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Previous: PRINCIPAL GOVERNMENT SECURITIES FUND INC, 485BPOS, 1996-04-12 |
Next: STRUCTURED ASSET SECURITIES CORPORATION, 10-Q, 1996-04-12 |
<PAGE>
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
Date of Report (Date of earliest event reported): January 28, 1996
SSE TELECOM, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-10965 52-1466297
(State or other jurisdiction of (Commission file Number) (I.R.S. Employer
incorporation or organization) Identification No.)
8230 Leesburg Pike, Suite 710
Vienna, Virginia 22182
(Address of principal
executive office)
Registrant's telephone number, including area code:
(703) 442-4503
<PAGE>
This Form 8-K/A amends Item 7 of that certain Form 8-K dated January 28, 1996,
(the "Original Form 8-K") by including the financial statements referred to
below.
Item 7. Financial Statements and Exhibits
(a) Financial statements of businesses acquired.
In connection with the business acquisition described in Item 2 of the
Original Form 8-K, attached are the financial statements of the business
acquired for the required periods, consisting of (i) Report of Independent
Auditor, (ii) balance sheets of Fairchild Data Corporation as of June 30, 1995
and 1994, (iii) the related statements of income and cash flows for the years
ended June 30, 1995 and 1994, (iv) unaudited balance sheet of Fairchild as of
December 31, 1995, (v) the related unaudited statements of income and cash flow
for each of the six months ended December 31, 1995 and 1994.
(b) Pro forma financial information.
In connection with the business acquisition described in Item 2 of the
Original Form 8-K, attached is the pro forma financial information required
pursuant to Article 11 of Regulation S-X, consisting of condensed combining
statements of operations of SSE Telecom, Inc. and its subsidiaries and Fairchild
Data Corporation for the years ended September 30, 1995, October 1, 1994 and the
three months ended December 30, 1995.
(c) Exhibits
23. Independent Auditors' Consent
2
<PAGE>
Signature
---------
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 hereunto duly authorized.
SSE Telecom, Inc
By /s/ Daniel E. Moore
------------------------------
Daniel E. Moore
Executive Vice President, Chief
Financial Officer and Treasurer
Dated: April 11, 1996
3
<PAGE>
Report of Independent Public Accountants
To Fairchild Data Corporation:
We have audited the accompanying balance sheets of Fairchild Data Corporation, a
Delaware Corporation, as of June 30, 1995 and 1994, and the related statements
of income, changes in equity and cash flows for the years ended June 30, 1995
and 1994. These financial statements are the responsibility of the Company's
management. 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 an 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 Fairchild Data Corporation, as
of June 30, 1995, and 1994, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
/s/ARTHUR ANDERSEN LLP
Washington, D.C.,
February 6, 1996
4
<PAGE>
FAIRCHILD DATA CORPORATION
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
December 31, June 30,
-------------------------------------------
1995 1995 1994
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Current assets:
Accounts receivable - trade, net of
allowances of $203, $291 and $68 $ 3,084 $ 2,662 $ 1,738
Inventories-
Raw materials 1,206 1,084 470
Work in process 2,060 1,504 1,183
Prepaid and other current assets 18 21 68
-------------------------------------------------------
Total current assets 6,368 5,271 3,459
Property, plant and equipment, at cost:
Buildings and improvements 71 73 73
Equipment and autos 3,798 3,864 3,997
Furniture and fixtures 142 150 184
-------------------------------------------------------
4,011 4,087 4,254
Accumulated depreciation (3,244) (3,287) (3,634)
-------------------------------------------------------
Property, plant and equipment, net 767 800 620
-------------------------------------------------------
Total assets $ 7,135 $ 6,071 $ 4,079
=======================================================
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 1,512 $ 1,989 $ 687
Accrued liabilities-
Salaries and wages 348 288 256
Accrued employee benefits 218 176 171
Insurance -- 240 237
Warranty 444 192 137
Property taxes -- 196 106
Customer advance deposits 28 303 --
Other 2 65 25
-------------------------------------------------------
Total current liabilities 2,552 3,449 1,619
