EX-99.2 2 exhibit992-8xkaamdocssale.htm EXHIBIT 99.2 Exhibit 99.2 - 8-KA Amdocs Sale


Exhibit 99.2
 
 
COMVERSE, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
 
On April 29, 2015, Comverse, Inc., a Delaware corporation (the “Company”), and certain of its subsidiaries (together with the Company, the “Sellers”) entered into an Asset Purchase Agreement (as
amended, the “Purchase Agreement”) with Amdocs Limited, a Guernsey company (the “Purchaser”). Pursuant to the Purchase Agreement, the Sellers agreed to sell substantially all of the Sellers’ assets required for operating the Company’s converged, prepaid and postpaid billing and active customer management systems for wireless, wireline, cable and multi-play communication service providers (the “BSS Business”) to the Purchaser and the Purchaser agreed to assume certain post-closing liabilities of the Company (the “Asset Sale”).
The Asset Sale was completed on July 2, 2015. The total cash purchase price payable by the Purchaser to the Company in connection with the Asset Sale is approximately $273 million, subject to various purchase price adjustments, of which an aggregate of $6.5 million will be paid upon certain deferred closings. Upon the closing, $26 million of the purchase price was deposited into escrow to fund potential indemnification claims and certain adjustments for a period of twelve (12) months following the closing. The remainder of the purchase price was paid by the Purchaser to the Company at the closing.
In connection with the Purchase Agreement, the Sellers and Purchaser have also entered into a Transition Services Agreement (the “TSA”), which provides for support services between the Sellers and Buyer in connection with the transition of the BSS Business to Purchaser, for various periods up to 12 months following the closing of the Asset Sale.
On June 14, 2015, the Company, entered into an agreement (the “Acision Purchase Agreement”) with Bergkamp Coöperatief U.A., a cooperative with excluded liability formed under the laws of the Netherlands (the “Seller”) relating to the sale and purchase of Acision Global Limited, a private company formed under the laws of the United Kingdom (the “Target”). Pursuant to the Acision Purchase Agreement, the Company will acquire the Target for a purchase price consisting of $135 million in cash, certain earnout payments and 3.13 million shares of the Company’s common stock, par value $0.01 per share (the “Consideration Shares”) which will be issued in a private placement transaction conducted pursuant to Section 4(a)(2) or Regulation S under the Securities Act of 1933, as amended, subject to certain adjustments. The Company expects to use a significant portion of the cash proceeds received upon completion of the BSS Business Asset Sale to finance the cash portion of the purchase price of the Acision Purchase Agreement and the remainder for working capital and to maintain sufficient liquidity. The impact of the expected Acision Purchase Agreement is not reflected in the pro forma financial statements.
 In the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 2015, the BSS Business met the criteria to be classified as held for sale as well as discontinued operations. As such, the BSS Business was reclassified and reflected as discontinued operations on the consolidated statements of operations for the three months ended April 30, 2015 and 2014. The estimated assets and liabilities related to BSS Business were reclassified and reflected as available for sale on the consolidated balance sheet at April 30, 2015.
The unaudited pro forma consolidated financial statements of Comverse, Inc. presented in this Exhibit were derived from the Company’s historical consolidated financial statements and are being presented to give effect to this sale of assets.




The unaudited pro forma condensed consolidated balance sheet assumes the sale occurred on April 30, 2015. The unaudited pro forma condensed consolidated statements of income are presented as if the sale occurred on February 1, 2012. The following unaudited pro forma condensed consolidated financial statements should be read in conjunction with our historical financial statements and accompanying notes.
The pro forma adjustments are based on the best information available and assumptions that management believes are (a) directly attributable to the sale, (b) are factually supportable and (c) with respect to the statement of operations, have a continuing impact on the consolidated results. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed consolidated financial information.
The pro forma adjustments for the unaudited consolidated balance sheet as of April 30, 2015 and the unaudited consolidated statements of operations for the three months ended April 30, 2015 also includes adjustments to reflect changes to the previously reported financial statements upon completion of the final terms of the Asset Sale.
The unaudited pro forma condensed consolidated financial information is provided herein for illustrative purposes only and is not necessarily indicative of the results of operations that would have occurred if the sale had occurred on February 1, 2012. The unaudited pro forma condensed consolidated financial information does not reflect future events that may occur after the sale, including potential general and administrative cost savings.





