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EXHIBIT 99.2 UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
On March 8, 2000, Redback merged with Siara in a transaction accounted for
as a purchase. In connection with the Merger, Redback issued 57,388,818 shares
of its common stock and options and warrants to purchase 5,295,038 shares of its
common stock. The consolidated financial statements include the results of
operations of Siara commencing on March 9, 2000. The purchase price, including
the value of options and warrants issued in connection with the Merger and
professional fees directly related to the acquisition, was approximately $4.5
billion.
The following unaudited pro forma combined statement of operations for the
nine months ended September 30, 2000 presents the effect of the merger between
Redback and Siara as if the merger occurred on January 1, 2000.
The unaudited pro forma combined financial data are based on the estimates
and assumptions set forth in the notes to such statements. The unaudited pro
forma combined financial data are not necessarily indicative of the results that
would have been achieved had the transaction been consummated as of the dates
indicated or that may be achieved in the future.
The unaudited pro forma combined financial data should be read in
conjunction with the historical financial statements of Redback and the
historical financial statements of Siara and other financial information
pertaining to Redback and Siara.
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REDBACK NETWORKS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Historical Historical Merger Combined
Redback Siara Adjustments Company
------------- ---------------- --------------- ------------
<S> <C> <C> <C> <C>
Net Revenues $163,449 $163,449
Cost of revenues 56,073 $645 (A) 56,718
------------- ---------------- --------------- ------------
Gross profit 107,376 0 (645) 106,731
Operating expenses:
Research and development 58,561 6,862 65,423
Selling, general and administrative 53,584 4,347 57,931
Amortization of intangibles 630,727 208,538 (B) 839,265
In-process research and development 40,400 (15,300)(A) 25,100
Amortization of deferred stock
compensation 5,884 80,574 (80,574)(C) 5,884
------------- ---------------- --------------- ------------
Total operating expenses 789,156 91,783 112,664 993,603
------------- ---------------- --------------- ------------
Loss from operations (681,780) (91,783) (113,309) (886,872)
Other income (expense), net 1,789 (573) 1,216
------------- ---------------- --------------- ------------
Net loss ($679,991) ($92,356) ($113,309) ($885,656)
============= ================ =============== ============
Basic and diluted net loss per share ($6.16) ($5.44) ($7.12)
============= ================ ============
Shares used in computing net loss
per share 110,403,000 16,986,000 14,033,000 124,436,000
============= ================ =============== ============
</TABLE>
See accompanying notes to Unaudited Pro Forma Combined Financial Data
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NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA
NOTE 1--BASIS OF PRESENTATION:
On March 8, 2000, Redback and Siara completed their merger, which was
accounted for as a purchase. In connection with the merger, Redback issued
57,388,818 shares of its common stock and options and warrants to purchase
5,295,038 shares of its common stock. The purchase price, including the value of
options and warrants issued in connection with the merger and professional fees
directly related to the merger, was approximately $4.5 billion.
The estimated value of the Redback common stock was $142.00 per share
based on the average closing price of Redback's common stock for the five-day
period commencing two days prior to the announcement of the merger. The value of
the options and warrants to purchase Redback's common stock was approximately
$140.77 per share, determined using the Black-Scholes pricing model.
The preliminary allocation of the purchase price using balances as of
March 8, 2000 is summarized below (in thousands):
Tangible assets acquired...................................... $ 16,381
Existing technology........................................... 13,800
In-process research and development........................... 15,300
In-place workforce............................................ 27,500
Non-compete agreements........................................ 10,000
Goodwill...................................................... 4,419,207
Assumed liabilities........................................... (35,619)
------------
Net assets acquired........................................... $4,466,569
============
The fair value allocation to in-process research and development was
determined by identifying the research projects for which technological
feasibility has not been achieved and which have no alternative future use at
the merger date, assessing the stage and expected date of completion of the
research and development effort at the merger date, and calculating the net
present value of the cash flows expected to result from the successful
deployment of the new technology resulting from the in-process research and
development effort.
The stages of completion were determined by estimating the costs and time
incurred to date relative to the costs and time incurred to develop the
in-process technology into a commercially viable technology or product, while
considering the relative difficulty of completing the various tasks and
obstacles necessary to attain technological feasibility. As of the date of the
acquisition, Siara had five projects in process that ranged from 24%-80%
complete.
The estimated net present value of cash flows was based on incremental
future cash flows from revenues expected to be generated by the technologies in
the process of development, taking into account the characteristics and
applications of the technologies, the size and growth rate of existing and
future markets and an evaluation of past and anticipated technology and product
life cycles. Estimated net future cash flows included allocations of operating
expenses and income taxes but excluded the expected completion costs of the
in-process projects, and were discounted at a rate of 26% to arrive at a net
present value. The discount rate included a factor that took into account the
uncertainty surrounding the successful deployment of in-process technology
projects. This net present value was allocated to in-process research and
development based on the percentage of completion at the merger date.
The amounts allocated to in-process research and development were charged
to the statement of operations during the nine months ended September 30, 2000.
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NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA (CONTINUED)
NOTE 2--PRO FORMA ADJUSTMENTS:
A To reflect amortization of developed technology over the estimated
useful life of four years as if the acquisition had occurred as of the
beginning of the periods indicated. The amount allocated to in-process
research and development has not been included in the unaudited pro
forma combined statement of operations as it is nonrecurring.
B To reflect amortization of goodwill, workforce and non-compete
agreements over their estimated useful lives of four, three and two
years, respectively, as if the acquisition occurred as of the beginning
of the periods indicated.
C To eliminate amortization of deferred stock compensation related to
Siara stock options and warrants which is duplicative, as the fair
value of the unvested options and warrants has been included in the
purchase price and results in additional goodwill amortization.
