EX-99.1 3 dex991.htm UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL Unaudited Pro Forma Condensed Combined Financial
Exhibit 99.1
 
NETRATINGS, INC.
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
 
    
Page
Statement Regarding Unaudited Pro Forma Condensed Combined Financial Statements
   
2
Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2002
   
3
Unaudited Pro Forma Condensed Combined Statement of Operations for the six months ended June 30, 2002.
   
4
Unaudited Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 2001
   
5
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
   
6

F-1

 
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
 
The following unaudited pro forma condensed combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and with Article 11 of the Securities and Exchange Commission Regulation S-X to illustrate the effects of the acquisition of NetValue by NetRatings on the historical financial position and results of operations of the combined entity.
 
The following unaudited pro forma condensed combined financial statements are NetRatings’ historial consolidated financial statements after having given effect to: (1) the May 2002 acquisition of e-Ratings.com Inc. by NetRatings; and (2) the August 2002 acquisition of NetValue by NetRatings. Consequently, the following unaudited pro forma condensed combined financial statements have been derived from, and should be read in conjunction with accompanying notes thereto, with:
 
 
•
 
NetRatings’ historial consolidated financial statements and related notes thereto, included in NetRatings’ Annual Report on Form 10-K filed with the SEC on April 1, 2002 and NetRatings’ Quarterly Report on Form 10-Q filed with the SEC on August 14, 2002;
 
 
•
 
NetRatings’ pro forma condensed combined financial statements, and related notes thereto, that gave effect to the acquisition of eRatings.com Inc. by NetRatings, included with NetRatings’ Periodic Report on Form 8-K as filed with the SEC on July 15, 2002; and
 
 
•
 
NetValue’s historial financial statements and related notes thereto, which are included in this Periodic Report on Form 8-K.
 
The unaudited pro forma condensed combined balance sheet as of June 30, 2002 gives effect to the acquisition of NetValue by NetRatings as if the acquisition had occurred on June 30, 2002. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2001 is presented to give effect to the acquisition of NetValue by NetRatings, after giving effect to the acquisition of eRatings.com Inc., as if it had been consummated on January 1, 2001. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2002 is presented to give effect to the acquisition of NetValue by NetRatings as if it had been consummated on January 1, 2002.
 
The allocation of the NetValue purchase price is preliminary and does not reflect the final fair value adjustments to their assets and liabilities, since those amounts have not been finalized and have been estimated at this time. The fair value of NetValue’s assets and liabilities will be determined as of the date of the acquisition through independent appraisal.

F-2

NETRATINGS, INC.
 
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
June 30, 2002
 
    
Historical
                
    
NetRatings
     
NetValue
     
Pro Forma Adjustments
     
Pro Forma Combined
  
    
(in thousands)
  
ASSETS
                                    
Current assets:
                                    
Cash and cash equivalents
   
$
87,421
 
   
$
1,907
 
   
$
(7,293
)(1)
   
$
82,035
 
Marketable securities
   
 
167,085
 
   
 
11,230
 
   
 
—  
 
   
 
178,315
 
Trade receivables, net
   
 
9,505
 
   
 
2,770
 
   
 
—  
 
   
 
12,275
 
Due from related parties
   
 
622
 
   
 
—  
 
   
 
—  
 
   
 
622
 
Prepaid expenses and other current assets
   
 
231
 
   
 
835
 
   
 
—  
 
   
 
1,066
 
    
  
  
  
Total current assets
   
 
264,864
 
   
 
16,742
 
   
 
(7,293
)
   
 
274,313
 
Property and equipment at cost, net
   
 
3,692
 
   
 
1,435
 
   
 
—  
 
   
 
5,127
 
Intangibles acquired
   
 
24,203
 
   
 
2,044
 
   
 
(1,044
)(1)
   
 
25,203
 
Goodwill
   
 
41,022
 
   
 
—  
 
   
 
7,418
 (1)
   
 
48,440
 
Other assets
   
 
5,642
 
   
 
349
 
   
 
—  
 
   
 
5,991
 
    
  
  
  
Total assets
   
$
339,423
 
   
$
20,570
 
   
$
(919
)
   
$
359,074
 
    
  
  
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                    
Current liabilities:
                                    
Accounts payable
   
$
5,617
 
   
$
3,233
 
   
$
—  
 
   
$
8,850
 
Accrued liabilities
   
 
12,274
 
   
 
1,809
 
   
 
1,750
 (1)
   
 
15,833
 
Due to related parties
   
 
4,280
 
   
 
—  
 
   
 
—  
 
   
 
4,280
 
Deferred revenue
   
 
11,100
 
   
 
1,622
 
   
 
—  
 
   
 
12,722
 
Restructuring liability
   
 
6,873
 
   
 
