Attached files
file | filename |
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8-K/A - WEB.COM GROUP, INC. | v199153_8ka.htm |
EX-99.1 - WEB.COM GROUP, INC. | v199153_ex99-1.htm |
EX-23.1 - WEB.COM GROUP, INC. | v199153_ex23-1.htm |
EX-23.2 - WEB.COM GROUP, INC. | v199153_ex23-2.htm |
Exhibit 99.2
UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS OF WEB.COM GROUP, INC.
AND
REGISTER.COM
LP
The following unaudited pro forma
combined condensed financial statements have been prepared to give effect the
acquisition of Register.com (Cayman) LP, a Cayman limited partnership
(“Register.com LP”) by Web.com Group, Inc. (“Web.com”). These unaudited pro
forma combined condensed financial statements are derived from the historical
and pro forma consolidated financial statements of Web.com and the historical
consolidated financial statements of Register.com LP. These financial
statements have been adjusted as described in the notes to the unaudited pro
forma combined condensed financial statements.
The unaudited pro forma combined
condensed balance sheet combines the historical consolidated balance sheets of
Web.com and Register.com LP as of the close of business on July 29, 2010, and
includes adjustments to reflect the transactions that are directly attributable
to the acquisition, factually supportable and expected to have a continuing
impact on the combined results. In addition, the unaudited pro forma
combined condensed statements of operations combine the historical consolidated
statements of operations of Web.com and Register.com LP and have also been
adjusted to give effect to pro forma events that are directly attributable to
the acquisition, factually supportable and expected to have a continuing impact
on the combined results. The unaudited pro forma combined condensed
statements of operations have been prepared assuming the acquisition occurred on
January 1, 2009.
We have prepared the unaudited pro forma
combined condensed financial statements based on available information using
assumptions that we believe are reasonable. These financial
statements are being provided for informational purposes only and do not claim
to represent our actual financial position or results of operations had the
acquisition occurred on that date specified nor do they project our results of
operations or financial position for any future period or date. In
addition, the pro forma financial statements do not account for the cost of any
restructuring activities or synergies resulting from the
acquisition.
The unaudited pro forma combined
condensed financial statements were prepared using the acquisition method of
accounting as outlined in Financial Accounting Standards Board Accounting
Standards Codification (“ASC”) 805 with Web.com considered the acquiring
company. Based on the acquisition method of accounting, the
consideration paid to Register.com LP’s partners is allocated to Register.com
LP’s assets and liabilities based on their fair value as of the date of the
completion of the acquisition. Web.com has been advised by independent
valuation experts on the estimated value of certain intangible assets
acquired from Register.com LP. The remaining amount of the
purchase price allocation is recorded as goodwill. The purchase price
allocation and valuation is still subject to final
adjustments.
as
of July 29, 2010
(in
thousands of dollars)
Pro forma
|
