<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _____.
Commission file number 333-32195
WAVETEK WANDEL GOLTERMANN, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 33-0457664
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1030 SWABIA COURT
RESEARCH TRIANGLE PARK, NORTH CAROLINA 27709-3585
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(919) 941-5730
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
NOT APPLICABLE
------------------------------------------
Former Name, Former Address and Former
Fiscal Year, if Changed Since Last Report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of May 15, 2000,
Registrant had only one class of common stock, of which there were 13,320,423
shares outstanding.
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 2000 and September 30, 1999..................3
Consolidated Statements of Operations for the Three and Six Months Ended
March 31, 2000 and March 31, 1999.....................................................4
Consolidated Statements of Cash Flows for the Six Months Ended March 31,
2000 and March 31, 1999...............................................................5
Notes to Consolidated Financial Statements...............................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.....................................................19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.............................................................................27
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS.......................................................................28
ITEM 2 CHANGES IN SECURITIES...................................................................28
ITEM 3 DEFAULTS UPON SENIOR SECURITIES.........................................................28
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................................28
ITEM 5 EXHIBITS AND REPORTS ON FORM 8-K........................................................28
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
WAVETEK WANDEL GOLTERMANN, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
--------- ---------
(unaudited) (note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................................... $ 17,974 $ 17,089
Accounts receivable (less allowance for doubtful accounts of $4,071 at
March 31, 2000 (unaudited) and $4,608 at September 30, 1999) ...................... 92,113 102,532
Inventories ......................................................................... 71,506 62,515
Deferred income taxes ............................................................... 6,467 8,922
Other current assets ................................................................ 13,997 13,636
--------- ---------
Total current assets .................................................................. 202,057 204,694
Property, plant and equipment, net .................................................... 53,066 60,575
Intangible assets, net ................................................................ 136,903 162,482
Other non-current assets .............................................................. 5,457 6,982
--------- ---------
Total assets .......................................................................... $ 397,483 $ 434,733
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks .............................................................. $ 9,094 $ 17,510
Current portion of long-term obligations ............................................ 5,079 6,202
Current portion of long-term obligations to related parties ......................... 9,582 10,721
Trade payables ...................................................................... 34,307 31,549
Accrued compensation ................................................................ 22,811 26,626
Income taxes payable ................................................................ 4,105 4,250
Other current liabilities ........................................................... 42,283 38,838
--------- ---------
Total current liabilities ............................................................. 127,261 135,696
Long-term obligations, net of current portion ......................................... 199,942 228,083
Pension liabilities ................................................................... 33,455 35,671
Deferred income taxes ................................................................. 4,418 7,957
Other non-current liabilities ......................................................... 7,582 9,389
--------- ---------
Total liabilities ..................................................................... 372,658 416,796
--------- ---------
Commitments and contingencies Stockholders' equity:
Common stock, par value $.01, 50,000 shares authorized, 13,320 shares
at March 31, 2000 and 13,202 shares at September 30, 1999
issued and outstanding .......................................................... 133 132
Additional paid-in capital ........................................................ 73,222 72,948
Accumulated deficit ............................................................... (59,387) (65,641)
Other comprehensive income ........................................................ 10,857 10,498
--------- ---------
Total stockholders' equity ............................................................ 24,825 17,937
--------- ---------
Total liabilities and stockholders' equity ............................................ $ 397,483 $ 434,733
========= =========
</TABLE>
Note: The balance sheet at September 30, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
The Accompanying Notes to Consolidated Financial Statements are an Integral Part
of these Balance Sheets.
3
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended March 31, Ended March 31,
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ................................................. $ 127,155 $ 114,466 $ 262,731 $ 240,931
Cost of goods sold ........................................ 50,434 47,927 103,428 102,562
--------- --------- --------- ---------
Gross margin .............................................. 76,721 66,539 159,303 138,369
Operating expenses:
Marketing and selling ................................... 35,974 34,915 73,042 70,437
Research and development ................................ 18,454 18,771 36,231 36,615
General and administrative .............................. 10,634 11,538 21,270 23,626
Amortization of intangible assets ....................... 4,049 4,874 8,488 9,690
Provisions for restructuring operations and other
non-recurring charges ................................. 1,652 -- 2,020
--------- --------- --------- ---------
Total operating expenses ..................... 70,763 70,098 141,051 140,368
--------- --------- --------- ---------
Operating income (loss) ................................... 5,958 (3,559) 18,252 (1,999)
Other (income) expense, net:
Interest income ......................................... (307) (242) (567) (475)
Interest expense ........................................ 4,606 5,244 9,968 10,435
Other, net .............................................. (3,834) 370 (2,522) 131
--------- --------- --------- ---------
Other (income) expense, net .................. 465 5,372 6,879 10,091
--------- --------- --------- ---------
Income (loss) before provision (benefit) for income taxes 5,493 (8,931) 11,373 (12,090)
Provision (benefit) for income taxes ...................... 2,471 (5,716) 5,119 (7,738)
--------- --------- --------- ---------
Net income (loss) ......................................... $ 3,022 $ (3,215) $ 6,254 $ (4,352)
========= ========= ========= =========
Basic net income (loss) per share ......................... $ .23 $ (0.24) $ .47 $ (0.33)
========= ========= ========= =========
Weighted average number of shares outstanding-basic ....... 13,313 13,202 13,288 13,202
========= ========= ========= =========
Diluted net income (loss) per share ....................... $ .22 $ (0.24) $ .46 $ (0.33)
========= ========= ========= =========
Weighted average number of shares outstanding-diluted ..... 13,653 13,202 13,567 13,202
========= ========= ========= =========
</TABLE>
The Accompanying Notes to Consolidated Financial Statements are an Integral Part
of these Statements of Operations.
4
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
----------------------
2000 1999
--------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ................................................ $ 6,254 $ (4,352)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization expense .......................... 14,428 17,308
Restructuring and other non-recurring charges .................. 2,020 --
Deferred income taxes .......................................... (1,082) (7,984)
Changes in operating assets and liabilities:
Accounts receivable .......................................... 10,462 1,989
Inventories .................................................. (8,958) 5,558
Other current assets ......................................... 488 6
Accounts payable and accrued expenses ........................ (1,425) (16,267)
Income taxes payable, net .................................... (144) 14
Pension liabilities .......................................... (2,200) 2,033
Gain on sale of assets ....................................... (3,229) --
Other, net ................................................... 1,890 1,278
--------- ---------
Net cash provided by (used in) operating activities .............. 18,504 (417)
INVESTING ACTIVITIES:
Purchase of property, plant and equipment ........................ (6,365) (7,642)
Exercise of stock options ........................................ 275 --
Proceeds from sale of assets ..................................... 29,400 --
--------- ---------
Net cash provided (used in) by investing activities .............. 23,310 (7,642)
FINANCING ACTIVITIES:
Proceeds from long-term obligations .............................. 107,477 139,059
Principle payments on long-term obligations ...................... (147,407) (145,702)
Other, net ....................................................... -- (672)
--------- ----------
Net cash used in financing activities ............................ (39,930) (7,315)
Effect of exchange rate changes on cash and cash equivalents ..... (999) (3,047)
--------- ----------
Increase (decrease) in cash and cash equivalents ................. 885 (18,421)
Cash and cash equivalents at beginning of period ................. 17,089 35,544
--------- ---------
Cash and cash equivalents at end of period ....................... $ 17,974 $ 17,123
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for interest ........................................... $ 10,406 $ 9,067
========= =========
Cash paid for income taxes ....................................... $ 3,223 $ 3,653
========= =========
</TABLE>
The Accompanying Notes to Consolidated Financial Statements are an Integral Part
of these Statements of Cash Flows.