-------------------------------------------------------
Equity:
Paid in capital 19,298 17,334 16,308
Retained deficit (14,715) (14,712) (13,848)
-------------------------------------------------------
Total equity 4,583 2,622 2,460
-------------------------------------------------------
Total liabilities and equity $ 7,135 $ 6,071 $ 4,079
=======================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
5
<PAGE>
FAIRCHILD DATA CORPORATION
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended Fiscal Years Ended
December 31, June 30,
------------ --------
1995 1994 1995 1994
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Sales
Cost of sales
$ 7,507 $ 5,254 $13,004 $13,815
Gross profit 5,301 3,702 9,316 8,899
-------------------------------------------------------
Operating expenses: 2,206 1,552 3,688 4,916
General and administrative expenses
Marketing and sales
Research and development and engineering 583 453 885 752
Total operating expense 780 723 1,409 1,736
806 795 2,012 1,478
-------------------------------------------------------
Other expense (income) 2,169 1,971 4,306 3,966
-------------------------------------------------------
Interest expense (73) 124 117 45
Net loss before taxes 113 29 129 945
-------------------------------------------------------
Income taxes (3) (572) (864) (40)
Net loss -- -- -- --
-------------------------------------------------------
$ (3) $ (572) $ (864) $ (40)
=======================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
6
<PAGE>
FAIRCHILD DATA CORPORATION
STATEMENTS OF EQUITY
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994 AND
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Paid-in Accumulated
Capital Deficit Total
------- ------- -----
<S> <C> <C> <C>
Balance, June 30, 1993 $17,621 $(13,808) $(3,813)
Parent capital contributions (1,313) -- (1,313)
Net loss -- (40) (40)
-------------------------------------------------------
Balance, June 30, 1994 16,308 (13,848) 2,460
Parent capital contributions 1,026 -- 1,026
Net loss -- (864) (864)
-------------------------------------------------------
Balance, June 30, 1995 17,334 (14,712) 2,622
Parent capital contributions 1,964 -- 1,964
Net loss -- (3) (3)
-------------------------------------------------------
Balance, December 31, 1995 (unaudited) $19,298 $(14,715) $ 4,583
=======================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
7
<PAGE>
FAIRCHILD DATA CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995 AND 1994, AND
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994 (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
December 31, December 31,
1995 1994 Fiscal Years Ended
June 30,
(Unaudited) (Unaudited) 1995 1994
---- ----
<S> <C> <C> <C> <C>
Cash flows provided by operating activities:
Net loss $ (3) $ (572) $ (864) $ (40)
Adjustments to reconcile net loss to net cash
provided by operating activities-
Amortization and depreciation 134 103 207 347
Decrease (increase) in accounts receivable (422) (97) (924) 745
Decrease (increase) in inventories (678) (724) (935) 744
Decrease (increase) in prepaid and other
current assets 3 4 47 113
Increase (decrease) in accounts payable (477) 420 1,302 (237)
Increase (decrease) in accrued expenses and
other liabilities (420) 294 528 (337)
Gain on sale of property, plant and equipment (1) -- (4) (24)
---------------------------------------------------
Net cash (used in) provided by operating
activities (1,864) (572) (643) 1,311
Cash flows used in investing activities:
Purchases of property, plant and equipment (101) (77) (392) (168)
Proceeds of sales of property, plant and equipment 1 4 9 75
---------------------------------------------------
Net cash used in investing activities (100) (73) (383) (93)
Cash flows provided by (used in) financing activities:
Change in paid-in capital 1,964 645 1,026 (1,313)
Net increase (decrease) in cash -- -- -- (95)
Cash, beginning of year -- -- -- 95
---------------------------------------------------
Cash, end of year $ -- $ -- $ -- $ --
===================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
8
<PAGE>
FAIRCHILD DATA CORPORATION
Notes to Financial Statements
As of June 30, 1995 and 1994 and
December 31, 1995 (Unaudited) and 1994 (Unaudited)
1. Summary of Business and Significant Accounting Policies:
CORPORATE STRUCTURE
Fairchild Data Corporation, (the "Company"), a Delaware corporation, was created
in 1978 as Comtech Data Corporation and began operations in Phoenix, Arizona.
