<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 23, 2000
Dynatech Corporation
(Exact name of registrant as specified in its charter)
Delaware 1-12657 04-2258582
(State or other jurisdiction (Commission File No.) (IRS Employee
of incorporation) Identification No.)
3 New England Executive Park, Burlington, Massachusetts 01803
(Address of principal executive offices) (Zip code)
Registrant's telephone no., including area code: (781) 272-6100
TOTAL NUMBER OF PAGES:
<PAGE>
Item 2. Acquisition and Disposition of Assets.
-------------------------------------
(a) On May 23, 2000, Dynatech Corporation, a Delaware corporation
("Dynatech"), and its wholly-owned subsidiary DWW Acquisition Corporation, a
Delaware corporation ("MergerCo"), completed their merger (the "Merger") with
Wavetek Wandel Goltermann, Inc., a Delaware corporation ("WWG"), pursuant to
which WWG became an indirect, wholly-owned subsidiary of Dynatech.
The Merger was consummated pursuant to an Agreement and Plan of Merger,
dated as of February 14, 2000 (the "Merger Agreement"), among Dynatech, MergerCo
and WWG, a copy of which is included as Exhibit 2.1 to this Report and is
incorporated by reference herein. In the Merger, Dynatech paid to the former WWG
stockholders approximately $250 million in cash and issued approximately 15
million newly-issued shares of Dynatech common stock. In addition, Dynatech paid
approximately $8 million to cash out existing WWG options.
Dynatech financed the Merger with new equity and debt. Dynatech sold
43.125 million newly-issued shares of common stock to investment funds managed
by Clayton, Dubilier & Rice, Inc. for $4.00 per share and an aggregate purchase
price of $172.5 million. Dynatech also entered a new credit facility with a
syndicate of lenders that provides for borrowings of up to $860 million. In
addition, Dynatech intends to sell 4.983 million newly-issued shares of common
stock at the same price per share that was paid by the Clayton, Dubilier & Rice
funds in a rights offering to its stockholders of record on April 20, 2000. The
rights offering will provide such stockholders the opportunity to reverse the
diminution of their percentage equity ownership interest in Dynatech that
resulted from our sale of common stock to the Clayton, Dubilier & Rice funds.
A copy of the press release announcing the completion of the Merger is
included as Exhibit 99.1 to this Report and is incorporated herein by reference.
As a result of the Merger, Dynatech will focus on its Communications Test
Solutions and Visual Communications businesses. As such, Dynatech has decided to
divest the Industrial Computing and Communication business conducted by its
ICS-Advent and Itronix Corporation subsidiaries. For the nine months ended
December 31, 1999, the Industrial Computing and Communication business accounted
for approximately 34% of Dynatech's sales. Dynatech remains committed to
maximizing its investment in ICS-Advent and Itronix. The planned divestiture is
expected to occur no later than the first quarter of fiscal year 2002. The
planned disposition of the Industrial Computing and Communications business will
be treated as discontinued operations for accounting purposes.
2
<PAGE>
Item 7. Financial Statements and Exhibits.
---------------------------------
(a) Financial statements of business acquired are included in this
Report as the following exhibits and are incorporated herein by reference.
99.2 Audited financial statements of WWG as of September 30, 1999
and September 30, 1998 and for the three years ended September 30, 1999.
99.3 Unaudited financial statements of WWG as of March 31, 2000 and
for the six-month periods ended March 31, 2000 and March 31, 1999.
(b) Unaudited Pro Forma Financial Statements.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Consolidated Financial Statements give
effect to the following:
. The merger with WWG (after giving effect to the divestitures of the
Precision Measurement and Test Tools divisions, which occurred in
January 2000);
. The sale, in connection with the WWG merger, of 43,125,000 newly-issued
but unregistered shares of our common stock to Clayton, Dubilier & Rice
Fund V Limited Partnership and Clayton, Dubilier & Rice Fund VI Limited
Partnership, and the concurrent establishment of our new credit
facility;
. Dynatech's rights offering to holders of its common stock on the close of
business on April 20, 2000, which is expected to be completed on or about
June 21, 2000;
. The inclusion of the results of operations for the full periods presented
relating to our acquisitions of Pacific Systems Corporation, Sierra Design
Labs, Applied Digital Access, Inc. and to reflect within the balance sheet
our acquisition of certain assets and liabilities of WPI, Inc. (WPI's
results of operations have been excluded from the pro forma statements
because this business is reported within discontinued operations);
. The exclusion of the results of operations for the full periods presented
relating to our divestitures of ComCoTec, Inc. and Parallax, Inc., and our
probable divestiture of DataViews Corporation, and the exclusion from the
balance sheet of certain assets and liabilities of DataViews Corporation;
and
. The plan to discontinue Dynatech's Industrial Computing and Communications
business segment.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December
31, 1999 set forth herein was prepared assuming that the above-listed
transactions took place on that date. The Unaudited Pro Forma Condensed
Consolidated Statement of Operations for the nine months ended December 31,
1999 and Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the fiscal year ended March 31, 1999 set forth herein were prepared assuming
that the above-listed transactions occurred as of the first day of each of the
periods presented.
