Attached files
Table of Contents
Exhibit 99.3
Index to Unaudited Pro Forma Consolidating Financial Information
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Table of Contents
Kenexa Corporation and Subsidiaries
Pro Forma Consolidating Financial Statements
(Unaudited)
The unaudited pro forma consolidating balance sheet of the Company as of September 30, 2010, has been prepared as if the Company’s acquisition of Salary.com had been consummated on September 30, 2010. The unaudited pro forma consolidating statements of operations for the year ended December 31, 2009 and nine months ended September 30, 2010, are presented as if the Company’s acquisition of Salary.com had occurred on January 1, 2009.
The pro forma consolidating financial statements do not purport to represent what the Company’s financial position or results of operations would have been assuming the completion of the Company’s acquisition of Salary.com, nor do they purport to project the Company’s financial position or results of operations at any future date or for any future period.
These pro forma consolidating financial statements should be read in conjunction with:
| (a) | the Company’s Form 10-K for the period ended December 31, 2009 filed on March 16, 2010 |
| (b) | the Company’s Form 8-K filed on October 1, 2010. |
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Kenexa Corporation and Subsidiaries
Pro Forma Consolidating Balance Sheet
As of September 30, 2010
(In thousands)
(Unaudited)
| Salary.com (A) |
Kenexa (B) |
Pro Forma Adjustments |
F/N | Pro Forma | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
| Assets |
||||||||||||||||||||
| Current Assets |
||||||||||||||||||||
| Cash and cash equivalents |
$ | 6,619 | $ | 90,430 | $ | (78,376 | ) | C | $ | 18,673 | ||||||||||
| Accounts receivable, net of allowance for doubtful accounts |
6,308 | 34,918 | 41,226 | |||||||||||||||||
| Unbilled receivables |
— | 5,128 | 5,128 | |||||||||||||||||
| Income tax receivable |
— | 273 | 273 | |||||||||||||||||
| Deferred income taxes |
— | 6,319 | 6,319 | |||||||||||||||||
| Prepaid expenses and other current assets |
1,620 | 10,813 | 12,433 | |||||||||||||||||
| Total Current Assets |
14,547 | 147,881 | (78,376 | ) | 84,052 | |||||||||||||||
| Property and equipment, net of accumulated depreciation |
962 | 18,542 | 19,504 | |||||||||||||||||
| Software, net of accumulated amortization |
82 | 21,060 | 21,142 | |||||||||||||||||
| Goodwill |
13,078 | 5,997 | 16,073 | C | 35,148 | |||||||||||||||
| Intangible assets, net of accumulated amortization |
6,422 | 8,602 | 56,278 | C | 71,302 | |||||||||||||||
| Deferred income taxes, non-current |
— | 36,686 | 36,686 | |||||||||||||||||
| Deferred financing costs, net of accumulated amortization |
— | 81 | 81 | |||||||||||||||||
| Other long-term assets |
1,333 | 9,975 | 11,308 | |||||||||||||||||
| Total assets |
$ | 36,424 | $ | 248,824 | $ | (6,025 | ) | $ | 279,223 | |||||||||||
| Liabilities and Shareholders’ Equity |
||||||||||||||||||||
| Current liabilities |
||||||||||||||||||||
| Line of credit |
$ | 2,525 | $ | — | $ | 2,525 | ||||||||||||||
| Accounts payable |
4,214 | 9,352 | 13,566 | |||||||||||||||||
| Notes payable, current |
— | 5 | 5 | |||||||||||||||||
| Commissions payable |
— | 2,047 | 2,047 | |||||||||||||||||
| Accrued compensation and benefits |
3,656 | 6,387 | 10,043 | |||||||||||||||||
| Other accrued liabilities |
4,491 | 7,042 | 11,533 | |||||||||||||||||
| Deferred revenue |
31,833 | 58,708 | (17,733 | ) | C | 72,808 | ||||||||||||||
| Capital lease obligations |
— | 229 | 229 | |||||||||||||||||
| Total current liabilities |
46,719 | 83,770 | (17,733 | ) | 112,756 | |||||||||||||||
| Capital lease obligations, less current portion |
— | 107 | 107 | |||||||||||||||||
| Revolving credit loan |
— | 25,000 | 25,000 | |||||||||||||||||
