Attached files
file | filename |
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8-K/A - FORM 8-K/A - COMSCORE, INC. | w80551e8vkza.htm |
EX-23.1 - EX-23.1 - COMSCORE, INC. | w80551exv23w1.htm |
EX-99.2 - EX-99.2 - COMSCORE, INC. | w80551exv99w2.htm |
EXHIBIT 99.3
Unaudited Pro Forma Financial Information
On August 31, 2010, CS Worldnet Holding B.V., a Netherlands company (CS Worldnet) and
wholly-owned subsidiary of comScore, Inc., a Delaware corporation (comScore or the Company),
acquired all of the issued and outstanding capital stock of Nedstat B.V., a Netherlands company
(Nedstat), and Nedstat became a wholly-owned subsidiary of CS Worldnet (the Acquisition). The
Acquisition was accomplished pursuant to the Stock Purchase Agreement.
The following unaudited pro forma consolidated financial statements have been prepared to give
effect to the completed Acquisition. The unaudited pro forma consolidated balance sheet at June 30,
2010 gives effect to the Acquisition as if it had occurred on June 30, 2010. The unaudited pro
forma consolidated balance sheet is derived from the unaudited historical financial statements of
comScore and Nedstat at June 30, 2010. The unaudited pro forma consolidated balance sheet at June
30, 2010 also gives effect to comScores prior acquisition of Nexius, Inc. (Nexius) on July 1,
2010 as if it occurred on June 30, 2010.
The unaudited pro forma consolidated statement of operations for the year ended December 31,
2009 and the unaudited consolidated statement of operations for the six months ended June 30, 2010
gives effect to the Acquisition, and the acquisition of Nexius as if they had occurred on January
1, 2009 and January 1, 2010, respectively. The unaudited pro forma consolidated statement of
operations is derived from the audited historical financial statements of comScore, Nexius, and
Nedstat as of and for the year ended December 31, 2009 and the unaudited, historical financial
statements of comScore, Nexius and Nedstat as of and for the six months ended June 30, 2010.
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
Notes 1 and 2 to the unaudited pro forma consolidated financial statements, is allocated to the net
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 and intangible assets acquired and liabilities assumed and such estimates and
assumptions are subject to change.
The unaudited pro forma consolidated financial statements do not include any adjustments
regarding liabilities incurred or cost savings achieved resulting from the integration of the
companies, as management is in the process of assessing what, if any, future actions are necessary.
However, additional liabilities ultimately may be recorded for severance and/or other costs
associated with removing redundant operations that could affect amounts in the unaudited pro forma
consolidated financial statements, and their effects may be material and would be reflected in the
consolidated statement of operations.
The unaudited pro forma consolidated financial statements should be read in conjunction with
the historical audited and unaudited consolidated financial statements and related notes of comScore, the section
entitled Managements Discussion and Analysis of Financial Condition and Results of Operations
contained in comScores Annual Report on Form 10-K for the fiscal year ended December 31, 2009,
filed on March 12, 2010 and comScores Quarterly Reports on
Form 10-Q for the quarter ended June 30, 2010, filed on August 9, 2010, the audited historical financial statements and related notes of Nexius as
of December 31, 2009 and for the year then ended, which are included as Exhibit 99.2 to the Current
Report on Form 8-K/A filed by comScore on September 14, 2010, the audited historical financial
statements and related notes of Nedstat as of December 31, 2009 and for the year then ended, which
are included as Exhibit 99.2 to this Current Report on Form 8-K/A. The unaudited pro forma
consolidated financial statements are not intended to represent or be indicative of the
consolidated results of operations or financial condition of comScore that would have been reported
had the acquisitions been completed as of the dates presented, and should not be construed as
representative of the future consolidated results of operations or financial condition of the
combined entity.
