Attached files
| file | filename |
|---|---|
| 8-K - COMPUWARE CORPORATION 8-K 1-31-2014 - COMPUWARE CORP | form8k.htm |
| EX-2.13 - EXHIBIT 2.13 - COMPUWARE CORP | ex2_13.htm |
Exhibit 99.1
COMPUWARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On January 31, 2014, Compuware Corporation (the “Company”) and M4 Global Solutions Holding B.V. (“Buyer”), a private limited liability company incorporated in the Netherlands, completed the initial closing of an Asset Purchase Agreement, as amended, between the Company and MEP PX Acquisition LLC (“MEP”), a Delaware limited liability company controlled by Marlin Equity Partners (“Marlin”). Buyer is the assignee of MEP’s rights under the Asset Purchase Agreement and, like MEP, is controlled by Marlin. The Asset Purchase Agreement provides for the acquisition by Buyer of substantially all of the assets that are primarily related to the Company’s Changepoint, Professional Services and Uniface business units, and certain liabilities of the acquired business units. The amended agreement provides for, among other things, multiple subsequent closings in foreign jurisdictions. At the initial closing on January 31, 2014, the relevant assets and liabilities located in the United States, Canada and the Netherlands were acquired by Buyer and Buyer paid the full cash payment of $112 million. The subsequent closings will occur in each jurisdiction as promptly as practicable thereafter. Notwithstanding the subsequent closings with respect to the assets and liabilities located in certain foreign jurisdictions, the Agreement, as amended, provides that for all economic purposes, all benefits and burdens of ownership of the full amount of the purchased assets and liabilities, risk of loss and all profit and loss from the purchased operations after January 31, 2014 belong to the Buyer, and the parties agreed to take certain actions necessary to that end.
The accompanying unaudited pro forma condensed consolidated financial statements of Compuware Corporation and its subsidiaries (collectively, the “Company”, Compuware”, “we”, “our” and “us”) were derived from the Company’s historical condensed consolidated financial statements and contain the required unaudited pro forma condensed consolidated balance sheet of the Company as of September 30, 2013, and the unaudited pro forma condensed consolidated statements of operations for the fiscal years ended March 31, 2011, 2012 and 2013 and for the six months ended September 30, 2013.
The following unaudited pro forma condensed consolidated financial statements are furnished for informational purposes only and do not purport to reflect the Company’s financial position and results of operations had the disposition occurred on the date as indicated above. Further, these financial statements are not necessarily indicative of the Company’s future financial position and future results of operations and should be read in conjunction with the accompanying notes and with the historical condensed consolidated financial statements of the Company and related notes thereto included in its Annual Report on Form 10-K for the year ended March 31, 2013 and its Quarterly Report on Form 10-Q for the six months ended September 30, 2013, both filed with the Securities and Exchange Commission. The unaudited pro forma condensed consolidated statements of operations give effect to the disposition by removing the results from the Changepoint, Professional Services and Uniface business units as if the disposition had occurred as of April 1, 2010 and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed consolidated financial information. The unaudited pro forma condensed consolidated balance sheet reflects the disposition of the Changepoint, Professional Services and Uniface business units as if it occurred on September 30, 2013. The pro forma adjustments are based on the best information available and assumptions that management believes are factually supportable.
Future results may vary significantly from the results reflected in such statements. For example, the financial information herein does not reflect any potential earnings or other impacts from the use of the proceeds from the disposition or cost reductions of previously allocated corporate costs and potential subsequent restructuring charges.
