Attached files
| file | filename |
|---|---|
| 8-K - CURRENT REPORT FORM 8-K - Dealertrack Technologies, Inc | v236416_8k.htm |
| EX-10.1 - EXHIBIT 10.1 - Dealertrack Technologies, Inc | v236416_ex10-1.htm |
EXHIBIT 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
Basis of Presentation
The following unaudited pro forma condensed consolidated financial statements have been prepared to reflect the October 1, 2011 sale of ALG, Inc. (ALG) to TrueCar, Inc (TrueCar) (the “Sale”) as described in Item 2.01 of the Current Report on Form 8-K.
The unaudited pro forma condensed consolidated statement of operations for the six months ended June 30, 2011 and the year ended December 31, 2010 are based on the DealerTrack Holdings, Inc. (“DealerTrack” or the “company”) historical consolidated statements of operations, and gives effect to the sale as if it had occurred on January 1, 2010. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2011 is based on DealerTrack’s historical balance sheet as of that date, and gives effect to the sale as if it had occurred on June 30, 2011.
The unaudited pro forma condensed consolidated financial statements presented below are based on the assumptions and adjustments set forth in the notes to such information. The unaudited pro forma adjustments made in the compilation of the unaudited pro forma condensed consolidated financial statements were directly attributable to the transaction, are factually supportable, are based upon available information and assumptions that the Company considers to be reasonable, and have been made solely for purposes of developing such unaudited pro forma financial information for illustrative purposes in compliance with the disclosure requirements of the Securities and Exchange Commission. The unaudited pro forma condensed consolidated financial information is for informational purposes only and should not be considered indicative of actual results that would have been achieved had the sale actually been consummated on the dates indicated and does not purport to be indicative of results of operations as of any future date or for any future period.
This unaudited pro forma condensed consolidated financial information should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010 filed on February 18, 2011, and the unaudited consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2011 filed on August 9, 2011.
1
DEALERTRACK HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
|
DealerTrack
June 30, 2011 (Note 2)
|
ALG
June 30,
2011
(Note 3)
|
Pro Forma Adjustments (Note 4)
|
Pro Forma Combined
|
|||||||||||||
|
(In thousands)
|
||||||||||||||||
|
ASSETS
|
||||||||||||||||
|
Current assets
|
||||||||||||||||
|
Cash and cash equivalents
|
$
|
70,061
|
$
|
–
|
$
|
(7,500
|
)
|
(a)(1)
|
$
|
62,561
|
||||||
|
Investments
|
655
|
–
|
5,500
|
(a)(2)
|
6,155
|
|||||||||||
|
Accounts receivable, net of allowances
|
37,127
|
(1,574
|
)
|
–
|
35,553
|
|||||||||||
|
Customer funds
|
2,960
|
–
|
–
|
2,960
|
||||||||||||
|
Customer funds receivable
|
13,593
|
–
|
–
|
13,593
|
||||||||||||
|
Prepaid expenses and other current assets
|
27,693
|
(191
|
)
|
–
|
27,502
|
|||||||||||
|
Total current assets
|
152,089
|
(1,765
|
)
|
(2,000
|
)
|
148,324
|
||||||||||
|
Investments – long-term
|
–
|
–
|
82,500
|
(a)(3)
|
82,500
|
|||||||||||
|
Property and equipment, net
|
21,532
|
(243
|
)
|
–
|
21,289
|
|||||||||||
|
Software and website development costs, net
|
34,505
|
(1,349
|
)
|
–
|
33,156
|
|||||||||||
|
Intangible assets, net
|
95,026
|
(2,704
|
)
|
5,400
|
(a)(4)
|
97,722
|
||||||||||
|
Goodwill
|
211,937
|
(32,558
|
)
|
|
–
|
179,379
|
||||||||||
|
Deferred tax assets – long-term
|
26,357
|
–
|
6,555
|
(b)
|
32,912
|
|||||||||||
|
Other assets – long-term
|
12,409
|
(33
|
)
|
–
|
12,376
|
|||||||||||
|
Total assets
|
$
|
553,855
|
$
|
(38,652
|
)
|
$
|
92,455
|
$
|
607,658
|
|||||||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||
|
Current liabilities
|
||||||||||||||||
|
Accounts payable
|
$
|
4,721
|
$
|
(23
|
)
|
$
|
2,547
|
(c)
|
$
|
7,245
|
||||||
|
Accrued liabilities - other
|
27,712
|
(570
|
)
|
1,076
|
(d)
|
28,218
|
||||||||||
|
Customer fund payable
|
16,553
|
–
|
–
|
16,553
|
||||||||||||
|
Deferred revenue
|
7,810
|
(304
|
)
|
–
|
7,506
|
|||||||||||
|
Capital leases payable
|
359
|
–
|
–
|
359
|
||||||||||||
|
Total current liabilities
|
57,155
|
(897
|
)
|
3,623
|
59,881
|
|||||||||||
|
Capital leases payable – long-term
|
173
|
–
|
–
|
173
|
||||||||||||
|
Deferred tax liabilities – long-term
|
38,691
|
(3,400
|
)
|
17,309
|
(e)
|
52,600
