SEC Info - Vertrue Inc - ‘8-K’ for 3/26/04

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Vertrue Inc – ‘8-K’ for 3/26/04 – EX-99.1

On: Friday, 3/26/04, at 12:08pm ET · For: 3/26/04 · Accession #: 950123-4-3826 · File #: 0-21527

  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/26/04  Vertrue Inc                       8-K:7,9     3/26/04    3:135K                                   RR Donnelley/FA

Current Report — Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                        13     50K 
 2: EX-99.1     Unaudited Pro Forma Financial Statements              14     73K 
 3: EX-99.2     Audited Consolidated Financial Statements             29    125K

EX-99.1 — Unaudited Pro Forma Financial Statements

EX-99.1 1st Page of 14 TOC ↑Top Previous Next ↓Bottom Just 1st
 
                                                                    EXHIBIT 99.1

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA 

    The unaudited pro forma condensed combined financial data are based on the
consolidated financial statements of MemberWorks and the consolidated financial 
statements of Lavalife. The unaudited pro forma condensed combined balance sheet
at December 31, 2003 is adjusted to give effect to (i) the execution of our     
amended and restated senior secured credit facility, borrowings thereunder and  
the use of proceeds therefrom, (ii) the acquisition of Lavalife and the         
concurrent purchase by Lavalife's senior management of MemberWorks' restricted  
common stock and (iii) this offering and the application of the net proceeds    
from this offering as described under "Use of Proceeds," as if each of these    
transactions had occurred on December 31, 2003. The unaudited pro forma         
condensed combined statements of operations for the year ended June 30, 2003,   
the six months ended December 31, 2003 and the twelve months ended December 31, 
2003 are adjusted to give effect to (i) the execution of our amended and        
restated senior secured credit facility, borrowings thereunder and the use of   
proceeds therefrom, (ii) the acquisition of Lavalife, and (iii) this offering   
and the application of the net proceeds from this offering as described under   
"Use of Proceeds," as if each of these transactions had occurred at the         
beginning of the respective periods presented.                                  

  Lavalife's consolidated financial statements were prepared in accordance
with Canadian generally accepted accounting principles ("Canadian GAAP"), which 
differ in certain respects from accounting principles generally accepted in the 
United States ("US GAAP") and were adjusted to US GAAP. Lavalife's condensed    
consolidated statements of earnings were prepared in Canadian dollars and       
translated to U.S. dollars at the average exchange rate of the daily noon buying
rates in New York City for the periods presented. Lavalife's condensed          
consolidated balance sheet as of December 31, 2003 was translated to U.S.       
dollars at the December 31, 2003 noon buying rate in New York City. Certain     
reclassifications were made to the Lavalife's consolidated financial statements 
to conform them to MemberWorks' presentation.                                   

  Adjustments for the Transactions are based upon the historical financial
information of MemberWorks and Lavalife and certain assumptions that management 
of MemberWorks believes are reasonable. The acquisition will be accounted for   
using the purchase method of accounting. Under this method, the purchase price  
has been allocated to the assets and liabilities acquired based on preliminary  
estimates of fair value. The actual fair value will be determined upon the      
consummation of the acquisition and may vary from the preliminary estimates.    

  The pro forma financial data does not necessarily reflect our results of
operations or the financial position that actually would have resulted had the  
transactions occurred at the date indicated, or project our results of          
operations or financial position for any future date or period.                 

You should read the following unaudited pro forma condensed combined  
financial data in conjunction with MemberWorks' and Lavalife's audited and      
unaudited consolidated historical financial statements and the related notes    
thereto and "Management's Discussion and Analysis of Financial Condition and    
Results of Operations." The Lavalife Management Discussion and Analysis of      
Financial Condition and Results of Operations is included on page 6 of this     
filing.                                                                         

 1

EX-99.1 2nd Page of 14 TOC 1st Previous Next ↓Bottom Just 2nd
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2003 

                                                        [Enlarge/Download Table]

                                             LAVALIFE                                                            
                                            HISTORICAL   ACQUISITION          TOTAL      FINANCING               
                               MEMBERWORKS      US        PRO FORMA         PRO FORMA    PRO FORMA     PRO FORMA 
                               HISTORICAL    GAAP(1)    ADJUSTMENTS(2)     ACQUISITION  ADJUSTMENTS      TOTAL   
                               -----------  ----------  --------------     -----------  -----------    --------- 
                                                               ($ IN THOUSANDS)                                  
                                                                                                                 
ASSETS                                                                                                           
Cash and cash equivalents....   $ 119,995    $17,557       $(96,240)(a)     $  41,312    $114,000(k)   $ 155,312 
Restricted cash..............       3,169         --             --             3,169          --          3,169 
Accounts receivable..........      11,477      1,857             --            13,334          --         13,334 
Other current assets.........      10,674      1,250             --            11,924         600(k)      12,524 
Deferred tax assets..........          --      4,195             --             4,195          --          4,195 
Membership solicitation and                                                                                      
  other deferred costs.......      62,618         --             --            62,618          --         62,618 
                                ---------    -------       --------         ---------    --------      --------- 
Total current assets.........     207,933     24,859        (96,240)          136,552     114,600        251,152 
Fixed assets, net............      22,855     11,368             --            34,223          --         34,223 
Goodwill.....................      42,039         --         77,060(b)        119,099          --        119,099 
Intangible and other                                                                                             
  assets.....................      12,379         --         37,916(b)         50,295       5,400(k)      55,695 
                                ---------    -------       --------         ---------    --------      --------- 
Total assets.................   $ 285,206    $36,227       $ 18,736         $ 340,169    $120,000      $ 460,169 
                                =========    =======       ========         =========    ========      ========= 

