UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
July 10, 2000 0-7928
------------------------------------------------ ------------------------
Date of Report (Date of earliest event reported) (Commission File Number)
COMTECH TELECOMMUNICATIONS CORP.
(Exact name of registrant as specified in its charter)
Delaware 1-2139466
------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
105 Baylis Road, Melville, NY 11747
--------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(631)777-8900
--------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OF ASSETS.
This Amendment to Form 8-K filed on July 25, 2000 is being submitted to
provide the financial statements required in connection with the acquisition by
Comtech Telecommunications Corp. of substantially all the assets of the EFData
Division of Adaptive Broadband Corporation.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired
Attached are the audited balance sheets of EF Data as of June 30, 2000,
1999 and 1998 and the related statements of operations and cash flows for
each of the three years in the period ended June 30, 2000.
(b) Pro Forma Financial Information
Attached is the unaudited pro forma financial information of the Company
as of April 30, 2000 and for the year ended July 31, 1999 and the nine
months ended April 30, 2000.
(c) Exhibits
The following exhibit is filed as part of this report pursuant to Item 601
of Regulation S-K:
Exhibit
Number Description
23.1 Consent of Ernst & Young LLP filed herewith.
(1)
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Comtech Telecommunications Corp. has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
COMTECH TELECOMMUNICATIONS CORP.
By:_____________________________________
Name: J. Preston Windus, Jr.
Title: Senior Vice President and
Chief Financial Officer
Date: September 25, 2000
Index to Financial Statements
Report of Independent Auditors.............................................F-1
Balance Sheets.............................................................F-2
Statements of Operations...................................................F-3
Statements of Cash Flows...................................................F-4
Notes to Financial Statements.......................................F-5 - F-14
<PAGE>
Report of Independent Auditors
The Board of Directors
Adaptive Broadband Corporation
We have audited the accompanying balance sheets of EF Data (a division of
Adaptive Broadband Corporation) as of June 30, 2000, 1999 and 1998, and the
related statements of operations and cash flows for the years then ended. These
financial statements are the responsibility of the managements of EF Data and of
Adaptive Broadband Corporation. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EF Data (a division of Adaptive
Broadband Corporation) at June 30, 2000, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted auditing principles.
Phoenix, Arizona /s/ Ernst & Young LLP
September 21, 2000
F-1
<PAGE>
EF Data
(a division of Adaptive Broadband Corporation)
Balance Sheets
(In thousands)
June 30
2000 1999 1998
-----------------------------------
Assets
Current assets:
Cash $ 2 $ 2,199 $ 1,130
Accounts receivable, net of
allowance for doubtful accounts of
$757, $559 and $809 in 2000, 1999,
and 1998, respectively 18,840 31,644 23,651
Inventories 12,901 13,680 15,990
Other current assets 404 1,056 703
-----------------------------------
Total current assets 32,147 48,579 41,474
Property and equipment, at cost 21,088 27,630 26,050
Less accumulated depreciation and
amortization (14,936) (18,206) (15,491)
-----------------------------------
Net property and equipment 6,152 9,424 10,559
Intangible assets 8,770 8,663 4,862
Accumulated amortization (3,817) (3,043) (2,491)
-----------------------------------
Net intangible assets 4,953 5,620 2,371
Other noncurrent assets 2 1,224 684
-----------------------------------
Total assets $ 43,254 $ 64,847 $ 55,088
===================================
Liabilities and division net assets
Current liabilities:
Accounts payable $ 4,901 $ 5,411 $ 6,607
Warranty reserve 1,029 1,026 992
Other accrued liabilities 2,691 6,512 4,093
-----------------------------------
Total current liabilities 8,621 12,949 11,692
Division net assets 34,633 51,898 43,396
-----------------------------------
Total liabilities and division net assets $ 43,254 $ 64,847 $ 55,088
===================================
See notes to financial statements.