1
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2010
AS OF JUNE 30, 2010
(In thousands)
Pro Forma | Pro Forma | |||||||||||||||||||||||||||||||
comScore | Nexius | Adjustments | Nedstat | Adjustments | Consolidated Total | |||||||||||||||||||||||||||
Current assets: |
||||||||||||||||||||||||||||||||
Cash and cash equivalents |
$ | 81,327 | $ | 4 | $ | (18,286 | ) | a | $ | 579 | $ | (33,213 | ) | a | $ | 30,411 | ||||||||||||||||
Short-term investments |
4,649 | | | | | 4,649 | ||||||||||||||||||||||||||
Accounts receivable, net |
34,921 | 421 | 63 | b | 2,905 | | 38,310 | |||||||||||||||||||||||||
Prepaid expenses and other current assets |
3,237 | 95 | (38 | ) | c | 844 | | 4,138 | ||||||||||||||||||||||||
Costs of products and services, current portion |
| 2,470 | (2,470 | ) | d | | | | ||||||||||||||||||||||||
Deferred tax assets |
8,885 | | | 341 | (341 | ) | e | 8,885 | ||||||||||||||||||||||||
Total current assets |
133,019 | 2,990 | (20,731 | ) | 4,669 | (33,554 | ) | 86,393 | ||||||||||||||||||||||||
Long-term investments |
2,809 | | | | | 2,809 | ||||||||||||||||||||||||||
Property and equipment, net |
21,230 | 326 | (36 | ) | f | 1,808 | (195 | ) | f | 23,133 | ||||||||||||||||||||||
Costs of products and services, net of current portion |
| 50 | (50 | ) | d | | | | ||||||||||||||||||||||||
Development costs |
| | | 148 | (148 | ) | g | | ||||||||||||||||||||||||
Other non-current assets |
190 | | | 174 | | 364 | ||||||||||||||||||||||||||
Long-term deferred tax assets |
11,040 | 2,419 | (2,419 | ) | e | 2,852 | (2,852 | ) | e | 11,040 | ||||||||||||||||||||||
Intangible assets, net |
16,951 | | 17,050 | h | | 17,983 | h | 51,984 | ||||||||||||||||||||||||
Goodwill |
50,069 | | 13,701 | i | | 23,726 | i | 87,496 | ||||||||||||||||||||||||
Total assets |
$ | 235,308 | $ | 5,785 | $ | 7,515 | $ | 9,651 | $ | 4,960 | $ | 263,219 | ||||||||||||||||||||
Current liabilities: |
||||||||||||||||||||||||||||||||
Notes payable |
$ | | $ | 1,414 | $ | (1,414 | ) | j | $ | | $ | | $ | | ||||||||||||||||||
Accounts payable |
2,272 | 1,045 | 345 | k | 913 | | 4,575 | |||||||||||||||||||||||||
Accrued expenses |
11,760 | 563 | (270 | ) | l | 1,420 | 1,848 | l | 15,321 | |||||||||||||||||||||||
Deferred revenues, current portion |
51,673 | 6,499 | (3,209 | ) | m | 8,552 | (2,675 | ) | m | 60,840 | ||||||||||||||||||||||
Deferred rent |
1,275 | | | 301 | (301 | ) | l | 1,275 | ||||||||||||||||||||||||
Deferred tax liabilities |
| | 5,064 | e | | 699 | e | 5,763 | ||||||||||||||||||||||||
Income tax payable |
| 163 | | | 39 | e | 202 | |||||||||||||||||||||||||
Equipment loans payable |
| 393 | (393 | ) | n | | | | ||||||||||||||||||||||||
Capital lease obligations |
1,972 | | | | | 1,972 | ||||||||||||||||||||||||||
Total current liabilities |
68,952 | 10,077 | 123 | 11,186 | (390 | ) | 89,948 | |||||||||||||||||||||||||
Notes payable, net of current portion |
| 1,576 | (1,183 | ) | j | | | 393 | ||||||||||||||||||||||||
Deferred revenue, net of current portion |
| 20 | 85 | m | | 157 | m | 262 | ||||||||||||||||||||||||
Deferred rent, long-term |
8,128 | | | | | 8,128 | ||||||||||||||||||||||||||
Deferred tax liabilities, net of current portion |
| | | | 4,505 | e | 4,505 | |||||||||||||||||||||||||
Capital lease obligations, long-term |
4,191 | | | | | 4,191 | ||||||||||||||||||||||||||
Other long-term liabilities |
475 | | | | | 475 | ||||||||||||||||||||||||||
Total liabilities |
81,746 | 11,673 | (975 | ) | 11,186 | 4,272 | 107,902 | |||||||||||||||||||||||||
Commitments and contingencies |
||||||||||||||||||||||||||||||||
Stockholders equity: |
||||||||||||||||||||||||||||||||
Common stock |
31 | 160 | (160 | ) | o | 93 | (93 | ) | o | 31 | ||||||||||||||||||||||
Additional paid-in capital |
204,269 | | 3,177 | p | 10,340 | (9,339 | ) | p | 208,447 | |||||||||||||||||||||||
Accumulated other comprehensive (loss) income |
(108 | ) | | | 155 | (155 | ) | o | (108 | ) | ||||||||||||||||||||||
Accumulated deficit |
(50,630 | ) | (6,048 | ) | 5,473 | o | (12,123 | ) | 10,275 | o | (53,053 | ) | ||||||||||||||||||||
Total stockholders equity |
153,562 | (5,888 | ) | 8,490 | (1,535 | ) | 688 | 155,317 | ||||||||||||||||||||||||
Total liabilities and stockholders equity |
$ | 235,308 | $ | 5,785 | $ | 7,515 | $ | 9,651 | $ | 4,960 | $ | 263,219 | ||||||||||||||||||||
See notes to the unaudited pro forma consolidated financial statements.