LIABILITIES AND SHAREHOLDERS'                                                                                    
  (DEFICIT) EQUITY                                                                                               
Current maturities...........   $      28    $    --       $ 30,000(c)      $  30,028    $(30,000)(k)  $      28 
Accounts payable.............      29,365      1,348             --            30,713          --         30,713 
Accrued liabilities..........      64,982     10,273             --            75,255          --         75,255 
Deferred revenue.............     150,062      3,487             --           153,549          --        153,549 
Deferred income taxes........       6,171         --             --             6,171          --          6,171 
                                ---------    -------       --------         ---------    --------      --------- 
Total current liabilities....     250,608     15,108         30,000           295,716     (30,000)       265,716 
Deferred income taxes........       5,157        855             --             6,012          --          6,012 
Other long-term                                                                                                  
  liabilities................       2,993         --             --             2,993          --          2,993 
Long-term debt...............      90,000                        --            90,000     150,000(k)     240,000 
                                ---------    -------       --------         ---------    --------      --------- 
Total liabilities............     348,758     15,963         30,000           394,721     120,000        514,721 
                                ---------    -------       --------         ---------    --------      --------- 

Convertible preferred                                                                                            
  stock......................          --     19,145        (19,145)(d)            --          --             -- 

Common stock.................         190         --              3(e)            193          --            193 
Capital in excess of par.....     146,646      6,086         19,145(d)        155,643          --        155,643 
                                                            (15,235)(f)                                          
                                                             (9,996)(g)                                          
                                                              8,997(h)                                           
Accumulated deficit..........      (6,269)    (5,824)         5,824(i)         (6,269)         --         (6,269)
Accumulated other                                                                                                
  comprehensive income                                                                                           
  (loss).....................        (453)       857           (857)(j)          (453)         --           (453)
Treasury stock...............    (203,666)        --             --          (203,666)         --       (203,666)
                                ---------    -------       --------         ---------    --------      --------- 
Total shareholders' (deficit)                                                                                    
  equity.....................     (63,552)     1,119          7,881           (54,552)         --        (54,552)
                                ---------    -------       --------         ---------    --------      --------- 
Total liabilities and                                                                                            
  shareholders' (deficit)                                                                                        
  equity.....................   $ 285,206    $36,227       $ 18,736         $ 340,169    $120,000      $ 460,169 
                                =========    =======       ========         =========    ========      ========= 

---------------                                                                 

(1) Reconciliation of Canadian GAAP to US GAAP is included on page 9 of this    
exhibit.                                                                

(2) Footnote explanations of pro forma adjustments are included on page 3 of    
this exhibit.                                                           

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EX-99.1 3rd Page of 14 TOC 1st Previous Next ↓Bottom Just 3rd
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET 
($ IN THOUSANDS)

(a) Reflects the following adjustments to the cash and cash equivalents balance 
resulting from the acquisition of Lavalife:                             

                                                                [Download Table]
                                                                       
Distribution of excess cash to Lavalife's shareholders prior           
  to closing................................................  $(15,235)
Cash received from Lavalife's senior management to purchase            
  MemberWorks Incorporated's common stock...................     9,000 
Funding of a portion of the Lavalife acquisition purchase              
  price.....................................................   (90,005)
                                                              -------- 
  Total cash adjustment.....................................  $(96,240)
                                                              ======== 

(b) The total estimated purchase price as shown in the table below is allocated 
  to the tangible and intangible assets and liabilities of Lavalife based on
  their estimated fair values as if the acquisition of Lavalife had occurred
on December 31, 2003. The estimated purchase price and preliminary      
allocation thereof is as follows:                                       

                                                                [Download Table]
                                                                      
Total estimated purchase price:                                       
  Cash purchase price paid..................................  $118,005
  Acquisition related costs, including certain financing              
     costs..................................................     2,000
                                                              --------
     Total purchase price paid including acquisition related          
      costs.................................................  $120,005
                                                              ========
Preliminary allocation of purchase price:                             

                                                                [Download Table]
                                                                    
Identifiable intangible assets............................  $ 37,916
Goodwill..................................................    77,060
Book value of acquired assets and liabilities.............     5,029
                                                            --------
   Total purchase price allocated.........................  $120,005
                                                            ========

  A final determination of the fair values and useful lives of such assets
  cannot be made prior to the completion of the acquisition and may differ
materially from the preliminary estimates made by management. This    
     preliminary allocation includes an estimate that all intangible assets will
   be acquired through a purchase transaction which yields a tax basis equal
  to book basis and therefore no deferred tax liability has been recorded.
 Any final adjustments may change the allocation of purchase price which
could affect the fair value assigned to the assets and liabilities and
could result in a change to the unaudited pro forma combined financial
data.                                                                 

(c) Represents borrowings under our senior secured credit facility to fund a    
portion of the purchase price.                                          

(d) Reflects conversion of Lavalife's convertible preferred stock to Lavalife's 
common stock immediately prior to the closing of the acquisition.       