The Unaudited Pro Forma Condensed Consolidated Financial Statements should
be read in conjunction with the Dynatech and WWG historical Consolidated
Financial Statements, which are incorporated by reference in this Report,
as well as Dynatech's "Management Discussion and Analysis of Financial
Condition and Results of Operations", included in Dynatech's Annual Report on
Form 10-K for the fiscal year ended March 31, 1999, filed with SEC on June 14,
1999.
The pro forma adjustments, as described in the Notes to Unaudited Pro Forma
Statements herein, are based on currently available information and certain
adjustments that management believes are reasonable. This pro forma financial
information is presented for informational purposes only and does not
necessarily represent what Dynatech's financial position or results of
operations would have been if these transactions had in fact occurred on the
dates indicated and is not necessarily indicative of Dynatech's financial
position or results of operations for any future period.
3
<PAGE>
DYNATECH CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
December 31, 1999
(in thousands)
<TABLE>
<CAPTION>
Adjusted Other WWG Purchase Debt Related Equity Related
Dynatech Acquisitions/ Pro Forma Accounting Pro Forma Pro Forma
Corporation (a) Divestitures (b) WWG (c) Adjustments (d) Adjustments (f) Adjustments (h) Total
--------------- ---------------- --------- --------------- --------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current asset:
Cash and cash
equivalents...... $ 39,016 $(30,804) $ 38,830 $(258,000) $ 170,000 $147,032 $ 106,074
Accounts
receivable,
net.............. 71,962 (970) 99,083 -- -- -- 170,075
Inventories....... 33,033 -- 61,863 45,000 -- -- 139,896
Other current
assets........... 26,206 (57) 15,104 -- -- -- 41,253
Net assets from
discontinued
operations....... 31,490 34,761 -- -- -- -- 66,251
--------- -------- -------- --------- --------- -------- ----------
Total current
assets......... 201,707 2,930 214,880 (213,000) 170,000 147,032 523,549
Property and
equipment, net.... 23,483 (387) 57,670 10,000 -- -- 90,766
Intangible assets,
net............... 63,388 -- 141,204 284,788 -- -- 489,380
Other assets....... 74,084 (20) 6,138 -- 9,200 -- 89,402
--------- -------- -------- --------- --------- -------- ----------
Total assets.... $ 362,662 $ 2,523 $419,892 $ 81,788 $ 179,200 $147,032 $1,193,097
========= ======== ======== ========= ========= ======== ==========
LIABILITIES &
STOCKHOLDERS'
DEFICIT
Current
liabilities:
Notes payable and
current portion
of long-term
debt............. $ 6,398 $ -- $ 32,752 $ -- $ (28,000) $ -- $ 11,150
Other current
liabilities...... 89,252 (753) 94,502 20,000 15,680 (40,000) 178,681
--------- -------- -------- --------- --------- -------- ----------
Total current
liabilities.... 95,650 (753) 127,254 20,000 (12,320) (40,000) 189,831
Long-term debt..... 560,198 -- 224,233 -- 198,000 -- 982,431
Pension
liabilities....... -- -- 34,552 -- -- -- 34,552
Deferred
compensation...... 7,145 -- -- -- -- -- 7,145
Other long term
liabilities....... -- -- 11,641 54,000 -- -- 65,641
Common stock and
APIC.............. -- -- -- 130,000 -- 192,432 322,432
Stockholders'
deficit........... (300,331) 3,276 22,212 (122,212) (6,480) (5,400) (408,935)
--------- -------- -------- --------- --------- -------- ----------
Total
liabilities and
stockholders'
deficit........ $ 362,662 $ 2,523 $419,892 $ 81,788 $ 179,200 $147,032 $1,193,097
========= ======== ======== ========= ========= ======== ==========
</TABLE>
See accompanying notes to the unaudited pro forma statements.
