Fair, Isaac and Company, Incorporated
Table of Contents

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A

Amendment Number 1

Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): AUGUST 5, 2002

FAIR, ISAAC AND COMPANY, INCORPORATED

(Exact name of Registrant as Specified in its Charter)

DELAWARE
(State or Other Jurisdiction of Incorporation)

     
0-16439
(Commission File Number)
  94-1499887
(I.R.S. Employer Identification Number)

200 SMITH RANCH ROAD, SAN RAFAEL, CA 94903
(Address of Principal Executive Offices)

(415) 472-2211
(Registrant’s Telephone Number, Including Area Code)

 


TABLE OF CONTENTS

ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS.
SIGNATURES
INDEX TO EXHIBITS
EXHIBIT 23.01
EXHIBIT 99.02


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ITEM 7: FINANCIAL STATEMENTS AND EXHIBITS.

     On August 19, 2002, Fair, Isaac and Company, Incorporated (“Fair, Isaac”) filed a Current Report on Form 8-K to report the closing of its merger (the “Merger”) of a wholly owned subsidiary of Fair, Isaac with and into HNC Software Inc., (“HNC”) pursuant to an Agreement and Plan of Merger, dated as of April 28, 2002 (the “Merger Agreement”), by and among Fair, Isaac, HNC and Northstar Acquisition Inc. As a result of the Merger, HNC became a wholly owned subsidiary of Fair, Isaac.

     In that report, Fair, Isaac indicated that it would file the information required by this Item 7 of Form 8-K no later than the date required by this item. Fair, Isaac is filing this Amendment Number 1 to provide this financial information, and hereby amends Item 7, in its entirety, as set forth below.

(a)    FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
 
     The following financial statements of HNC are filed with this report as Exhibit 99.01 and are incorporated into this report by this reference:

        (i)    Audited consolidated balance sheets as of December 31, 2001 and December 31, 2000.
 
        (ii)    Audited consolidated statements of operations, shareholders’ equity (deficit) and cash flows for the years ended December 31, 2001, 2000 and 1999.
 
        (iii)    Unaudited consolidated balance sheet as of June 30, 2002.
 
        (iv)    Unaudited consolidated statements of operations, shareholders’ equity (deficit) and cash flows for the six months ended June 30, 2002.

(b)    PRO FORMA FINANCIAL INFORMATION.
 
     The following unaudited pro forma financial information is filed with this report as Exhibit 99.02 and is incorporated into this report by this reference.

        (i)    Unaudited pro forma condensed combined consolidated balance sheet as of June 30, 2002.
 
        (ii)    Unaudited pro forma condensed combined consolidated statement of operations for the nine months ended June 30, 2002.
 
        (iii)    Unaudited pro forma condensed combined consolidated statement of operations for the year ended September 30, 2001.
 
        (iv)    Notes to unaudited pro forma condensed combined consolidated financial statements.

(c)    EXHIBITS.

       23.01      Consent of PricewaterhouseCoopers LLP (filed herewith)
       99.01      Historical financial statements of HNC:
                  i)    Audited consolidated balance sheets as of December 31, 2001 and December 31, 2000 (incorporated by reference to the Current Report on Form 8-K of HNC Software Inc. filed May 24, 2002 (File No. 0-26146)).
 
        ii)    Audited consolidated statements of operations, shareholders’ equity (deficit) and cash flows for the years ended December 31, 2001, 2000 and 1999 (incorporated by reference to the Current Report on Form 8-K of HNC Software Inc. filed May 24, 2002 (File No. 0-26146)).
 
        iii)    Unaudited consolidated balance sheet as of June 30, 2002 (incorporated by reference to the Quarterly Report on Form 10-Q of HNC Software Inc. filed August 14, 2002 (File No. 0-26146)).

 


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                  iv)     Unaudited consolidated statements of operations, shareholders’ equity (deficit) and cash flows for the six months ended June 30, 2002 (incorporated by reference to the Quarterly Report on Form 10-Q of HNC Software Inc. filed August 14, 2002 (File No. 0-26146)).

       99.02      Unaudited pro forma condensed consolidated financial information (filed herewith):

                   i)    Unaudited pro forma condensed combined consolidated balance sheet as of June 30, 2002.
 
       ii)    Unaudited pro forma condensed combined consolidated statement of operations for the nine months ended June 30, 2002.
 
       iii)    Unaudited pro forma condensed combined consolidated statement of operations for the year ended September 30, 2001.
 
       iv)    Notes to unaudited pro forma condensed combined consolidated financial statements.