                                                                [Download Table]
                                                                      
(e)  Reflects the par value of the MemberWorks' restricted common     
     stock purchased by Lavalife's senior management.                 
(f)  Reflects the reduction in shareholders' equity as a result       
     of the distribution of excess cash to Lavalife's                 
     shareholders prior to closing.                                   
(g)  Reflects the elimination of the balance of Lavalife's            
     capital in excess of par after giving effect to (d) and (f)      
     above.                                                           
(h)  Reflects the capital in excess of par resulting from the         
     purchase of MemberWorks' restricted common stock by              
     Lavalife's senior management.                                    
(i)  Reflects elimination of Lavalife's accumulated deficit.          
(j)  Reflects elimination of Lavalife's other comprehensive           
     income.                                                          

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                                                                [Download Table]
                                                                      
(k)  Reflects issuance of the senior notes offered hereby             
     (including the incurrence of debt issuance costs) and the        
     use of proceeds therefrom, including the repayment of            
     $30,000 under the senior secured credit facility.                

                                                                [Download Table]
                                                                       
Issuance of the notes.......................................  $150,000 
Payment of debt issuance costs*.............................    (6,000)
Repayment of senior secured credit facility.................   (30,000)
                                                              -------- 
  Net cash proceeds.........................................  $114,000 
                                                              ======== 

---------------                                                                 

* $600 represents the current portion of debt issuance costs.         

 4

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED DECEMBER 31, 2003 

                                                        [Enlarge/Download Table]

                                        LAVALIFE                                                             
                          MEMBERWORKS  HISTORICAL    ACQUISITION        TOTAL        FINANCING      PRO FORMA
                          HISTORICAL       US         PRO FORMA       PRO FORMA      PRO FORMA        TOTAL  
                            US GAAP     GAAP(1)     ADJUSTMENTS(2)   ACQUISITION   ADJUSTMENTS(2)    US GAAP 
                          -----------  ----------   --------------   -----------   --------------   ---------
                                               ($ IN THOUSANDS, EXCEPT PER SHARE DATA)                       
                                                                                                             
Revenues.................  $474,820     $ 70,576      $      --       $545,396       $       --     $545,396 
Expenses:                                                                                                    
  Marketing..............   278,626       25,795             --        304,421               --      304,421 
  Operating..............    85,697       14,780             --        100,477               --      100,477 
  General and                                                                                                
    Administrative.......    74,420       22,296             --         96,716               --       96,716 
  Amortization of                                                                                            
    intangibles..........     1,243           --          6,493(a)       7,736               --        7,736 
                           --------     --------      ---------       --------       ----------     -------- 
Operating income.........    34,834        7,705         (6,493)        36,046               --       36,046 
Interest income                                                                                              
  (expense), net.........    (1,117)         287         (1,200)(b)     (2,030)         (11,775)(e)  (13,805)
Other income (expense),                                                                                      
  net....................      (162)          88             --            (74)              --          (74)
                           --------     --------      ---------       --------       ----------     -------- 
Income before income                                                                                         
  taxes..................    33,555        8,080         (7,693)        33,942          (11,775)      22,167 
Provision for income                                                                                         
  taxes..................    13,422        2,515         (3,077)(c)     12,860           (4,710)(c)    8,150 
                           --------     --------      ---------       --------       ----------     -------- 
Net income...............  $ 20,133     $  5,565      $  (4,616)      $ 21,082       $   (7,065)    $ 14,017 
                           ========     ========      =========       ========       ==========     ======== 
Earnings per share                                                                                           
  Basic..................  $   1.73                                   $   1.74                      $   1.15 
                           ========                                   ========                      ======== 
  Diluted................  $   1.63                                   $   1.64                      $   1.11 
                           ========                                   ========                      ======== 
Weighted average shares                                                                                      
  Basic..................    11,638                      501(d)         12,139                        12,139 
                           ========                   =========       ========                      ======== 
  Diluted................    12,821                         501         13,322                        13,322 
                           ========                   =========       ========                      ======== 

---------------                                                                 

(1) Reconciliation of Canadian GAAP to US GAAP is included on page 11 of this   
exhibit.                                                                

(2) Footnote explanations of pro forma adjustments are included on page 8 of    
this exhibit.                                                           

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EX-99.1 6th Page of 14 TOC 1st Previous Next ↓Bottom Just 6th
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 2003

                                                        [Enlarge/Download Table]

                                       LAVALIFE                                                             
                                      HISTORICAL    ACQUISITION        TOTAL        FINANCING               
                         MEMBERWORKS      US         PRO FORMA       PRO FORMA      PRO FORMA      PRO FORMA
                         HISTORICAL   GAAP(1)(3)   ADJUSTMENTS(2)   ACQUISITION   ADJUSTMENTS(2)     TOTAL  
                         -----------  ----------   --------------   -----------   --------------   ---------
                                              ($ IN THOUSANDS, EXCEPT PER SHARE DATA)                       
                                                                                                            