F-2
<PAGE>
EF Data
(a division of Adaptive Broadband Corporation)
Statements of Operations
(In thousands)
Year ended June 30
2000 1999 1998
------------------------------------
Revenue $ 92,058 $ 82,372 $ 95,223
Cost of revenue 61,658 57,887 63,295
------------------------------------
Gross profit 30,400 24,485 31,928
Expenses before allocation of sales,
marketing, administration and other
operating expenses by Adaptive
Broadband Corporation:
Research and development 9,821 11,872 10,416
Sales, marketing and administration
expenses -- 22,249 14,132
Restructuring charges -- 1,123 581
Amortization 774 552 243
------------------------------------
Total direct expenses 10,595 35,796 25,372
------------------------------------
Contribution to operating income (loss)
before allocation of sales, marketing,
administration and other operating
expenses by Adaptive Broadband
Corporation 19,805 (11,311) 6,556
Expenses allocated by Adaptive Broadband:
Sales, marketing and administration 19,587 3,753 166
In process research and development
expense -- 3,565 --
------------------------------------
Operating income (loss) 218 (18,629) 6,390
Interest income -- (371) (442)
------------------------------------
Income (loss) before allocated provision
(benefit) for income taxes 218 (18,258) 6,832
Provision (benefit) for income taxes
allocated by Adaptive Broadband
Corporation 78 (6,573) 2,460
------------------------------------
Net income (loss) $ 140 $(11,685) $ 4,372
====================================
See notes to financial statements.
F-3
<PAGE>
EF Data
(a division of Adaptive Broadband Corporation)
Statements of Cash Flows
(In thousands)
Year ended June 30
2000 1999 1998
------------------------------------
Operating activities
Net income (loss) $ 140 $(11,685) $ 4,372
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization 4,986 5,152 4,393
Provision (credit) for bad debts 198 (250) 514
Provision for inventory allowance -- -- 1,110
Loss on disposal of property and
equipment 706 -- --
In process research and development
expense -- 3,565 --
Adjustments to reconcile to net cash
provided by (used in) operating
activities:
Accounts receivable 12,606 (7,743) (7,504)
Inventories 779 2,609 4,381
Other current assets 652 (353) (703)
Accounts payable (510) (1,196) (5,483)
Accrued liabilities (3,818) 2,453 700
------------------------------------
Net cash provided by (used in) 15,739 (7,448) 1,780
operating activities
Investing activities
Purchases of property and equipment (1,646) (3,465) (6,185)
Acquisition of business (107) (7,665) --
(Increase) decrease in other
noncurrent assets 1,222 (540) 1,002
------------------------------------
Net cash used in investing activities (531) (11,670) (5,183)
Financing activities adaptive broadband
Transfer (to) from Adaptive Broadband
Corporation (17,405) 20,187 3,223
------------------------------------
Net cash (used in) provided by (17,405) 20,187 3,223
financing activities
Net (decrease) increase in cash and cash
equivalents (2,197) 1,069 (180)
Cash and cash equivalents at beginning
of year 2,199 1,130 1,310
------------------------------------
Cash and cash equivalents at end of year $ 2 $ 2,199 $ 1,130
====================================
See notes to financial statements.
F-4
<PAGE>
1. Summary of Significant Accounting Policies
Business and Basis of Presentation
The accompanying financial statements represent the financial position,
operations, and cash flows of EF Data (the Company), located in Tempe, Arizona,
a division of Adaptive Broadband Corporation ("ADAP"). The Company is in the
business of manufacturing and marketing satellite modems, transceivers and
related equipment.
The financial statements include expense amounts allocated to the Company by
ADAP (see Note 8). Income taxes reflect an allocation of ADAP's income tax
expense (benefit) calculated based on ADAP's effective tax rate of 36 percent.
No deferred tax assets and liabilities relating to the Company are included in
the balance sheet. These financial statements are not necessarily indicative of
the financial position and results of operations which would have occurred had
the Company been an independent entity.
Revenue Recognition, Receivables and Credit Risk
Product revenue is recognized upon shipment to a credit-worthy customer.
The Company generally requires no collateral prior to shipment, but does require
letters of credit denominated in U.S. dollars from its international customers.
The Company also maintains a credit insurance program to insure international
receivables where a confirmed letter of credit may neither be cost effective nor
available. Additionally, from time to time the Company sells certain
international receivables, without recourse, at prevailing discount rates.
Cash
Cash consists of short-term investments with a remaining maturity of less than
three months when acquired.
Property and Equipment
Property and equipment are carried at cost, less accumulated depreciation and
amortization. Depreciation and amortization charges are computed using the
straight-line method based on the estimated useful lives of the related assets
(generally 3 to 7 years).