Historical
|
Pro forma
|
Pro forma
|
|||||||||||||||
Web.com
|
Register.com LP
|
Adjustments
|
Combined
|
|||||||||||||||
Current
Assets:
|
||||||||||||||||||
Cash
and cash equivalents
|
$ | 46,196 | $ | 12,010 | k | $ | (40,144 | ) | a | $ | 18,062 | |||||||
Accounts
receivable, net of allowance for doubtful accounts
|
3,251 | 3,200 | - | 6,451 | ||||||||||||||
Prepaid
expenses and other current assets
|
1,855 | 1,230 | - | 3,085 | ||||||||||||||
Restricted
investments
|
301 | 1,468 | - | 1,769 | ||||||||||||||
Deferred
taxes, current
|
961 | 16,175 | - | 17,136 | ||||||||||||||
Total
current assets
|
52,564 | 34,083 | (40,144 | ) | 46,503 | |||||||||||||
Restricted
investments
|
928 | - | - | 928 | ||||||||||||||
Prepaid
domains
|
- | 27,851 | (24,180 | ) | b | 3,671 | ||||||||||||
Property
and equipment, net
|
10,884 | 4,360 | - | 15,244 | ||||||||||||||
Goodwill
|
12,881 | 63,285 | (63,285 | ) | c | 86,901 | ||||||||||||
74,020 | d | |||||||||||||||||
Intangible
assets, net
|
48,373 | 8,730 | (8,730 | ) | c | 112,753 | ||||||||||||
64,380 | d | |||||||||||||||||
Other
assets
|
95 | 2,753 | (2,738 | ) | e | 5,272 | ||||||||||||
5,162 | j | |||||||||||||||||
Total
assets
|
$ | 125,725 | $ | 141,062 | $ | 4,485 | $ | 271,272 | ||||||||||
Current
liabilities:
|
||||||||||||||||||
Accounts
payable
|
$ | 1,241 | $ | 196 | - | 1,437 | ||||||||||||
Accrued
expenses
|
5,975 | 16,830 | (10,061 | ) | f | 12,744 | ||||||||||||
Accrued
marketing fees
|
224 | 434 | - | 658 | ||||||||||||||
Current
portion of long-term debt and capital lease obligations
|
160 | - | 7,125 | g | 7,285 | |||||||||||||
Deferred
revenue
|
5,598 | 88,842 | (75,960 | ) | b | 18,480 | ||||||||||||
Deferred
tax liability
|
- | 9,615 | - | 9,615 | ||||||||||||||
Other
liabilities
|
195 | 212 | (212 | ) | h | 195 | ||||||||||||
Total
current liabilities
|
13,393 | 116,129 | (79,108 | ) | 50,414 | |||||||||||||
Accrued
rent expense
|
783 | - | - | 783 | ||||||||||||||
Long-term
debt and capital lease obligations
|
113 | 105,209 | (105,209 | ) | h | 107,988 | ||||||||||||
107,875 | g | |||||||||||||||||
Deferred
revenue
|
127 | - | - | 127 | ||||||||||||||
Deferred
taxes
|
1,429 | - | - | 1,429 | ||||||||||||||
Other
long-term liabilities
|
408 | 651 | - | 1,059 | ||||||||||||||
Total
liabilities
|
16,253 | 221,989 | (76,442 | ) | 161,800 | |||||||||||||
Total
Stockholder' equity
|
||||||||||||||||||
Common
stock
|
27 | - | - | 27 | ||||||||||||||
Additional
paid in capital
|
261,958 | - | - | 261,958 | ||||||||||||||
Treasury
stock
|
(4,239 | ) | - | - | (4,239 | ) | ||||||||||||
Accumulated
deficit
|
(148,274 | ) | (80,927 | ) | 80,927 | i | (148,274 | ) | ||||||||||
Total
stockholders' equity
|
109,472 | (80,927 | ) | 80,927 | 109,472 | |||||||||||||
Total
liabilities and stockholders' equity
|
$ | 125,725 | $ | 141,062 | $ | 4,485 | $ | 271,272 |
Period
ended July 29, 2010
(In
thousands of dollars)
Historical
|
Historical
|
Pro forma
|
Pro forma
|
||||||||||||||
Web.com
|
Register.com LP
|
Adjustments
|
Combined
|
||||||||||||||
Revenue
|
$ | 57,428 | $ | 49,271 | $ | (24,378 | ) |
(7)
|
$ | 82,321 | |||||||
Cost
of revenue (exclusive of depreciation and amortization shown
below)
|
23,739 | 18,096 | (8,288 | ) |
(7)
|
33,547 | |||||||||||
Sales
& Marketing
|
12,364 | 10,839 | - | 23,203 | |||||||||||||
Research
& Development
|
5,171 | 3,833 | - | 9,004 | |||||||||||||
General