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 2013
(Unaudited, In Thousands)
|
Pro Forma Adjustments
|
||||||||||||||||||||
|
ASSETS
|
Historical
as Reported |
Business
Disposition |
Sale-Related
Pro Forma |
Pro Forma
Totals |
||||||||||||||||
|
CURRENT ASSETS:
|
||||||||||||||||||||
|
Cash and cash equivalents
|
$
|
50,372
|
$
|
- |
$
|
112,000
|
(a)
|
$
|
162,372
|
|||||||||||
|
Accounts receivable, net
|
381,892
|
(28,746
|
)
|
(b)
|
- |
353,146
|
||||||||||||||
|
Offering proceeds receivable
|
68,448
|
- | - |
68,448
|
||||||||||||||||
|
Deferred tax asset, net
|
42,837
|
- |
(4,649
|
)
|
(g)
|
38,188
|
||||||||||||||
|
Income taxes refundable
|
4,628
|
- |
257
|
(e)
|
4,885
|
|||||||||||||||
|
Prepaid expenses and other current assets
|
33,365
|
(1,458
|
)
|
(b)
|
- |
31,907
|
||||||||||||||
|
Total current assets
|
581,542
|
(30,204
|
)
|
107,608
|
658,946
|
|||||||||||||||
|
|
||||||||||||||||||||
|
PROPERTY AND EQUIPMENT, LESS ACCUMULATED DEPRECIATION AND AMORTIZATION
|
295,264
|
(3,211
|
)
|
(b)
|
- |
292,053
|
||||||||||||||
|
|
||||||||||||||||||||
|
CAPITALIZED SOFTWARE AND OTHER INTANGIBLE ASSETS, NET
|
111,162
|
(7,007
|
)
|
(b)
|
- |
104,155
|
||||||||||||||
|
|
||||||||||||||||||||
|
OTHER:
|
||||||||||||||||||||
|
Accounts receivable
|
191,208
|
(13,769
|
)
|
(b)
|
- |
177,439
|
||||||||||||||
|
Deferred tax asset, net
|
30,351
|
- |
(1,974
|
)
|
(g)
|
28,377
|
||||||||||||||
|
Goodwill
|
732,265
|
(86,153
|
)
|
(b)
|
- |
646,112
|
||||||||||||||
|
Other
|
28,688
|
(7
|
)
|
(b)
|
- |
28,681
|
||||||||||||||
|
TOTAL ASSETS
|
$
|
1,970,480
|
$
|
(140,351
|
)
|
$
|
105,634
|
$
|
1,935,763
|
|||||||||||
|
|
||||||||||||||||||||
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||||||||||||||
|
|
||||||||||||||||||||
|
CURRENT LIABILITIES:
|
||||||||||||||||||||
|
Accounts payable
|
$
|
16,894
|
$
|
(1,365
|
)
|
(b)
|
$
|
- |
$
|
15,529
|
||||||||||
|
Accrued expenses
|
92,969
|
(7,317
|
)
|
(b)
|
13,440
|
(c)
|
99,092
|
|||||||||||||
|
Income taxes payable
|
18,266
|
- |
23,145
|
(e)
|
41,411
|
|||||||||||||||
|
Deferred revenue
|
387,878
|
(35,801
|
)
|
(b)
|
-
|
352,077
|
||||||||||||||
|
Total current liabilities
|
516,007
|
(44,483
|
)
|
36,585
|
508,109
|
|||||||||||||||
|
|
||||||||||||||||||||
|
LONG TERM DEBT
|
14,000
|
- | - |
14,000
|
||||||||||||||||
|
|
||||||||||||||||||||
|
DEFERRED REVENUE
|
285,119
|
(19,591
|
)
|
(b)
|
- |
265,528
|
||||||||||||||
|
|
||||||||||||||||||||
|
ACCRUED EXPENSES
|
18,274
|
- |
4,071
|
(d)
|
22,345
|
|||||||||||||||
|
|
||||||||||||||||||||
|
DEFERRED TAX LIABILITY, NET
|
52,769
|
- |
(11,108
|
)
|
(1)
|
41,661
|
||||||||||||||
|
Total liabilities
|
886,169
|
(64,074
|
)
|
29,548
|
851,643
|
|||||||||||||||
|
|
||||||||||||||||||||
|
SHAREHOLDERS' EQUITY:
|
||||||||||||||||||||
|
Common stock
|
2,157
|
- | - |
2,157
|
||||||||||||||||
|
Additional paid-in capital
|
799,647
|
- |
(244
|
)
|
(f)
|
799,403
|
||||||||||||||
|
Retained earnings
|
268,937
|
(76,277
|
)
|
(h)
|
76,330
|
(h)
|
268,990
|
|||||||||||||
|
Accumulated other comprehensive loss
|
(7,539
|
)
|
- | - |
(7,539
|
)
|
||||||||||||||
|
Total Compuware shareholders' equity
|
1,063,202
