Attached files
| file | filename |
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| 8-K/A - FORM 8-K AMENDMENT NO. 1 - IGATE CORP | d8ka.htm |
Exhibit 99.1
Pro Forma Consolidated Financial Information
Introduction
On September 30, 2008, iGATE Corporation (“iGATE” or the “Company”) entered into a Separation and Distribution Agreement and a Tax Sharing Agreement in connection with iGATE’s spin-off (the “Spin-Off”) of Mastech Holdings, Inc. (“Mastech”), its wholly-owned subsidiary. As a result of the Spin-Off, iGATE shareholders of record as of September 16, 2008 received one share of Mastech common stock, par value $0.01 per share, for every fifteen shares of iGATE common stock held as of September 16, 2008 and cash for any fractional shares of Mastech common stock. iGATE distributed approximately 3.6 million shares of Mastech in the distribution. The Spin-Off was made without the payment of any consideration or the exchange of any shares by iGATE shareholders. As a result of the Spin-Off, Mastech is no longer owned by iGATE and is now an independent public company.
Pro Forma Information
The unaudited pro forma consolidated statements of earnings for the six months ended June 30, 2008 and the years ended December 31, 2007, 2006 and 2005 treat the Spin-Off of Mastech, and other transactions described below, as if the distribution and related transactions occurred on January 1, 2005. The unaudited pro forma consolidated balance sheet as of June 30, 2008 gives effect to the Spin-Off of Mastech as if the distribution and related transactions occurred on June 30, 2008. The unaudited pro forma consolidated financial statements are subject to the assumptions and adjustments set forth in the accompanying notes. Management believes that the assumptions used and the adjustments made are reasonable under the circumstances and given the information available.
In accordance with SEC Regulation S-X, the unaudited pro forma statement of earnings for the six months ended June 30, 2008 disclose income from continuing operations and therefore exclude loss from discontinued operations of $0.1 million.
The amounts presented under the column “Historical iGATE” in the accompanying unaudited pro forma statements of earnings for the years ended December 31, 2007, 2006 and 2005 reflect the historical consolidated amounts as reported by the Company in its respective Form 10-K filings with the Securities and Exchange Commission.
The amount presented under the column “Historical iGATE” in the accompanying unaudited pro forma consolidated balance sheet as of June 30, 2008 reflects the historical consolidated amounts as reported by the Company in its Quarterly report on Form 10 Q filed with the Securities and Exchange Commission on August 1, 2008.
The amount presented under the column “Spin off of Mastech” represents the historical amounts of Mastech, previously consolidated by the Company.
On November 16, 2005, the Company sold Mastech Quantum Limited (“Canada”), its wholly owned Canadian subsidiary for approximately $9.3 million in cash. The Company recognized a gain on sale of Canada amounting to $5.5 million. Canada’s operations were included as part of the iGATE Professional Services (“iPS”) segment in 2005. On December 24, 2007, the Company sold its wholly owned affiliate, jobcurry Systems Private Ltd., (“jobcurry”) for total net cash proceeds of $1.0 million. The Company recognized a gain on the sale of jobcurry amounting to $0.1 million. jobcurry was reported as part of the iPS segment in fiscal years 2005, 2006 and 2007. On July 31, 2008, the Company completed the divesture and sale of iGATE Clinical Research International Inc and iGATE Clinical Research International Private Limited (collectively, “iCRI”) for cash consideration of $3.6 million. This sale resulted in a gain of approximately $1.8 million. iCRI was reported as part of iGATE Shared Services Segment in fiscal years 2005, 2006 and 2007. The accompanying unaudited pro forma statement of earnings for the years ended December 31, 2007, 2006 and 2005 reflect the Canada, jobcurry and iCRI sales/divesture under a separate column “Other than Mastech” as if the transactions occurred on January 1, 2005.
These unaudited pro forma consolidated financial statements are presented for illustrative purpose only and are not necessarily indicative of the operating results or the financial position that would have been achieved had the sales/divestures discussed above been consummated as of the dates indicated or of the results that may be obtained in the future. These unaudited pro forma consolidated financial statements and accompanying notes should be read together with the Company’s audited consolidated financial statements and accompanying notes as of and for the year ended December 31, 2007, Management’s Discussion and Analysis included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008.
