EX-99 3 pro_forma.txt EXHIBIT 99-2 PRO FORMA FINANCIAL INFORMATION EXHIBIT 99-2 CALIFORNIA AMPLIFIER, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION The following unaudited pro forma condensed combined financial statements include the pro forma condensed combined balance sheet of California Amplifier at February 28, 2004, which gives effect to the acquisition of Vytek by California Amplifier as if the transaction were consummated on that date. The pro forma condensed combined balance sheet combines California Amplifier's balance sheet as of February 28, 2004 and Vytek's balance sheet as of December 31, 2003. Also presented is the pro forma condensed combined statement of operations of California Amplifier for the year ended February 28, 2004, giving effect to the acquisition of Vytek as if it had been consummated on March 1, 2003. The pro forma condensed combined statement of operations for the year ended February 28, 2004 combines the results of California Amplifier for its fiscal year then ended and Vytek's results for its fiscal year ended December 31, 2003. These pro forma financial statements are based on the combined historical statements of California Amplifier and Vytek, giving effect to the acquisition by California Amplifier of Vytek under the purchase method of accounting, and to the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements. The pro forma adjustments set forth in the following unaudited pro forma condensed combined financial statements are estimates and may differ from the actual adjustments when they become known. Vytek was formed in April 2000 and grew principally through a "roll-up" process in which it acquired seven privately held companies from September 2000 through April 2003. Consequently, the historical financial statements of Vytek for the year ended December 31, 2003 include nonrecurring costs and expenses in connection with acquiring and integrating certain of these companies into Vytek's business that have not been eliminated in the accompanying pro forma condensed combined statement of operations. Furthermore, the following unaudited pro forma condensed combined financial statements do not give effect to certain cost and expense savings that management of California Amplifier believes may be realized following the acquisition of Vytek. These savings are expected to be realized primarily through integration of Vytek's operations with California Amplifier's operations and elimination of redundant corporate functions. California Amplifier, Inc. Pro Forma Condensed Combined Balance Sheet (Unaudited) February 28, 2004 (In thousands) Historical ----------------------- California Pro Forma Pro Forma Amplifier Vytek (A) Adjustments Total ---------- --------- ----------- --------- ASSETS Current assets: Cash and cash equivalents $ 22,885 $ 2,458 $ (2,600)(B) $ 22,743 Accounts receivable, net 18,579 6,696 25,275 Inventories, net 20,253 1,311 24 (C) 21,588 Costs and estimated earnings in excess of billings on uncompleted contracts - 1,755 1,755 Deferred income tax assets 2,404 2,404 Prepaid expenses and other current assets 3,244 742 3,986 ------- ------- ------ ------- Total current assets 67,365 12,962 (2,576) 77,751 Property and equipment, net 4,381 1,580 (50)(D) 5,911 Deferred income tax assets, less current portion 4,359 - 4,359 Goodwill 20,938 22,737 (22,737)(E) 98,505 77,567 (F) Intangible assets, net - 2,774 (2,774)(E) 4,476 4,476 (G) Other assets 599 2,130 2,729 ------- ------- ------- ------- $ 97,642 $ 42,183 $ 53,906 $193,731 ======= ======= ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank line of credit and current portion of long-term debt $ 3,603 $ 3,223 $ 6,826 Accounts payable 17,395 1,991 19,386 Accrued payroll and employee benefits 1,513 1,629 3,142 Accrued expenses and other current liabilities 2,078 2,334 1,375 (H) 6,537 750 (I) Deferred revenue - 2,083 (715)(J) 1,368 ------- ------- ------ ------- Total current liabilities 24,589 11,260 1,410 37,259 ------- ------- ------- ------- Long-term debt 7,690 123 7,813 ------- ------- ------- ------- Other non-current liabilities - 258 258 ------- ------- ------- ------- Redeemable convertible preferred stock - 50,270 (50,270)(K) 0 ------- ------- ------- ------- Stockholders' equity: Common stock and additional paid-in capital 44,635 28,809 (28,809)(K) 137,738 93,103 (L) Less common stock held in escrow (9,594)(L) (9,594) Stock subscriptions receivable (29) 29 (K) 0 Unearned stock compensation (1,966) 1,966 (K) 0 Retained earnings (accumulated deficit) 21,550 (46,542) 46,542 (K) 21,079 (471)(H) Accumulated other comprehensive loss (822) - (822) ------- ------- ------- ------- Total stockholders' equity (deficit) 65,363 (19,728) 102,766 148,401 ------- ------- ------- ------- $ 97,642 $ 42,183 $ 53,906 $193,731 ======= ======= ======= =======