Revenues................  $236,988     $35,543       $      --       $272,531       $      --      $272,531 
Expenses:                                                                                                   
  Marketing.............   133,401      12,455              --        145,856              --       145,856 
  Operating.............    44,505       7,426              --         51,931              --        51,931 
  General and                                                                                               
    Administrative......    37,962      11,646              --         49,608              --        49,608 
  Amortization of                                                                                           
    intangibles.........       589          --           3,247(a)       3,836              --         3,836 
                          --------     -------       ---------       --------       ---------      -------- 
Operating income........    20,531       4,016          (3,247)        21,300              --        21,300 
Interest income                                                                                             
  (expense), net........    (1,082)        183            (600)(b)     (1,499)         (5,887)(e)    (7,386)
Other income (expense),                                                                                     
  net...................      (183)        999                            816                           816 
                          --------     -------       ---------       --------       ---------      -------- 
Income before income                                                                                        
  taxes.................    19,266       5,198          (3,847)        20,617          (5,887)       14,730 
Provision for income                                                                                        
  taxes.................     7,706       1,474          (1,539)(c)      7,641          (2,355)(c)     5,286 
                          --------     -------       ---------       --------       ---------      -------- 
Net income..............  $ 11,560     $ 3,724       $  (2,308)      $ 12,976       $  (3,532)     $  9,444 
                          ========     =======       =========       ========       =========      ======== 
Earnings per share                                                                                          
  Basic.................  $   1.03                                   $   1.11                      $   0.81 
                          ========                                   ========                      ======== 
  Diluted...............  $   0.91                                   $   0.98                      $   0.73 
                          ========                                   ========                      ======== 
Weighted average shares                                                                                     
  Basic.................    11,192                      452(d)         11,644                        11,644 
                          ========                   =========       ========                      ======== 
  Diluted...............    13,541                         452         13,993                        13,993 
                          ========                   =========       ========                      ======== 

---------------                                                                 

(1) Reconciliation of Canadian GAAP to US GAAP is included on page 12 of this   
exhibit.                                                                

(2) Footnote explanations of pro forma adjustments are included on pages 8 of   
this exhibit.                                                           

(3) Includes $18,746 of revenue, $3,324 of operating income and $3,165 of net   
    income for the three months ended September 30, 2003, which is also included
 in the unaudited pro forma condensed combined statement of operations for
the year ended June 30, 2003.                                           

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 2003

                                                        [Enlarge/Download Table]

                                          LAVALIFE                                                                
                                         HISTORICAL    ACQUISITION         TOTAL          FINANCING               
                            MEMBERWORKS      US         PRO FORMA        PRO FORMA        PRO FORMA      PRO FORMA
                            HISTORICAL   GAAP(1)(3)   ADJUSTMENTS(2)   ACQUISITION(2)   ADJUSTMENTS(2)     TOTAL  
                            -----------  ----------   --------------   --------------   --------------   ---------
                                                   ($ IN THOUSANDS, EXCEPT PER SHARE DATA)                        
                                                                                                                  
Revenues...................  $456,881     $70,751       $      --         $527,632        $       --     $527,632 
Expenses:                                                                                                         
  Marketing................   280,673      26,055              --          306,728                --      306,728 
  Operating................    78,444      14,657              --           93,101                --       93,101 
  General and                                                                                                     
    Administrative.........    74,085      21,003              --           95,088                --       95,088 
  Amortization of                                                                                                 
    intangibles............     1,393          --           6,493(a)         7,886                --        7,886 
                             --------     -------       ---------         --------        ----------     -------- 
Operating income...........    22,286       9,036          (6,493)          24,829                --       24,829 
Settlement of investment                                                                                          
  related litigation.......    19,148          --              --           19,148                --       19,148 
Interest income (expense),                                                                                        
  net......................       570         200          (1,200)(b)         (430)          (11,775)(e)  (12,205)
Other income (expense),                                                                                           
  net......................    (1,409)        142              --           (1,267)               --       (1,267)
                             --------     -------       ---------         --------        ----------     -------- 
Income before income                                                                                              
  taxes....................    40,595       9,378          (7,693)          42,280           (11,775)      30,505 
Provision for income                                                                                              
  taxes....................    16,239       3,484          (3,077)(c)       16,646            (4,710)(c)   11,936 
                             --------     -------       ---------         --------        ----------     -------- 
Net income.................  $ 24,356     $ 5,894       $  (4,616)        $ 25,634        $   (7,065)    $ 18,569 
                             ========     =======       =========         ========        ==========     ======== 
Earnings per share                                                                                                
  Basic....................  $   1.93                                     $   1.96                       $   1.42 
                             ========                                     ========                       ======== 
  Diluted..................  $   1.84                                     $   1.87                       $   1.35 
                             ========                                     ========                       ======== 
Weighted average shares                                                                                           
  Basic....................    12,596                      481(d)           13,077                         13,077 
                             ========                   =========         ========                       ======== 
  Diluted..................    13,233                         481           13,714                         13,714 
                             ========                   =========         ========                       ======== 

---------------                                                                 

(1) Reconciliation of Canadian GAAP to US GAAP is included on page 13 of this   
exhibit.                                                                

(2) Footnote explanations of pro forma adjustments are included on pages 8 of   
this exhibit.                                                           

(3) Lavalife's statement of income is for the year ended September 30, 2003.    

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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED 
STATEMENTS OF OPERATIONS
($ IN THOUSANDS)

(a) Reflects the amortization of acquired identifiable intangible assets deemed 
to have determinable useful lives. Preliminary estimates of identifiable
    intangible assets include trade names of approximately $18,800 with a useful
    life of 12 years, customer relationships of $14,700 with useful lives of 3-5
years and other intangibles of $4,400 with useful lives of 3-5 years.   