|
||||||||||
|
Deferred revenue – long-term
|
5,387
|
(11
|
)
|
–
|
5,376
|
|||||||||||
|
Other liabilities – long-term
|
3,166
|
(52
|
)
|
–
|
3,114
|
|||||||||||
|
Total liabilities
|
104,572
|
(4,360
|
)
|
20,932
|
121,144
|
|||||||||||
|
Stockholders’ equity
|
449,283
|
(34,292
|
)
|
71,523
|
(f)
|
486,514
|
||||||||||
|
Total liabilities and stockholders’ equity
|
$
|
553,855
|
$
|
(38,652
|
)
|
$
|
92,455
|
$
|
607,658
|
|||||||
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
2
DEALERTRACK HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
|
DealerTrack
Six Months Ended
June 30, 2011 (Note 2)
|
ALG
Six Months Ended
June 30, 2011 (Note 3)
|
Pro Forma Adjustments (Note 4)
|
Pro Forma Adjusted
|
||||||||||||
|
(In thousands, except share and per share data)
|
|||||||||||||||
|
Revenue
|
|||||||||||||||
|
Net Revenue
|
$
|
166,242
|
$
|
(4,928
|
)
|
$
|
1,000
|
(g)
|
$
|
162,314
|
|||||
|
Operating expenses:
|
|||||||||||||||
|
Cost of revenue
|
91,906
|
(2,951
|
)
|
665
|
(h)
|
89,620
|
|||||||||
|
Product development
|
7,242
|
(66
|
)
|
–
|
7,176
|
||||||||||
|
Selling, general and administration
|
62,234
|
(977
|
)
|
(136
|
)
|
(i)
|
61,121
|
||||||||
|
Total operating expenses
|
161,382
|
(3,994
|
)
|
529
|
157,917
|
||||||||||
|
Income (loss) from operations
|
4,860
|
(934
|
)
|
471
|
4,397
|
||||||||||
|
Interest and other income
|
188
|
–
|
–
|
188
|
|||||||||||
|
Interest expense
|
(244
|
)
|
–
|
–
|
(244
|
)
|
|||||||||
|
Other income
|
266
|
266
|
|||||||||||||
|
Realized gain on securities
|
409
|
–
|
–
|
409
|
|||||||||||
|
Income (loss) before benefit from (provision for) income taxes
|
5,479
|
(934
|
)
|
471
|
5,016
|
||||||||||
|
Benefit from (provision for)income taxes, net
|
21,415
|
111
|
(180
|
)
|
(j)
|
21,346
|
|||||||||
|
Net income (loss)
|
$
|
26,894
|
$
|
(823
|
)
|
$
|
291
|
$
|
26,362
|
||||||
|
Basic net income per share:
|
$
|
0.66
|
$
|
0.64
|
|||||||||||
|
Diluted net income per share:
|
$
|
0.64
|
$
|
0.62
|
|||||||||||
|
Shares Used in the Calculation of Net Income Per Share:
|
|||||||||||||||
|
Basic
|
41,035,681
|
41,035,681
|
|||||||||||||
|
Diluted
|
42,279,986
|
42,279,986
|
|||||||||||||
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
3
DEALERTRACK HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
|
DealerTrack
Year Ended
December 31, 2010 (Note 2)
|
ALG
Year Ended
December 31, 2010 (Note 3)
|
Pro Forma Adjustments
(Note 4)
|
Pro Forma Adjusted
|
||||||||||||||
|
(In thousands, except share and per share data)
|
|||||||||||||||||
|
Revenue
|
|||||||||||||||||
|
Net Revenue
|
$ | 243,826 | $ | (8,574 | ) | $ | 2,000 |
(g)
|
$ | 237,252 | |||||||
|
Operating expenses:
|
|||||||||||||||||
|
Cost of revenue
|
124,070 | (5,932 | ) | 1,330 |
(k)
|
119,468 | |||||||||||
|
Product development
|
13,386 | (226 | ) | – | 13,160 | ||||||||||||
|
Selling, general and administration
|
105,715 | (1,891 | ) | – | 103,824 | ||||||||||||
|
Total operating expenses
|
243,171 | (8,049 | ) | 1,330 | 236,452 | ||||||||||||
|
Income (loss) from operations
|
655 | (525 | ) | 670 | 800 | ||||||||||||
|
Interest and other income
|
525 | – | – | 525 | |||||||||||||
|
Interest expense
|
(175 | ) | 68 | – | (107 | ) | |||||||||||
|
Other income
|
1,177 | – | – | 1,177 | |||||||||||||
|
Realized gain on securities
|
5822 | –– | –– | 5822 | |||||||||||||
|
Income (loss) before (provision for) benefit from income taxes
|
2,764 | (457 | ) | 670 | 2,977 | ||||||||||||
|
(Provision for) benefit from income taxes, net
|
(30,597 | ) | 3,623 | (252 | ) |
(l)
|
(27,226 | ) | |||||||||
|
Net (loss) income
|
$ | (27,833 | ) | $ | 3,166 | $ | 418 | $ | (24,249 | ) | |||||||
|
Basic net lossper share:
|
$ | (0.69 | ) | $ | (0.60 | ) | |||||||||||
|
Diluted net loss per share:
|
$ | (0.69 | ) | $ | (0.60 | ) | |||||||||||
|
Shares Used in the Calculation of Net LossPer Share:
|
|||||||||||||||||
|
Basic
|
40,322,939 | 40,322,939 | |||||||||||||||
|
Diluted
|
40,322,939 | 40,322,939 | |||||||||||||||
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
4
DEALERTRACK HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
1. Summary of Transaction
On October 1, 2011, we sold our wholly owned subsidiary, ALG, to TrueCar. In connection with the sale, we have entered into additional commercial arrangements with TrueCar, including a perpetual, royalty-free license for the use of certain ALG intellectual property and data in our products and services and commercial arrangements for TrueCar’s use of certain DealerTrack and Chrome intellectual property in TrueCar and ALG’s products and services.