F-5
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Intangible Assets
Intangible assets consist of goodwill, developed technology and assembled
workforce and are capitalized and amortized on a straight-line basis over the
expected life of the asset which ranges from three to twenty years.
Use of Estimates; Risks and Uncertainties
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Significant estimates are used in determining amounts reported in the financial
statements and accompanying notes such as the collectibility of accounts
receivable, inventory realization, warranty costs, recoverability of property
and equipment, and contingencies. Actual results could differ from estimates.
Stock-Based Compensation
The Company employees participate in stock compensation plans provided by ADAP.
ADAP accounts for stock option grants in accordance with APB Opinion No. 25,
"Accounting for Stock Issued to Employees." ADAP currently grants stock options
to the Company employees with an exercise price equal to the fair value of the
underlying ADAP shares at the date of grant, and therefore records no
compensation expense.
Comprehensive Income
The Company has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"), which establishes standards for
reporting comprehensive income and its components in the financial statements.
There have been no transactions that are required to be included in other
comprehensive income, therefore comprehensive net income equals net income.
Impact of Recently Issued Accounting Standards
Management does not anticipate that the adoption of any recently issued
Accounting Standards will have a material impact on net income or divisional
equity.
F-6
<PAGE>
1. Summary of Significant Accounting Policies (continued)
In December 1999, the Securities and Exchange Commission (the "SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). SAB 101 summarizes certain areas of the Staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The Company believes that its current revenue recognition policies
comply with SAB 101.
2. Acquisition
On November 19, 1998, Adaptive Broadband acquired Crown Satellite (Crown), which
develops and supplies products and software for the network delivery of Internet
Protocol (IP) data and multimedia services, from Crown International, Inc. The
acquisition was accounted for under the purchase method. The operations and
financial position of Crown have been included in the financial statements of EF
Data since acquisition.
The initial purchase price was approximately $7.7 million including cash
payments, direct costs and the assumption of Crown's net liabilities. The
purchase price will include additional future payments based on Crown's
operating gross margin performance. During fiscal 2000, an additional $.1
million was paid to the former owners of Crown. The assets and liabilities
assumed by the Company were recorded based on their fair values at the date of
acquisition. The purchase price was allocated $3.6 million to in-process
research and development, $0.3 million to net tangible assets, $2.5 million to
identified intangible assets and $1.3 million to goodwill. The amount allocated
to in-process research and development was expensed at the time of acquisition.
The Company's results include Crown's results from November 19, 1998.
The pro forma results for fiscal years 1999 and 1998, assuming the acquisitions
had been made at the beginning of the fiscal year, would not be materially
different from the report results.
F-7
<PAGE>
3. Inventories
Inventories are stated at the lower of cost (first-in, first-out) method or
market. Inventory consisted of the following:
June 30
2000 1999 1998
----------------------------------
Finished goods $ 1,072 $ 2,827 $ 836
Raw materials 9,769 8,439 11,806
Work-in-process and finished goods 2,820 3,766 6,225
----------------------------------
13,661 15,032 18,867
Less inventory reserves (760) (1,352) (2,877)
==================================
Total inventory $ 12,901 $ 13,680 $ 15,990
==================================
4. Property and Equipment
Property and equipment consisted of the following:
June 30
2000 1999 1998
------------------------------------
Building and improvements $ 1,714 $ 1,116 $ 829
Office and computer equipment and software 3,983 6,488 6,278
Machinery and equipment 15,353 19,943 18,860
Vehicles 38 83 83
------------------------------------
21,088 27,630 26,050
Less accumulated depreciation and
amortization (14,936) (18,206) (15,491)
------------------------------------
$ 6,152 $ 9,424 $ 10,559
====================================
Depreciation and amortization expense on property and equipment was $4,212,
$4,600, and $4,150 for the years ended June 30, 2000, 1999 and 1998.