|
(76,277
|
)
|
76,086
|
1,063,011
|
|||||||||||||||
|
Non-controlling interest
|
21,109
|
- | - |
21,109
|
||||||||||||||||
|
Total shareholders' equity
|
1,084,311
|
(76,277
|
)
|
76,086
|
1,084,120
|
|||||||||||||||
|
|
||||||||||||||||||||
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
1,970,480
|
$
|
(140,351
|
)
|
$
|
105,634
|
$
|
1,935,763
|
|||||||||||
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statements of Operations
Year Ended March 31, 2011
(Unaudited, in thousands, except per share data)
|
|
Historical
as Reported |
Results of
operations of |
|
Pro Forma
Totals |
|||||||||
|
REVENUES
|
|
||||||||||||
|
Software license fees
|
$
|
194,745
|
$
|
(21,102
|
)
|
(j)
|
$
|
173,643
|
|||||
|
Maintenance fees
|
419,240
|
(43,992
|
)
|
(j)
|
375,248
|
||||||||
|
Subscription fees
|
67,718
|
-
|
|
67,718
|
|||||||||
|
Professional services fees
|
192,202
|
(163,480
|
)
|
(j)
|
28,722
|
||||||||
|
Application services fees
|
55,025
|
-
|
|
55,025
|
|||||||||
|
|
|
||||||||||||
|
Total revenues
|
928,930
|
(228,574
|
)
|
|
700,356
|
||||||||
|
|
|
||||||||||||
|
OPERATING EXPENSES
|
|
||||||||||||
|
Cost of software license fees
|
14,216
|
(1,160
|
)
|
(j)
|
13,056
|
||||||||
|
Cost of maintenance fees
|
32,975
|
(3,716
|
)
|
(j)
|
29,259
|
||||||||
|
Cost of subscription fees
|
24,974
|
-
|
|
24,974
|
|||||||||
|
Cost of professional services
|
165,939
|
(137,022
|
)
|
(j)
|
28,917
|
||||||||
|
Cost of application services
|
51,011
|
-
|
|
51,011
|
|||||||||
|
Technology development and support
|
90,330
|
(10,178
|
)
|
(j)
|
80,152
|
||||||||
|
Sales and marketing
|
243,771
|
(34,647
|
)
|
(j)
|
209,124
|
||||||||
|
Administrative and general
|
155,400
|
(10,029
|
)
|
(j)
|
145,371
|
||||||||
|
|
|
||||||||||||
|
Total operating expenses
|
778,616
|
(196,752
|
)
|
|
581,864
|
||||||||
|
|
|
||||||||||||
|
INCOME FROM OPERATIONS
|
150,314
|
(31,822
|
)
|
|
118,492
|
||||||||
|
|
|
||||||||||||
|
Other income, net
|
4,462
|
-
|
|
4,462
|
|||||||||
|
|
|
||||||||||||
|
INCOME BEFORE INCOME TAX PROVISION
|
154,776
|
(31,822
|
)
|
|
122,954
|
||||||||
|
|
|
||||||||||||
|
Income tax provision
|
47,335
|
(14,032
|
)
|
(k)
|
33,303
|
||||||||
|
|
|
||||||||||||
|
NET INCOME FROM CONTINUING OPERATIONS
|
$
|
107,441
|
$
|
(17,790
|
)
|
|
$
|
89,651
|
|||||
|
|
|
||||||||||||
|
Net income from continuing operations per common share - basic
|
$
|
0.49
|
|
$
|
0.41
|
||||||||
|
|
|
||||||||||||
|
Net income from continuing operations per common share - diluted
|
$
|
0.48
|
|
$
|
0.40
|
||||||||
|
|
|
||||||||||||
|
Weighted average shares outstanding - basic
|
220,616
|
|
220,616
|
||||||||||
|
|
|
||||||||||||
|
Weighted average shares outstanding - diluted
|
226,095
|
|
226,095
|
||||||||||
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statements of Operations
Year Ended March 31, 2012
(Unaudited, in thousands, except per share data)
|
|
Historical
as Reported |
Results of
operations of |
|
Pro Forma
Totals |
|||||||||
|
REVENUES
|
|
||||||||||||
|
Software license fees
|
$
|
220,885
|
$
|
(25,134
|
)
|
(j)
|
$
|
195,751
|
|||||
|
Maintenance fees
|
427,534
|
(46,566
|
)
|
(j)
|
380,968
|
||||||||