 


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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to report to be signed on its behalf by the undersigned thereunto duly authorized.

  FAIR, ISAAC AND COMPANY, INCORPORATED

Dated: October 21, 2002

     
  By:  /s/ ANDREA M. FIKE
 
  Andrea M. Fike
Vice President, General Counsel and Secretary

 


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INDEX TO EXHIBITS

         
EXHIBIT NO.   DESCRIPTION

 
23.01   Consent of PricewaterhouseCoopers LLP
 
99.01   Historical financial statements of HNC:
 
    i)   Audited consolidated balance sheets as of December 31, 2001 and December 31, 2000 (incorporated by reference to the Current Report on Form 8-K of HNC Software Inc. filed May 24, 2002 (File No. 0-26146)).
 
    ii)   Audited consolidated statements of operations, shareholders’ equity (deficit) and cash flows for the years ended December 31, 2001, 2000 and 1999 (incorporated by reference to the Current Report on Form 8-K of HNC Software Inc. filed May 24, 2002 (File No. 0-26146)).
 
    iii)   Unaudited consolidated balance sheet as of June 30, 2002 (incorporated by reference to the Quarterly Report on Form 10-Q of HNC Software Inc. filed August 14, 2002 (File No. 0-26146)).
 
    iv)   Unaudited consolidated statements of operations, shareholders’ equity (deficit) and cash flows for the six months ended June 30, 2002 (incorporated by reference to the Quarterly Report on Form 10-Q of HNC Software Inc. filed August 14, 2002 (File No. 0-26146)).
 
99.02   Unaudited pro forma condensed consolidated financial information:
 
    i)   Unaudited pro forma condensed combined consolidated balance sheet as of June 30, 2002.
 
    ii)   Unaudited pro forma condensed combined consolidated statement of operations for the nine months ended June 30, 2002.
 
    iii)   Unaudited pro forma condensed combined consolidated statement of operations for the year ended September 30, 2001.
 
    iv)   Notes to unaudited pro forma condensed combined consolidated financial statements.

 

EXHIBIT 23.01 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-72804) of Fair, Isaac and Company, Incorporated of our report dated January 23, 2002, except as to Note 16, to which the date is May 23, 2002, relating to the financial statements of HNC Software Inc., which appears in HNC Software Inc.'s Current Report on Form 8-K dated May 24, 2002, which is incorporated by reference in this Current Report on Form 8-K/A of Fair, Isaac and Company, Incorporated dated August 5, 2002. PricewaterhouseCoopers LLP San Diego, California October 17, 2002

EXHIBIT 99.02 PRO FORMA FINANCIAL INFORMATION UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS The following unaudited pro forma condensed combined consolidated financial statements give effect to the merger between Fair, Isaac and HNC using the purchase method of accounting for business combinations. The information is only a summary and you should read it together with our historical financial statements and related notes contained in the annual reports and other information that we have filed with the SEC and incorporated by reference. The pro forma data is based on an exchange ratio for the merger of 0.519 of a share of Fair, Isaac common stock for each share of HNC common stock. The Fair, Isaac historical and pro forma share and per share data reflect Fair, Isaac's 3-for-2 stock split on June 5, 2002. The unaudited pro forma condensed combined consolidated balance sheet of Fair, Isaac gives effect to the merger as if it occurred on June 30, 2002 and combines the unaudited historical consolidated balance sheets of Fair, Isaac and HNC as of June 30, 2002. The unaudited pro forma condensed combined consolidated statements of operations of Fair, Isaac gives effect to the proposed merger as if the merger had been consummated on October 1, 2000. The unaudited pro forma condensed combined consolidated statement of operations of Fair, Isaac for the nine month period ended June 30, 2002 combines the unaudited consolidated statements of operations of Fair, Isaac and HNC for the nine month period ended June 30, 2002. The unaudited pro forma condensed combined consolidated statement of operations of Fair, Isaac for the fiscal year ended September 30, 2001 combines the audited historical consolidated statement of operations of Fair, Isaac for the fiscal year ended September 30, 2001 with the unaudited pro forma condensed consolidated statement of operations of HNC for the year ended December 31, 2001. On August 15, 2001, HNC acquired the assets of the Blaze business unit from Brokat Technologies, Inc., which was a significant transaction to HNC. The HNC unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2001 reflects the historical results of operations of HNC for the year ended December 31, 2001, which included operations of Blaze from the acquisition date through December 31, 2001, adjusted to give effect to the Blaze acquisition as if it had occurred on January 1, 2001. The accompanying unaudited pro forma condensed combined consolidated financial statements are presented in accordance with Article 11 of Regulation S-X. The pro forma information is not necessarily indicative of the operating results or financial position that would have occurred if the proposed merger had been consummated on October 1, 2000 or June 30, 2002, respectively, nor is it necessarily indicative of future operating results or financial position. The pro forma financial statements should be read in conjunction with the accompanying notes and with Fair, Isaac's and HNC's historical consolidated financial statements and related notes.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET AT JUNE 30, 2002 (THOUSANDS OF DOLLARS)