F-8
<PAGE>
5. Intangible Assets
Intangible assets consisted of the following:
June 30
2000 1999 1998
------------------------------------
Goodwill $ 6,271 $ 6,164 $ 4,862
Assembled workforce 425 425 --
Developed technology 2,074 2,074 --
------------------------------------
8,770 8,663 4,862
Less accumulated amortization (3,817) (3,043) (2,491)
------------------------------------
$ 4,953 $ 5,620 $ 2,371
====================================
6. Other Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
June 30
2000 1999 1998
------------------------------------
Payroll and payroll related $1,441 $4,035 $2,354
Sick and vacation accrual 1,039 1,057 939
Accrued liabilities and other 211 1,420 800
------------------------------------
$2,691 $6,512 $4,093
====================================
F-9
<PAGE>
7. Operating Leases
The Company has certain equipment under operating leases. At June 30, 2000, the
contractual maturities of operating leases in the next five years and thereafter
is as follows:
2001 $ 937
2002 937
2003 937
2004 937
2005 937
Thereafter 598
-------------
$5,283
=============
Rent expense was $866, $863 and $1,074 for the years ended June 30, 2000, 1999
and 1998, respectively.
8. Division Net Assets
A summary of the division net assets activity is as follows (in thousands):
June 30
2000 1999 1998
---------------------------------------
Beginning of year $ 51,898 $ 43,396 $ 35,801
Net income (loss) 140 (11,685) 4,372
Transfer (to) from ADAP (17,405) 20,187 3,223
---------------------------------------
Ending balance at June 30 $ 34,633 $ 51,898 $ 43,396
=======================================
9. Employee Benefits
EF Data participates in the ADAP defined contribution retirement plan which
covers substantially all of the employees of EF Data. EF Data contributed $381,
$386 and $447, for 2000, 1999 and 1998, respectively.
F-10
<PAGE>
10. Corporate Allocations
The accompanying financial statements reflect charges for general sales,
marketing and administration expenses incurred by ADAP. Such charges amounted to
approximately $19,587, $3,753 and $166 for 2000, 1999 and 1998, respectively.
This allocation has been made based on revenues during 1999 and 1998. During
2000, ADAP reorganized its accounting function to include a shared services
arrangement whereby a substantial portion of sales, marketing and administration
services were processed as a corporate function. Accordingly, during 2000
directly incurred expenses were replaced by corporate allocations. Management
believes the allocations are reasonable and closely approximate the level of
actual effort relative to EF Data for the periods presented. However, the shared
service approach implemented in 2000 resulted in a significant decrease in the
combined direct and allocated operating expenses compared to prior years.
No interest is allocated by ADAP to EF Data.
11. Stock Plan
EF Data employees participate in the ADAP stock plan, whereby options to
purchase ADAP common stock are granted at exercise prices equal to the fair
market value of the ADAP common stock at the date of the grant. The majority of
options outstanding vest upon attainment of specified increases in the stock
price or after five years. Options granted prior to September 1997 become
exercisable in annual installments of 25 percent beginning one year after the
date of the grant. Options granted under the 1986 and the 1992 stock option
plans expire ten years after the date of the grant.
F-11
<PAGE>
11. Stock Plan (continued)
A summary of ADAP's stock option activity (specific to EF Data employees), and
related information is as follows:
Weighted-
Average
Exercise
Options Price
---------------------------
Options outstanding - July 1, 1997 399,396 $ 8.84
Options granted 367,600 9.23
Options exercised (12,964) 8.56
Options canceled (11,316) 8.52
-------------
Options outstanding - June 30, 1998 742,716 9.04
Options granted 635,000 7.64
Options exercised (16,718) 6.66
Options canceled (373,538) 8.56
-------------
Options outstanding - June 30, 1999 987,460 8.37
Options granted 254,000 22.48
Options exercised (1,021,425) 10.13
Options canceled (73,388) 16.78
-------------
Options outstanding - June 30, 2000 146,647 16.24
=============
Options exercisable - end of year 132,197
=============
Weighted-average fair value of options granted during 2000, 1999 and 1998 was
$10.62, $5.41 and $5.10, respectively.
