Attached files
file | filename |
---|---|
8-K/A - FORM 8-K/A - ERESEARCHTECHNOLOGY INC /DE/ | c03742e8vkza.htm |
EX-99.2 - EXHIBIT 99.2 - ERESEARCHTECHNOLOGY INC /DE/ | c03742exv99w2.htm |
EX-23.1 - EXHIBIT 23.1 - ERESEARCHTECHNOLOGY INC /DE/ | c03742exv23w1.htm |
EX-99.1 - EXHIBIT 99.1 - ERESEARCHTECHNOLOGY INC /DE/ | c03742exv99w1.htm |
Exhibit 99.3
eResearchTechnology, Inc and Subsidiaries
Unaudited Pro Forma Condensed Combined Financial Information
Unaudited Pro Forma Condensed Combined Financial Information
The accompanying unaudited pro forma condensed combined financial statements present the
historical financial information of eResearchTechnology, Inc. (ERT or the Company) as adjusted
for the purchase of Research Services Germany 234 GmbH
(RS), which was formed as a result of a
demerger of CareFusion Germany 234 GmbH under German law which
effectively divided CareFusion Germany 234 GmbH into RS and another
entity. RS is comprised of the research services division of
CareFusion Germany 234 GmbH and certain research operations of CareFusion Corporation, using the
acquisition method of accounting.
The accompanying unaudited pro forma condensed combined balance sheet presents the historical
financial information of ERT as of March 31, 2010, as adjusted for the purchase of RS as if the
acquisition had occurred on March 31, 2010.
The accompanying unaudited pro forma condensed combined statements of operations for the three
months ended March 31, 2010 and the year ended December 31, 2009, combines the historical financial
information of ERT for the three months ended March 31, 2010 and the year ended December 31, 2009
with the historical information of RS for the three months ended March 31, 2010 and the year ended
December 31, 2009, respectively, as if the acquisition had occurred on January 1, 2009.
The Company will account for the acquisition using the acquisition method of accounting. As
such, the Company will record the assets (including identifiable intangible assets) and liabilities
of RS at their estimated fair value as of the date of acquisition. The difference between the
purchase price and the estimated fair value of RS net assets and liabilities will result in
goodwill.
Because these unaudited pro forma condensed combined financial statements have been prepared
based on preliminary estimates of fair values, the actual amounts recorded may differ from the
information presented in these unaudited pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial statements have been prepared by
management, based upon the historical financial statements of ERT and RS. The pro forma condensed
combined financial statements are for illustrative purpose only and may not be indicative of the
results that actually would have occurred if the combination had been in effect on the dates
indicated or which may be obtained in the future. You should not rely on this information as being
indicative of future consolidated results after the acquisition. The unaudited pro forma condensed
combined financial statements should be read in conjunction with the historical financial
statements of ERT which have been previously filed with the Securities and Exchange Commission, and
with the historical financial statements of RS as of December 31, 2009 and 2008 and March 31, 2010
and the years ended December 31, 2009 and 2008 and for the three months ended March 31, 2010,
included elsewhere in this filing.