HISTORICAL ----------------------------- PRO FORMA PRO FORMA FAIR, ISAAC HNC ADJUSTMENTS COMBINED ----------- ------------- ----------- --------- ASSETS Current assets: Cash and cash equivalents $ 42,013 $ 128,384 $ -- $ 170,397 Short-term investments 16,822 122,301 -- 139,123 Accounts receivable, net 55,522 36,635 -- 92,157 Unbilled work in progress 28,943 4,784 -- 33,727 Prepaid expenses and other current assets 13,408 9,933 -- 23,341 Deferred income taxes 6,512 19,782 (15,554)A 10,740 --------- --------- --------- ---------- Total current assets 163,220 321,819 (15,554) 469,485 Investments 60,305 71,028 -- 131,333 Property and equipment, net 48,491 20,102 (1,572)A 67,021 Goodwill, net 7,551 88,000 (88,000)C 428,799 421,248 A Intangibles, net 1,190 32,321 (32,321)C 91,490 42,000 A 39,700 A 8,600 A Deferred income taxes 5,504 41,467 1,201 A 48,172 Other assets 3,493 6,264 (4,871)A 4,886 --------- --------- --------- ---------- $ 289,754 $ 581,001 $ 370,431 $1,241,186 ========= ========= ========= ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 32,493 $ 30,017 $ 8,544 A $ 87,287 16,233 A Billings in excess of earned revenues 10,247 9,030 (2,729)A 16,548 --------- --------- --------- ---------- Total current liabilities 42,740 39,047 22,048 103,835 Long-term liabilities: Other liabilities 4,859 1,650 2,265 A 8,774 Convertible subordinated notes -- 150,000 (10,302)A 139,698 --------- --------- --------- ---------- Total long-term liabilities 4,859 151,650 (8,037) 148,472 --------- --------- --------- ---------- Total liabilities 47,599 190,697 14,011 252,307 --------- --------- --------- ---------- Stockholders' equity: Common stock 351 36 (36)B 539 188 A Paid in capital in excess of par value 130,694 536,519 (536,519)B 919,257 68,706 A 719,857 A Retained earnings (accumulated deficit) 241,251 (146,143) 146,143 B 201,051 (40,200)A Less treasury stock, at cost (129,694) -- -- (129,694) Deferred compensation -- (140) 140 B (1,827) (1,827)A Accumulated other comprehensive income (loss) (447) 32 (32)B (447) --------- --------- --------- ---------- Total stockholders' equity 242,155 390,304 356,420 988,879 --------- --------- --------- ---------- $ 289,754 $ 581,001 $ 370,431 $1,241,186 ========= ========= ========= ==========
See accompanying notes to unaudited pro forma condensed combined consolidated financial statements.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 30, 2002 (IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