F-12
<PAGE>
11. Stock Plan (continued)
Options Outstanding Options Exercisable
-------------------------------------------------------------
Number Weighted- Number
outstanding Average Weighted exercisable Weighted-
as of Remaining Average as of Average
Range of June 30, Contractual Exercise June 30, Exercise
Exercise Prices 2000 Life Price 2000 Price
-------------------------------------------------------------------------------
$6.81 to $8.81 56,571 7.5 years $ 8.11 47,121 $ 8.31
$10.50 to $14.69 11,320 6.3 years 11.83 11,320 11.83
$18.59 62,156 9.3 years 18.59 62,156 18.59
$34.53 11,600 9.5 years 34.53 11,600 34.53
$60.94 5,000 9.6 years 60.94 -- 0.00
----------- -----------
146,647 132,197
=========== ===========
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), prescribes a fair value method of accounting for
employee stock options. SFAS 123 gives companies a choice of recognizing related
compensation expense by adopting the new fair value method or continuing to
measure compensation under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). EF Data has elected to
follow APB 25 in accounting for the ADAP employee stock options and employee
stock purchase plan.
Had compensation expense for the stock options and shares issued under the stock
purchase plans been determined using the fair value method in accordance with
SFAS 123, EF Data's pro forma net income would have been as follows:
Year ended June 30
2000 1999 1998
-------------------------------------
Net income (loss):
As reported $ 5,333 $(10,723) $ 4,372
Proforma expense (5,908) (315) (1,040)
-------------------------------------
Proforma net income (loss) $ (575) $(11,038) $ 3,332
=====================================
F-13
<PAGE>
11. Stock Plan (continued)
Pro forma compensation expense is allocated to EF Data based upon stock option
awards to specific EF Data employees. The fair value for these options was
estimated at the date of grant using Black-Scholes option pricing model with the
following weighted-average assumptions:
Year ended June 30
2000 1999 1998
-------------------------------------
Risk-free interest rate 5.8% 5.8% 5.7%
Expected volatility .99 .92 .82
Expected life for options in
years 1.41 years 5 years 4.46 years
12. Income Taxes
EF Data's results have historically been reported in the ADAP tax returns
because it was not a separate entity. The tax provisions reflected in the
statement of operations reflect the taxes attributable to the separate results
of EF Data's, and are generally the same as if EF Data had been a separate,
stand-alone taxpayer.
13. Subsequent Events
Effective July 10, 2000, ADAP agreed to sell EF Data to an unrelated party for
$42 million in cash subject to adjustment.
F-14
<PAGE>
Comtech Telecommunications Corp.
Pro Forma Condensed Combined Financial Statements
On July 10, 2000 Comtech Telecommunications Corp. acquired the business of the
EF Data division of Adaptive Broadband Corporation for an adjusted purchase
price of $54.4 million.
The attached unaudited pro forma condensed combined balance sheet as of April
30, 2000 and statements of operations for the nine months ended April 30, 2000
and the year ended July 31, 1999 give effect to the purchase by the Company of
the net assets of EF Data for an adjusted purchase price of $54.4 million. The
unaudited pro forma condensed combined statements of operations for the year
ended July 31, 1999 combines the Company's historical results for the year ended
July 31, 1999 and EF Data's historical results for the year ended June 30, 1999,
giving effect to the acquisition as if it had occurred as of August 1, 1998. The
unaudited pro forma condensed combined statements of operations for the nine
months ended April 30, 2000 and EF Data's historical results for the nine months
ended March 31, 2000 also giving effect to the acquisition as if it had occurred
as of August 1, 1998. The unaudited pro forma condensed combined balance sheet
combines the Company's balance sheet as of April 30, 2000 with EF Data's balance
sheet as of March 31, 2000 giving effect to the acquisition as if it had
occurred on April 30, 2000.
The unaudited pro forma condensed combined financial statements were prepared
utilizing the accounting principles of the respective entities as outlined in
each entitiy's historical financial statements. The pro forma adjustments are
based upon available information and certain assumptions that the Company
believes are reasonable under the circumstances. The unaudited condensed
combined financial statements do not purport to be indicative of the operating
results or financial position that would have been achieved had the acquisition
taken place on the dates indicated or the results that may be obtained in the
future.
Contents
Pro Forma Condensed Combined Balance Sheet as of April 30, 2000............F-16
Pro Forma Condensed Combined Statement of Operations for the
Nine Month Period Ended April 30, 2000.....................................F-17
Pro Forma Condensed Combined Statement of Operations for the Year
Ended July 31, 1999........................................................F-18
Notes to Pro Forma Condensed Combined Financial Statements.............F-19-F-20
F-15
<PAGE>
Comtech Telecommunications Corp.