Comtech Data's first products were digital satellite modems, satellite video
receivers and satellite digital audio receivers. The Company was acquired by
Fairchild Industries, Inc. ("FII") in 1984 with the intention of creating a
synergistic partnership with one of Comtech's largest customers, American
Satellite Corporation, which was partly owned by FII. Fairchild Data has
continued to internally develop and market various satellite communication
devices and remains a market leader in the satellite industry.
On January 28, 1996, Fairchild sold all of the assets of Fairchild Data
Corporation to SSE DataCom, Inc. ("SSED"), a wholly owned subsidiary of SSE
Telecom, Inc. ("SSET") with the exception of certain receivables assigned to the
seller, pursuant to an asset purchase agreement dated as of January 26, 1996 for
approximately $6 million (the "Fairchild Data Corporation Sale"), comprised of
approximately $4.2 million in cash and approximately $1.8 million (200,000
shares) of the common stock of SSET (the "SSET Common Stock"). Fairchild's right
to retain 100,000 shares of the SSET Common Stock is subject to SSED's achieving
specified profit margins within twelve months of the Fairchild Data Corporation
Sale. Also, Fairchild was issued a three year warrant to purchase 50,000
additional shares of the common stock of SSET.
FISCAL YEAR
The fiscal year ("Fiscal") of the Company ends on June 30. All references
herein to "1995" and "1994" mean the fiscal years ended June 30, 1995, and 1994,
respectively.
CASH EQUIVALENTS/STATEMENTS OF CASH FLOWS
For purposes of these statements, the Company considers all highly liquid
investments with original maturity dates of three months or less as cash
equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in-first-out method. The inventories consist of pre-fabricated board
assemblies and proprietary components as well as sheet metal hardware. Most
product lines are outsourced as modem configurations are numerous and the demand
for internal board assembly production is not cost
9
<PAGE>
justified. The majority of inventory flows into the plant and is tested with
some minor assembly being required and then incorporated into finished level
modems.
PROPERTIES AND DEPRECIATION
Properties are stated at cost and depreciated over estimated useful lives,
generally on a straight-line basis. For Federal income tax purposes,
accelerated depreciation methods are used. No interest costs were capitalized
in any of the years presented. Useful lives for property, plant and equipment
are:
<TABLE>
<CAPTION>
USEFUL LIVES
------------
<S> <C>
Buildings and improvement 10 years
Equipment and autos 5 years
Furniture and fixtures 7 years
</TABLE>
Depreciation expense related to property, plant and equipment amount to $207,400
and $346,800 for fiscal years 1995 and 1994, respectively.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed
of." SFAS No. 121 required that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Company expects that adoption of this statement
will not have a material effect on the Company's financial statements.
INTERIM FINANCIAL STATEMENTS
The accompanying interim consolidated financial statements, as of December 31,
1995, and 1994, of the Company have been prepared by the Company without audit.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been omitted from the accompanying interim statements. The Company
believes the disclosures made are adequate to make the information presented not
misleading.
10
<PAGE>
In the opinion of the Company, the accompanying unaudited interim consolidated
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position of the
Company as of December 31, 1995, the results of its operations for the six
months ended December 31, 1995, and 1994, and its cash flows for the six months
ended December 31, 1995 and 1994.
Interim results are not necessarily indicative of annual performance because of
the impact of seasonal variations.
Certain reclassifications have been made to the 1994 amounts to conform with the
1995 presentation.
2. PENSIONS AND POSTRETIREMENT BENEFITS:
PENSIONS
The Company has established defined benefit pension plans covering substantially
all employees. The Company's funding policy for the plans is to contribute each
year the minimum amount required under the Employee Retirement Income Security
Act of 1974.
