EX-99.2 4 f02152a1exv99w2.txt EXHIBIT 99.2 EXHIBIT 99.2 ENDWAVE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION On July 21, 2004, Endwave Corporation ("Endwave" or "the Company") completed the acquisition of JCA Technology, Inc. ("JCA"), a wholly-owned subsidiary of Bookham Technology plc. The following unaudited pro forma condensed combined financial statements and explanatory notes have been prepared to give effect to the acquisition by Endwave of JCA as if the acquisition had been completed on January 1, 2003 for statement of operations purposes, and June 30, 2004 for balance sheet purposes. The acquisition is expected to be accounted for as a purchase business combination as defined by Statement of Financial Accounting Standards (SFAS) No. 141. In accordance with Article 11 of Regulation S-X under the Securities Act, an unaudited pro forma condensed combined balance sheet as of June 30, 2004, and unaudited pro forma condensed combined statements of operations for the year ended December 31, 2003, and the six months ended June 30, 2004, have been prepared to reflect the acquisition of JCA by Endwave. The unaudited pro forma condensed combined balance sheet as of June 30, 2004 combines the historical unaudited balance sheet of Endwave as of June 30, 2004 with the historical unaudited balance sheet of JCA as of July 3, 2004 (JCA's second fiscal quarter end). The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2004 combines the unaudited pro forma condensed combined statement of operations of Endwave for the six months ended June 30, 2004, with the historical unaudited statement of operations of JCA for the six months ended July 3, 2004. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2003 combines the audited statement of operations for the year ended December 31, 2003 of Endwave with the audited statement of operations of JCA for the year ended December 28, 2003. Certain reclassifications were made to the financial information of JCA to conform to the Endwave presentation. The pro forma financial statements should be read in conjunction with (a) the historical financial statements and notes of Endwave included in Endwave's Annual Report on Form 10-K for the year ended December 31, 2003; (b) the unaudited condensed financial statements of Endwave as of June 30, 2004, and for the six month periods ended June 30, 2004 and 2003 included in Endwave's Quarterly Report on Form 10-Q; and (c) the audited financial statements of JCA as of December 28, 2003 and December 29, 2002, and for the years then ended, and the unaudited financial statements of JCA as of July 3, 2004 and for the six month periods ended July 3, 2004 and June 29, 2003, included in this Amendment to the Current Report on Form 8-K. The pro forma adjustments are preliminary and based on Endwave management's estimates of the value of the tangible and intangible assets acquired and liabilities assumed. Based on the timing of the closing of the transaction and other factors, pro forma adjustments may differ materially from those presented in these pro forma financial statements. A change affecting the value assigned to long-term assets acquired and liabilities acquired and/or assumed would result in a reallocation of purchase price and modifications to the pro forma adjustments. The balance sheet and statement of operations effect of these changes will depend on the nature and amount of the assets or liabilities adjusted. The pro forma financial information is intended for informational purposes only and is not necessarily indicative of the future financial position or future results of operations of Endwave after the acquisition and the merger or the financial position or results of operations had the acquisition and the merger actually been effected on January 1, 2003. ENDWAVE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET JUNE 30, 2004 (IN THOUSANDS)
