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EXHIBIT 99.3
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The Company, through a wholly-owned subsidiary, offered to purchase all
outstanding Class A Voting Common Shares and Class B Non-Voting Common Shares
(collectively, the "FastLane Shares") of FastLane Technologies Inc., in exchange
for 1,125,262 shares of Quest common stock valued at $60.3 million (based on the
September 11, 2000 closing market price of $53.63 per share), a cash payment of
$33.5 million, assumption of stock options valued at $6.6 million, and the
assumption of net assets estimated to be $5.0 million at December 31, 1999 and
net liabilities estimated to be $1.2 million at June 30, 2000. Transaction costs
are estimated at $0.5 million.
The following table sets out certain consolidated financial information
for Quest and FastLane as well as certain pro forma consolidated financial
information for Quest after giving effect to the offer and certain other
adjustments. The unaudited pro forma adjustments are based upon currently
available information and upon certain assumptions that management of Quest
believes are reasonable under the circumstances.
The following unaudited pro forma consolidated balance sheet as of June
30, 2000 includes the unaudited consolidated balance sheet of FastLane and
assumes that the acquisition had occurred on June 30, 2000. The unaudited pro
forma consolidated statement of operations for the six months ended June 30,
2000 includes the unaudited statement of operations of FastLane for the six
months ended June 30, 2000, and assumes that the acquisition occurred on January
1, 1999. The unaudited pro forma consolidated statement of operations for the
year ended December 31, 1999 includes the statement of operations of FastLane
for the year December 31, 1999, and assumes that the acquisition occurred on
January 1, 1999. The FastLane balance sheet at June 30, 2000 was translated from
Canadian dollars to U.S. dollars at the exchange rate at June 30, 2000 of
0.6739. The FastLane statement of operations for the six months ended June 30,
2000 was translated from Canadian dollars to U.S. dollars at the six-month
average exchange rate of 0.68199. The FastLane statement of operations for the
twelve months ended December 31, 1999 was translated from Canadian dollars to
U.S. dollars at the twelve-month average exchange rate of 0.6731. The exchange
rates used to translate the combined unaudited pro forma amounts from Canadian
to U.S. dollars are solely for the convenience of the reader. Certain FastLane
historical financial statement amounts have been reclassified to pro forma
presentation to comply with U.S. GAAP. In addition, an adjustment was made to
FastLane's historical financial statements to recognize the value of technology
acquired from an affiliate in accordance with U.S. GAAP. The information
presented below assumes all the FastLane Shares are tendered to the offer, Quest
takes up and pays for such FastLane Shares and all Exchangeable Shares are
exchanged for shares of Quest Common Stock.
The unaudited pro forma consolidated financial information does not
reflect any cost savings or other synergies which may result from the
transaction and is not necessarily indicative of future results of operations or
financial position. Additionally, the unaudited pro forma consolidated financial
information excludes non-recurring charges directly attributable to the
transaction which will be charged to operations in the quarter in which the
transaction is consummated. The unaudited pro forma consolidated financial
information is presented on the basis of U.S. GAAP.
The acquisition will be accounted for using the purchase method of
accounting. Accordingly, the cost to acquire FastLane will be allocated to the
assets acquired and liabilities assumed according to their estimated fair values
as of the date of acquisition after giving effect to the purchase price
adjustments required by the offer. The allocation is dependent upon certain
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valuations and other studies that have not progressed to a stage where there is
sufficient information to make a definitive allocation. Accordingly, the
purchase allocation adjustments made in connection with the preparation of the
unaudited pro forma consolidated financial information are preliminary, and have
been made solely for the purpose of preparing such unaudited pro forma
consolidated financial information.
On December 17, 1999 Quest, through a wholly-owned subsidiary, acquired
all of the outstanding common stock and stock options of MBR Technologies, Inc.
(MBR) in exchange for 186,942 shares of Quest common stock valued at $9.3
million, a cash payment of $1.3 million, and the assumption of net liabilities
of $0.3 million. The acquisition was accounted for as a purchase and the result
of MBR's operations were included in Quest's statement of operations from the
date of acquisition.