 COMVERSE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share data)
 
April 30, 2015
 
Historical(1)
 
Pro Forma Adjustments
 
 
Pro Forma
ASSETS
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
Cash and cash equivalents
$
136,096

 
$
238,814

(a)
 
$
374,910

Restricted cash and bank deposits
36,054

 
 
 
 
36,054

Accounts receivable, net of allowance of $2,952 and $4,403, respectively
33,914

 
6,868

(b)
 
40,782

Inventories
17,550

 
 
 
 
17,550

Deferred cost of revenue
3,481

 
1,322

(b)
 
4,803

Deferred income taxes
14,314

 
 
 
 
14,314

Prepaid expenses
12,635

 
(1,089
)
(b)
 
11,546

Other current assets
13,758

 
1,410

(b)
 
15,168

Assets held for sale
154,829

 
(154,829
)
(d)
 
—

Total current assets
422,631

 
92,496

 
 
515,127

Property and equipment, net
39,825

 
 
 
 
39,825

Goodwill
67,585

 
 
 
 
67,585

Intangible assets, net
1,561

 
 
 
 
1,561

Deferred cost of revenue
20,305

 
 
 
 
20,305

Deferred income taxes
2,875

 
 
 
 
2,875

Long-term restricted cash
7,714

 
26,000

(c)
 
33,714

Other assets
15,365

 
 
 
 
15,365

Total assets
$
577,861

 
$
118,496

 
 
$
696,357

LIABILITIES AND (DEFICIT) EQUITY
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
Accounts payable and accrued expenses
$
106,074

 
 
 
 
$
106,074

Deferred revenue
116,738

 
28,913

(b)
 
145,651

Deferred income taxes
1,575

 
 
 
 
1,575

Income taxes payable
4,339

 
 
 
 
4,339

Liabilities held for sale
134,013

 
(134,013
)
(d)
 
—

Total current liabilities
362,739

 
(105,100
)
 
 
257,639

Deferred revenue
56,729

 
 
 
 
56,729

Deferred income taxes
51,034

 
 
 
 
51,034

Other long-term liabilities
114,539

 
 
 
 
114,539

Total liabilities
585,041

 
(105,100
)
 
 
479,941

Commitments and contingencies
 
 
 
 
 
 
(Deficit) equity:
 
 
 
 
 
 
Common stock, $0.01 par value - authorized, 100,000,000 shares; issued 22,695,729 and 22,591,411 shares, respectively; outstanding, 21,930,512 and 21,830,081 shares, respectively
227

 
 
 
 
227

Preferred stock, $0.01 par value - authorized, 100,000 shares
—

 
 
 
 
—

Treasury stock, at cost, 765,217 and 761,330 shares, respectively
(17,292
)
 
 
 
 
(17,292
)
Accumulated deficit
(73,051
)
 
223,596

(e)
 
150,545

Additional paid in capital
48,990

 
 
 
 
48,990

Accumulated other comprehensive income
33,946

 
 
 
 
33,946

Total (deficit) equity
(7,180
)
 
223,596

 
 
216,416

Total liabilities and (deficit) equity
$
577,861

 
$
118,496

 
 
$
696,357

(1) The historical consolidated balance sheet as of April 30, 2015 reflects the BSS business as available for sale. The pro forma adjustments assume the sale occurred on April 30, 2015. The pro forma adjustments also reflect changes to the previously reported financial statement upon completion of the final terms of the Asset Sale.






 COMVERSE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
 
Three Months Ended April 30, 2015
 
Historical (1)
 
Pro Forma Adjustments
 
Pro Forma
Revenue:
 
 
 
 
 
Product revenue
$
10,107

 
$
3,006

(b)
$
13,113

Service revenue
35,598

 
3,693

(b)
39,291

Total revenue
45,705

 
6,699

 
52,404

Costs and expenses:
 
 
 
 

Product costs
12,953

 
3,746

(b)
16,699

Service costs
30,804

 


 
30,804

Research and development, net
8,280

 
 
 
8,280

Selling, general and administrative
19,873

 
 
 
19,873

Other operating expenses:
 
 
 
 

Restructuring expenses and write-off of property and equipment
3,408

 
 
