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Previous: IXION BIOTECHNOLOGY INC, SB-2/A, 1997-12-02 |
Next: SOUTHERN PACIFIC SECURED ASSETS CORP, 8-K, 1997-12-02 |
<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
FORM 8-K/A
(AMENDMENT NO. 1)
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 18, 1997
TELTREND INC.
- -------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-26114 13-3476859
- ---------------------------- ----------------------- ----------------------
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)
620 STETSON AVENUE, ST. CHARLES, ILLINOIS 60174
- -------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code: (630) 377-1700
-----------------
-------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
===============================================================================
<PAGE> 2
Teltrend Inc. (the "Company" or the "Registrant") hereby amends as follows
Item 7 of its Current Report on Form 8-K, dated September 18, 1997, as
originally filed with the Securities and Exchange Commission on October 2,
1997.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired.
See pages 3 through 21 of this report.
-2-
<PAGE> 3
Securicor 3net Limited
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholder
of Securicor 3net Limited
We have audited the accompanying consolidated balance sheet of Securicor 3net
Limited, (incorporated in the United Kingdom) and Subsidiaries as of September
30, 1996, and the related consolidated statements of operations, changes in
shareholders' equity (deficit), and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. We did not audit the financial
statements of Securicor 3net (NDL) Limited, a wholly owned subsidiary,
incorporated in New Zealand, which statements reflect total assets of
$3,405,000 as of September 30, 1996 and total revenues of $2,393,000 for the
year then ended. Those statements were audited by auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the amounts
included for Securicor 3net (NDL) Limited is based solely on the report of the
other auditors.
We conducted our audit in accordance with generally accepted auditing standards
used in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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 audit and the report of other auditors provide a reasonable basis for
our opinion.
In our opinion, based on our audit and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Securicor 3net Limited and
Subsidiaries as at September 30, 1996 and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
London, England BAKER TILLY
September 18, 1997 Chartered Accountants
-3-
<PAGE> 4
Securicor 3net Limited and Subsidiaries
CONSOLIDATED BALANCE SHEET
September 30, 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
September 30,
1996
ASSETS
<S> <C>
Current Assets
Cash $ 56
Inventory 5,531
Accounts receivable, net of allowance of $39,000 3,461
Prepaid expenses and other 711
Receivable from parent and affiliate companies 594
----------
Total current assets 10,353
Property and equipment, net 1,585
Intangible assets, net 2,017
Deferred income taxes 206
----------
Total assets $ 14,161
==========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current Liabilities
Bank overdraft $ 70
Accounts payable 1,518
Amounts payable to parent and affiliate companies 10,880
Taxes payable, including corporation tax 145
Accrued liabilities and deferred revenue 479
Other payables 1,235
----------
Total current liabilities 14,327
Long term debt payable to parent and affiliate companies 9,471
Deferred consideration due on the acquisition of
Securicor 3net (NDL) Limited 807
Other noncurrent liabilities 53
----------
Total liabilities 24,658
==========
Shareholder's equity (deficit)
Ordinary shares:
At September 30, 1996, 163,352,800 ordinary shares
of nominal value Pound .01 each authorised,
130,968,912 issued $ 2,073
Additional paid-in capital 4,121
Deficit (16,547)
Cumulative translation adjustment (144)
----------
Total shareholder's equity (deficit) (10,497)
----------
Total liabilities and shareholder's equity (deficit) $ 14,161
==========
</TABLE>
These financial statements were approved by the board of directors on
September 18, 1997:
/s/ M.W. Wilkinson------Director
The accompanying notes are an integral part of these statements.