—  
 
   
 
3,000
 (1)
   
 
9,873
 
    
  
  
  
Total current liabilities
   
 
40,144
 
   
 
6,664
 
   
 
4,750
 
   
 
51,558
 
Minority interests
   
 
—  
 
   
 
—  
 
   
 
6,675
 (2)
   
 
6,675
 
Commitments and contingencies
                                    
Stockholders’ equity:
                                    
Common stock
   
 
33
 
   
 
2,196
 
   
 
(2,196
)(1)
   
 
33
 
Additional paid-in capital
   
 
417,785
 
   
 
64,213
 
   
 
(62,651
)(1)
   
 
419,347
 
Deferred compensation and other costs
   
 
(21,314
)
   
 
630
 
   
 
(630
)(1)
   
 
(21,314
)
Accumulated deficit
   
 
(76,595
)
   
 
(53,133
)
   
 
  53,133
 (1)
   
 
(76,595
)
Treasury stock
   
 
(20,630
)
   
 
—  
 
   
 
—  
 
   
 
(20,630
)
    
  
  
  
Total stockholders’ equity
   
 
299,279
 
   
 
13,906
 
   
 
(12,344
)
   
 
300,841
 
    
  
  
  
Total liabilities and stockholders’ equity
   
$
339,423
 
   
$
20,570
 
   
$
(919
)
   
$
359,074
 
    
  
  
  

F-3

NETRATINGS, INC.
 
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Six Months Ended June 30, 2002
 
    
Historical
                
    
NetRatings
     
NetValue
     
Pro Forma Adjustments
     
Pro Forma Combined
  
    
(in thousands, except per share data)
  
Revenue
   
$
11,596
 
   
$
2,066
 
   
 
—  
 
   
$
13,662
 
Cost of revenue
   
 
6,528
 
   
 
2,231
 
   
 
(462
)(6)
   
 
8,297
 
    
  
  
  
Gross profit
   
 
5,068
 
   
 
(165
)
   
 
462
 
   
 
5,365
 
Operating expenses:
                                    
Research and development
   
 
3,399
 
   
 
547
 
   
 
—  
 
   
 
3,946
 
Sales and marketing
   
 
6,371
 
   
 
1,786
 
   
 
—  
 
   
 
8,157
 
General and administrative
   
 
3,054
 
   
 
2,560
 
   
 
—  
 
   
 
5,614
 
Restructuring expense
   
 
6,969
 
   
 
173
 
   
 
—  
 
   
 
7,142
 
Acquisition expenses
   
 
3,033
 
   
 
—  
 
   
 
—  
 
   
 
3,033
 
Amortization of intangibles
   
 
610
 
   
 
—  
 
   
 
100
 (3)
   
 
710
 
Stock-based compensation
   
 
4,872
 
   
 
—  
 
   
 
—  
 
   
 
4,872
 
    
  
  
  
Total operating expenses
   
 
28,308
 
   
 
5,066
 
   
 
100
 
   
 
33,474
 
    
  
  
  
Loss from operations
   
 
(23,240
)
   
 
(5,231
)
   
 
362
 
   
 
(28,109
)
Loss from joint ventures
   
 
(2,111
)
   
 
—  
 
   
 
—  
 
   
 
(2,111
)
Interest income, net
   
 
4,218
 
   
 
(335
)
   
 
—  
 
   
 
3,883
 
Minority interest
   
 
—  
 
   
 
62
 
   
 
2,458
 (4)
   
 
2,520
 
    
  
  
  
Net loss
   
$
(21,133
)
   
$
(5,504
)
   
$
2,820
 
   
$
(23,817
)
    
  
  
  
Net loss per share:
                                    
Basic
   
$
(0.64
)
   
$
(0.62
)
            
$
(0.72
)
    
  
           
Diluted
   
$
(0.64
)
   
$
(0.62
)
            
$
(0.72
)
    
  
           
Shares used in the calculation of net loss per share:
                                    
Basic
   
 
32,765
 
   
 
8,852
 
   
 
(8,586
)(5)
   
 
33,031
 
    
  
  
  
Diluted
   
 
32,765
 
   
 
8,852
 
   
 
(8,586
)(5)
   
 
33,031
 
    
  
  
  

F-4

NETRATINGS, INC.
 
