<PAGE>
Exhibit 99.2
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial
information is based on the historical financial statements of TriZetto and
Erisco and has been prepared to illustrate the effect of the merger of
TriZetto and Erisco (the "Merger").
The unaudited pro forma condensed combined balance sheet is as of
September 30, 2000 and is presented as if the Merger occurred as of September
30, 2000. The unaudited pro forma condensed combined statements of income for
the year ended December 31, 1999 and for the nine-month period ended
September 30, 2000 assume that the Merger occurred as of January 1, 1999.
The unaudited pro forma condensed combined financial information
should be read in conjunction with the historical financial statements and
accompanying disclosures contained in this filing on Form 8-K.
The Merger will be accounted for under the purchase method of
accounting in accordance with Financial Accounting Standards Board Opinion
No. 16. Under the purchase method of accounting, assets acquired and
liabilities assumed are recorded at their estimated fair values. Goodwill is
created to the extent that the Merger consideration, including certain
acquisition and closing costs, exceeds the fair value of the net assets
acquired. Based on the information currently available, the Merger is
estimated to initially create approximately $171.2 million in goodwill and
other intangibles. It is currently estimated that this goodwill and other
intangibles will be amortized on a straight-line basis over 3-5 years. The
actual goodwill arising from the Merger will be based on the Merger
consideration, including certain estimated acquisition and closing costs, and
fair values of assets and liabilities on the date the merger is consummated.
The Company anticipates making a final purchase price allocation in the
fourth quarter of 2000 based upon completion of management's assessment of
the fair value of assets acquired and liabilities assumed as of the date the
Merger was consummated. Most significantly, management is in the process of
performing a full analysis of deferred revenue and the final amount of
deferred revenue could be materially different than the estimated amount
shown in the pro forma financial statements. Therefore, the actual goodwill
amount arising from the Merger or the related amortization period may be more
or less than the amount or period currently contemplated in the unaudited pro
forma condensed combined financial information.
TriZetto expects that it will incur costs in connection with the
Merger which will be capitalized. Neither certain post-combination
integration expenses resulting from combining the companies, which will be
expensed, nor the impact of interest income related to cash proceeds, are
reflected in the unaudited pro forma condensed combined financial
information. Additionally, the unaudited pro forma condensed combined
financial information is based on a number of assumptions, estimates and
uncertainties including, but not limited to, estimates of the fair values of
assets acquired and liabilities assumed, deferred income taxes and estimated
acquisition and closing costs.
The unaudited pro forma condensed combined financial information
presented below does not reflect future events that may occur after the
Merger. TriZetto believes that certain operating expense synergies between
TriZetto and Erisco will be realized after the Merger. However, for purposes
of the unaudited pro forma condensed combined financial information presented
below, these synergies have not been reflected because TriZetto cannot assure
you that they will be realized.
The unaudited pro forma condensed combined financial information is
based on the issuance of 12,142,857 shares of TriZetto's common stock to
effect the Merger.
As a result of these assumptions, estimates and uncertainties, the
accompanying unaudited pro forma condensed combined financial information
does not purport to describe the actual financial condition or results of
operations that would have been achieved had the Merger in fact occurred on
the dates indicated, nor does it purport to predict TriZetto's future
financial condition or results of operations.
Page 1
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------- ADJUSTMENTS PRO FORMA
TRIZETTO ERISCO (NOTE 3) TOTAL
-------- ------ ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 6,818 $ -- $ 32,000 (A) $ 38,818
Accounts receivable, net 11,594 3,382 14,976
Deferred income tax -- 125 (125) (E) --
Prepaid expenses and other current assets 3,744 737 4,481
Due from IMS HEALTH -- 31,910 (31,910) (A) --
--------- --------- --------- ---------
Total current assets 22,156 36,154 (35) 58,275
Property and equipment, net 14,531 4,517 19,048
Computer Software -- 7,060 (7,060) (B) --
Other assets 4,358 -- 4,358
Goodwill and other intangible assets, net 20,116 -- 181,504 (B,C) 201,620
--------- --------- --------- ---------
Total assets $ 61,161 $ 47,731 $ 174,409 $ 283,301
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,421 $ 617 $ 4,038
Accrued expenses 11,969 4,675 $ 9,500 (D) 26,144
Short term obligations 6,697 6,697
--------- --------- --------- ---------
Total current liabilities 22,087 5,292 9,500 36,879
Long term obligations 4,548 852 5,400
Deferred income taxes -- 2,010 11,955 (E) 13,965
Deferred revenue 213 10,960 (7,672) (F) 3,501
--------- --------- --------- ---------
Total liabilities 26,848 19,114 13,783 59,745
--------- --------- --------- ---------
Stockholders' equity
Common stock 21 -- 12 (H) 33
Paid-in capital 72,774 57,061 135,850 (G,H) 265,685
Deferred stock compensation (5,096) -- (5,096)
Accumulated deficit (33,342) (28,444) 24,764 (G,K) (37,022)
Other stockholders' equity (44) -- (44)
--------- --------- --------- ---------
Total stockholders' equity 34,313 28,617 160,626 223,556
--------- --------- --------- ---------
Total liabilities and stockholders' equity $ 61,161 $ 47,731 174,409 $ 283,301
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these pro forma
combined condensed consolidated financial statements.