-4-
<PAGE> 5
Securicor 3net Limited and Subsidiaries
CONSOLIDATED STATEMENT OF OPERATIONS
Year ended September 30, 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
Year ended
September 30,
1996
<S> <C>
Revenues $ 17,365
----------
Operating expenses:
Cost of projects 7,780
Sales and marketing 734
General and administrative 10,742
Depreciation 711
Goodwill amortisation 673
----------
Total operating expenses 20,640
----------
Loss from operations (3,275)
Interest expense (404)
Interest income 3
----------
Loss before provision (recovery) for income taxes (3,676)
Provision (recovery) for income taxes:
Current 37
Deferred (130)
----------
Total (recovery) of income taxes (93)
----------
Loss before minority interest (3,583)
Minority interest 575
----------
Net loss $ (3,008)
==========
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE> 6
Securicor 3net Limited and Subsidiaries
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY (DEFICIT)
(in thousands of US dollars)
<TABLE>
<CAPTION>
Additional Cumulative Total
Share Paid in Translation Shareholder's
Capital Capital Deficit Adjustment Equity (Deficit)
<S> <C> <C> <C> <C> <C>
Balance at October 1, 1995 $2,073 $4,121 $(13,539) $ (144) $ (7,489)
Net loss for the year - - (3,008) - (3,008)
Exchange translation
adjustments - - - - -
------- ------- -------- --------- --------
Balance at September 30, 1996 $ 2,073 $ 4,121 $(16,547) $ (144) $(10,497)
======= ======= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE> 7
Securicor 3net Limited and Subsidiaries
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended September 30, 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
Year ended
September 30,
1996
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,008)
Adjustments to reconcile net loss to net cash (used in)
operating activities:
Depreciation and amortisation 1,384
Deferred income taxes (130)
Gain on sale of fixed assets (5)
Changes in operating assets and liabilities:
Accounts receivable, net (445)
Prepaid expenses and other (423)
Inventory (3,773)
Accrued liabilities, taxes and accounts payable (370)
Other noncurrent liabilities 8
----------
Net cash (used in) operating activities (6,762)
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposal of property and equipment 19
Purchases of property and equipment (876)
Acquisition, net of cash acquired (1,791)
----------
Net cash (used in) investing activities (2,648)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in bank overdraft (488)
Repayment of capital lease obligations (8)
Increase in deferred consideration due on the acquisition
of Securicor 3net (NDL) Limited 796
Net cash provided by parent and affiliate companies 9,303
----------
Net cash provided by financing activities 9,603
----------
Effect of exchange rate changes on cash (473)
----------
----------
Net (decrease) in cash (280)
Cash at beginning of period 336
----------
Cash at end of period $ 56
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 404
Interest received 3
Corporation tax paid 37
</TABLE>
The accompanying notes are an integral part of these statements.
-7-
<PAGE> 8
Securicor 3net Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended September 30, 1996
(in thousands of US dollars)
1. ORGANISATION AND NATURE OF BUSINESS
Securicor Communications Limited ("Securicor Communications"), a wholly
owned subsidiary of Securicor plc a publicly held company whose shares are
traded on the London Stock Exchange, has a wholly owned subsidiary,
Securicor 3net Limited ("3net"), also incorporated in the United Kingdom.
This company has two further subsidiaries, Securicor 3net (NDL) Limited
incorporated in New Zealand and WISDM Limited incorporated in the United
Kingdom. These companies collectively are subsequently referred to as the
"Group".
The Group is engaged in the research, development, manufacture and
distribution of ISDN communication products.
2. GROUP SUPPORT AND GOING CONCERN STATUS
Securicor Communications and Security Services plc, an affiliate, have
confirmed their willingness to support the Group and its operating
activities for the foreseeable future.
Management have prepared these financial statements on a going concern
basis in the expectation that all amounts shown in the balance sheet will
be recoverable, and subject to group support as detailed above.
3. FINANCIAL STATEMENT PRESENTATION
The consolidated financial statements of the Group include the
consolidated results of operations and financial position of Securicor
3net Limited, WISDM Limited and Securicor 3net (NDL) Limited.
All material intercompany accounts and transactions have been eliminated
on consolidation.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")
The financial statements have been prepared in accordance with GAAP used
in the United States. Such accounting principles differ in certain
respects from United Kingdom GAAP, which is applied by the Group for local
and statutory financial reporting purposes. In addition, certain
reclassifications and changes in terminology have been made to the
financial statements previously issued in the United Kingdom including
conversion to US dollars from British pounds in order that these financial
statements conform with reporting practices prevailing in the United
States.
USE OF ESTIMATES
The preparation of financial statements under GAAP 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.
REVENUE RECOGNITION
Revenue from maintenance and support contracts is recognised on a straight
line basis over the contracted period.
All other revenues are recognised in the period in which the services were
provided.
-8-
<PAGE> 9
Securicor 3net Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended September 30, 1996
(in thousands of US dollars)
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
WARRANTY PROVISIONS
The Group grants a warranty on its hardware sales and sets aside a sum,
based upon the value of cash sales, to meet expenditure which may arise
from claims during the warranty period.
FOREIGN CURRENCY
The functional currency of Securicor 3net Limited is the pound sterling.
The functional currencies of the other consolidated group companies are
their local currencies.
For U.S. reporting purposes, the financial statements are presented in
U.S. dollars using the translation principles set out in Statement of
Financial Accounting Standards No. 52. The consolidated balance sheet is
translated into U.S. dollars at the exchange rates prevailing at the
balance sheet date and the statement of operations and cash flows at the
average rates for the year. Gains and losses resulting from translation
are accumulated as a separate component of shareholder's equity.