Historical ---------------------------- Endwave JCA Pro forma Pro forma Corporation Technology Adjustments Combined ----------- ---------- ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 18,092 $ 861 $ (6,044) (A) $ 12,909 Restricted cash - - - - Short-term investments 13,486 - - 13,486 Accounts receivable, net 5,535 877 - 6,412 Accounts receivable from affiliates, net 2 - - 2 Inventories 7,441 362 - 7,803 Equipment held for sale 259 - - 259 Receivable from parent company - 3,428 (3,428) (C) - Other current assets 388 15 - 403 ----------- --------- ---------- ---------- Total current assets 45,203 5,543 (9,472) 41,274 Property, plant and equipment 2,778 259 - 3,037 Intangible assets, net 4,155 4,230 (A) 4,170 (4,155) (B) - (60) (A) Other assets, net 117 - - 117 ----------- --------- ---------- ---------- Total assets $ 48,098 $ 9,957 $ (9,457) $ 48,598 =========== ========= ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,493 $ 66 $ - $ 1,559 Accounts payable to affiliates 125 - - 125 Accrued warranty 4,754 112 - 4,866 Accrued compensation 946 388 - 1,334 Notes payable - - - - Restructuring liabilities, current 86 - - 86 Other current liabilities 862 254 - 1,116 ----------- --------- ---------- ---------- Total current liabilities 8,266 820 - 9,086 Notes payable, less current portion - - - - Other long-term liabilities 682 - - 682 ----------- --------- ---------- ---------- Total liabilities 8,948 820 - 9,768 ----------- --------- ---------- ---------- Stockholders' equity: Common stock 9 - 9 Additional paid-in capital 302,963 11,110 (11,110) (B) 302,963 Deferred stock compensation - - - - Accumulated other comprehensive loss (44) - - (44) Accumulated deficit (263,699) (1,973) (320) (A) (264,019) 1,973 (B) Treasury stock (79) - - (79) ----------- --------- ---------- ---------- Total stockholders' equity 39,150 9,137 (9,457) 38,830 ----------- --------- ---------- ---------- Total liabilities and stockholders' equity $ 48,098 $ 9,957 $ (9,457) $ 48,598 =========== ========= ========== =========
ENDWAVE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2004 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Historical ---------------------------- Endwave JCA Pro forma Pro forma Corporation Technology Adjustments Combined ----------- ---------- ----------- ----------- Revenues: Product revenues $ 13,783 $ 3,184 $ - $ 16,967 Development fees 410 - - 410 ----------- --------- ---------- ---------- Total revenues 14,193 3,184 - 17,377 ----------- --------- ---------- ---------- Costs and expenses: Cost of product revenues 9,228 2,900 - 12,128 Research and development 2,057 652 - 2,709 Selling, general and administrative 3,534 1,185 - 4,719 Restructuring charges, net 2,899 - - 2,899 Amortization of intangible assets - 420 303 (D) 303 (420) (E) Amortization of deferred stock compensation 204 - - 204 Loss (recovery) on building sublease (359) - - (359) ----------- --------- ---------- ---------- Total costs and expenses 17,563 5,157 (117) 22,603 ----------- --------- ---------- ---------- Loss from operations (3,370) (1,973) 117 (5,226) Interest and other income, net 762 - - 762 ----------- --------- ---------- ---------- Net loss $ (2,608) $ (1,973) $ 117 $ (4,464) =========== ========= ========== ========== Basic and diluted net loss per share $ (0.27) $ (0.47) =========== ========== Shares used in computing per share amounts 9,564 9,564 =========== ==========
ENDWAVE CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2003 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Historical ---------------------------- Endwave JCA Pro forma Pro forma Corporation Technology Adjustments Combined ----------- ---------- ----------- ---------- Revenues: Product revenues $ 32,135 $ 6,573 $ - $ 38,708 Development fees 1,712 - - 1,712 ----------- --------- ---------- ---------- Total revenues 33,847 6,573 40,420 ----------- --------- ---------- ---------- Costs and expenses: Cost of product revenues 24,830 7,272 - 32,102 Research and development 4,462 1,477 - 5,939 Selling, general and administrative 8,755 2,202 - 10,957 Restructuring charges, net 966 124 - 1,090 Impairment of long-lived assets 2,589 - - 2,589 Amortization of intangible assets - 692 746 (D) 746 (692) (E) Amortization of deferred stock compensation 796 - - 796 Loss (recovery) on building sublease - - - - ----------- --------- ---------- ---------- Total costs and expenses 42,398 11,767 54 54,219 ----------- --------- ---------- ---------- Loss from operations (8,551) (5,194) (54) (13,799) Interest and other income, net 641 20 - 661 ----------- --------- ---------- ---------- Net loss $ (7,910) $ (5,174) $ (54) $ (13,138) =========== ========= ========== ========== Basic and diluted net loss per share $ (0.87) $ (1.44) =========== ========== Shares used in computing per share amounts 9,135 9,135 =========== ==========