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<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------- ADJUSTMENTS PRO FORMA
TRIZETTO ERISCO (NOTE 3) TOTAL
-------- ------ ----------- ----------
<S> <C> <C> <C> <C>
Revenues:
Recurring revenue $ 19,448 $ -- $ 19,448
Non-recurring revenue 13,478 -- 13,478
Software license, maintenance services and other revenue -- 49,307 49,307
--------- --------- ----------
Total revenues 32,926 49,307 82,233
--------- --------- ----------
Cost of Revenues:
Recurring revenue 17,057 -- 17,057
Non-recurring revenue 9,751 -- 9,751
Software license, maintenance services and other revenue -- 29,068 $ 6,623 (J) 35,691
--------- --------- ---------- ----------
Total cost of revenues 26,808 29,068 6,623 62,499
--------- --------- ---------- ----------
Gross profit 6,118 20,239 (6,623) 19,734
--------- --------- ---------- ---------
Operating expenses:
Research and development 2,371 2,496 4,867
Selling, general and administrative 9,694 8,720 31,639 (J) 50,053
Amortization of deferred stock compensation 1,057 -- 1,057
Write off of acquired in-process technology 1,407 -- (1,407)(I) --
--------- --------- ---------- ----------
Total operating expenses 14,529 11,216 30,232 55,977
--------- --------- ---------- ----------
Income (loss) from operations (8,411) 9,023 (36,855) (36,243)
Interest income 527 527
Interest expense (256) (256)
Other expense -- (2,750) (2,750)
--------- --------- ---------- ----------
Income (loss) before provision for (benefit of)
Income taxes (8,140) 6,273 (36,855) (38,722)
Provision for (benefit of) income taxes (213) 2,704 2,491
--------- --------- ---------- ----------
Net income (loss) $ (7,927) $ 3,569 $ (36,855) $ (41,213)
========= ========= ========== ==========
Net loss per share
Basic $ (0.85) $ (1.92)
======== =========
Diluted $ (0.85) $ (1.92)
======== =========
Shares used in computing net loss per share:
Basic 9,376 21,519
======== =========
Diluted 9,376 21,519
======== =========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined condensed consolidated financial statements.
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UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------- ADJUSTMENTS PRO FORMA
TRIZETTO ERISCO (NOTE 3) TOTAL
-------- ------ ------------- ----------
<S> <C> <C> <C> <C>
Revenues:
Recurring revenue $ 38,581 $-- $ 38,581
Non-recurring revenue 16,302 -- 16,302
Software license, maintenance, service and other
revenue -- 37,869 37,869
----------- --------- -----------
Total revenues 54,883 37,869 92,752
----------- --------- -----------
Cost of Revenues:
Recurring revenue 35,495 -- 35,495
Non-recurring revenue 11,367 -- 11,367
Software license, maintenance, service and other revenue -- 23,054 5,176 (J) 28,230
----------- --------- ----------- -----------
Total cost of revenues 46,862 23,054 5,176 75,092
----------- --------- ----------- -----------
Gross profit 8,021 14,815 (5,176) 17,660
----------- --------- ----------- -----------
Operating expenses:
Research and development 4,624 2,952 7,576
Selling, general and administrative 26,163 8,076 23,729 (J) 57,968
Amortization of deferred stock compensation 1,202 -- 1,202
Write off of acquired in-process technology 536 -- (536)(I) --
----------- --------- ----------- -----------
Total operating expenses 32,525 11,028 23,193 66,746
----------- --------- ----------- -----------
Income (loss) from operations (24,504) 3,787 (28,369) (49,086)
Interest income 922 922
Interest expense (647) (647)
Other expense -- (1,712) (1,712)
----------- --------- ----------- -----------
Income (loss) before provision for (benefit of)
Income taxes (24,229) 2,075 (28,369) (50,523)
Provision for income taxes -- 969 969
----------- --------- ----------- -----------
Net income (loss) $ (24,229) $ 1,106 $ (28,369) $ (51,492)
=========== ========= =========== ===========
Net loss per share
Basic $(1.21) $(1.60)
=========== ===========
Diluted $(1.21) $(1.60)
=========== ===========
Shares used in computing net loss per share:
Basic 20,010 32,153
=========== ===========
Diluted 20,010 32,153
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited pro forma
combined condensed consolidated financial statements.
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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
NOTE 1. SUMMARY OF TRANSACTION
In connection with TriZetto's acquisition of Erisco, TriZetto will
exchange 12,143 shares of common stock, and assumed liabilities of
approximately $23.4 million for all of the outstanding shares of Erisco and
incurred or are expecting to incur acquisition related costs of approximately
$9.5 million.