4
<PAGE>
DYNATECH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended December 31, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Adjusted Other Other
Dynatech Acquisitions/ Pro Forma Amortization Pro Forma
Corporation (a) Divestitures (b) WWG (c) of Intangibles (e) Adjustments Total
--------------- ---------------- --------- ------------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Sales................... $316,808 $21,791 $370,196 $ -- $ -- $708,795
Cost of sales........... 105,499 9,758 143,394 -- -- 258,651
-------- ------- -------- -------- ------- --------
Gross profit............ 211,309 12,033 226,802 -- -- 450,144
-------- ------- -------- -------- ------- --------
Selling, general and
administrative
expense................ 106,212 8,975 134,119 1,250 -- 250,556
Product development
expense................ 41,643 5,717 51,286 -- -- 98,646
Recapitalization-related
costs.................. 13,259 -- -- -- -- 13,259
Restructuring and other
non-recurring charges.. -- -- 2,748 -- -- 2,748
Acquired In-Process
R&D.................... -- -- -- -- -- --
Amortization of
intangibles............ 4,538 389 14,716 48,762 -- 68,405
Amortization of unearned
compensation........... 1,102 (55) -- -- -- 1,047
-------- ------- -------- -------- ------- --------
Total operating
expenses............... 166,754 15,026 202,869 50,012 -- 434,661
-------- ------- -------- -------- ------- --------
Operating income....... 44,555 (2,993) 23,933 (50,012) -- 15,483
Interest expense........ (38,429) (4) (15,891) -- (16,262)(f) (70,586)
Interest income......... 1,872 346 462 -- -- 2,680
Other income, net....... (48) 2 (2,250) -- -- (2,296)
-------- ------- -------- -------- ------- --------
Income (Loss) from
continuing operations
before income taxes.... 7,950 (2,649) 6,254 (50,012) (16,262) (54,719)
Provision for income
taxes.................. 4,771 198 7,046 (3,250) (6,505)(g) 2,260
Minority interest....... -- -- -- -- -- --
-------- ------- -------- -------- ------- --------
Income (Loss) from
continuing operations.. $ 3,179 $(2,847) $ (792) $(46,762) $(9,757) $(56,979)
======== ======= ======== ======== ======= ========
Income (Loss) per share
for continuing
operations:
Basic.................. $ 0.03 $ (0.31)
======== ========
Diluted................ $ 0.02 $ (0.31)
======== ========
Weighted average number
of shares:
Basic.................. 121,310 184,405
Diluted................ 131,366 184,405
</TABLE>
See accompanying notes to the unaudited pro forma statements.
5
<PAGE>
DYNATECH CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Fiscal Year Ended March 31, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Adjusted Other Pro Other
Dynatech Acquisitions Forma Amortization Pro Forma
Corporation (a) Divestitures (b) WWG (c) of Intangibles (e) Adjustments Total
--------------- ---------------- -------- ------------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sales................... $329,532 $ 27,223 $447,061 $ -- $ -- $ 803,816
Cost of sales........... 108,568 12,028 183,811 -- -- 304,407
-------- -------- -------- -------- -------- ---------
Gross profit............ 220,964 15,195 263,250 -- -- 499,409
-------- -------- -------- -------- -------- ---------
Selling, general and
administrative
expense................ 112,581 10,604 175,636 1,667 -- 300,488
Product development
expense................ 42,181 13,529 69,011 -- -- 124,721
Recapitalization-related
costs.................. 40,767 -- -- -- -- 40,767
Restructuring and other
non-recurring charges.. -- 1,666 8,896 -- -- (i) 10,562
Acquired In-Process
R&D.................... -- -- 27,732 -- -- 27,732
Amortization of
intangibles............ 2,726 1,073 10,405 75,934 -- 90,138
Amortization of unearned
compensation........... 1,228 -- -- -- -- 1,228
-------- -------- -------- -------- -------- ---------
Total operating
expenses............... 199,483 26,872 291,680 77,601 -- 595,636
-------- -------- -------- -------- -------- ---------
Operating income...... 21,481 (11,677) (28,430) (77,601) -- (96,227)
Interest expense........ (46,178) -- (19,856) -- (23,764) (f) (89,798)
Interest income......... 3,391 620 847 -- -- 4,858
Other income, net....... 15,702 (15,912) (4,735) -- -- (4,945)
-------- -------- -------- -------- -------- ---------
Income (Loss) from
continuing operations
before income taxes.... (5,604) (26,969) (52,174) (77,601) (23,764) (186,112)
Provision (benefit) for
income taxes........... (152) (5,912) (12,475) (4,334) (9,506)(g) (32,379)
Minority interest....... -- -- (2,314) -- -- (2,314)
-------- -------- -------- -------- -------- ---------
Income (Loss) from
continuing operations.. $ (5,452) $(21,057) $(37,385) $(73,267) $(14,258) $(151,419)
======== ======== ======== ======== ======== =========
Income (Loss) per share
from continuing
operations:
Basic................. $ 0.05 $ (0.89)
======== =========
Diluted............... $ 0.05 $ (0.89)
======== =========
Weighted average number
of shares:
Basic................. 106,212 169,307
Diluted............... 106,212 169,307
</TABLE>
See accompanying notes to the unaudited pro forma statements.
6
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS
a. Discontinued Operations
In May 2000, the Board of Directors approved a plan to discontinue Dynatech's
Industrial Computing and Communications business segment. Dynatech expects to
dispose of the businesses in this segment through a sale transaction no later
than the first quarter of fiscal year 2002.
Set forth below is the unaudited balance sheet for Dynatech as of December
31, 1999, which has been adjusted to reflect the discontinued operations.