& Administrative
|
9,706 | 7,371 | (875 | ) |
(4)
|
16,202 | |||||||||||
Depreciation
and amortization
|
7,625 | 3,204 | 3,346 |
(1)
|
|||||||||||||
(1,880 | ) |
(2)
|
12,295 | ||||||||||||||
Total
cost and operating expenses
|
58,605 | 43,343 | (7,697 | ) | 94,251 | ||||||||||||
Income
(loss) from operations
|
(1,177 | ) | 5,928 | (16,681 | ) | (11,930 | ) | ||||||||||
Interest,
net
|
136 | (3,627 | ) | 3,627 |
(5)
|
136 | |||||||||||
(3,956 | ) |
(6)
|
(3,956 | ) | |||||||||||||
Other
income (expense), net
|
- | 381 | - | 381 | |||||||||||||
136 | (3,246 | ) | (329 | ) | (3,439 | ) | |||||||||||
Income
(loss) from operations before income taxes
|
(1,041 | ) | 2,682 | (17,010 | ) | (15,369 | ) | ||||||||||
(Provision)
benefit for income tax
|
(637 | ) | (2,470 | ) | 6,457 |
(8)
|
3,350 | ||||||||||
Income
(loss) from continuing operations
|
(1,678 | ) | 212 | (10,553 | ) | (12,019 | ) | ||||||||||
Discontinued
operations:
|
|||||||||||||||||
Income
(loss) from discontinued operations, net of tax
|
(9 | ) | - | - | (9 | ) | |||||||||||
Gain
on sale of discontinued operations, net of tax
|
125 | - | - | 125 | |||||||||||||
Net
income (loss)
|
$ | (1,562 | ) | $ | 212 | $ | (10,553 | ) | $ | (11,903 | ) | ||||||
Basic
earnings per share:
|
|||||||||||||||||
Income
(loss) from continuing operations' per common share
|
(0.07 | ) | N/A | N/A | (0.47 | ) | |||||||||||
Income
(loss) from discontinued operations per common share
|
0.00 | N/A | N/A | 0.00 | |||||||||||||
Net
income (loss) per common share
|
(0.07 | ) | N/A | N/A | (0.47 | ) |
Unaudited
Pro Forma Combined Condensed Statement of Operations
Year
ended December 31, 2009
(In
thousands of dollars)
Historical
|
Historical
|
Pro forma
|
Pro forma
|
||||||||||||||
Web.com
|
Register.com LP
|
Adjustments
|
Combined
|
||||||||||||||
Revenue
|
$ | 106,489 | $ | 85,713 | $ | (43,124 | ) |
(7)
|
$ | 149,078 | |||||||
Cost
of revenue (exclusive of depreciation and amortization shown
below)
|
40,392 | 30,804 | (14,226 | ) |
(7)
|
56,970 | |||||||||||
Sales
& Marketing
|
23,338 | 17,996 | - | 41,334 | |||||||||||||
Research
& Development
|
8,477 | 7,419 | - | 15,896 | |||||||||||||
General
& Administrative
|
21,080 | 9,209 | (1,500 | ) |
(4)
|
33,142 | |||||||||||
4,353 |
(3)
|
||||||||||||||||
Depreciation
and amortization
|
13,295 | 3,223 | (3,223 | ) |
(2)
|
19,031 | |||||||||||
5,736 |
(1)
|
||||||||||||||||
Total
cost and operating expenses
|
106,582 | 68,651 | (8,860 | ) | 166,373 | ||||||||||||
Income
(loss) from operations
|
(93 | ) | 17,062 | (34,264 | ) | (17,295 | ) | ||||||||||
Other
income (expense), net
|
- | (381 | ) | - | (381 | ) | |||||||||||
Interest,
net
|
233 | (6,700 | ) | (6,782 | ) |
(6)
|
(6,549 | ) | |||||||||
6,700 |
(5)
|
||||||||||||||||
Income
(loss) from operations before income taxes
|
140 | 9,981 | (34,346 | ) | (24,225 | ) | |||||||||||
(Provision)
benefit for income tax
|
1,429 | (3,980 | ) | 13,038 |
(8)
|
10,487 | |||||||||||
Income
(loss) from continuing operations
|
$ | 1,569 | $ | 6,001 | $ | (21,308 | ) | $ | (13,738 | ) | |||||||
Discontinued
operations:
|
|||||||||||||||||
Income
(loss) from discontinued operations, net of tax
|
232 | - | - | 232 | |||||||||||||
Gain
on sale of discontinued operations, net of tax
|
808 | - | - | 808 | |||||||||||||
Net
income (loss)
|
$ | 2,609 | $ | 6,001 | $ | (21,308 | ) | $ | (12,698 | ) | |||||||
Basic
earnings per share:
|