(b) Reflects increased interest expense incurred due to borrowings of $30,000   
  under our senior secured credit facility to fund a portion of the Lavalife
acquisition purchase price.                                             

(c) Reflects the income tax effect of the acquisition pro forma adjustments at a
40% effective tax rate.                                                 

(d) Reflects the purchase of MemberWorks' restricted common stock by Lavalife's 
senior management.                                                      

(e) Reflects interest expense, including amortization of debt issuance costs    
   related to the senior notes offered hereby, and the elimination of interest
  expenses under the senior secured credit facility. The interest expense on
the senior notes offered hereby was $12,375 based on an assumed interest
   rate of 8.25%. A change in interest rates of 0.125% would have increased or
decreased the interest expense by $187.                                 
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RECONCILIATION OF CANADIAN GAAP TO US GAAP
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2003 

The following table reconciles the Lavalife's unaudited condensed     
consolidated balance sheet as of December 31, 2003, derived from the December   
31, 2003 unaudited condensed consolidated financial statements, from Canadian   
GAAP to US GAAP. The amounts have been translated at the December 31, 2003 noon 
buying rate in New York City of $0.7738 to Cdn$1.00.                            

                                                        [Enlarge/Download Table]

                               LAVALIFE                             RECLASSIFICATIONS  LAVALIFE US GAAP          
                               CANADIAN    US GAAP       LAVALIFE    TO MEMBERWORKS     IN MEMBERWORKS   LAVALIFE
                                 GAAP    ADJUSTMENTS     US GAAP      PRESENTATION       PRESENTATION    US GAAP 
                                (CDN$)    (CDN$)(1)       (CDN$)         (CDN$)             (CDN$)        (US$)  
                               --------  -----------     --------   -----------------  ----------------  --------
                                                                 (IN THOUSANDS)                                  
                                                                                                                 
ASSETS                                                                                                           
Cash and cash equivalents..... $22,689    $     --       $22,689         $    --           $22,689       $17,557 
Accounts receivable...........   2,041          --         2,041             359             2,400         1,857 
Income taxes receivable.......     359          --           359            (359)               --            -- 
Prepaid membership                                                                                               
  materials...................      --          --            --              --                --            -- 
Prepaid expenses and other                                                                                       
  current assets..............   1,616          --         1,616              --             1,616         1,250 
Future tax assets.............   5,052         369 (a)     5,421              --             5,421         4,195 
                               -------    --------       -------         -------           -------       ------- 
Total current assets..........  31,757         369        32,126              --            32,126        24,859 
Fixed assets, net.............  14,691          --        14,691              --            14,691        11,368 
Share purchase loans..........      47         (47)(b)        --              --                --            -- 
Deferred charges..............      45         (45)(c)        --              --                --            -- 
Intangible assets.............      25         (25)(d)        --              --                --            -- 
                               -------    --------       -------         -------           -------       ------- 
Total assets.................. $46,565    $    252       $46,817         $    --           $46,817       $36,227 
                               =======    ========       =======         =======           =======       ======= 
LIABILITIES AND SHAREHOLDERS'                                                                                    
  EQUITY                                                                                                         
Accounts payable(2)........... $ 9,517    $  1,798 (e)   $11,315         $(9,572)          $ 1,743       $ 1,348 
Accrued liabilities...........      --          --            --          13,276            13,276        10,273 
Income and other taxes                                                                                           
  payable.....................   3,704          --         3,704          (3,704)               --            -- 
Deferred revenue..............   3,512         994 (f)     4,506              --             4,506         3,487 
                               -------    --------       -------         -------           -------       ------- 
Total current liabilities.....  16,733       2,792        19,525              --            19,525        15,108 
Deferred income taxes.........   1,105          --         1,105              --             1,105           855 
Liability component of                                                                                           
  convertible preferred                                                                                          
  shares......................  18,678     (18,678)(c)        --              --                --            -- 
                               -------    --------       -------         -------           -------       ------- 
Total liabilities.............  36,516     (15,886)       20,630              --            20,630        15,963 
                               -------    --------       -------         -------           -------       ------- 
Convertible preferred stock...      --      24,741 (c)    24,741              --            24,741        19,145 
Share capital.................  18,123     (10,258)(c),(b)   7,865        (7,865)               --            -- 
Capital in excess of par......      --          --            --           7,865             7,865         6,086 
Accumulated deficit...........  (9,181)      1,655        (7,526)             --            (7,526)       (5,824)
Accumulated other                                                                                                
  comprehensive income........   1,107          --         1,107              --             1,107           857 
                               -------    --------       -------         -------           -------       ------- 
Total shareholders' equity....  10,049      (8,603)        1,446              --             1,446         1,119 
                               -------    --------       -------         -------           -------       ------- 
Total liabilities and                                                                                            
  shareholders' equity........ $46,565    $    252       $46,817         $    --           $46,817       $36,227 
                               =======    ========       =======         =======           =======       ======= 

---------------                                                                 

(1) Footnote explanations of reconciliation of Canadian GAAP to US GAAP are     
included on page 10 of this exhibit.                                    

(2) The accounts payable amount of Cdn$9,517 for Lavalife Canadian GAAP includes
Cdn$7,774 in accrued liabilities.                                       

 9

EX-99.1 10th Page of 14 TOC 1st Previous Next ↓Bottom Just 10th
NOTES TO CANADIAN GAAP TO US GAAP RECONCILIATION OF 
LAVALIFE'S UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET 
(IN THOUSANDS)

The following notes should be read in conjunction with Note 21 of     
Lavalife's consolidated financial statements in exhibit 99.2.                   

(a) Current and deferred taxes have been provided on all adjustments at the     
applicable local statutory rate to which the adjustment relates.        

(b) Shareholder Loans. Lavalife records loans to shareholders to purchase shares
    of Lavalife as receivables under Canadian GAAP. Under US GAAP, these amounts
are deducted from shareholders' equity.                                 

