EXHIBIT 99.3 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS INFORMATION SeaChange International, Inc. (the "Company") exchanged 625,000 shares of the Company's common stock for all of the outstanding shares of IPC Interactive Pte. Ltd. ("IPC"). The Company's common stock was valued at $4.3 million. The unaudited pro forma condensed consolidated financial information is based on the historical consolidated financial statements of the Company (not presented herein) and the historical financial statements of IPC and reflects certain pro forma adjustments and assumptions that the Company believes to be reasonable based upon available information. The acquisition was accounted for under the purchase method of accounting, with the total purchase price being allocated to tangible and indentifiable intangible assets acquired, including goodwill, and liabilities assumed from IPC based upon their estimated fair market values. Based upon the results of an independent appraisal, a significant portion of the purchase price has been allocated to identified intangible assets, including approximately $5.3 million of purchased research and development which resulted in an immediate charge to earnings. The unaudited pro forma condensed consolidated balance sheet as of September 30, 1997 gives effect to the acquisition as if it had been consummated on that date, while the unaudited proforma condensed consolidated statements of operations for the year ended December 31, 1996 and for the nine months ended September 30, 1997 give effect to the acquisition as if it had been consummated at the beginning of each period, respectively. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of the financial position or results of operations which would have actually been reported had the acquisition been consummated as presented, or which may be reported in the future. The unaudited pro forma condensed consolidated financial information should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1996 and quarterly report on Form 10-Q for the quarter ended September 30, 1997 and the financial statements of IPC included elsewhere on this Form 8-K/A. 1 SeaChange International, Inc. Unaudited Pro Forma Condensed Consolidated Statement of Operations Year ended December 31, 1996
Historical Pro Forma --------------------------------- --------------------------------- SeaChange IPC Notes Adjustments Combined --------- --- ----- ----------- -------- Revenues: Systems $ 45,745,000 $ 6,366,000 $ - $ 52,111,000 Services 3,521,000 4,740,000 - 8,261,000 --------------- --------------- ------------- ------------- 49,266,000 11,106,000 - 60,372,000 --------------- --------------- ------------- ------------- Cost of revenues: Systems 27,133,000 5,478,000 - 32,611,000 Services 4,030,000 1,745,000 3 562,000 6,337,000 --------------- --------------- ------------- ------------- 31,163,000 7,223,000 562,000 38,948,000 --------------- --------------- ------------- ------------- Gross profit 18,103,000 3,883,000 (562,000) 21,424,000 --------------- --------------- ------------- ------------- Operating expenses: Research and development 5,394,000 2,141,000 - 7,535,000 Selling and marketing 4,254,000 2,379,000 - 6,633,000 General and administrative 2,064,000 2,450,000 3 (562,000) 3,952,000 Amortization of intangible assets - - 1 279,000 279,000 --------------- --------------- ------------- ------------- 11,712,000 6,970,000 (283,000) 18,399,000 --------------- --------------- ------------- ------------- Income (loss) from operations 6,391,000 (3,087,000) (279,000) 3,025,000 Interest income, net 354,000 148,000 - 502,000 --------------- --------------- ------------- ------------- Income (loss) before income taxes 6,745,000 (2,939,000) (279,000) 3,527,000 Provision for income taxes 2,483,000 - 2 (103,000) 2,380,000 --------------- --------------- ------------- ------------- Net income (loss) $ 4,262,000 $ (2,939,000) $ (176,000) $ 1,147,000 =============== =============== ============= ============= Net income (loss) per share $ 0.36 $ 0.09 =============== ============= Weighted average common shares and equivalent common shares outstanding 11,900,483 4 625,000 12,525,483 =============== ============= =============
See notes to pro forma condensed consolidated financial statements Note: For the purposes of the unaudited pro forma condensed consolidated statement of operations, the purchased research and development writeoff has been assumed to have been written off prior to the periods presented so that only recurring costs are included. 2 SeaChange International, Inc. Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Nine Months Ended September 30, 1997
Historical Pro Forma ---------------------------------- ------------------------------- SeaChange IPC Notes Adjustments Combined --------- --- ----- ----------- -------- Revenues: Systems $ 50,168,000 $ 3,459,000 2 $ (164,000) $ 53,463,000 Services 4,987,000 3,698,000 8,685,000 --------------- --------------- --------------- --------------- 55,155,000 7,157,000 (164,000) 62,148,000 --------------- --------------- --------------- --------------- Cost of revenues: Systems 28,425,000 3,253,000 2 (164,000) 31,514,000 Services 4,961,000 2,571,000 - 7,532,000 --------------- --------------- --------------- --------------- 33,386,000 5,824,000 (164,000) 39,046,000 --------------- --------------- --------------- --------------- Gross profit 21,769,000 1,333,000 - 23,102,000 --------------- --------------- --------------- --------------- Operating expenses: Research and development 8,325,000 1,989,000 - 10,314,000 Selling and marketing 4,541,000 1,885,000 - 6,426,000 General and administrative 2,588,000 1,920,000 - 4,508,000 Amortization