The following table provides a summary of the components of net periodic pension
cost for the plans:
<TABLE>
<CAPTION>
1995 1994
------------------------------
(In thousands)
<S> <C> <C>
Service cost of benefits earned during the period $ 78 $ 98
Interest cost of projected benefit obligation 65 54
Return on plan assets (53) --
Net amortization and deferral 4 (64)
Amortization of prior service cost 12 12
------------------------------
Total pension cost $106 $100
==============================
</TABLE>
Assumptions used in accounting for the plans were:
<TABLE>
<CAPTION>
1995 1994
------------------------------
<S> <C> <C>
Discount rate 8.5% 8.5%
Expected rate of increase in salaries 4.5% 4.5%
Expected long-term rate of return on plan assets 9.0% 9.0%
</TABLE>
11
<PAGE>
The following table sets forth the funded status and amounts recognized in the
Company's consolidated balance sheets at June 30, 1995 and 1994 for its defined
benefit pension plans:
<TABLE>
<CAPTION>
1995 1994
---------------------------
(In thousands)
<S> <C> <C>
Vested benefit obligation $ 403 $ 333
Non-vested benefit obligation 137 125
---------------------------
Accumulated benefit obligation 540 458
---------------------------
Projected benefit obligation 707 595
Plan assets at fair value 554 483
---------------------------
Projected benefit obligation in excess of plan assets (153) (112)
Unrecognized net loss 115 56
Unrecognized prior service cost 55 75
---------------------------
Prepaid pension cost $ 17 $ 19
===========================
</TABLE>
POSTRETIREMENT HEALTH CARE BENEFITS
Effective July 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 106 ("SFAS No. 106"), "Employers' Accounting for Postretirement
Benefits Other Than Pensions". This standard requires that the expected cost of
postretirement benefits be accrued and charged to expense during the years the
employees render the services. The impact of the accounting change was not
significant.
The components of expense for continuing operations in 1995 and 1994 are as
follows.
<TABLE>
<CAPTION>
1995 1994
----------------------------
(In thousands)
<S> <C> <C>
Service cost of benefits earned $ 13 $ 20
Interest cost on liabilities 10 12
Net amortization and deferral (2) (37)
----------------------------
Net periodic postretirement benefit cost (benefit) $ 21 $ (5)
============================
</TABLE>
The following table set forth the funded status for the Company's postretirement
health care benefit plan at June 30, 1995 and 1994.
<TABLE>
<CAPTION>
1995 1994
----------------------------
(In thousands)
<S> <C> <C>
Accumulated postretirement benefit obligation $ 125 $ 102
Unrecognized net gain 49 51
----------------------------
Accrued postretirement benefit cost $ 174 $ 153
============================
</TABLE>
12
<PAGE>
The accumulated postretirement benefit obligation was determined using a
discount rate of 8.5%, and a health care cost trend rate of 8.0% and 7.5% for
pre-age-65 and post-age-65 employees, respectively, gradually decreasing to 4.5%
and 4.5%, respectively, in the year 2003 and thereafter.
Increasing the assumed health care cost trend rates by 1% would increase the
accumulated postretirement benefit obligation as of June 30, 1995, by
approximately $34,000, and increase net periodic postretirement benefit cost by
approximately $7,000 for fiscal 1995.
3. INCOME TAXES:
Effective July 1, 1993, the Company changed its method of accounting for income
taxes from the deferred method to the liability method required by Statement of
Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income
Taxes".
Under the liability method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities, and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Prior to the adoption
of SFAS No. 109, income tax expense was determined using the deferred method.
Deferred tax expense was based on items of income and expense that were reported
in different years in the financial statements and tax returns and were measured
at the tax rate in effect in the year the difference originated. As permitted
under SFAS No. 109, prior year's financial statements were not restated. The
effect of the accounting change was not material.
There was no provision or benefit for current or deferred income taxes from
continuing operations for 1995 and 1994 due to historical losses of continuing
operations.
The provision (benefit) for income taxes from continuing operations is
summarized as follows:
<TABLE>
<CAPTION>
1995 1994
-------------------------------
(In thousands)
<S> <C> <C>
Current:
Federal $ (94) $ 94
State -- --
-------------------------------
(94) 94
Deferred:
Federal 94 (94)
State -- --
94 (94)
-------------------------------
Net tax provision (benefit) $ -- $ --
===============================
</TABLE>
13
<PAGE>
The income tax provision differs from that computed using the statutory Federal
income tax rate of 35.0% in 1995 and 1994 for the following reasons:
<TABLE>
<CAPTION>
1995 1994
------------------------------
(In thousands)
<S> <C> <C>
Computed statutory amount $(333) $ (8)
Net operating losses offsetting deferred tax liability 327 15
Other 6 (7)
------------------------------
$ -- $ --
==============================
</TABLE>
The following table is a summary of the significant components of the Company's
deferred tax assets and liabilities as of June 30, 1995 and 1994.