California Amplifier, Inc. Notes to Pro Forma Condensed Combined Balance Sheet (In thousands except per share amounts) (A) The amounts shown for Vytek are the historical amounts for Vytek as of December 31, 2003. (B) To reflect cash paid for direct costs of acquisition .......... $ (2,600) ====== (C) To write-up finished goods inventory to fair value ............ $ 24 ====== (D) To adjust Vytek's property and equipment to fair value ........ $ (50) ====== (E) To eliminate Vytek's goodwill and intangible asset balances. (F) To reflect as goodwill the excess of cost over the fair value of assets acquired and liabilities assumed (see computation at (M) below) .................................... $ 77,567 ====== (G) To record identifiable intangible assets arising from the California Amplifier - Vytek merger: Developed / core technology ..................... $ 3,349 In-process research and development ............. 471 Customer relationships and database ............. 1,127 ----- 4,947 Less write-off of in-process research and development (1) .................. (471) ----- Intangible assets recorded at time of merger ............................................. $ 4,476 ===== (1) California Amplifier will record an immediate write-off of in-process research and development costs in the amount of $471 at the consummation of merger with Vytek, which will be reflected as a nonrecurring charge in California Amplifier's actual income statement for the period which includes the closing of the merger transaction. In-process research and development consists of a next-generation software version that provides urgent messaging and remote problem resolution for distributed organizations. For purposes of valuing this in-process research and development, it is assumed that: (i) this new software would be introduced in 2004; (ii) that annual revenue would range between $1.6 million and $2.1 million in 2004 through 2008; (iii) annual revenues from this product are allocated 50% to in-process research and development and 50% to core technology; (iv) the gross margin percentage is 80%; and (v) the operating margin is approximately 45% in years 2005 though 2008. The projected after-tax cash flows were then present valued using a discount rate of 23%. (H) To accrue Vytek's merger-related non-recurring expenses ........ $ 1,375 ====== (I) To accrue estimated merger integration costs ................... $ 750 ====== (J) To adjust deferred revenue to fair value ....................... $ (715) ====== (K) To eliminate historical equity balances of Vytek. (L) To reflect California Amplifier common stock issued as consideration for the purchase, as follows: Deposited Issued to to escrow sellers account(2) Total ----- ------- ----- Number of common stock shares issued (000s) 7,268.7 854.7 8,123.4 Fair market value per share (3) $ 11.26 $ 11.26 ------ ------ Value of shares issued $81,846 $ 9,624 $91,470 Less stock registration costs (270) (30) (300) ------ ------ ------ Fair value of shares issued net of registration costs 81,576 9,594 91,170 Fair value of fully vested Vytek stock options and warrants assumed by California Amplifier (4) 1,933 1,933 ------ ------ ------ Recorded value of common stock issued and assumed options and warrants $83,509 $ 9,594 $93,103 ====== ====== ====== (2) The common stock shares deposited to the escrow account are, for accounting purposes, treated as contingent consideration, and accordingly are excluded from the computation of goodwill until such time as the shares are released from escrow. (3) The fair market value per share is the average closing price of California Amplifier's common stock on the Nasdaq National Market for the period beginning two trading days before and ending two trading days after December 23, 2003, the day that the merger terms were agreed to and announced. (4) The fair value of options and warrants assumed was estimated using the Black-Scholes option pricing model with an interest rate of 3.3%, a dividend yield of 0%, a volatility factor of 133.6%, and an expected life of 5 years in the case of stock options and 1.75 years to 2 years in the case of warrants. (M) Following is a computation of the excess of cost over the value of net assets acquired (i.e., goodwill): Recorded value of common stock issued to sellers and assumed options and warrants (excluding shares deposited to escrow account) ............................... $ 83,509 Direct costs of acquisition including legal, accounting and financial advisory fees ..................... 2,600 ------ Total cost of Vytek acquisition (excluding common stock deposited to escrow account) ......................... 86,109 Fair value of net assets acquired: Current assets .................................... $12,962 Adjust finished goods inventory to fair value ..... 24 Property and equipment ............................ 1,580 Adjust property and equipment to fair value ....... (50) Intangible assets ................................. 4,947 Other assets ...................................... 