EX-99.3 6 ex993financial.htm Exhibit 99.3

Exhibit 99.3

DENDRITE INTERNATIONAL, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS

On June 16, 2003, Dendrite International, Inc. (“the Company” or “Dendrite”) completed its acquisition of SYNAVANT Inc. (“Synavant”), and Dendrite and Synavant combined operations.

The following unaudited pro forma condensed combined financial statements are presented to illustrate the effects of the merger on the historical financial position and operating results of Dendrite and Synavant. The unaudited pro forma condensed combined statements of operations combine the historical consolidated statements of operations of Dendrite and Synavant, giving effect to the merger as if it had occurred on January 1, 2002. The unaudited pro forma condensed combined balance sheet combines the historical consolidated balance sheets of Dendrite and Synavant, giving effect to the merger as if it had occurred on March 31, 2003. We have adjusted the historical consolidated financial information to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable and (3) with respect to the statement of income, expected to have a continuing impact on the combined results. You should read this information in conjunction with the:


  — accompanying Notes to the Unaudited Pro Forma Condensed Combined Financial Statements;

  — separate historical financial statements of Dendrite as of and for the year ended December 31, 2002 included in Dendrite’s Annual Report on Form 10-K for the year ended December 31, 2002, and Form 10-Q for the three months ended March 31, 2003; and

  — separate historical financial statements of Synavant as of and for the year ended December 31, 2002 included in Synavant’s Annual Report on Form 10-K for the year ended December 31, 2002, and Form 10-Q for the three months ended March 31, 2003.

We prepared the unaudited pro forma condensed combined financial information using the purchase method of accounting with Dendrite treated as the acquirer. Accordingly, Dendrite’s estimated cost to acquire Synavant of approximately $86,000,000 has been allocated to the assets acquired and liabilities assumed according to their estimated fair values at the date of acquisition. Any excess of the purchase price over the estimated fair value of the net assets acquired has been recorded as goodwill. Third party consultants are currently assisting management in determining the fair values of a significant portion of these net assets. The preliminary work performed by the third party consultants has been considered by management in estimating the fair values reflected in these unaudited pro forma condensed combined financial statements.

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)


Dendrite
International,
Inc.
Synavant Inc. Pro Forma
Adjustments
Note 3 Combined





REVENUES                          
COSTS AND EXPENSES:   $ 225,756   $ 166,365   $ --       $ 392,121  
   Cost of revenues    111,547    125,966    1,986   (a)(b)(c)    239,499  
   Selling, general and administrative  
     expenses    77,301    34,861    4,911   (a)(b)(c)    117,073  
   Research and development  
     expenses    10,396    6,536    174        17,106  
   Restructuring (benefit) charge    (47 )  2,200    --        2,153  
   Asset Impairment    1,832    --    --        1,832  
   Depreciation and amortization    --    7,644    (7,644 ) (c)    --  
   Other loss (income), net    (936 )  458    775   (g)    297  




   Income (loss) before income tax  
     expense (benefit)    25,663    (11,300 )  (202 )      14,161  
INCOME TAX EXPENSE (BENEFIT)    10,265    (205 )  (230 ) (d)    9,830  




NET INCOME (LOSS)   $ 15,398    (11,095 ) $ 28        4,331  




NET INCOME (LOSS) PER SHARE:  
        Basic   $ 0.39   $ (0.73 )           0.11  



        Diluted   $ 0.38   $ (0.73 )          $ 0.11  



SHARES USED IN COMPUTING NET  
   INCOME (LOSS) PER SHARE:  
        Basic    39,872    15,130    (15,130 ) (e)    39,872  




        Diluted    40,127    15,130    (15,130 ) (e)    40,127  





See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements, which are an integral part of these statements

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2002
(IN THOUSANDS, EXCEPT PER SHARE DATA)


Dendrite
International,
Inc.
Synavant Inc. Pro Forma
Adjustments
Note 3 Combined





REVENUES                          
COSTS AND EXPENSES:   $ 59,710   $ 34,815   $ --       $ 94,525  
   Cost of revenues    29,820    28,815    981   (a)(b)(c)    59,616  
   Selling, general and administrative  
     expenses    20,239    8,397    1,350   (a)(b)(c)    29,986  
   Research and development  
     expenses    2,698    1,308    20   (c)    4,026  
   Restructuring (benefit) charge    --    500    --        500  
   Asset Impairment    --    --    --        --  
   Depreciation and amortization    --    1,881    (1,881 ) (c)    --  
   Other loss (income), net    (252 )  1,023    194   (g)    965  




   Income (loss) before income tax  
     expense (benefit)  
     7,205    (7,109 )  (664 )      (568 )
INCOME TAX EXPENSE (BENEFIT)  
     2,882    (349 )  (178 ) (d)    2,355  




NET INCOME (LOSS)   $ 4,323   $ (6,760 ) $ (486 )     $ (2,923 )