<TABLE>
<CAPTION>
1994
1995 Deferred Deferred
June 30, (Provision) June 30, (Provision)
1995 Benefit 1994 Benefit
---- ------- ---- -------
(in thousands)
<S> <C> <C> <C> <C>
Deferred tax assets:
Accrued expenses $ 288 $ 124 $ 164 $ 28
Employee compensation and
benefits 123 (10) 133 10
Pension 72 26 46 46
Postretirement benefits 61 7 54 (2)
Other 93 51 42 (7)
-----------------------------------------------------------
637 198 439 75
Deferred tax liabilities:
Asset basis differences - fixed assets (9) 35 (44) 34
-----------------------------------------------------------
Less - Valuation allowance (628) (327) (301) (15)
-----------------------------------------------------------
Net deferred tax asset
(liability) $ -- $ (94) $ 94 $ 94
===========================================================
</TABLE>
In the opinion of management, adequate provision has been made for all income
taxes and interest, and any tax liability that may arise for prior periods will
not have a material effect on the financial condition or results of operations
of the Company.
The Company has entered into a tax sharing agreement ("Agreement") with its
parent whereby the Company is included in the consolidated Federal income tax
return of The Fairchild Corporation ("TFC"). The Agreement provides for the
Company to make payments to its parent based on the amounts of Federal income
taxes, if any, it would have paid had it filed a separate Federal income tax
return.
14
<PAGE>
4. RELATED-PARTY TRANSACTIONS:
TFC and its subsidiaries' corporate staff performs work for the Company.
Corporate administrative expense incurred is invoiced on a monthly basis and
represents the estimated cost of services performed based primarily on estimated
hours spent by corporate employees. Corporate administrative expense amounted
to $73,000 and $0 in fiscal 1995 and 1994, respectively.
The Company incurred and paid interest expense of $129,000 and $945,000 on loans
from TFC in 1995 and 1994 respectively. As TFC will not require repayment of
these loans, the loans have been classified as capital contributions.
5. COMMITMENTS AND CONTINGENCIES:
Rental expense under all leases amounted to $450,000 for the years ended June
30, 1995 and 1994.
Leases
Minimum rentals under noncancelable leases at June 30, 1995, are as follows (in
thousands):
<TABLE>
<CAPTION>
Operating Leases
----------------
<S> <C>
1996 $ 450
1997 450
1998 450
1999 450
2000 450
2001 450
----------------------------
Total minimum lease payments $2,700
============================
</TABLE>
15
<PAGE>
SSE TELECOM, INC AND FAIRCHILD DATA CORPORATION
PRO FORMA COMBINED BALANCE SHEET
(Unaudited)
The following unaudited pro forma combined balance sheet presents the combined
financial position of SSE Telecom, Inc. ("the Company"), as of December 30,
1995, with the acquired assets of Fairchild Data Corporation as of the
acquisition date (January 28, 1996). Such unaudited pro forma information is
based on the combined historical balance sheet of the Company with the fair
value of the assets acquired at the date of acquisition and is accounted for
under the purchase method of accounting. The pro forma adjustments are
described in the accompanying Notes to the Pro Forma Combined Balance Sheet.