|
Subscription fees
|
78,438
|
(2,192
|
)
|
(j)
|
76,246
|
||||||||
|
Professional services fees
|
209,184
|
(172,389
|
)
|
(j)
|
36,795
|
||||||||
|
Application services fees
|
73,731
|
-
|
|
73,731
|
|||||||||
|
|
|
||||||||||||
|
Total revenues
|
1,009,772
|
(246,281
|
)
|
|
763,491
|
||||||||
|
|
|
||||||||||||
|
OPERATING EXPENSES
|
|
||||||||||||
|
Cost of software license fees
|
17,572
|
(1,181
|
)
|
(j)
|
16,391
|
||||||||
|
Cost of maintenance fees
|
38,670
|
(3,955
|
)
|
(j)
|
34,715
|
||||||||
|
Cost of subscription fees
|
29,669
|
(567
|
)
|
(j)
|
29,102
|
||||||||
|
Cost of professional services
|
182,625
|
(146,349
|
)
|
(j)
|
36,276
|
||||||||
|
Cost of application services
|
72,384
|
-
|
|
72,384
|
|||||||||
|
Technology development and support
|
104,968
|
(10,735
|
)
|
(j)
|
94,233
|
||||||||
|
Sales and marketing
|
273,520
|
(31,309
|
)
|
(j)
|
242,211
|
||||||||
|
Administrative and general
|
163,723
|
(9,357
|
)
|
(j)
|
154,366
|
||||||||
|
|
|
||||||||||||
|
Total operating expenses
|
883,131
|
(203,453
|
)
|
|
679,678
|
||||||||
|
|
|
||||||||||||
|
INCOME FROM OPERATIONS
|
126,641
|
(42,828
|
)
|
|
83,813
|
||||||||
|
|
|
||||||||||||
|
Other income, net
|
1,633
|
|
1,633
|
||||||||||
|
|
|
||||||||||||
|
INCOME BEFORE INCOME TAX PROVISION
|
128,274
|
(42,828
|
)
|
|
85,446
|
||||||||
|
|
|
||||||||||||
|
Income tax provision
|
39,903
|
(17,898
|
)
|
(k)
|
22,005
|
||||||||
|
|
|
||||||||||||
|
NET INCOME FROM CONTINUING OPERATIONS
|
$
|
88,371
|
$
|
(24,930
|
)
|
|
$
|
63,441
|
|||||
|
|
|
||||||||||||
|
Net income from continuing operations per common share - basic
|
$
|
0.40
|
|
$
|
0.29
|
||||||||
|
|
|
||||||||||||
|
Net income from continuing operations per common share - diluted
|
$
|
0.40
|
|
$
|
0.29
|
||||||||
|
|
|
||||||||||||
|
Weighted average shares outstanding - basic
|
218,344
|
|
218,344
|
||||||||||
|
|
|
||||||||||||
|
Weighted average shares outstanding - diluted
|
222,378
|
|
222,378
|
||||||||||
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statements of Operations
Year Ended March 31, 2013
(Unaudited, in thousands, except per share data)
|
|
Historical
as Reported |
Results of
operations of |
|
Pro Forma
Totals |
|||||||||
|
REVENUES
|
|
||||||||||||
|
Software license fees
|
$
|
178,922
|
$
|
(19,829
|
)
|
(j)
|
$
|
159,093
|
|||||
|
Maintenance fees
|
407,480
|
(46,121
|
)
|
(j)
|
361,359
|
||||||||
|
Subscription fees
|
82,442
|
(2,580
|
)
|
(j)
|
79,862
|
||||||||
|
Professional services fees
|
185,011
|
(152,115
|
)
|
(j)
|
32,896
|
||||||||
|
Application services fees
|
90,694
|
-
|
|
90,694
|
|||||||||
|
|
|
||||||||||||
|
Total revenues
|
944,549
|
(220,645
|
)
|
|
723,904
|
||||||||
|
|
|
||||||||||||
|
OPERATING EXPENSES
|
|
||||||||||||
|
Cost of software license fees
|
20,165
|
(1,179
|
)
|
(j)
|
18,986
|
||||||||
|
Cost of maintenance fees
|
35,084
|
(3,463
|
)
|
(j)
|
31,621
|
||||||||
|
Cost of subscription fees
|
31,127
|
(863
|
)
|
(j)
|
30,264
|
||||||||
|
Cost of professional services
|
163,713
|
(131,936
|
)
|
(j)
|
31,777
|
||||||||
|
Cost of application services
|
83,298
|
-
|
|
83,298
|
|||||||||
|
Technology development and support
|
