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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report
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(Date of earliest event reported): July 7, 2000
NETSCOUT SYSTEMS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0000-26251 04-2837575
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(State or Other Jurisdiction of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
4 Technology Park Drive
Westford, Massachusetts 01886
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (978) 614-4000
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Item 5. OTHER EVENTS.
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NETSCOUT SYSTEMS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
NETSCOUT NEXTPOINT ADJUSTMENTS COMBINED
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<S> <C> <C> <C> <C>
Revenue:
Product $38,551 $ - $ - $38,551
Service 8,404 61 - 8,465
License and royalty 7,033 963 - 7,996
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Total revenue 53,988 1,024 - 55,012
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Cost of revenue:
Product 13,357 - - 13,357
Service 1,452 30 - 1,482
License - 16 - 16
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Total cost of revenue 14,809 46 - 14,855
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Gross margin 39,179 978 - 40,157
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Operating expenses:
Research and development 6,911 828 552 E 8,291
Sales and marketing 18,976 1,899 - 20,875
General and administrative 3,943 1,443 - 5,386
Stock-based compensation - 121 (121)D -
Amortization of intangible assets 2,666 - 2,568 A 5,234
In-process research and development 268 - (268)G -
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Total operating expenses 32,764 4,291 2,731 39,786
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Income (loss) from operations 6,415 (3,313) (2,731) 371
Interest income (expense), net 2,142 (1,899) (229)B 14
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Income (loss) before provision for income taxes 8,557 (5,212) (2,960) 385
Provision for income taxes 5,014 - (4,619) C 395
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Net income (loss) $ 3,543 $(5,212) $ 1,659 $ (10)
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Basic net income (loss) per share $ 0.13 $ (0.00)
Diluted net income (loss) per share $ 0.12 $ (0.00)
Shares used in computing:
Basic net income (loss) per share 27,561 1,178 F 28,739
Diluted net income (loss) per share 28,955 28,739
</TABLE>
See accompanying notes to the unaudited pro forma combined
financial information.
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NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
1. PRO FORMA BASIS OF PRESENTATION AND ADJUSTMENTS
The foregoing unaudited pro forma combined financial information gives effect
to the acquisition by NetScout Systems, Inc. ("NetScout") of NextPoint
Networks, Inc. ("NextPoint") in a transaction accounted for using the
purchase method. The unaudited pro forma combined statement of operations is
based on the individual statements of operations of NetScout for the six
months ended September 30, 2000 and NextPoint for the period from April 1,
2000 to July 7, 2000 as if the acquisition occurred on April 1, 2000. The
results of operations of NextPoint subsequent to July 7, 2000 have been
included in NetScout's statement of operations for the six months ended
September 30, 2000. The unaudited pro forma combined statement of operations
for the six months ended September 30, 2000 excludes $1.1 million of revenue
and $1.8 million of net loss related to NextPoint for the three months ended
March 31, 2000.
On July 7, 2000, NetScout acquired all of the outstanding common and
preferred stock of NextPoint in exchange for 1,831,518 shares of NetScout
common stock and $19.6 million in cash. NetScout also issued options and
warrants exercisable for 298,647 shares of NetScout common stock in exchange
for all outstanding options and warrants of NextPoint common stock. In
addition 267,602 shares of NetScout common stock have been reserved and will
be issued to two founding shareholders and employees of NextPoint in
accordance with the terms of the acquisition. The initial value of the
acquisition was $53.1 million based on the fair value of the consideration
paid plus direct acquisition costs.
2. PRO FORMA ADJUSTMENTS TO PRO FORMA COMBINED CONSOLIDATED FINANCIAL
INFORMATION
A. The initial purchase price of $53.1 million is based on the
consideration paid to NextPoint stockholders including common
stock, options, warrants and cash plus acquisition related
expenses. The purchase price was allocated as follows (in
thousands):
Tangible net assets $ 3,709
Intangible assets acquired:
Goodwill 45,142
Completed technology 2,166
Customer base 1,100
Assembled workforce 700
In-process research and development 268
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Total purchase price allocation $53,085
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Based on an estimated useful life of three to five years for
such intangible assets, the unaudited pro forma combined
financial information includes an adjustment of $2.6 million
for the six months ended September 30, 2000 for amortization
expense.
B. Decrease in interest income resulting from cash payment of
$19.6 million and the repayment of notes payable for $3.3
million.
C. Decrease in provision for income taxes as a result of the
various pro forma adjustments.
D. Elimination of stock-based compensation expense related to
options issued by NextPoint prior to the acquisition.
E. Increase in research and development expense for the
amortization of deferred compensation expense on unvested
options issued by NetScout in exchange for unvested NextPoint
options and for the amortization of deferred compensation on
common stock issued to two founding shareholders and employees
on NextPoint during the unaudited pro forma period presented.
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F. Basic and diluted net loss per share assumes that the
1,831,518 shares of NetScout's common stock issued in the
acquisition were outstanding for the entire period and assumes
61,548 shares of NetScout's common stock were issued to two
founding shareholders and employees of NextPoint as they
remained continuously employed by NetScout during the
unaudited pro forma combined statements of operations for the
six months ended September 30, 2000. All potential common
stock has been excluded from the calculation of pro forma
net loss per share as their inclusion would be anti-dilutive.
G. To eliminate the one-time write-off of in-process research and
development as a result of the acquisition.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETSCOUT SYSTEMS, INC.
January 2, 2001
By: /s/ Anil K. Singhal
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Anil K. Singhal
Chairman and Chief Executive Officer