(c) Financial Instruments. Under Canadian GAAP, Lavalife accounts for its       
convertible preferred shares in accordance with their substance and, as 
   such, they are presented in the financial statements in their liability and
    equity components. The liability component is accreted to the face amount of
the convertible preferred shares as interest expense. Financing costs   
    associated with the convertible preferred shares have been allocated between
the liability and equity components whereby those costs allocated to the
liability component are recorded as deferred financing costs and those  
allocated to the equity component are recorded as a reduction of the    
carrying value of the equity component.                                 

Under US GAAP the convertible preferred shares are treated as mezzanine 
   equity and the associated financing costs have been recorded as a reduction
of the carrying value of the convertible preferred shares.              

During the year ended September 30, 2003, Lavalife made a payment to the
    holders of the convertible preferred shares in the amount of Cdn$3,125 that,
 under Canadian GAAP, was recorded as a reduction in the carrying value of
the equity component of the convertible preferred shares. Under US GAAP,
this payment is recorded as a direct charge to deficit.                 

(d) Intangible Assets. Marketing costs related to launching new services are    
 deferred until launch under Canadian GAAP. Under US GAAP, these costs are
expensed as incurred.                                                   

(e) Stock Based Compensation. Lavalife's stock option plan allows for the       
  redemption of the employees' vested options whereby the difference between
the grant price and the market price is paid by Lavalife under certain  
    conditions. Under Canadian GAAP, Lavalife records amounts paid on redemption
as a direct charge to deficit. Under US GAAP, Emerging Issues Task Force
Abstract No. 00-23 requires that all options with such a feature be     
marked-to-market and the obligation be recognized through the income    
statement of Lavalife.                                                  

(f) Revenue Recognition. Under US GAAP, Lavalife has adopted the recommendations
of Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial 
Statements." Based on these recommendations, which require a more       
restrictive analysis of management's best estimates of deferred revenue,
   Lavalife defers revenue from the sale of voice-based meeting services based
 on usage and management's estimate that unused minutes aged less than one
  year will be used by customers. Revenue from web-based meeting services is
   deferred ratably over the estimated average expected usage of the customer.

  10

EX-99.1 11th Page of 14 TOC 1st Previous Next ↓Bottom Just 11th
RECONCILIATION OF CANADIAN GAAP TO US GAAP
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2003 

 The following table reconciles from Canadian GAAP to US GAAP Lavalife's
unaudited condensed combined statement of income for the twelve months ended    
December 31, 2003 that has been derived from Lavalife's unaudited condensed     
consolidated financial statements for the three months ended December 31, 2003  
and December 31, 2002 and the audited consolidated financial statements for the 
year ended September 30, 2003. The amounts have been translated at an average   
daily rate for the period of $0.7159 to Cdn$1.00.                               

                                                        [Enlarge/Download Table]

                             LAVALIFE                          RECLASSIFICATIONS TO  LAVALIFE US GAAP          
                             CANADIAN    US GAAP     LAVALIFE      MEMBERWORKS        IN MEMBERWORKS   LAVALIFE
                               GAAP    ADJUSTMENTS   US GAAP       PRESENTATION        PRESENTATION    US GAAP 
                              (CDN$)    (CDN$)(1)     (CDN$)          (CDN$)              (CDN$)        (US$)  
                             --------  -----------   --------  --------------------  ----------------  --------
                                                               (IN THOUSANDS)                                  
                                                                                                               
Revenues.................... $98,561     $   23(a)   $98,584         $     --            $98,584       $70,576 
Expenses:                                                                                                      
  Cost of services sold.....  13,400        (15)(b)   13,385          (13,385)                --            -- 
  Marketing expense.........      --         --           --           36,032             36,032        25,795 
  Operating expense.........      --         --           --           20,646             20,646        14,780 
  Salaries and benefits.....  19,570       (249)(c)   19,321          (19,321)                --            -- 
  Selling, office and                                                                                          
    general.................  50,307       (152)(b)   50,155          (50,155)                --            -- 
  General and                                                                                                  
    administrative..........      --         --           --           31,143             31,143        22,296 
  Intangible amortization...      --         --           --               --                 --            -- 
                             -------     ------      -------         --------            -------       ------- 
Operating income............  15,284        439       15,723           (4,960)            10,763         7,705 
Other income................     246         --          246             (123)               123            88 
Amortization................  (4,929)        18(d)    (4,911)           4,911                 --            -- 
Accretion of liability                                                                                         
  component of convertible                                                                                     
  preferred shares..........  (2,001)     2,001(d)        --               --                 --            -- 
Loss on disposal of capital                                                                                    
  assets....................    (172)        --         (172)             172                 --            -- 
Interest income.............     432         --          432             (432)                --            -- 
Interest expense............     (31)        --          (31)             432                401           287 
                             -------     ------      -------         --------            -------       ------- 
Income before income                                                                                           
  taxes.....................   8,829      2,458       11,287               --             11,287         8,080 
Current provision for                                                                                          
  taxes.....................     275         --          275             (275)                --            -- 
Future provision for                                                                                           
  taxes.....................   3,266        (27)(e)    3,239           (3,239)                --            -- 
Provision for income                                                                                           
  taxes.....................      --         --           --            3,514              3,514         2,515 
                             -------     ------      -------         --------            -------       ------- 
Net income.................. $ 5,288     $2,485      $ 7,773         $     --            $ 7,773       $ 5,565 
                             =======     ======      =======         ========            =======       ======= 

---------------                                                                 

(1) Footnote explanations of reconciliation of Canadian GAAP to US GAAP are     
included on page 14 of this exhibit.                                    