Net gains and losses resulting from foreign exchange transactions are
included in the consolidated statement of operations.
INCOME TAXES
Income taxes are computed using the liability method, in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("FAS 109"). Under this method, deferred income tax assets and
liabilities are determined based on temporary differences between the
financial reporting and tax basis of assets and liabilities and are
measured using enacted tax rates and laws.
PROPERTY AND EQUIPMENT
Property and equipment, including leasehold improvements, are stated at
cost. Depreciation is computed using the straight-line method over the
estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
CATEGORY PER ANNUM
<S> <C>
Motor vehicles 20 - 25%
Laboratory, test & development equipment 20 - 40%
Demonstration equipment 100%
Computer equipment 33%
Furniture and fixtures 20%
Leasehold improvements 10%
</TABLE>
-9-
<PAGE> 10
Securicor 3net Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended September 30, 1996
(in thousands of US dollars)
5. ACQUISITIONS
In March 1996 Securicor 3net Limited purchased the remaining 49% of
Securicor 3net (NDL) Limited (formerly Network Dynamics Limited) for
$1,789,000 (L.1,172,000) giving rise to $2,690,000 (L.1,762,000) of
goodwill. The goodwill on the acquisition of Securicor 3net (NDL) Limited
will be amortised over a period of two years from the date of acquisition.
On the basis that this acquisition had occurred with effect from the
beginning of the year, the net loss for the year would be increased by
$575,000 to $5,600,000.
6. INVENTORIES
<TABLE>
<CAPTION>
September 30,
1996
<S> <C>
Inventory comprises:
Raw materials $ 297
Finished goods 5,234
----------
$ 5,531
==========
</TABLE>
7. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
September 30,
1996
<S> <C>
Property and equipment comprises:
Land and buildings $ 4,826
Furniture and fixtures 299
Equipment and motor vehicles 3,325
Leasehold improvements 239
----------
$ 8,689
Less: accumulated depreciation (7,104)
----------
$ 1,585
==========
</TABLE>
8. INTANGIBLE ASSETS
<TABLE>
<CAPTION>
September 30,
1996
<S> <C>
Goodwill 2,690
Less: accumulated amortization (673)
----------
$ 2,017
==========
</TABLE>
-10-
<PAGE> 11
Securicor 3net Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended September 30, 1996
(in thousands of US dollars)
9. RELATED PARTY TRANSACTIONS
Included in current assets and current liabilities are amounts due from
parent and affiliate companies. These balances represent normal trading
accounts and funding balances from parents.
Long term debt consists of the following:
<TABLE>
<CAPTION>
September 30,
1996
<S> <C>
Loan of Pounds 5,800,000 from Securicor Communications Limited,
interest free $ 9,068
Loan of Pounds 258,000 from 3 Net Holdings Limited,
interest free 403
----------
$ 9,471
==========
</TABLE>
Other related Party transactions include:
<TABLE>
<CAPTION>
September 30,
1996
<S> <C>
Interest Expense $ 383
Sales 611
</TABLE>
10. RETIREMENT PLANS
The Group contributes to the pension scheme of Securicor plc, the
ultimate parent company, which maintains a defined benefit pension plan
that covers the executives and selected other employees based on merit.
The plan calls for benefits to be paid to eligible employees at retirement
based primarily upon years of service with the Group and compensation rates
near retirement. Contributions to the plan reflect the benefits attributed
to employees' services to date, as well as services expected to be earned
in the future.
The pension costs are assessed on the advice of independent
qualified actuaries using the project unit credit method. The most recent
actuarial valuation was April 5, 1994. The assets of the scheme are held
in separate trustee administered funds. Full particulars of the pension
scheme are disclosed in the published accounts of Securicor plc.
The Group's share of the costs of the defined benefit pensions scheme in
the year amounted to $175,000.
-11-
<PAGE> 12
Securicor 3net Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended September 30, 1996
(in thousands of US dollars)
11. INCOME TAXES
The Group is subject to taxes in the United Kingdom and a number of
other countries.