2
COMSCORE, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
FOR THE SIX MONTHS ENDED JUNE 30, 2010
(In thousands, except share and per share data)
Pro Forma | Pro Forma | |||||||||||||||||||||||||||||||
comScore | Nexius | Adjustments | Nedstat | Adjustments | Consolidated | |||||||||||||||||||||||||||
Revenues |
$ | 78,101 | $ | 4,309 | $ | (2,487 | ) | q | $ | 8,893 | $ | (2,478 | ) | q | $ | 86,338 | ||||||||||||||||
Cost of revenues (excludes amortization of intangible assets resulting |
||||||||||||||||||||||||||||||||
from acquisitions shown below) |
22,733 | 3,584 | (1,070 | ) | q | 3,141 | | 28,388 | ||||||||||||||||||||||||
Selling and marketing |
25,610 | | | 2,887 | | 28,497 | ||||||||||||||||||||||||||
Research and development |
11,135 | | | 1,336 | | 12,471 | ||||||||||||||||||||||||||
General and administrative |
14,373 | 1,776 | 851 | r | 1,600 | 238 | r | 18,838 | ||||||||||||||||||||||||
Amortization of intangible assets resulting from acquisitions |
1,165 | | 862 | s | | 1,736 | s | 3,763 | ||||||||||||||||||||||||
Total expenses from operations |
75,016 | 5,360 | 643 | 8,964 | 1,974 | 91,957 | ||||||||||||||||||||||||||
Income from operations |
3,085 | (1,051 | ) | (3,130 | ) | (71 | ) | (4,452 | ) | (5,619 | ) | |||||||||||||||||||||
Interest and other income, net |
154 | (89 | ) | 89 | t | | | 154 | ||||||||||||||||||||||||
(Loss) gain from foreign currency |
(129 | ) | | | (77 | ) | | (206 | ) | |||||||||||||||||||||||
Income (loss) before income taxes |
3,110 | (1,140 | ) | (3,041 | ) | (148 | ) | (4,452 | ) | (5,671 | ) | |||||||||||||||||||||
Income tax (provision)/benefit |
(2,056 | ) | 343 | 1,174 | u | (13 | ) | (8 | ) | u | (560 | ) | ||||||||||||||||||||
Net income |
$ | 1,054 | $ | (797 | ) | $ | (1,867 | ) | $ | (161 | ) | $ | (4,460 | ) | $ | (6,231 | ) | |||||||||||||||
Net income available to common stockholders per common share: |
||||||||||||||||||||||||||||||||
Basic |
$ | 0.03 | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.14 | ) | $ | (0.20 | ) | |||||||||||||||
Diluted |
$ | 0.03 | $ | (0.03 | ) | $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.14 | ) | $ | (0.20 | ) | |||||||||||||||
Weighted-average number of shares used in per share calculation
common stock: |
||||||||||||||||||||||||||||||||
Basic |
30,817,853 | | 287,702 | v | | 217,215 | v | 31,322,770 | ||||||||||||||||||||||||
Diluted |
31,625,650 | | (520,095 | ) | v | | 217,215 | v | 31,322,770 |
See notes to the unaudited pro forma consolidated financial statements.
3
COMSCORE, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009
FOR THE YEAR ENDED DECEMBER 31, 2009
(In thousands, except share and per share data)
Pro Forma | Pro Forma | Consolidated | ||||||||||||||||||||||||||||||
comScore | Nexius | Adjustments | Nedstat | Adjustments | Total | |||||||||||||||||||||||||||
Revenues |
$ | 127,740 | $ | 8,155 | $ | (2,075 | ) | q | $ | 20,286 | $ | (3,548 | ) | q | $ | 150,558 | ||||||||||||||||
Cost of revenues (excludes amortization of intangible assets resulting from acquisitions
shown below) |
38,730 | 7,526 | (1,041 | ) | q | 7,506 | | 52,721 | ||||||||||||||||||||||||
Selling and marketing |
41,954 | | | 8,052 | | 50,006 | ||||||||||||||||||||||||||
Research and development |
17,827 | | | 2,945 | | 20,772 | ||||||||||||||||||||||||||
General and administrative |
18,232 | 2,645 | 1,130 | r | 3,774 | 459 | r | 26,240 | ||||||||||||||||||||||||
Amortization of intangible assets resulting from acquisitions |
1,457 | | 1,724 | s | | 3,697 | s | 6,878 | ||||||||||||||||||||||||
Total expenses from operations |
118,200 | 10,171 | 1,813 | 22,277 | 4,155 | 156,616 | ||||||||||||||||||||||||||
Income from operations |
9,540 | (2,016 | ) | (3,888 | ) | (1,991 | ) | (7,703 | ) | (6,058 | ) | |||||||||||||||||||||
Interest income and other, net |
410 | (126 | ) | 126 | t | (6 | ) | | 404 | |||||||||||||||||||||||
Loss from foreign currency |
(132 | ) | | | (66 | ) | | (198 | ) | |||||||||||||||||||||||
Gain from sale (impairment) of marketable securities |
89 | | | | | 89 | ||||||||||||||||||||||||||
Income before (provision) benefit for income taxes |
9,907 | (2,142 | ) | (3,762 | ) | (2,063 | ) | (7,703 | ) | (5,763 | ) | |||||||||||||||||||||
(Provision) benefit for income taxes |
(5,938 | ) | 980 | 1,453 | u | 86 | (113 | ) | u | (3,532 | ) | |||||||||||||||||||||
Net income |
$ | 3,969 | $ | (1,162 | ) | $ | (2,309 | ) | $ | (1,977 | ) | $ | (7,816 | ) | $ | (9,295 | ) | |||||||||||||||
Net income attributable to common stockholders per common share: |
||||||||||||||||||||||||||||||||
Basic |
$ | 0.13 | $ | (0.04 | ) | $ | (0.08 | ) | $ | (0.06 | ) | $ | (0.26 | ) | $ | (0.30 | ) | |||||||||||||||
Diluted |
$ | 0.13 | $ | (0.04 | ) | $ | (0.08 | ) | $ | (0.06 | ) | $ | (0.26 | ) | $ | (0.30 | ) | |||||||||||||||
Weighted-average number of shares used in per share calculation common stock: |
||||||||||||||||||||||||||||||||
Basic |
30,014,085 | | 444,869 | v | | 289,900 | v | 30,748,854 | ||||||||||||||||||||||||
Diluted |
30,970,642 | | 444,869 | v | | (666,657 | ) | v | 30,748,854 |
See notes to the unaudited pro forma consolidated financial statements.