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS 1. Basis of Presentation The unaudited pro forma condensed combined financial statements included herein have been prepared by Endwave pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and certain footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, Endwave believes that the disclosures are adequate to make the information presented not misleading. The unaudited pro condensed combined forma balance sheet was prepared by combining the unaudited condensed balance sheet of Endwave as of June 30, 2004, and the unaudited condensed balance sheet of JCA as of July 3, 2004, assuming the acquisition had occurred on June 30, 2004. The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2004 has been prepared by combining the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2004 of Endwave and the unaudited statement of operations of JCA for the six months ended July 3, 2004, assuming the acquisition had occurred on January 1, 2003. The unaudited pro forma statement of operations for the year ended December 31, 2003 has been prepared by combining the audited statement of operations of Endwave for the year ended December 31, 2003 and the audited statement of operations of JCA for the year ended December 28, 2003, assuming the acquisition had occurred on January 1, 2003. 2. Unaudited Condensed Combined Pro Forma Adjustments (A) Records the purchase of JCA by Endwave Pursuant to the acquisition agreement between Endwave and JCA, the Company paid $5.9 million in cash for certain assets and the assumption of certain liabilities of JCA. In addition, the Company incurred transaction costs of $135,000 related to the acquisition, which are accounted for as part of the purchase price of JCA. The total purchase price of JCA is preliminarily allocated based upon the estimated fair value of the net tangible and intangible assets acquired and liabilities assumed. This allocation is subject to change pending a final analysis of the value of the assets acquired and liabilities assumed. The final allocation will be based on financial information as of the acquisition date. The following tables summarize the components of the total purchase price and the estimated allocation (in thousands):
Cash consideration $5,909 Transaction costs 135 ------ Estimated total purchase price $6,044 ====== Purchase price allocation: Net tangible assets acquired $1,554 In-process research and development 320(1) Identifiable intangible assets 4,170 ------ Estimated total purchase price $6,044 ======
---------- (1) In-process research and development costs of $320,000 will be charged to operations on the acquisition date. The in-process research and development charge has not been included in the accompanying unaudited pro forma condensed combined statement of operations as it represents a non-recurring charge directly related to the acquisition. In-process research and development consisted of technology which had not yet reached technological feasibility and had no alternative future use as of the date of acquisition. (B) Reflects the elimination of the historical intangible assets, stockholders' equity, and accumulated deficit of JCA in accordance with SFAS No. 141. (C) Reflects the elimination of receivable from parent company, which was forgiven by JCA prior to the closing of the acquisition of JCA by Endwave (D) Reflects the amortization of identifiable intangible assets (excluding in-process research and development of $320,000) related to the acquisition of JCA. Core technology and customer relationships are being amortized over five years, and customer backlog is being amortized over six months. Brandname/tradename was determined to have an indefinite life, and will be periodically measured for impairment (dollars in thousands):
JCA ----------------------------------------------------------------------- Total Core Brandname/ Customer Customer Intangible Technology Tradename Backlog Relationships Assets ---------- ---------- -------- ------------- ---------- Purchase price allocated $ 2,250 $ 1,000 $ 140 $ 780 $ 4,170 Amortization period in Indefinite months 60 Life 6 60 - Amortization expense per month $ 38 $ - $ 23 $ 13 $ 74 Twelve months pro forma adjustment to intangibles $ 450 $ - $ 140 $ 156 $ 746 Six months pro forma adjustment to intangibles $ 225 $ - $ - $ 78 $ 303
(E) Reflects the elimination of the historical amortization of intangible assets of JCA. 3. Unaudited Pro Forma Combined Net Loss Per Share The unaudited pro forma combined basic and diluted loss per common share is computed by dividing the pro forma combined net loss by Endwave's historical weighted average number of common shares outstanding.