Significant components of the income tax expense (recovery) are as follows:
<TABLE>
<CAPTION>
Year ended
September 30,
1996
<S> <C>
Current
United Kingdom $ 37
Rest of world -
----------
Total current $ 37
----------
Deferred
United Kingdom (130)
Rest of world -
----------
Total deferred (130)
----------
Income tax expense (recovery) $ (93)
==========
</TABLE>
The actual income tax expense (recovery) differs from the tax expense
computed at the United Kingdom statutory rate of 31% as follows:
<TABLE>
<CAPTION>
Year ended
September 30,
1996
<S> <C>
Computed expected income tax $ (1,764)
Increase in income tax expense resulting from:
Losses for which no tax benefit is available 1,671
----------
Income tax expense (recovery) $ (93)
==========
</TABLE>
-12-
<PAGE> 13
Securicor 3net Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended September 30, 1996
(in thousands of US dollars)
11. INCOME TAXES (CONTINUED)
Significant components of the deferred tax assets are as follows:
September 30,
1996
<TABLE>
<S> <C>
ASSETS:
Net operating loss carryforwards $ 2,548
Provision on inventories, warranties, and bad debts 128
Accelerated capital allowances 78
----------
2,754
Less: valuation allowance (2,548)
----------
$ 206
==========
</TABLE>
Deferred tax asset has been classified as noncurrent.
At September 30, 1996, the Group had net consolidated operating loss
carryforwards of approximately $5,174,000 arising in the United Kingdom
and $2,860,000 arising in New Zealand and Australia.
12. COMMITMENTS
The Group leases certain of its properties and equipment under
non-cancellable operating lease arrangements which expire at
various dates through 2005.
Future minimum annual lease payments under all non-cancellable
operating leases are as follows:
<TABLE>
<CAPTION>
Operating
Leases
<S> <C>
Year ending September 30,
1997 $ 250
1998 433
1999 352
2000 236
2001 206
Thereafter 671
----------
$ 2,148
==========
</TABLE>
Rental expenses under operating leases totaled $491 for the year ended
September 30, 1996.
-13-
<PAGE> 14
Securicor 3net Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended September 30, 1996
(in thousands of US dollars)
13. INDUSTRY AND GEOGRAPHIC INFORMATION
The Group operates in one industry segment: the research, development,
manufacture and distribution of ISDN communications products.
The following customers accounted for 10% or more of the revenue in the
year:
<TABLE>
<CAPTION>
Year ended
September 30,
1996
<S> <C>
Customer A 11%
Customer B 33
---------
44%
=========
</TABLE>
The following customers accounted for 10% or more of accounts receivable
balance at the year end:
<TABLE>
<CAPTION>
Year ended
September 30,
1996
<S> <C>
Customer A $ 768
Customer B 741
Customer C 390
----------
$ 1,899
==========
</TABLE>
-14-
<PAGE> 15
Securicor 3net Limited and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year ended September 30, 1996
(in thousands of US dollars)
13. INDUSTRY AND GEOGRAPHIC INFORMATION (CONTINUED)
Information about the Group's operations by geographic area is as
follows:
<TABLE>
<CAPTION>
Year ended
September 30,
1996
<S> <C>
Revenues
United Kingdom $ 10,651
Rest of Europe 771
Rest of World 5,943
----------
Total $ 17,365
==========
</TABLE>
<TABLE>
<CAPTION>
Year ended
September 30,
1996
<S> <C>
Change in shareholder's equity (deficit) from operations
United Kingdom $ (43)
Rest of Europe (2,559)
Corporate costs (2,690)
----------
Total $ (5,292)
==========
</TABLE>
<TABLE>
<CAPTION>
Year ended
September 30,
1996
<S> <C>
Total assets
United Kingdom $ 10,344
Rest of World 3,405
----------
Total $ 13,749
==========
</TABLE>
14. SUBSEQUENT EVENTS
On August 28, 1997 Teltrend Inc. signed a Share Purchase Agreement to
acquire the entire outstanding share capital of Securicor 3net Limited and
Securicor 3net Inc., an affiliate company, for a total consideration of
Pounds 9million payable in US dollars at the rate prevailing at the
date of completion.
-15-
<PAGE> 16
Securicor 3net Limited, Subsidiaries and Affiliate
Unaudited Combined Financial Statements with Condensed Footnotes
For the nine months ended June 30, 1997
UNAUDITED COMBINED BALANCE SHEET
June 30, 1997
(in thousands of US Dollars)
<TABLE>
<CAPTION>
June 30,
1997
ASSETS
<S> <C>
Current Assets
Cash $ 205
Inventory 4,767
Accounts receivable, net of allowance of $42,000 3,500
Prepaid expenses and other 1,118
Receivable from parent and affiliate companies 52
----------
Total current assets 9,642
Property and equipment, net 2,182
Intangible assets, net 1,102
Deferred income taxes 434
----------
Total assets $ 13,360
==========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
Current Liabilities
Bank overdraft $ 143
Accounts payable 1,749
Amounts payable to parent and affiliate companies 19,042
Accrued liabilities and deferred revenue 2,706
----------
Total current liabilities 23,640
Long term debt payable to parent and affiliate companies 10,082
Other noncurrent liabilities 52
----------
Total liabilities 33,774
----------
Shareholder's equity (deficit)
Ordinary shares:
At June 30, 1997, 163,352,800 ordinary shares of
nominal value Pounds .01 each authorised, 130,968,912 issued $ 2,073
Additional paid-in capital 4,121
Deficit (25,886)
Cumulative translation adjustment (722)
----------
Total shareholder's equity (deficit) (20,414)
----------
Total liabilities and shareholder's equity (deficit) 13,360
==========
</TABLE>
The accompanying notes are an integral part of these statements.