| Deferred income taxes |
1,636 | 530 | (238 | ) | C | 1,928 | ||||||||||||||
| Other non-current liabilities |
15 | 1,892 | 1,907 | |||||||||||||||||
| Total liabilities |
48,370 | 111,299 | (17,971 | ) | 141,698 | |||||||||||||||
| Commitments and Contingencies |
||||||||||||||||||||
| Temporary Equity |
||||||||||||||||||||
| Noncontrolling interest |
— | 2,546 | 2,546 | |||||||||||||||||
| Shareholders’ (Deficit) Equity |
||||||||||||||||||||
| Preferred stock |
— | — | — | |||||||||||||||||
| Common stock |
2 | 227 | (2 | ) | D | 227 | ||||||||||||||
| Additional paid-in-capital |
103,269 | 278,656 | (103,269 | ) | D | 278,656 | ||||||||||||||
| Accumulated deficit |
(114,383 | ) | (139,795 | ) | 114,383 | D | (139,795 | ) | ||||||||||||
| Accumulated other comprehensive loss |
(834 | ) | (4,109 | ) | 834 | D | (4,109 | ) | ||||||||||||
| Total shareholders’ (deficit) equity |
(11,946 | ) | 134,979 | 11,946 | 134,979 | |||||||||||||||
| Total liabilities and shareholders’ equity |
$ | 36,424 | $ | 248,824 | $ | (6,025 | ) | $ | 279,223 | |||||||||||
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Kenexa Corporation and Subsidiaries
Pro Forma Consolidating Statement of Operations
For the nine months ended September 30, 2010
(In thousands, except share and per share data)
(Unaudited)
| Salary.com (A) |
Kenexa (B) |
Pro Forma Adjustments |
F/N | Pro Forma | ||||||||||||||||
| Revenues: |
||||||||||||||||||||
| Subscription |
$ | 28,239 | $ | 109,136 | $ | 137,375 | ||||||||||||||
| Other |
2,184 | 26,177 | 28,361 | |||||||||||||||||
| Total revenues |
30,423 | 135,313 | 165,736 | |||||||||||||||||
| Cost of revenues |
7,919 | 46,828 | (936 | ) | C | 53,811 | ||||||||||||||
| Gross profit |
22,504 | 88,485 | 936 | 111,925 | ||||||||||||||||
| Operating expenses: |
||||||||||||||||||||
| Sales and marketing |
16,921 | 32,540 | (2,385 | ) | C | 47,076 | ||||||||||||||
| General and administrative |
15,786 | 32,542 | (8,033 | ) | C/F | 40,295 | ||||||||||||||
| Research and development |
8,100 | 7,693 | (1,775 | ) | C | 14,018 | ||||||||||||||
| Depreciation and amortization |
3,781 | 12,457 | 8,175 | D | 24,413 | |||||||||||||||
| Goodwill impairment charge |
5,599 | — | 5,599 | |||||||||||||||||
| Restructuring charge |
6,653 | — | 6,653 | |||||||||||||||||
| Total operating expenses |
56,840 | 85,232 | (4,018 | ) | 138,054 | |||||||||||||||
| (Loss) income from operations |
(34,336 | ) | 3,253 | 4,954 | (26,129 | ) | ||||||||||||||
| Interest income (expense) |
— | 355 | (844 | ) | E | (489 | ) | |||||||||||||
| Loss on change in fair market value of investments including ARS and put option, net and sale of municipal bonds |
— | (379 | ) | (379 | ) | |||||||||||||||
| Other expense |
(248 | ) | — | (248 | ) | |||||||||||||||
| (Loss) income before income tax |
(34,584 | ) | 3,229 | 4,110 | (27,245 | ) | ||||||||||||||
| Income tax expense |
(123 | ) | (906 | ) | (1,029 | ) | ||||||||||||||
| Net (loss) income |
$ | (34,707 | ) | $ | 2,323 | $ | 4,110 | $ | (28,274 | ) | ||||||||||
| Income allocated to noncontrolling interests |
— | (406 | ) | (406 | ) | |||||||||||||||
| Accretion associated with variable interest entity |
— | (809 | ) | (809 | ) | |||||||||||||||
| Discontinued operations |
545 | — | 545 | |||||||||||||||||
| Net (loss) income allocable to common shareholders |
$ | (34,162 | ) | $ | 1,108 | $ | 4,110 | $ | (28,944 | ) | ||||||||||
| Basic net income (loss) per share |
$ | 0.05 | $ | (1.28 | ) | |||||||||||||||
| Weighted average shares used to compute net income (loss) allocable to common shareholders per share – basic |
22,603,323 | 22,603,323 | ||||||||||||||||||
| Diluted net income (loss) per share |
$ | 0.05 | $ | (1.31 | ) | |||||||||||||||
| Weighted average shares used to compute net income (loss) allocable to common shareholders per share – diluted |