5
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Wavetek Wandel Goltermann, Inc., (the "Company") is a leading global
designer, manufacturer, and marketer of a broad range of communications test
instruments used to develop, manufacture, install, and maintain
communications networks and equipment. The Company conducts its
communications test business, which addresses most sectors of the
communications test market, in four product areas: (1) telecom networks
(traditional voice/data transmissions and new multi-service networks), (2)
enterprise networks (local and wide-area network infrastructures), (3)
multimedia (cable television and digital video broadcast), and (4) wireless
(mobile telephony and data). These products provide comprehensive testing
solutions to a wide range of end users. The Company's high-end instruments
are used during the product development phase to stress test product
functionality and performance. Other products are used during the production
process to verify conformance to manufacturing specifications, while the
Company's enhanced portable field service tools enable field technicians to
quickly install, repair and maintain complex network infrastructures, as well
as validate service levels. The Company also provides distributed remote test
systems to many of its service provider customers, which allow such customers
to more efficiently utilize their network engineers to monitor and test
service levels. In addition, the Company provides repair, upgrade, and
calibration services, as well as value-added professional services such as
consulting and training on a worldwide basis.
The consolidated financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. The consolidated balance sheet as of September 30, 1999
has been taken from the audited financial statements as of that date. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. These consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto
included in the Company's latest annual report on Form 10-K for the fiscal year
ended September 30, 1999.
The consolidated financial statements included herein reflect all adjustments
(none of which are other than normal recurring accruals) which are, in the
opinion of management, necessary for a fair presentation of the information
included. All significant intercompany accounts and transactions have been
eliminated in consolidation. Interim results are not necessarily indicative of
results to be expected for the full year. For comparative purposes, certain
amounts have been reclassified to conform with the fiscal 2000 presentation.
2. NET INCOME (LOSS) PER SHARE
The Company computes earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, EARNINGS PER SHARE ("SFAS
128"). Basic net income (loss) per share is based only on average common
shares outstanding and excludes the dilutive effects of the Company's
outstanding stock options. Diluted net income (loss) per share includes the
dilutive effect of the Company's outstanding stock options. The Company has a
simple capital structure and, accordingly, the only difference in the
Company's computations of basic and diluted net income (loss) per share is
the dilutive effect of outstanding stock options. For the three and six
months ended March 31, 1999, the effect of outstanding stock options would
have been anti-dilutive and, therefore, was not considered in the computation
of diluted loss per share for such periods. All net income (loss) per share
amounts for all periods have been presented in accordance with the
requirements of SFAS 128.
6
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. FINANCIAL STATEMENT DETAILS
Inventories consist of the following:
<TABLE>
<CAPTION>
March 31, September 30,
2000 1999
---------- -------------
(dollars in thousands)
<S> <C> <C>
Materials ............... $17,919 $13,997
Work-in-progress ........ 14,718 18,172
Finished goods .......... 38,869 30,346
------- -------
$71,506 $62,515
========= =======
</TABLE>
4. OTHER COMPREHENSIVE INCOME (LOSS)
On October 1, 1998, the Company adopted SFAS No. 130, Reporting Comprehensive
Income, which established standards for reporting and displaying comprehensive
income (loss) and its components in a financial statement that is displayed with
the same prominence as other financial statements. Comprehensive income (loss)
includes net income (loss) and other comprehensive income (loss). The Company's
current and accumulated other comprehensive income (loss) as of and for the
three and six month periods ended March 31, 2000 and 1999 is comprised solely of
foreign currency translation adjustments.
Comprehensive income (loss) is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
------------------ ----------------
2000 1999 2000 1999
------- ------- ------ -------
(dollars in thousands)
<S> <C> <C> <C> <C>
Net income (loss) ...................... $ 3,022 $(3,215) $6,254 $(4,352)
Foreign currency translation adjustments (764) (345) 360 (671)
------- ------- ------ -------
Comprehensive income (loss) ............ $ 2,258 $(3,560) $6,614 $(5,023)
======= ======= ====== =======
</TABLE>
5. SEGMENT INFORMATION
Based on its organizational structure prior to January 2000, the Company
previously operated in two reportable segments: communications test and other
test products. The Company's communications test business includes telecom
networks, enterprise networks, multimedia, wireless and the service business. In
the second quarter of 2000, the Company divested itself of its other test
products business, which included test tools, precision measurement instruments,
and electromagnetic measurement instruments.
The Company's chief operating decision makers utilize revenue and operating
income (loss) information, as defined below, in assessing performance and making
overall operating decisions and resource allocations.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies.
7
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Information about the Company's operating segments for the three months ended
March 31, 2000 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
Communications Other Test Corporate/
Test Products Other Total
-------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues:
2000 ...................................... $124,592 $ 2,563 $ -- $127,155
1999 ...................................... 106,825 7,641 -- 114,466
Operating income (loss):
2000 (1) .................................. 10,764 333 562 11,659
1999 (1) .................................. 2,846 204 (1,735) 1,315
</TABLE>
Information about the Company's operating segments for the six months ended
March 31, 2000 and 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
Communications Other Test Corporate/
Test Products Other Total
-------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues:
2000 ...................................... $250,564 $12,167 $ -- $262,731
1999 ...................................... 226,090 14,842 -- 240,932
Operating income (loss):
2000 (1) .................................. 28,423 287 51 28,760
1999 (1) .................................. 14,176 937 (7,422) 7,691
Information about the Company's operating segments as of March 31, 2000 and
September 30, 1999 is as follows (in thousands):
</TABLE>
<TABLE>
<CAPTION>
Communications Other Test Corporate/
Test Products Other (2) Total
-------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Total Assets:
March 31, 2000 ............................ $117,619 $ 3,934 $275,931 $397,483
September 30, 1999 ........................ 129,426 6,749 298,558 434,733
</TABLE>
Notes:
(1) Operating income (loss) on reportable segments is defined by management as
operating income (loss), including intersegment profits, and excluding
amortization of intangible assets and restructuring and other non-recurring
charges.
(2) Corporate/Other assets include purchased intangible assets and investments
in subsidiaries at March 31, 2000 and September 30, 1999 totaling $203,433
and $237,499, respectively.
8
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
6. SALE OF PRECISION MEASUREMENT AND TEST TOOLS DIVISIONS
In January 2000, the Company completed the sale of its precision measurement
and test tools divisions to Fluke Electronics Corporation, a subsidiary of
Danaher Corporation. It was determined that these businesses were not a
strategic fit with the Company's core communications test business. Sales for
the three months ended December 31, 1999 amounted to $8.8 million and fiscal
year 1999 sales totaled $25.8 million. There were no significant gains or
losses realized on the sale of these two divisions.
7. SALE OF SAFETY TEST SOLUTION BUSINESS
In February 2000, the Company completed the sale of its safety test solution
business to L-3 Communications Corporation. It was determined that this
business was not a strategic fit with the Company's core communications test
business. Sales for the three months ended December 31, 1999 amounted to $.8
million and fiscal year 1999 sales totaled $4.4 million. Sales from January
1, 2000 to the closing date of the sale were immaterial. The gain realized
on the sale was approximately $3.2 million.
8. MERGER WITH DYNATECH CORPORATION
On February 14, 2000, the Company, Dynatech corporation, a Delaware
corporation ("Dynatech"), and DWW Acquisition Corporation, a Delaware
corporation and indirect subsidiary of Dynatech ("Mergerco"), entered into an
Agreement and Plan of Merger pursuant to which Mergerco would merge with the
Company, with the Company as the surviving corporation. The merger is subject
to customary closing conditions, including obtaining applicable competition
law approvals. In the merger, at the election of holders of the Company's
common stock, such holders will be entitled to receive with respect to each
share of common stock of the Company (i) $25.00 or (ii) 4.49 shares of common
stock of Dynatech. The aggregate transaction value is approximately $600
million, which includes approximately $224 million of the Company's
indebtedness.
The merger will constitute a change in control with respect to the Company's
10.125% Senior Subordinated Notes due June 14, 2007. As a result, the Company
will be obligated to send to the holders of the notes within ten days
following the closing of the merger an offer to purchase the notes at 101% of
their principal amount. Such offer must specify a day not less than 30 and
not more than 60 days from the date the Company's notice mailed on which the
Company will purchase all notes tendered to the Company. On March 14, 2000,
the Company launched a tender offer to repurchase all of the outstanding
notes. The tender offer for the notes is conditioned upon the closing of the
merger.
