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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
Amendment No. 2
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported): November 3, 1993
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NETWORK SYSTEMS CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 0-9691 41-1231031
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(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
7600 BOONE AVENUE NORTH, MINNEAPOLIS, MINNESOTA 55428
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(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (612) 424-4888
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
B. PRO FORMA FINANCIAL INFORMATION.
Unaudited condensed consolidated pro forma financial statements consisting
of a balance sheet as of September 30, 1993 and statements of operations
for the year ended December 31, 1992 and for the nine months ended
September 30, 1993.
2
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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.
Dated: January 6, 1995 NETWORK SYSTEMS CORPORATION
(Registrant)
By /s/ Malcom D. Reid
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Malcolm D. Reid,
Vice President, Secretary
and General Counsel
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Item 7(b)
4
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PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated balance sheet and
condensed consolidated statements of operations of Network Systems Corporation
("Network") and Bytex Corporation ("Bytex") (collectively, "the Pro Forma
Statements") were prepared to illustrate the estimated effects of the
acquisition by Network of all the outstanding common shares of Bytex at $6.80
per share, for balance sheet purposes as of September 30, 1993, and for purposes
of the statements of operations as of January 1, 1992. The statements of
operations reflect the combined revenues and expenses of Network and Bytex.
There were no intercompany transactions for the periods presented. The pro
forma statements of operations reflect the recurring items which are directly at
tributable to the acquisition, such as amortization of intangible assets,
reduction of interest income, reduction in payroll costs for positions
eliminated as a result of the merger, and the related tax effects thereof. The
Pro Forma Statements do not purport to represent what the companies' financial
position or results of operations would have been if the acquisition had
occurred on the date or at the beginning of the periods indicated or to project
the companies' financial position or results of operations for any future date
or period.
The pro forma adjustments are based upon available information and upon certain
assumptions that Network believes are reasonable in the circumstances. The
purchase price has been allocated to the acquired assets and liabilities based
on a preliminary determination of their respective fair values. The Pro Forma
Statements and accompanying notes should be read in conjunction with the
respective historical consolidated financial statements of Network and Bytex,
including the notes thereto.
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NETWORK SYSTEMS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS OF SEPTEMBER 30, 1993
(in Thousands)
<TABLE>
<CAPTION>
Network
Systems Bytex
Corporation Corporation Adjustments Pro Forma
----------- ----------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and short-term investments $ 23,381 $ 2,916 $(13,491) (a) $ 12,806
Marketable securities 20,011 7,251 (13,987) (a) 13,275
Accounts receivable, net 53,776 8,098 61,874
Interest and other receivables 3,325 3,325
Inventories 21,065 8,663 29,728
Other assets 11,816 1,344 13,160
------- ------- ------ -----------
Total current assets 133,374 28,272 (27,478) 134,168
Property, plant, and equipment, at cost 94,923 18,097 (12,893)(c) 100,127
Less accumulated depreciation 58,602 12,893 (12,893)(c) 58,602
------ ------ -------- -----------
Net property, plant, and equipment 36,321 5,204 0 41,525
Other assets
Marketable securities 27,522 (14,120)(a) 13,402
Software development, net 4,383 4,383
Income tax deposits, including interest 39,251 39,251
Other assets 43,372 1,517 47,121 (a) 62,217
(29,793)(b)
------- ------- ------ -----------
Total other assets 114,528 1,517 3,208 119,253
------- ------- ------ -----------
$284,223 $34,993 $(24,270) $294,946
------- ------- ------ -----------
------- ------- ------ -----------
LIABILITIES AND STOCKHOLDERS'EQUITY
Current liabilities
Accounts payable $ 3,495 $ 1,913 $ $ 5,408
Accrued liabilities 28,907 3,287 1,694 (a) 47,890
14,002 (d)
Income taxes payable 447 (5,320)(d) (4,873)
Deferred revenue 2,000 2,000
------- ------- ------ -----------
Total current liabilities 34,849 5,200 10,376 50,425
Long-term debt 1,000 1,000
Deferred compensation 11,348 11,348
Deferred income taxes 4,130 4,130
Other long-term liabilities 4,342 2,413 (a) 6,755
STOCKHOLDERS'EQUITY
Common stock 594 634 (634)(b) 594