-16-
<PAGE> 17
Securicor 3net Limited, Subsidiaries and Affiliate
UNAUDITED COMBINED STATEMENT OF OPERATIONS
Nine months ended June 30, 1997 and 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
Nine Months Nine Months
ended ended
June 30, 1997 June 30, 1996
<S> <C> <C>
Revenues $13,253 12,417
-------- ---------
Operating expenses:
Cost of projects 7,068 5,688
Sales and marketing 2,442 1,912
General and administrative 10,323 5,942
Depreciation 1,194 529
Goodwill amortisation 1,066 336
-------- ---------
Total operating expenses 22,093 14,407
--------- --------
Loss from operations (8,840) (1,990)
Interest expense (709) (244)
--------- --------
Loss before (recovery) of income taxes (9,549) (2,234)
(Recovery) of income taxes:
Deferred (208) (97)
--------- --------
Total (recovery) of income taxes (208) (97)
--------- --------
Loss before minority interest (9,341) (2,137)
Minority interest - 586
--------- --------
Net loss $(9,341) $(1,551)
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
-17-
<PAGE> 18
Securicor 3net Limited, Subsidiaries and Affiliate
UNAUDITED COMBINED STATEMENT OF CASH FLOWS
Nine months ended June 30, 1997 and 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
June 30, 1997 June 30, 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (9,341) $ (1,515)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation and amortisation 2,260 865
Deferred income taxes (208) (97)
Changes in operating assets and liabilities:
Accounts receivable, net 179 (113)
Prepaid expenses and other (352) (58)
Inventory 1,088 (4,384)
Accrued liabilities, taxes and accounts payable 744 (261)
Other noncurrent liabilities (4) 3
--------- ---------
Net cash (used in) operating activities (5,634) (5,596)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,252) (698)
Purchase of intangible assets (417) -
Acquisition, net of cash acquired - (1,791)
--------- ---------
Net cash (used in) investing activities (1,669) (2,489)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in bank overdraft 66 (451)
Repayment of capital lease obligations - (4)
Decrease in deferred consideration due on the
acquisition of Securicor 3net (NDL) Limited (833) -
Net cash provided by parent and affiliate companies 7,891 8,675
--------- ---------
Net cash provided by financing activities 7,124 8,220
--------- ---------
Effect of exchange rate changes on cash 328 (501)
--------- ---------
--------- ---------
Net increase (decrease) in cash 149 (366)
Cash at beginning of period 56 366
--------- ---------
Cash at end of period $ 205 $ -
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 709 $ 244
Interest received - -
Corporation tax paid - -
</TABLE>
The accompanying notes are an integral part of these statements.
-18-
<PAGE> 19
Securicor 3net Limited, Subsidiaries and Affiliate
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
Nine months ended June 30, 1997 and 1996
(in thousands of US dollars)
1. ORGANISATION AND NATURE OF BUSINESS
Securicor Communications Limited ("Securicor Communications"), a wholly
owned subsidiary of Securicor plc, a publicly held company whose shares
are traded on the London Stock Exchange, has a wholly owned subsidiary,
Securicor 3net Limited ("3net"), also incorporated in the United Kingdom.
This company has two further subsidiaries, Securicor 3net (NDL) Limited
incorporated in New Zealand and WISDM Limited incorporated in the United
Kingdom. These companies, together with Securicor 3net Inc., an affiliate
under common control, collectively are subsequently referred to as the
"Group".
The Group is engaged in the research, development, manufacture and
distribution of ISDN communication products.
2. GROUP SUPPORT AND GOING CONCERN STATUS
Securicor Communications and Security Services plc, an affiliate,
have confirmed their willingness to support the Group and its
operating activities for the foreseeable future.
Management have prepared these financial statements on a going
concern basis in the expectation that all amounts shown in the
balance sheet will be recoverable, and subject to group support as
detailed above.