23,098,070 | 23,098,070 | ||||||||||||||||||
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Kenexa Corporation and Subsidiaries
Pro Forma Consolidating Statement of Operations
For the year ended December 31, 2009
(In thousands, except share and per share data)
(Unaudited)
| Salary.com (A) |
Kenexa (B) |
Pro Forma Adjustments |
F/N | Pro Forma | ||||||||||||||||
| Revenues: |
||||||||||||||||||||
| Subscription |
$ | 43,021 | $ | 133,854 | 176,875 | |||||||||||||||
| Other |
3,146 | 23,815 | 26,961 | |||||||||||||||||
| Total revenues |
46,167 | 157,669 | 203,836 | |||||||||||||||||
| Cost of revenues |
13,244 | 53,371 | (1,271 | ) | C | 65,344 | ||||||||||||||
| Gross profit |
32,923 | 104,298 | 1,271 | 138,492 | ||||||||||||||||
| Operating expenses: |
||||||||||||||||||||
| Sales and marketing |
22,235 | 35,182 | (2,535 | ) | C | 54,882 | ||||||||||||||
| General and administrative |
13,514 | 40,801 | (4,415 | ) | C/F | 49,900 | ||||||||||||||
| Research and development |
9,654 | 9,757 | (1,358 | ) | C | 18,053 | ||||||||||||||
| Depreciation and amortization |
6,412 | 14,264 | 9,502 | D | 30,178 | |||||||||||||||
| Goodwill impairment charge |
— | 33,329 | 33,329 | |||||||||||||||||
| Restructuring charge |
3,312 | — | 3,312 | |||||||||||||||||
| Total operating expenses |
55,127 | 133,333 | 1,194 | 189,654 | ||||||||||||||||
| Loss from operations |
(22,204 | ) | (29,035 | ) | 77 | (51,162 | ) | |||||||||||||
| Interest expense |
— | (44 | ) | (1,125 | ) | E | (1,169 | ) | ||||||||||||
| Loss on change in fair market value of investments including ARS and put option, net and sale of municipal bonds |
— | (12 | ) | (12 | ) | |||||||||||||||
| Other expense |
(297 | ) | — | (297 | ) | |||||||||||||||
| Loss before income tax |
(22,501 | ) | (29,091 | ) | (1,048 | ) | (52,640 | ) | ||||||||||||
| Income tax expense |
(98 | ) | (1,927 | ) | (2,025 | ) | ||||||||||||||
| Net loss |
$ | (22,599 | ) | $ | (31,018 | ) | $ | (1,048 | ) | $ | (54,665 | ) | ||||||||
| Income allocated to noncontrolling interests |
— | (61 | ) | (61 | ) | |||||||||||||||
| Net loss allocable to common shareholders |
$ | (22,599 | ) | $ | (31,079 | ) | $ | (1,048 | ) | $ | (54,726 | ) | ||||||||
| Basic and diluted net loss per share |
$ | (1.38 | ) | $ | (2.43 | ) | ||||||||||||||
| Weighted average shares used to compute net loss allocable to common shareholders per share – basic and diluted |
22,532,719 | 22,532,719 | ||||||||||||||||||
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Notes to Pro Forma Consolidating Financial Statements
(Unaudited)
Notes to Pro Forma Consolidating Balance Sheet as of September 30, 2010
| (A) | To reflect the historical balance sheet of Salary.com as of September 30, 2010. |
| (B) | To reflect the historical balance sheet of the Company as of September 30, 2010. |
| (C) | To record the consideration of $78.4 million for the purchase of Salary.com, financed through borrowings under our credit facility for $25.0 million and $53.4 through existing cash. The total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed based upon management’s best estimate of their fair value with excess cost over the net tangible and intangible assets acquired allocated to goodwill and identified intangible assets as presented below. |
The preliminary estimated fair value determination is allocated as follows and is for illustrative purposes only
| Description |
Amount | Amortization period | ||||||
| Assets Acquired |
||||||||
| Cash and cash equivalents |
$ | 6,619 | ||||||
| Accounts receivable |
6,308 | |||||||
| Prepaid expenses and other current assets |
1,620 | |||||||
| Fixed assets |
1,044 | |||||||
| Other assets |
1,333 | |||||||
| Trademark/Trade name, Service Marks & Domain Name |
1,400 | 3 years | ||||||
| Customer lists |
40,000 | 12 years | ||||||
| Software |