|||||||||||||||||
Income
(loss) from continuing operations per common share
|
$ | 0.06 | N/A | N/A | $ | (0.54 | ) | ||||||||||
Income
(loss) from discontinued operations per common share
|
$ | 0.04 | N/A | N/A | $ | 0.04 | |||||||||||
Net
income (loss) per common share
|
$ | 0.10 | N/A | N/A | $ | (0.50 | ) | ||||||||||
Diluted
earnings per share:
|
|||||||||||||||||
Income
(loss) from continuing operations per common share
|
$ | 0.06 | N/A | N/A | $ | (0.51 | ) | ||||||||||
Income
(loss) from discontinued operations per common share
|
$ | 0.04 | N/A | N/A | $ | 0.04 | |||||||||||
Net
income (loss) per common share
|
$ | 0.10 | N/A | N/A | $ | (0.47 | ) |
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
Note 1. Basis of
Presentation
On July
30, 2010, Web.com Group, Inc. (“Web.com”) completed its acquisition (the
“Acquisition”) of Register.com (Cayman) LP, a Cayman limited partnership
(“Register.com LP”), a provider of global domain name registration and
complementary website design and management services pursuant to that certain
Purchase Agreement among Web.com, Register.com GP (Cayman) Ltd, each seller
named therein and Register.com LP, dated June 17, 2010 (the “Purchase
Agreement”). The interests in Register.com LP were purchased from (i)
Register.com GP (Cayman) Ltd., an exempted company incorporated under the laws
of the Cayman Islands, and (ii) the limited partners of Register.com LP.
Consideration for the acquisition of the limited partnership interests was
approximately $135 million financed with a $95 million term loan and a $15
million revolving credit facility, each pursuant to the Credit Agreement,
approximately $20 million in cash and a $5 million seller note.
The
accompanying unaudited pro forma combined condensed financial statements present
the results of operations and financial position of Web.com and Register.com LP
based on the historical financial information of each company and include adjustments to reflect the transactions
that are directly attributable to the acquisition, factually supportable and
expected to have a continuing impact on the combined
results. In addition, the unaudited pro forma combined
condensed balance sheet has been prepared assuming the merger occurred as of the
close of business on July 29, 2010. The unaudited pro forma combined
condensed statements of operations have been prepared assuming the acquisition
occurred on January 1, 2009.
The
unaudited pro forma combined condensed financial statements are based on
estimates and assumptions, which have been made solely for purposes of
developing such pro forma information. The estimated pro forma
adjustments arising from the acquisition are derived from the estimated purchase
price and estimated fair value of the assets acquired and liabilities
assumed.
The
acquisition is accounted for under the acquisition method as outlined in ASC
805. Under this method, the purchase price is allocated to the fair
value of tangible and intangible assets acquired and the fair value of
liabilities assumed. The remaining amount of unallocated purchase
price is recorded as goodwill. Web.com has been advised by independent
valuation experts on the estimated fair value of certain intangible
assets. The
purchase price valuation is still subject to final adjustments primarily for
amounts allocated to deferred tax assets and liabilities and intangible and
fixed assets.