3. FINANCIAL STATEMENT PRESENTATION
The combined financial statements included the consolidated
results of operations and financial position of Securicor 3net
Limited, WISDM Limited and Securicor 3net (NDL) Limited together
with the results of operations and financial position of Securicor
3net Inc., an affiliate under common control.
All material intercompany accounts and transactions have been
eliminated on combination.
4. UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited balance sheet as of June 30, 1997 and the unaudited
statements of operations and cash flows for the nine month periods
ended June 30, 1997 and 1996 (interim financial information), have
been prepared on the same basis as the audited financial
statements. In the opinion of the Company, the interim financial
information includes all adjustments, consisting of only normal
recurring adjustments, necessary for a fair statement of the
results of the interim periods.
Certain information and footnote disclosure normally included in
the financial statements prepared in accordance with generally
accepted accounting principles has been condensed or omitted from
the interim financial information. The results of operations for
the nine months ended June 30, 1997 may not be indicative of the
operating results for the full year or any other interim period.
-19-
<PAGE> 20
Securicor 3net Limited, Subsidiaries and Affiliate
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
Nine months ended June 30, 1997 and 1996
(in thousands of US dollars)
<TABLE>
<CAPTION>
5. INVENTORIES June 30,
1997
<S> <C>
Inventory comprises:
Raw materials $ 789
Finished goods 3,978
--------
$4,767
=======
6. RELATED PARTY TRANSACTIONS
June 30,
1997
Long term debt consists of the following:
Loan of L.5,800,000 from Securicor Communications Limited,
interest free $9,653
Loan of L.258,000 from 3 Net Holdings Limited,
interest free 429
--------
$10,082
=======
7. INCOME TAXES
The Group is subject to taxes in the United Kingdom and a
number of other countries.
Significant components of the income tax expense (recovery)
are as follows:
Nine months Nine months
ended ended
June 30, June 30,
1997 1996
<S> <C> <C>
Current
United Kingdom $ - $ -
Rest of world - -
------- -------
Total current - -
Deferred ------- -------
United Kingdom (208) (97)
Rest of world - -
------- -------
Total deferred (208) (97)
------- -------
Income tax expense (recovery) $ (208) $(97)
======= ======
</TABLE>
-20-
<PAGE> 21
Securicor 3net Limited, Subsidiaries and Affiliate
NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS
Nine months ended June 30, 1997 and 1996
(in thousands of US dollars)
7. INCOME TAXES (CONTINUED)
The actual income tax expense (recovery) differs from the tax
expense computed at the United Kingdom statutory rate of 31% as follows:
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
June 30, June 30,
1997 1996
<S> <C> <C>
Computed expected income tax $ (2,422) $ (1,422)
Increase in income tax expense resulting from:
Losses for which no tax benefit is available 2,214 1,325
-------- --------
Income tax expense (recovery) $ (208) $ (97)
======== ========
</TABLE>
<TABLE>
<CAPTION>
Significant components of the deferred tax assets are as follows:
<S> <C> <C>
June 30, June 30,
1997 1996
Assets:
Net operating loss carryforwards $ 2,824 $1,600
Provision on inventories, warranties, and bad debts 283 110
Accelerated capital allowances 151 62
-------- --------
3,258 1,772
Less: valuation allowance (2,824) (1,600)
-------- --------
$ 434 $ 172
======== ========
</TABLE>
Deferred tax asset has been classified fully as noncurrent.
At June 30, 1997, the group had net consolidated operating loss carryforwards
of approximately $9,112,000 with a tax value of $2,825,000. Deferred tax
assets arising in New Zealand and Australia have not been valued as a change in
ownership of the companies would result in the deferred tax assets not being
recognised.
-21-
<PAGE> 22
(b)Pro Forma Financial Information.
On September 18, 1997, the Company consummated the purchase of all the
outstanding shares (the "Shares") in the capital of Securicor 3 Net Limited of
Basingstoke, England ("3Net Limited") and its U. S. affiliate Securicor 3Net
Inc. ("3Net Inc.") from 3 Net Holdings Limited of Surrey, England (the
"Acquisition"). The Unaudited Pro Forma Condensed Consolidated Balance Sheet
and Unaudited Pro Forma Condensed Consolidated Statement of Operations
presented below have been prepared from the historical combined financial
statements of the Company, 3Net Limited and its consolidated subsidiaries and
3Net Inc. (collectively, the "3Net Group"). The Unaudited Pro Forma Condensed
Consolidated Balance Sheet reflects the balance sheet of the Company as of July
26, 1997 and the combined balance sheet of the 3Net Group as of June 30, 1997.