iGATE CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands, except per share data)
Six Months Ended June 30, 2008
(Unaudited)
| Historical iGATE |
Spin off of Mastech |
Adjustments | Pro Forma iGATE |
|||||||||||||
| Revenues |
$ | 159,844 | $ | 49,348 | $ | 1,384 | (a) | $ | 111,880 | |||||||
| Cost of revenues (exclusive of depreciation and amortization) |
109,943 | 39,650 | 1,384 | (a) | 71,677 | |||||||||||
| Gross margin |
49,901 | 9,698 | — | 40,203 | ||||||||||||
| Selling, general and administrative |
28,819 | 7,105 | — | 21,714 | ||||||||||||
| Depreciation and amortization |
6,057 | 161 | — | 5,896 | ||||||||||||
| Income from operations |
15,025 | 2,432 | — | 12,593 | ||||||||||||
| Interest income |
1,181 | 29 | — | 1,152 | ||||||||||||
| Interest expense |
(50 | ) | — | — | (50 | ) | ||||||||||
| Other income (expense), net |
1,125 | (2 | ) | — | 1,127 | |||||||||||
| Minority interest |
(371 | ) | — | — | (371 | ) | ||||||||||
| (Loss) equity in income of affiliated companies |
(25 | ) | (27 | ) | — | 2 | ||||||||||
| Income from continuing operations before income taxes |
16,885 | 2,432 | — | 14,453 | ||||||||||||
| Income tax expense |
942 | 362 | — | 580 | ||||||||||||
| Income from continuing operations |
$ | 15,943 | $ | 2,070 | $ | — | $ | 13,873 | ||||||||
| Earnings per share - Basic |
$ | 0.30 | $ | 0.26 | ||||||||||||
| Earnings per share - Diluted |
$ | 0.29 | $ | 0.25 | ||||||||||||
| Weighted average common shares, basic |
53,717 | 53,717 | ||||||||||||||
| Weighted average common shares, diluted |
55,254 | 55,254 | ||||||||||||||
iGATE CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands, except per share data)
Year Ended December 31, 2007
(Unaudited)
| Historical iGATE |
Spin off of Mastech |
Other than Mastech |
Adjustments | Pro Forma iGATE |
|||||||||||||||
| Revenues |
$ | 307,258 | $ | 104,171 | $ | 4,269 | $ | 2,916 | (a) | $ | 201,734 | ||||||||
| Cost of revenues (exclusive of depreciation and amortization) |
218,249 | 82,146 | 2,320 | 2,839 | (a) | 136,622 | |||||||||||||
| Gross margin |
89,009 | 22,025 | 1,949 | 77 | (a) | 65,112 | |||||||||||||
| Selling, general and administrative |
60,421 | 15,231 | 2,796 | 77 | (a) | 42,471 | |||||||||||||
| Depreciation and amortization |
11,021 | 320 | 262 | — | 10,439 | ||||||||||||||
| Restructuring charges |
769 | — | — | — | 769 | ||||||||||||||
| Goodwill impairment |
1,950 | — | — | — | 1,950 | ||||||||||||||
| Income from operations |
14,848 | 6,474 | (1,109 | ) | — | 9,483 | |||||||||||||
| Interest income |
4,030 | 83 | 24 | — | 3,923 | ||||||||||||||
| Interest expense |
(91 | ) | — | (2 | ) | — | (89 | ) | |||||||||||
| Other income, net |
2,099 | — | 129 | — | 1,970 | ||||||||||||||
| Minority interest |
(2,992 | ) | — | — | — | (2,992 | ) | ||||||||||||
| Equity in income of affiliated companies |
29 | — | — | — | 29 | ||||||||||||||
| Gain on sale of stock of subsidiary |
136 | — | — | — | 136 | ||||||||||||||
| Loss on venture investments and affiliated companies, net |
(193 | ) | — | — | — | (193 | ) | ||||||||||||
| Income before income taxes |
17,866 | 6,557 | (958 | ) | — | 12,267 | |||||||||||||
| Income tax expense |
2,281 | 701 | (187 | ) | — | 1,767 | |||||||||||||
| Net income from continuing operations |
$ | 15,585 | $ | 5,856 | $ | (771 | ) | $ | — | $ | 10,500 | ||||||||
| Earnings per share - Basic |
$ | 0.29 | $ | 0.20 | |||||||||||||||
| Earnings per share - Diluted |
$ | 0.29 | $ | 0.20 | |||||||||||||||
| Weighted average common shares, basic |
53,333 | 53,333 | |||||||||||||||||
| Weighted average common shares, diluted |
53,972 | 53,972 | |||||||||||||||||
iGATE CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands, except per share data)
Year Ended December 31, 2006
(Unaudited)
| Historical iGATE |
Spin off of Mastech |
Other than Mastech |
Adjustments | Pro Forma iGATE |
||||||||||||||||
| Revenues |
$ | 283,588 | $ | 110,900 | $ | 3,117 | $ | 843 | (a) | $ | 170,414 | |||||||||
