Attached files
| file | filename |
|---|---|
| EX-23.1 - EX-23.1 - Verisk Analytics, Inc. | d399829dex231.htm |
| EX-99.1 - EX-99.1 - Verisk Analytics, Inc. | d399829dex991.htm |
| 8-K - FORM 8-K - Verisk Analytics, Inc. | d399829d8k.htm |
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed consolidated financial statements (the “pro forma financial statements”) present the pro forma results of operations and financial position of Verisk Analytics, Inc. (the “Company”), AIAS Holding Company, LLC (“Argus”) and MediConnect Global, Inc. (“MediConnect”) on a consolidated basis, giving effect to these acquisitions, which were accounted for under the purchase method of accounting, as well as the assumptions and adjustments described in the accompanying notes to the pro forma financial statements. The unaudited pro forma condensed consolidated balance sheet gives effect to the acquisition of Argus as if it had occurred on June 30, 2012. MediConnect was acquired on March 30, 2012, and therefore, its balance sheet is included in the Verisk Analytics condensed consolidated balance sheet as of June 30, 2012. The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2012 and the year ended December 31, 2011 are presented as if the acquisitions of Argus and MediConnect occurred on January 1, 2011. The pro forma financial statements are based on the unaudited historical consolidated financial statements of the Company and Argus as of June 30, 2012, and the audited historical financial statements of the Company and Argus and unaudited historical financial statements of MediConnect for the year ended December 31, 2011.
The pro forma financial statements are based on currently available information and assumptions and estimates, which the Company believes are reasonable. These assumptions and estimates, however, are subject to change. The Company believes that all necessary adjustments have been made to fairly present the pro forma information.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 2012
(In thousands)
| Pro Forma | Pro Forma | |||||||||||||||
| Verisk Analytics | Argus | Adjustments | Consolidated | |||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: |
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| Cash and cash equivalents |
$ | 97,198 | $ | 1,677 | $ | (46,677 | )a1 | $ | 52,198 | |||||||
| Accounts receivable, net |
173,607 | 16,921 | (1,456 | )a2 | 189,072 | |||||||||||
| Other current assets |
126,690 | 1,886 | (1,315 | )a2 | 127,261 | |||||||||||
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| Total current assets |
397,495 | 20,484 | (49,448 | ) | 368,531 | |||||||||||
| Noncurrent assets: |
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| Intangible assets, net |
363,555 | 21,498 | 144,963 | a3 | 530,016 | |||||||||||
| Goodwill |
934,762 | 25,318 | 254,118 | a4 | 1,214,198 | |||||||||||
| Other assets |
157,531 | 5,256 | 20,000 | a5 | 182,787 | |||||||||||
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| Total assets |
$ | 1,853,343 | $ | 72,556 | $ | 369,633 | $ | 2,295,532 | ||||||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Current liabilities: |
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| Accounts payable and accrued liabilities |
$ | 153,684 | $ | 4,867 | $ | (149 | )a1 | $ | 158,402 | |||||||
| Fees received in advance |
253,880 | 3,710 | (1,456 | )a2 | 256,134 | |||||||||||
| Other current liabilities |
204,695 | 330 | (330 | )a1 | 204,695 | |||||||||||
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| Total current liabilities |
612,259 | 8,907 | (1,935 | ) | 619,231 | |||||||||||
| Noncurrent liabilities: |
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| Long-term debt |
1,054,395 | 27,250 | 352,750 | a1 | 1,434,395 | |||||||||||
| Other liabilities |
140,007 | — | 55,217 | a6 | 195,224 | |||||||||||
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| Total liabilities |
1,806,661 | 36,157 | 406,032 | 2,248,850 | ||||||||||||
| Commitments and contingencies |
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| Stockholders’ equity |
46,682 | 36,399 | (36,399 | )a2 | 46,682 | |||||||||||
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| Total liabilities and stockholders’ equity |
$ | 1,853,343 | $ | 72,556 | $ | 369,633 | $ | 2,295,532 | ||||||||
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| (a1) | The unaudited pro forma condensed consolidated balance sheet assumes that the purchase price for the acquisition of Argus was funded through $380.0 million of senior notes with a fixed interest rate of 5.75% (average cost of debt of Verisk) and $45.0 million of cash from operations. Differences between the assumed financing, as presented in the pro forma financial statements as of June 30, 2012, and the actual financing of this acquisition could have a significant impact on the pro forma financial statements. The pro forma adjustments also reflect the delivery of Argus on a debt-free and cash-free basis as required by the purchase agreement. |
| (a2) | To reflect other preliminary purchase accounting adjustments. |
| (a3) | To reflect preliminary purchase accounting adjustments for fair value of acquired definite-lived intangible assets with a preliminary estimated weighted average useful lives of ten years, offset by the removal of Argus’ existing balance of $21.5 million. |
| (a4) | To reflect the fair value of acquired goodwill based on assets acquired and liabilities assumed as if the acquisition occurred on June 30, 2012. |
| (a5) | To reflect preliminary purchase accounting adjustments for the indemnity escrow funded by Verisk and withheld from the purchase consideration. |
| (a6) | To reflect preliminary purchase accounting adjustments for deferred tax liabilities and the indemnity escrow funded by Verisk and withheld from the purchase consideration. |
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 2012
(In thousands, except for share and per share data)
| Verisk Analytics (b1) | Argus | MediConnect (b1) | Pro Forma Adjustments |
Pro Forma Consolidated |
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| Revenues |
$ | 719,727 | $ | 27,434 | $ | 17,158 | $ | — | $ | 764,319 | ||||||||||
| Expenses: |