On January 7, 2000 Quest, through a wholly-owned subsidiary, acquired
all of the outstanding common stock of Foglight Software, Inc. (Foglight) in
exchange for 2,375,206 shares of Quest common stock valued at $104.2 million,
cash payments of $0.4 million, the assumption of unvested Foglight stock options
valued at $2.2 million, and the assumption of net liabilities of $4.1 million.
The acquisition was accounted for as a purchase.
The December 31, 1999 unaudited consolidated statement of operations
reflects the pro forma results and related adjustments for the MBR and Foglight
acquisitions as if the acquisitions had occurred on January 1, 1999. The balance
sheet and statement of operations of Quest as of and for the six months ended
June 30, 2000 includes the financial position and operations of Foglight and
MBR.
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QUEST SOFTWARE, INC. AND FASTLANE TECHNOLOGIES INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
($USD in thousands, except for per share amounts)
<TABLE>
<CAPTION>
MBR
Technologies Foglight
Quest For The Period Foglight and MBR
Software January 1, 1999 to Software Pro Forma Total
Dec 31, 1999 Dec 17, 1999 Dec 31, 1999 Adjustments Dec 31, 1999
------------ ------------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses $54,269 $ 380 $ 2,433 $ -- $ 57,082
Services 16,599 190 383 -- 17,172
------- ------- ------- -------- --------
Total revenues 70,868 570 2,816 -- 74,254
Cost of revenues:
Licenses 2,998 346 109 3,453
Services 4,195 195 207 -- 4,597
Amortization of purchased
developed technology -- -- -- 2,550(1) 2,550
------- ------- ------- -------- --------
Total cost of revenues 7,193 541 316 2,550 10,600
------- ------- ------- -------- --------
Gross profit 63,675 29 2,500 (2,550) 63,654
Operating expenses:
Sales and marketing 32,078 149 3,734 -- 35,961
Research and development 15,980 209 3,680 -- 19,869
General and administrative 9,906 524 1,233 -- 11,663
Other compensation costs
and goodwill amortization 1,243 -- 409 22,826(1) 24,478
------- ------- ------- -------- --------
Total operating expenses 59,207 882 9,056 22,826 91,971
------- ------- ------- -------- --------
Income (loss) from operations 4,468 (853) (6,556) (25,376) (28,317)
Other income, net 1,202 (31) (865) (87)(2) 219
------- ------- ------- -------- --------
Income (loss) before income
tax provision 5,670 (884) (7,421) (25,463) (28,098)
Income tax provision (benefit) 2,273 1 1 (3,810)(3) (1,535)
------- ------- ------- -------- --------
Net income (loss) 3,397 (885) (7,422) (21,653) (26,563)
Preferred dividends 590 -- 679 -- 1,269
------- ------- ------- -------- --------
Net income (loss) applicable to
common shareholders $ 2,807 $ (885) $(8,101) $(21,653) $(27,832)
======= ======= ======= ======== ========
Earnings per share:
Basic $ 0.04
Diluted $ 0.03
Weighted average shares:
Basic 75,354 2,562(4)
Diluted 83,600 (5,684)(4)
<CAPTION>
FastLane FastLane Combined
Technologies Pro Forma Pro Forma
Dec 31, 1999 Adjustments Dec 31, 1999
------------ ----------- ------------
<S> <C> <C> <C>
Revenues:
Licenses $ 4,350 -- $ 61,432
Services 1,127 -- 18,299
-------- -------- ---------
Total revenues 5,477 -- 79,731
Cost of revenues:
Licenses 90 -- 3,543
Services 307 -- 4,904
Amortization of purchased
developed technology 1,338 -- 3,888
-------- -------- ---------
Total cost of revenues 1,735 -- 12,335
-------- -------- ---------
Gross profit 3,742 -- 67,396
Operating expenses:
Sales and marketing 8,075 -- 44,036
Research and development 2,549 -- 22,418
General and administrative 1,398 -- 13,061
Other compensation costs
and goodwill amortization -- 21,860(1) 46,338
-------- -------- ---------
Total operating expenses 12,022 21,860 125,853
-------- -------- ---------
Income (loss) from operations (8,280) (21,860) (58,457)
Other income, net 95 (314)(2) --
-------- -------- ---------
Income (loss) before income
tax provision (8,185) (22,174) (58,457)
Income tax provision (benefit) -- (126)(3) (1,661)
-------- -------- ---------
Net income (loss) (8,185) (22,048) (56,796)
Preferred dividends -- -- 1,269
-------- -------- ---------
Net income (loss) applicable to
common shareholders $ (8,185) $(22,048) $ (58,065)
======== ======== =========
Earnings per share:
Basic $ (0.73)
Diluted $ (0.73)
Weighted average shares:
Basic 1,125(4) 79,041
Diluted 1,125(4) 79,041
</TABLE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
(1) To reflect the amortization of goodwill over five years on a straight-line
basis, and workforce over three and one-half years on a straight-line
basis ($20,601) and the amortization of purchased developed technology
over two years on a straight-line basis ($2,550) for the Foglight
transaction. For the MBR transaction, includes the amortization of
goodwill for the period January 1, 1999 to December 17, 1999 of $2,225.