HISTORICAL -------------------------- PRO FORMA PRO FORMA FAIR, ISAAC HNC ADJUSTMENTS COMBINED ----------- -------- ----------- ---------- Revenues $263,125 $167,011 -- $430,136 Costs and expenses: Cost of revenues 118,436 67,727 -- 186,163 Research and development 21,672 38,595 -- 60,267 Sales, general and administrative 57,004 53,636 -- 110,640 Amortization of intangibles and transaction-related costs 1,743 25,367 (23,752) C 12,933 9,575 A Amortization of deferred compensation -- -- 864 A 864 Restructuring and impairment charges -- 897 -- 897 -------- -------- --------- -------- Total costs and expenses 198,855 186,222 (13,313) 371,764 -------- -------- --------- -------- Income (loss) from operations 64,270 (19,211) 13,313 58,372 Other income (expense), net 4,439 (298) (301) A 3,840 -------- -------- --------- -------- Income (loss) before income taxes 68,709 (19,509) 13,012 62,212 Provision (benefit) for income taxes 26,625 (6,010) 4,892 D 25,507 -------- -------- --------- -------- Net income (loss) $ 42,084 $(13,499) $ 8,120 $ 36,705 ======== ======== ========= ======== Earnings (loss) per share: Diluted $ 1.17 $ (0.38) E $ 0.64 Basic $ 1.23 $ (0.38) E $ 0.70 Shares used in computing earnings (loss) per share: Diluted 35,832 35,585 E 57,524 Basic 34,113 35,585 E 52,582
See accompanying notes to unaudited pro forma condensed combined consolidated financial statements.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS OF HNC SOFTWARE INC. FOR THE YEAR ENDED DECEMBER 31, 2001 (IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)

HISTORICAL PRO FORMA ----------------------- PRO FORMA CONSOLIDATED HNC BLAZE(1) ADJUSTMENTS HNC -------- --------- ----------- ------------ Revenues $226,670 $ 17,357 $ -- $244,027 Costs and expenses: Costs of revenues 87,192 8,602 -- 95,794 Research and development 45,667 7,739 -- 53,406 Sales, general and administrative 74,649 24,596 -- 99,245 Transaction-related amortization and costs 56,556 552,227 (552,227)(F) 58,693 2,137 (G) In-process research and development 487 -- -- 487 Restructuring and impairment charges 4,642 1,393 -- 6,035 -------- --------- --------- -------- Total operating expenses 269,193 594,557 (550,090) 313,660 Income (loss) from operations (42,523) (577,200) 550,090 (69,633) Other income (expense), net (201) (35) -- (236) -------- --------- --------- -------- Income (loss) before income tax provision (benefit) (42,724) (577,235) 550,090 (69,869) Income tax provision (benefit) (6,272) -- (876)(H) (7,148) -------- --------- --------- -------- Net income (loss) $(36,452) $(577,235) $ 550,966 $(62,721) ======== ========= ========= ======== Earnings (loss) per share: Basic and diluted net loss per common share $ (1.06) $ (1.82) Shares used in computing basic and diluted net loss per common share 34,509 34,509
- ------------ (1) Blaze was acquired by HNC on August 15, 2001. These results represent revenue and expenses recognized by the predecessor owner of Blaze from January 1, 2001 through August 14, 2001 and are not reflective of actual results subsequent to HNC's acquisition of Blaze. The unaudited pro forma condensed combined consolidated statement of operations for the nine months ended June 30, 2002 includes actual results for Blaze subsequent to the acquisition. These amounts reflect the effects of integrating Blaze, including associated cost-cutting measures.

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2001 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