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| Cost of revenues (exclusive of items shown separately below) |
280,404 | 12,319 | 7,870 | — | 300,593 | |||||||||||||||
| Selling, general and administrative |
116,452 | 3,374 | 1,845 | — | 121,671 | |||||||||||||||
| Depreciation and amortization of fixed assets |
24,734 | 1,018 | 451 | — | 26,203 | |||||||||||||||
| Amortization of intangible assets |
20,774 | 1,663 | 152 | 10,145 | b2 | 32,734 | ||||||||||||||
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| Total expenses |
442,364 | 18,374 | 10,318 | 10,145 | 481,201 | |||||||||||||||
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| Operating income |
277,363 | 9,060 | 6,840 | (10,145 | ) | 283,118 | ||||||||||||||
| Other income/(expense): |
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| Investment income |
261 | — | 80 | — | 341 | |||||||||||||||
| Realized gain on securities, net |
300 | — | — | — | 300 | |||||||||||||||
| Interest expense |
(33,762 | ) | (577 | ) | (502 | ) | (14,854 | )b3 | (49,695 | ) | ||||||||||
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| Total other expense, net |
(33,201 | ) | (577 | ) | (422 | ) | (14,854 | ) | (49,054 | ) | ||||||||||
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| Income before income taxes |
244,162 | 8,483 | 6,418 | (24,999 | ) | 234,064 | ||||||||||||||
| Provision for income taxes |
(96,230 | ) | (273 | ) | (556 | ) | 4,868 | b4 | (92,191 | ) | ||||||||||
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| Net income |
147,932 | 8,210 | 5,862 | (20,131 | ) | $ | 141,873 | |||||||||||||
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| Basic net income per share |
$ | 0.89 | $ | 0.86 | ||||||||||||||||
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| Diluted net income per share |
$ | 0.86 | $ | 0.83 | ||||||||||||||||
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| Weighted average shares outstanding: |
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| Basic |
165,391,500 | 165,391,500 | ||||||||||||||||||
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| Diluted |
171,626,084 | 171,626,084 | ||||||||||||||||||
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| (b1) | MediConnect was acquired on March 30, 2012, and therefore, its results of operations subsequent to the acquisition date are included in Verisk Analytics’ results of operations. |
| (b2) | To reflect amortization expense related to the acquired definite-lived intangible assets. |
| (b3) | The unaudited pro forma condensed consolidated balance sheet assumes that the purchase price for the acquisition of Argus was funded through $380.0 million of senior notes with a fixed interest rate of 5.75% (average cost of debt of Verisk) and $45.0 million of cash from operations. Differences between the assumed financing, as presented in the pro forma financial statements as of June 30, 2012, and the actual financing of this acquisition could have a significant impact on the pro forma financial statements. The pro forma adjustments also reflect the delivery of Argus on a debt-free and cash-free basis as required by the purchase agreement. |
| (b4) | To reflect estimated adjustment to tax provision from pro forma adjustments using a statutory tax rate of 40.0%. |
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2011
(In thousands, except for share and per share data)
| Verisk Analytics | Argus | MediConnect | Pro Forma Adjustments |
Pro Forma Consolidated |
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| Revenues |
$ | 1,331,840 | $ | 47,211 | $ | 58,567 | $ | — | $ | 1,437,618 | ||||||||||
| Expenses: |
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| Cost of revenues (exclusive of items shown separately below) |
533,735 | 20,155 | 30,135 | — | 584,025 | |||||||||||||||
| Selling, general and administrative |
209,469 | 6,039 | 6,774 | — | 222,282 | |||||||||||||||
| Depreciation and amortization of fixed assets |
43,827 | 1,444 | 1,603 | — | 46,874 | |||||||||||||||
| Amortization of intangible assets |
34,792 | 3,326 | 667 | 27,200 | b2 | 65,985 | ||||||||||||||
| Acquisition related liabilities adjustment |
(3,364 | ) | — | — | — | (3,364 | ) | |||||||||||||
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| Total expenses |
818,459 | 30,964 | 39,179 | 27,200 | 915,802 | |||||||||||||||
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| Operating income |
513,381 | 16,247 | 19,388 | (27,200 | ) | 521,816 | ||||||||||||||
| Other income/(expense): |
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| Investment income |
201 | 1 | 589 | — | 791 | |||||||||||||||
| Realized gain on securities, net |
686 | — | — | — | 686 | |||||||||||||||
| Interest expense |
(53,847 | ) | (966 | ) | (312 | ) | (40,593 | )b3 | (95,718 | ) | ||||||||||
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| Total other expense, net |
(52,960 | ) | (965 | ) | 277 | (40,593 | ) | (94,241 | ) | |||||||||||
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| Income before income taxes |
460,421 | 15,282 | 19,665 | (67,793 | ) | 427,575 | ||||||||||||||
| Provision for income taxes |
(177,663 | ) | (56 | ) | (7,160 | ) | 20,354 | b4 | (164,525 | ) | ||||||||||
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| Net income |
$ | 282,758 | $ | 15,226 | $ | 12,505 | $ | (47,439 | ) | $ | 263,050 | |||||||||
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| Basic net income per share |
$ | 1.70 | $ | 1.58 | ||||||||||||||||
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| Diluted net income per share |
$ | 1.63 | $ | 1.52 | ||||||||||||||||
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| Weighted average shares outstanding: |
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| Basic |
166,015,238 | 166,015,238 | ||||||||||||||||||
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| Diluted |
173,325,110 | 173,325,110 | ||||||||||||||||||
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Pro Forma Presentation
The pro forma financial statements and explanatory notes give effect to the combination of the Company, Argus and MediConnect. These acquisitions were accounted for under the purchase method of accounting.