The Unaudited Pro Forma Condensed Consolidated Statement of Operations reflect
the operations of the Company for the fiscal year ended July 26, 1997 and the
combined operations of the 3Net Group for the twelve months ended June 30,
1997.
The unaudited pro forma condensed consolidated financial information
gives effect to accounting for the Acquisition as a purchase, in
accordance with Accounting Principles Board Opinion No. 16. The
Unaudited Pro Forma Condensed Consolidated Statement of Operations below
has been prepared as if the Acquisition had occurred on July 28, 1996.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of July
26, 1997 has been prepared as if the Acquisition had occurred on July
26, 1997.
The pro forma adjustments are based on currently available information
and upon certain assumptions that management of the Company believes are
reasonable under the circumstances. The unaudited pro forma condensed
consolidated financial information for the respective periods should be
read in conjunction with the accompanying notes, as well as the
historical consolidated financial information, including the notes
thereto.
The unaudited pro forma condensed consolidated information is not
necessarily indicative of the financial position or results which
actually would have been attained if the Acquisition had been
consummated on the dates indicated above, nor does it purport to
indicate or suggest what the financial position and/or results of
operations of the Company will be for any future period.
-22-
<PAGE> 23
TELTREND INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
Teltrend Inc. 3Net Group
Audited Unaudited Pro Forma
as of as of Pro Forma Unaudited
7/26/97 6/30/97 Adjustments Consolidated
------------- ---------- -------------------- ----------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $11,837,265 $205,000 $ 12,042,265
Marketable securities 20,930,326 0 1)$ (15,800,000) 5,130,326
Trade accounts receivable 7,833,708 3,500,000 11,333,708
Inventories 11,048,285 4,767,000 15,815,285
Deferred income taxes 1,870,560 0 1,870,560
Prepaid expenses and
other current assets 964,092 1,118,000 2,082,092
Receivable from former parent
and affiliate companies of 3Net Group 0 52,000 2) (52,000) 0
----------- ------------ ----------------- -----------
54,484,236 9,642,000 (15,852,000) 48,274,236
Land 1,949,234 0 1,949,234
Machinery, equipment and
leasehold improvements, net 6,090,616 2,182,000 8,272,616
Deferred income taxes 134,428 434,000 568,428
Other assets, net 173,020 1,102,000 3) 3,623,000 4,898,020
----------- ------------ ----------------- -----------
$62,831,534 $13,360,000 $ (12,229,000) $63,962,534
=========== ============ ================= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank overdraft $ - $ 143,000 $ $143,000
Accounts payable 3,443,249 1,749,000 5,192,249
Amounts payable to former parent
and affiliate companies of 3Net Group 0 19,042,000 2) (19,042,000) 0
Accrued expenses 6,903,763 2,706,000 4) 476,000 10,085,763
Current portion of long-term debt 49,032 0 49,032
----------- ------------ ----------------- -----------
10,396,044 23,640,000 (18,566,000) 15,470,044
----------- ------------ ----------------- -----------
Long-term debt payable to
former parent and affiliate
companies of 3Net Group 0 10,082,000 2) (10,082,000) 0
Other noncurrent liabilities 0 52,000 52,000
----------- ------------ ----------------- -----------
10,396,044 33,774,000 (28,648,000) 15,522,044
Stockholders' equity (deficit):
Capital stock 64,363 2,073,000 5) (2,073,000) 64,363
Additional paid-in capital 99,327,697 4,121,000 5) (4,121,000) 99,327,697
Retained (deficit) (46,956,570) (25,886,000) 5) 25,886,000
5) (3,995,000) (50,951,570)
Cumulative translation adjustment 0 (722,000) 5) 722,000 0
----------- ------------ ----------------- -----------
52,435,490 (20,414,000) 16,419,000 48,440,490
----------- ------------ ----------------- -----------
$62,831,534 $13,360,000 $ (12,229,000) $63,962,534
=========== ============ ================= ===========
</TABLE>
-23-
<PAGE> 24
1) Reflects costs incurred by the Company in connection with the Acquisition
of the Shares.
2) Reflects the elimination of certain receivables from and amounts
payable and long-term debt payable to the former parent and certain
affiliated companies of the 3Net Group as is described in the Share
Purchase Agreement dated August 28, 1997 among the Company, Security
Services plc, 3 Net Holdings Limited, Securicor Communications Limited and
3Net Limited.
3) Reflects the net effect of eliminating the recorded goodwill at June 30,
1997 of $1,102,000 and the recording of $4,725,000 of intangibles in
connection with the Acquisition.
4) Reflects the adjustment for additional costs incurred in connection with
the Acquisition.