| Cost of revenues (exclusive of depreciation and amortization) |
210,212 | 85,650 | 1,868 | (317 | ) (a) | 122,377 | ||||||||||||||
| Gross margin |
73,376 | 25,250 | 1,249 | 1,160 | 48,037 | |||||||||||||||
| Selling, general and administrative |
58,769 | 17,864 | 1,538 | 1,160 | (a) | 40,527 | ||||||||||||||
| Depreciation and amortization |
10,851 | 251 | 317 | — | 10,283 | |||||||||||||||
| Restructuring recovery |
(3,062 | ) | (555 | ) | — | — | (2,507 | ) | ||||||||||||
| Income from operations |
6,818 | 7,690 | (606 | ) | — | (266 | ) | |||||||||||||
| Interest income |
3,311 | 82 | 83 | — | 3,146 | |||||||||||||||
| Interest expense |
(121 | ) | (11 | ) | (14 | ) | — | (96 | ) | |||||||||||
| Other income, net |
802 | — | 274 | — | 528 | |||||||||||||||
| Minority interest |
(752 | ) | — | — | — | (752 | ) | |||||||||||||
| Equity in income of affiliated companies |
317 | — | — | — | 317 | |||||||||||||||
| Gain on venture investments and affiliated companies, net |
578 | — | — | — | 578 | |||||||||||||||
| Income before income taxes |
10,953 | 7,761 | (263 | ) | — | 3,455 | ||||||||||||||
| Income tax expense |
2,249 | 662 | (10 | ) | — | 1,597 | ||||||||||||||
| Net income from continuing operations |
$ | 8,704 | $ | 7,099 | $ | (253 | ) | $ | — | $ | 1,858 | |||||||||
| Earnings per share - Basic |
$ | 0.16 | $ | 0.03 | ||||||||||||||||
| Earnings per share - Diluted |
$ | 0.16 | $ | 0.03 | ||||||||||||||||
| Weighted average common shares, basic |
52,939 | 52,939 | ||||||||||||||||||
| Weighted average common shares, diluted |
53,278 | 53,278 | ||||||||||||||||||
iGATE CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
(Dollars in thousands, except per share data)
Year Ended December 31, 2005
(Unaudited)
| Historical iGATE |
Spin off of Mastech |
Other than Mastech |
Adjustments | Pro Forma iGATE |
||||||||||||||||
| Revenues |
$ | 275,992 | $ | 106,423 | $ | 31,536 | $ | 1,484 | (a) | $ | 139,517 | |||||||||
| Cost of revenues (exclusive of depreciation and amortization) |
205,110 | 83,350 | 24,651 | 246 | (a) | 97,355 | ||||||||||||||
| Gross margin |
70,882 | 23,073 | 6,885 | 1,238 | 42,162 | |||||||||||||||
| Selling, general and administrative |
56,568 | 14,925 | 5,207 | 1,238 | (a) | 37,674 | ||||||||||||||
| Depreciation and amortization |
10,915 | 160 | 668 | — | 10,087 | |||||||||||||||
| Restructuring recovery |
(481 | ) | — | — | — | (481 | ) | |||||||||||||
| Income (loss) from operations |
3,880 | 7,988 | 1,010 | — | (5,118 | ) | ||||||||||||||
| Interest income |
2,123 | 48 | 63 | — | 2,012 | |||||||||||||||
| Interest expense |
(204 | ) | (85 | ) | (91 | ) | — | (28 | ) | |||||||||||
| Other expense, net |
(2,194 | ) | — | 40 | — | (2,234 | ) | |||||||||||||
| Minority interest |
(261 | ) | — | — | — | (261 | ) | |||||||||||||
| Equity in income of affiliated companies |
338 | — | — | — | 338 | |||||||||||||||
| Gain on sale of stock of subsidiaries |
5,549 | — | 5,549 | — | — | |||||||||||||||
| Loss on venture investments and affiliated companies, net |
(2,149 | ) | — | — | — | (2,149 | ) | |||||||||||||
| Income (loss) before income taxes |
7,082 | 7,951 | 6,571 | — | (7,440 | ) | ||||||||||||||
| Income tax expense (benefit) |
113 | 1,425 | 156 | — | (1,468 | ) | ||||||||||||||
| Net income (loss) from continuing operations |
$ | 6,969 | $ | 6,526 | $ | 6,415 | $ | — | $ | (5,972 | ) | |||||||||
| Earnings (loss) per share - Basic |
$ | 0.13 | $ | (0.11 | ) | |||||||||||||||
| Earnings (loss) per share - Diluted |
$ | 0.13 | $ | (0.11 | ) | |||||||||||||||
| Weighted average common shares, basic |
52,530 | 52,530 | ||||||||||||||||||
| Weighted average common shares, diluted |
52,734 | 52,530 | ||||||||||||||||||
iGATE CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
(dollars in thousands)
As of June 30, 2008
(Unaudited)
| Historical iGATE |
Spin off of Mastech |
Other than Mastech |
Adjustments | Pro Forma iGATE |
|||||||||||||||
| ASSETS | |||||||||||||||||||
| Current assets: |
|||||||||||||||||||
| Cash and cash equivalents |