  11

EX-99.1 12th Page of 14 TOC 1st Previous Next ↓Bottom Just 12th
RECONCILIATION OF CANADIAN GAAP TO US GAAP
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 2003

 The following table reconciles from Canadian GAAP to US GAAP Lavalife's
unaudited condensed consolidated statement of income for the six months ended   
December 31, 2003 that has been derived from Lavalife's unaudited condensed     
consolidated financial statements for the three months ended September 30, 2003 
and December 31, 2003. The amounts have been translated at an average daily rate
for the period of $0.7419 to Cdn$1.00.                                          

                                                        [Enlarge/Download Table]

                             LAVALIFE                          RECLASSIFICATIONS TO  LAVALIFE US GAAP          
                             CANADIAN    US GAAP     LAVALIFE      MEMBERWORKS        IN MEMBERWORKS   LAVALIFE
                               GAAP    ADJUSTMENTS   US GAAP       PRESENTATION        PRESENTATION    US GAAP 
                              (CDN$)    (CDN$)(1)     (CDN$)          (CDN$)              (CDN$)        (US$)  
                             --------  -----------   --------  --------------------  ----------------  --------
                                                               (IN THOUSANDS)                                  
                                                                                                               
Revenues.................... $48,305      $(397)(a)  $47,908         $     --            $47,908       $35,543 
Expenses:                                                                                                      
  Cost of services sold.....   6,778         --        6,778           (6,778)                --            -- 
  Marketing expense.........      --         --           --           16,788             16,788        12,455 
  Operating expense.........      --         --           --           10,009             10,009         7,426 
  Salaries and benefits.....   9,588         19(b)     9,607           (9,607)                --            -- 
  Selling, office and                                                                                          
    general.................  23,683         25(c)    23,708          (23,708)                --            -- 
  General and                                                                                                  
    administrative..........      --         --           --           15,698             15,698        11,646 
  Intangible amortization...      --         --           --               --                 --            -- 
                             -------      -----      -------         --------            -------       ------- 
Operating income............   8,256       (441)       7,815           (2,402)             5,413         4,016 
Other income................   1,411         --        1,411              (65)             1,346           999 
Amortization................  (2,304)         8(d)    (2,296)           2,296                 --            -- 
Accretion of liability                                                                                         
  component of convertible                                                                                     
  preferred shares..........  (1,030)  1,030(d)           --               --                 --            -- 
Loss on disposal of capital                                                                                    
  assets....................    (171)        --         (171)             171                 --            -- 
Interest income.............     247         --          247             (247)                --            -- 
Interest expense............      --         --           --              247                247           183 
                             -------      -----      -------         --------            -------       ------- 
Income before income                                                                                           
  taxes.....................   6,409        597        7,006               --              7,006         5,198 
Current provision for                                                                                          
  taxes.....................      58         --           58              (58)                --            -- 
Future provision for                                                                                           
  taxes.....................   2,105       (177)(e)    1,928           (1,928)                --            -- 
Provision for income                                                                                           
  taxes.....................      --         --           --            1,986              1,986         1,474 
                             -------      -----      -------         --------            -------       ------- 
Net income.................. $ 4,246      $ 774      $ 5,020         $     --            $ 5,020       $ 3,724 
                             =======      =====      =======         ========            =======       ======= 

---------------                                                                 

(1) Footnote explanations of reconciliation of Canadian GAAP to US GAAP are     
included on page 14 of this exhibit.                                    

  12

EX-99.1 13th Page of 14 TOC 1st Previous Next ↓Bottom Just 13th
RECONCILIATION OF CANADIAN GAAP TO US GAAP
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED SEPTEMBER 30, 2003 

 The following table reconciles from Canadian GAAP to US GAAP Lavalife's
unaudited condensed consolidated statement of income for the year ended         
September 30, 2003 derived from the audited consolidated financial statements   
for the year ended September 30, 2003. The amounts have been translated at an   
average daily rate for the period of $0.6853 to Cdn$1.00.                       

                                                        [Enlarge/Download Table]

                             LAVALIFE                           RECLASSIFICATIONS TO  LAVALIFE US GAAP          
                             CANADIAN     US GAAP     LAVALIFE      MEMBERWORKS        IN MEMBERWORKS   LAVALIFE
                               GAAP     ADJUSTMENTS   US GAAP       PRESENTATION        PRESENTATION    US GAAP 
                              (CDN$)     (CDN$)(1)     (CDN$)          (CDN$)              (CDN$)        (US$)  
                             --------   -----------   --------  --------------------  ----------------  --------
                                                                (IN THOUSANDS)                                  
                                                                                                                