Also includes the amortization of goodwill over five years on a
straight-line basis ($19,179), and amortization of unearned compensation
related to assumed options over two and one-half years ($2,681) for the
FastLane transaction.
(2) To reflect the decrease in interest income due to the use of cash in the
acquisitions.
(3) To adjust the income tax provision to reflect the estimated income tax
benefits from the reduction of interest income.
(4) To adjust for the 2,375,206 and 186,942 shares of Quest common stock
issued in the acquisitions of Foglight and MBR, respectively, in the basic
net income per share calculation and reduce the number of weighted average
shares for the diluted net loss per share calculation. Also includes the
adjustment for the 1,125,262 shares of Quest common stock issued in the
acquisition of FastLane in the basic and diluted net loss per share
calculation.
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QUEST SOFTWARE, INC. AND FASTLANE TECHNOLOGIES INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
($USD, in thousands)
<TABLE>
<CAPTION>
Quest FastLane
Software Technologies Total
June 30, 2000 June 30, 2000 June 30, 2000
------------- ------------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 83,290 $ 42 $ 83,332
Short-term marketable securities 40,163 -- 40,163
Accounts receivable, net 19,719 3,303 23,022
Prepaid expenses and other current assets 7,740 370 8,110
Deferred income taxes 5,499 -- 5,499
--------- -------- ---------
Total current assets 156,411 3,715 160,126
Property and equipment, net 33,033 1,858 34,891
Long-term marketable securities 137,461 -- 137,461
Goodwill and purchased intangible assets, net 142,969 1,451 144,420
Deferred income taxes 415 -- 415
Other assets 4,365 -- 4,365
--------- -------- ---------
Total assets $ 474,654 $ 7,024 $ 481,678
========= ======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,918 $ 2,277 $ 6,195
Accrued compensation 6,132 -- 6,132
Other accrued expenses 10,187 -- 10,187
Income taxes payable 1,903 -- 1,903
Current portion of long-term debt -- 1,547 1,547
Deferred support revenue 16,693 247 16,940
Deferred license revenue 8,495 989 9,484
--------- -------- ---------
Total current liabilities 47,328 5,060 52,388
Long-term liabilities and other 3,148 3,203 6,351
Shareholders' equity:
Common stock and additional paid in capital 465,616 17,770 483,386
Retained earnings (accumulated deficit) (8,231) (19,001) (27,232)
Accumlated other comprehensive income (541) -- (541)
Notes receivable from sale of common stock (2,602) (8) (2,610)
Unearned compensation -- -- --
Capital distribution in excess of basis in common stock (30,064) -- (30,064)
--------- -------- ---------
Total shareholders' equity 424,178 (1,239) 422,939
--------- -------- ---------
Total liabilities and shareholders' equity $ 474,654 $ 7,024 $ 481,678
========= ======== =========
</TABLE>
<TABLE>
<CAPTION>
Combined
Pro Forma Pro Forma
Adjustments June 30, 2000
----------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ (33,965)(1) $ 49,367
Short-term marketable securities 40,163
Accounts receivable, net 23,022
Prepaid expenses and other current assets 8,110
Deferred income taxes 5,499
--------- ---------
Total current assets (33,965) 126,161
Property and equipment, net 34,891
Long-term marketable securities 137,461
Goodwill and purchased intangible assets, net 102,104(1) 246,524
Deferred income taxes 415
Other assets 4,365
--------- ---------
Total assets $ 68,139 $ 549,817
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,195
Accrued compensation 6,132
Other accrued expenses 10,187
Income taxes payable 1,903
