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8-K/A - FORM 8-K/A - Vangent, Inc.c17389e8vkza.htm
EX-99.3 - EXHIBIT 99.3 - Vangent, Inc.c17389exv99w3.htm
Exhibit 99.4
Vangent Inc.
Pro Forma Condensed Combined Interim Balance Sheet Financial Information (Unaudited)
The following unaudited pro forma condensed combined interim balance sheet data as of July 3, 2010, are derived from the consolidated financial statements of Vangent and Buccaneer and give effect to the Acquisition. The unaudited pro forma condensed combined interim balance sheet data are presented as if the Acquisition had occurred as of July 3, 2010. The Acquisition has been accounted for under the acquisition method of accounting, under which the total purchase consideration is allocated to assets acquired and liabilities assumed based on their estimated fair values. The excess of the purchase price over the amounts assigned to tangible or intangible assets acquired and liabilities assumed is recognized as goodwill.
The unaudited pro forma condensed combined financial information has been prepared for illustrative purposes only and does not include the effects of any operating efficiencies or cost savings that may be achieved or acquisition and integration expenses.
The unaudited pro forma condensed combined financial information, including the notes thereto, should be read in conjunction with (i) the consolidated financial statements of Vangent included in its annual report on Form 10-K for the year ended December 31, 2009, and its quarterly report on Form 10-Q for the three months ended July 3, 2010, and (ii) the consolidated financial statements of Buccaneer included as Exhibit 99.1 to Vangent’s current report on Form 8-K/A filed November 16, 2010, and to Exhibit 99.3 to this current report on Form 8-K/A (amending the current report on Form 8-K filed by Vangent on September 21, 2010).

 

 


 

Vangent, Inc.
Pro Forma Condensed Combined Interim Balance Sheets Data (Unaudited)
July 3, 2010

(in thousands)
                                 
                    Pro Forma  
    Vangent, Inc.     Buccaneer     Adjustments     Combined  
Assets
                               
Current assets:
                               
Cash and cash equivalents
  $ 37,533     $ 853     $ 16,000 (a)        
 
                    (64,635 )(b)   $ (10,249 )
Trade receivables, net
    140,212       25,998             166,210  
Prepaid expenses and other assets
    11,850       185             12,035  
Assets of discontinued operations
    6,718                   6,718  
 
                       
Total current assets
    196,313       27,036       (48,635 )     174,714  
 
                               
Property and equipment, net
    22,914       7,803       (5,158 )(c)     25,559  
Intangible assets, net
    140,948             25,792 (d)     166,740  
Goodwill
    267,401             27,422 (d)     294,823  
Deferred debt financing costs and other
    7,355       217             7,572  
 
                       
Total assets
  $ 634,931     $ 35,056     $ (579 )   $ 669,408  
 
                       
 
                               
Liabilities and Stockholders’ Equity
                               
Current liabilities:
                               
Notes payable and short-term borrowing
  $     $ 1,761     $ 16,000 (a)        
 
                    (1,761 )(c)   $ 16,000  
Accounts payable and accrued liabilities
    75,422       17,750             93,172  
Accrued interest payable
    7,950                   7,950  
Deferred tax liability
    4,412                   4,412  
Deferred revenue
    4,288                   4,288  
Liabilities of discontinued operations
    5,631                   5,631  
 
                       
Total current liabilities
    97,703       19,511       14,239       131,453  
 
                               
Long-term debt, net of current portion
    406,754       632       (632 )(c)     406,754  
Other long-term liabilities
    5,009                   5,009  
Deferred tax liability
    16,286                   16,286  
Liabilities of discontinued operations
    199                   199  
 
                       
Total liabilities
    525,951       20,143       13,607       559,701  
 
                       
 
                               
Stockholders’ equity:
                               
Common stock
          26       (26 )      
Additional paid-in capital
    207,875                   207,875  
Accumulated other comprehensive loss
    (13,815 )                 (13,815 )
Retained earnings (accumulated deficit)
    (85,080 )     14,805       (14,805 )     (85,080 )
 
                       
 
    108,980       14,831       (14,831 )     108,980  
Noncontrolling interest
          82       645       727  
 
                       
Total stockholders’ equity
    108,980       14,913       (14,186 )     109,707  
 
                       
Total liabilities and stockholders’ equity
  $ 634,931     $ 35,056     $ (579 )   $ 669,408  
 
                       
See notes to unaudited pro forma condensed combined financial information.

