• | The Current Report on Form 8-K filed with the SEC on March 3, 2014, as amended by the Current Report on Form 8-K/A (Amendment No. 1) (the Form 8-K/A) of which these unaudited pro forma condensed combined financial statements are included as Exhibit 99.2 to the Form 8-K/A. |
• | Westell’s audited consolidated financial statements as of and for the year ended March 31, 2014, including the related notes thereto contained in Westell’s Annual Report on Form 10-K for the year ended March 31, 2013; and |
• | CSI’s audited consolidated financial statements, including the related notes thereto, as of and for the year ended December 31, 2013, which are included as Exhibit 99.1 to the Form 8-K/A. |
Historical | |||||||||||||||
Westell Technologies, Inc. | Cellular Specialties, Inc. | Pro Forma Adjustments | Pro Forma Condensed Combined | ||||||||||||
Assets | |||||||||||||||
Cash and cash equivalents | $ | 69,649 | $ | 6,183 | $ | (43,738 | ) | (a) | $ | 32,094 | |||||
Short-term investments | 17,159 | — | — | 17,159 | |||||||||||
Accounts receivable, net | 12,357 | 4,000 | (535 | ) | (b) | 15,822 | |||||||||
Inventories | 20,544 | 4,906 | 1,517 | (c) | 26,967 | ||||||||||
Prepaid expenses and other current assets | 1,991 | 2,054 | (1,815 | ) | (d) | 2,230 | |||||||||
Assets available-for-sale | 1,044 | — | — | 1,044 | |||||||||||
Total current assets | 122,744 | 17,143 | (44,571 | ) | 95,316 | ||||||||||
Property and equipment, net | 1,267 | 810 | 6 | (e) | 2,083 | ||||||||||
Goodwill | 8,025 | — | 21,153 | (f) | 29,178 | ||||||||||
Intangible assets, net | 17,447 | 1,227 | 15,003 | (g) | 33,677 | ||||||||||
Other non-current assets | 435 | 435 | |||||||||||||
Total assets | $ | 149,918 | $ | 19,180 | $ | (8,409 | ) | $ | 160,689 | ||||||
Liabilities and Stockholders’ Equity | |||||||||||||||
Accounts payable | $ | 6,471 | $ | 2,524 | $ | — | $ | 8,995 | |||||||
Accrued expenses | 7,322 | 1,768 | (193 | ) | (b) | 8,897 | |||||||||
Current portion of capital lease | — | 17 | — | 17 | |||||||||||
Deferred revenue | 236 | 2 | — | 238 | |||||||||||
Total current liabilities | 14,029 | 4,311 | (193 | ) | 18,147 | ||||||||||
Deferred revenue non-current | 738 | — | — | 738 | |||||||||||
Contingent consideration non-current | 785 | — | — | 785 | |||||||||||
Capital lease obligation, net of current portion | — | 26 | — | 26 | |||||||||||
Deferred income tax | — | 6 | (6 | ) | (h) | — | |||||||||
Other non-current liabilities | 1,108 | — | 12 | (b) | 1,120 | ||||||||||
Total liabilities | 16,660 | 4,343 | (187 | ) | 20,816 | ||||||||||
Total stockholders’ equity | 133,258 | 14,837 | (8,222 | ) | (i) | 139,873 | |||||||||
Total liabilities and stockholders’ equity | $ | 149,918 | $ | 19,180 | $ | (8,409 | ) | $ | 160,689 |
Historical | Historical | ||||||||||||||||||
Westell Technologies, Inc. | CNS Discontinued Operations (a) | Cellular Specialties, Inc. | Pro Forma Adjustments | Pro Forma Condensed Combined | |||||||||||||||
Revenue | $ | 40,044 | $ | (1,236 | ) | $ | 21,370 | $ | 179 | (b) | $ | 60,357 | |||||||
Gross profit | 14,324 | (999 | ) | 10,374 | (1,337 | ) | (c) | 22,362 | |||||||||||
Operating expenses: | |||||||||||||||||||
Sales and marketing | 7,439 | 53 | 4,264 | — | 11,756 | ||||||||||||||
Research and development | 7,326 | (1,398 | ) | 3,117 | — | 9,045 | |||||||||||||
General and administrative | 9,910 | (600 | ) | 4,337 | — | 13,647 | |||||||||||||
Intangible amortization | 892 | (5 | ) | — | 3,296 | (d) | 4,183 | ||||||||||||
Restructuring | 149 | — | — | — | 149 | ||||||||||||||
Goodwill impairment | 2,884 | — | — | — | 2,884 | ||||||||||||||
Total operating expenses | 28,600 | (1,950 | ) | 11,718 | 3,296 | 41,664 | |||||||||||||
Operating income (loss) | (14,276 | ) | 951 | (1,344 | ) | (4,633 | ) | (19,302 | ) | ||||||||||
Other income (expense) | 175 | — | (147 | ) | — | 28 | |||||||||||||
Income (loss) before income taxes and discontinued operations | (14,101 | ) | 951 | (1,491 | ) | (4,633 | ) | (19,274 | ) | ||||||||||
Income tax benefit (expense) | (29,392 | ) | (367 | ) | (110 | ) | (342 | ) | (e) | (30,211 | ) | ||||||||
Income (loss) from continuing operations | (43,493 | ) | 584 | (1,601 | ) | (4,975 | ) | (49,485 | ) | ||||||||||
Income (loss) per share from continuing operations: | |||||||||||||||||||
Basic | $(0.73) | $(0.83) | |||||||||||||||||
Diluted | $(0.73) | $(0.83) | |||||||||||||||||
Average number of common shares outstanding: | |||||||||||||||||||
Basic | 59,944 | 59,944 | |||||||||||||||||
Diluted | 59,944 | 59,944 |
Historical | Historical | ||||||||||
Westell Technologies, Inc. | Cellular Specialties, Inc. | Pro Forma Adjustments | Pro Forma Condensed Combined | ||||||||
Revenue | 77,652 | 31,026 | 158 | (b) | 108,836 | ||||||
Gross profit | 33,434 | 15,967 | — | 49,401 | |||||||