PF-1
eResearchTechnology, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 2010
(In thousands)
Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 2010
(In thousands)
Historical | Pro Forma | Pro Forma | ||||||||||||||
ERT | RS | Adjustments | Combined | |||||||||||||
ASSETS |
||||||||||||||||
Current Assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 72,175 | $ | 95 | $ | (61,033 | ) a, b, h | $ | 11,237 | |||||||
Short-term investments |
7,065 | | | 7,065 | ||||||||||||
Investment in marketable securities |
1,317 | | | 1,317 | ||||||||||||
Accounts receivable, net |
15,309 | 12,347 | | 27,656 | ||||||||||||
Inventories, net |
| 3,473 | 704 | c | 4,177 | |||||||||||
Prepaid income taxes |
2,563 | | | 2,563 | ||||||||||||
Prepaid expenses and other assets |
4,569 | 741 | | 5,310 | ||||||||||||
Deferred income taxes |
1,547 | | | 1,547 | ||||||||||||
Total current assets |
104,545 | 16,656 | (60,329 | ) | 60,872 | |||||||||||
Property and equipment, net |
25,096 | 10,468 | | 35,564 | ||||||||||||
Goodwill |
34,711 | 39,905 | 303 | d | 74,919 | |||||||||||
Intangible assets |
1,493 | 17,579 | 3,506 | e | 22,578 | |||||||||||
Other assets |
353 | 417 | | 770 | ||||||||||||
Total assets |
$ | 166,198 | $ | 85,025 | $ | (56,520 | ) | $ | 194,703 | |||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||||||
Current liabilities: |
||||||||||||||||
Accounts payable |
3,085 | 2,055 | | 5,140 | ||||||||||||
Current portion of long term debt |
| 2,018 | (2,018 | ) f | | |||||||||||
Accrued expenses |
6,803 | 3,798 | | 10,601 | ||||||||||||
Due to Carefusion |
| | 2,482 | g | 2,482 | |||||||||||
Deferred revenues |
11,167 | | | 11,167 | ||||||||||||
Total current liabilities |
21,055 | 7,871 | 464 | 29,390 | ||||||||||||
Long-term debt |
| | 23,000 | h | 23,000 | |||||||||||
Deferred rent |
2,299 | | | 2,299 | ||||||||||||
Deferred income taxes and other liabilities |
3,525 | 3,713 | (3,231 | ) i | 4,007 | |||||||||||
Total liabilities |
26,879 | 11,584 | 20,233 | 58,696 | ||||||||||||
Stockholders Equity: |
||||||||||||||||
Common stock ` |
604 | | | 604 | ||||||||||||
Parent company investment |
| 74,371 | (74,371 | ) j | | |||||||||||
Additional paid-in capital |
98,048 | | | 98,048 | ||||||||||||
Accumulated other comprehensive income (loss) |
(2,368 | ) | (930 | ) | 930 | j | (2,368 | ) | ||||||||
Retained earnings |
122,918 | | (3,312 | ) b | 119,606 | |||||||||||
Treasury stock |
(79,883 | ) | | | (79,883 | ) | ||||||||||
Total stockholders equity |
139,319 | 73,441 | (76,753 | ) | 136,007 | |||||||||||
Total liabilities and stockholders equity |
$ | 166,198 | $ | 85,025 | $ | (56,520 | ) | $ | 194,703 | |||||||
See Notes to Unaudited Condensed Combined Pro Forma Financial Statements.
PF-2
eResearchTechnology, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2009
(In thousands, except per share amounts)
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2009
(In thousands, except per share amounts)
Historical | Pro Forma | Pro Forma | ||||||||||||||
ERT | RS | Adjustments | Combined | |||||||||||||
Net revenues |
$ | 93,823 | $ | 49,962 | $ | | $ | 143,785 | ||||||||
Cost of revenues |
44,293 | 25,385 | 14,444 | k, l | 84,122 | |||||||||||
Gross margin |
49,530 | 24,577 | (14,444 | ) | 59,663 | |||||||||||
Operating expenses: |
||||||||||||||||
Selling, general and administrative expenses |
27,764 | 19,301 | (8,932 | ) k, m | 38,133 | |||||||||||
Research and development |
3,853 | 1,606 | | 5,459 | ||||||||||||
Total operating expenses |
31,617 | 20,907 | (8,932 | ) | 43,592 | |||||||||||
Operating income |
17,913 | 3,670 | (5,512 | ) | 16,071 | |||||||||||
Interest (expense)/income and other, net |
(435 | ) | (1,101 | ) | (583 | ) n | (2,119 | ) | ||||||||
Income before income taxes |
17,478 | 2,569 | (6,095 | ) | 13,952 | |||||||||||
Income tax provision |
6,791 | 1,295 | (2,663 | ) p | 5,423 | |||||||||||
Net income |
$ | 10,687 | $ | 1,274 | $ | (3,432 | ) | $ | 8,529 | |||||||
Net income per share: |
||||||||||||||||
Basic |
$ | 0.22 | $ | 0.17 | ||||||||||||
Diluted |
$ | 0.22 | $ | 0.17 | ||||||||||||
Shares used in computing net income per share: |
||||||||||||||||
Basic |
49,173 | 49,173 | ||||||||||||||
Diluted |
49,468 | 49,468 |
See Notes to Unaudited Condensed Combined Pro Forma Financial Statements.
