<PAGE> 1
TYPE: EX-99.2
SEQUENCE: 4
DESCRIPTION: PRO FORMA FINANCIAL INFORMATION
EXHIBIT 99.2
On August 28, 2000, Sapient Corporation (the "Company" or "Sapient")
acquired Human Code, Inc. for approximately $133.1 million in stock and the
replacement of existing Human Code stock options, including direct acquisition
costs of approximately $1.9 million. The Company issued approximately 1,508,000
shares of the Company's common stock and approximately 471,000 stock options of
the Company pursuant to this acquisition. Human Code is a provider of
interactive design services for broadband applications. The acquisition was
accounted for as a purchase and accordingly, the purchase price was allocated to
the assets acquired and liabilities assumed based on their respective fair
values. Human Code's results of operations are included in the Company's
consolidated statement of operations from the date of acquisition.
The unaudited Pro Forma Condensed Consolidated Statements of Operations
(the Pro Forma Statements of Operations) for the year ended December 31, 1999
and the six months ended June 30, 2000 give effect to the acquisition of Human
Code as if it had occurred on January 1, 1999. The Pro Forma Statements of
Operations are based on the historical results of operations of the Company and
Human Code for the year ended December 31, 1999 and the six months ended June
30, 2000. The Pro Forma Statements of Operations and the accompanying notes
thereto should be read in conjunction with and are qualified by the historical
consolidated financial statements of the Company and notes thereto included in
the Company's Annual Report on Form 10-K.
The Pro Forma Financial Information is intended for informational purposes
only and is not necessarily indicative of the future results of operations of
the combined company after the acquisition of Human Code, or of the results of
operations of the combined company that would have actually occurred had the
acquisition of Human Code been effected on January 1, 1999.
A summary of the acquisition follows (in thousands):
<TABLE>
<S> <C>
Common stock $101,172
Stock options 29,941
Transaction costs 1,941
--------
Total consideration 133,054
Fair value of net liabilities assumed 2,161
--------
Excess of purchase price over fair value of net tangible assets acquired $135,215
========
</TABLE>
In connection with the acquisition of Human Code, the Company assumed the
outstanding options granted under the Human Code 1994 Stock Option/Stock
Issuance Plan (the Human Code Plan). Prior to the acquisition, options to
purchase approximately 2,864,000 shares of Human Code common stock were
outstanding at exercise prices between $0.10 and $3.25 per share. As a result of
the acquisition, the Company replaced the outstanding Human Code stock options
with options to purchase approximately 471,000 shares of the Company's common
stock. The options will vest ratably over a period up to four years. The Company
recorded deferred compensation of $11.2 million related to the intrinsic value
of the unvested options. The deferred compensation will be charged to operations
at the rate of approximately $1.0 million per quarter for the next seven
quarters, and $3.9 million in total thereafter, spread over nine quarters.
The excess of purchase price over fair value of net tangible assets
acquired was as follows (in thousands):
<TABLE>
<S> <C>
Customer contracts $ 300
Assembled workforce and employment agreements 2,900
</TABLE>
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<TABLE>
<S> <C>
Deferred compensation 11,185
Developed technology 13,000
Deferred taxes (6,480)
Goodwill 114,310
---------
Total $ 135,215
=========
</TABLE>
The purchase price allocation for intangible assets is based on the report
of an independent appraiser. These assets are being amortized on a straight-line
basis over lives principally ranging from three to seven years.
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<PAGE> 3
SAPIENT CORPORATION
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Sapient Pro Forma Combined
Corporation Human Code, Inc. Adjustments Pro Forma
----------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 226,103 $ 11,473 $ -- $ 237,576
--------- --------- --------- ---------
COSTS AND EXPENSES:
Project personnel costs 108,896 7,747 -- 116,643
Selling and Marketing 15,654 1,661 -- 17,315
General and administrative 59,006 5,731 -- 64,737
Amortization of intangible assets 1,641 -- 10,736(a) 12,377
Stock-based compensation 220 -- 2,014(a) 2,234
--------- --------- --------- ---------
Total Operating Expenses 185,417 15,139 12,750 213,306
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 40,686 (3,666) (12,750) 24,270
INTEREST INCOME (EXPENSE) 5,241 (56) -- 5,185
--------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES 45,927 (3,722) (12,750) 29,455
PROVISION (BENEFIT) FOR INCOME TAXES 18,446 -- (2,030)(b) 16,416
--------- --------- --------- ---------
INCOME (LOSS) BEFORE NET EQUITY LOSS FROM INVESTEE 27,481 (3,722) (10,720) 13,039
NET EQUITY LOSS FROM INVESTEE 629 -- -- 629
--------- --------- --------- ---------
NET INCOME (LOSS) $ 26,852 $ (3,722) $ (10,720) $ 12,410
========= ========= ========= =========
NET INCOME PER SHARE:
Basic $ 0.23 $ 0.10
Diluted $ 0.20 $ 0.09
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Basic 117,066 1,508 118,574
Diluted 133,006 1,979 134,985
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Amortization expense related to deferred compensation charge, goodwill and
other intangible assets was recorded in connection with the acquisition of
Human Code by Sapient
(b) Tax benefit for Human Code losses and deductibility of certain intangible
asset amortization
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<PAGE> 4
SAPIENT CORPORATION
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Sapient Pro Forma Combined
Corporation Human Code, Inc. Adjustments Pro Forma
----------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
REVENUES $ 276,844 $ 15,354 $ -- $ 292,198
--------- --------- --------- ---------
COSTS AND EXPENSES:
Project personnel costs 134,638 9,426 -- 144,064
Selling and Marketing 21,429 1,188 -- 22,617
General and administrative 69,388 5,058 -- 74,446
Amortization of intangible assets 2,284 203 21,772(a) 24,259
Stock-based compensation 2,029 -- 4,094(a) 6,123
Acquisition Costs 2,340 -- -- 2,340
--------- --------- --------- ---------
Total Operating Expenses 232,108 15,875 25,866 273,849
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 44,736 (521) (25,866) 18,349
INTEREST INCOME 4,227 49 -- 4,276
OTHER INCOME (GAIN ON SALE) -- 15 -- 15
--------- --------- --------- ---------
INCOME (LOSS) BEFORE TAXES 48,963 (457) (25,866) 22,640
PROVISION (BENEFIT) FOR INCOME TAXES 18,506 (14) (2,216)(b) 16,276
--------- --------- --------- ---------
INCOME (LOSS) BEFORE NET EQUITY LOSS FROM INVESTEE 30,457 (443) (23,650) 6,364
NET EQUITY LOSS FROM INVESTEE 157 -- -- 157
--------- --------- --------- ---------
NET INCOME (LOSS) $ 30,300 $ (443) $ (23,650) $ 6,207
========= ========= ========= =========
NET INCOME PER SHARE:
Basic $ 0.27 $ 0.05
Diluted $ 0.24 $ 0.05
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Basic 111,418 1,508 112,926
Diluted 125,626 1,979 127,605
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Amortization expense related to deferred compensation charge, goodwill and
other intangible assets was recorded in connection with the acquisition of
Human Code by Sapient
(b) Tax benefit for Human Code losses and deductibility of certain intangible
asset amortization
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