4
NOTES TO THE UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS OF
COMSCORE INC.
CONSOLIDATED FINANCIAL STATEMENTS OF
COMSCORE INC.
Note 1. Basis of Pro Forma Presentation
The unaudited pro forma consolidated financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission for the purposes of
inclusion in comScores amended Current Report on Form 8-K/A prepared and filed in connection with
the Acquisition.
Certain information and certain disclosures normally included in financial statements prepared
in accordance with U.S. generally accepted accounting principles (GAAP) have been condensed or
omitted pursuant to such rules and regulations. However, the Company believes that the disclosures
provided herein are adequate to make the information presented not misleading.
The following unaudited pro forma consolidated financial statements have been prepared to give
effect to the completed Acquisition. The unaudited pro forma consolidated balance sheet at June 30,
2010 gives effect to the Acquisition as if it had occurred on June 30, 2010. The unaudited pro
forma consolidated balance sheet is derived from the unaudited historical financial statements of
comScore and Nedstat at June 30, 2010. The unaudited pro forma consolidated balance sheet at June
30, 2010 also gives effect to comScores acquisition of Nexius on July 1, 2010 as if it occurred on
June 30, 2010. The unaudited pro forma consolidated statement of operations for the year ended
December 31, 2009 and the unaudited consolidated statement of operations for the six months ended
June 30, 2010 gives effect to the Acquisition, and the acquisition of Nexius as if they had
occurred on January 1, 2009 and January 1, 2010, respectively. The unaudited pro forma consolidated
statement of operations is derived from the audited historical financial statements of comScore,
Nexius, and Nedstat as of and for the year ended December 31, 2009 and the unaudited, historical
financial statements of comScore, Nexius and Nedstat as of and for the six months ended June 30,
2010.
The unaudited pro forma consolidated financial statements are provided for informational
purposes only and do not purport to be indicative of the Companys consolidated financial position
or consolidated results of operations which would actually have been obtained had such transactions
been completed as of the date or for the periods presented, or of the consolidated financial
position or consolidated results of operations that may be obtained in the future.
Note 2. Purchase Price Allocation
Nexius
On July 1, 2010, comScore completed the acquisition of Nexius (the Nexius Acquisition). The
unaudited pro forma consolidated financial statements have been prepared to give effect to the
completed Nexius Acquisition, which was accounted for under the acquisition method of accounting.
Nexius is a provider of mobile carriergrade products that deliver network analysis focused on the
experience of wireless subscribers, as well as network intelligence with respect to performance,
capacity and configuration analytics. The aggregate amount of the consideration paid by comScore
upon the Nexius Acquisition was $20.9 million in cash and stock, of which approximately $3.0
million was paid in cash to satisfy certain of Nexiuss existing debt. The remaining estimated
Acquisition consideration of $15.3 million in cash and an aggregate 158,070 shares of comScore
common stock (totaling $2.6 million) was paid to the Nexius shareholders. The fair value of the
shares of comScore common stock was determined based on the closing price of comScores common
stock on the NASDAQ Global Market for trading day ended June 30, 2010 of $16.47 per share.
5
In
addition, 137,725 shares of restricted comScore common stock were issued to former employees
of Nexius pursuant to the terms of the Nexius Acquisition. Such restricted stock grants vest over a three-year period, with 25% of the total shares
subject to grant vested upon issuance and an additional 25% of the total shares subject to grant
vesting on each anniversary of the closing date thereafter, subject to such holders continued
status as an employee of comScore. These restricted shares have been excluded from the purchase
price allocation and are accounted for as stock based compensation expense by comScore.
Under the acquisition method of accounting, the total estimated purchase price is allocated to
Nexius net tangible and intangible assets acquired and liabilities assumed based on their
estimated fair values as of July 1, 2010, the effective date of the Nexius Acquisition. 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 the introduction to these unaudited pro forma consolidated financial
statements, the preliminary estimated purchase price is allocated as follows (in thousands):
Cash and cash equivalents |
$ | 4 | ||
Accounts receivable |
484 | |||
Prepaid expenses and other current assets |
57 | |||
Property and equipment |
290 | |||
Deferred tax asset |
1,621 | |||
Accounts payable |
(1,390 | ) | ||
Accrued expenses |
(456 | ) | ||
Notes payable |
(393 | ) | ||
Deferred revenue |
(3,395 | ) | ||
Deferred tax liability |
(6,685 | ) | ||
Net tangible liabilities acquired |
(9,863 | ) | ||
Definite-lived intangible assets acquired |
17,050 | |||
Goodwill |
13,701 | |||
Total estimated purchase price |
$ | 20,888 | ||
Prior to the end of the measurement period for finalizing the purchase price allocation,
if information becomes available which would indicate adjustments are required to the purchase
price allocation, such adjustments will be included in the purchase price allocation
retrospectively.
Of the total estimated purchase price, $9.9 million has been allocated to net tangible
liabilities acquired, and $17.1 million has been allocated to definite-lived intangible assets
acquired. Definite-lived intangible assets of $17.1 million consist of the value assigned to
Nexius customer relationships of $14.5 million, developed and core technology of $1.6 million, and
trademarks of $1.0 million.