of intangible assets 1 210,000 210,000 --------------- --------------- --------------- --------------- 15,454,000 5,794,000 210,000 21,458,000 --------------- --------------- --------------- --------------- Income (loss) from operations 6,315,000 (4,461,000) (210,000) 1,644,000 Interest income, net 523,000 - - 523,000 --------------- --------------- --------------- --------------- Income (loss) before income taxes 6,838,000 (4,461,000) (210,000) 2,167,000 Provision for income taxes 2,598,000 3 (80,000) 2,518,000 --------------- --------------- --------------- --------------- Net income (loss) $ 4,240,000 $ (4,461,000) $ (130,000) $ (351,000) =============== =============== =============== =============== Net income (loss) per share $ 0.32 $ (0.03) =============== =============== Weighted average common shares and equivalent common shares 4 (500,100) outstanding 13,388,634 5 625,000 13,513,534 =============== =============== ===============
See notes to pro forma condensed consolidated financial statements Note: For the purposes of the unaudited pro forma condensed consolidated statement of operations, the purchased research and development writeoff has been assumed to have been written off prior to the periods presented so that only recurring costs are included. 3 SeaChange International, Inc. Unaudited Pro Forma Condensed Consolidated Balance Sheet September 30, 1997
Historical Pro Forma ---------------------------------- ------------------------------- SeaChange IPC Notes Adjustments Combined --------- --- ------ ----------- -------- Assets Current assets: Cash and cash equivalents $ 13,403,000 $ 274,000 $ - $ 13,677,000 Accounts receivable 14,457,000 1,232,000 5 (125,000) 15,564,000 Inventories 14,024,000 779,000 - 14,803,000 Prepaid expenses 1,002,000 1,292,000 - 2,294,000 Deferred income taxes 713,000 - - 713,000 --------------- --------------- ------------- ------------ Total current assets 43,599,000 3,577,000 (125,000) 47,051,000 --------------- --------------- ------------- ------------ Property and equipment, net 5,342,000 2,875,000 - 8,217,000 Other assets 82,000 - - 82,000 Intangible assets - - 3 5,375,000 946,000 6 (4,429,000) --------------- --------------- ------------- ------------ $ 49,023,000 $ 6,452,000 $ 821,000 $ 56,296,000 =============== =============== ============= ============ Liabilities and Stockholders' Equity (Deficit) Current liabilities: Accounts payable and accrued expenses $ 9,224,000 $ 5,662,000 1 $ 750,000 $ 15,511,000 5 (125,000) Deferred revenue and customer deposits 3,267,000 1,255,000 4,522,000 --------------- --------------- ------------- ------------ Total current liabilities 12,491,000 6,917,000 625,000 20,033,000 --------------- --------------- ------------- ------------ Preferred stock - 6,700,000 4 (6,700,000) - Common stock 129,000 300,000 2 6,000 135,000 4 (300,000) Additional paid-in capital 26,629,000 - 2 4,324,000 30,953,000 Retained earnings (accumulated deficit) 9,774,000 (7,397,000) 1 (170,000) 5,175,000 4 7,397,000 6 (4,429,000) Cumulative translation adjustment - (68,000) 4 68,000 - --------------- --------------- ----------- ------------ Total stockholders' equity (deficit) 36,532,000 (465,000) 196,000 36,263,000 --------------- --------------- ----------- ------------ --------------- --------------- ----------- ------------ $ 49,023,000 $ 6,452,000 $ 821,000 $ 56,296,000 =============== =============== =========== ============
See notes to pro forma condensed consolidated financial statements 4 NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED). BASIS OF PRESENTATION The acquisition was accounted for under the purchase method of accounting and, accordingly, the purchase price was allocated to the fair market value of the assets acquired and liabilities assumed. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED PERIOD ENDED DECEMBER 31, 1996. 1. Amortization on $946,000 of identified intangible assets on a straight-line basis using an estimated life of three to five years. 2. Represents the recording of a tax benefit at the Company's effective tax rate, resulting from the effect of the pro forma adjustments booked. 3. Reclassification of IPC statement of operations to reflect the Company's classifications. 4. Pro forma earnings per share are based on the weighted average shares and equivalent common shares, assuming the 625,000 shares of common stock of the Company were outstanding as of the beginning of the period. NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997. 1. Amortization on $946,000 of identified intangible assets on a straight-line basis using an estimated life of three to five years. 2. Reduction in revenue and cost of revenues for system sold by the Company to IPC. 3. Represents the recording of a tax benefit at the Company's effective tax rate, resulting from the effect of the pro forma adjustments booked. 4. Equivalent common shares have been excluded as they would have been anti- dilutive to pro forma net loss per share. 5. Pro forma earnings per share are based on the weighted average shares and equivalent common shares, assuming the 625,000 shares of common stock of the Company were outstanding as of the beginning of the period. NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1997. 1. Reflects legal, accounting and severance incurred in connection with the acquisition. 2. Reflects the issuance of common stock in connection with the acquisition. 3. Reflects the fair value ascribed to the identified intangibles including purchased research and development. 4. Reflects the elimination of IPC's historical equity. 5. Eliminates intercompany activity. 6. Reflects the writeoff of purchased research and development acquired by the Company. 5