Pro Forma Balance Sheet at December 31, 1999
(In thousands)
<TABLE>
<CAPTION>
Adjusted
Dynatech Discontinued Dynatech
Corporation Operations Corporation
----------- ------------ -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... $ 39,016 $ -- $ 39,016
Accounts receivable, net................ 88,813 (16,851) 71,962
Inventories............................. 51,244 (18,211) 33,033
Other current assets.................... 27,670 (1,464) 26,206
Net assets from discontinued
operations............................. -- 31,490 31,490
--------- -------- ---------
Total current assets.................. 206,743 (5,036) 201,707
Property and equipment, net............... 32,781 (9,298) 23,483
Intangible assets, net.................... 92,769 (29,381) 63,388
Other assets.............................. 74,704 (620) 74,084
--------- -------- ---------
Total assets.......................... $ 406,997 $(44,335) $ 362,662
========= ======== =========
LIABILITIES & STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable and current portion of
long-term debt......................... $ 6,398 $ -- $ 6,398
Other current liabilities............... 133,587 (44,335) 89,252
--------- -------- ---------
Total current liabilities............. 139,985 (44,335) 95,650
Long-term debt............................ 560,198 -- 560,198
Pension liability......................... -- -- --
Deferred compensation..................... 7,145 -- 7,145
Other long term liabilities............... -- -- --
Common stock.............................. -- -- --
Stockholders' deficit..................... (300,331) -- (300,331)
--------- -------- ---------
Total liabilities and stockholders'
deficit.............................. $ 406,997 $(44,335) $ 362,662
========= ======== =========
</TABLE>
7
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS--(Continued)
a. Discontinued Operations--(continued)
Set forth below are the unaudited results of operations adjusted for
discontinued operations for Dynatech for the nine month period ended December
31, 1999.
<TABLE>
<CAPTION>
For the Nine Month Period Ended
December 31, 1999
------------------------------------------
(In thousands)
Dynatech Discontinued Adjusted Dynatech
Corporation Operations Corporation
----------- ------------ -----------------
<S> <C> <C> <C>
Sales............................... $477,125 $(160,317) $316,808
Cost of sales....................... 205,900 (100,401) 105,499
-------- --------- --------
Gross profit........................ 271,225 (59,916) 211,309
-------- --------- --------
Selling, general and administrative
expense............................ 131,604 (25,392) 106,212
Product development expense......... 51,628 (9,985) 41,643
Recapitalization-related costs...... 13,259 -- 13,259
Restructuring and other non-
recurring charges.................. -- -- --
Acquired In-Process R&D............. -- -- --
Amortization of intangibles......... 7,053 (2,515) 4,538
Amortization of unearned
compensation....................... 1,451 (349) 1,102
-------- --------- --------
Total operating expenses............ 204,995 (38,241) 166,754
-------- --------- --------
Operating income.................. 66,230 (21,675) 44,555
Interest expense.................... (38,433) 4 (38,429)
Interest income..................... 1,874 (2) 1,872
Other income, net................... 11 (59) (48)
-------- --------- --------
Income from continuing operations
before income taxes................ 29,682 (21,732) 7,950
Provision for income taxes.......... 12,812 (8,041) 4,771
-------- --------- --------
Income from continuing operations... 16,870 (13,691) 3,179
Discontinued Operations:
Income from discontinued
operations, net of income tax
provision of 8,041............... -- 13,691 13,691
-------- --------- --------
Net Income.......................... $ 16,870 $ -- $ 16,870
======== ========= ========
</TABLE>
8
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS--(Continued)
a. Discontinued Operations--(continued)
Set forth below are the unaudited results of operations adjusted for
discontinued operations for the fiscal year ended March 31, 1999.
<TABLE>
<CAPTION>
For the Fiscal Year Ended March 31, 1999
------------------------------------------
(In thousands)
Dynatech Discontinued Adjusted Dynatech
Corporation Operations Corporation
----------- ------------ -----------------
<S> <C> <C> <C>
Sales............................... $522,854 $(193,322) $329,532
Cost of sales....................... 228,572 (120,004) 108,568
-------- --------- --------
Gross profit........................ 294,282 (73,318) 220,964
-------- --------- --------
Selling, general and administrative
expense............................ 149,006 (36,425) 112,581
Product development expense......... 54,023 (11,842) 42,181
Recapitalization-related costs...... 43,386 (2,619) 40,767
Restructuring and other non-
recurring charges.................. -- -- --
Acquired In-Process R&D............. -- -- --
Amortization of intangibles......... 6,228 (3,502) 2,726
Amortization of unearned
compensation....................... 1,519 (291) 1,228
-------- --------- --------
Total operating expenses............ 254,162 (54,679) 199,483
-------- --------- --------
Operating income................ 40,120 (18,639) 21,481
Interest expense.................... (46,198) 20 (46,178)
Interest income..................... 3,398 (7) 3,391
Other income, net................... 15,959 (257) 15,702
-------- --------- --------
Income (Loss) from continuing
operations before income taxes..... 13,279 (18,883) (5,604)
Provision (Benefit) for income
taxes.............................. 6,834 (6,986) (152)
-------- --------- --------
Income (Loss) from continuing
operations......................... 6,445 (11,897) (5,452)
Discontinued Operations:
Income from discontinued
operations, net of income tax
provision of 6,986............... -- 11,897 11,897
-------- --------- --------
Net Income.......................... $ 6,445 $ -- $ 6,445
======== ========= ========
</TABLE>
9
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS--(Continued)
b. Dynatech Acquisitions and Divestitures
Acquisitions related to Continuing Operations
Pacific Systems Corporation
On June 19, 1998, Dynatech, through one of its indirectly wholly owned
subsidiaries, acquired all of the outstanding capital stock of Pacific Systems
Corporation of Kirkland, Washington ("Pacific") for a total purchase price of
approximately $20 million, including an incentive earnout. The acquisition was
accounted for using the purchase method of accounting and resulted in $18.0
million of goodwill which is being amortized over 30 years. The operating
results of Pacific have been included in Dynatech's consolidated financial
statements since June 19, 1998.
