<PAGE> 1
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)
SEPTEMBER 24, 1999
BROOKTROUT, INC.
(Exact name of registrant as specified in charter)
MASSACHUSETTS 0-20698 04-2814792
- ---------------------------- ------------------------ ------------------
(State or other jurisdiction (Commission file number) (IRS employer
of incorporation) identification no.)
410 FIRST AVENUE, NEEDHAM, MASSACHUSETTS 02494
---------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (781) 449-4100
--------------
<PAGE> 2
ITEM 5 - ACQUISITION OR DISPOSITION OF ASSETS
On September 24, 1999, Interspeed, Inc. ("Interspeed"), a subsidiary
of Brooktrout, Inc. (the "Company"), sold 2,000,000 million shares of its common
stock in its initial public offering at a price of $12 per share. The Company
also sold 1,500,000 secondary shares of Interspeed's common stock in this
offering. The Company expects to recognize a pre-tax gain of approximately $16.7
million in connection with this transaction in its third quarter ended September
30, 1999. The Company will continue to own 6,500,000 shares, or approximately
61%, of Interspeed's outstanding shares, subject to an underwriters' over
allotment option.
This offering is described more fully in a press release issued on
September 24, 1999, a copy of which is included as an exhibit hereto and
incorporated herein by reference.
ITEM 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) PRO FORMA FINANCIAL INFORMATION
1. Unaudited Pro Forma Condensed Consolidated Balance Sheet for
the Company as of June 30, 1999.
2. Unaudited Pro Forma Condensed Consolidated Statements of
Income for the Company for the year ended December 31, 1998
and the six months ended June 30, 1999.
3. Notes to the Pro Forma Consolidated Financial Statements of
the Company.
(b) EXHIBITS
99.1 Press Release of the Company, dated September 24,1999.
2
<PAGE> 3
BROOKTROUT, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
The following unaudited pro forma condensed consolidated financial statements of
Brooktrout, Inc. ("Brooktrout") are based on the historical consolidated
financial statements of Brooktrout, and give pro forma effect to the sale by
Interspeed, Inc., a subsidiary of Brooktrout, ("Interspeed") of 2,000,000 shares
of common stock in its initial public offering at a price of $12 per share and
an additional 1,500,000 secondary shares of Interspeed's common stock sold by
Brooktrout (together, the "Offering"). The unaudited pro forma condensed
consolidated statements of operations for the six months ended June 30, 1999 and
for the fiscal year ended December 31, 1998 give effect to the Offering as if it
occurred at the beginning of the earliest period presented. Such statements do
not include the effect of the $16.7 million nonrecurring gain ($10,044 net of
tax) from the sale by Brooktrout of 1,500,000 secondary shares of common stock
of Interspeed. In addition the statements do not include interest income on the
proceeds from the sale by Brooktrout of 1,500,000 secondary shares of common
stock of Interspeed of approximately $500,000 and $264,000 for the year ended
December 31, 1998 and the six months ended June 30, 1999, respectively. Such
amounts may not be indicative of future interest income as Brooktrout has not
currently determined the future use of such proceeds. The unaudited pro forma
adjustments described in the accompanying notes are based on certain assumptions
that we believe are reasonable.
For the periods presented, operating expenses of Interspeed include allocations
of general corporate overhead expenses related to Brooktrout's corporate
headquarters and common support activities, including payroll administration,
worker's compensation and general liability insurance, accounting and finance,
legal, tax and human resources. These costs have been allocated to Interspeed
using methodologies primarily based on headcount and usage. Interspeed has
entered into a Transition Services Agreement with Brooktrout, pursuant to which
Brooktrout will continue to provide certain services to Interspeed during a
transition period. There can be no assurance that Brooktrout will be able to
reduce such overhead and other costs currently allocated to Interspeed upon
completion of the Transition Services Agreement.
During the transition period, Interspeed is building its own capabilities to
provide these services. The cost of services provided by Brooktrout may not be
indicative of the costs that Interspeed will incur in the future.
The unaudited pro forma condensed consolidated financial statements and related
notes are provided for informational purposes only and are not necessarily
indicative of the consolidated financial position or results of operations of
Brooktrout as they may be in the future or as they might have been had the
Offering been effected on the assumed dates. You should read the unaudited pro
forma condensed consolidated financial statements in conjunction with, and such
statements are qualified in their entirety by, the historical financial
statements of Brooktrout, and the related notes thereto.