HISTORICAL ------------------------- PRO FORMA HISTORICAL PRO FORMA PRO FORMA FAIR, ISAAC(1) HNC(2) ADJUSTMENTS SUBTOTAL BLAZE(3) ADJUSTMENTS COMBINED -------------- -------- ----------- -------- ---------- ----------- --------- Revenues $329,148 $226,670 $ -- $555,818 $ 17,357 $ -- $573,175 Costs and expenses: Cost of revenues 148,559 87,192 -- 235,751 8,602 -- 244,353 Research and development 28,321 45,667 -- 73,988 7,739 -- 81,727 Sales, general and administrative 78,061 74,649 -- 152,710 24,596 -- 177,306 Amortization of intangibles and transaction-related costs 2,100 56,556 (56,444)(C) 14,979 552,227 (552,227)(F) 14,979 12,767 (A) -- -- Amortization of deferred compensation -- -- 1,152 (A) 1,152 -- -- 1,152 In-process research and development -- 487 -- 487 -- -- 487 Restructuring and impairment charges -- 4,642 -- 4,642 1,393 -- 6,035 -------- -------- -------- -------- --------- --------- -------- Total costs and expenses 257,041 269,193 (42,525) 483,709 594,557 (552,227) 526,039 -------- -------- -------- -------- --------- --------- -------- Income (loss) from operations 72,107 (42,523) 42,525 72,109 (577,200) 552,227 47,136 Other income (expense), net 4,746 (201) (244)(A) 4,301 (35) -- 4,266 -------- -------- -------- -------- --------- --------- -------- Income (loss) before income taxes 76,853 (42,724) 42,281 76,410 (577,235) 552,227 51,402 Provision (benefit) for income taxes 30,741 (6,272) 6,859 (D) 31,328 -- (10,253)(D) 21,075 -------- -------- -------- -------- --------- --------- -------- Net income (Loss) $ 46,112 $(36,452) $ 35,422 $ 45,082 $(577,235) $ 562,480 $ 30,327 ======== ======== ======== ======== ========= ========= ======== Earnings (loss) per share: Diluted $ 1.33 $ (1.06) $ 0.84 (E) $ 0.56 Basic $ 1.40 $ (1.06) $ 0.89 (E) $ 0.60 Shares used in computing earnings (loss) per share: Diluted 34,589 34,509 53,917 (E) 53,917 Basic 32,979 34,509 50,889 (E) 50,889
- --------------- (1) For the year ended September 30, 2001. (2) For the year ended December 31, 2001. (3) Blaze was acquired by HNC on August 15, 2001. These results represent revenue and expenses recognized by the predecessor owner of Blaze from January 1, 2001 through August 14, 2001 and are not reflective of actual results subsequent to HNC's acquisition of Blaze. The unaudited pro forma condensed combined consolidated statement of operations for the nine months ended June 30, 2002 includes actual results for Blaze subsequent to the acquisition. These amounts reflect the effects of integrating Blaze, including associated cost-cutting measures. See accompanying notes to unaudited pro forma condensed combined consolidated financial statements.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS PRO FORMA ADJUSTMENTS The measurement date to determine the value of the merger was August 5, 2002. (A) Purchase Price Adjustments The purchase price adjustments reflect the issuance of 18,780,482 shares of Fair, Isaac common stock to HNC stockholders using an exchange ratio of 0.519, based on the outstanding shares of HNC on August 5, 2002. The fair value of the Fair, Isaac shares assumed to be issued is based on a per share value of $38.3401, which is equal to the weighted average closing sale price per share, by volume, of Fair, Isaac's common stock as reported on the New York Stock Exchange for the five-day trading period beginning two days before and ending two days after August 5, 2002. For purposes of the pro forma financial information, the following table presents the assumptions used. Total consideration (in thousands): Fair value of Fair, Isaac common stock assumed to be issued $720,045 Acquisition related costs 8,544 Fair value of options to purchase Fair, Isaac common stock to be issued, less $1.8 million representing the portion of the intrinsic value of HNC's unvested options applicable to the remaining vesting period 66,879 -------- $795,468 ======== The estimated acquisition-related costs consist primarily of banking, legal and accounting fees, printing and mailing costs, and other directly related charges. The planning process for the integration of HNC's operations may result in additional accruals for severance costs and/or facilities closures in accordance with Emerging Issues Task Force (EITF) Issue No. 95-3. Such accruals would increase the allocation of the purchase consideration to goodwill. The following represents the preliminary allocation of the purchase price to the acquired assets and assumed liabilities of HNC. This allocation is preliminary and based on HNC's assets and liabilities as of June 30, 2002. Purchase price allocation (in thousands): Net tangible assets $243,720 Goodwill 421,248 Other intangible assets: Existing Technology 42,000 Customer Relationship 39,700 Trade Name 8,600 In-process research and development 40,200 -------- $795,468 ======== Net tangible assets consist of $270.0 million recorded on the HNC historical financial statements as of June 30, 2002, adjusted principally to reflect a decrease in deferred tax assets of $14.3 million, a decrease of net property and equipment of $1.6 million, a decrease in the convertible subordinated note liability of $10.3 million and the removal of associated deferred debt issuance costs of $2.8 million, and a reduction in deferred revenue of $2.7 million, along with an aggregate $18.5 million increase in other liabilities recorded as of the acquisition date, related primarily to HNC severance and change in control liabilities, accrued lease exit costs and accrued banking fees that became payable upon the merger consummation. Goodwill represents the excess of the purchase price over the fair value of tangible and identifiable intangible assets. The unaudited pro forma condensed combined consolidated statement of operations does not reflect the amortization of goodwill acquired in the proposed merger consistent with the guidance in the Financial Accounting Standards Board (FASB) Statement No. 142, Goodwill and Other Intangible Assets. Amortization of other intangible assets has been provided over the following estimated useful lives: existing technology--5 years; customer relationship--15 years; trade name--5 years. This will result in annual amortization of approximately $8.4 million for existing technology, $2.6 million for customer relationship and $1.7 million for trade name. The purchase price allocation includes a reduction in HNC's reported deferred revenue at August 5, 2002. HNC's deferred revenue relates primarily to the remaining portion of periodic licenses, maintenance and services sold to customers for