 

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Vangent Inc.
Notes to Pro Forma Condensed Combined Interim Financial Information (Unaudited)
1. Acquisition of Buccaneer Computer Systems & Service, Inc.
On September 15, 2010, Vangent, Inc. (“Vangent”) completed the acquisition (“Buccaneer Acquisition”) of Buccaneer Computer Systems & Service, Inc. (“Buccaneer”). Buccaneer is a leading provider of IT services, infrastructure, secure data hosting and data analytics for the government healthcare market.
Vangent acquired all outstanding shares of Buccaneer stock in exchange for total purchase consideration of $64.6 million. The amount of the purchase consideration paid at closing was $60.0 million, of which $44.0 million was funded with available cash and $16.0 million was funded with a variable-rate borrowing drawn on the senior secured revolving credit facility. Other cash consideration paid amounted to $1.1 million.
A wholly-owned consolidated subsidiary of Buccaneer that owns and leases real property to Buccaneer was not included in the Buccaneer Acquisition. The capital stock of the subsidiary was spun off as a dividend prior to closing.
The Buccaneer Acquisition has been accounted for under the acquisition method of accounting which requires the total purchase consideration to be allocated to the assets acquired and liabilities assumed based on estimates of fair value. The excess of the purchase consideration over the amounts assigned to tangible or intangible assets acquired and liabilities assumed is recognized as goodwill.
The allocation of the purchase price is provisional pending, among other things, final agreement of the adjustment to the purchase price based upon the level of net working capital transferred at closing. A summary of the allocation of the purchase consideration based on estimates of fair value for the assets acquired and the liabilities assumed follows (in thousands):
         
Allocation of Purchase Consideration
       
Cash
  $ 897  
Accounts receivable
    18,224  
Property and equipment
    2,055  
Intangible assets
    25,792  
Goodwill
    30,457  
Other assets
    2,009  
Less: Liabilities assumed
    (14,072 )
 
     
Net assets acquired
    65,362  
Less: Noncontrolling interest
    (727 )
 
     
 
  $ 64,635  
 
     
Allocation of Intangible Assets Acquired
       
Customer relationships (eight-year life)
  $ 23,809  
Non-compete agreements (three-year life)
    1,983  
 
     
 
  $ 25,792  
 
     
The fair value of the definite-life intangible asset for customer relationships is based on customer contracts and relationships with existing customers and is expected to have an eight-year life. Amortization of the definite-life intangible asset for customer relationships is based on an accelerated method, and amortization of the definite-life intangible asset for non-compete agreements is based on the straight-line method. Amortization expense is included in cost of revenue.
Goodwill represents the excess of purchase consideration over the amounts assigned to tangible and intangible assets acquired and liabilities assumed. As a result of the election under Section 338(h) (10) of the Internal Revenue Code, the amount allocated to intangible assets and goodwill for tax purposes is expected to be tax deductible.

 

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Buccaneer has a 70% ownership interest in Buccaneer Data Services, LLC, a joint venture that provides computer technical and other consulting services to an agency of the U.S. government. Buccaneer is entitled to a majority of the income and losses of the joint venture and has determined that it is the primary beneficiary. The joint venture is fully consolidated in the financial statements. Noncontrolling interest represents the remaining 30%.
2. Basis of Pro Forma Balance Sheet Presentation
The unaudited pro forma condensed combined interim balance sheet data are presented as if the Acquisition had occurred as of July 3, 2010.
3. Pro Forma Balance Sheet Adjustments
The unaudited pro forma condensed combined financial information gives effect to fair value adjustments attributed to the Buccaneer Acquisition and the related revolving credit borrowing of $16.0 million by Vangent under its senior secured revolving credit facility. The purchase consideration has been preliminarily allocated to the assets acquired and liabilities assumed based on estimates of fair value.
The unaudited interim pro forma condensed combined financial information does not include the effects of any operating efficiencies or cost savings that may be achieved or acquisition and integration expenses.
The pro forma adjustments to the unaudited condensed combined pro forma balance sheet data as of July 3, 2010, follow:
  (a)   Revolving credit borrowing of $16.0 million under Vangent’s senior secured credit facility used to fund a portion of the total purchase consideration paid at closing.
  (b)   Record total purchase consideration of $64.6 million.
  (c)   Remove building fixed assets and related mortgage debt of a wholly-owned consolidated subsidiary of Buccaneer that owns and leases real property to Buccaneer. Pursuant to the terms of the Buccaneer Acquisition, the capital stock of the subsidiary was spun off as a dividend prior to closing.
  (d)   Record the fair value of intangible assets acquired for customer relationships of $23.8 million and non-compete agreements of $2.0 million, and record pro forma goodwill of $27.4 million as of July 3, 2010.

 

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