16
<PAGE>
SSE Telecom, Inc. and Fairchild Data
Pro Forma Combined Balance Sheet
(Amounts in Thousands, Except per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
December 30, 1995
SSE Pro Forma Pro Forma Pro Forma
12/30/95 Adjustments Note Combined
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,495 (128) (1) $ 2,367
Short term investments 4,072 (4,072) (1) 0
Accounts receivable (net of reserves) 7,299 1,669 (2) 8,968
Inventory 7,388 3,641 (2) 11,029
Other current assets 1,090 38 (2) 1,128
----------------------------------- -------------------
Total current assets 22,344 1,148 23,492
Net property, equipment and leasehold improvements 2,049 420 (2) 2,469
Long-term investments 22,512 0 22,512
Other assets 271 1,147 (2),(3) 1,418
----------------------------------- -------------------
Total assets $ 47,176 2,715 49,891
=================================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,332 $ 1,475 (2) 4,807
Accrued salaries and employee benefits 640 318 (2) 958
Other accrued liabilities 803 1,075 (1),(2),(3) 1,878
----------------------------------- -------------------
Total current liabilities 4,775 2,868 7,643
Deferred taxes 8,087 0 8,087
Notes payable 9,573 0 9,573
Commitments and contingencies 0 0
Stockholders' equity:
Common stock 55 0 55
Additional paid in capital 6,749 1,109 (1) 7,858
Retained earnings 7,088 (1,262) (3) 5,826
Net unrealized gain on available for sale investments 12,473 0 12,473
Treasury stock (1,624) 0 (1,624)
----------------------------------- -------------------
Total stockholders' equity 24,741 (153) 24,588
----------------------------------- -------------------
Total liabilities & stockholders' equity $ 47,176 $ 2,715 49,891
=================================== ===================
</TABLE>
17
<PAGE>
Notes to the Pro Forma Combined Balance Sheet
Note (A) The Acquisition of Fairchild Data Corporation Assets
The total purchase price is approximately $5.5 million and consists of the
following
(in thousands):
<TABLE>
<S> <C>
Cash paid, or to be paid, to Fairchild $4,200
100,000 shares of SSE common stock issued 909
Estimated value of Warrants issued for 50,000
shares of SSE common stock 200
Estimated acquisition costs 200
-----------
$5,509
===========
</TABLE>
The allocation of the purchase price, based upon independent valuation, is as
follows (in thousands):
<TABLE>
<S> <C>
Net tangible assets acquired $3,542
In-process technology 1,262
Developed technology 498
Other purchased assets; assembled
workforce, trade name, distributor
relationships 207
-----------
$5,509
===========
</TABLE>
Note (B) Pro Forma Adjustments
The proforma adjustments to account for the purchase of the assets are
referenced below.
(1) Cash payments, and other consideration given, as described in Note (A)
above.
(2) Fair value of the assets acquired, as of January 28, 1996, the date of
acquisition, as described in Note (A) above.
(3) Write off of the in-process technology, net of tax effect.
18
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
(Unaudited)
The following unaudited pro forma combined statements of operations give effect
to the combination of SSE Telecom and Fairchild Data by combining the results of
operations of SSE Telecom for the year ended October 1, 1994 with the results of
operations of Fairchild Data for the year ended June 30, 1994, and by combining
the results of operations of SSE Telecom for the year ended September 30, 1995,
with the results of operations of Fairchild Data for the year ended June 30,
1995, and by combining the results of operations of SSE Telecom for the three
months ended December 30, 1995 with the results of operations of Fairchild Data
for the three months ended December 31, 1995, and give effect to the acquisition
of Fairchild Data as of the beginning of each period accounted for under the
purchase method of accounting and as described in the Notes to the Pro Forma
Combined Statements of Operations.
19
<PAGE>
SSE Telecom, Inc. and Fairchild Data Corporation
Pro Forma Combined Statement of Operations
(Amounts in Thousands, Except per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended December 30, 1995
Pro forma
Telecom Fairchild Adjustments Note Combined
<S> <C> <C> <C> <C> <C>
Revenue $ 9,019 $ 3,713 $ 12,732
Cost of revenue 6,129 2,892 (19) (8) 9,002
Gross margin 2,890 821 19 3,730
Expenses
Research and development 687 263 (10) (8) 940
Marketing, general and administrative 1,381 709 45 (6),(7) 2,135
Operating income 822 (151) (16) 655
Other corporate expense 21 21 (21) (1) 21
Net interest expense 43 58 (12) (2),(3) 89
Income before income tax 758 (230) 17 545
Provision for income tax 265 0 (74) (4) 191
Net income $ 493 $ (230) 91 $ 354
