Attached files
file | filename |
---|---|
8-K/A - FORM 8-K/A - SolarWinds, Inc. | d575974d8ka.htm |
EX-23.1 - EX-23.1 - SolarWinds, Inc. | d575974dex231.htm |
EX-99.1 - EX-99.1 - SolarWinds, Inc. | d575974dex991.htm |
EX-99.2 - EX-99.2 - SolarWinds, Inc. | d575974dex992.htm |
Exhibit 99.3
UNAUDITED COMBINED CONDENSED PRO FORMA FINANCIAL INFORMATION
We have derived the following unaudited combined condensed pro forma financial information by applying pro forma adjustments to the historical consolidated financial statements of SolarWinds, Inc. included in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on February 19, 2013. For purposes of the presentation of the Unaudited Combined Condensed Pro Forma Balance Sheet, the adjustments were reflected as of December 31, 2012. The Unaudited Combined Condensed Pro Forma Statements of Income for the year ended December 31, 2012 and for the three months ended March 31, 2013, as adjusted, gives pro forma effect to the acquisition of N-able Technologies International, Inc. as if the acquisition occurred on January 1, 2012. We collectively refer to the adjustments relating to the N-able acquisition as the Acquisition Adjustments. We have described the adjustments, which are directly attributable to the transaction and assumptions that management believes to be reasonable, in the accompanying notes. The unaudited combined condensed pro forma financial information is for informational purposes only and should not be considered indicative of actual results that would have been achieved had the acquisition actually been consummated on the dates indicated and does not purport to be indicative of results of operations as of any future date or for any future period.
On May 24, 2013, we through one of our subsidiaries, SolarWinds Worldwide, LLC (collectively referred to as SolarWinds) completed the acquisition of N-able Technologies International, Inc., a Delaware corporation (N-able) pursuant to an Agreement and Plan of Merger and Reorganization dated May 17, 2013 (the Merger Agreement). Upon completion of the acquisition, N-able became a subsidiary of SolarWinds in exchange for consideration of $127.7 million in cash, including cash acquired (the Closing Cash Consideration) as set forth in the Merger Agreement. $12.0 million of the Closing Cash Consideration is being held in escrow as partial security for the indemnification obligations of the equity holders of N-able. The foregoing description of the transaction is qualified in its entirety by the full text of the Merger Agreement.
N-able is a leader in Cloud-based remote monitoring and management and service automation software for Managed Service Providers. The acquisition was entered into for strategic purposes. The acquisition was accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total estimated purchase price, calculated as described in Note 2 to the unaudited pro forma condensed consolidated financial statements, is allocated to the tangible and intangible assets acquired and liabilities assumed in connection with the acquisition, based on their estimated fair values as of the effective date of the acquisition. The preliminary allocation of the purchase price was based upon managements preliminary valuation of the fair value of tangible assets acquired and liabilities assumed and such estimates and assumptions are subject to change.
The unaudited combined condensed pro forma financial information is prepared for illustrative purposes only and is not necessarily indicative of or intended to represent the results that would have been achieved had the transactions been consummated as of the date indicated or that may be achieved in the future. The unaudited combined condensed pro forma statement of income does not reflect any operating efficiencies and associated cost savings that we may achieve with respect to the combined companies.
The unaudited combined condensed pro forma financial information should be read in conjunction with SolarWinds historical consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on February 19, 2013 and the historical financial statements of N-able also included in the Current Report on Form 8-K/A to which this exhibit relates.
UNAUDITED COMBINED CONDENSED PRO FORMA BALANCE SHEET
As of March 31, 2013
N-Able | Pro Forma | |||||||||||||||||
SolarWinds | Technologies, International, Inc. |
Acquisition Adjustments |
Combined | |||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||
Assets |
||||||||||||||||||
Current Assets |
||||||||||||||||||
Cash and cash equivalents |
$ | 221,325 | $ | 7,104 | $ | (127,731 | ) | (b) | $ | 100,698 | ||||||||
Short-term investments |
44,438 | | | 44,438 | ||||||||||||||
Accounts receivable |
34,315 | 3,667 | | 37,982 | ||||||||||||||
Income tax receivable |
1,776 | 1,656 | | 3,432 | ||||||||||||||
Deferred taxes |
3,036 | | 125 | (a) | 3,161 | |||||||||||||
Other current assets |
2,723 | 1,631 | (1,065 | ) | (a) | 3,289 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total current assets |