Sierra Design Labs
On September 10, 1999, Dynatech, through one of its wholly owned
subsidiaries, purchased the outstanding stock of Sierra Design Labs ("Sierra"),
a Nevada Corporation for a total purchase price of $6.3 million. The
acquisition was accounted for using the purchase method of accounting and
resulted in $4.9 million of goodwill which is being amortized over 10 years.
The operating results of Sierra have been included in Dynatech's consolidated
financial statements since September 10, 1999.
Applied Digital Access, Inc.
On November 1, 1999, Dynatech, through one of its wholly owned subsidiaries,
acquired all the outstanding stock of Applied Digital Access, Inc. ("ADA") for
a total purchase price of approximately $81 million. The acquisition was
accounted for using the purchase method of accounting and resulted in $36
million of goodwill which is being amortized over 3 years. The operating
results of ADA have been included in Dynatech's consolidated financial
statements since November 1, 1999.
Divestitures related to Continuing Operations
ComCoTec, Inc.
On June 30, 1998, Dynatech sold the assets of ComCoTec, Inc. ("ComCoTec")
located in Lombard, Illinois to The Potomac Group, Inc. for $21 million.
Dynatech recorded a pre-tax gain on $15.9 million on the sale of the assets,
which was included in other income.
Parallax, Inc.
During fiscal year 1999, Dynatech liquidated the assets and liabilities of
Parallax, Inc. ("Parallax"). Any gain or loss from the liquidation activities
was immaterial.
DataViews Corporation
During the fourth quarter of fiscal year 2000, Dynatech initiated activities
to dispose of DataViews Corporation ("DataViews"), located in Northampton,
Massachusetts. During March 2000, the Company received a signed letter of intent
to sell the stock of DataViews for a sale price of approximately $4 million. The
gain on sale of the business is expected to be approximately $3.3 million.
Acquisitions related to Discontinued Operations
WPI Husky Computer, Inc., WPI Husky Computers Limited, WPI Oyster Termiflex
Limited
On February 24, 2000, Dynatech, through one of its wholly owned
subsidiaries, purchased with cash certain assets and liabilities of WPI Husky
Computer, Inc., WPI Husky Computers Limited and WPI Oyster Termiflex Limited
(collectively "Husky"), all of which were subsidiaries of WPI, Inc. The total
purchase price for Husky totalled approximately $34.8 million. The acquisition
was accounted for using the purchase method of accounting and resulted in
approximately $30.0 million of goodwill which is being amortized over 5 years.
10
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS--CONTINUED
c. Pro Forma WWG
On May 23, 2000, Dynatech consummated the merger of one of its subsidiaries
with Wavetek Wandel Goltermann, Inc. ("WWG") pursuant to which WWG became a
Dynatech subsidiary.
Set forth below is the unaudited pro forma balance sheet of WWG as of
December 31, 1999, which assumes that the divestitures of the Precision
Measurement and Test Tools divisions, which occurred in January 2000, were
consummated on December 31, 1999. The proceeds related to these divestitures
totalled approximately $25.3 million in cash.
<TABLE>
<CAPTION>
WWG pro forma balance sheet
at December 31, 1999
------------------------------
(In thousands)
WWG Pro Forma
WWG Divestiture WWG
-------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 13,530 $25,300 $ 38,830
Accounts receivable, net.................. 103,831 (4,748) 99,083
Inventories............................... 66,308 (4,445) 61,863
Other current assets...................... 15,104 -- 15,104
-------- ------- --------
Total current assets.................... 198,773 16,107 214,880
Property and equipment, net................. 58,075 (405) 57,670
Intangible assets, net...................... 157,405 (16,201) 141,204
Other assets................................ 6,146 (8) 6,138
-------- ------- --------
Total assets............................ $420,399 $ (507) $419,892
======== ======= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and current portion of long-
term debt................................ $ 32,752 $ -- $ 32,752
Other current liabilities................. 95,221 (719) 94,502
-------- ------- --------
Total current liabilities............... 127,973 (719) 127,254
Long-term debt.............................. 224,233 -- 224,233
Pension liabilities......................... 34,552 -- 34,552
Deferred compensation....................... -- -- --
Other long term liabilities................. 11,641 -- 11,641
Common stock................................ -- -- --
Stockholders' equity (deficit).............. 22,000 212 22,212
-------- ------- --------
Total liabilities and stockholders'
equity (deficit)....................... $420,399 $ (507) $419,892
======== ======= ========
</TABLE>
11
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS--CONTINUED
c. Pro Forma WWG--(continued)
Set forth below are the unaudited pro forma results of operations for WWG
for the nine month period ended December 31, 1999 and for the twelve months
ended March 31, 1999. The WWG results have been adjusted to exclude the results
of operations for the divestitures of the Precision Measurement and Test Tools
divisions, which occurred during January 2000.