PF-3
eResearchTechnology, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2010
(In Thousands, except per share amounts)
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Three Months Ended March 31, 2010
(In Thousands, except per share amounts)
Historical | Pro Forma | Pro Forma | ||||||||||||||
ERT | RS | Adjustments | Combined | |||||||||||||
Net revenues |
$ | 21,868 | $ | 16,399 | $ | | $ | 38,267 | ||||||||
Cost of revenues |
10,110 | 8,095 | 3,302 | k, l | 21,507 | |||||||||||
Gross margin |
11,758 | 8,304 | (3,302 | ) | 16,760 | |||||||||||
Operating expenses: |
||||||||||||||||
Selling, general and administrative expenses |
8,153 | 6,245 | (3,823 | ) k, m, o | 10,575 | |||||||||||
Research and development |
858 | 627 | | 1,485 | ||||||||||||
Total operating expenses |
9,011 | 6,872 | (3,823 | ) | 12,060 | |||||||||||
Operating income |
2,747 | 1,432 | 521 | 4,700 | ||||||||||||
Interest (expense)/income and other, net |
100 | 1,088 | (164 | ) n | 1,024 | |||||||||||
Income before income taxes |
2,847 | 2,520 | 357 | 5,724 | ||||||||||||
Income tax provision |
1,095 | 746 | 362 | p | 2,203 | |||||||||||
Net income |
$ | 1,752 | $ | 1,774 | $ | (5 | ) | $ | 3,521 | |||||||
Net income per share: |
||||||||||||||||
Basic |
$ | 0.04 | $ | 0.07 | ||||||||||||
Diluted |
$ | 0.04 | $ | 0.07 | ||||||||||||
Shares used in computing net income per share: |
||||||||||||||||
Basic |
48,675 | 48,675 | ||||||||||||||
Diluted |
48,845 | 48,845 |
See Notes to Unaudited Condensed Combined Pro Forma Financial Statements.
PF-4
eResearchTechnology, Inc. and Subsidiaries
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
1. Transaction Summary:
On May 28, 2010, eResearchTechnology, Inc. (the Company or ERT), through its indirect
wholly-owned subsidiary Blitz F10-acht-drei-fünf GmbH & Co. KG (Purchaser) completed the
acquisition of Research Services Germany 234 GmbH (RS) pursuant to the Amended Share Purchase
Agreement among Purchaser and CareFusion Germany 234 GmbH (Seller), an indirect wholly-owned
subsidiary of CareFusion Corporation.
RS is a leading provider of respiratory diagnostics services and of diagnostic devices and
also offers cardiac safety and ePRO services. The purchase price for the acquisition is $83.2
million, after giving effect to preliminary closing balance sheet adjustments, and remains subject
to final closing balance sheet adjustments that ERT does not anticipate will be material. $80.7
million of the purchase price was paid in cash, including a portion of the $23.0 million borrowed
on the revolver loan under the Credit Agreement (the Credit Agreement) entered into on May 27,
2010 with Citizens Bank of Pennsylvania (Citizens Bank). Additional consideration of $2.5
million, resulting from preliminary closing balance sheet adjustments, is payable to CareFusion
pending final review. Transaction costs related to the acquisition
were $0.7 million for the three months
ended March 31, 2010 with an additional approximately $3.3 million incurred subsequent to March 31,