105,800
|
(10,444
|
)
|
(j)
|
95,356
|
||||||||
|
Sales and marketing
|
251,925
|
(31,211
|
)
|
(j)
|
220,714
|
||||||||
|
Administrative and general
|
162,810
|
(9,077
|
)
|
(j)
|
153,733
|
||||||||
|
Goodwill impairment
|
71,840
|
(71,840
|
)
|
(j)
|
-
|
||||||||
|
Restructuring costs
|
16,573
|
(822
|
)
|
(j)
|
15,751
|
||||||||
|
|
|
||||||||||||
|
Total operating expenses
|
942,335
|
(260,835
|
)
|
|
681,500
|
||||||||
|
|
|
||||||||||||
|
INCOME FROM OPERATIONS
|
2,214
|
40,190
|
|
42,404
|
|||||||||
|
|
|
||||||||||||
|
Other expense, net
|
(1,170
|
)
|
-
|
|
(1,170
|
)
|
|||||||
|
|
|
||||||||||||
|
INCOME BEFORE INCOME TAX PROVISION
|
1,044
|
40,190
|
|
41,234
|
|||||||||
|
|
|
||||||||||||
|
Income tax provision
|
18,295
|
(2,378
|
)
|
(k)
|
15,917
|
||||||||
|
|
|
||||||||||||
|
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
|
$
|
(17,251
|
)
|
$
|
42,568
|
|
$
|
25,317
|
|||||
|
|
|
||||||||||||
|
Net income (loss) from continuing operations per common share - basic
|
$
|
(0.08
|
)
|
|
$
|
0.12
|
|||||||
|
|
|
||||||||||||
|
Net income (loss) from continuing operations per common share - diluted
|
$
|
(0.08
|
)
|
|
$
|
0.12
|
|||||||
|
|
|
||||||||||||
|
Weighted average shares outstanding - basic
|
214,627
|
|
214,627
|
||||||||||
|
|
|
||||||||||||
|
Weighted average shares outstanding - diluted
|
214,627
|
|
219,580
|
||||||||||
COMPUWARE CORPORATION AND SUBSIDIARIES
Pro Forma Condensed Consolidated Statements of Operations
Six Months Ended September 30, 2013
(Unaudited, in thousands, except per share data)
|
|
Historical
as Reported |
Results of
operations of |
|
Pro Forma
Totals |
|||||||||
|
REVENUES
|
|
||||||||||||
|
Software license fees
|
$
|
71,116
|
$
|
(6,782
|
)
|
(j)
|
$
|
64,334
|
|||||
|
Maintenance fees
|
199,028
|
(23,047
|
)
|
(j)
|
175,981
|
||||||||
|
Subscription fees
|
41,436
|
(1,373
|
)
|
(j)
|
40,063
|
||||||||
|
Professional services fees
|
95,412
|
(81,880
|
)
|
(j)
|
13,532
|
||||||||
|
Application services fees
|
48,626
|
-
|
|
48,626
|
|||||||||
|
|
|
||||||||||||
|
Total revenues
|
455,618
|
(113,082
|
)
|
|
342,536
|
||||||||
|
|
|
||||||||||||
|
OPERATING EXPENSES
|
|
||||||||||||
|
Cost of software license fees
|
11,038
|
(882
|
)
|
(j)
|
10,156
|
||||||||
|
Cost of maintenance fees
|
15,945
|
(1,760
|
)
|
(j)
|
14,185
|
||||||||
|
Cost of subscription fees
|
16,803
|
(513
|
)
|
(j)
|
16,290
|
||||||||
|
Cost of professional services
|
77,959
|
(66,141
|
)
|
(j)
|
11,818
|
||||||||
|
Cost of application services
|
57,950
|
-
|
|
57,950
|
|||||||||
|
Technology development and support
|
50,660
|
(5,590
|
)
|
(j)
|
45,070
|
||||||||
|
Sales and marketing
|
112,943
|
(13,320
|
)
|
(j)
|
99,623
|
||||||||
|
Administrative and general
|
73,321
|
(4,435
|
)
|
(j)
|
68,886
|
||||||||
|
Restructuring costs
|
5,345
|
(323
|
)
|
(j)
|
5,022
|
||||||||
|
|
|
||||||||||||
|
Total operating expenses
|
421,964
|
(92,964
|
)
|
|
329,000
|
||||||||
|
|
|
||||||||||||
|
INCOME FROM OPERATIONS
|
33,654
|
(20,118
|
)
|
|
13,536
|
||||||||
|
|
|
||||||||||||
|
Other income, net
|
387
|
-
|
|
387
|
|||||||||
|
|
|
||||||||||||
|
INCOME BEFORE INCOME TAX PROVISION
|
34,041
|
(20,118