The value assigned to Nexius customer relationships was determined by discounting the estimated
cash flows associated with the existing customers as of the date the Nexius Acquisition was
consummated taking into consideration estimated attrition of the existing customer base. comScore
expects to amortize the value of Nexius customer relationships on a straight-line basis over
twelve years. Amortization of customer relationships is not deductible for tax purposes.
6
The value assigned Nexius developed and core technology was determined utilizing the Relief
from Royalty Method. This method derives the estimated value by discounting the estimated royalty
savings associated with an estimated royalty rate for the use of the technology to their present
value. Nexius owns certain internally-developed technology (the Technology) which it licenses to
customers in order to generate revenue. Further, in addition to generating licensing fees from the
Technology, Nexius also generates a revenue stream as a result of these license sales in the form
of annual maintenance and support revenue. comScore expects to amortize the developed and core
technology on a straight-line basis over five years. Amortization of developed and core technology
is not deductible for tax purposes.
The value assigned to Nexius trademarks was determined by utilizing the Relief from Royalty
Method. This method derives the estimated value by discounting the estimated royalty savings
associated with an estimated royalty rate for the use of the trademarks to their present value. The
trademarks consist of Nexius Xplore trade name and various trademarks related to its existing
product lines. comScore expects to amortize the trademarks on a straight-line basis over five
years. Amortization of trademarks is not deductible for tax purposes.
The definite-lived intangible assets acquired will result in approximately the following
annual amortization expense (in thousands):
2010 |
$ | 862 | ||
2011 |
1,724 | |||
2012 |
1,724 | |||
2013 |
1,724 | |||
2014 |
1,724 | |||
Thereafter |
9,292 | |||
$ | 17,050 | |||
Of the total estimated purchase price, approximately $13.7 million has been allocated to
goodwill and is not deductible for tax purposes. Goodwill represents factors including expected
synergies from combining operations and is the excess of the purchase price of an acquired business
over the fair value of the net tangible and intangible assets acquired. Goodwill will not be
amortized but instead will be tested for impairment at least annually (more frequently if
indicators of impairment arise). In the event that management determines that the goodwill has
become impaired, the Company will incur an accounting charge for the amount of the impairment
during the fiscal quarter in which the determination is made.
7
Nedstat
On August 31, 2010, the Company completed its acquisition of Nedstat, a leading provider of
technology that helps web sites, particularly publishers and video companies, analyze the behavior
of their users with powerful analytic tools, pursuant to the Stock Purchase Agreement dated
August 31, 2010 (the Nedstat Acquisition).
The aggregate amount of the consideration paid by the Company upon the closing of the
transaction was approximately $34.4 million in cash and an aggregate of 58,045 shares of the
Companys common stock valued at $1.1 million was issued to two key shareholders of Nedstat.
The Nedstat Acquisition resulted in goodwill of approximately $25.5 million. This amount
represents the residual amount of the total purchase price after allocation to net assets and
identifiable intangible assets acquired. The amount recorded for goodwill is consistent with the
Companys intentions for the acquisition of Nedstat. The Company acquired Nedstat to help transform
the Company into a broad based Digital Business Analytics company and solidify its Unified
Digital Measurement (UDM) platform.
Under the acquisition method of accounting, the total estimated purchase price is allocated to
Nedstats net tangible and intangible assets acquired and liabilities assumed based on their
estimated fair values as of August 31, 2010, the effective date of the Acquisition. 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 the introduction to these unaudited pro forma consolidated financial
statements, the preliminary estimated purchase price is allocated as follows (in thousands):
Cash and cash equivalents |
$ | 622 | ||
Accounts receivable |
2,939 | |||
Prepaid expenses and other current assets |
177 | |||
Property and equipment |
1,520 | |||
Other receivables, non-current |
224 | |||
Accounts payable |
(878 | ) | ||
Accrued expenses |
(2,034 | ) | ||
Accrued taxes |
(249 | ) | ||
Deferred revenue |
(5,583 | ) | ||
Deferred tax liabilities |
(5,401 | ) | ||
Net tangible liabilities acquired |
(8,663 | ) | ||
Definite-lived intangible assets acquired |
18,673 | |||
Goodwill |
25,482 | |||
Total estimated purchase price |
$ | 35,492 | ||
Prior to the end of the measurement period for finalizing the purchase price allocation,
if information becomes available which would indicate adjustments are required to the purchase
price allocation, such adjustments will be included in the purchase price allocation
retrospectively.
Of the total estimated purchase price, a preliminary estimate of $8.7 million has been
allocated to net tangible liabilities acquired, and $18.7 million has been allocated to
definite-lived intangible assets acquired. Definite-lived intangible assets of $18.7 million
consist of the value assigned to Nedstats customer relationships of $15.3 million developed and
core technology of $1.9 million and trademarks of $1.5 million.
The value assigned to Nedstats customer relationships was determined by discounting the
estimated cash flows associated with the existing customers as of the date the Acquisition was
consummated taking into consideration estimated attrition of the existing customer base. comScore
expects to amortize the value of Nedstat customer relationships on a straight-line basis over
seven years.
8
Amortization of customer relationships is not deductible for tax purposes.
