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Exhibit 99.2
EDGEWATER TECHNOLOGY, INC. - FORM 8-K
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
INTRODUCTION
We (Edgewater Technology, Inc. and our subsidiaries) provide human
resource and business solutions through two segments. Our eSolutions segment
consists of Edgewater Technology (Delaware), Inc. ("Edgewater"), an eSolutions
consulting firm acquired effective April 1, 1999. Our ClinForce segment provides
clinical trials support services. As discussed below, we have previously sold
our interests in our Commercial staffing segment, Robert Walters plc ("Robert
Walters") (finance and accounting staffing services), and Strategic Legal
Resources (legal staffing). At the time of our Form 10-Q filing for the three
months ended September 30, 2000, we had signed a non-binding letter of intent to
sell our IntelliMark division (information technology staffing and solutions).
As a result of the above, the operating results for these divisions were
included in discontinued operations in the financial statements as of and for
the nine months ended September 30, 2000.
On June 29, 2000, pursuant to a Purchase Agreement dated May 16, 2000
with Stephens Group, Inc., we sold all of our subsidiaries, and the assets and
liabilities of our Commercial staffing segment to affiliate entities of Stephens
Group, Inc. As consideration, we received gross proceeds of $190.1 million in
cash before fees, expenses and taxes. As part of the transaction, we sold the
name "StaffMark" as that was the name used by the Commercial segment. As a
result of the transaction, we changed our name to "Edgewater Technology, Inc."
and our stock symbol to "EDGW."
On July 13, 2000, we sold, through two indirect wholly-owned
subsidiaries, all of our equity interests in Robert Walters through an initial
public offering ("IPO") on the London Stock Exchange. Robert Walters had
previously been our finance and accounting platform within our Professional/IT
segment. Our two subsidiaries sold 67,200,000 ordinary shares at a price of 170
pence per share (or $2.57 at then current exchange rates). The shares began
trading on a conditional basis on the London Stock Exchange on July 6, 2000. On
July 14, 2000, the underwriters exercised the over-allotment of 10,400,000
ordinary shares. Our share of offering gross proceeds, including the exercise of
the over-allotment option, was $199.2 million prior to offering commissions,
fees and expenses.
On September 25, 2000, we sold all of the outstanding stock of Strategic
Legal Resources, our legal staffing platform within our Professional/IT segment,
to a company owned by a group of investors including MidMark Capital II, L.P.
and Edwardstone & Company for $13.25 million, of which $4.25 million is
represented by a promissory note payable in January 2001.
On November 17, 2000, we sold all of the outstanding shares of stock of
our subsidiaries that comprised IntelliMark, our information technology staffing
and solutions division, to an affiliate of Charlesbank Equity Fund V for
approximately $42.7 million in cash, subject to potential upward or downward
post-closing adjustments (the "Sale Transaction"). The following unaudited pro
forma consolidated statements of income set forth the results of operations for
the twelve months ended December 31, 1999 and for the nine months ended
September 30, 2000 as if the Sale Transaction had occurred at the beginning of
fiscal 1999. The unaudited pro forma consolidated balance sheet sets forth the
financial position as of September 30, 2000, as if the Sale Transaction had
occurred as of that date.
The pro forma results of operations are not necessarily indicative of
future operations or the actual results that would have occurred had the Sale
Transaction been completed at the beginning of fiscal 1999. These statements
should be read in conjunction with the accompanying notes herein and the
historical consolidated financial statements and related notes included in our
1999 Annual Report of Form 10-K and Quarterly Report on Form 10-Q for the three
months ended September 30, 2000.
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Edgewater Technology, Inc.
Unaudited Pro Forma Combined
Balance Sheet
As of September 30, 2000
(In Thousands)
<TABLE>
<CAPTION>
Edgewater Pro Forma
Technology, Inc. Adjustments Pro Forma
---------------------- ----------------- -----------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 100,226 $ 41,000 (a) $ 139,088
(2,138) (b)
Accounts receivable, net 12,374 12,374
Prepaid expenses and other 6,681 6,681
Income tax receivable - 13,499 (d) 13,499
Deferred income taxes 1,484 1,484
---------------------- ---------------- ----------------
Total current assets 120,765 52,361 173,126
PROPERTY AND EQUIPMENT, net 2,154 2,154
INTANGIBLE ASSETS, net 49,390 49,390
DEFERRED INCOME TAXES 51,646 325 (d) 37,971
(14,000) (d)
OTHER ASSETS 164 164
NET ASSETS HELD FOR SALE 39,710 (39,710) (c) -
---------------------- ---------------- ----------------
$ 263,829 $ (1,024) $ 262,805
====================== ================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and other accrued liabilities $ 14,107 $ 14,107
Payroll and related liabilities 3,946 3,946
Income taxes payable 501 (501) (d) -
---------------------- ---------------- ----------------
Total current liabilities 18,554 (501) 18,053
OTHER LONG-TERM LIABILITIES 238 238
STOCKHOLDERS' EQUITY:
Common stock 296 296
Treasury stock (6,127) (6,127)
Paid-in capital 217,604 217,604
Retained earnings 33,264 (523) (e) 32,741
---------------------- ---------------- ----------------
Total stockholders' equity 245,037 (523) 244,514
---------------------- ---------------- ----------------
Total Liabilities and Stockholders' Equity $ 263,829 $ (1,024) $ 262,805
====================== ================ ================
</TABLE>
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EDGEWATER TECHNOLOGY, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(a) Records the proceeds of $42.7 million received by Edgewater for the Sale
Transaction net of receivable collections already reflected in the cash
balance.