In connection with the merger, Dynatech intends to enter into a new
multi-currency senior credit facility with a syndicate of banks for an
aggregate principal amount of approximately $860 million including revolver
and term loans, and to sell newly-issued common stock to Clayton, Dubilier &
Rice Fund V Limited Partnership ("Fund V"), Dynatech's controlling
stockholder, and Clayton Dublier & Rice Fund VI Limited Partnership ("Fund
VI"), an affiliate of Dynatech's controlling stockholder, at a price per
share of $4.00. In addition, Dynatech expects to make a rights offering to
the Company's other stockholders to purchase newly issued shares at the same
price per share offered to Fund V and Fund VI.
The Company anticipates the customary closing conditions, including obtaining
applicable competition law approvals will be finalized by late May 2000 and
the Company estimates that the closing of the merger will occur shortly
thereafter.
Peter Wagner, the Company's Chief Executive Officer, has indicated that he will
remain with the Company through the closing of the Merger with Dynatech.
However, Mr. Wagner has accepted employment with another company as of June 1,
2000. In the event that the Merger is not consummated by such time, the Company
will appoint an interim Chief Executive Officer or make other interim
arrangements.
9
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA
The Company's payment obligations under its 10.125% Senior Subordinated Notes
are guaranteed by all of the Company's current and future domestic
subsidiaries (collectively, the "Subsidiary Guarantors"). WGTI, Wandel &
Goltermann ATE Systems, Inc., and Wavetek U.S. Inc. and its subsidiary,
Digital Transport Systems, Inc. are shown as Subsidiary Guarantors for all
periods presented. Such guarantees are full and unconditional and joint and
several. Separate financial statements of the Subsidiary Guarantors are not
presented because the Company's management has deemed that they would not be
material to investors. The following supplemental condensed consolidating
financial data sets forth, on an unconsolidated basis, balance sheets,
statements of operations, and statements of cash flows data for (i) the
Company (Wavetek Wandel Goltermann, Inc., formerly Wavetek Corporation, the
issuer of the Notes), (ii) the current Subsidiary Guarantors, and (iii) the
Company's foreign subsidiaries (the "Foreign Subsidiaries"). The supplemental
financial data reflects the investments of the Company in the Subsidiary
Guarantors and the Foreign Subsidiaries using the equity method of accounting.
10
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING BALANCE SHEETS
AS OF MARCH 31, 2000
(DOLLARS AND SHARES IN THOUSANDS)
<TABLE>
<CAPTION>
Wavetek Wandel
Goltermaun Subsidiary Foreign
Inc. Guarantors Subsidiaries Eliminations Consolidated
-------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 663 $ 4,424 $ 12,887 $ - $ 17,974
Accounts receivable (less allowance for
doubtful accounts of $4,071)................. 44,998 62,503 79,405 (94,793) 92,113
Inventories.................................... - 19,161 57,564 (5,219) 71,506
Deferred income taxes.......................... 2,912 3,932 (876) 499 6,467
Other current assets........................... 57 1,009 12,931 - 13,997
-------------- ---------- ------------ ------------ ------------
Total current assets.............................. 48,630 91,029 161,911 (99,513) 202,057
Property, plant and equipment, net................ 1,322 7,266 44,478 - 53,066
Intangible assets, net............................ 5,922 100,875 30,106 - 136,903
Investment in subsidiaries........................ 166,712 - - (166,712) -
Other non-current assets.......................... 3 (434) 2,618 3,270 5,457
-------------- ---------- ------------ ------------ ------------
Total assets...................................... $ 222,589 $ 198,736 $ 239,113 $ (262,955) $ 397,483
============== ========== ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.................................. $ - $ - $ 9,094 $ - $ 9,094
Current portion of long-term obligations .... - 633 4,446 - 5,079
Current portion of long-term obligations to
related parties ............................. - - 9,582 - 9,582
Trade payables................................. 31,105 28,127 62,870 (87,795) 34,307
Accrued compensation........................... 1,195 4,551 17,065 - 22,811
Income taxes payable........................... (21,650) 21,419 4,336 - 4,105
Other current liabilities...................... 3,814 8,122 32,667 (2,320) 42,283
------------- --------- ----------- ----------- ----------
Total current liabilities......................... 14,464 62,852 140,060 (90,115) 127,261
Long-term obligations, net of current portion..... 172,565 1,626 29,323 (3,572) 199,942
Pension liabilities............................... - 203 33,252 - 33,455
Deferred income taxes............................. (519) 22,662 (15,696) (2,029) 4,418
Other non-current liabilities..................... - 2,140 5,442 - 7,582
-------------- ---------- ------------ ------------ ----------
Total liabilities 186,510 89,483 192,381 (95,716) 372,658
-------------- ---------- ------------ ------------ ------------
Commitments and contingencies Stockholders' equity:
Common stock................................... 133 - (1,466) 1,466 133
Additional paid-in capital..................... 73,222 171,122 85,506 (256,628) 73,222
Accumulated deficit............................ (59,386) (61,841) (33,946) 95,786 (59,387)
Other comprehensive income (loss).............. 22,110 (28) (3,362) (7,863) 10,857
-------------- ---------- ------------ ------------ ------------
Total stockholders' equity........................ 36,079 109,253 46,732 (167,239) 24,825
-------------- ---------- ------------ ------------ ------------
Total liabilities and stockholders' equity........ $222,589 $ 198,736 $ 239,113 $ (262,955) $ 397,483
============== ========== ============ ============ ============
</TABLE>
11
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING BALANCE SHEETS
AS OF SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Wavetek Wandel
Goltermaun Subsidiary Foreign
Inc. Guarantors Subsidiaries Eliminations Consolidated
-------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................... $ 11 $ 4,578 $ 12,500 $ - $ 17,089
Accounts receivable (less allowance for
doubtful accounts of $4,608)................. 42,956 46,715 87,312 (74,451) 102,532
Inventories.................................... - 13,884 52,388 (3,757) 62,515
Deferred income taxes.......................... 561 4,482 3,879 - 8,922
Other current assets........................... 156 1,917 11,563 - 13,636
-------------- ---------- ------------ ------------ ----------
Total current assets.............................. 43,684 71,576 167,642 (78,208) 204,694
Property, plant and equipment, net................ 1,361 8,013 51,201 - 60,575
Intangible assets, net............................ 5,617 110,170 46,695 - 162,482
Investment in subsidiaries........................ 167,992 - - (167,992) -
Other non-current assets.......................... 6 1,988 4,988 - 6,982
-------------- ---------- ------------ ------------ ----------
Total assets...................................... $ 218,660 $ 191,747 $ 270,526 $ (246,200) $ 434,733
============== ========== ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.................................. $ - $ - $ 17,510 $ - $ 17,510
Current portion of long-term obligations ...... - 685 5,517 - 6,202
Current portion of long-term obligations to
related parties - - 10,721 - 10,721
Trade payables................................. 17,236 17,322 61,873 (64,882) 31,549
Accrued compensation........................... 396 6,734 19,496 - 26,626
Income taxes payable........................... (18,986) 18,978 4,258 - 4,250
Other current liabilities...................... 4,516 5,786 28,536 - 38,838
-------------- ---------- ------------ ------------ ----------
Total current liabilities......................... 3,162 49,505 147,911 (64,882) 135,696
Long-term obligations, net of current portion..... 198,080 7,784 31,695 (9,476) 228,083
Pension liabilities............................... - - 35,671 - 35,671
Deferred income taxes............................. (519) 19,953 (11,477) - 7,957
Other non-current liabilities..................... - 4,088 5,301 - 9,389
-------------- ---------- ------------ ------------ ----------
Total liabilities 200,723 81,330 209,101 (74,358) 416,796
-------------- ---------- ------------ ------------ ------------
Commitments and contingencies Stockholders' equity:
Common stock................................... 132 - - - 132
Additional paid-in capital..................... 72,948 171,121 87,187 (258,308) 72,948
Accumulated deficit............................ (65,641) (60,682) (36,282) 96,964 (65,641)
Other comprehensive income (loss).............. 10,498 (22) 10,520 (10,498) 10,498
-------------- ---------- ------------ ------------ ------------
Total stockholders' equity........................ 17,937 110,417 61,425 (171,842) 17,937
-------------- ---------- ------------ ------------ ------------
Total liabilities and stockholders' equity........ $218,660 $ 191,747 $ 270,526 $ (246,200) $434,733
============== ========== ============ ============ ============
</TABLE>
12
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Wavetek Wandel
Goltermaun Subsidiary Foreign
Inc. Guarantors Subsidiaries Eliminations Consolidated
-------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ - $ 46,224 $ 100,851 $ (19,920) $127,155
Cost of goods sold................................ - 21,908 47,534 (19,008) 50,434
-------------- ---------- ------------ ------------ ------------
Gross margin...................................... - 24,316 53,317 (912) 76,721
Operating expenses:
Marketing and selling.......................... 552 9,764 25,658 - 35,974
Research and development....................... - 5,881 12,573 - 18,454
General and administrative..................... 17 3,148 7,469 - 10,634
Amortization of intangible assets.............. (52) 2,993 1,108 - 4,049
Provisions for restructuring operations and
other non-recurring charges 521 779 641 (289) 1,652
-------------- ---------- ------------ ------------ ----------
Total operating expenses.................... 1,038 22,565 47,449 (289) 70,763
-------------- ---------- ------------ ------------ ------------
Operating income (loss)........................... (1,038) 1,751 5,868 (623) 5,958
Other (income) expense, net:
Interest income................................ (514) (174) (133) 514 (307)
Interest expense............................... 3,260 264 1,596 (514) 4,606
Equity in net (income) loss of subsidiaries..