Operating expenses: | — | ||||||||||
Sales and marketing | 10,812 | 1,806 | — | 12,618 | |||||||
Research and development | 7,845 | 3,606 | — | 11,451 | |||||||
General and administrative | 10,200 | 2,484 | — | 12,684 | |||||||
Intangible amortization | 3,588 | 102 | 2,317 | (d) | 6,007 | ||||||
Restructuring | 273 | — | — | 273 | |||||||
Total operating expenses | 32,718 | 7,998 | 2,317 | 43,033 | |||||||
Operating income (loss) | 716 | 7,969 | (2,317 | ) | 6,368 | ||||||
Other income (expense) | (63 | ) | (37 | ) | — | (100 | ) | ||||
Income (loss) before income taxes and discontinued operations | 653 | 7,932 | (2,317 | ) | 6,268 | ||||||
Income tax benefit (expense) | (125 | ) | (657 | ) | 192 | (e) | (590 | ) | |||
Income (loss) from continuing operations | 528 | 7,275 | (2,125 | ) | 5,678 | ||||||
Income (loss) per share from continuing operations: | |||||||||||
Basic | $0.01 | $0.10 | |||||||||
Diluted | $0.01 | $0.10 | |||||||||
Average number of common shares outstanding: | |||||||||||
Basic | 58,678 | 58,678 | |||||||||
Diluted | 59,765 | 59,765 |
Purchase price | $39,000 | |
Working capital adjustment | 4,738 | |
Total consideration | $43,738 |
Cash and cash equivalents | $ | 6,183 | |
Accounts receivable, net | 3,465 | ||
Inventories | 6,423 | ||
Prepaid expenses and other current assets | 239 | ||
Property and equipment, net | 816 | ||
Intangible assets, net | 16,230 | ||
Accounts payable | (2,524 | ) | |
Accrued expenses | (1,575 | ) | |
Current portion of capital lease | (17 | ) | |
Deferred revenue | (2 | ) | |
Capital lease obligation, net of current portion | (26 | ) | |
Deferred income tax | (6,615 | ) | |
Other non-current liabilities | (12 | ) | |
Goodwill | 21,153 | ||
Total consideration | $ | 43,738 |
(a) | Represents the purchase price of $39.0 million plus the preliminary working capital adjustment of $4.7 million. |
(b) | Represents the preliminary adjustments to CSI’s historical accounts to conform to Westell’s accounting policies. |
(c) | Inventory acquired was increased by $1.5 million to reflect the estimated fair value. The remaining adjustment represents the preliminary adjustments to CSI’s historical accounts to conform to Westell’s accounting policies. |
(d) | Reflects the elimination of a $1.8 million asset retained by the Sellers following the completion of the Acquisition. |
(e) | Represents the adjustment to property, plant and equipment to reflect the preliminary fair market value. |
(f) | Reflects the preliminary estimated adjustment to goodwill as a result of the Acquisition. Goodwill represents the excess of the consideration transferred over the preliminary fair value of the assets acquired and liabilities assumed as described in Note 2. The goodwill is attributable to the synergies and other benefits that are expected to arise from the acquisition of CSI. The goodwill is not expected to be deductible for tax purposes. |
(g) | Reflects the estimated impact of the recognized identifiable intangible assets that are being acquired relating to customer relationships, developed technology and trade name. |
(h) | The preliminary value of net assets acquired included a deferred tax liability of $6.6 million recorded using a statutory tax rate of 38%. The deferred tax liability is anticipated to reverse over a definite lived period which will allow Westell to realize additional deferred tax assets which are currently reserved with a valuation allowance. The deferred tax balance has been adjusted to reflect the anticipated additional realization of Westell's deferred tax assets. The effect of this one-time benefit is a reduction of Westell's valuation allowance and an increase in equity as noted in note (i). |
(i) | Represents the elimination of CSI’s historical Stockholders' equity plus a $6.6 million entry to record the one-time income tax effects of the Acquisition described in note (h). |
(a) | Westell discontinued the operations of its CNS segment in the first quarter of fiscal year 2014. The adjustments restate the historical statement of operations to present the results of the CNS segment as discontinued operations. |
(b) | Represents the preliminary adjustments to CSI’s historical accounts to conform to Westell’s accounting policies. |
(c) | Inventory acquired was increased by $1.5 million to reflect the estimated fair value. This adjustment reflects the impact of that fair value adjustment on cost of goods sold, assuming the inventory is sold in the first year of the acquisition. |
(d) | Reflects the preliminary estimate for additional amortization for the fair value of recognized identifiable intangible assets acquired from CSI. |
(e) | Reflects the estimated income tax effects of the pro forma adjustments related to the acquisition of CSI. |