4,100 | 3 years | ||||||
| Content |
17,200 | 3 years | ||||||
| Goodwill |
29,151 | Indefinite | ||||||
| Less: Liabilities Assumed |
||||||||
| Line of credit |
(2,525 | ) | ||||||
| Accounts payable |
(4,214 | ) | ||||||
| Accrued compensation |
(3,656 | ) | ||||||
| Accrued other liabilities |
(4,491 | ) | ||||||
| Deferred Revenue |
(14,100 | ) | ||||||
| Deferred federal income taxes |
(1,398 | ) | ||||||
| Other noncurrent liabilities |
(15 | ) | ||||||
| Total fair value of the acquisition |
$ | 78,376 | ||||||
(D) To eliminate Salary.com’s shareholders’ deficit as of September 30, 2010
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Kenexa Corporation
Notes to Pro Forma Consolidating Financial Statements (continued)
(Unaudited)
Notes to Pro Forma Consolidating Statement of Operations for the nine months ended September 30, 2010.
| (A) |
To reflect the consolidated historical statement of operations of Salary.com for the nine months ended September 30, 2010. | |
| (B) |
To reflect the consolidated historical statement of operations of the Company for the nine months ended September 30, 2010, as reported. | |
| (C) |
To reflect reduced staff expense including salaries, employer taxes, bonus, and fringe benefits. The Company notified employees of their termination on the acquisition date and entered into severance agreements with such employees that state the termination benefit. | |
| (D) |
To reflect the amortization of intangible assets (per the allocation of the estimated purchase price) that would have been recorded in the period, using a useful life of three to twelve years. The amortization is subject to revision based upon the completion of the purchase price allocation study. | |
| (E) |
To reflect the Company’s borrowings under the Credit Agreement at LIBOR plus 225 basis points or the Base Rate, as defined, plus 125 basis points. Interest on LIBOR borrowings is calculated on an actual/360 day basis and is payable the earlier of quarterly or on the last day of each interest period. The base interest rate at September 30, 2010 was 4.5%. | |
| (F) |
To reflect professional fee expenses of approximately $1.5 million and reduced outside board of director fees and CEO transition and separation fees of approximately $0.9 million and $2.1 million, respectively. | |
Notes to Pro Forma Consolidating Statement of Operations for the year ended December 31, 2009.
| (A) |
To reflect the consolidated historical statement of operations of Salary.com for the twelve months ended December 31, 2009. | |
| (B) |
To reflect the consolidated historical statement of operations of the Company for the year ended December 31, 2009, as reported. | |
| (C) |
To reflect reduced staff expense including salaries, employer taxes, bonus, and fringe benefits. The Company notified employees of their termination on the acquisition date and entered into severance agreements with such employees that state the termination benefit. | |
| (D) |
To reflect the amortization of intangible assets (per the allocation of the estimated purchase price) that would have been recorded in the period, using a useful life of three to twelve years. The amortization is subject to revision based upon the completion of the purchase price allocation study. | |
| (E) |
To reflect the Company’s borrowings under the Credit Agreement at LIBOR plus 225 basis points or the Base Rate, as defined, plus 125 basis points. Interest on LIBOR borrowings is calculated on an actual/360 day basis and is payable the earlier of quarterly or on the last day of each interest period. The base interest rate at September 30, 2010 was 4.5%. | |
| (F) |
To reflect professional fee expenses of approximately $1.5 million and reduced outside board of director fees of approximately $0.5 million. | |
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