 
3,408

Total other operating expenses
3,408

 
—

 
3,408

Total costs and expenses
75,318

 
3,746

 
79,064

Loss from operations
(29,613
)
 
2,953

 
(26,660
)
Interest income
84

 
 
 
84

Interest expense
(193
)
 
 
 
(193
)
Foreign currency transaction loss, net
(5,573
)
 
 
 
(5,573
)
Other income, net
102

 
 
 
102

Loss before income tax expense
(35,193
)
 
2,953

 
(32,240
)
Income tax expense
(4,787
)
 
 
 
(4,787
)
Net loss from continuing operations
$
(39,980
)
 
$
2,953

 
$
(37,027
)
Weighted average common shares outstanding:
 
 
 
 

Basic & Diluted
21,865,326

 
 
 
21,865,326

Loss per share - basic & diluted:
 
 
 
 


Continuing operations
$
(1.83
)
 


 
$
(1.69
)
(1) The historical consolidated statements of operations for the three months ended April 30, 2015 reflected the BSS business as a discontinued operation. The pro forma adjustments also reflect changes to the previously reported financial statement upon completion the final terms of the Asset Sale.




COMVERSE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
 
Fiscal Year Ended January 31, 2015
 
Historical
 
Pro Forma Adjustments
 
 
Pro Forma
Revenue:
 
 
 
 
 
 
Product revenue
$
99,768

 
$
(30,531
)
(d)
 
$
69,237

Service revenue
377,537

 
(177,800
)
(d)
 
199,737

Total revenue
477,305

 
(208,331
)
 
 
268,974

Costs and expenses:
 
 
 
 
 
 
Product costs
55,572

 
(465
)
(d)
 
55,107

Service costs
253,070

 
(106,446
)
(d)
 
146,624

Research and development, net
56,334

 
(19,477
)
(d)
 
36,857

Selling, general and administrative
111,832

 
(30,573
)
(d)
 
81,259

Other operating expenses:
 
 
 
 
 
 
Restructuring expenses and write-off of property and equipment
16,333

 
(2,759
)
(d)
 
13,574

Total other operating expenses
16,333

 
(2,759
)
 
 
13,574

Total costs and expenses
493,141

 
(159,720
)
 
 
333,421

Loss from operations
(15,836
)
 
(48,611
)
 
 
(64,447
)
Interest income
480

 
—

 
 
480

Interest expense
(641
)
 
—

 
 
(641
)
Foreign currency transaction gain, net
4,659

 
—

 
 
4,659

Other expense, net
(517
)
 
—

 
 
(517
)
Loss before income tax expense
(11,855
)
 
(48,611
)
 
 
(60,466
)
Income tax expense
(10,284
)
 
3,795

(f)
 
(6,489
)
Net loss from continuing operations
$
(22,139
)
 
$
(44,816
)
 
 
$
(66,955
)
Weighted average common shares outstanding:
 
 
 
 
 
 
Basic & diluted
22,190,630

 
 
 
 
22,190,630

Loss per share - basic & diluted:
 
 
 
 
 
 
Basic & diluted
$
(1.00
)
 


 
 
$
(3.02
)




COMVERSE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
 
Fiscal Year Ended January 31, 2014
 
Historical
 
Pro Forma Adjustments
 
 
Pro Forma
Revenue:
 
 
 
 
 
 
Product revenue
$
220,167

 
$
(65,461
)
(d)
 
$
154,706

Service revenue
432,334

 
(171,070
)
(d)
 
261,264

Total revenue
652,501

 
(236,531
)
 
 
415,970

Costs and expenses:
 
 
 
 
 
 
Product costs
116,259

 
(19,350
)
(d)
 
96,909

Service costs
286,217

 
(118,984
)
(d)
 
167,233

Research and development, net
67,512

 
(28,111
)
(d)
 
39,401

Selling, general and administrative
134,031

 
(43,423
)
(d)
 
90,608

Other operating expenses:
 
 
 
 
 
 
Restructuring expenses
10,783

 
(938
)
(d)
 
9,845

Total other operating expenses
10,783

 
(938
)
 
 
9,845

Total costs and expenses
614,802

 
(210,806
)
 
 
403,996

Loss from operations
37,699

 
(25,725
)
 
 
11,974

Interest income
614

 
—

 
 