The value assigned Nedstats developed and core technology was determined utilizing the
Relief from Royalty Method. This method derives the estimated value by discounting the estimated
royalty savings associated with an estimated royalty rate for the use of the technology to their
present value. Nedstat owns certain internally-developed technology (the Technology) which it licenses to
customers on a subscription basis in order to generate revenue. comScore expects to amortize the
developed and core technology on a straight-line basis over five years. Amortization of developed
and core technology is not deductible for tax purposes.
The value assigned to Nedstats trademarks was determined by utilizing the Relief from
Royalty Method. This method derives the estimated value by discounting the estimated royalty
savings associated with an estimated royalty rate for the use of the trademarks to their present
value. comScore expects to amortize the trademarks on a straight-line basis over two years.
Amortization of trademarks is not deductible for tax purposes.
The definite-lived intangible assets acquired will result in approximately the following
annual amortization expense (in thousands):
2010 |
$ | 1,107 | ||
2011 |
3,321 | |||
2012 |
3,067 | |||
2013 |
2,559 | |||
2014 |
2,559 | |||
Thereafter |
6,060 | |||
$ | 18,673 | |||
Of the total estimated purchase price, approximately $25.5 million has been allocated to
goodwill and is not deductible for tax purposes. Goodwill represents factors including expected
synergies from combining operations and is the excess of the purchase price of an acquired business
over the fair value of the net tangible and intangible assets acquired. Goodwill will not be
amortized but instead will be tested for impairment at least annually (more frequently if
indicators of impairment arise). In the event that management determines that the goodwill has
become impaired, the Company will incur an accounting charge for the amount of the impairment
during the fiscal quarter in which the determination is made.
Note 3. Pro Forma Adjustments
Pro forma adjustments are made to reflect the estimated purchase price of the Acquisition and
the Nexius Acquisitions, to adjust amounts related to Nedstats and Nexius net tangible assets and
intangible assets to a preliminary estimate of the fair values of those liabilities and assets, to
reflect the amortization expense related to the intangible assets and to reclassify certain
financial statement amounts to conform to comScores financial statement presentation.
The specific pro forma adjustments included in the unaudited pro forma consolidated financial
statements are as follows:
a) | To reflect cash payments made to Nedstats shareholders ($33.9 million) offset by the cash inflows from stock subscriptions related to the Acquisition ($1.0 million); and to reflect cash payments made to Nexius shareholders ($15.3 million) and to satisfy certain of Nexius existing debt obligations ($3.0 million). | ||
b) | To fair value accounts receivable acquired in the Nexius Acquisition. | ||
c) | To reflect the fair value of prepaid and other assets acquired in the Nexius Acquisition. | ||
d) | To eliminate capitalized contractual costs recorded on Nexius books. | ||
e) | To properly reflect current and long term deferred tax assets and liabilities and income tax payable as a result of the Nexius Acquisition and the Acquisition. |
9
f) | To reflect fair value of acquired property and equipment. | ||
g) | To eliminate capitalized development costs recorded on Nedstats books which have been included in the intangible asset related to technology discussed in item h. | ||
h) | To reflect the fair value of the customer relationships, which is estimated as $14.7 million; the fair value of the technology, which is estimated as $1.8 million; the fair value of the trade name and trademarks, which are estimated as $1.5 million acquired in the Acquisition; and to reflect the fair value of the customer relationships, which is estimated as $14.5 million; the fair value of the technology, which is estimated as $1.6 million; and the fair value of the trade name and trademarks, which are estimated as $1.0 million acquired in the Nexius Acquisition. The difference between the amounts recorded on a pro forma basis and the actual balance as of the Effective date of the Acquisition is the result of changes in Euro to U.S. Dollar exchange rate between June 30, 2010 and the closing date of August 31, 2010. | ||
i) | To reflect the fair value of the goodwill of $23.7 million and $13.7 million based upon net assets acquired less intangible assets as a result of the Acquisition and the Nexius Acquisition, respectively. The difference between the amount recorded on a pro forma basis and the actual balance as of the Effective date of the Acquisition is the result of changes in the assets and liabilities of Nedstat between June 30, 2010 and the closing date of August 31, 2010, as well as changes in Euro to U.S. Dollar exchange rate between June 30, 2010 and the closing date of August 1, 2010. | ||
j) | To reflect the payoff of the notes payable of $3.0 million in connection with the Nexius Acquisition offset by the reclassification of $0.4 million from equipment loans payable to notes payable (see item n) to conform with comScores presentation. | ||
k) | To reflect the fair value of liabilities acquired in connection with the Nexius Acquisition. | ||