|
)
|
|
13,923
|
||||||||
|
|
|
||||||||||||
|
Income tax provision
|
8,888
|
(7,727
|
)
|
(k)
|
1,161
|
||||||||
|
|
|
||||||||||||
|
NET INCOME FROM CONTINUING OPERATIONS
|
25,153
|
(12,391
|
)
|
|
12,762
|
||||||||
|
|
|
||||||||||||
|
Less: Net income (loss) from continuing operations attributable to the non-controlling interest in Covisint Corporation
|
(1,154
|
)
|
-
|
|
(1,154
|
)
|
|||||||
|
|
|
||||||||||||
|
NET INCOME FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMPUWARE CORPORATION
|
$
|
26,307
|
$
|
(12,391
|
)
|
|
$
|
13,916
|
|||||
|
|
|
||||||||||||
|
Net income from continuing operations attributable to Compuware Corporation per common share - basic
|
$
|
0.12
|
|
$
|
0.06
|
||||||||
|
|
|
||||||||||||
|
Net income from continuing operations attributable to Compuware Corporation per common share - diluted
|
$
|
0.12
|
|
$
|
0.06
|
||||||||
|
|
|
||||||||||||
|
Weighted average shares outstanding - basic
|
214,287
|
|
214,287
|
||||||||||
|
|
|
||||||||||||
|
Weighted average shares outstanding - diluted
|
220,007
|
|
220,007
|
||||||||||
COMPUWARE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
| (a) | The cash adjustment amount consists of gross proceeds of $160 million receive from the sale of the Changepoint, Professional Services and Uniface business units on January 31, 2014. This amount is reduced by $25 million for accounts receivable retained by the Company and $23 million related to an allowance for certain liabilities assumed by the Buyer. |
|
Gross proceeds
|
$
|
160,000,000
|
||
|
Less accounts receivable retained
|
(25,000,000
|
)
|
||
|
Less allowance for certain liabilities assumed
|
(23,000,000
|
)
|
||
|
Net proceeds
|
$
|
112,000,000
|
| (b) | Represents material adjustments as of September 30, 2013 to remove the assets and liabilities subject to the initial closing and subsequent closings, as discussed in Amendment No. 1 to the Asset Purchase Agreement between the Company and Buyer. The Asset Purchase Agreement provides for the acquisition by Buyer of substantially all of the assets that are primarily related to the Company’s Changepoint, Professional Services and Uniface business units and certain liabilities of these business units. The assets and liabilities related to both the initial and subsequent closings have been presented as deconsolidated within the balance sheet. The accounting for this transaction is being evaluated by the Company and could be subject to change. To the extent that any of the subsequent closings of the aforementioned assets and liabilities occur after the Company’s fiscal year end, the Company will evaluate if deconsolidation is appropriate in the balance sheet as of March 31, 2014. |
| (c) | Current accrued expense adjustments include: |
|
Estimated accounts receivable retained by the Company in excess of the amount allowed under the agreement
|
$
|
10,500,000
|
||
|
Current portion of estimated post-closing liability
|
600,000
|
|||
|
Accrued transaction bonuses and fees
|
2,340,000
|
|||
|
Current accrued expense
|
$
|
13,440,000
|
The expenses associated with these accruals are not reflected in the pro forma statements of operations.