614

Interest expense
(847
)
 
—

 
 
(847
)
Foreign currency transaction loss, net
(10,290
)
 
—

 
 
(10,290
)
Other income, net
699

 
—

 
 
699

Income before income tax expense
27,875

 
(25,725
)
 
 
2,150

Income tax expense
(9,189
)
 
6,397

(f)
 
(2,792
)
Net income (loss) from continuing operations
$
18,686

 
$
(19,328
)
 
 
$
(642
)
Weighted average common shares outstanding:
 
 
 
 
 
 
Basic & diluted
22,164,131

 
 
 
 
22,164,131

Diluted
22,382,234

 
 
 
 
22,164,131

Income (loss) per share - basic & diluted:
 
 
 
 
 
 
Basic
$
0.84

 


 
 
$
(0.03
)
Diluted
$
0.83

 


 
 
$
(0.03
)




COMVERSE, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
 
Fiscal Year Ended January 31, 2013
 
Historical
 
Pro Forma Adjustments
 
 
Pro Forma
Revenue:
 
 
 
 
 
 
Product revenue
$
242,104

 
$
(62,224
)
(d)
 
$
179,880

Service revenue
435,659

 
(169,949
)
(d)
 
265,710

Total revenue
677,763

 
(232,173
)
 
 
445,590

Costs and expenses:
 
 
 
 
 
 
Product costs
123,152

 
(19,377
)
(d)
 
103,775

Service costs
308,492

 
(132,204
)
(d)
 
176,288

Research and development, net
76,461

 
(25,137
)
(d)
 
51,324

Selling, general and administrative
160,340

 
(30,386
)
(d)
 
129,954

Other operating expenses:
 
 
 
 
 
 
Impairment of goodwill
5,605

 
 
 
 
5,605

Restructuring expenses
5,905

 
(1,468
)
(d)
 
4,437

Total other operating expenses
11,510

 
(1,468
)
 
 
10,042

Total costs and expenses
679,955

 
(208,572
)
 
 
471,383

Loss from operations
(2,192
)
 
(23,601
)
 
 
(25,793
)
Interest income
829

 
—

 
 
829

Interest expense
(901
)
 
—

 
 
(901
)
Interest expense on notes payable to CTI
(455
)
 
 
 
 
 
Foreign currency transaction loss, net
(4,961
)
 
—

 
 
(4,961
)
Other income, net
912

 
—

 
 
912

Loss before income tax expense
(6,768
)
 
(23,601
)
 
 
(29,914
)
Income tax expense
(13,526
)
 
13,036

(f)
 
(490
)
Net loss from continuing operations
$
(20,294
)
 
$
(10,565
)
 
 
$
(30,404
)
Weighted average common shares outstanding:
 
 
 
 
 
 
Basic & diluted
21,923,981

 
 
 
 
21,923,981

Loss per share - basic & diluted:
 
 
 
 
 
 
Basic & diluted
$
(0.93
)
 


 
 
$
(1.39
)





COMVERSE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following pro forma adjustments are included in the unaudited pro forma condensed consolidated balance sheet and/or the unaudited pro forma condensed consolidated statements of operations:
(a)
Includes cash proceeds from the sale of approximately $273 million, including $6.5 million of deferred closings pending regulatory approval for transfer of assets, net of $26 million deposited into escrow, approximately $4 million in income and other transaction related taxes and $4 million of transaction commissions.
 
 
(b)
Represents adjustment upon the completion of the terms of the Asset Sale to the previously reported unaudited consolidated balance sheet as of April 30, 2015 and the unaudited consolidated statements of operations for the three months ended April 30, 2015.
 
 
(c)
Restricted cash deposited into escrow to fund potential indemnification claims and certain adjustments for a period of twelve (12) months following the closing.
 
 
(d)
Represents the elimination of assets, liabilities and historical operating results included in the Asset Sale.
 
 
(e)
Includes the estimated after-tax effect on retained earnings from the disposition, including the after-tax gain on the sale.
 
 
(f)
Includes the impact on the Company’s global consolidated estimated tax computation at the applicable statutory rate excluding the BSS Business.
Items non-recurring in nature, including the one-time gain associated with the sale of the BSS business, are not reflected in the pro forma adjustments in the condensed consolidated statements of operations.