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8-K/A - FORM 8-K/A - FUSION-IO, INC.d560342d8ka.htm
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EX-99.1 - EX-99.1 - FUSION-IO, INC.d560342dex991.htm

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On April 24, 2013, Fusion-io, Inc. (the “Company” or “Fusion-io”) completed its acquisition of NexGen Storage, Inc. (“NexGen”), pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) entered into on April 24, 2013 between Fusion-io, NexGen and Shareholder Representative Services LLC as stockholder representative.

The unaudited pro forma condensed combined balance sheet as of December 31, 2012 and the unaudited pro forma condensed combined statements of operations for the six months ended December 31, 2012 and the year ended June 30, 2012, are based on the historical financial statements of the Company and NexGen after giving effect to the Company’s acquisition of NexGen, and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements.

The Company’s fiscal year end is June 30 and NexGen’s calendar year end is December 31. The unaudited pro forma condensed combined statement of operations for the six months ended December 31, 2012 combined the Company’s historical results for the fiscal six months ended December 31, 2012 with NexGen’s historical results for the calendar six months ended December 31, 2012. The unaudited pro forma condensed combined statement of operations for the year ended June 30, 2012 combined the Company’s historical results for the fiscal year ended June 30, 2012 with NexGen’s historical results for the calendar six months ended December 31, 2011 and the calendar six months ended June 30, 2012.

The unaudited pro forma condensed combined balance sheet is presented as if the acquisition of NexGen had occurred on December 31, 2012. The unaudited pro forma condensed combined statement of operations for the six months ended December 31, 2012 is presented as if the acquisition of NexGen had occurred on July 1, 2012. The unaudited pro forma condensed combined statement of operations for the year ended June 30, 2012 is presented as if the acquisition of NexGen had occurred on July 1, 2011.

The preliminary allocation of the consideration transferred 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 NexGen.

The unaudited pro forma condensed combined financial statements, including the notes thereto, do not reflect any potential cost savings or other synergies that could result from the Merger Agreement. The unaudited pro forma condensed combined 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 Merger Agreement had been consummated on the dates indicated. The pro forma adjustments are based upon information and assumptions available at the time of filing this Current Report on Form 8-K/A.

The unaudited pro forma condensed combined 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 June 30, 2012, which was filed with the SEC on August 27, 2012, the Company’s subsequent filings with the Securities and Exchange Commission, and NexGen’s historical financial statements as of December 31, 2012 and 2011 and for the years then ended and accompanying notes included as Exhibit 99.1 in this Current Report on Form 8–K/A.

 

 

1


FUSION-IO, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of December 31, 2012

(in thousands)

 

     Historical                  
     Fusion-io     NexGen     Pro Forma
Adjustments
    Adjustment
Reference
  Pro Forma
Combined
 

Assets

          

Current assets:

          

Cash and cash equivalents

   $ 368,525      $ 2,554      $ (108,973   (A)   $ 262,106   

Restricted cash

     —          288        —            288   

Accounts receivable

     55,968        628        (97   (B)     56,499   

Inventories

     74,185        850        —            75,035   

Prepaid expenses and other current assets

     9,614        151        (30   (C)     9,735   
  

 

 

   

 

 

   

 

 

     

 

 

 

Total current assets

     508,292        4,471        (109,100       403,663   

Property and equipment, net

     34,509        1,736        (198   (C)     36,047   

Intangible assets, net

     6,852        —          15,910      (D)     22,762   

Goodwill

     54,777        —          89,895      (E)     144,672   

Other assets

     635        146        (146   (C)     635   
  

 

 

   

 

 

   

 

 

     

 

 

 

Total assets

   $ 605,065      $ 6,353      $ (3,639     $ 607,779   
  

 

 

   

 

 

   

 

 

     

 

 

 

Liabilities and Stockholders’ Equity

          

Current liabilities:

          