(b) Records the payment of transaction fees associated with the Sale
Transaction.
(c) Represents the assets and liabilities of IntelliMark that were sold by
Edgewater in the Sale Transaction.
(d) Records the income tax effects of the Sale Transaction which resulted in an
income tax receivable.
(e) Records the book loss generated from the Sale Transaction.
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Edgewater Technology, Inc.
Unaudited Pro Forma Combined
Statement of Income
for the Nine Months Ended
September 30, 2000
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Edgewater Pro Forma
Technology, Inc. (a) Adjustments Pro Forma
---------------------- ------------- ------------
<S> <C> <C> <C>
SERVICE REVENUES $ 43,969 $ -- $ 43,969
COST OF SERVICES 25,491 -- 25,491
---------------------- ------------- ------------
Gross profit 18,478 -- 18,478
OPERATING EXPENSES:
Selling, general and administrative 14,656 -- 14,656
Depreciation and amortization 3,724 -- 3,724
Nonrecurring restructure charge 2,803 2,803
---------------------- ------------- ------------
Operating loss (2,705) -- (2,705)
---------------------- ------------- ------------
OTHER INCOME:
Interest income, net 35 5,360 (b) 5,395
Other, net 817 -- 817
---------------------- ------------- ------------
(LOSS) INCOME BEFORE INCOME TAXES (1,853) 5,360 3,507
INCOME TAX (BENEFIT) PROVISION (710) 2,054 (c) 1,344
---------------------- ------------- ------------
(Loss) income from continuing operations (1,143) 3,306 2,163
DISCONTINUED OPERATIONS:
Loss from operations of discontinued divisions (105,637) 105,637 (d) --
Gain on sale of divisions 63,513 (63,513) (d) --
---------------------- ------------- ------------
Net (loss) income $ (43,267) $ 45,430 $ 2,163
====================== ============= ============
EARNINGS PER COMMON SHARE
BASIC $ (1.47) $ 0.07
====================== ============
DILUTED $ (1.47) $ 0.07
====================== ============
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC 29,387 29,387
====================== ============
DILUTED 29,492 29,492
====================== ============
</TABLE>
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EDGEWATER TECHNOLOGY, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(a) As we had signed a non-binding letter of intent to sell our IntelliMark
division as of September 30, 2000, the results of operation for this
division are included in discontinued operations. As we have previously
sold our interests in our Commercial staffing segment, Robert Walters, and
Strategic Legal Resources, the operating results for these divisions are
also included in discontinued operations for the nine months ended
September 30, 2000.
(b) Adjustment to reflect interest income that would have resulted from
consideration had the Sale Transaction occurred effective January 1, 2000.
(c) Records the provision for federal and state income taxes at an effective
combined tax rate of approximately 38.3%.
(d) Adjustment to remove discontinued operations, which includes results from
our Commercial staffing segment, Robert Walters, Strategic Legal Resources
and IntelliMark.
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Edgewater Technology, Inc.
Unaudited Pro Forma Combined
Statement of Income
for the Twelve Months Ended
December 31, 1999
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Disposition Related Adjustments
-----------------------------------------
Edgewater Previous Pro Forma Total
Technology, Inc. Dispositions (a) IntelliMark (b) Adjustments Adjustments Pro Forma
---------------- --------------- --------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
SERVICE REVENUES $ 1,220,852 $ (924,313) $ (255,003) $ -- $(255,003) $ 41,536
COST OF SERVICES 918,574 (710,314) (182,246) -- (182,246) 26,014
----------------- ------------ -------------- ----------- --------- ----------
Gross profit 302,278 (213,999) (72,757) -- (72,757) 15,522
OPERATING EXPENSES:
Selling, general and
administrative 214,824 (153,448) (47,522) -- (47,522) 13,854
Depreciation and amortization 21,448 (10,723) (9,253) -- (9,253) 1,472
Nonrecurring charges 2,153 -- (2,153) -- (2,153) --
----------------- ------------ -------------- ----------- --------- ----------
Operating income (loss) 63,853 (49,828) (13,829) -- (13,829) 196
----------------- ------------ -------------- ----------- --------- ----------
OTHER INCOME (EXPENSE):
Interest (expense) income, net (17,419) 8,248 7,573 8,858 (c) 16,431 7,260
Other, net (227) 227 -- -- -- --
----------------- ------------ -------------- ----------- --------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 46,207 (41,353) (6,256) 8,858 2,602 7,456
INCOME TAX PROVISION (BENEFIT) 15,994 (14,314) (2,165) 3,066 (d) 901 2,581
----------------- ------------ -------------- ----------- --------- ----------
Net income (loss) $ 30,213 $ (27,039) $ (4,091) $ 5,792 $ 1,701 $ 4,875
================= ============ ============== =========== ========= ==========
EARNINGS PER COMMON SHARE
BASIC $ 1.03 $ 0.17
================= ==========
DILUTED $ 1.02 $ 0.17
================= ==========
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC 29,280 29,280
================= ==========
DILUTED 29,526 29,526
================= ==========
</TABLE>
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EDGEWATER TECHNOLOGY, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(a) Represents the results of operations for the Commercial staffing segment,
Robert Walters and Strategic Legal Resources. These platforms were
previously sold by Edgewater during 2000.
(b) Represents the unaudited financial results of IntelliMark, which was sold
by Edgewater via the Sale Transaction on November 16, 2000.
(c) Adjustment to reflect net interest income that results from investing cash
in excess of the amounts necessary to repay debt obligations.
(d) Records the provision for federal and state income taxes at an effective
combined tax rate of approximately 34.6%.
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