$ | 27,606 | $ | 8,042 | $ | 3,600 | (b) | $ | 497 | (c) | $ | 23,661 | |||||||
| Short term investments |
33,724 | — | — | — | 33,724 | ||||||||||||||
| Accounts receivable, net |
41,226 | 7,733 | — | — | 33,493 | ||||||||||||||
| Unbilled receivable |
17,339 | 2,329 | — | — | 15,010 | ||||||||||||||
| Prepaid and other current assets |
5,428 | 207 | — | — | 5,221 | ||||||||||||||
| Deferred income taxes |
722 | 254 | — | — | 468 | ||||||||||||||
| Current assets of discontinued operations |
1,945 | — | (1,945 | ) | — | — | |||||||||||||
| Total current assets |
127,990 | 18,565 | 1,655 | 497 | 111,577 | ||||||||||||||
| Non-current assets of discontinued operations |
1,643 | — | (1,643 | ) | — | — | |||||||||||||
| Deposits |
2,995 | — | — | — | 2,995 | ||||||||||||||
| Investments in unconsolidated affiliates |
60 | 60 | — | — | — | ||||||||||||||
| Land, building, equipment and leasehold improvements, net |
35,216 | 332 | — | — | 34,884 | ||||||||||||||
| Deferred income taxes |
4,458 | 300 | — | — | 4,158 | ||||||||||||||
| Goodwill |
33,912 | — | — | — | 33,912 | ||||||||||||||
| Intangible assets, net |
2,998 | — | — | — | 2,998 | ||||||||||||||
| Total assets |
$ | 209,272 | $ | 19,257 | $ | 12 | $ | 497 | $ | 190,524 | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||
| Current liabilities: |
|||||||||||||||||||
| Accounts payable |
$ | 4,405 | $ | 1,914 | $ | — | $ | — | $ | 2,491 | |||||||||
| Accrued payroll and related costs |
18,062 | 4,594 | — | — | 13,468 | ||||||||||||||
| Accrued income taxes |
848 | — | — | — | 848 | ||||||||||||||
| Other current liabilities |
25,919 | 91 | — | — | 25,828 | ||||||||||||||
| Restructuring reserve |
575 | — | — | — | 575 | ||||||||||||||
| Deferred revenue |
387 | 67 | — | — | 320 | ||||||||||||||
| Current liabilities of discontinued operations |
1,486 | — | (1,486 | ) | — | — | |||||||||||||
| Total current liabilities |
51,682 | 6,666 | (1,486 | ) | — | 43,530 | |||||||||||||
| Other long term liabilities |
738 | — | — | — | 738 | ||||||||||||||
| Deferred tax liabilities |
961 | — | — | — | 961 | ||||||||||||||
| Total liabilities |
53,381 | 6,666 | (1,486 | ) | — | 45,229 | |||||||||||||
| Shareholders’ equity: |
|||||||||||||||||||
| Common Stock, par value $0.01 per share |
548 | — | — | — | 548 | ||||||||||||||
| Additional paid-in capital |
169,221 | — | — | — | 169,221 | ||||||||||||||
| Retained earnings (deficit) |
9,790 | 12,591 | 1,498 | (b) | 497 | (c) | (806 | ) | |||||||||||
| Common stock in treasury, at cost |
(14,714 | ) | — | — | — | (14,714 | ) | ||||||||||||
| Accumulated other comprehensive loss |
(8,954 | ) | — | — | — | (8,954 | ) | ||||||||||||
| Total shareholders’ equity |
155,891 | 12,591 | 1,498 | 497 | 145,295 | ||||||||||||||
| Total liabilities and shareholders’ equity |
$ | 209,272 | $ | 19,257 | $ | 12 | $ | 497 | $ | 190,524 | |||||||||
Notes to Unaudited Pro Forma Consolidated Financial Statements
| (a) | The pro forma adjustments to iGATE’s unaudited consolidated statement of earnings for the six months ended June 30, 2008 and the years ended December 31, 2007, 2006 and 2005, relate to the adjustments to revenues, cost of revenues and selling, general and administrative expenses for transactions between iGATE and Mastech that were eliminated in consolidation in the preparation of iGATE’s historical consolidated financial statements. |
| (b) | Represents the cash consideration on sale of iCRI amounting to $3.6 million and gain on sale amounting to $1.8 million. |
| (c) | Represents the adjustment to record the following: |
| (i) | Transfer of excess cash balance from Mastech amounting to $3.4 million subsequently. In accordance with the Separation and Distribution Agreement, all “excess cash” will be transferred from Mastech, prior to the spin off. Excess cash is defined as those cash balances that result in working capital exceeding $8.5 million. |
| (ii) | $2.9 million of spin-off costs incurred subsequent to June 30, 2008. |