Accounts payable

   $ 9,109      $ 451      $ (97   (B)   $ 9,463   

Accrued and other current liabilities

     33,850        863        390      (F)     35,080   
         (23   (C)  

Deferred revenue

     27,203        77        —            27,280   

Long-term debt, current portion

     —          976        (976   (I)       
  

 

 

   

 

 

   

 

 

     

 

 

 

Total current liabilities

     70,162        2,367        (706       71,823   

Derivative warrant liability

     —          25        (25   (C)     —     

Deferred revenue, less current portion

     10,927        92        —            11,019   

Deferred rent

     —          171        (171   (C)     —     

Long-term debt, net of current portion

     —          2,509        (2,509   (I)     —     

Other liabilities

     13,591        —          (67   (C)     13,524   

Commitments and contingencies

          

Stockholders’ equity:

          

Preferred stock

     —          11,926        (11,926   (G)     —     

Common stock

     19        5        (5   (G)     19   

Additional paid-in capital

     575,272        114        (114   (G)     576,690   
         1,418      (H)  

Accumulated other comprehensive loss

     (12     —          —            (12

Accumulated deficit

     (64,894     (10,856     10,856      (G)     (65,284
         (390   (F)  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total stockholders’ equity

     510,385        1,189        (161       511,413   
  

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities and stockholders’ equity

   $ 605,065      $ 6,353      $ (3,639     $ 607,779   
  

 

 

   

 

 

   

 

 

     

 

 

 

See accompanying notes to unaudited pro forma condensed combined consolidated financial statements

 

2


FUSION-IO, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED DECEMBER 31, 2012

(in thousands, except per share amounts)

 

     Historical                  
     Fusion-io     NexGen     Pro Forma
Adjustments
    Adjustment
Reference
  Pro Forma
Combined
 
     (in thousands, except per share data)  

Revenue

   $ 238,684      $ 1,021      $ (385   (AA)   $ 239,320   

Cost of revenue

     94,004        617        (385   (AA)     96,111   
         1,875      (BB)  
  

 

 

   

 

 

   

 

 

     

 

 

 

Gross profit

     144,680        404        (1,875       143,209   

Operating expenses:

          

Sales and marketing

     53,696        2,433        812      (CC)     57,104   
         163      (BB)  

Research and development

     43,995        1,588        1,210      (CC)     47,018   
         225      (DD)  

General and administrative

     31,646        1,327        1,976      (CC)     34,722   
         (227   (DD)  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total operating expenses

     129,337        5,348        4,159          138,844   
  

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) from operations

     15,343        (4,944     (6,034       4,365   

Other income (expense):

          

Interest income

     213        1        —            214   

Interest expense

     (48     (27     27      (EE)     (48

Other income

     (14     —          —            (14
  

 

 

   

 

 

   

 

 

     

 

 

 

Income (loss) before income taxes

     15,494        (4,970     (6,007       4,517   

Income tax expense

     (9,829     —          1,650      (FF)     (8,179
  

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss)

   $ 5,665      $ (4,970   $ (4,357     $ (3,662
  

 

 

   

 

 

   

 

 

     

 

 

 

Net income (loss) per common share:

          

Basic

   $ 0.06            $ (0.04

Diluted

   $ 0.05            $ (0.04

Weighted average number of shares:

          

Basic

     95,030              95,030   

Diluted

     108,737              95,030   

See accompanying notes to unaudited pro forma condensed combined consolidated financial statements

 

3


FUSION-IO, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED JUNE 30, 2012

(in thousands, except per share amounts)

 

     Historical                  
     Fusion-io     NexGen     Pro Forma
Adjustments
    Adjustment
Reference
  Pro Forma
Combined
 
     (in thousands, except per share data)  

Revenue

   $ 359,349      $ 275      $ (813   (AA)   $ 358,811   

Cost of revenue

     159,045        208        (813   (AA)     162,190   
         3,750      (GG)  
  

 

 

   

 

 

   