For the purposes of the pro forma financial statements, the acquisition of Argus was assumed to be funded through $380.0 million of senior notes and $45.0 million of cash from operations, and the acquisition of MediConnect was assumed to be funded with $347.8 million of senior notes and $0.6 million of cash from operations used to fund the working capital adjustment. The senior notes were assumed to have a fixed interest rate of 5.75% (average cost of debt of the Company). A hypothetical 1/8% increase or decrease in the assumed interest rate on the borrowings used to fund these acquisitions would have resulted in a $0.9 million increase or decrease, respectively, in annual interest expense. These assumptions are based on prevailing circumstances existing during the period covered by the pro forma financial statements.
Due to the limited time since the acquisition date and limitations on access to Argus’ information prior to the acquisition date, the initial accounting for the acquisition is incomplete at this time. As a result, the amount of certain assets and liabilities presented is based on preliminary valuations and is subject to adjustment as additional information is obtained and valuations are reviewed and finalized. However, as indicated in note (a4) above, the Company has made certain adjustments to the June 30, 2012 historical book values of the assets and liabilities of Argus to reflect certain preliminary estimates of the fair values necessary to prepare the pro forma financial statements. Any excess purchase price over the historical net assets of Argus, as adjusted to reflect estimated fair values, has been recorded as goodwill. Actual results may differ from the pro forma financial statements once the Company has completed the valuations necessary to finalize the required purchase price allocation. Such finalization could result in material changes to the pro forma financial statements. The allocation of the purchase price will be finalized once all information is obtained, but not to exceed one year from the acquisition date.
The pro forma financial statements are not intended to represent or be indicative of the consolidated results of operations or financial position of the Company that would have been reported had the acquisition been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial position of the Company. This information should be read in conjunction with the accompanying notes to the pro forma financial statements, the historical consolidated financial statements and accompanying notes to the Company’s annual report filed on Form 10-K for the year ended December 31, 2011, filed on February 28, 2012, the Company’s quarterly report on Form 10-Q for the six months ended June 30, 2012, filed on July 31, 2012, the audited and unaudited financial statements of Argus included as Exhibit 99.1 in this Current Report on Form 8-K, and the audited and unaudited financial statements of MediConnect included as Exhibit 99.1 and 99.2, respectively, in the Company’s current report on Form 8-K/A filed on May 31, 2012.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. Preliminary Purchase Price Allocation
Due to the limited time since the acquisition date and limitations on access to Argus information prior to the acquisition date, the initial accounting for the business combination is preliminary at this time. The following table presents the preliminary purchase price allocation for Argus and MediConnect as of the acquisitions’ effective dates, assuming a net cash purchase price for Argus of $425.0 million. The preliminary purchase price allocation for Argus is also subject to further upward or downward adjustments based on the final working capital level at the time of the close.
| Argus | MediConnect | Total | ||||||||||
| Accounts receivable |
$ | 11,947 | $ | 7,077 | $ | 19,024 | ||||||
| Current assets |
737 | 14,918 | 15,655 | |||||||||
| Fixed assets |
4,919 | 1,075 | 5,994 | |||||||||
| Intangible assets |
166,461 | 157,905 | 324,366 | |||||||||
| Goodwill |
284,982 | 223,982 | 508,964 | |||||||||
| Other assets |
20,614 | 17,087 | 37,701 | |||||||||
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| Total assets acquired |
489,660 | 422,044 | 911,704 | |||||||||
| Current liabilities |
9,370 | 3,005 | 12,375 | |||||||||
| Other liabilities |
55,290 | 70,634 | 125,924 | |||||||||
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| Total liabilities assumed |
64,660 | 73,639 | 138,299 | |||||||||
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| Net assets acquired |
$ | 425,000 | $ | 348,405 | $ | 773,405 | ||||||
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