Primary earnings per share $ 0.09 N/A $ 0.06
Shares used in computing primary earnings per share 5,441 100 (5) 5,541
</TABLE>
20
<PAGE>
SE Telecom, Inc. and Fairchild Data Corporation
Pro Forma Combined Statement of Operations
(Amounts in Thousands, Except per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended September 30, 1995
Pro forma
Telecom Fairchild Adjustments Note Combined
<S> <C> <C> <C> <C> <C>
Revenue $ 33,569 $ 13,004 $ 46,573
Cost of revenue 22,952 9,316 (44) (8) 32,224
Gross margin 10,617 3,688 44 14,349
Expenses
Research and development 2,958 2,012 (23) (8) 4,947
Marketing, general and administrative 5,829 2,294 178 (6),(7) 8,301
Operating income 1,830 (618) (111) 1,101
Other corporate expense 94 117 (73) (1) 138
Net interest expense 223 129 57 (2),(3) 409
Income before income tax 1,513 (864) (95) 554
Provision for income tax 414 0 (262) (4) 152
Net income $ 1,099 $ (864) 167 $ 402
Primary earnings per share $ 0.20 N/A $ 0.07
Shares used in computing primary earnings per share 5,587 N/A 100 (5) 5,687
</TABLE>
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<PAGE>
SSE Telecom, Inc. and Fairchild Data Corporation
Pro Forma Combined Statement of Operations
(Amounts in Thousands, Except per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended October 1, 1994
Pro forma
Telecom Fairchild Adjustments Note Combined
<S> <C> <C> <C> <C> <C>
Revenue $ 30,173 $ 13,815 $ 43,988
Cost of revenue 19,997 8,899 (135) (8) 28,761
Gross margin 10,176 4,916 135 15,227
Expenses
Research and development 2,543 1,478 (72) (8) 3,949
Marketing, general and administrative 4,733 2,488 178 (6),(7) 7,399
Operating income 2,900 950 29 3,879
Other corporate expense 586 45 631
Gain on sale of DBSC, net of (1,227) 0 (1,227)
transaction expense
Net interest expense 147 945 (722) (2),(3) 370
Income before income tax 3,394 (40) 751 4,105
Provision for income tax 1,224 0 256 (4) 1,480
Net income $ 2,170 $ (40) 495 $ 2,625
Primary earnings per share $ 0.40 N/A $ 0.47
Shares used in computing primary earnings per share 5,467 N/A 100 (5) 5,567
</TABLE>
22
<PAGE>
Notes to the Pro Forma Combined Statements of Operations:
Note 1. Other corporate expense for Fairchild Data has been reduced. The
Fairchild Corporation and its subsidiaries' corporate staff perform work for
Fairchild Data. Corporate administrative expense incurred was invoiced on a
monthly basis. The invoice represented the estimated cost of services performed
based primarily on estimated hours spent by corporate employees. Corporate
administrative expense amounted to $21,000, $73,000, and $0 for the three months
ended December 30, 1995, and the years ended September 30, 1995, and October 1,
1994, respectively.
Note 2. Interest expense has been reduced in the pro forma combined statement
of operations. Fairchild Data incurred interest expense of $58,000, $129,000,
and $945,000 on contributions to paid in capital from The Fairchild Corporation
for the three months ended December 30, 1995, and the years ended September 30,
1995, and October 1, 1994, and, respectively.
Note 3. Interest income has been reduced in the pro forma combined statement
of operations to reflect the reduced cash balances that would have been
available to invest had the transaction occurred at the beginning of the period
in question. These reductions were $46,000, $186,000, and $223,000 for the
three months ended December 30, 1995, and the years ended September 30, 1995,
and October 1, 1994, and, respectively.
Note 4. The results of the adjusted combined statements of operations for SSE
Telecom and Fairchild Data has been adjusted to reflect the SSE Telecom's
effective tax rate for each of the respective periods.
Note 5. Pro Forma Shares Outstanding has been increased to reflect the
additional shares issued to The Fairchild Corporation as part of the purchase
price.
Note 6. Adjustment for the amortization of the developed technology, which the
Company will amortize over 5 years. The adjustment assumes the acquisition took
place on October 1, 1993.
Note 7. Adjustment for the amortization of (i) the assembled workforce over
3.5 years, (ii) the trade name over 2 years, (iii) distributor relationships
over 8 years. The adjustment assumes the acquisition took place on October 1,
1993.
Note 8. Adjustment to reflect the depreciation that would have been recorded
if the transaction had occurred on October 1, 1993, assuming current fair
values.
23
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 8-K, into SSE Telecom, Inc.'s previously filed
Registration Statement File Nos., 33-57700, 33-65084, and 33-57046.
/s/ ARTHUR ANDERSEN LLP
Washington, D.C.
April 10, 1996
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