 

 

     

 

 

 

Gross profit

     200,304        67        (3,750       196,621   

Operating expenses:

          

Sales and marketing

     87,171        2,389        1,632      (HH)     91,509   
         325      (GG)  
         (8   (II)  

Research and development

     60,006        1,712        2,437      (HH)     64,630   
         475      (II)  

General and administrative

     58,423        1,256        3,958      (HH)     63,586   
         (51   (II)  
  

 

 

   

 

 

   

 

 

     

 

 

 

Total operating expenses

     205,600        5,357        8,768          219,725   
  

 

 

   

 

 

   

 

 

     

 

 

 

Loss from operations

     (5,296     (5,290     (12,518       (23,104

Other income (expense):

          

Interest income

     384        10        —            394   

Interest expense

     (177     (6     6      (EE)     (177

Other income

     121        —          —            121   
  

 

 

   

 

 

   

 

 

     

 

 

 

Loss before income taxes

     (4,968     (5,286     (12,512       (22,766

Income tax expense

     (615            331      (FF)     (284
  

 

 

   

 

 

   

 

 

     

 

 

 

Net loss

   $ (5,583   $ (5,286   $ (12,181     $ (23,050
  

 

 

   

 

 

   

 

 

     

 

 

 

Net loss per common share:

          

Basic

   $ (0.06         $ (0.26

Diluted

   $ (0.06         $ (0.26

Weighted average number of shares:

          

Basic

     87,674              87,674   

Diluted

     87,674              87,674   

See accompanying notes to unaudited pro forma condensed combined consolidated financial statements

 

4


FUSION-IO, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRO FORMA PRESENTATION

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

The Company accounts for business combinations pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations. 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 fair value transferred and the net of the identifiable assets acquired and the liabilities assumed at the acquisition date.

The Company has made significant assumptions and estimates in determining the consideration transferred and the preliminary allocation of the consideration transferred 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 condensed combined financial statements, including variances in fair values recorded, as well as expenses and cash flows associated with these items.

The unaudited pro forma condensed combined 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 NexGen 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 condensed combined financial statements have been adjusted to give effect to pro forma events that are (i) directly attributable to the acquisitions, (ii) factually supportable, and (iii) with respect to the statements of operations, expected to have a continuing impact on the combined results. The unaudited pro forma condensed combined 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 condensed combined financial statements should be read in conjunction with the Company’s historical consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended June 30, 2012, the Company’s subsequent filings with the Securities and Exchange Commission, and NexGen’s historical financial statements as of December 31, 2012 and 2011 and for the years then ended and accompanying notes included as Exhibit 99.1 in this Current Report on Form 8–K/A.

NOTE 2. NEXGEN ACQUISITION

On April 24, 2013, the Company acquired 100% of the stock of NexGen, a developer of hybrid storage systems based in Louisville, Colorado, pursuant to the Merger Agreement dated April 24, 2013. For purposes of the unaudited pro forma condensed combined balance sheet, the consideration transferred was $110,488,000, consisting of (i) $108,973,000 in cash, (ii) $1,418,000 in assumed stock options, and (iii) $97,000 elimination of intercompany balances.

Of the cash consideration, $17,854,000 of cash was deposited in escrow as partial security for the indemnification obligations of the NexGen stockholders pursuant to the Merger Agreement. This amount, less any indemnification claims, will be distributed promptly following April 24, 2014.

In addition, the Company agreed to pay $5,000,000 in cash to one of the selling stockholders in twelve equal quarterly installments and issue 339,627 in shares of the Company’s common stock to another selling stockholder, which is subject to a repurchase right that lapses in twelve equal quarterly installments. The quarterly installments for both the cash and restricted stock amounts are subject to ongoing employment requirements.

