and associated cost savings that the Company may achieve with respect to the combined companies. The unaudited pro forma combined condensed financial statements should be read in conjunction with the Company’s historical consolidated financials statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2010 and Cytiva’s historical consolidated financial statements and accompanying notes included as Exhibit 99.1 in this Current Report on Form 8–K/A.

NOTE 2. CYTIVA ACQUISITION

On January 31, 2011, Taleo entered into an Acquisition Agreement for Plan of Arrangement (the “Acquisition Agreement”) to acquire Cytiva, a Canadian based mid-market provider of on-demand recruiting software solutions.

On April 1, 2011, Taleo completed the acquisition of Cytiva. Accordingly, the assets, liabilities and operating results of Cytiva will be reflected in the Company’s consolidated financial statements from the date of acquisition. The total consideration paid by Taleo for Cytiva was approximately $12.3 million in cash in exchange for all of the outstanding capital stock of Cytiva.

Preliminary Purchase Price Allocation

Pursuant to the Company’s business combinations accounting policy, the total preliminary purchase price for Cytiva was allocated to the preliminary net tangible and intangible assets based upon their preliminary fair values as set forth below. With the acquisition of Cytiva, we expect to improve our position in talent management for small and medium-sized businesses and expand our customer base. These factors contributed to a purchase price in excess of the fair value of the Cytiva net tangible and intangible assets acquired, and as a result, the Company has recorded


goodwill in connection with this transaction. The excess of the preliminary purchase price over the preliminary net tangible assets and preliminary intangible assets was recorded as goodwill. The preliminary allocation of the purchase price was based upon a preliminary valuation and the Company’s estimates and assumptions are subject to change within the measurement period (up to one year from the acquisition date). The Company expects the allocation of the purchase price to be final in the first quarter of 2012.

The Company’s preliminary purchase price allocation for Cytiva is as follows:

 

Preliminary Allocation of Purchase Price

   Amount  
     (In thousands)  

Net tangible assets (liabilities)

   $ (3,158

Identifiable intangible assets:

  

Developed Technology

     100   

Customer Relationships

     6,300   

Customer backlog - Application revenue and Services revenue

     1,900   

Trade name

     50   

Covenant not to compete

     150   

Goodwill

     6,972   
        

Total purchase price

   $ 12,314   
        

NOTE 3. PRO FORMA ADJUSTMENTS

The unaudited pro forma combined condensed balance sheets and statements of operations give effect to the following pro forma adjustments:

(1) Adjustment to record the cash consideration of approximately $12.3 million related to the acquisition of Cytiva.

(2) Adjustment to record the fair value of identifiable intangible assets and goodwill, including the income-tax effects resulting from the Cytiva acquisition (see Footnote 2 above).

(3) Adjustment for unpaid non-recurring merger-related costs of approximately $0.3 million incurred by the Company in connection with the acquisition.

(4) Adjustments to record a write-down of deferred revenue to the estimated fair value of the contractual obligation to customers.

(5) Adjustment to record the pay-off of the current portion of Cytiva’s convertible debenture and current portion of Cytiva’s long-term debt.

(6) Adjustment to eliminate Cytiva’s historical equity balances.

(7) Adjustment for approximately $0.3 million of merger-related costs incurred by the Company and a $2.3 million income-tax benefit in connection with the acquisition.

(8) Adjustment to record the difference between Cytiva’s historical stock-based compensation expense and the estimated stock-based compensation expense had the Company acquired Cytiva on April 1, 2011.

Adjustment to amortize identifiable intangible assets obtained from the acquisition of Cytiva on April 1, 2011. Had the Company acquired Cytiva on January 1, 2010, amortization expense for the year ended December 31, 2010 would have increased by approximately $3.2 million.

Adjustment for depreciation expense associated with certain fixed assets obtained from the Company’s acquisition of Cytiva. Had the Company acquired Cytiva on January 1, 2010, depreciation expense for the year ended December 31, 2010 would have increased by approximately $0.1 million.


Adjustment for merger-related costs incurred by the Company in connection with the acquisition of Cytiva which were already reflected in the historical financial statements of the Company in the twelve months ended December 31, 2010. The Company incurred or will incur certain legal, accounting and consulting expenses associated with the acquisition of Cytiva. These expenses are expensed in the period incurred.

 

     Cytiva Pro Forma Expense Adjustments  
     For the Year Ended December 31, 2010  
     Stock-based
Compensation
    Amortization
of Intangible  Assets
     Depreciation      Merger-related
Costs
    Total  
     (In thousands)        

Cost of revenue

   $ (61   $ 100       $ 36       $ —        $ 75   

Sales and marketing

     (30     3,076         13         —          3,059   

Research and development

     —          —           14         —          14   

General and administrative

     (30     —           11         (1,120     (1,139
                                          

Total

   $ (121   $ 3,176       $ 74       $ (1,120   $ 2,009   
                                          

(9) Adjustment to record a reduction in estimated interest income earned at an assumed rate of approximately 0.20% for the year ended December 31, 2010 on cash and cash equivalents as a result of the following cash payments associated with the Company’s acquisition of Cytiva:

 

Total cash payments

   Amount  
     (In thousands)  

Purchase consideration

   $ 12,236   

Cash advance to Cytiva

     78   
        

Total payments

   $ 12,314   
        

The reduction in interest income for the year ended December 31, 2010 totaled $25,000.

(10) Adjustment to record a reduction in estimated interest expense of approximately $0.2 million for the year ended December 31, 2010 as a result of the pay-off of the current portion of Cytiva’s convertible debenture and current portion of Cytiva’s long-term debt upon the acquisition.

(11) Adjustment represents changes to income tax benefit as a result of the consummation of this transaction. Had the Company acquired Cytiva on January 1, 2010, the tax benefit for the year ended December 31, 2010 would have increased by approximately $2.6 million, primarily due to a tax benefit related to a reduction in the Company’s valuation allowance.