The transaction is structured as a tax-free reorganization, and in consideration for the sale of ALG, we will receive a 15.0 percent equity interest in TrueCar and warrants to increase our ownership interest to up to 19.9 percent, which will be accounted for as a cost method investment. As a result of continuing cash flows, the sale is not being treated as a discontinued operation.
2. DealerTrack Balance Sheet and Statements of Operations
Amounts derived from the Company’s Quarterly Report on Form 10-Q for the six months ended June 30, 2011, filed on August 9, 2011, and the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, filed on February 18, 2011.
3. ALG, Inc. Balance Sheet and Statements of Operations
The ALG columns in the unaudited pro forma condensed consolidated financial statements represents the historical financial results of the company’s ALG business and reflects the elimination of the results of operations, assets, liabilities and equity amounts associated with sale of ALG, including intercompany accounts and the allocation of goodwill related to ALG.
4. Pro Forma Adjustments
The pro forma adjustments included in the unaudited pro forma condensed combined financial information are as follows:
Unaudited Pro Forma Condensed Consolidated Balance Sheet
|
(a)
|
To record the sale of ALG as if the transaction occurred on June 30, 2011 including the following components (in thousands):
|
|
(1) To record cash paid for investment in TrueCar.
|
$
|
(7,500
|
)
|
|
|
(2) To record warrants received at the preliminary estimate of fair value.
|
5,500
|
|||
|
(3) To record total investment in TrueCar.
|
82,500
|
|||
|
(4) To record perpetual, royalty-free data license at the preliminary estimate of fair value.
|
5,400
|
|
(b)
|
To record deferred tax asset valuation allowance adjustment as a result of the deferred tax liabilities generated from the sale.
|
|
(c)
|
To record an accrual for unpaid professional fees related to the sale as if the transaction occurred on June 30, 2011.
|
|
(d)
|
To record impact to current taxes payable at an effective tax rate of 37.7%.
|
|
(e)
|
To record deferred tax liabilities resulting from the transaction.
|
|
(f)
|
The components of pro forma adjustment (f) are as follows (in thousands):
|
|
To record the estimated gain on the sale.
|
$
|
52,276
|
||
|
To record the elimination of our investment in ALG.
|
33,624
|
|||
|
To record tax impact of sale.
|
(11,830
|
)
|
||
|
To record an accrual for unpaid professional fees related to the sale as if the transaction occurred on June 30, 2011.
|
(2,547
|
)
|
||
|
Total of pro forma adjustment (f)
|
$
|
71,523
|
5
Unaudited Pro Forma Condensed Consolidated Statement of Operations
|
(g)
|
To record revenue expected from the commercial arrangements related to ALG. Revenue for other commercial arrangements is not included.
|
|
(h)
|
The components of pro forma adjustment (h) are as follows (in thousands):
|
|
To record intangible amortization expense on the perpetual, royalty free data license received by DealerTrack as if the transaction occurred on January 1, 2010. The preliminary estimate of fair value of the license was determined based upon discounted cash flows and is being amortized straight-line basis over a useful life of five years.
|
$
|
540
|
||
|
To record costs related to providing services for commercial arrangements in pro forma adjustment (g).
|
125
|
|||
|
Total of pro forma adjustment (h)
|
$
|
665
|
|
(i)
|
To eliminate non-recurring professional fees expensed in 2011 that related to the sale as if the transaction occurred on January 1, 2010.
|
|
(j)
|
To record the tax effect of pro forma adjustments (g), (h) and (i) at an effective tax rate of 38.3%.
|
|
(k)
|
The components of pro forma adjustment (k) are as follows (in thousands):
|
|
To record intangible amortization expense on the perpetual, royalty free data license received by DealerTrack as if the transaction occurred on January 1, 2010. The preliminary estimate of fair value of the license was determined based upon discounted cash flows and is being amortized straight-line basis over a useful life of five years.
|
$
|
1,080
|
||
|
To record costs related to providing services for commercial arrangements in pro forma adjustment (g).
|
250
|
|||
|
Total of pro forma adjustment (k)
|
$
|
1,330
|
|
(l)
|
To record the tax effect of pro forma adjustment (g) and (k)at an effective tax rate of 37.6%.
|
6