WESTELL AND TELTREND
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial
statements give effect to the acquisition of Teltrend by Westell under the
purchase method of accounting as defined in APB Opinion No. 16.
The purchase price of Teltrend included in this Form 8-K varies from
that previously reported. The pro forma financial statements included herein
reflect a purchase price for Teltrend which is based upon the exchange rate
agreed to by the parties and the per share value of Westell's Class A Common
Stock as of a range of dates surrounding the announcement of the transaction,
which occurred on December 13, 1999. These amounts will be reflected in the
financial statements of Westell as of and for the year ended March 31, 2000.
When reviewing the following pro forma information, you should note
that:
o the pro forma condensed consolidated balance sheet as of December
31, 1999 assumes that the merger took place on December 31, 1999
and combines Westell's December 31, 1999 unaudited consolidated
balance sheet with Teltrend's January 29, 2000 unaudited
consolidated balance sheet;
o the pro forma condensed consolidated statement of operations for
the fiscal year ended March 31, 1999 assumes the merger took place
as of April 1, 1998, and combines Westell's consolidated statement
of operations for its fiscal year ended March 31, 1999 with
Teltrend's unaudited consolidated statement of operations for the
comparable twelve month period ending May 1, 1999; and
o the pro forma condensed consolidated statement of operations for
the nine month period ended December 31, 1999 assumes that the
merger took place as of April 1, 1999, and combines the unaudited
consolidated statement of operations of Westell for the nine month
period ending December 31, 1999 with Teltrend's unaudited
consolidated statement of operations for the comparable nine month
period ending January 29, 2000.
The unaudited pro forma condensed consolidated financial data have been
included for illustrative purposes only, and do not reflect any cost savings and
other synergies anticipated by Westell's management as a result of the merger or
any nonrecurring charges directly attributable to the merger. The unaudited pro
forma condensed consolidated financial data are not necessarily indicative of
the results of operations or financial position that would have occurred had the
merger been completed on the dates indicated, nor are they necessarily
indicative of future results of operations or financial position of the
consolidated company.
The purchase price reflected in the accompanying pro forma condensed
consolidated financial data has been calculated based upon a fair market value
of Westell's Class A Common Stock of $10.575 per share which was the average
closing price for the period from December 8, 1999 to December 14, 1999.
The acquired assets and liabilities of Teltrend are stated in the
accompanying pro forma condensed consolidated financial statements at values
representing a preliminary allocation of the purchase price. Westell is
currently in the process of finalizing valuations for the tangible and
intangible assets of Teltrend. The effects resulting from any differences in the
final allocation of the purchase price may differ significantly from the
estimates used herein.
The accompanying pro forma information should be read in conjunction
with the historical financial statements and related notes for both Westell and
Teltrend, which are included in their annual and quarterly reports on file with
the SEC.
WESTELL AND TELTREND
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
Historical
-----------------------------------
ASSETS Westell Teltrend Pro Forma Pro Forma
12/31/99 1/29/00 Adjustments Combined
(Note 2)
------------------- --------------- ------------ ---------------
Current assets:
Cash and cash equivalents...... $10,621 $21,054 $(8,120)(a) $ 23,555
Short term investments......... - 8,768 - 8,768
Accounts receivable (net of
allowances).................... 18,886 12,834 - 31,720
Inventories.................... 13,912 10,871 1,269(c) 26,052
Prepaid expenses and other
current assets................. 2,528 4,323 - 6,851
------- ------- ------- --------
Total current assets........... 45,947 57,850 (6,851) 96,946
Property and equipment, net of
accumulated depreciation and 12,802 9,590 763(c) 23,155
amortization ..................