WWG's fiscal year ends on September 30. The WWG historical information for
the nine month period ended December 31, 1999 has been derived from the
Statement of Operations for the year ended September 30, 1999 included in WWG's
Form 10-K for the year ended September 30, 1999, then adding the Statement of
Operations for the three months ended December 31, 1999, included in WWG's Form
10-Q for the period ended December 31, 1999, and then subtracting the Statement
of Operations for the six month period ended March 31, 1999, included in WWG's
Form 10-Q for the period ended March 31, 1999.
Wandel Goltermann, Inc. acquired Wavetek Corporation in September 1998. The
WWG historical information for the twelve month period ended March 31, 1999 has
been derived from the historical Statements of Operations information of Wandel
Goltermann, Inc. and Wavetek Corporation.
<TABLE>
<CAPTION>
For the Nine Month Period Ended
December 31, 1999
--------------------------------
(In thousands)
WWG WWG Pro Forma
Historical Divestiture WWG
---------- ----------- ---------
<S> <C> <C> <C>
Sales........................................ $391,904 $(21,708) $370,196
Cost of sales................................ 155,164 (11,770) 143,394
-------- -------- --------
Gross profit................................. 236,740 (9,938) 226,802
-------- -------- --------
Selling, general and administrative expense.. 142,103 (7,984) 134,119
Product development expense.................. 52,601 (1,315) 51,286
Restructuring and other non-recurring
charges..................................... 2,748 -- 2,748
Amortization of intangibles.................. 14,716 -- 14,716
-------- -------- --------
Total operating expenses..................... 212,168 (9,299) 202,869
-------- -------- --------
Operating income........................... 24,572 (639) 23,933
Interest expense............................. (15,891) -- (15,891)
Interest income.............................. 462 -- 462
Other income, net............................ (2,250) -- (2,250)
-------- -------- --------
Income from continuing operations before
income taxes................................ 6,893 (639) 6,254
Provision (Benefit) for income taxes......... 7,302 (256) 7,046
-------- -------- --------
Income from continuing operations............ $ (409) $ (383) $ (792)
======== ======== ========
</TABLE>
12
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS--CONTINUED
c. Pro Forma WWG--(continued)
<TABLE>
<CAPTION>
For the Twelve Month Period Ended
March 31, 1999
----------------------------------------
(In thousands)
WWG WWG Pro Forma
Historical Divestiture WWG
----------- ------------ -----------
<S> <C> <C> <C>
Sales............................... $ 477,807 $ (30,746) $ 447,061
Cost of sales....................... 199,380 (15,569) 183,811
----------- ----------- -----------
Gross profit........................ 278,427 (15,177) 263,250
----------- ----------- -----------
Selling, general and administrative
expense............................ 186,980 (11,344) 175,636
Product development expense......... 70,728 (1,717) 69,011
Restructuring and other non-
recurring charges.................. 8,896 -- 8,896
Acquired In-Process R&D............. 27,732 -- 27,732
Amortization of intangibles......... 10,405 -- 10,405
----------- ----------- -----------
Total operating expenses............ 304,741 (13,061) 291,680
----------- ----------- -----------
Operating income (loss)........... (26,314) (2,116) (28,430)
Interest expense.................... (19,856) -- (19,856)
Interest income..................... 847 -- 847
Other income (loss), net............ (4,735) -- (4,735)
----------- ----------- -----------
Income (Loss) from continuing
operations before income taxes..... (50,058) (2,116) (52,174)
Provision (benefit) for income
taxes.............................. (11,629) (846) (12,475)
Minority interest................... (2,314) -- (2,314)
----------- ----------- -----------
Income (Loss) from continuing
operations......................... $ (36,115) $ (1,270) $ (37,385)
=========== =========== ===========
</TABLE>
d. Purchase Accounting related to WWG Acquisition
<TABLE>
<S> <C>
Aggregate purchase price:
Cash in exchange for WWG stock..................................... $ 250,000
Cash in exchange for WWG options................................... 8,000
Dynatech Common Stock (approximately 14,987,000 shares)............ 130,000
---------
388,000
Add: Estimated acquisition costs................................... 20,000
---------
Total purchase price............................................. 408,000
Less: Pro Forma WWG net assets acquired (see Note C )................ (22,212)
---------
Total purchase price in excess of net assets acquired............ 385,788
Estimated purchase accounting allocations:
Less: Inventory step-up to fair value.............................. (45,000)
Less: Fixed assets step-up to fair value........................... (10,000)
Less: Incremental completed technology acquired.................... (22,000)
Less: Incremental assembled workforce acquired..................... (33,000)
Less: In-process research and development acquired................. (100,000)
Add: Deferred tax liabilities...................................... 54,000
Add: WWG historical debt issuance costs not acquired............... 5,415
---------
Estimated incremental goodwill from acquisition.................. $ 235,203
=========
</TABLE>
13
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS--CONTINUED
The final allocation of the purchase price is dependent upon certain
valuations and other studies that are still in progress. The estimated purchase
price allocations are therefore preliminary, and have been presented solely for
the purpose of developing these pro forma statements. The final allocation of
the purchase price to be ultimately recorded in Dynatech's historical
financial statements may or may not be materially different than what has been
presented in these pro forma statements.