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
Year Ended December 31, 2001
 
    
Historical
                
    
NetRatings
     
NetValue
     
Pro Forma Adjustments
     
Pro Forma Combined
  
    
(in thousands, except per share data)
  
Revenue
   
$
30,409
 
   
$
5,925
 
   
 
—  
 
   
$
36,334
 
Cost of revenue
   
 
30,914
 
   
 
11,184
 
   
 
(530
)(6)
   
 
41,568
 
    
  
  
  
Gross profit
   
 
(505
)
   
 
(5,259
)
   
 
530
 
   
 
(5,234
)
Operating expenses:
                                    
Research and development
   
 
9,427
 
   
 
1,412
 
   
 
—  
 
   
 
10,839
 
Selling and marketing
   
 
23,444
 
   
 
5,420
 
   
 
—  
 
   
 
28,864
 
General and administrative
   
 
14,491
 
   
 
8,630
 
   
 
—  
 
   
 
23,121
 
Restructuring Expenses
   
 
—  
 
   
 
1,547
 
   
 
—  
 
   
 
1,547
 
Amortization of intangibles
   
 
—  
 
   
 
—  
 
   
 
200
 (3)
   
 
200
 
Stock-based compensation
   
 
9,906
 
   
 
—  
 
   
 
—  
 
   
 
9,906
 
    
  
  
  
Total operating expenses
   
 
57,268
 
   
 
17,009
 
   
 
200
 
   
 
74,477
 
    
  
  
  
Loss from operations
   
 
(57,773
)
   
 
(22,268
)
   
 
330
 
   
 
(79,711
)
Loss from joint ventures
   
 
(2,505
)
   
 
—  
 
   
 
—  
 
   
 
(2,505
)
Interest income, net
   
 
15,561
 
   
 
1,379
 
   
 
—  
 
   
 
16,940
 
Minority interest
   
 
—  
 
   
 
2,511
 
   
 
8,627
 (4)
   
 
11,138
 
    
  
  
  
Net loss
   
$
(44,717
)
   
$
(18,378
)
   
$
8,957
 
   
$
(54,138
)
    
  
  
  
Net loss per share:
                                    
Basic
   
$
(1.33
)
   
$
(2.08
)
            
$
(1.60
)
    
  
           
Diluted
   
$
(1.33
)
   
$
(2.08
)
            
$
(1.60
)
    
  
           
                                     
Shares used in the calculation of net loss per share:
                                    
Basic
   
 
33,613
 
   
 
8,818
 
   
 
(8,552
)(5)
   
 
33,879
 
    
  
  
  
Diluted
   
 
33,613
 
   
 
8,818
 
   
 
(8,552
)(5)
   
 
33,879
 
    
  
  
  

F-5

 
A.  Basis of pro forma presentation
 
On August 5, 2002, NetRatings announced the acquisition of 52% of NetValue’s outstanding common stock. NetValue is a French company traded on the French stock exchange whose business is focused in the international internet media and market research industries. In exchange for 52% of NetValue’s outstanding common stock, NetRatings paid $7,293,000 in cash and issued 266,000 shares of NetRatings’ common stock to NetValue’s common stockholders. On October 7, 2002, NetRatings commenced a simplified all-cash take-over bid to acquire the outstanding NetValue shares that NetRatings did not already own. NetRatings is accounting for the transaction under the purchase method.
 
NetValue issues its publicly filed financial statements in accordance with accounting principles generally accepted in France. A reconciliation of these financial statements to accounting principles generally accepted in the United States has been provided for purposes of these pro forma statements.
 
B.  Pro forma adjustments
 
1.
 
To record the issuance of 266,000 shares of NetRatings common stock in exchange for 52% of the outstanding shares of NetValue common stock as if the acquisition occurred on June 30, 2002. The following calculation of estimated purchase price and preliminary allocation to the net assets of NetValue were determined as follows and are used for illustrative pro forma purposes only:
 
CALCULATION OF ESTIMATED PURCHASE PRICE:
 
        
Estimated cash
   
$
7,293,000
Estimated number of shares to be issued
   
 
266,000
Average share price of NetRatings common stock two days
before and two days after the acquisition announcement
   
$
5.87
    
Fair value of estimated common stock to be issued
   
$
1,562,000
Estimated acquisition costs
   
 
1,750,000
    
    
$
10,605,000
    
Preliminary allocation of purchase price:
       
NetValue’s pro forma net assets, less estimated restructuring costs
   
$
2,187,000
Estimate of specifically identified intangibles
   
 
1,000,000
Goodwill
   
 
7,418,000
    
    
$
10,605,000
    
 
2.
 
To record the minority interest in the net assets of NetValue as of June 30, 2002.
 
3.
 
To record amortization on specifically identified intangibles related to the NetValue acquisition.
 
4.
 
To reflect the minority stockholders’ interest in NetValue’s loss.
 
5.
 
To reflect the issuance of 266,000 shares of NetRatings’ common stock to NetValue common stockholders as if the acquisition occurred at the beginning of the period and to eliminate NetValue’s weighted average shares outstanding.
 
6.
 
To eliminate amortization of intangibles and record panel expenses associated with each respective period.

F-6