The
preliminary purchase price allocation as of the close of business on July 29,
2010 is as follows (in thousands of dollars):
Goodwill
|
$ | 74,020 | ||
Trade
Names
|
15,890 | |||
Developed
Technology
|
28,720 | |||
Customer
Relationships
|
19,770 | |||
Net
assets (liabilities) acquired
|
(3,400 | ) | ||
Total
preliminary purchase price allocation
|
$ | 135,000 |
Note
2. Pro Forma Income Statement Adjustments
The following pro forma adjustments
have been recorded in the combined condensed statement of operations for the
period ended July 29, 2010 and the year ended December 31, 2009:
(1) The
following table includes Web.com’s amortization expense by category on a
straight-line basis related to the estimated identifiable intangible assets
resulting from this transaction for the year ended December 31, 2009 and the
period ended July 29, 2010:
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
December
31,
2009
|
July 29,
2010
|
Useful life at
Acquisition
Date
|
|||||||||
(in
thousands)
|
(in
years)
|
||||||||||
Amortization
of:
|
|||||||||||
Trade
Names
|
$ | - | $ | - |
Indefinite
|
||||||
Customer
Relationships-Partners
|
65 | 38 |
16
|
||||||||
Customer
Relationships-Retail
|
2,081 | 1,214 |
9
|
||||||||
Technology
|
3,590 | 2,094 |
8
|
||||||||
Total
amortization expense
|
5,736 | 3,346 |
(2) To
eliminate amortization expense from Register.com LP’s intangible assets that
have been eliminated by acquisition accounting;
(3) This
adjustment records the estimated direct costs of the acquisition, primarily
legal, employee related expenses and investment banker’s fees for Register.com
LP and Web.com. These costs were incurred during the period ended
July 29, 2010, but are presented as expenses incurred during the year ended
December 31, 2009 to conform with the presentation that the acquisition occurred
on January 1, 2009;
(4) To
eliminate the management fee payable to Register.com LP owners;
(5) To
eliminate the interest expense and deferred financing amortization expense from
Register.com LP as this debt was paid in full at the closing of the acquisition
on July 30, 2010;
(6) To
record Web.com’s interest expense and deferred financing fee amortization
resulting from the $95 million term loan, the $15 million revolving credit
facility and the $5 million note to Register.com LP, all issued to finance the
acquisition;
(7) To
record the impact of the fair market value write down of deferred revenue and
the related prepaid costs from Register’s historical income statement for the
year ended December 31, 2009 and the period ended July 29, 2010. This
adjustment also includes the elimination of intercompany revenue and cost of
revenue between Register.com LP and Web.com of approximately $1.4 million and
$2.0 million for the periods ended July 29, 2010 and the year ended December 31,
2010, respectfully; and
|
(8)
|
To
record income tax expense (benefit) at Web.com’s combined federal and
state income tax rate of approximately 38
percent.
|
Note
3. Pro Forma Balance Sheet Adjustments
The following adjustments have been
made to the unaudited pro forma combined condensed balance sheet as of July 29,
2010 to reflect the merger-related transactions:
|
(a)
|
To
record cash paid in exchange for the purchase of Register.com LP’s net
assets as part of this transaction;
|
|
(b)
|
To
record the fair market value write-down of deferred revenue and the
related prepaid costs;
|
|
(c)
|
To
eliminate Register.com LP’s historical goodwill and intangible
assets;
|
|
(d)
|
To
record Web.com’s goodwill and intangible assets arising from the
acquisition of Register.com LP;
|
|
(e)
|
To
eliminate Register’s deferred financing fees and a joint venture
investment not acquired;
|
|
(f)
|
This
adjustment eliminates existing employment related liabilities triggered as
a result of the acquisition and acquisition related fees recorded by
Register.com LP. These liabilities were not acquired by Web.com
and were settled by the seller at the time of the
acquisition;
|
|
(g)
|
To
record the current and long-term portion of the $110 million bank notes
and the $5 million note due to the seller that Web.com issued to finance
the acquisition;
|
|
(h)
|
To
eliminate Register.com LP’s long-term debt and related accrued interest
that was settled at the closing of the
merger;
|
|
(i)
|
To
eliminate Register.com LP’s historical partner
deficit;
|
|
(j)
|
To
record Web.com’s deferred financing fees related to the $110 million of
bank notes; and
|
|
(k)
|
The
July, 29 2010 Register.com LP cash and cash equivalents includes
approximately $5 million that was held by Register.com LP and acquired in
the acquisition but was not consolidated into the audited financial
statements of Register.com Investments Cooperatie
U.A.
|
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
Note
4. Pro Forma Net Income (Loss) per Share
The pro forma basic and diluted net
income (loss) per share are based on the weighted average Web.com shares used in
computing basic and diluted net income (loss) as calculated for the year ended
December 31, 2009 and the period ended July 29, 2010.
Note
5. Reclassifications
Certain reclassifications have been
made to the historical financial statements of Register.com LP to conform to
Web.com’s presentation.