NET INCOME (LOSS) PER SHARE:  
        Basic   $ 0.11   $ (0.49 )          $ (0.07 )



        Diluted  
    $ 0.11   $ (0.49 )          $ (0.07 )



SHARES USED IN COMPUTING NET  
   INCOME (LOSS) PER SHARE:  
        Basic    40,097    15,243    (15,243 ) (e)    40,097  




        Diluted    40,269    15,243    (15,415 ) (e) (f)    40,097  





See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements, which are an integral part of these statements

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF MARCH 31, 2003
(IN THOUSANDS, EXCEPT PER SHARE DATA)


Dendrite
International,
Inc.
Synavant Inc. Pro Forma
Adjustments
Note 3 Combined





                         ASSETS                          
CURRENT ASSETS:  
   Cash and cash equivalents   $ 75,565   $ 10,146   $ (51,685 ) (a)   $ 34,026  
   Accounts receivable, net    38,150    29,941             68,091  
   Other current assets    15,004    9,018    (992 ) (a)    23,030  




     Total current assets    128,719    49,105             125,147  
PROPERTY AND EQUIPMENT, net    25,949    12,176    (2,356 ) (a)    35,769  
LONG-TERM RECEIVABLE    3,157    --             3,157  
GOODWILL    12,353    41,156    4,985   (a)    58,494  
INTANGIBLE ASSETS, net    10,536    2,342    28,252   (a)    41,130  
OTHER NON-CURRENT ASSETS    6,871    2,388    5,050   (a)    14,309  



    $ 187,585   $ 107,167            $ 278,006  



          LIABILITIES AND STOCKHOLDERS' EQUITY  
CURRENT LIABILITIES:  
   Accounts payable   $ 2,219   $ 12,139            $ 14,358  
   Accrued compensation and benefits    6,073    --             6,073  
   Other accrued expenses    11,457    14,724    13,166   (a)    39,347  
   Purchase accounting restructuring accrual    3,153    --    14,184   (a)    17,337  
   Accrued restructuring    70    1,374             1,444  
   Deferred revenues    8,544    9,784             18,328  
   Other current liabilities    2,905    6,461             9,366  



     Total current liabilities    34,421    44,482             106,253  



ACCRUED DISTRIBUTION LIABILITY TO  
     FORMER PARENT    --    9,000             9,000  
PURCHASE ACCOUNTING RESTRUCTURING  
     ACCRUAL    --    --    7,918   (a)    7,918  
OTHER NON-CURRENT LIABILITIES    904    1,671             2,575  
STOCKHOLDERS' EQUITY:  
Preferred stock    --    --             --  
Common stock    94,315    113,494    (113,494 ) (a)    94,315  
Retained earnings (accumulated deficit)    81,199    (58,864 )  58,864   (a)    81,199  
Deferred compensation    (47 )  --             (47 )
Accumulated other comprehensive loss    (2,331 )  (2,616 )  2,616   (a)    (2,331 )
Less treasury stock, at cost    (20,876 )  --             (20,876 )



     Total stockholders' equity  
     152,260    52,014             152,260  



    $ 187,585   $ 107,167            $ 278,006  




See accompanying notes to Unaudited Pro Forma Condensed Combined Financial Statements, which are an integral part of these statements

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DENDRITE INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1.      Background

On June 16, 2003, Dendrite completed its strategic acquisition of Synavant. Synavant provides a broad range of knowledge-based services to biopharmaceutical and healthcare companies around the world. Its comprehensive, global solutions include pharmaceutical Customer Relationship Management (CRM) and e-Business applications, interactive marketing, server and database management, dedicated local helpline support, training, telemarketing, sample management, and product recall services. Synavant was headquartered in Atlanta, Georgia, USA and has offices in 21 countries.

The acquisition was completed pursuant to an Agreement and Plan of Merger, dated as of May 9, 2003 and amended as of May 16, 2003 (as amended, the “Merger Agreement”) by and among Dendrite, Synavant, and Amgis Acquisition Co. (“Amgis”), a wholly-owned subsidiary of Dendrite. Amgis and Dendrite conducted an all cash tender offer to acquire all of the outstanding shares of common stock of Synavant, at a price of $3.22 per share, followed by a short-form merger through which Amgis merged with and into Synavant. The consideration involved in the acquisition was a result of a bidding process and arms-length negotiations between the executive officers and the boards of directors of Synavant and Dendrite. As a result of the merger, Synavant became a wholly-owned subsidiary of Dendrite.

The merger has been accounted for as a purchase by the Company, under accounting principles generally accepted in the United States of America. Under the purchase method of accounting, the assets and liabilities of Synavant are recorded as of completion of the merger, at their respective fair values, and added to those of the Company.