2010. All transaction costs were expensed as incurred.
2. Preliminary Purchase Price Allocation
The purchase consideration of $83.2 million has been allocated to the assets acquired and the
liabilities assumed, including identifiable intangible assets, based upon their respective fair
values at the date of acquisition. The fair values were determined by management. Such allocations
resulted in goodwill of approximately $40.2 million. These allocations are preliminary and are
subject to final working capital adjustments. The purchase consideration has been allocated as
follows (dollars in thousands):
Purchase Price:
Cash paid |
$ | 80,721 | ||
Additional consideration for preliminary closing balance sheet adjustments |
2,482 | |||
Total |
$ | 83,203 | ||
Allocations: |
||||
Fair value of assets acquired |
||||
Cash |
$ | 95 | ||
Accounts receivable |
12,347 | |||
Inventory |
4,177 | |||
Other current assets |
741 | |||
Property and equipment, net |
10,468 | |||
Goodwill |
40,208 | |||
Other intangible assets, net |
21,085 | |||
Other assets |
417 | |||
Liabilities assumed |
||||
Accounts payable |
(2,055 | ) | ||
Accrued liabilities |
(4,280 | ) | ||
Net assets acquired |
$ | 83,203 | ||
A summary of the acquired intangible assets and their estimated useful lives is as follows (dollars in thousands):
Estimated | Estimated | |||||||
Acquired Intangibles | Fair Value | Useful life | ||||||
Backlog |
$ | 12,518 | * | 4 | ||||
Technology |
8,248 | 8 | ||||||
Covenants-not-to-compete |
319 | 4 | ||||||
Total |
$ | 21,085 | ||||||
* | The backlog will be amortized over 4 years on an accelerated basis. |
PF-5
3. Pro Forma Adjustments
The following pro forma adjustments have been made in the Unaudited Pro Forma Condensed Combined
Balance Sheet:
a. | Adjustment to record $80.7 million cash consideration paid to the Seller | ||
b. | Adjustment to record transaction costs of $3.3 million incurred subsequent to March 31, 2010. | ||
c. | Adjustment to record the fair value step-up related to the finished goods inventory. | ||
d. | Adjustment to eliminate RSs historical goodwill ($39.9 million) and to record the goodwill, of approximately $40.2 million. | ||
e. | Adjustment to eliminate RSs historical intangible assets of $17.6 million and to record acquired intangible assets which include backlog, covenant not-to-compete and technology. The fair value of these acquired intangible assets is approximately $21.1 million. | ||
f. | Adjustment to eliminate RS debt due to CareFusion that was not acquired. | ||
g. | Adjustment to record additional purchase consideration due to CareFusion resulting from preliminary closing balance sheet adjustments. | ||
h. | Adjustment to record the $23.0 million borrowed on the revolver loan with Citizens Bank for the acquisition of RS including $9.0 million for additional working capital needs. | ||
i. | Adjustment to eliminate deferred taxes not acquired from RS as the acquisition is an asset purchase for tax purposes. | ||
j. | Adjustment to eliminate RSs historical equity. |
The following pro forma adjustments have been made in the Unaudited Pro Forma
Condensed Combined Statements of Operations:
k. | Adjustment to reclassify RS costs such as project and data management and product management expenses from Selling, general and administrative expenses to Cost of revenues to conform the reporting classifications with the classification historically used by ERT. The amounts reclassified were $6.4 million and $1.6 million for the year ended December 31, 2009 and the three months ended March 31, 2010, respectively. | ||
l. | Adjustment to record amortization expense of $8.0 million and $1.7 million for the acquired intangible assets for the year ended December 31, 2009 and for the three months ended March 31, 2010, respectively. Amortization of backlog is based upon forecasted contractual revenue by year. | ||
m. | Adjustment to eliminate RS historical amortization of $2.5 million and $1.5 million for the year ended December 31, 2009 and the three months ended March 31, 2010 respectively. | ||
n. | Adjustment to record the interest expense of $0.3 million and $0.1 million at December 31, 2009 and March 31, 2010 respectively, incurred on the $23.0 million borrowed on the revolver loan from Citizens Bank under the Credit Agreement. Interest accrues on amounts borrowed under the revolver loan at a rate equal to the Lenders prime rate or LIBOR plus 1.00% to 1.75%. The interest rate at the acquisition date was 1.35375%. Adjustment also reflects the elimination of RS intercompany interest expense of $0.1 million for the year ended December 31, 2009 and $6,000 for the three months ended March 31, 2010 for intercompany debt that RS had with CareFusion and an adjustment for ERTs foregone interest income (at an average rate of 0.5%) of $0.3 million for the year ended December 31, 2009 and $0.1 million for the three months ended March 31, 2010. An additional adjustment was made to amortize the debt issuance costs of $0.2 million in the amount of $0.1 million for the year ended December 31, 2009 and $17,000 for the three months ended March 31, 2010 over the 36 month life of the revolver loan. A change of 1/8% in the interest rate on the revolver loan would result in a change in annual interest expense of approximately $29,000. | ||
o. | Adjustment to eliminate non-recurring transaction costs related to the acquisition of $0.7 million incurred in the three months ended March 31, 2010. | ||
p. | Adjustment to taxes for the effect of the acquisition. The expected tax rate for ERT is assumed to be at the historical effective rate. |
PF-6