Additional paid-in capital 109,769 20,001 1,416 (a) 111,185
(20,001)(b)
Retained earnings 120,188 9,403 (9,403 (b) 111,506
(8,682)(d)
Cumulative translation adjustment (1,997) (132) 132 (b) (1,997)
Treasury stock, at cost (113) 113 (b) 0
------- ------- -------- -----------
Total stockholders' equity 228,554 29,793 (37,059) 221,288
------- ------- --------- -----------
$284,223 $34,993 $(24,270) $ 294,946
------- ------- --------- -----------
------- ------- --------- -----------
</TABLE>
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NETWORK SYSTEMS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1992
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Network
Systems Bus-Tech, Bytex
Corporation Inc. Corporation Adjustments Pro Forma
----------- -------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Product $152,606 $ 7,156 $ 32,945 $ $192,707
Services 66,512 7,315 73,827
------- ------ ------- ------- -------
Total revenues 219,118 7,156 40,260 0 266,534
Cost of revenues:
Product 59,368 1,968 15,849 2,908 (e) 80,093
Services 43,361 3,853 47,214
------- ------ ------- ------- -------
Total cost of revenues 102,729 1,968 19,702 2,908 127,307
------- ------ ------- ------- -------
Gross profit 116,389 5,188 20,558 (2,908) 139,227
Operating expenses:
Research and development 24,997 1,404 7,348 33,749
Selling, general, and administrative 69,338 2,221 18,679 329 (f) 90,567
Amortization of intangibles 3,257 2,499 (g) 5,756
Restructuring charge 60,310 60,310
------- ------ ------- ------- -------
Total operating expenses 157,902 3,625 26,027 2,828 190,382
------- ------ -------- ------- -------
Income (loss) from operations (41,513) 1,563 (5,469) (5,736) (51,155)
Interest income, net of interest and
other expense 7,429 22 622 (1,206)(h) 5,028
(1,839)(i)
------- ------ ------- ------- -------
Income (loss) before income taxes (34,084) 1,585 (4,847) (8,781) (46,127)
Income taxes 5,590 37 (2,018) (1,688)(j) 1,222
(699)(k)
------- ------ ------- ------- -------
Net income (loss) $(39,674) $ 1,548 $ (2,829) $ (6,394) $(47,349)
------- ------ ------- ------- -------
------- ------ ------- ------- -------
Earnings per common and common
equivalent share $(1.31) $ (1.56)
------- -------
------- -------
Common and common equivalent
shares used in the calculation of
earnings per share 30,313 30,313
</TABLE>
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NETWORK SYSTEMS CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Network
Systems Bus-Tech, Bytex
Corporation Inc. Corporation
September 30, 1993 April 30,1993 September 30, 1993 Adjustments Pro Forma
------------------ ------------- ------------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Revenues:
Product $100,198 $ 3,418 $ 22,822 $ $126,438
Services 48,250 5,371 53,621
------- ------- ------- ------- -------
Total revenues 148,448 3,418 28,193 0 180,059
Cost of revenues:
Product 43,329 1,057 13,372 969 (e) 58,727
Services 30,911 2,925 33,836
------- ------- ------- ------- -------
Total cost of revenues 74,240 1,057 16,297 969 92,563
------- ------- ------- ------- -------
Gross profit 74,208 2,361 11,896 (969) 87,496
Operating expenses:
Research and development 19,374 602 4,537 24,513
Selling, general, and administrative 49,150 954 12,891 110 (f) 63,105
Amortization of intangibles 1,874 (g) 1,874
------- ------- ------- ------- -------
Total operating expenses 68,524 1,556 17,428 1,984 89,492
------- ------- ------- ------- -------
Income (loss) from operations 5,684 805 (5,532) (2,953) (1,996)
Interest income, net of interest and
other expense 5,840 6 215 (402)(h) 4,280
(1,379)(i)
------- ------- ------- ------- -------
Income (loss) before income taxes 11,524 811 (5,317) (4,734) 2,284
Income taxes 4,240 40 (879) (563)(j) 2,314
(524)(k)
------- ------- ------- ------- -------
Net income (loss) $ 7,284 $ 771 $ (4,438) $ (3,647) $ (30)
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Earnings per common and common
equivalent share $ 0.24 $ 0.00
------- -------
------- -------
Common and common equivalent
shares used in the calculation of
earnings per share 30,208 30,208
</TABLE>
<PAGE>
NETWORK SYSTEMS CORPORATION
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1993
1. BASIS OF PRESENTATION
On September 27, 1993, Network Systems Corporation ("Network") commenced a
cash tender offer for all the outstanding shares of Bytex Corporation
("Bytex") for $6.80 per share. On November 2, 1993, the date the tender
offer expired, Network purchased approximately 96% of the then outstanding
shares of Bytex pursuant to the tender offer. On November 16, 1993, Bytex
was merged with Network's wholly-owned acquisition subsidiary. As a result
of the merger, Bytex became a wholly-owned subsidiary of Network and all
remaining outstanding shares of Bytex were cancelled and exchanged for the
cash price of $6.80 per share. All funds necessary to purchase the Bytex
shares and to pay the acquisition related costs will be provided by cash
and cash equivalents of Network and Bytex.