307,613 | 14,058 | (128,671 | ) | 193,000 | |||||||||||||
Property and equipment, net |
8,267 | 711 | | 8,978 | ||||||||||||||
Long-term investments |
8,232 | | | 8,232 | ||||||||||||||
Deferred taxes |
1,207 | | | 1,207 | ||||||||||||||
Goodwill |
157,882 | | 92,042 | (a) | 249,924 | |||||||||||||
Intangible assets and other, net |
65,790 | 313 | 30,080 | (a) | 95,870 | |||||||||||||
(313 | ) | (a) | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total assets |
$ | 548,991 | $ | 15,082 | $ | (6,862 | ) | $ | 557,211 | |||||||||
|
|
|
|
|
|
|
|
|||||||||||
Liabilities and stockholders equity |
||||||||||||||||||
Current liabilities other than deferred revenue |
$ | 13,849 | $ | 2,684 | $ | (106 | ) | (a) | $ | 16,427 | ||||||||
Deferred revenue |
109,279 | 3,168 | 1,796 | (a) | 111,075 | |||||||||||||
(3,168 | ) | (a) | ||||||||||||||||
Long-term liabilities other than deferred revenue |
11,855 | | 3,846 | (a) | 15,701 | |||||||||||||
Redeemable preferred stock |
| 9,594 | (9,594 | ) | (c) | | ||||||||||||
Shareholders equity |
||||||||||||||||||
Convertible preferred stock |
| 3,984 | (3,984 | ) | (c) | | ||||||||||||
Common Stock |
75 | 17 | (17 | ) | (c) | 75 | ||||||||||||
Additional paid-in capital |
239,739 | 16,026 | (16,026 | ) | (c) | 239,739 | ||||||||||||
Accumulated other comprehensive loss |
(3,412 | ) | | | (3,412 | ) | ||||||||||||
Accumulated deficit |
177,606 | (20,391 | ) | 20,391 | (c) | 177,606 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total stockholders equity (deficit) |
414,008 | (364 | ) | 364 | 414,008 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities and stockholders equity (deficit) |
$ | 548,991 | $ | 15,082 | $ | (6,862 | ) | $ | 557,211 | |||||||||
|
|
|
|
|
|
|
|
See notes to unaudited combined condensed pro forma financial statements.
2
UNAUDITED COMBINED CONDENSED PRO FORMA STATEMENT OF INCOME
For the Year Ended December 31, 2012
N-Able Technologies, |
Pro Forma | |||||||||||||||||
SolarWinds | International, Inc. |
Acquisition Adjustments |
Combined | |||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||
Net revenue |
$ | 268,964 | $ | 23,947 | $ | | $ | 292,911 | ||||||||||
Cost of revenue |
18,400 | 4,312 | 2,287 | (d) | 24,999 | |||||||||||||
Sales and marketing |
73,046 | 12,321 | | 85,367 | ||||||||||||||
Research and development |
28,769 | 4,202 | | 32,971 | ||||||||||||||
General and administrative |
35,649 | 3,488 | 3,192 | (d) | 42,329 | |||||||||||||
Accrued earnout gain |
(570 | ) | | | (570 | ) | ||||||||||||
Other income (expense) |
849 | (150 | ) | | 699 | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) before income taxes |
114,519 | (526 | ) | (5,479 | ) | 108,514 | ||||||||||||
Expense (benefit) for income taxes |
33,176 | (1,321 | ) | (978 | ) | (e) | 30,877 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | 81,343 | $ | 795 | $ | (4,501 | ) | $ | 77,637 | |||||||||
|
|
|
|
|
|
|
|
|||||||||||
Earnings per share available to common stockholders |
||||||||||||||||||
Basic |
$ | 1.10 | $ | 1.05 | ||||||||||||||
|
|
|
|
|||||||||||||||
Diluted |
$ | 1.07 | $ | 1.02 | ||||||||||||||
|
|
|
|
|||||||||||||||
Shares used in computation of per share amounts |
||||||||||||||||||
Basic |
74,166 | 74,166 | ||||||||||||||||
|
|
|
|
|||||||||||||||
Diluted |
76,035 | 76,035 | ||||||||||||||||
|
|
|
|
See notes to unaudited combined condensed pro forma financial statements.
3
UNAUDITED COMBINED CONDENSED PRO FORMA STATEMENT OF INCOME
For the Three Months Ended March 31, 2013
N-Able Technologies, |
Pro Forma | |||||||||||||||||
SolarWinds | International, Inc. |
Acquisition Adjustments |
Combined | |||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||||
Net revenue |
$ | 72,910 | $ | 7,543 | $ | | $ | 80,453 | ||||||||||
Cost of revenue |
5,631 | 1,395 | 1,238 | (d) | 8,264 | |||||||||||||
Sales and marketing |
20,300 | 3,361 | | 23,661 | ||||||||||||||
Research and development |
7,846 | 1,320 | | 9,166 | ||||||||||||||
General and administrative |
9,821 | 876 | 558 | (d) | 11,255 | |||||||||||||
Other income (expense) |
(28 | ) | 23 | | (5 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Income (loss) before income taxes |
29,284 | 614 | (1,796 | ) | 28,102 | |||||||||||||
Expense (benefit) for income taxes |
6,285 | (379 | ) | (96 | ) | (e) | 5,810 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Net income (loss) |
$ | 22,999 | $ | 993 | $ | (1,700 | ) | $ | 22,292 | |||||||||
|
|
|
|
|
|
|
|
|||||||||||
Earnings per share available to common stockholders |
||||||||||||||||||
Basic |
$ | 0.31 | $ | 0.30 | ||||||||||||||
|
|
|
|
|||||||||||||||
Diluted |
$ | 0.30 | $ | 0.29 | ||||||||||||||
|
|
|
|
|||||||||||||||
Shares used in computation of per share amounts |
||||||||||||||||||
Basic |
74,987 | 74,987 | ||||||||||||||||
|
|
|
|
|||||||||||||||
Diluted |
76,672 | 76,672 | ||||||||||||||||
|
|
|
|
See notes to unaudited combined condensed pro forma financial statements.