The estimated in-process research and development charge of $100,000 has
been included as an adjustment within the Unaudited Pro Forma Condensed
Consolidated Balance Sheet, but has not been included as an adjustment within
the Unaudited Pro Forma Consolidated Statements of Operations, as this charge
is non-recurring in nature.
For purposes of these pro forma statements, the estimated life of the WWG
related pro forma intangible assets is a blended life of six years. WWG
historical and pro forma intangible assets (adjusted as a result of the
acquisition) at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Pro Forma
WWG
Purchase Adjusted for
WWG Accounting Purchase
Historical Adjustments Accounting
---------- ----------- ------------
<S> <C> <C> <C>
Goodwill............................... $ 62,211 $235,203 $297,414
Completed technology................... 77,544 22,000 99,544
Assembled work force................... 6,845 33,000 39,845
Deferred issuance costs................ 5,415 (5,415) --
Other.................................. 5,390 -- 5,390
-------- -------- --------
$157,405 $284,788 $442,193
======== ======== ========
Pro forma annual amortization
expense............................. $ 73,699
========
</TABLE>
To the extent that the blended life of the intangibles changed from six
years to five years, total pro forma annual amortization expense would be
$88,439.
The estimated incremental increase related to the amortization of intangible
assets is as follows:
<TABLE>
<CAPTION>
Nine months Twelve months
ended ended
December 31, March 31,
1999 1999
------------ -------------
<S> <C> <C>
Pro forma amortization expense................... $ 55,274 $ 73,699
Less: WWG historical amortization of intangible
assets.......................................... (14,716) (10,405)
-------- --------
Incremental pro forma amortization of
intangible assets............................. $ 40,558 $ 63,294
======== ========
</TABLE>
14
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS--CONTINUED
e. Amortization of Intangibles and Depreciation
<TABLE>
<CAPTION>
Nine months Twelve months
ended ended
December 31, March 31,
1999 1999
------------ -------------
<S> <C> <C>
Incremental pro forma amortization of intangible
assets from WWG acquisition....................... $40,558 $63,294
Adjustments to reflect full year amortization of
goodwill to acquisitions consummated during the
respective periods, as discussed in Note (b)
(excludes amortization related to Husky
acquisition, which is reflected in discontinued
operations segment) .............................. 8,204 12,640
------- -------
48,762 75,934
Tax benefit related to incremental amortization of
intangible assets other than goodwill............. (2,750) (3,667)
------- -------
Net impact to continuing operations............ $46,012 $72,267
======= =======
Incremental depreciation for fixed assets step-up.. $ 1,250 $ 1,667
Tax benefit related to incremental depreciation.... (500) (667)
------- -------
Net impact to continuing operations............ $ 750 $ 1,000
======= =======
</TABLE>
f. Restructuring of debt
Upon consummation of the WWG merger, Dynatech refinanced the existing debt
of both Dynatech and WWG, as follows:
<TABLE>
<CAPTION>
Deferred Debt
Issuance
Debt Costs Interest Expense
------------ ------------- -------------------------
For the For the
As of As of 9 Months Ended Year Ended
December 31, December 31, December 31, March 31,
1999 1999 1999 1999
------------ ------------- -------------- ----------
<S> <C> <C> <C> <C>
Existing debt to be paid:
Dynatech bank debt...... $(290,000) $ -- $ 15,267 $ 19,874
Dynatech debt issuance
costs for bank debt.... -- (10,800) 1,409 1,566
WWG senior subordinated
debt, bank debt
and other debt, current
and long-term ......... (225,000) -- 15,892 19,903
WWG debt issuance costs
for bank
and other debt......... -- 677 902
--------- -------- -------- --------
(515,000) (10,800) 33,245 42,245
--------- -------- -------- --------
New debt:
$860,000 Senior Credit
Facility:
6 year amortizing term
loan at an assumed
interest rate of 2.75%
plus LIBOR (8.85%)..... 175,000 -- (11,616) (15,488)
Debt issuance costs (6
year amortization)..... -- 5,109 (639) (852)
7.5 year term loan at an
assumed interest
rate of 3.25% plus
LIBOR (9.35%).......... 510,000 -- (35,763) (47,684)
Debt issuance costs (7.5
year amortization)..... -- 14,891 (1,489) (1,985)
--------- -------- -------- --------
685,000 20,000 (49,507) (66,009)
--------- -------- -------- --------
Net addition to debt,
current and long-term.... $ 170,000
=========
Net addition to debt
issuance costs........... $ 9,200
========
Net addition to interest
expense.................. $(16,262) $(23,764)
======== ========
</TABLE>
15
<PAGE>
NOTES TO UNAUDITED PRO FORMA STATEMENTS--CONTINUED
Upon the consummation of the merger, Dynatech borrowed approximately
$685,000 of the facility, leaving $175,000 available to be drawn under a 6 year
revolving credit facility, with an assumed interest rate of LIBOR plus 2.5%
(8.7%).