5) Reflects the elimination of the 3Net Group's equity in connection with the
Acquisition as well as the write-off of $3,995,000 of purchased in process
research and development costs. The write-off of purchased in process
research and development costs will occur in the first quarter immediately
following the completion of the Acquisition.
-24-
<PAGE> 25
TELTREND INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Teltrend Inc. 3Net Group
Audited Unaudited Pro Forma
Year ended Year ended Pro Forma Unaudited
7/26/97 6/30/97 Adjustments Consolidated
------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales $ 81,242,707 $ 18,201,000 $99,443,707
Cost of sales 45,296,096 9,160,000 54,456,096
------------- ------------- ----------- ------------
Gross profit 35,946,611 9,041,000 44,987,611
Operating expenses:
Sales & marketing 7,333,068 1,264,000 1) 6,236,000 14,833,068
Research & development 9,685,832 0 1) 3,200,000 12,885,832
General & administrative 4,494,643 16,499,000 1) (9,436,000) 11,557,643
Amortization of intangibles 0 1,403,000 2) (1,088,000) 315,000
------------- ------------- ----------- ------------
21,513,543 19,166,000 (1,088,000) 39,591,543
------------- ------------- ----------- ------------
Income (loss) from operations 14,433,068 (10,125,000) 1,088,000 5,396,068
Other (expense) income:
Interest expense (766) (869,000) 3) 869,000 (776)
Interest income 1,467,750 3,000 4) (805,800) 664,950
Other, net (29,954) 0 (29,954)
------------- ------------- ----------- ------------
1,437,020 (866,000) 63,200 634,220
------------- ------------- ----------- ------------
Income (loss) before incomes taxes 15,870,088 (10,991,000) 1,151,200 6,030,288
Provision (benefit) for income taxes 6,241,987 (204,000) 5) 98,202 6,136,189
------------- ------------- ----------- ------------
Net income (loss) $ 9,628,101 $ (10,787,000) $1,052,998 $ (105,901)
============= ============= ========== ===========
Earnings per share of common equity $ 1.45 $ (0.08) $ (0.02)
Average common shares 6,654,488 130,968,912 6,654,488
</TABLE>
1) Reflects reclassification of certain costs within general and
administrative expenses to sales and marketing and research and
development.
2) Reflects the net effect of the elimination of amortization of $1,403,000 of
the 3Net Group's goodwill prior to the Acquisition and the recording of
amortization of intangibles incurred in connection with the Acquisition.
3) Reflects the elimination of interest expense resulting from the
elimination of 3Net Group debt outstanding.
4) Reflects a reduction in interest income for the amount of interest
income foregone on the $15,800,000 investments used to provide funds for
the Acquisition.
5) Reflects the tax effect of amortization of intangibles related to
the Acquisition and of adjustments of interest expense and income based on
an estimated marginal income tax rate of 39%.
-25-
<PAGE> 26
(c)Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
1 None
2 None
4 None
16 None
17 None
20 None
23.1 Consent of Baker Tilly, Chartered Accountants
24 None
27 None
* 99.1 Share Purchase Agreement among Security
Services plc, Securicor Communications
Limited, 3 Net Holdings Limited,
Securicor 3 Net Limited and Teltrend
Inc. dated August 28, 1997.
</TABLE>
* Filed on October 2, 1997
-26-
<PAGE> 27
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.
Teltrend Inc.
Dated: December 2, 1997 By: /s/ Douglas P. Hoffmeyer
---------------------------
Douglas P. Hoffmeyer
Vice President, Finance
-27-
<PAGE> 28
TELTREND INC.
EXHIBIT INDEX
(Pursuant to Item 601 of Regulation S-K)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
1 None
2 None
4 None
16 None
17 None
20 None
23.1 Consent of Baker Tilly, Chartered Accountants
24
27 None
* 99.1 Share Purchase Agreement among Security
Services plc, Securicor Communications
Limited, 3 Net Holdings Limited,
Securicor 3 Net Limited and Teltrend
Inc. dated August 28, 1997.
</TABLE>
* Filed on October 2, 1997
-28-
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements on
Form S-8 (Registration Nos. 33-95316, 33-95314, 333-35683 and 333-00254)
pertaining to stock option plans of Teltrend Inc. ("Teltrend") of our report
dated September 18, 1997, with respect to the consolidated financial statements
of Securicor 3Net Limited and Subsidiaries included in the Current Report on
Form 8-K/A (Amendment No. 1) of Teltrend dated September 18, 1997, and to all
references to our firm contained therein.
BAKER TILLY
Chartered Accountants
London, England
December 1, 1997
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