Unaudited Pro Forma Condensed Combined Balance Sheet
April 30, 2000
(in thousands)
<TABLE>
<CAPTION>
Comtech Tel. Pro Forma Pro Forma
Corp. EF Data Adjustments Combined
<S> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 10,483 1 (3,641)(a) 14,125
Marketable investment
securities 35,857 -- (18,000)(a) 17,857
Accounts receivable, net 7,729 16,700 9,038 (a) 24,429
Inventories, net 11,493 13,674 25,167
Prepaid expenses and other
current assets 642 33 675
Deferred tax asset-current 731 -- 731
Net assets of discontinued
operations 192 -- -- 192
-------- ------ ----- -------
Total current assets 67,127 30,408 (14,359) 83,176
Property, plant and equipment, net 4,708 6,062 10,770
Intangible assets, net of
amortization 2,159 -- 15,939 (a) 18,098
Other assets 237 2 239
Deferred tax asset-non current 2,917 -- -- 2,917
-------- ------ ------- -------
Total assets $ 77,148 36,472 1,580 115,200
======== ====== ======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current liabilities:
Current installments of
long-term debt $ 588 -- 588
Accounts payable 5,343 4,193 9,536
Accrued expenses and other
current liabilities 6,357 4,077 -- 10,434
-------- ------ ------- -------
Total current liabilities 12,288 8,270 20,558
Long-term debt, less current
installments 824 -- 40,000 (b) 40,824
Other long-term liabilities 394 -- -- 394
-------- ------ ------- -------
Total liabilities 13,506 8,270 40,000 61,776
-------- ------ ------- -------
Stockholders' equity:
Preferred stock --
Capital stock 735 735
Additional paid-in capital 66,743 66,743
Accumulated other
comprehensive income (231) (231)
(Accumulated deficit)
retained earnings (28,202)(c)
(2,578) 28,202 (10,218)(d) (12,796)
-------- ------ ------- -------
64,669 28,202 (38,420) 54,451
Less:
Treasury stock (184) (184)
Deferred compensation expense (843) -- -- (843)
-------- ------ ------- -------
63,642 28,202 (38,420) 53,424
-------- ------ ------- -------
Total liabilities and
stockholders' equity $ 77,148 36,472 1,580 115,200
======== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these
unaudited pro forma condensed combined financial statements.
F-16
<PAGE>
Comtech Telecommunications Corporation
Unaudited Pro Forma Condensed Combined Statement of Operations
For the nine month period ended April 30, 2000
(in thousands except per share data)
<TABLE>
<CAPTION>
Comtech Pro Forma Pro Forma
Tel. Corp. EF Data Adjustments Combined
---------- ------- ----------- --------
<S> <C> <C> <C>
Net sales $ 40,950 69,144 -- 110,094
----------- ------ ------- ---------
Operating costs and expenses:
Cost of sales 29,080 45,468 74,548
Selling, general and
administrative 7,381 13,267 1,673 (e) 22,321
Research and development 1,611 7,385 -- 8,996
----------- ------ ------- ---------
Total operating costs and
expenses 38,072 66,120 1,673 105,865
----------- ------ ------- ---------
Operating income (loss) 2,878 3,024 (1,673) 4,229
Other expense (income):
Interest expense 99 2,775 (f) 2,874
Interest income (635) -- -- (635)
----------- ------ ------- ---------
Income (loss) before provision
for income taxes 3,414 3,024 (4,448) 1,990
Provision (benefit) for income
taxes 1,246 1,089 (1,646)(g) 689
----------- ------ ------- ---------
Net income (loss) $ 2,168 1,935 (2,802) 1,301
=========== ====== ======= =========
Net income per share:
Basic $ 0.42 0.25
=========== =========
Diluted $ 0.38 0.23
=========== =========
Weighted average number of common
shares outstanding - basic
computation 5,120,000 5,120,000
Potential dilutive common shares 652,000 652,000
----------- ---------
Weighted average number of
common and common equivalent shares
outstanding assuming dilution --
diluted computation 5,772,000 5,772,000
=========== =========
</TABLE>
The accompanying notes are an integral part of these
unaudited pro forma condensed combined financial statements.