Other, net..................................... (386) 85 (5,321) 1,788 (3,834)
-------------- ---------- ------------ ------------ ------------
Other (income) expense, net................. 2,360 175 (3,858) 1,788 465
-------------- ---------- ------------ ------------ ------------
Income (loss) before provision (benefit) for
income taxes ................................... (3,398) 1,576 9,726 (2,411) 5,493
Provision (benefit) for income taxes.............. (6,420) (128) 6,800 2,219 2,471
-------------- ---------- ------------ ------------ ------------
Net income (loss)................................. 3,022 1,704 2,926 (4,630) 3,022
============== ========== ============ ============ ============
</TABLE>
13
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Wavetek
Wandel
Goltermaun Subsidiary Foreign
Inc. Guarantors Subsidiaries Eliminations Consolidated
-------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ - $ 36,025 $ 94,383 $ (15,942) $ 114,466
Cost of goods sold................................ 11 17,274 47,122 (16,480) 47,927
-------------- ---------- ------------ ------------ ------------
Gross margin...................................... (11) 18,751 47,261 538 66,539
Operating expenses:
Marketing and selling.......................... 487 8,994 25,434 - 34,915
Research and development....................... 2 5,846 12,923 - 18,771
General and administrative..................... 1,824 2,388 7,326 - 11,538
Amortization of intangible assets.............. 85 3,008 1,781 - 4,874
-------------- ---------- ------------ ------------ ------------
Total operating expenses................... 2,398 20,236 47,464 - 70,098
-------------- ---------- ------------ ------------ ------------
Operating income (loss)........................... (2,409) (1,485) (203) 538 (3,559)
Other (income) expense, net:
Interest income................................ (305) (85) (157) 305 (242)
Interest expense............................... 3,694 153 1,702 (305) 5,244
Equity in net (income) loss of subsidiaries.... (439) - - 439 -
Other, net..................................... (558) (35) 963 - 370
-------------- ---------- ------------ ------------ ------------
Other (income) expense, net................ 2,392 33 2,508 439 5,372
-------------- ---------- ------------ ------------ ------------
Income (loss) before provision (benefit) for
income taxes ................................... (4,801) (1,518) (2,711) 99 (8,931)
Provision (benefit) for income taxes.............. (1,586) (112) 2,024 (6,042) (5,716)
-------------- ---------- ------------ ------------ ------------
Net income (loss)................................. $ (3,215) $ (1,406) $ (4,735) $ 6,141 $ (3,215)
============== ========== ============ ============ ============
</TABLE>
14
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Wavetek
Wandel
Goltermaun Subsidiary Foreign
Inc. Guarantors Subsidiaries Eliminations Consolidated
-------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ - $ 92,877 $209,460 $ (39,606) $ 262,731
Cost of goods sold................................ - 43,587 97,985 (38,144) 103,428
-------------- ---------- ------------ ------------ ------------
Gross margin...................................... - 49,290 111,475 (1,462) 159,303
Operating expenses:
Marketing and selling.......................... 1,082 19,502 52,458 - 73,042
Research and development....................... - 11,566 24,665 - 36,231
General and administrative..................... 306 6,497 14,467 - 21,270
Amortization of intangible assets.............. (73) 6,080 2,481 - 8,488
Provisions for non-recurring charges........... 521 783 1,005 (289) 2,020
-------------- ---------- ------------ ------------ ------------
Total operating expenses................... 1,836 44,428 95,076 (289) 141,051
-------------- ---------- ------------ ------------ ------------
Operating income (loss)........................... (1,836) 4,862 16,399 (1,173) 18,252
Other (income) expense, net:
Interest income................................ (1,031) (199) (368) 1,031 (567)
Interest expense............................... 7,201 541 3,257 (1,031) 9,968
Equity in net (income) loss of subsidiaries.... (5,105) - - 5,105 -
Other, net..................................... 87 338 (4,735) 1,788 (2,522)
-------------- ---------- ------------ ------------ ------------
Other (income) expense, net................ 1,152 680 (1,846) 6,893 6,879
-------------- ---------- ------------ ------------ ------------
Income (loss) before provision (benefit) for
income taxes ................................... (2,988) 4,182 18,245 (8,066) 11,373
Provision (benefit) for income taxes.............. (9,242) 1,567 11,572 1,222 5,119
-------------- ---------- ------------ ------------ ------------
Net income (loss)................................. 6,254 2,615 6,673 (9,288) 6,254
============== ========== ============ ============ ============
</TABLE>
15
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Wavetek
Wandel
Goltermaun Subsidiary Foreign
Inc. Guarantors Subsidiaries Eliminations Consolidated
-------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ - $ 74,859 $ 198,864 $ (32,792) $ 240,931
Cost of goods sold................................ 39 38,032 95,829 (31,338) 102,562
-------------- ---------- ------------ ------------ ------------
Gross margin...................................... (39) 36,827 103,035 (1,454) 138,369
Operating expenses:
Marketing and selling.......................... 1,512 18,054 50,871 - 70,437
Research and development....................... 2 11,189 25,424 - 36,615
General and administrative..................... 2,885 5,377 15,364 - 23,626
Amortization of intangible assets.............. 121 6,016 3,553 - 9,690
-------------- ---------- ------------ ------------ ------------
Total operating expenses................... 4,520 40,636 95,212 - 140,368
-------------- ---------- ------------ ------------ ------------
Operating income (loss)........................... (4,559) (3,809) 7,823 (1,454) (1,999)
Other (income) expense, net:
Interest income................................ (339) (135) (306) 305 (475)
Interest expense............................... 6,563 293 3,884 (305) 10,435
Equity in net (income) loss of subsidiaries.... (2,451) - 1,452 999 -
Other, net..................................... (693) (288) 1,112 - 131
-------------- ---------- ------------ ------------ ------------
Other (income) expense, net................ 3,080 (130) 6,142 999 10,091
-------------- ---------- ------------ ------------ ------------
Income (loss) before provision (benefit) for
income taxes.................................... (7,639) (3,679) 1,681 (2,453) (12,090)
Provision (benefit) for income taxes.............. (3,287) 119 5,979 (10,549) (7,738)
-------------- ---------- ------------ ------------ ------------
Net income (loss)................................. $ (4,352) $ (3,798) $ (4,298) $ 8,096 $ (4,352)
============== ========== ============ ============ ============
</TABLE>
16
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Wavetek
Wandel
Goltermaun Subsidiary Foreign
Inc. Guarantors Subsidiaries Eliminations Consolidated
-------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating
activities.................................... $ (764) $ 6,795 $ 12,473 $ - $ 18,504
INVESTING ACTIVITIES
Purchase of property and equipment.............. (230) (1,209) (4,926) - (6,365)
-------------- ---------- ------------ ------------ ------------
Net cash provided by (used in) investing
activities.................................... 25,345 (8,024) 5,989 - 23,310
FINANCING ACTIVITIES
Proceeds from long-term obligations............. 95,077 - 12,400 - 107,477
Principal payments on long-term obligations..... (119,007) - (28,400) - (147,407)
Capital contribution from Wavetek Wandel
Goltermann, Inc. to subsidiary................ - 650 (650) - -
Loans to subsidiaries from Wavetek Wandel
Goltermann, Inc. ............................. (1,461) - 1,461 - -
Repayment of loan from subsidiary to Wavetek
Wandel Golterman Inc. ........................ 297 (26) (271) - -
Repayment of loans from subsidiaries............ (1,575) - 1,575 - -
Other, net...................................... 2,739 451 (3,190) - -
-------------- ---------- ------------ ------------ ------------
Net cash provided by (used in) financing
activities ................................... (23,930) 1,075 (17,075) - (39,930)
Effect of exchange rate changes on cash and
cash equivalets .............................. - - (999) - (999)
-------------- ---------- ------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents .................................. 652 (154) 387 - 885
Cash and cash equivalents at beginning of
period ....................................... 11 4,578 12,500 - 17,089
-------------- ---------- ------------ ------------ ------------
Cash and cash equivalents at end of period...... 663 4,424 12,887 - 17,974
============== ========== ============ ============ ============
</TABLE>
17
<PAGE>
WAVETEK WANDEL GOLTERMANN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
9. SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL DATA (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Wavetek
Wandel
Goltermaun Subsidiary Foreign
Inc. Guarantors Subsidiaries Eliminations Consolidated
-------------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating
activities ................................... $(23,865) $ 22,301 $ 1,147 $ - $ (417)
INVESTING ACTIVITIES
Purchase of property and equipment.............. (264) (1,588) (5,790) - (7,642)
Transfer of subsidiaries (28,536) - 28,536 - -
-------------- ---------- ------------ ------------ ------------
Net cash provided by (used in) investing
activities ................................... (28,800) (1,588) 22,746 - (7,642)
FINANCING ACTIVITIES
Proceeds from long-term obligations............. 107,352 1,402 30,305 - 139,059
Principal payments on long-term obligations..... (59,408) (1,775) (84,519) - (145,702)
Dividend from subsidiary to Wavetek Wandel
Goltermann, Inc. ............................. 22,000 (22,000)
Capital contribution from Wavetek Wandel
Goltermann, Inc. to subsidiary ............... (2,034) - 2,034 - -
Loans to subsidiaries from Wavetek Wandel
Goltermann, Inc. ............................. (36,078) 6,203 29,875 - -
Repayment of loan from subsidiary to Wavetek
Wandel Goltermann, Inc. ...................... 28,996 (28,996) - - -
Repayment of loans from subsidiaries............ (7,500) (1,818) 9,318 - -
Other, net...................................... (672) - - - (672)
-------------- ---------- ------------ ------------ ------------
Net cash provided by (used in) financing
activities ................................... 52,656 (46,984) (12,987) - (7,315)
Effect of exchange rate changes on cash and
cash equivalents ............................. - - (3,047) - (3,047)
-------------- ---------- ------------ ------------ ------------
Increase (decrease) in cash and cash
equivalents .................................. (9) (26,271) 7,859 - (18,421)
Cash and cash equivalents at beginning of
period ....................................... 19 31,143 4,382 - 35,544
-------------- ---------- ------------ ------------ ------------
Cash and cash equivalents at end of period...... $ 10 $ 4,872 $ 12,241 $ - $ 17,123
============== ========== ============ ============ ============
</TABLE>
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
consolidated financial statements included in Item 1 herein.
GENERAL
The Company is a leading global designer, manufacturer, and marketer of a
broad range of communications test instruments used to develop, manufacture,
install, and maintain communications networks and equipment. The Company
conducts its communications test business, which addresses most sectors of
the communications test market, in four product areas: (1) telecom networks
(traditional voice/data transmissions and new multi-service networks), (2)
enterprise networks (local and wide-area network infrastructures), (3)
multimedia (cable television and digital video broadcast), and (4) wireless
(mobile telephony and data). These products provide comprehensive testing
solutions to a wide range of end users. The Company's high-end instruments
are used during the product development phase to stress test product
functionality and performance. Other products are used during the production
process to verify conformance to manufacturing specifications, while the
Company's enhanced portable field service tools enable field technicians to
quickly install, repair, and maintain complex network infrastructure, as well
as validate service levels. The Company also provides distributed remote test
systems to many of its service provider customers, which allow such customers
to more efficiently utilize their network engineers to monitor and test
service levels. In addition, the Company provides repair, upgrade, and
calibration services, as well as value-added professional services such as
consulting, training an rental services on a worldwide basis.
The Company sells its products to a broad base of over 5,000 customers
worldwide, including (1) global communications equipment manufacturers such
as Alcatel, 3Com, Cisco Systems, Ericsson, IBM, Lucent Technologies,
Motorola, NCR Corporation, Nokia, Nortel and Siemens, (2) communications
service providers such as AT&T/TCI, Bell South, Continental Cablevision,
Deutsche Telekom and Time Warner Cable and (3) the information service
departments of corporations and governmental entities such as Boeing,
DaimlerChrysler and the U.S. Navy. The Company's sales are also diversified
geographically.
The Company sells and services its products through (1) its global sales and
service organization of over 800 employees in over 25 countries and (2) a
global network of over 250 distributors, resellers and independent
representatives, which together provide the Company with a sales and service
presence in over 85 countries. The Company has design and manufacturing
capabilities through 11 facilities located in the United States, Germany,
France, the United Kingdom, Switzerland and Brazil.
The Company's operating expenses are substantially impacted by marketing and
selling activities, as well as by research and development activities.
Marketing and selling expenses are primarily driven by: (1) sales volume,
with respect to sales force expenses and commission expenses, (2) the extent
of market research activities for new product design efforts, (3) advertising
and trade show activities and (4) the number of new products launched in the
period. In recent periods, the Company has increased its spending on research
and development activities primarily to accelerate the timing of new product
introductions. General and administrative expenses primarily include costs
associated with the Company's administrative employees, facilities, and
functions. The Company incurs expenses in foreign countries primarily in the
functional currencies of such locations. As a result of the Company's
substantial international operations, the United States dollar amount of its
expenses is impacted by changes in foreign currency exchange rates. The
Company's ability to maintain and grow its sales depends on a variety of
factors, including its ability to maintain its competitive position in areas
such as technology, performance, price, brand identity, quality, reliability,
distribution, and customer service and support, and its ability to continue
to introduce new products that respond to technological change and market
demand in a timely manner.
19
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth selected financial information as a percentage
of sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------- --------------------------
2000 1999 2000 1999
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Sales..................................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........................................ 39.7 41.9 39.4 42.6
----------- ------------- ----------- -----------
Gross margin.............................................. 60.3 58.1 60.6 57.4
Operating expenses........................................ 55.6 61.2 53.7 58.2
----------- ------------- ----------- -----------
Operating income (loss)................................... 4.7 (3.1) 6.9 (0.8)
Interest expense, net..................................... 3.4 4.4 3.6 4.1
Other (income) expense, net............................... (3.0) 0.3 (1.0) 0.1
----------- ------------- ----------- -----------
ncome (loss) before provision (benefit) for income
taxes.................................................... 4.3 (7.8) 4.3 (5.0)
Provision (benefit) for income taxes...................... 1.9 (5.0) 1.9 (3.2)
----------- ------------- ----------- -----------
Net income (loss)......................................... 2.4% (2.8)% 2.4% (1.8)%
=========== ============= =========== ===========
EBITDA (1) 11.1% 4.7% 13.2% 7.5%
=========== ============= =========== ===========
</TABLE>
The Company's ratio of earnings to fixed charges was as follows for the periods
indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
---------------------------- --------------------------
2000 1999 2000 1999
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges (2).................. 2.0x (0.5)x 2.0x 0.0x
</TABLE>
(1) EBITDA, as defined in the Indenture related to the Company's 10.125%
Senior Subordinated Notes due June 15, 2007 (the "Indenture"), is
operating income plus depreciation and amortization expense, acquired
in-process research and development and provisions for restructuring
operations and other non-recurring charges. While EBITDA should not be
construed as a substitute for income from operations, net income, or
cash flows from operating activities in analyzing the Company's
operating performance, financial position or cash flows, the Company
has included EBITDA because it may be viewed as an indicator of
compliance with certain covenants in the Indenture and is commonly
used by certain investors and analysts to analyze and compare
companies on the basis of operating performance, leverage, and
liquidity and to determine a company's ability to service debt.