<PAGE> 4
<TABLE>
<CAPTION>
BROOKTROUT, INC.
UNAUDITED PRO FORMA CONDENSEDCONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
Pro forma June 30, 1999
June 30, 1999 Adjustments (Pro forma)
------------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 9,772 37,310(a) 47,082
Marketable securities 5,040 5,040
Accounts receivable (less allowance for doubtful accounts
of $2,357 in 1999) 17,741 17,741
Inventory 10,594 10,594
Deferred tax assets 3,477 3,477
Prepaid expenses 1,339 1,339
------- --------
TOTAL CURRENT ASSETS 47,963 85,273
======= ========
Equipment and furniture:
Computer equipment 9,130 9,130
Furniture and office equipment 7,479 7,479
------- --------
Total 16,609 16,609
Less accumulated depreciation and amortization (7,773) (7,773)
------- --------
EQUIPMENT AND FURNITURE - NET 8,836 8,836
Deferred tax assets 4,544 4,544
Acquired technology and other intangible assets 13,855 13,855
Investment and other assets 1,291 1,291
------- --------
TOTAL ASSETS $76,489 113,799
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accruals $15,780 $ 15,780
Accrued compensation and commissions 4,248 4,248
Customer deposits 439 439
Accrued warranty costs 1,252 1,252
Accrued taxes 1,258 6,696(b) 7,954
------- --------
TOTAL CURRENT LIABILITIES 22,977 29,673
======= ========
Deferred rent 419 419
Minority interest -- 8,263(c) 8,263
Stockholders' equity: Common stock, $.01 par value;
authorized, 25,000,000 shares; issued and outstanding
10,948,573 shares in 1999 and 10,828,362 in 1998 110 110
Additional paid-in capital 33,225 12,307(a)(c) 45,532
Accumulated other comprehensive income (loss) (409) (409)
Retained earnings 20,167 10,044(b) 30,211
------- --------
STOCKHOLDERS' EQUITY 53,093 75,444
------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$76,489 $113,799
======= ========
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
BROOKTROUT, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year ended
Year ended December 31,
December 31, Pro forma 1998
1998 Adjustments (Pro forma)
------------ ----------- ------------
<S> <C> <C> <C>
Revenue $100,851 100,851
Cost and expenses:
Cost of product sold 40,884 40,884
Research and development 22,106 22,106
In-process research and development 9,786 9,786
Selling, general and administrative 29,902 29,902
Merger related charges -- --
-------- -------
Total cost and expenses 102,678 102,678
-------- -------
Income (loss) from operations (1,827) (1,827)
Other income (expense):
Interest and other income 1,893 1,893
Interest expense (3) (3)
-------- -------
Total other income 1,890 1,890
-------- -------
Income before minority interest and income
tax provision (benefit) 63 63
Minority interest 0 (1,961)(c) (1,961)
Income before income tax provision (benefit) 63 1,961 2,024
Income tax provision (benefit) (270) 2027(d) 1,757
-------- -------
Net income $ 333 (66) $ 267
======== =======
Income per common share:
Basic $ 0.03 $ 0.02
======== =======
Shares for basic 10,784 10,784
======== =======
Diluted $ 0.03 $ 0.02
======== =======
Shares for diluted 11,483 11,483
======== =======
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
<PAGE> 6
<TABLE>
<CAPTION>
BROOKTROUT, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Six Months Six Months Ended
Ended Pro Forma June 30, 1999
June 30, 1999 Adjustments (Pro forma)
------------- ----------- ----------------
<S> <C> <C> <C>
REVENUE $66,009 66,009
Cost and expenses:
Cost of product sold 26,170 26,170
Research and development 13,314 13,314
Selling, general and administrative 21,683 21,683
Non-cash compensation charge 1,850 1,850
------- -------
Total cost and expenses 63,017 63,017
------- -------
INCOME FROM OPERATIONS 2,992 2,992
Interest income, net 195 195
------- -------
Income before minority interest and income
tax provision 3,187 3,187
Minority interest 0 (2,048)(c) (2,048)
Income before income tax provision 3,187 2,048 5,235
Income tax provision 1,712 2,245(d) 3,957
------- -------
NET INCOME (LOSS) $ 1,475 (197) 1,278
======= =======
BASIC INCOME (LOSS) PER COMMON SHARE $ 0.14 $ 0.12
======= =======
SHARES FOR BASIC 10,890 10,890
======= =======
DILUTED INCOME (LOSS) PER COMMON SHARE $ 0.13 $ 0.11
======= =======
SHARES FOR DILUTED 11,536 11,536
======= =======
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
<PAGE> 7
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) Reflects the cash received on the sale of 3,500,000 shares of Interspeed
common stock at $12 per share less expenses of approximately $1,750,000.