Revenues.................... $102,613     $  626(a)   $103,239        $     --            $103,239      $70,751 
Expenses:                                                                                                       
  Cost of services sold.....   13,831         --       13,831          (13,831)                 --           -- 
  Marketing expense.........       --         --           --           38,020              38,020       26,055 
  Operating expense.........       --         --           --           21,388              21,388       14,657 
  Salaries and benefits.....   19,406       (452)(b)   18,954          (18,954)                 --           -- 
  Selling, office and                                                                                           
    general.................   52,260       (124)(c)   52,136          (52,136)                 --           -- 
  General and                                                                                                   
    administrative..........       --         --           --           30,646              30,646       21,003 
  Intangible amortization...       --         --           --               --                  --           -- 
                             --------     ------      --------        --------            --------      ------- 
Operating income............   17,116      1,202       18,318           (5,133)             13,185        9,036 
Other income................      335         --          335             (128)                207          142 
Amortization................   (5,107)        18(d)    (5,089)           5,089                  --           -- 
Accretion of liability                                                                                          
  component of convertible                                                                                      
  preferred shares..........   (1,943)     1,943(d)        --               --                  --           -- 
Loss on disposal of capital                                                                                     
  assets....................     (172)        --         (172)             172                  --           -- 
Interest income.............      385         --          385             (385)                 --           -- 
Interest expense............      (93)        --          (93)             385                 292          200 
                             --------     ------      --------        --------            --------      ------- 
Income before income                                                                                            
  taxes.....................   10,521      3,163       13,684               --              13,684        9,378 
Current provision for                                                                                           
  taxes.....................      708         --          708             (708)                 --           -- 
Future provision for                                                                                            
  taxes.....................    4,172        203(e)     4,375           (4,375)                 --           -- 
Provision for income                                                                                            
  taxes.....................       --         --           --            5,083               5,083        3,484 
                             --------     ------      --------        --------            --------      ------- 
Net income.................. $  5,641     $2,960      $ 8,601         $     --            $  8,601      $ 5,894 
                             ========     ======      ========        ========            ========      ======= 

---------------                                                                 

(1) Footnote explanations of reconciliation of Canadian GAAP to US GAAP are     
included on page 14 of this exhibit.                                    

  13

EX-99.1 Last Page of 14 TOC 1st Previous Next ↓Bottom Just 14th
NOTES TO CANADIAN GAAP TO US GAAP RECONCILIATION OF 
LAVALIFE'S UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF INCOME 
(IN THOUSANDS)

    The following notes should be read in conjunction with Note 21 of Lavalife's
consolidated financial statements in exhibit 99.2.                      

(a) Revenue Recognition.  Under US GAAP, Lavalife has adopted the               
  recommendations of Staff Accounting Bulletin No. 101, "Revenue Recognition
 in Financial Statements." Based on these recommendations, which require a
more restrictive analysis of management's best estimates of deferred    
revenue, Lavalife defers revenue from the sale of voice-based meeting   
  services based on usage and management's estimate that unused minutes aged
    less than one year will be used by customers. Revenue from web-based meeting
 services is deferred ratably over the estimated average expected usage of
the customer.                                                           

(b) Stock Based Compensation.  Lavalife's stock option plan allows for the      
  redemption of the employees' vested options whereby the difference between
the grant price and the market price is paid by Lavalife under certain  
    conditions. Under Canadian GAAP, Lavalife records amounts paid on redemption
as a direct charge to deficit. Under US GAAP, Emerging Issues Task Force
Abstract No. 00-23 requires that all options with such a feature be     
marked-to-market and the obligation be recognized through the income    
statement of Lavalife.                                                  

(c) Intangible Assets.  Marketing costs related to launching new services are   
 deferred until launch under Canadian GAAP. Under US GAAP, these costs are
expensed as incurred.                                                   

(d) Financial Instruments.  Under Canadian GAAP, Lavalife accounts for its      
convertible preferred shares in accordance with their substance and, as 
   such, they are presented in the financial statements in their liability and
    equity components. The liability component is accreted to the face amount of
the convertible preferred shares as interest expense. Financing costs   
    associated with the convertible preferred shares have been allocated between
the liability and equity components whereby those costs allocated to the
liability component are recorded as deferred financing costs and those  
allocated to the equity component are recorded as a reduction of the    
carrying value of the equity component.                                 

 Under U.S. GAAP the convertible preferred shares are treated as mezzanine
   equity and the associated financing costs have been recorded as a reduction
of the carrying value of the convertible preferred shares.              

During the year ended September 30, 2003, Lavalife made a payment to the
    holders of the convertible preferred shares in the amount of Cdn$3,125 that,
 under Canadian GAAP, was recorded as a reduction in the carrying value of
  the equity component of the convertible preferred shares. Under U.S. GAAP,
this payment is recorded as a direct charge to deficit.                 

(e) Current and deferred taxes have been provided on all adjustments at the     
applicable local statutory rate to which the adjustment relates.        

  14

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Dates Referenced Herein and Documents Incorporated by Reference

		Referenced-On Page
This ‘8-K’ Filing	Date	First	Last	Other Filings

Filed on / For Period End:	3/26/04			8-K
	12/31/03	1	12	10-Q
	9/30/03	6	14	10-Q, 8-K, DEF 14A
	6/30/03	1	7	10-K
	12/31/02	11		10-Q, 10-Q/A
				List all Filings

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Filing Submission 0000950123-04-003826 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)

Vertrue Inc – ‘8-K’ for 3/26/04 – EX-99.1

On: Friday, 3/26/04, at 12:08pm ET · For: 3/26/04 · Accession #: 950123-4-3826 · File #: 0-21527

Previous ‘8-K’: ‘8-K’ on / for 3/26/04 · Next: ‘8-K’ on 4/5/04 for 4/1/04 · Latest: ‘8-K’ on / for 8/16/07

Current Report — Form 8-KFiling Table of Contents

EX-99.1 — Unaudited Pro Forma Financial Statements

Dates Referenced Herein and Documents Incorporated by Reference

Current Report — Form 8-K
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