EBITDA, as presented by the Company herein, may not be comparable to
similarly titled measures reported by other companies. In addition,
the amount reported by the Company as EBITDA may not be fully
available for management's discretionary use due to the Company's
needs to conserve funds for debt service, capital expenditures and
other commitments.
(2) For purposes of computing this ratio, earnings consist of income
(loss) before provision (benefit) for income taxes plus fixed charges.
Fixed charges consist of interest expense and one-third of the rent
expense from operating leases, which management believes is a
reasonable approximation of the interest factor of the rent.
20
<PAGE>
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31,
1999
NET SALES. Net sales in the three months ended March 31, 2000 increased $12.7
million, or 11.1%, to $127.2 million from $114.5 million in the comparable
fiscal 1999 period. This increase is primarily due to an increase in cable
television product shipments as a result of strong infrastructure investments
by cable television operators, an increase in transport test product
shipments due to new product features offered to the customer, and increases
in both the wireless and fiber optic businesses. As a result, there was an
increase in sales to customers in the United States of $9.1 million, or
35.3%, to $35.1 million while international sales increased $3.5 million, or
4.0%, to $92.1 million in comparison to the three months ended March 31,
1999. The Company's sales to customers outside the United States decreased to
72.4% of total sales in the three months ended March 31, 2000 from 77.4% in
the comparable fiscal 1999 period. Changes in certain foreign exchange rates
had a $2.9 million or 2.3% unfavorable impact on the United States dollar
equivalent of the Company's sales denominated in foreign currencies in the
three months ended March 31, 2000. Sales of the Company's communications test
products in the three months ended March 31, 2000 increased $17.8 million, or
17.5%, from the comparable fiscal 1999 period to $119.0 million also, which
increase was primarily due to the increase in cable television, transport,
wireless and fiber optic product shipments. Sales of the Company's other test
products decreased $5.1 million, or 66.5%, from the comparable fiscal 1999
period to $2.6 million due primarily to the divestiture of the precision
measurement and test tools divisions, and the safety test solution business
in 2000.
GROSS MARGIN. The Company's gross margin in the three months ended March 31,
2000 increased $10.2 million, or 15.3%, to $76.7 million from $66.5 million
in the comparable fiscal 1999 period primarily due to the impact of change in
product mix. Gross margin as a percentage of sales increased to 60.3% in the
three months ended March 31, 2000 from 58.1% in the comparable fiscal 1999
period. Changes in foreign exchange rates had a $2.3 million or 3.0%
unfavorable impact on the United States dollar equivalent of gross margins
related to international sales denominated in foreign currencies in the three
months ended March 31, 2000.
OPERATING EXPENSES. Operating expenses in the three months ended March 31,
2000 increased slightly in comparison to the three months ended March 31,
1999. Operating expenses as a percentage of sales decreased to 55.6% in the
three months ended March 31, 2000 from 61.2% in the comparable fiscal 1999
period. Marketing and selling expenses increased $1.1 million, or 3.2%, to
$36.0 million in the three months ended March 31, 2000 from $34.9 million in
the comparable fiscal 1999 period due primarily to increased spending related
to certain market development resources and fixed selling expenses. General
and administrative expenses decreased $0.9 million, or 7.8%, to $10.6 million
in the three months ended March 31, 2000 from $11.5 million in the comparable
fiscal 1999 period due primarily to non-recurring employee retention and
compensation expenses at March 31, 1999 related to the exchange transaction
between Wavetek Corporation and Wandel & Goltermann Management Holding GmbH.
Restructuring and other non-recurring charges increased $1.7 million, or 100%
in the three months ended March 31, 2000 from $0.0 in the comparable fiscal
1999 period due primarily to restructuring charges for the shut down of
operating locations. Changes in foreign exchange rates had a $1.3 million or
17.3% unfavorable impact on the United States dollar equivalent of operating
expenses denominated in foreign currencies in the three months ended March
31, 2000.
OTHER (INCOME) EXPENSE, NET. Other (income) expense, net, in the three
months ended March 31, 2000 decreased by $4.9 million over the comparable
fiscal 1999 period to $0.5 million. The decrease was primarily due to the
gain on sale of the safety test solution business during the three months
ended March 31, 2000.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company's effective tax rate
decreased to approximately 45% in the three months ended March 31, 2000, from
approximately 64% in the comparable fiscal 1999 period. The Company's
effective tax rate takes into account the expected annual mix of income and
related tax rates by geographical location. Such effective rate also reflects
the non-deductibility of the amortization expense related to certain
intangible assets and other expenses related to the Exchange Transaction.
NET INCOME (LOSS). As a result of the above factors, net income (loss) was
$3.0 million in the three months ended March 31, 2000 as compared to ($3.2)
million in the comparable fiscal 1999 period.
21
<PAGE>
SIX MONTHS ENDED MARCH 31, 2000 COMPARED TO SIX MONTHS ENDED MARCH 31, 1999
NET SALES. Net sales in the six months ended March 31, 2000 increased $21.8
million, or 9.0%, to $262.7 million from $240.9 million in the comparable
fiscal 1999 period. This increase is primarily due to an increase in cable
television product shipments as a result of strong infrastructure investments
by cable television operators, an increase in transport test product
shipments due to new product features offered to the customer, and increases
in both the wireless and fiber optic businesses. As a result, there was an
increase in sales to customers in the United States of $16.4 million, or
30.6%, to $70.2 million while international sales increased $5.4 million, or
2.9%, to $192.5 million in comparison to the six months ended March 31, 1999.
The Company's sales to customers outside the United States decreased to 73.3%
of total sales in the six months ended March 31, 2000 from 77.7% in the
comparable fiscal 1999 period. Changes in certain foreign exchange rates had
a $3.2 million or 1.2% unfavorabl impact on the United States dollar
equivalent of the Company's sales denominated in foreign currencies in the
six months ended March 31, 2000. Sales of the Company's communications test
products in the six months ended March 31, 2000 increased $24.0 million, or
11.2%, from the comparable fiscal 1999 period to $238.3 million, which
increase was also primarily due to the increase in cable television,
transport, wireless and fiber optic product shipments. Sales of the Company's
other test products decreased $2.7 million, or 18.0%, from the comparable
fiscal 1999 period to $12.2 million due primarily to the divestiture of the
precision measurement and test tools divisions, and the safety test solution
business in 2000.
GROSS MARGIN. The Company's gross margin in the six months ended March 31,
2000 increased $20.9 million, or 15.1%, to $159.3 million from $138.4 million
in the comparable fiscal 1999 period primarily due to the impact of change in
product mix. Gross margin as a percentage of sales increased to 60.6% in the
six months ended March 31, 2000 from 57.4% in the comparable fiscal 1999
period. Changes in foreign exchange rates had a $2.7 million or 1.66%
unfavorable impact on the United States dollar equivalent of gross margins
related to international sales denominated in foreign currencies in the six
months ended March 31, 2000.
OPERATING EXPENSES. Operating expenses in the six months ended March 31, 2000
increased slightly in comparison to the six months ended March 31, 1999.
Operating expenses as a percentage of sales decreased to 53.7% in the six
months ended March 31, 2000 from 58.2% in the comparable fiscal 1999 period.