In accordance with the terms of the WWG subordinated debt agreement, Dynatech
will be obligated to pay a penalty of approximately $9,000 due to the early
termination of the WWG debt. Such amount has been excluded from the pro forma
statements of operations as it is non-recurring in nature. For historical
financial statement purposes, this $9,000 ($5,400 on an after tax basis) penalty
will be presented as an extraordinary item on Dynatech's statement of operations
(see Note (h) for impact to cash).
For historical financial statement purposes, the $10,800 ($6,480 on an after
tax basis) of debt issuance costs of Dynatech at December 31, 1999 will be
written off and presented as extraordinary item on Dynatech's statement of
operations. For pro forma purposes, this charge has been excluded from the pro
forma statement of operations, as it is non-recurring in nature.
g. Tax benefit on interest expense
<TABLE>
<CAPTION>
For the For the
9 Months Ended Year Ended
December 31, March 31,
1999 1999
--- --- -------------- ----------
<S> <C> <C> <C> <C>
Tax benefit on interest expense at effective
statutory rate of 40%
(see Note (f))............................. $(6,505) $(9,506)
======= =======
</TABLE>
h. Proceeds from sale of stock
<TABLE>
<S> <C>
Sale of 12,500 shares of Dynatech common stock
to CD&R Fund V at $4.00 per share............................... $ 50,000
Sale of 30,625 shares of Dynatech common stock
to CD&R Fund VI at $4.00 per share.............................. 122,500
Sale of 4,983 shares of Dynatech common stock
in Rights Offering to stockholders of record on April 20, 2000
(other than CD&R Fund V) at $4.00 per share (assumes the Rights
Offering is fully subscribed)(i)................................ 19,932
--------
Gross cash proceeds.............................................. 192,432
Transaction fees and expenses(ii)................................ 40,000
Payment, net of tax, for early retirement of WWG senior
subordinated debt (see Note f).................................. 5,400
--------
Net cash proceeds................................................ $147,032
========
</TABLE>
--------
(i) The record date for the Rights Offering is April 20, 2000. As the WWG
merger was consummated after the record date, neither CD&R Fund VI nor the
WWG stockholders will be entitled to receive any Rights by virtue of the
shares of Dynatech common stock acquired in connection with the
consummation of the WWG merger.
(ii) In connection with the WWG merger and the concurrent establishment of
Dynatech's new credit facility, the company incurred approximately $40
million of transaction related fees and expenses (as discussed in Notes
(d) and (f)), including $6 million payable to Clayton, Dubilier & Rice,
Inc., an investment firm that directs the management of Clayton, Dubilier
& Rice Fund V Limited Partnership and Clayton, Dubilier & Rice Fund VI
Limited Partnership, Dynatech's controlling shareholders.
16
<PAGE>
(c) Exhibits:
2.1 Agreement and Plan of Merger, dated as of February 14, 2000,
among Dynatech, MergerCo and WWG.
23.1. Consent of Arthur Andersen LLP, independent accountants.
99.1. Press Release of Dynatech, dated May 23, 2000.
99.2 Audited financial statements of WWG as of September 30, 1999
and September 30, 1998 and for the three years ended September
30, 1999.
99.3 Unaudited financial statements of WWG as of March 31, 2000 and
for the six-month periods ended March 31, 2000 and March 31,
1999.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DYNATECH CORPORATION
(Registrant)
/s/ Mark V.B. Tremallo
Date: May 31, 2000 ----------------------------------------------
Name: Mark V.B. Tremallo
Title: Corporate Vice President, General
Counsel and Secretary
18
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
2.1 Agreement and Plan of Merger, dated as of February 14, 2000, among
Dynatech, MergerCo and WWG.
23.1 Consent of Arthur Andersen LLP, independent accountants.
99.1 Press Release of Dynatech, dated May 23, 2000.
99.2 Audited financial statements of WWG as of September 30, 1999 and
September 30, 1998 and for the three years ended September 30,
1999.
99.3 Unaudited financial statements of WWG as of March 31, 2000 and for
the six-month periods ended March 31, 2000 and March 31, 1999.
19