2.      Accounting Policies and Financial Statement Classification

Dendrite is currently reviewing the accounting policies and financial statement classifications used by Synavant. As a result of this review, it may become necessary to make certain reclassifications to the combined company’s financial statements to conform to those accounting policies and classifications that are determined to be more appropriate or consistent with Dendrite’s practices according to accounting principles generally accepted in the United States of America.

3.      Pro Forma Adjustments

Adjustments included in the column under the heading “Pro Forma Adjustments” relate to the following:

      Balance Sheet


(a)  

Purchase accounting adjustments to reflect the purchase of Synavant including consideration paid, and adjustment of assets and liabilities acquired to fair value, and elimination of opening Synavant equity:


Estimated Purchase Price:        
  Cash payments for stock, options and restricted stock   $ 51,685,000  
  Accrued legal, professional and related fees    3,129,000  
  Liabilities assumed related to the acquisition    7,289,000  
  Accrued severance related to Synavant employees    13,042,000  
  Accrued facility closing costs    9,060,000  
  Other merger-related liabilities    1,798,000  

Total purchase price and assumed liabilities    86,003,000  

Net assets of Synavant per March 31, 2003 balance sheet    52,014,000  
Adjustments to net assets:  
  Goodwill    (41,156,000 )
  Capitalized software development costs    (1,648,000 )
  Leasehold improvements of facilities to be closed    (2,356,000 )
  Prepaid insurance premiums with no future value    (992,000 )
  Accrue investment banking fees of acquiree    (950,000 )
  Net deferred tax assets recorded in purchase accounting    5,050,000  

     9,962,000  

Excess of purchase price over net assets acquired    76,041,000  


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  The preliminary allocation of excess purchase price, based upon the net assets acquired for the pro forma March 31, 2003 balance sheet, is as follows:

Indefinite lived:        
   Goodwill (1)   $ 46,141,000  
   Trademarks    6,000,000  
Definite-lived:  
   Non-compete agreements    2,100,000  
   Backlog    4,500,000  
   Purchased capitalized  
    software    2,600,000  
   Customer relationships    14,700,000  

    $ 76,041,000  

  

(1)        Pro forma goodwill represents the residual purchase price in excess of the fair value of identified tangible and intangible assets based upon the March 31, 2003 net assets of Synavant. Actual goodwill at the date of acquisition will be determined based on net assets acquired at that date

      Statements of Operations


(a)  

To eliminate amortization expense recorded by Synavant related to definite-lived intangible assets of approximately $4,013,000 in the twelve months ended December 31, 2002 ($2,380,000 within Cost of revenues and $1,633,000 within Selling, general and administrative expense) and $390,000 in the three months ended March 31, 2003 ($42,000 within Cost of revenues and $348,000 within Selling, general and administrative expense).


(b)  

To record amortization expense related to the estimated fair value of identifiable intangible assets from the purchase price allocation, which are being amortized over a range of 3 to 15 years, of approximately $3,440,000 in the twelve months ended December 31, 2002 and approximately $860,000 in the three months ended March 31, 2003. The following table details the cost, useful life and amortization amount for the definite-lived intangible assets assigned in purchase accounting:


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Pro forma amortization expense for the
Asset type Pro forma
assigned value
Estimated
life
Twelve months ended
December 31, 2002
Three months ended
March 31, 2003




Non-Compete Agreements     $ 2,100,000    3   $ 700,000   $ 175,000  
Backlog    4,500,000    3    1,500,000    375,000  
Information Database    2,600,000    10    260,000    65,000  
Customer Relationships    14,700,000    15    980,000    245,000  



    $ 23,900,000        $ 3,440,000   $ 860,000  




(c) To allocate Synavant historical depreciation expense to the related expense captions for the twelve months ended December 31, 2002 and the three months ended March 31, 2003 to conform to Dendrite’s presentation. The following table details the allocation of depreciation expense:


Depreciation allocation for the
Twelve months ended
December 31, 2002
Three months ended
March 31, 2003

Cost of revenues     $ 4,106,000   $ 958,000  
 Selling, general and administrative  
   expenses    3,364,000    903,000  
 Research and development  
   expenses    174,000    20,000  
 Depreciation and amortization    (7,644,000 )  (1,881,000 )

    $--   $--  

(d) To record the pro forma income tax expense (benefit) for the twelve months ended December 31, 2002 and the three months ended March 31, 2003.

(e) To remove Synavant’s outstanding shares of common stock for the twelve months ended December 31, 2002 and the three months ended March 31, 2003.

(f) To remove the additional shares used to calculate Dendrite’s diluted earnings per share for the three months ended March 31, 2003, as the inclusion of such shares would be anti-dilutive.

(g) To reduce interest income by $775,000 for the twelve months ended December 31, 2002 and $194,000 for the three months ended March 31, 2003, to reflect cash used in the acquisition. The reduction assumes a 1.5% annualized return, which is reasonable based upon the Company’s investment strategy.

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