Marketing and selling expenses increased $2.6 million, or 3.7%, to $73.0
million in the six months ended March 31, 2000 from $70.4 million in the
comparable fiscal 1999 period due primarily to a one-time purchase price
reclassification between operating expense accounts at March 31, 1999 related
to the exchange transaction between Wavetek Corporation and Wandel &
Goltermann Management Holding GmbH, and increased spending related to certain
market development resources and fixed selling expenses. General and
administrative expenses decreased $2.4 million, or 10.2%, to $21.3 million in
the six months ended March 31, 2000 from $23.6 million in the comparable
fiscal 1999 period due primarily to a one-time purchase price
reclassification between operating expense accounts and non-recurring
retention and compensation expenses at March 31, 1999 related to the exchange
transaction between Wavetek Corporation and Wandel & Goltermann Management
Holding GmbH. Restructuring and other non-recurring charges increased $2.0
million, or 100% in the six months ended March 31, 2000 from $0.0 in the
comparable fiscal 1999 period due primarily to restructuring charges for the
shut down of operating locations. Changes in foreign exchange rates had a
$1.9 million or 9.42% unfavorable impact on the United States dollar
equivalent of operating expenses denominated in foreign currencies in the six
months ended March 31, 2000.
OTHER (INCOME) EXPENSE, NET. Other (income) expense, net, in the six months
ended March 31, 2000 decreased by $3.2 million over the comparable fiscal
1999 period to $6.9 million. The decrease was primarily due to the gain on
sale of the safety test solution business during the three months ended March
31, 2000.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company's effective tax rate
decreased to approximately 45% in the six months ended March 31, 2000, from
approximately 64% in the comparable fiscal 1999 period. The Company's
effective tax rate takes into account the expected annual mix of income and
related tax rates by geographical location. Such effective rate also reflects
the non-deductibility of the amortization expense related to certain
intangible assets and other expenses related to the Exchange Transaction.
NET INCOME (LOSS). As a result of the above factors, net income (loss) was
$6.3 million in the six months ended March 31, 2000 as compared to ($4.4)
million in the comparable fiscal 1999 period.
22
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash provided by operating activities of $18.5 million for the
six months ended March 31, 2000 included net income of $6.3 million, and
non-cash charges of $14.4 million in depreciation and amortization expense,
$2.0 million in restructuring and other non-recurring charges, and ($1.1)
million in deferred income taxes. In addition, the changes in operating
assets and liabilities during the six months ended March 31, 2000 produced a
negative cash flow of $3.1 million. This was primarily due to the gain on sale
of the safety test solution business.
The Company's net cash provided by investing activities was $23.3 million for
the six months ended March 31, 2000. This was primarily due to proceeds of
$29.4 million from the sale of the precision measurement and test tools
divisions and the safety test solutions business. The Company's net cash used
in financing activities was $39.9 million for the six months ended March 31,
2000, which represented the net effect of payments on borrowings of $147.4
million and new borrowings of $107.5 million from its credit agreements and
the multi-currency revolving credit facility and bilateral ancillary
facilities.
The Company invests its excess cash in highly liquid money market funds, U.S.
Treasury obligations and investment grade commercial paper. In recent years,
the Company has funded its business through operating cash flow, has not
relied on sales of equity to provide cash, and has used short-term debt
primarily for cash management purposes. The Company had borrowings
outstanding under revolving credit agreements of $129.1 million at March 31,
2000, including amounts borrowed for working capital requirements, of which
$9.1 million was classified as short-term. The Company also has contingent
obligations outstanding totaling approximately $6.5 million in the form of
letters of credit and bank guarantees. The Company's total credit lines
provide for total availability of $158.4 million. At March 31, 2000, the
Company had approximately $26.7 million available under these facilities. The
reduction in the funds available of $41.6 million from September 30, 1999 to
March 31, 2000 is primarily due to a reduction in the credit limits
associated with our credit agreements, which resulted because of the sale of
the precision measurement division, and due to the unfavorable changes in the
foreign exchange rates.
The Company believes that its cash and cash equivalents of $18.0 million,
cash flow from operations, as well as the remaining borrowings under its
existing credit agreements and the multi-currency revolving credit facility
and bilateral ancillary facilities will be sufficient to fund the Company's
debt service obligations and working capital requirements, as well as
implement the Company's growth strategy over the remaining fiscal year.
23
<PAGE>
FOREIGN OPERATIONS
As discussed above, a significant portion of the Company's sales and expenses
are denominated in currencies other than the United States dollar. In order
to maintain access to such foreign currencies, the Company, and certain of
its foreign subsidiaries, have credit facilities providing for borrowings in
local currency. Adjustments made in translating the balance sheet accounts of
the foreign subsidiaries from their respective functional currencies at
appropriate exchange rates are included as a separate component of
stockholders' equity. In addition, the Company periodically uses forward
exchange contracts and collars to hedge certain known foreign exchange
exposures. Gains or losses from such contracts are included in the Company's
consolidated statements of operations to offset gains and losses from the
underlying foreign currency transactions.
The Indenture, under which the Company's 10.125% Senior Subordinated Notes
due June 15, 2007 were issued, permits the Company and its subsidiaries to
make investments in, and intercompany loans to, its foreign subsidiaries.
Payments to the Company or its other subsidiaries by such foreign
subsidiaries, including the payment of dividends, redemption of capital stock
or repayment of such intercompany loans, may be restricted by the credit
agreements of the foreign subsidiaries.
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing currencies
and a new common currency (the "EURO"). The participating countries adopted
the EURO as their common legal currency on that date. The Company is
assessing the potential impact from the EURO conversion in a number of areas,
including the competitive impact of cross-border price transparency, which
may make it more difficult for businesses to charge different prices for the
same products on a country-by-country basis, and the impact on currency
exchange costs and currency exchange rate risk. At this stage of its
assessment, the Company believes most of the impact has been absorbed in the
company's pricing and currency policies.
24
<PAGE>
PERIODIC FLUCTUATIONS
The Company's net sales occurred in the following percentages in each of the
last four quarters: 22% for the quarter ended June 30, 1999, 28% for the
quarter ended September 30, 1999, 26% for the quarter ended December 31, 1999
and 24% for the quarter ended March 31, 2000. A variety of factors may cause
period-to-period fluctuations in the operating results of the Company. Such
factors include, but are not limited to, the purchase of businesses, product
mix, European summer holidays and other seasonal influences, competitive
pricing pressures, materials costs, currency fluctuations, revenues and
expenses related to new products and enhancements of existing products, as
well as delays in customer purchases in anticipation of the introduction of
new products or product enhancements by the Company or its competitors. The
majority of the Company's revenues in each quarter result from orders
received in that quarter. As a result, the Company establishes its
production, inventory and operating expenditure levels based on anticipated
revenue levels. Thus, if sales do not occur when expected, expenditure levels
could be disproportionately high and operating results for that quarter, and
potentially future quarters, would be adversely affected.
IMPACT OF YEAR 2000
Many computer programs and applications define the applicable year using two
digits rather than four in order to save memory and enhance the speed of
repeated date-based calculations. The "Year 2000 Issue" refers to the
inability of these computer programs on and after January 1, 2000 to
recognize that "00" refers to "2000" rather than "1900." The term "Year
2000-compliant" means a computer or a computer system that has been designed
or modified to recognize dates on and after January 1, 2000.
The Company established programs to coordinate its year 2000 ("Y2K")
compliance efforts across all business functions and geographic areas.
Starting in 1995, the Company began to evaluate their internal business and
information systems for Year 2000 compliance. The Company modified or
replaced existing hardware and software to mitigate the Year 2000 Issue and
there was no material impact on or interruption to the operations of the
Company subsequent to January 1, 2000, including the leap year date, February
29, 2000.
Since inception of its program through March 31, 2000, the costs related to
the Company's Y2K compliance efforts totaled approximately $2.2 million,
including costs associated with the implementation of certain new core
information systems. Much of this expenditure would have been necessary in
any case as part of the regular process of maintaining and updating systems.
In some instances, the expenditures were accelerated in order to comply with
Year 2000 requirements.