In another transaction, on May 26, 1993, Network completed the acquisition
of Bus-Tech, Inc. ("BTI"). On April 29, 1993, Network had announced its
intention to acquire privately held BTI in a cash-for-assets purchase
valued at $24.5 million. All funds necessary to purchase BTI and pay
acquisition related costs were provided by cash and cash equivalents of
Network and BTI.
Network's, Bytex's, and BTI's most recent fiscal year end was December 31,
1992. The accompanying pro forma condensed consolidated balance sheet
reflects the pro forma condensed consolidated financial position of Network
and Bytex at September 30, 1993. Network's September 30, 1993, condensed
consolidated balance sheet already reflects the acquisition of BTI in May
1993. The accompanying pro forma condensed consolidated statements of
operations reflects the pro forma consolidated results of operations of the
companies for their most recent fiscal years and the pro forma nine-month
period ended September 30, 1993. BTI's results of operations are
separately reported through April 30, 1993, after which BTI's results of
operations are a part of Network's results of operations. Because the BTI
transaction was not considered a significant transaction, pro forma
financial information was not previously reported.
Certain amounts have been reclassified in order to conform the financial
statements of Network and Bytex.
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2. PRO FORMA ADJUSTMENTS
(a) The pro forma financial statements assume a purchase price of
$47,121,000. The pro forma financial statements assume the purchase
price is funded as follows (in thousands of dollars):
<TABLE>
<S> <C>
Utilization of cash and short-term investments and marketable $ 41,598
securities
Accrual for untendered shares 2,413
Accruals for acquisition costs and other currently payable
equity transactions 1,694
Cash from the exercise of Bytex stock options and
Employee Stock Purchase Plan options 1,416
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$ 47,121
-------
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</TABLE>
(b) To eliminate Bytex's historical equity.
(c) To eliminate Bytex's historical accumulated depreciation.
(d) Non-recurring acquisition, restructuring, and acquired research and
development costs and related tax effect are reflected in the balance
sheet only. The $14,002,000 includes a write-off of $7,060,000 of fair
value allocated to research and development costs relating to
unfinished product development in connection with the valuation of
the Bytex acquistion.
The remaining $6,942,000 of charges are associated with moving the
Bytex operation from Boston to Minneapolis and completing the move
of the remaining Vitalink operations from Fremont to Minneapolis
which was part of a restructuring plan that was finalized and
approved by Network System's Board of Directors in December 1994.
The primary components of the $6,942,000 restructuring charge
discussed above include $2,127,000 of costs associated with severance
and relocation of employees; $1,927,000 for the write-off of non-
productive or abandoned fixed assets, leasehold improvements, and
inventory; $1,490,000 of accrual of costs relating to the complete
abandonment of the Vitalink facility which is to be completed in
1994; and $550,000 of costs associated with modifying current
automated accounting and service support systems to accomodate
Vitalink and Bytex requirements.
(e) Amortization of technology intangibles acquired in the BTI acquisition
over their 7-year lives.
(f) Amortization of covenants not to compete in connection with the BTI
acquisition over their 3-year lives.
(g) Amortization of intangibles in connection with the Bytex acquisition
over their 7-year lives.
(h) Reduction of interest income as a result of utilizing the companies'
cash and short-term investments and marketable securities to fund the
BTI acquisition.
(i) Reduction of interest income as a result of utilizing the companies'
cash and short-term investments and marketable securities to fund the
Bytex acquisition.
(j) Income tax effect of pro forma adjustments related to the acquisition
of BTI calculated at a combined net federal and state rate of 38%.
(k) Income tax effect of pro forma adjustments related to the acquisition
of Bytex, after nondeductible permanent differences related to
amortization of certain intangibles, calculated at a combined federal
and state rate of 38%.