The estimated allocation of the purchase price was as follows:
<TABLE>
<S> <C>
Total current assets..................................................... $36,119
Property and equipment and other noncurrent assets ..................... 4,517
Goodwill(a).............................................................. 126,614
Acquired workforce(b).................................................... 6,330
Core technology(c)....................................................... 27,530
Trade Name(d)............................................................ 8,870
Customer lists(e)........................................................ 12,160
Acquired in-process technology(f)........................................ 3,680
--------
$225,820
========
</TABLE>
--------------------------
(a) Goodwill represents the excess of the purchase price over the fair
value of the net assets acquired and will be amortized over five
years.
(b) Acquired workforce was valued on a replacement cost basis and will
be amortized on a straight line basis over a three-year period,
the period of time TriZetto estimates it will benefit from the
workforce.
(c) Core technology is being amortized on a straightline basis over
three years.
(d) Trade name represents the intangible asset related to Erisco's
trade name and is being amortized on a straightline basis over
five years.
(e) Customer lists are being amortized on a straightline basis over
five years.
(f) The valuation of the purchased in-process research and development
of $3,680 was based on the result of an independent appraisal
using the income approach. Under this method, value is dependent
on the present value of future economic benefits to be derived
from the ownership of an asset. Central to this method is an
analysis of the earnings potential represented by the appraised
asset and of the underlying risks associated by obtaining those
earnings. Value indications are developed by discounting future
net cash flows available for distribution to their present value
at market-based rates of return. Management concluded that
technological feasibility of the purchased in-process research and
development had not been reached, and the technology had no
alternative future uses. Accordingly, this amount will be expensed
immediately.
NOTE 2. UNAUDITED PRO FORMA COMBINED NET INCOME (LOSS) PER SHARE:
Basic net income (loss) per share and shares used in computing the
net income (loss) per share for the year ended December 31, 1999 and the nine
months ended September 30, 2000 are based upon the historical weighted
average common shares outstanding. Dilutive net income (loss) per share
reflects the potential dilution that could occur from common shares issuable
through stock options, warrants and other convertible securities. Potential
common stock has been excluded from the computation of net loss per share as
its effect would be anti-dilutive.
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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
The 12,143 shares of common stock issued in connection with the
acquisition has been included in the calculation of pro forma basic and
diluted net loss per share as follows:
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1999 2000
------------------ -----------------
BASIC DILUTED BASIC DILUTED
----- ------- ----- -------
<S> <C> <C> <C> <C>
Shares used in computing basic and diluted net loss per
share..................................................... 9,376 9,376 20,010 20,010
Adjustment to reflect common stock issued in acquisition.. 12,143 12,143 12,143 12,143
-------- -------- -------- --------
Shares used in computing pro forma basic and diluted
net loss per share attributable to common
stockholders........................................ 21,519 21,519 32,153 32,153
======== ======== ======== ========
</TABLE>
NOTE 3. PRO FORMA ADJUSTMENTS:
The following pro forma adjustments are based upon management's
preliminary estimates of the value of the tangible and intangible assets
acquired. These estimates are subject to finalization.
(A) Represents the guaranteed cash that TriZetto will receive from
Erisco's parent company upon the closing of the Erisco merger
as stated in the Agreement and Plan of Reorganization, this
amount is reclassified from the "due from IMS HEALTH" line on
the balance sheet. As the guarantee was limited, the
remaining intercompany receivable will not be assumed by
TriZetto.
(B) Computer Software has been revalued by an independent
appraisal and reclassified as part of intangible
assets-"Completed technology." See Note (C).
(C) Represents $181,504 of goodwill and other intangible assets,
summarized as follows:
<TABLE>
<S> <C>
Goodwill........................................................ $126,614
Completed technology............................................ 27,530
Trade name...................................................... 8,870
Acquired workforce.............................................. 6,330
Customer lists.................................................. 12,160
--------
$181,504
========
</TABLE>
(D) Represents accrued transaction costs associated with the
acquisition.
(E) Represents the adjustment of Erisco's net deferred tax
liabilities to reflect the deferred tax effects of the
purchase price allocation.
(F) Represents the currently estimated elimination of that portion
of Erisco's deferred revenue for which no future deliverable
or liability exists.
(G) Represents the elimination of $57,061 from Erisco's
paid-in-capital account.
(H) Represents the common stock issued in connection with the
acquisition (12,143 shares of $0.001 par value common stock at
an estimated price of $15.89 calculated using the average
stock price from September 28, 2000 through October 4, 2000,
resulting in $12 of par value and $192,911 of paid-in-capital).
(I) Reflects the elimination of the non-recurring charges recorded
by Trizetto for the write-off of acquired in-process technology
resulting from the acquisitions of Creative Business Solutions,
Health Web Systems and Novalis Corporation in 1999 and
Healthcare Media Enterprises, Inc. in 2000. At the dates of
these acquisitions, management concluded that technological
feasibility of the acquired in-process research and development
projects had not been reached, and the technology had no
alternative future uses. Accordingly, the portion of the
purchase price allocated to in-process research and
development was expensed.
(J) Represents amortization of goodwill and other intangible
assets over three to five years.
(K) Represents the elimination of $28,444 from Erisco's accumulated
deficit account and the immediate writeoff of acquired
in-process technology resulting from the Erisco acquisition of
$ 3,680 (NOTE 1).
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