| (d) | Non-current accrued expense adjustment includes $3.4 million related to a post-closing liability associated with potential adjustment based on future revenue from a specific customer and $671,000 related to tax reserves. The expense associated with these accruals is not reflected in the pro forma statements of operations. |
| (e) | Represents the estimated taxes payable/receivable as a result of the sale of the Changepoint, Professional Services and Uniface business units. |
| (f) | Additional paid-in capital adjustment represents equity awards that were modified as a result of the sale of the Changepoint, Professional Services and Uniface business units, reduced by the tax effect of equity compensation attributable to the divested business units. |
| (g) | Represents material adjustments to remove the deferred tax assets and liabilities as of September 30, 2013 related to the Changepoint, Professional Services and Uniface business units as well as deferred taxes resulting from the transaction. |
| (h) | The pro forma gain on the sale of the Changepoint, Professional Services and Uniface business units as of September 30, 2013 was calculated as follows: |
|
Net proceeds
|
$
|
112,000,000
|
(a) | |||
|
Less transaction bonuses
|
(1,488,000
|
)
|
(c) | |||
|
Less transaction fees
|
(1,200,000
|
)
|
(c) | |||
|
Less estimated billed accounts receivable due to Buyer
|
|
(10,500,000
|
) | (c) | ||
| Less estimated post-closing liability | (4,000,000 | ) | (c,d | ) | ||
| Less net assets disposed of | (76,277,000 | ) | ||||
| Pretax gain on sale | 18,535,000 | |||||
| Tax on gain | 18,482,000 | (i) | ||||
| Gain on sale | $ | 53,000 |
| (i) | Represents income tax expense associated with the sale. Income taxes are expected to exceed the statutory rate primarily due to a lower basis for the intangible assets associated with the disposition for income tax purposes. |
| (j) | Represents material adjustments to remove the historical operations of the Changepoint, Professional Services and Uniface business units represented in the condensed consolidated statements of operations for the six months ended September 30, 2013 and for the years ended March 31, 2013, 2012 and 2011, as applicable, as if the transaction occurred on April 1, 2010. |
| (k) | The Company calculated the pro forma effective tax rates by excluding the Professional Services, Changepoint and Uniface business units’ activity from the historical income tax provision calculations. The tax provision used for the divested business units was the difference between the pro forma calculated provision and the historical provision. The applicable effective federal, state and foreign tax rates were applied to the resulting income (loss) from continuing operations to determine the income tax provision on continuing operations. The calculated effective tax rates are as follows: |
|
Year ended March 31, 2011
|
27.09%
|
|
Year ended March 31, 2012
|
25.75%
|
|
Year ended March 31, 2013
|
38.60%
|
|
Six months ended September 30, 2013
|
8.34%
|
| (l) | Deferred tax liability represents the estimated deferred tax liability as a result of the sale of the Changepoint, Professional Services and Uniface business units. |