The Company also assumed NexGen’s options and restricted stock units that were unvested at the time of the merger that were converted into unvested options to purchase 822,927 shares of the Company’s common stock and

 

5


FUSION-IO, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

84,808 of the Company’s restricted stock units. The fair value of the assumed options was estimated using the Black-Scholes-Merton option pricing model with market assumptions. Option pricing models require the use of highly subjective market assumptions, including expected stock price volatility, which if changed, can materially affect fair value estimates. The more significant assumptions used in estimating the fair value of these stock options include expected volatility of 65.0%, expected option term of between 3.9 years and 5.7 years and a risk-free interest rate of 0.70%.

Subsequent to the acquisition, the Company will recognize over the underlying future service period up to approximately $23,701,000 of stock-based compensation expense related to cash and restricted stock held back by the Company and the fair value of assumed stock-based awards.

Preliminary Allocation of Consideration Transferred

Pursuant to the Company’s business combinations accounting policy, the total consideration transferred for NexGen was allocated to the preliminary net tangible and intangible assets based upon their preliminary fair values as set forth below. The acquisition of NexGen adds to the Company’s software defined storage product portfolio and expands the Company’s reach into small to medium enterprise markets. These factors contributed to a consideration transferred in excess of the fair value of the NexGen net tangible and intangible assets acquired, and as a result, the Company has recorded goodwill in connection with this transaction. The Company does not expect the goodwill associated with the acquisition of NexGen to be deductible for tax purposes. The preliminary allocation of the consideration transferred 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’s preliminary allocation of consideration transferred for NexGen is as follows (in thousands):

 

Consideration Transferred

   Amount  

Net tangible assets

   $ 4,683   

Identifiable intangible assets

     15,910   

Goodwill

     89,895   
  

 

 

 

Total

   $ 110,488   
  

 

 

 

NOTE 3. PRO FORMA ADJUSTMENTS

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

 

  (A) Adjustment to record the cash consideration transferred to the former NexGen stockholders.

 

  (B) Adjustment to record the elimination of intercompany balances.

 

  (C) Adjustment to remeasure the acquired assets and assumed liabilities to fair value.

 

  (D) Adjustment to record the fair value of the following identifiable intangible assets (in thousands):

 

     Amount  

Developed technology

   $ 15,000   

Trade names

     520   

Customer relationships

     390   
  

 

 

 

Total

   $ 15,910   
  

 

 

 

 

6


FUSION-IO, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

  (E) Adjustment to record goodwill.

 

  (F) Adjustment to record non-recurring transaction costs incurred by the Company in connection with the acquisition.

 

  (G) Adjustments to record the elimination of NexGen’s historical stockholders’ equity.

 

  (H) Adjustment to record the estimated fair value of consideration related to assumed stock options.

 

  (I) Adjustments to eliminate the long-term debt not assumed in connection with the acquisition.

 

  (AA) Adjustments to eliminate the impact of sales transactions with NexGen.

 

  (BB) Adjustment to record the amortization expense related to the intangible assets acquired as if the acquisition of NexGen had occurred on July 1, 2012 as shown in the table below (in thousands).

 

      NexGen Historical
Amortization  Expense
     Estimated
Amortization Expense
     Difference  

Cost of revenue

   $ —         $ 1,875       $ 1,875   

Sales and marketing

     —           163         163   
  

 

 

    

 

 

    

 

 

 

Total

   $ —         $ 2,038       $ 2,038   
  

 

 

    

 

 

    

 

 

 

Estimated amortization expense by intangible asset category as if the acquisition of NexGen had occurred on July 1, 2012 and the respective estimated useful life of each intangible asset category are shown below (dollar amounts in thousands).

 

      Intangible Asset
Amount
     Estimated
Useful Life
     Estimated
Amortization Expense
 

Developed technology

   $ 15,000         4 years       $ 1,875   

Trade names

     520         2 years         130   

Customer relationships

     390         6 years         33   
  

 

 

       

 

 

 

Total

   $ 15,910          $ 2,038   
  

 

 

       

 

 

 

 

  (CC) Adjustment to record the difference between NexGen’s historical stock-based compensation expense and the estimated stock-based compensation expense as if the acquisition of NexGen had occurred on July 1, 2012 as shown in the table below (in thousands).

