EX-99.1 4 dex991.htm UNAUDITED PRO FORMA COMBINED FIN OF SYMMETRICOM Unaudited Pro Forma Combined FIN of Symmetricom
 
Exhibit 99.1
 
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
 
The following unaudited pro forma combined financial statements present the effect of the mergers between Symmetricom, TrueTime and Datum. The unaudited pro forma combined financial statements include:
 
 
•
 
unaudited pro forma combined balance sheet as of June 30, 2002;
 
 
•
 
unaudited pro forma combined statement of operations for the year ended June 30, 2002; and
 
 
•
 
the accompanying notes to unaudited pro forma combined financial statements.
 
The unaudited pro forma combined statement of operations for the year ended June 30, 2002 gives effect to the mergers as if they had occurred on July 1, 2001. The unaudited pro forma combined statement of operations for the year ended June 30, 2002 is based on the historical audited results of operations of Symmetricom, and the unaudited results of operations of TrueTime and Datum for the twelve months then ended.
 
The unaudited pro forma combined balance sheet as of June 30, 2002 gives effect to the mergers as if they had occurred on June 30, 2002. The unaudited pro forma combined balance sheet as of June 30, 2002 is based on the historical audited balance sheet of Symmetricom and the unaudited balance sheets of TrueTime and Datum as at that date.
 
The following unaudited pro forma combined financial information, consisting of the unaudited pro forma combined statement of operations, unaudited pro forma combined balance sheet and the accompanying notes should be read in conjunction with the historical consolidated financial statements and notes of Symmetricom and TrueTime and the historical financial statements and notes of Datum set forth in this Form 8-K/A.
 
The unaudited pro forma combined financial information is presented for illustrative purposes only and is not necessarily indicative of the future financial position or future results of operations of Symmetricom after the mergers or of the financial position or results of operations of Symmetricom that would have actually occurred had the mergers been effected as of the dates described above.
 
The allocation of the aggregate purchase price of each TrueTime and Datum reflected in the unaudited pro forma combined financial information of Symmetricom is preliminary. The actual purchase price allocation to reflect the fair values of assets acquired and liabilities assumed will be based upon management’s evaluation of such assets and liabilities and, accordingly, the adjustments that have been included will change based on the final allocation of the total purchase price (including any purchase price adjustment). Such allocation may differ significantly from the preliminary allocation included in this Form 8-K/A.

 
 
SYMMETRICOM, INC.
 
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As of June 30, 2002
(In thousands)
 
 
    
Historical Symmetricom
    
Historical TrueTime
   
Adjustments
     
Pro Forma
Symmetricom
TrueTime
    
Historical Datum
     
Adjustments
     
Pro Forma
Symmetricom
TrueTime
Datum
  
Assets
                                                           
Current assets:
                                                           
Cash and investments:
                                                           
Cash and cash equivalents
   
$
52,521
 
  
$
6,702
   
$
(6,234
)(1)
   
$
52,989
 
  
$
2,471
 
   
$
(6,300
)(5)
   
$
49,160
 
Restricted cash
   
 
—  
 
  
 
—  
   
 
—  
 
   
 
—  
 
  
 
530
 
   
 
—  
 
   
 
530
 
Short-term investments
   
 
1,640
 
  
 
—  
   
 
—  
 
   
 
1,640
 
  
 
—  
 
   
 
—  
 
   
 
1,640
 
    
 
  
  
 
  
  
Total cash and investments
   
 
54,161
 
  
 
6,702
   
 
(6,234
)
   
 
54,629
 
  
 
3,001
 
   
 
(6,300
)
   
 
51,330
 
Accounts receivable, net
   
 
9,399
 
  
 
3,495
   
 
—  
 
   
 
12,894
 
  
 
17,311
 
   
 
150
(5)
   
 
30,355
 
Inventories, net
   
 
18,397
 
  
 
4,623
   
 
(475
)(1)
   
 
22,545
 
  
 
25,068
 
   
 
—  
 
   
 
47,613
 
Prepaids and other current assets
   
 
3,179
 
  
 
970
   
 
—  
 
   
 
4,149
 
  
 
1,586
 
   
 
(137
)(5)
   
 
5,598
 
Deferred income taxes
   
 
2,802
 
  
 
—  
   
 
—  
 
   
 
2,802
 
  
 
3,158
 
   
 
—  
 
   
 
5,960
 
    
 
  
  
 
  
  
Total current assets
   
 
87,938
 
  
 
15,790
   
 
(6,709
)
   
 
97,019
 
  
 
50,124
 
   
 
(6,287
)
   
 
140,856
 
Property, plant and equipment, net
   
 
21,877
 
  
 
3,781
   
 
(235
)(1)
   
 
25,423
 
  
 
14,730
 
   
 
—  
 
   
 
40,153
 
Goodwill, net
   
 
3,704
 
  
 
745
   
 
3,660
(1)
   
 
8,109
 
  
 
8,549
 
   
 
44,830
(5)
   
 
61,488
 
Other intangible assets, net
   
 
7,419
 
  
 
—  
   
 
2,760
(1)
   
 
10,179
 
  
 
3,319
 
   
 
10,009
(5)
   
 
23,507
 
Deferred taxes and other assets
   
 
8,872
 
  
 
—  
   
 
—  
 
   
 
8,872
 
  
 
6,399
 
   
 
(5,331
)(5)
   
 
9,940
 
Note receivable from employee
   
 
500
 
  
 
—  
   
 
—  
 
   
 
500
 
  
 
—  
 
   
 
—  
 
   
 
500
 
    
 
  
  