F-17
<PAGE>
Comtech Telecommunications Corporation
Unaudited Pro Forma Condensed Combined Statement of Operations
For the year ended July 31, 1999
(in thousands except per share data)
<TABLE>
<CAPTION>
Comtech Pro Forma Pro Forma
Tel. Corp EF Data Adjustments Combined
---------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net sales 37,886 82,478 -- 120,364
---------- --------- -------- ---------
Operating costs and expenses:
Cost of sales 26,405 60,999 87,404
Selling, general and administrative 6,632 25,857 2,231 (e) 34,720
Research and development 2,022 11,880 -- 13,902
---------- --------- -------- ---------
Total operating costs and expenses 35,059 98,736 2,231 136,026
---------- --------- -------- ---------
Operating income (loss) from
continuing operations 2,827 (16,258) (2,231) (15,662)
Other expense (income):
Interest expense 204 497 3,700 (f) 4,401
Interest income (65) -- (65)
Other (39) -- -- (39)
---------- --------- -------- ---------
Income (loss) from continuing
operations before income taxes 2,727 (16,755) (5,931) (19,959)
Benefit for income taxes (3,754) (6,032) (2,194)(g) (11,980)
---------- --------- -------- ---------
Income (loss) from continuing
operations 6,481 (10,723) (3,737) (7,979)
========== ========= ======== =========
Net income (loss) per share:
Basic $ 1.56 (1.93)
Diluted $ 1.42 (1.74)
Weighted average number of common
shares outstanding-
Basic computation 4,143,000 4,143,000
Potential dilutive common shares 430,000 430,000
---------- ---------
Weighted average number of common and
common equivalent shares outstanding
assuming dilution -
Diluted computation 4,573,000 4,573,000
========== =========
</TABLE>
The accompanying notes are an integral part of these
unaudited pro forma condensed combined financial statements.
F-18
<PAGE>
Comtech Telecommunications Corp.
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
(in thousands)
(a) Reflects acquisition of EF Data for an aggregate adjusted purchase price
of $54,359, resulting in an excess of the purchase price over the fair
value of the net assets acquired (intangibles) of $15,939. The adjusted
purchase price and adjusted purchase price allocation are summarized as
follows assuming the acquisition had occurred on April 30, 2000:
Cash paid by Comtech $12,462
Debt issued 40,000
Estimated transaction expenses 1,897
-------
Adjusted purchase price $54,359
=======
The adjusted purchase price has been allocated as follows:
Fair value of other net assets acquired $28,202
Fair value of in-process research and
development costs 10,218
Fair value of existing technology 7,508
Fair value of assembled workforce 2,835
Fair value of customer base 742
Excess of the purchase price over the fair
value of the net assets 4,854
-------
$54,359
=======
The fair value of the acquired property, plant and equipment, net is
currently being assessed and may result in an additional adjustment.
(a) Reflects the acquisition of new debt to finance the acquisition.
(b) Represents the elimination of EF Data's retained earnings as a result of
using the purchase method of accounting.
(c) The estimated charge to earnings of $10,218 resulting from purchased
in-process research and development costs has been reflected as a
reduction of stockholders' equity in the pro forma condensed combined
balance sheet as of April 30, 2000. This same charge has been excluded
from the pro forma condensed combined statement of operations for the nine
months ended April 30, 2000 and the year ended July 31, 1999 since the
charge is non-recurring and directly related to the acquisition.
An independent third-party appraiser was used to assess and value the
purchased in-process research and development from the acquisition. The
value was determined by estimating the projected net cash flows related to
products under development based upon
F-19
<PAGE>
future revenues to be earned upon commercialization of such products. The
percentage of the cash flow allocated to purchased in-process research and
development was based upon the estimated percentage complete for each of
the projects. These cash flows were discounted back to their net present
value. The resulting projected net cash flows from such projects were
based on management's estimates of revenues and operating profits related
to such products.
(d) Represents the amortization of intangible assets on a straight-line basis
computed as follows:
o Goodwill, totaling $4,854, amortized over 10 years.
o Existing technology and customer base, totaling $8,250, amortized
over 7 years.
o Assembled workforce, totaling $2,835, amortized over 5 years.
(e) Interest expense resulting from the issuance of debt to finance the
acquisition. The interest rate on new debt of $40,000 is 9.25%.
(f) Reflects the income tax effect of increased interest and amortization
expense at the statutory tax rate of 37% for the year ended July 31, 1999
and the nine months ended April 30, 2000.
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