Current portion of long-term debt 1,547
Deferred support revenue 16,940
Deferred license revenue 9,484
--------- ---------
Total current liabilities -- 52,388
Long-term liabilities and other 6,351
Shareholders' equity:
Common stock and additional paid in capital 55,841(1) 539,227
Retained earnings (accumulated deficit) 19,001(1) (8,231)
Accumlated other comprehensive income (541)
Notes receivable from sale of common stock (2,610)
Unearned compensation (6,703)(1) (6,703)
Capital distribution in excess of basis in common stock (30,064)
--------- ---------
Total shareholders' equity 68,139 491,078
--------- ---------
Total liabilities and shareholders' equity $ 68,139 $ 549,817
========= =========
</TABLE>
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QUEST SOFTWARE, INC. AND FASTLANE TECHNOLOGIES INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
($USD in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Quest FastLane Combined
Software Technologies Total Pro Forma Pro Forma
June 30, 2000 June 30, 2000 June 30, 2000 Adjustments June 30, 2000
------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses $ 50,423 $ 3,697 $ 54,120 $ 54,120
Services 14,956 1,128 16,084 16,084
-------- ------- -------- -------- --------
Total revenues 65,379 4,825 70,204 -- 70,204
Cost of revenues:
Licenses 1,505 78 1,583 1,583
Services 4,122 553 4,675 4,675
Amortization of purchased
developed technology 1,758 678 2,436 2,436
-------- ------- -------- -------- --------
Total cost of revenues 7,385 1,309 8,694 -- 8,694
-------- ------- -------- -------- --------
Gross profit 57,994 3,516 61,510 -- 61,510
Operating expenses:
Sales and marketing 30,876 6,240 37,116 37,116
Research and development 16,702 2,180 18,882 18,882
General and administrative 6,732 1,271 8,003 8,003
Other compensation costs and
goodwill amortization 15,409 -- 15,409 11,551(2) 26,960
-------- ------- -------- -------- --------
Total operating expenses 69,719 9,691 79,410 11,551 90,961
-------- ------- -------- -------- --------
Loss from operations (11,725) (6,175) (17,900) (11,551) (29,451)
Other income, net 4,644 -- 4,644 (831)(3) 3,813
-------- ------- -------- -------- --------
Loss before income tax provision (7,081) (6,175) (13,256) (12,382) (25,638)
Income tax provision (benefit) 3,013 -- 3,013 (332)(4) 2,681
-------- ------- -------- -------- --------
Net loss $(10,094) $(6,175) $(16,269) $(12,050) $(28,319)
======== ======= ======== ======== ========
Earnings per share:
Basic $ (0.12) $ (0.34)
Diluted $ (0.12) $ (0.34)
Weighted average shares:
Basic 83,351 1,125(5) 84,476
Diluted 83,351 1,125(5) 84,476
</TABLE>
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
(1) To reflect the elimination of FastLane's equity accounts and the
allocation of the purchase price of $102,104 to goodwill. The allocation
may change once the audit of FastLane's closing balance sheet is completed
and other valuation information is received. Also reflects the recording
of the assumed unvested options at intrinsic value of $6,703.
(2) To reflect the amortization of goodwill over five years on a straight-line
basis ($10,210) and amortization of unearned compensation related to the
intrinsic value of assumed unvested options over two and one-half years
($1,341).
(3) To reflect the decrease in interest income due to the use of cash in the
acquisition at a 4.75% annual yield.
(4) To adjust the income tax provision to reflect the estimated income tax
benefits from the reduction of interest income.
(5) To adjust for the 1,125,262 shares of Quest common stock issued in the
acquisition in the basic and diluted net loss per share calculation.
5