Intangible assets, net............... - 1,383 180,289(d) 181,672
Deferred tax asset and other long term
assets......................... 19,175 931 - 20,106
------- ------- ------- --------
Total assets $77,924 $69,754 $174,201 $ 321,879
======= ======= ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities.................. $22,086 $13,833 $(2,356)(e) $38,275
Other long term liabilities.......... 3,281 - - 3,281
Convertible debt (net of debt discount
of $1,696)..................... 18,304 - - 18,304
Total liabilities......... 43,671 13,833 (2,365) 59,860
======= ======= ========= =========
Stockholders equity
Class A common stock,
par $0.01...................... 176 66 (136)(b) 378
Class B common stock,
par $0.01...................... 191 - - 191
Preferred stock, par $0.01..... - - - -
Additional paid in capital..... 100,850 100,843 (126,721)(b) 328,414
Treasury stock................. (11,728) (11,728)(b)
Cumulative translation
adjustment..................... 78 33 33(b) 78
Accumulated deficit............ (67,042) (33,293) (33,293)(b) (67,042)
------- ------- ------- --------
Total stockholders' equity........... 34,253 55,921 (171,845) 262,019
------- ------- ------- --------
Total liabilities and stockholders' $77,924 $69,754 $(174,201) $ 321,879
equity
======= ======= ========= =========
WESTELL AND TELTREND
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE TWELVE MONTH PERIOD ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Historical
----------------------------------- Pro Forma
Westell Teltrend Adjustments Pro Forma
3/31/99 5/01/99 (Note 2) Combined
------- ------- -------- --------
Equipment Sales...................... $71,863 $108,034 $ - $179,897
Service Revenue...................... 21,317 - - 21,317
------- -------- ---------- --------
Total Revenue.................. 93,180 108,034 - 201,214
Cost of equipment sales.............. 55,439 58,284 - 113,723
Cost of services..................... 12,877 - - 12,877
------- -------- ---------- --------
Total cost of goods sold....... 68,316 58,284 - 126,600
------- -------- ---------- --------
Gross profit.............. 24,864 49,750 - 74,614
Operating expenses:
Sales and marketing............ 19,442 14,359 - 33,801
Research and development....... 26,605 15,475 - 42,080
General and administrative 13,117 8,265 254(f) 21,636
Restructuring and loss on sale of
disposal....................... 800 1,300 - 2,100
Intangible amortization........ - - 32,157(g) 32,157
------- -------- ---------- --------
Total operating expenses.. 59,964 39,399 32,412 131,775
Operating income (loss).............. (35,100) 10,351 (32,412) (56,161)
Other income, net.................... 404 823 - 1,227
Interest expense..................... 296 - - 296
------- -------- ---------- --------
Income (loss) before income taxes.... (34,992) 11,174 (32,412) (56,230)
Provision (benefit) for income taxes. - 4,383 (4,383)(h) -
------- -------- ---------- --------
Net income (loss).................... $(34,992) $ 6,791 $ (28,029) $(56,230)
------- -------- ---------- --------
Net income (loss) per
basic common share............... $(0.96) $1.11 $ - $ (0.99)
======== ======== =========== ========
Net income (loss) per
diluted common share............. $(0.96) $1.10 $ - $ (0.99)
======== ======== =========== ========
Weighted basic average of common
shares and common share
equivalents..... ............... 36,427 6,116 14,067(i) 56,610
======== ======== =========== ========
Weighted diluted average of common
shares and common share equivalents
36,427 6,200 14,261(i) 56,888
======== ======== =========== ========
WESTELL AND TELTREND
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE NINE MONTH PERIOD ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Historical
----------------------------------- Pro Forma
Westell Teltrend Adjustments Pro Forma
12/31/99 1/29/00 (Note 2) Combined
-------- ------- -------- --------
Equipment sales...................... $56,478 $75,460 $ - $131,938
Service revenue...................... 22,702 - - 22,702
------- ------- ------------ --------
Total revenue.................. 79,180 75,460 - 154,640
Cost of equipment sales.............. 43,002 41,484 - 84,486
Cost of services..................... 14,783 - - 14,783
------- ------- ------------ --------
Total cost of goods sold...... 57,785 41,484 - 99,269
------- ------- ------------ --------
Gross profit.............. 21,395 33,976 - 55,371
Operating expenses
Sales and marketing............ 10,966 7,931 - 18,897
Research and development....... 8,183 11,269 - 19,452
General and administrative 9,519 5,842 191(f) 15,552
Loss on sale of disposal ..... - (495) (495)
Intangible amortization........ - - 24,118(g) 24,118
------- ------- ------------ --------
Total operating expenses.. 28,668 24,547 24,309 77,524
Operating income (loss).............. (7,273) 9,429 (24,309) (22,153)
Other income, net.................... 905 1,033 - 1,938
Interest expense..................... 1,418 - - 1,418
------- ------- ------------ --------
Income (loss) before income taxes.... (7,786) 10,462 (24,309) (21,633)
Provision (benefit) for income taxes. 3,677 (3,677)(h) -