l) | To reflect the accrual of transaction costs and costs associated with the Acquisition of $2.2 million, and to reflect the elimination of deferred rent recorded by Nedstat prior to the Acquisition of $0.3 million; and to reflect the fair value of accrued expenses acquired in connection with the Nexius Acquisition. | ||
m) | To reflect the fair value of deferred revenue recorded on Nedstats books to the estimated cost of performance plus a reasonable profit margin in connection with the Acquisition; and to reflect the fair value of deferred revenue recorded on Nexius books to the estimated cost of performance plus a reasonable profit margin in connection with the Nexius Acquisition. | ||
n) | To reclassify the Bank of America notes payable secured by equipment to notes payable to conform with comScores presentation. See item j. | ||
o) | To eliminate Nedstats common stock, other comprehensive income and accumulated deficit in connection with the Acquisition and to reflect $2.2 million of transaction costs associated with the Acquisition; to eliminate Nexius common stock and accumulated deficit in connection with the Nexius Acquisition, and to record the effects of the $0.6 million of share based payments associated with the immediate vesting of 25% of the shares of comScore restricted stock issued in connection with the Nexius Acquisition. | ||
p) | To eliminate acquired paid-in capital and to reflect $1 million of stock issued to former shareholders of Nedstat totaling 60,807 shares of comScore common stock associated with the Acquisition (difference between 60,807 shares and actual shares issued of 58,045 due to changes in stock price between June 30, 2010 and August 31, 2010); and to reflect the 158,070 shares of comScore common stock issued in connection with the Nexius Acquisition ($2.6 million), and the $0.6 million of share based payments associated with the immediate vesting of 25% of the shares of comScore restricted stock issued in connection with the Nexius Acquisition. | ||
q) | To reflect impacts of revaluation of Nedstats and Nexius deferred revenue balances assuming the Acquisition and the Nexius Acquisition happened at beginning of period. |
10
r) | To reflect stock based compensation expense of $0.2 million and $0.6 million for the six months ended June 30, 2010 and the twelve months ended December 31, 2009, respectively associated with the shares of comScore restricted stock issued in connection with the Acquisition, and to reflect the reduced depreciation expense of $0.06 million and $0.12 million for the six months ended June 30, 2010 and the twelve months ended December 31, 2009, respectively related to the reduction in the PP&E to conform with comScores capitalization policies as a result of the Acquisition; and to primarily reflect the stock based compensation expense of $0.9 million and $1.2 million for the six months ended June 30, 2010 and the twelve months ended December 31, 2009, respectively associated with the shares of comScore restricted stock issued in connection with the Nexius Acquisition. | ||
s) | To reflect the amortization of intangible assets of $1.7 million and $3.7 million for the six months ended June 30, 2010 and the twelve months ended December 31, 2009, respectively arising from the Acquisition; and to reflect the amortization of intangible assets of $0.9 million and $1.7 million for the six months ended June 30, 2010 and the twelve months ended December 31, 2009, respectively arising from the Nexius Acquisition. | ||
t) | To reflect the elimination of interest expense recorded by Nexius that would not have been incurred as a result of the payoff of the associated notes payable as part of the Nexius Acquisition transaction assuming the Nexius Acquisition happened at beginning of period. | ||
u) | To reflect the effect of the Acquisition on the (provision) benefit for income taxes. | ||
v) | To adjust weighted average number of shares to reflect the shares of restricted common stock of comScore issued in connection with the Acquisition and to remove from the weighted average number of shares the anti-dilutive shares as a result of the net loss generated by the pro-forma consolidated adjustments. |
The unaudited pro forma consolidated financial statements do not include adjustments for
liabilities related to business integration activities for the Nexius Acquisition or the
Acquisition as management is in the process of assessing what, if any, future actions are
necessary. However, liabilities ultimately may be recorded for costs associated with business
integration activities for the Nexius Acquisition or the Acquisition in the Companys consolidated
financial statements.
comScore has not identified any material pre-Acquisition or pre-Nexius Acquisition
contingencies where the related asset, liability or impairment is probable and the amount of the
asset, liability or impairment can be reasonably estimated.
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 comScores common stock outstanding during the period. The diluted
weighted average number of common shares does not include outstanding stock options as their
inclusion would be anti-dilutive.
11
Note 5. IFRS to US GAAP Adjustments and Euro to US Dollar Translation
The reconciliation between Nedstats financial statements in IFRS and Euros and the pro forma
financial statements presented in this report is as follows:
NEDSTAT BV
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2010
AS OF JUNE 30, 2010
(In thousands)
US GAAP | US GAAP | |||||||||||||||
IFRS | Adjustments | US GAAP Total | Total (a) | |||||||||||||
| | | $ | |||||||||||||
Current assets: |
||||||||||||||||
Cash and cash equivalents |
| 473 | | | | 473 | $ | 579 | ||||||||