which payment has been received. Under the purchase method of accounting, HNC's deferred revenue was reduced by approximately $2.7 million to the estimated fair value of the related obligations as of August 5, 2002. This adjustment will have the effect of reducing the amount of revenue the combined company will recognize in periods subsequent to the merger compared to the amount of revenue HNC would have recognized in the same periods absent the merger. The purchase price allocation also includes a reduction in HNC's reported convertible subordinated note balance at August 5, 2002, to reflect such balance at its estimated fair value. The purchase price allocation also eliminates associated deferred debt issuance costs. These adjustments will have the effect of increasing the amount of interest expense the combined company will recognize in periods subsequent to the merger compared to the amount of interest expense HNC would have recognized in the same periods absent the merger. The $1.8 million of deferred stock-based compensation represents the unearned portion, as of August 5, 2002, of the intrinsic value of HNC's unvested common stock options assumed in the merger. The deferred compensation will be amortized on a straight-line basis over the remaining vesting period of less than one to four years. (B) The pro forma adjustment represents the elimination of HNC's stockholders' equity accounts. (C) The pro forma adjustment represents the elimination of HNC's capitalized goodwill and other intangible assets aggregating $120.3 million at June 30, 2002 and related amortization expense of $56.4 million and $23.8 million for the fiscal year ended September 30, 2001 and the nine month period ended June 30, 2002, respectively. (D) The adjustment reflects the statutory tax rate of 41%.

(E) The following table sets forth the computation of basic and diluted earnings per share: HISTORICAL ---------------------- PRO FORMA FOR THE NINE MONTHS ENDED JUNE 30, 2002 FAIR, ISAAC HNC COMBINED - --------------------------------------- ----------- -------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Numerator: Net income (loss) $ 42,084 $(13,499) $ 36,883 Denominator: Weighted-average common shares outstanding 34,113 35,585 52,582 Effect of dilutive employee stock options outstanding 1,656 1,031 2,133 Restricted securities issued in Nykamp acquisition 63 -- 63 Effect of dilutive Employee Stock Purchase Plan equivalents -- 82 43 Effect of conversion of convertible subordinated notes -- 5,208 2,703 Diluted common shares 35,832 41,906 57,524 Diluted earnings (loss) per share $ 1.17 $ (0.38) $ 0.64 Basic earnings (loss) per share $ 1.23 $ (0.38) $ 0.70 HISTORICAL PRO FORMA PRO FORMA FOR THE YEAR ENDED SEPTEMBER 30, 2001 FAIR, ISAAC HNC COMBINED - ------------------------------------- ----------- ---------- ---------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Numerator: Net income (loss) $ 46,112 $(62,721) $ 30,471 Denominator: Weighted-average common shares outstanding 32,979 34,509 50,889 Effect of dilutive employee stock options outstanding 1,610 1,799 2,044 Effect of dilutive Employee Stock Purchase Plan equivalents -- 61 32 Effect of conversion of convertible subordinated notes -- 1,835 952 Diluted common shares 34,589 38,204 53,917 Diluted earnings (loss) per share $ 1.33 $ (1.82) $ 0.57 Basic earnings (loss) per share $ 1.40 $ (1.82) $ 0.60 (F) Reflects the elimination of Blaze's historical amortization and impairment of goodwill and intangible assets. (G) Reflects the amortization of identifiable intangible assets resulting from the Blaze acquisition over the estimated useful lives of two to four years, as if the acquisition had occurred on January 1, 2001. (H) Reflects the estimated tax benefit resulting from the amortization of the intangible assets recorded as part of the Blaze acquisition, as if it had occurred on January 1, 2001.