(b) Reflects gain recorded on the sale of 1,500,000 secondary shares of
Interspeed's common stock by Brooktrout at $12 per share and the associated
tax effect at an assumed statutory rate of 40%.
(c) Reflects the minority interest (37.57%) in Interspeed for the period
presented.
(d) Reflects the reversal of tax benefit associated with Interspeed losses as
Interspeed will no longer be included in the consolidated tax return of
Brooktrout.
<PAGE> 8
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.
BROOKTROUT, INC.
Date: October 5, 1999 By: /s/ Robert C. Leahy
------------------------------------------
Robert C. Leahy
Vice President, Finance & Operations
4
<PAGE> 9
Exhibit Index
Exhibits
- --------
99.1 Press Release of the Company, dated September 24,1999.
<PAGE> 1
EXHIBIT 99.1
PRESS RELEASE
BROOKTROUT ANNOUNCES INITIAL PUBLIC OFFERING OF ITS INTERSPEED SUBSIDIARY
Brooktrout to Realize Pre-Tax Gain of Approximately $16.7 Million
Needham, Mass., September 24, 1999 - Brooktrout, Inc. (NASDAQ: BRKT) announced
that its Interspeed subsidiary has commenced an initial public offering today
(see separate Interspeed, Inc. release), selling 2 million primary shares of
common stock at $12 per share. In the offering Brooktrout is selling an
additional 1.5 million secondary shares of Interspeed common stock. Brooktrout
expects to recognize a pre-tax gain of approximately $16.7 million in connection
with the transaction in its third quarter ending September 30, 1999. Following
the completion of the offering, Interspeed will operate as an independent
entity. Brooktrout will continue to own approximately 6.5 million shares of
Interspeed's common stock, or approximately 61% of the shares outstanding, with
a market value of $78 million based on the initial offering price to the public.
"Brooktrout was committed to unlocking the value of Interspeed for its
shareholders," said Eric Giler, president of Brooktrout, Inc. "The pre-tax
proceeds we will receive from the IPO, combined with the value of Interspeed
stock that will be retained by Brooktrout, (based on the initial offering price
to the public) equals approximately $95 million. We invested in Interspeed
because we believe in the market potential of its products and the ability and
expertise of its management team to compete successfully. The capital to be
raised in the IPO will help Interspeed run independently and compete more
effectively in the DSL marketplace."
Except for historical information contained in this release, there may be
forward-looking statements that do not give full weight to all the potential
risks including, but not limited to, product demand and market acceptance, rapid
changes in technology, the impact of competition and the integration of acquired
companies. Actual results may differ materially. Additional Information
concerning those and other factors is contained in the "Risk Factors" section of
the Registration Statement filed with the Securities and Exchange Commission on
June 26, 1996.
ABOUT BROOKTROUT, INC.
Brooktrout, Inc., headquartered in Needham, Massachusetts, is a worldwide
supplier of electronic communications products. Through its multiple companies
and divisions, Brooktrout's mission is to provide high performance, high quality
electronic communications products to system vendors, service providers and VARs
dependent on electronic information exchange. Brooktrout is traded publicly on
NASDAQ under the symbol BRKT.
<PAGE> 2
ABOUT INTERSPEED
Interspeed, Inc. designs, develops and markets advanced high-speed data
communications solutions based on digital subscriber line (DSL), technology. Its
products enable data communication service providers, such as competitive local
exchange carriers, Internet service providers, and owners of multi-tenant units
to utilize the existing copper wire infrastructure to deliver high-speed data
access to their customers. Interspeed offers the industry's only single platform
system that integrates the principal components required to offer DSL service,
including signal concentration, routing, switching and network management.
Unlike traditional DSL products, Interspeed's DSL Access Router can offer
customers a highly scalable and flexible solution at a lower total cost of
ownership.
All trademarks are the property of their respective owners.
For more information about Brooktrout, visit www.brooktrout.com. For more
information about Interspeed, visit www.interspeed.com.
Contacts: Anne Marie Clark Bob Leahy
Director, Corporate Relations Chief Financial Officer
Brooktrout, Inc. Brooktrout, Inc.
(781) 433-9552 (781) 449-4100