2,130 Current liabilities ............................... (11,260) Long-term debt and other non-current liabilities ...................................... (381) Accrued liability for Vytek's transaction costs ............................................ (1,375) Accrued liability for estimated merger integration costs ................................ (750) Adjust deferred revenue to fair value 715 ------ Total fair value of net assets acquired ................... 8,542 ------ Goodwill ..................................................... $77,567 ====== California Amplifier, Inc. Pro Forma Condensed Combined Statement of Operations Year Ended February 28, 2004 (In thousands except per share amounts) Historical ----------------------- California Pro Forma Pro Forma Amplifier Vytek (A) Adjustments Total ---------- --------- ----------- --------- Revenue: Product sales $128,616 $ 17,565 $ (2,388)(B) $ 143,793 Service revenue 24,635 (833)(C) 23,215 (587)(D) ------- ------- ------ ------- Total revenue 128,616 42,200 (3,808) 167,008 Cost of revenue: Cost of product sales 110,950 13,595 (1,671)(B) 122,874 Cost of service revenue 13,719 13,719 ------- ------- ------ ------- Total cost of revenue 110,950 27,314 (1,671) 136,593 ------- ------- ------ ------- Gross profit 17,666 14,886 (2,137) 30,415 ------- ------- ------ ------- Operating expenses: Research and development 5,363 3,389 8,752 Sales and marketing 2,336 5,903 8,239 General and administrative 3,984 10,048 14,032 Depreciation and amortization 1,483 1,483 Amortization of intangible assets 3,322 (2,427)(E) 895 ------- ------- ------ ------- Total operating expenses 11,683 24,145 (2,427) 33,401 ------- ------- ------ ------- Operating income (loss) 5,983 (9,259) 290 (2,986) Non-operating income (expense) (243) 380 137 ------- ------- ------ ------- Income (loss) before income taxes 5,740 (8,879) 290 (2,849) Income tax benefit (provision) (26) 0 39 (F) 13 ------- ------- ------ ------- Net income (loss) $ 5,714 $ (8,879) $ 329 $ (2,836) ======= ======= ====== ======= Earnings (loss) per share: Basic $ 0.39 $ (0.13) Diluted $ 0.37 $ (0.13) Shares used in computing earnings (loss) per share: Basic 14,791 7,269 (G) 22,060 Diluted 15,390 6,670 (H) 22,060
California Amplifier, Inc. Notes to Pro Forma Condensed Combined Statement of Operations (Unaudited) Year Ended February 28, 2004 (In thousands) (A) The amounts shown for Vytek are the historical amounts for Vytek's fiscal year ended December 31, 2003. (B) To adjust revenue and costs of goods sold to eliminate deferred revenue and deferred costs at December 31, 2002 which were recognized by Vytek in revenue and cost of revenue during the year ended December 31, 2003, as follows: (i) Reduction of product sales revenue .................. $(2,388) ===== (ii) Reduction of cost of product sales .................. $(1,671) ===== (C) To reflect as a reduction of service revenue for the year ended December 31, 2003 the fair value adjustment to Vytek's contracts backlog .............................. $ (833) ===== (D) To reflect as a reduction of service revenue for the year ended December 31, 2003 the fair value adjustment to Vytek's deferred revenue on maintenance and support service agreements ......................................... $ (587) ===== (E) To adjust intangible asset amortization expense, as follows: Amortization Ascribed period in Amortization Intangible asset description value years expense -------------------------------- -------- ------- ------- Developed / core technology $ 3,349 5 $ 670 Customer relationships and database 1,127 5 225 ---- Intangible asset amortization expense ...................... 895 Less: Vytek's intangible asset amortization expense (3,322) ----- Pro forma adjustment to reduce amortization expense ......... $(2,427) ===== (F) To adjust the income tax provision to reflect the effective rate that is reflected in California Amplifier's historical results for the fiscal year Ended February 28, 2004 ..................................... $ 39 ===== (G) The pro forma adjustment to shares used for basic earning (loss) per share is comprised as follows (in 000s): Common shares issued for Vytek acquisition ................ 8,124 Less shares deposited to escrow account, treated as contingent consideration .............................. (855) ----- Pro forma adjustment to shares used for basic earnings (loss) per share ................................ 7,269 ===== (H) The pro forma adjustment to shares used for diluted earning (loss) per share is comprised as follows (in 000s): Common shares issued for Vytek acquisition ................ 8,124 Less anti-dilutive shares: Shares deposited to escrow account, treated as contingent consideration ............................ (855) Equivalent shares related to California Amplifier stock options that are included in the historical diluted share amount for the year ended February 28, 2004 ....................... (599) ----- Pro forma adjustment to shares used for diluted earnings (loss) per share ....................... 6,670 =====