Short-term investments |
| | | | ||||||||||||
Accounts receivable, net |
2,375 | | 2,375 | 2,905 | ||||||||||||
Prepaid expenses and other current assets |
690 | | 690 | 844 | ||||||||||||
Deferred tax assets |
| 279 | (b) | 279 | 341 | |||||||||||
Total current assets |
3,538 | 279 | 3,817 | 4,669 | ||||||||||||
Long-term investments |
| | | | ||||||||||||
Property and equipment, net |
1,478 | | 1,478 | 1,808 | ||||||||||||
Development costs |
121 | | 121 | 148 | ||||||||||||
Other non-current assets |
142 | | 142 | 174 | ||||||||||||
Long-term deferred tax assets |
2,610 | (279 | )(b) | 2,331 | 2,852 | |||||||||||
Intangible assets, net |
| | | | ||||||||||||
Goodwill |
| | | | ||||||||||||
Total assets |
| 7,889 | | | | 7,889 | $ | 9,651 | ||||||||
Current liabilities: |
||||||||||||||||
Notes payable |
| | | | | | $ | | ||||||||
Accounts payable |
746 | | 746 | 913 | ||||||||||||
Accrued expenses |
1,161 | | 1,161 | 1,420 | ||||||||||||
Deferred revenues, current portion |
6,980 | 11 | (c) | 6,991 | 8,552 | |||||||||||
Deferred rent |
246 | | 246 | 301 | ||||||||||||
Capital lease obligations |
| | | | ||||||||||||
Total current liabilities |
9,133 | 11 | 9,144 | 11,186 | ||||||||||||
Notes payable, net of current portion |
| | | | ||||||||||||
Deferred revenue, net of current portion |
| | | | ||||||||||||
Deferred rent, long-term |
| | | | ||||||||||||
Capital lease obligations, long-term |
| | | | ||||||||||||
Other long-term liabilities |
| | | | ||||||||||||
Total liabilities |
9,133 | 11 | 9,144 | 11,186 | ||||||||||||
Commitments and contingencies |
||||||||||||||||
Stockholders equity: |
||||||||||||||||
Common stock |
76 | | 76 | 93 | ||||||||||||
Additional paid-in capital |
8,452 | | 8,452 | 10,340 | ||||||||||||
Accumulated other comprehensive (loss) income |
127 | | 127 | 155 | ||||||||||||
Accumulated deficit |
(9,899 | ) | (11 | )(c) | (9,910 | ) | (12,123 | ) | ||||||||
Total stockholders equity |
(1,244 | ) | (11 | ) | (1,255 | ) | (1,535 | ) | ||||||||
Total liabilities and stockholders equity |
| 7,889 | | | | 7,889 | $ | 9,651 | ||||||||
(a) | The Nedstat amounts included in the pro forma consolidated balance sheet was translated into US dollars using an exchange rate of 1.22 Euros per US dollar, which was the representative exchange rate for June 30, 2010. | |
(b) | To reflect the current portion of deferred tax assets which are not broken out between current and deferred for IFRS. | |
(c) | To adjust for differences in revenue recognition rules for multi element arrangements between IFRS and US GAAP. |
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NEDSTAT BV
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
FOR THE SIX MONTHS ENDED JUNE 30, 2010
(In thousands)
US GAAP | US GAAP | |||||||||||||||
IFRS | Adjustments | US GAAP Total | Total (a) | |||||||||||||
| | | $ | |||||||||||||
Revenues |
| 6,708 | | (11 | )(b) | | 6,697 | $ | 8,893 | |||||||
Cost of revenues |
2,365 | | 2,365 | 3,141 | ||||||||||||
Selling and marketing |
2,174 | | 2,174 | 2,887 | ||||||||||||
Research and development |
1,006 | | 1,006 | 1,336 | ||||||||||||
General and administrative |
1,205 | | 1,205 | 1,600 | ||||||||||||
Total expenses from operations |
6,750 | | 6,750 | 8,964 | ||||||||||||
Income from operations |
(42 | ) | (11 | ) | (53 | ) | (71 | ) | ||||||||
Interest and other income, net |
| | | | ||||||||||||
(Loss) gain from foreign currency |
(58 | ) | | (58 | ) | (77 | ) | |||||||||
(Loss) before income taxes |
(100 | ) | (11 | ) | (111 | ) | (148 | ) | ||||||||
Income tax (provision)/benefit |
(10 | ) | | (10 | ) | (13 | ) | |||||||||
Net (loss) |
| (110 | ) | | (11 | ) | | (121 | ) | $ | (161 | ) | ||||
(a) | The Nedstat amounts included in the pro forma consolidated statement of operations was translated into US dollars using an exchange rate of 1.33 Euros per US dollar, which was the average of the representative exchange rates for six months ended June 30, 2010. | |
(b) | To adjust for differences in revenue recognition rules for multi element arrangements between IFRS and US GAAP. |
NEDSTAT BV
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER, 2009
FOR THE YEAR ENDED DECEMBER, 2009
(In thousands)
US GAAP | US GAAP | |||||||||||||||
IFRS | Adjustments | US GAAP Total | Total (a) | |||||||||||||
| | | $ | |||||||||||||
Revenues |
| 14,262 | | 84 | (b) | | 14,346 | $ | 20,286 | |||||||
Cost of revenues |
5,308 | | 5,308 | 7,506 | ||||||||||||
Selling and marketing |
5,694 | | 5,694 | 8,052 | ||||||||||||
Research and development |
2,083 | | 2,083 | 2,945 | ||||||||||||
General and administrative |
2,669 | | 2,669 | 3,774 | ||||||||||||
Total expenses from operations |
15,754 | | 15,754 | 22,277 | ||||||||||||
Income from operations |
(1,492 | ) | 84 | (1,408 | ) | (1,991 | ) | |||||||||
Interest and other income, net |
(4 | ) | | (4 | ) | (6 | ) | |||||||||
(Loss) gain from foreign currency |
(47 | ) | | (47 | ) | (66 | ) | |||||||||
Income
(loss) before income taxes |
(1,543 | ) | 84 | (1,459 | ) | (2,063 | ) | |||||||||
Income tax (provision)/benefit |
61 | | 61 | 86 | ||||||||||||
Net
(loss) income |
| (1,482 | ) | | 84 | | (1,398 | ) | $ | (1,977 | ) | |||||
(a) | The Nedstat amounts included in the pro forma consolidated statement of operations was translated into US dollars using an exchange rate of 1.41 Euros per US dollar, which was the average of the representative exchange rates for twelve months ended December 31, 2009. | |
(b) | To adjust for differences in revenue recognition rules for multi element arrangements between IFRS and US GAAP. |
13