Net income (loss) ................... $ (7,786) $ 6,785 $(20,632) $ (21,633)
------- ------- ------------ --------
Net income (loss) per
basic common share............... $ (0.21) $ 1.16 $ - $ (0.39)
======= ======= ============ ========
Net income (loss) per
diluted common share............. $ (0.21) $ 1.12 $ - $ (0.38)
======= ======= ============ ========
Weighted basic average of common
shares and common share
equivalents..... ................ 36,561 5,861 13,480(i) 55,902
======= ======= ============ ========
Weighted diluted average of common
shares and common share
equivalents ..................... 36,561 6,048 13,911(i) 56,520
======= ======= ============ ========
WESTELL AND TELTREND
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL DATA
NOTE 1-- PURCHASE PRICE ALLOCATION
The purchase price for the acquisition was $238.2 million, based upon a
fair market value of Westell's Class A Common Stock of $10.575 per share which
was the average closing price for the period from December 8, 1999 to December
14, 1999, and the issuance of 20.196 million shares of Westell Class A Common
Stock in exchange for all shares of Teltrend common stock, plus the fair market
value of the 2.0 million Westell stock options issued in exchange for the
outstanding Teltrend stock options.
The acquired assets and liabilities of Teltrend are stated in the
accompanying pro forma condensed consolidated financial statements at values
representing a preliminary allocation of the purchase price. Westell is
currently in the process of finalizing valuations for the tangible and
intangible assets of Teltrend. The effects resulting from any differences in the
final allocation of the purchase price may differ significantly from the
estimates used herein.
Total purchase consideration and allocation of increase in basis used in
the preparation of these statements was computed as follows:
Purchase price:
Acquisition of outstanding shares of common stock, including stock options....................... $213,575
Conversion of Teltrend options for Westell options................................................ 14,191
Acquisition expenses.............................................................................. 8,120
Severance costs................................................................................... 2,356
----------------
Total purchase price............................................................ $238,242
Allocation of purchase price:
Book value of assets acquired..................................................................... $54,538
Increase in inventory to fair market value less selling costs..................................... 1,269
Increase in basis of property and equipment to estimated fair market value........................ 763
Goodwill.......................................................................................... 181,672
----------------
Total purchase price............................................................ $238,242
NOTE 2-- PRO FORMA ADJUSTMENTS
Certain pro forma adjustments have been made to the historical amounts
in the unaudited pro forma condensed consolidated financial data:
a) Total costs associated with the merger are estimated to be approximately
$8.1 million. Costs to be incurred by Westell and Teltrend in connection
with the merger include investment banking, legal, accounting and other
related fees, and have been reflected in the accompanying unaudited pro
forma condensed consolidated balance sheet as a reduction to cash.
b) Reflects (i) the issuance of 20.196 million shares of Westell Class A
Common Stock in exchange for all shares of Teltrend common stock based
upon an exchange ratio of 3.3 shares of Westell Class A Common Stock for
each share of Teltrend common stock at an estimated fair market value of
$10.575 per share of Westell Class A Common Stock and (ii) the fair market
value of 2.0 million Westell stock options issued in exchange for the
outstanding Teltrend stock options. Also reflects the elimination of
Teltrend equity accounts.
c) Adjustment to record inventory and property and equipment to estimated
fair market value, less selling costs.
d) Excess of purchase price consideration over fair market value of
identifiable tangible and intangible assets.
e) Estimated severance costs that will be accrued at the acquisition date and
paid over the following year.
f) Additional depreciation as a result of the increase of property and
equipment to fair market value.
g) Amortization of goodwill and intangibles on a straight-line basis over
2-15 year lives.
h) Elimination of tax provision recorded due to the combined entity operating
at a pro forma loss. All tax benefit is offset by a valuation allowance in
pro forma analysis.
i) The calculation of weighted average common and common equivalent shares
uses an exchange ratio of 3.3 shares of Westell Class A Common Stock for
each share of Teltrend common stock. Common equivalent shares consist of
dilutive shares issuable upon the exercise of stock options and have been
excluded from the calculation, as their effect would be anti-dilutive.