4
NOTES TO UNAUDITED COMBINED CONDENSED
PRO FORMA FINANCIAL STATEMENTS
Note 1. Basis of Pro forma Presentation
The historical financial information of N-able Technologies International, Inc. has been adjusted from Canadian dollars to U.S. dollars for pro forma presentation purposes. We used the spot exchange rate as of March 31, 2013 for balance sheet conversion purposes, and the average exchange rate for the period presented for statement of income conversion purposes.
Note 2. Purchase Price Allocation
The unaudited pro forma consolidated financial statements have been prepared to give effect to the completed acquisition, which was accounted for under the acquisition method of accounting. The aggregate amount of the consideration paid by SolarWinds was approximately $127.7 million in cash, including cash acquired. Under the acquisition method of accounting, the total estimated purchase price is allocated to N-ables tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of May 24, 2013, the effective date of the acquisition. Goodwill is not deductible for tax purposes. The fair value of the assets acquired, including goodwill, is preliminary due to the pending completion of the valuation of intangible assets.
Based on managements preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed, which are based on estimates and assumptions that are subject to change, and other factors as described in these unaudited pro forma consolidated financial statements, the preliminary estimated purchase price is allocated as follows:
Fair Value | ||||
(in thousands) | ||||
Current assets, including cash of $6,845 |
$ | 11,660 | ||
Property and equipment |
693 | |||
Deferred tax assets |
125 | |||
Identifiable intangible assets |
30,080 | |||
Goodwill |
94,109 | |||
Current liabilities |
(3,294 | ) | ||
Deferred tax liabilities |
(3,846 | ) | ||
Deferred revenue |
(1,796 | ) | ||
|
|
|||
Total consideration |
$ | 127,731 | ||
|
|
Prior to the end of the measurement period for finalizing the purchase price allocation, if information becomes available which would indicate material adjustments are required to the purchase price allocation, such adjustments will be included in the purchase price allocation retrospectively.
The following table summarizes the fair value of the identifiable intangible assets and estimated useful lives. The resulting fair value is being amortized over the estimated useful life of each identifiable asset.
Fair Value | Useful Life | |||||
(in thousands) | (in years) | |||||
Developed product technologies |
$ | 17,170 | 5 | |||
Customer relationships |
9,330 | 8 | ||||
Customer backlog |
2,170 | 4 | ||||
Tradenames |
970 | 8 | ||||
Non-competition covenant |
440 | 6 | ||||
|
|
|||||
Total identifiable intangible assets |
$ | 30,080 | ||||
|
|
5
Note 3. Pro forma Adjustments
The pro forma financial information illustrates the measurable effects of a particular transaction, while excluding effects that rely on highly judgmental estimates of how operating decisions may or may not have changed as a result of that transaction. Accordingly, we adjusted the pro forma results for quantifiable items such as the amortization of acquired intangible assets and the estimated income tax provision of the pro forma combined results. We prepared the pro forma financial information for the combined entities for comparative purposes only, and it is not indicative of what actual results would have been if the acquisition had taken place on January 1, 2012, or of future results.
The unaudited combined condensed pro forma balance sheet has been adjusted to reflect the following:
(a) | Adjustments to record the fair value of N-ables historical assets acquired and liabilities assumed and intangible assets and goodwill related to the acquisition. |
(b) | To reflect cash payments made to N-able as a result of the completed acquisition. |
(c) | Adjustment to eliminate N-able historical common stockholders equity (deficit). |
The unaudited combined condensed pro forma statements of income has been adjusted to reflect the following:
(d) | Adjustment to reflect the amortization expense for the intangible assets arising from the acquisition. |
(e) | Adjustment to reflect the estimated income tax provision of the pro forma combined results. Includes the tax impact of the pro forma acquisition adjustments using the estimated income tax rates applicable to the jurisdictions in which the pro forma acquisition adjustments are expected to be recorded. |
The N-able pro forma results were not adjusted for post-acquisition operational decisions made by management such as changes in the product offerings, pricing and packaging of the products or adjustments for liabilities related to business integration activities. However, liabilities ultimately may be recorded for costs associated with business integration activities and such liabilities will be expensed as incurred in our consolidated financial statements.
Note 4. Pro forma Net Loss per Common Share
The pro forma basic and diluted net loss per common share is based on the weighted average number of common shares of our common stock outstanding during the period. No shares of common stock were issued as consideration in the acquisition. The diluted weighted average number of common shares does not include outstanding stock options as their inclusion would be anti-dilutive.
6