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