 

              NexGen Historical         
Stock-Based Compensation
                 Estimated             
Stock-Based Compensation
     Difference  

Sales and marketing

   $ 14       $ 826       $ 812   

Research and development

     18         1,228         1,210   

General and administrative

     11         1,987         1,976   
  

 

 

    

 

 

    

 

 

 

Total

   $ 43       $ 4,041       $ 3,998   
  

 

 

    

 

 

    

 

 

 

 

7


FUSION-IO, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

  (DD) Adjustment to record the difference between NexGen’s historical depreciation expense and the estimated depreciation expense based upon the remeasurement of the related property and equipment to fair value as if the acquisition of NexGen had occurred on July 1, 2012 as shown in the table below (in thousands).

 

      NexGen Historical
Depreciation Expense
     Estimated
Depreciation Expense
     Difference  

Research and development

   $       $ 225       $ 225   

General and administrative

     264         37         (227
  

 

 

    

 

 

    

 

 

 

Total

   $ 264       $ 262       $ (2
  

 

 

    

 

 

    

 

 

 

 

  (EE) Adjustments to record the elimination of interest expense related to the long-term debt not assumed in connection with the acquisition.
  (FF) Adjustments to record the impact of pretax losses generated by NexGen.
  (GG) Adjustment to record the amortization expense related to the intangible assets acquired as if the acquisition of NexGen had occurred on July 1, 2011 as shown in the table below (in thousands).

 

      NexGen Historical
Amortization  Expense
     Estimated
Amortization Expense
     Difference  

Cost of revenue

   $ —         $ 3,750       $ 3,750   

Sales and marketing

     —           325         325   
  

 

 

    

 

 

    

 

 

 

Total

   $ —         $ 4,075       $ 4,075   
  

 

 

    

 

 

    

 

 

 

Estimated amortization expense by intangible asset category as if the acquisition of NexGen had occurred on July 1, 2011 and the respective estimated useful life of each intangible asset category are shown below (dollar amounts in thousands).

 

      Intangible Asset
Amount
     Estimated
Useful Life
     Estimated
Amortization Expense
 

Developed technology

   $ 15,000         4 years       $ 3,750   

Trade names

     520         2 years         260   

Customer relationships

     390         6 years         65   
  

 

 

       

 

 

 

Total

   $ 15,910          $ 4,075   
  

 

 

       

 

 

 

 

  (HH) Adjustment to record the difference between NexGen’s historical stock-based compensation expense and the estimated stock-based compensation expense as if the acquisition of NexGen had occurred on July 1, 2011 as shown in the table below (in thousands).

 

8


FUSION-IO, INC.

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

              NexGen Historical         
Stock-Based Compensation
                 Estimated             
Stock-Based Compensation
     Difference  

Sales and marketing

   $ 18       $ 1,650       $ 1,632   

Research and development

     18         2,455         2,437   

General and administrative

     16         3,974         3,958   
  

 

 

    

 

 

    

 

 

 

Total

   $ 52       $ 8,079       $ 8,027   
  

 

 

    

 

 

    

 

 

 

 

  (II) Adjustment to record the difference between NexGen’s historical depreciation expense and the estimated depreciation expense based upon the remeasurement of the related property and equipment to fair value as if the acquisition of NexGen had occurred on July 1, 2011 as shown in the table below (in thousands).

 

      NexGen Historical
Depreciation Expense
     Estimated
Depreciation Expense
     Difference  

Sales and marketing

   $ 8       $ —         $ (8

Research and development

     19         494         475   

General and administrative

     132         81         (51
  

 

 

    

 

 

    

 

 

 

Total

   $ 159       $ 575       $ 416   
  

 

 

    

 

 

    

 

 

 

 

9