25
<PAGE>
CAUTIONARY STATEMENTS
Certain of the information contained herein may contain "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995, as the same may be amended from time to time ("the Act") and in
releases made by the Securities and Exchange Commission ("SEC") from time to
time. Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors, which may cause the actual results,
performance, or achievements expressed or implied by such forward-looking
statements. The words "estimate", "believes", "project", "intend", "expect"
and similar expressions when used in connection with the Company, are
intended to identify forward-looking statements. Any such forward-looking
statements are based on various factors and derived utilizing numerous
assumptions and other important factors that could cause actual results to
differ materially from those on the forward-looking statements. These
cautionary statements are being made pursuant to the Act, with the intention
of obtaining benefits of the "Safe Harbor" provisions of the Act. The Company
cautions investors that any forward-looking statements made by the Company
are not guarantees of future performance and that actual results may differ
materially from those in the forward-looking statements as a result of
various factors, including but not limited to those set forth below.
Important assumptions and other important factors that could cause actual
results to differ materially from those in the forward-looking statements
include, but are not limited to: (i) risks associated with leverage,
including cost increases due to rising interest rates; (ii) risks associated
with the possibility of the Company not meeting its debt covenant
requirements, including financial covenants, in accordance with various debt
agreements; (iii) risks associated with changes in domestic and/or foreign
laws and regulations, including changes in tax laws, accounting standards,
environmental laws, occupational, health and safety laws; (iv) risks
associated with access to foreign markets together with foreign economic
conditions, including currency fluctuations and trade, monetary and/or tax
policies; (v) uncertainty as to the effect of competition in existing and
potential future lines of business; (vi) economic uncertainty in various
countries throughout the world; (vii) changes in laws and regulations,
including changes in tax rates, accounting standards, environmental laws,
occupational, health and safety laws; (viii) access to foreign markets
together with foreign economic conditions, including currency fluctuations;
and (ix) the effect of, or changes in, general economic conditions. Other
factors and assumptions not identified above may also be involved in the
derivation of forward-looking statements, and the failure of such other
assumptions to be realized, as well as other factors may also cause actual
results to differ materially from those projected. The Company assumes no
obligation to update these forward-looking statements to reflect actual
results, changes in assumptions, or changes in other factors affecting such
forward-looking statements.
26
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company uses financial instruments, including fixed and variable rate
debt, to finance its operations. The information below summarizes the
Company's market risks associated with debt obligations outstanding as of
March 31, 2000. The following table presents principal cash flows and related
weighted average interest rates by fiscal year of maturity. Variable interest
rate obligations under the Credit Facility and other revolving bank credit
agreements, capital lease obligations, and notes payable to related parties
are not included in the table. The Company has no long-term variable interest
obligations other than certain borrowings under the Credit Facility which
have been classified as long-term. The information is presented in U.S.
dollar equivalents, which is the Company's reporting currency. The actual
cash flows of the instruments are denominated in U.S. dollars ("US$"), German
Deutsche marks ("DM") and other currencies ("other") as indicated.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
-----------------------------------------------------------------------------------------------
2000 2001 2002 2003 2004 Thereafter Total
----------- ------------ ------------ ------------ ------------ ------------ ------------
(US$ EQUIVALENT IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Long-term Obligations:
Fixed Rate (US$)........... $ 685 $ 633 $ 585 $ 541 $ 500 $85,000 $87,944
Average interest rate.... 8.2% 8.2% 8.2% 8.2% 8.2% 10.1% 10.1%
Fixed Rate (DM)............ $ 2,124 $3,977 $3,609 $3,562 $2,443 $10,839 $26,553
Average interest rate.... 5.9% 5.8% 5.7% 5.7% 5.3% 5.6% 5.7%
Fixed Rate (other)......... $ 282 $ 82 $1,581 $ 55 $ 58 $ 447 $ 2,505
Average interest rate.... 7.6% 6.0% 5.3% 6.4% 6.4% 6.3% 5.8%
</TABLE>
The carrying amounts of the Company's debt instruments approximate their fair
values. At March 31, 2000, the Company had interest rate cap agreements and
swap agreements in an aggregate notional amount of $9.7 million to limit its
exposure on interest rate changes related to certain variable interest rate
debt instruments. The carrying values of the interest rate caps and swaps
approximate fair value.
The Company uses forward exchange contracts and collars in the ordinary
course of business to mitigate its exposure to changes in foreign currency
exchange rates relating to cash, accounts receivable, accounts payable,
significant transactions and anticipated future sales denominated in foreign
currencies. The terms of these contracts are generally less than one year.
The Company's risk management policies do not provide for the utilization of
financial instruments for trading purposes.
Gains and losses on financial instruments that qualify as hedges of existing
assets or liabilities or firm commitments are recognized in income or as
adjustments of carrying amounts when the hedged transaction occurs. Financial
instruments which are not designated as hedges of specific assets,
liabilities, firm commitments or anticipated transactions are marked to
market and any resulting unrealized gains or losses are recorded in "Other
(income) expense, net" in the accompanying consolidated statements of
operations. At March 31, 2000, the Company had foreign exchange contracts
outstanding in an aggregate notional amount of $16.6 million. While it is not
the Company's intention to terminate any of these contracts, the estimated
fair value of these contracts indicated that termination of the forward
currency exchange contracts at March 31, 2000 would have resulted in a loss
of $1.0 million. Due to the volatility of currency exchange rates, these
estimated results may or may not be realized.
27
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of its business, the Company from time to time is
subject to legal claims. The Company does not believe that the likely outcome
of any such claims or related lawsuits would have a material adverse affect
on the Company's results of operations, financial condition, cash flows or
its ability to develop new products.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
12 Schedule Re: Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule for the three and six months ended
March 31, 2000
(b) Reports on Form 8-K
The Company filed a Form 8-K on March 2, 2000 relating to the merger
between the Company and Dynatech corporation.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of the 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WAVETEK WANDEL GOLTERMANN, INC.
(Registrant)
/s/ KARL-HEINZ EISEMANN
-------------------------------
Karl-Heinz Eisemann
Executive Vice President,
Chief Financial Officer,
Treasurer and Secretary
(principle financial officer and
principle accounting officer)
Dated: May 15, 2000
29
<PAGE>
EXHIBIT 12
SCHEDULE RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31, Six Months Ended March 31,
------------------------------ ----------------------------
2000 1999 2000 1999
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Income (loss) before provision (benefit) for income taxes.... $ 5,493 $(8,931) $ 11,373 $(12,090)
Interest expense............................................. 4,606 5,244 9,968 10,435
Interest portion of rental expense........................... 708 541 1,506 1,556
-------------- -------------- ------------- -------------
Earnings..................................................... $10,807 $(3,146) $ 22,847 $ (99)
============== ============== ============= =============
Interest expense............................................. 4,606 $ 5,244 $ 9,968 $ 10,435
Interest portion of rental expense........................... 708 541 1,506 1,556
-------------- -------------- ------------- -------------
Fixed charges................................................ $ 5,314 $ 5,785 $ 11,474 $ 11,991
============== ============== ============= =============
Ratio of earnings to fixed charges........................... 2.0x (0.5)x 2.0x 0.0x
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS
ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 17,974
<SECURITIES> 0
<RECEIVABLES> 96,184
<ALLOWANCES> 4,071
<INVENTORY> 71,506
<CURRENT-ASSETS> 202,057
<PP&E> 143,984
<DEPRECIATION> 90,918
<TOTAL-ASSETS> 397,483
<CURRENT-LIABILITIES> 127,261
<BONDS> 199,942
0
0
<COMMON> 133
<OTHER-SE> 73,222
<TOTAL-LIABILITY-AND-EQUITY> 397,483
<SALES> 262,731
<TOTAL-REVENUES> 262,731
<CGS> 103,428
<TOTAL-COSTS> 244,479
<OTHER-EXPENSES> 6,879
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,968
<INCOME-PRETAX> 11,373
<INCOME-TAX> 5,119
<INCOME-CONTINUING> 6,254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,254
<EPS-BASIC> .47
<EPS-DILUTED> .46
</TABLE>