 
  
  
Total assets
   
$
130,310
 
  
$
20,316
   
$
(524
)
   
$
150,102
 
  
$
83,121
 
   
$
43,221
 
   
$
276,444
 
    
 
  
  
 
  
  
Liabilities and Stockholders’ Equity
                                                           
Current liabilities:
                                                           
Accounts payable
   
$
5,051
 
  
$
888
   
$
—  
 
   
$
5,939
 
  
$
5,695
 
   
$
—  
 
   
$
11,634
 
Accrued compensation
   
 
4,157
 
  
 
—  
   
 
—  
 
   
 
4,157
 
  
 
2,206
 
   
 
—  
 
   
 
6,363
 
Other accrued liabilities
   
 
9,260
 
  
 
1,607
   
 
(118
)(1)
   
 
10,749
 
  
 
2,392
 
   
 
(171
)(5)
   
 
12,970
 
Current maturities of long-term obligations
   
 
610
 
  
 
182
   
 
—  
 
   
 
792
 
  
 
60
 
   
 
—  
 
   
 
852
 
Long-term debt classified as current
   
 
—  
 
  
 
—  
   
 
—  
 
   
 
—  
 
  
 
2,605
 
   
 
—  
 
   
 
2,605
 
    
 
  
  
 
  
  
Total current liabilities
   
 
19,078
 
  
 
2,677
   
 
(118
)
   
 
21,637
 
  
 
12,958
 
   
 
(171
)
   
 
34,424
 
Noncurrent liabilities:
                                                           
Long-term obligations
   
 
6,574
 
  
 
480
   
 
647
(1)
   
 
7,701
 
  
 
1,676
 
   
 
—  
 
   
 
9,377
 
Deferred income taxes
   
 
469
 
  
 
—  
   
 
—  
 
   
 
469
 
  
 
—  
 
   
 
—  
 
   
 
469
 
    
 
  
  
 
  
  
Total liabilities
   
 
26,121
 
  
 
3,157
   
 
529
 
   
 
29,807
 
  
 
14,634
 
   
 
(171
)
   
 
44,270
 
    
 
  
  
 
  
  
Stockholders’ equity:
                                                           
Preferred stock
   
 
—  
 
  
 
—  
   
 
—  
 
   
 
—  
 
  
 
—  
 
   
 
—  
 
   
 
—  
 
Common stock
   
 
29,441
 
  
 
13,427
   
 
3,084
(1)
   
 
45,952
 
  
 
55,926
 
   
 
57,025
(5)
   
 
158,903
 
Stockholder note receivable
   
 
(555
)
  
 
—  
   
 
—  
 
   
 
(555
)
  
 
—  
 
   
 
—  
 
   
 
(555
)
Unearned stock compensation
   
 
—  
 
  
 
—  
   
 
—  
 
   
 
—  
 
  
 
(103
)
   
 
98
 
   
 
(5
)
Accumulated and other comprehensive loss
   
 
(118
)
  
 
—  
   
 
—  
 
   
 
(118
)
  
 
(721
)
   
 
721
(5)
   
 
(118
)
Retained earnings
   
 
75,421
 
  
 
3,732
   
 
(4,137
)(1)(2)
   
 
75,016
 
  
 
13,385
 
   
 
(14,452
)(5)(6)
   
 
73,949
 
    
 
  
  
 
  
  
Total stockholders’ equity
   
 
104,189
 
  
 
17,159
   
 
(1,053
)
   
 
120,295
 
  
 
68,487
 
   
 
43,392
 
   
 
232,174
 
    
 
  
  
 
  
  
Total liabilities and stockholders’ equity
   
$
130,310
 
  
$
20,316
   
$
(524
)
   
$
150,102
 
  
$
83,121
 
   
$
43,221
 
   
$
276,444
 
    
 
  
  
 
  
  
 
 
See notes to unaudited pro forma combined financial statements.

 
SYMMETRICOM, INC.
 
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year Ended June 30, 2002
(In thousands, except per share data)
 
    
Historical Symmetricom
    
Historical TrueTime
     
Adjustments
     
Pro Forma Symmetricom
TrueTime
    
Historical Datum
     
Adjustments
     
Pro Forma Symmetricom
TrueTime
Datum
  
Net sales
   
$
72,643
 
  
$
19,503
 
   
$
—  
 
   
$
92,146
 
  
$
80,471
 
   
$
—  
 
   
$
172,617
 
Cost of sales
   
 
45,528
 
  
 
11,832
 
   
 
—  
 
   
 
57,360
 
  
 
48,493
 
   
 
—  
 
   
 
105,853
 
    
 
  
  
 
  
  
Gross profit
   
 
27,115
 
  
 
7,671
 
   
 
—  
 
   
 
34,786
 
  
 
31,978
 
   
 
—  
 
   
 
66,764
 
Operating expenses:
                                                             
Research and development
   
 
11,316
 
  
 
3,571
 
   
 
—  
 
   
 
14,887
 
  
 
12,307
 
   
 
—  
 
   
 
27,194
 
Selling, general and administrative
   
 
24,776
 
  
 
6,790
 
   
 
—  
 
   
 
31,566
 
  
 
27,928
 
   
 
—  
 
   
 
59,494
 
Amortization of goodwill and intangibles
   
 
1,583
 
  
 
26
 
   
 
526
(2)(3)
   
 
2,135
 
  
 
447
 
   
 
2,405
(3)(6)
   
 
4,987
 
Nonrecurring losses and expenses
   
 
581
 
  
 
1,323
 
   
 
(325
)(4)
   
 
1,579
 
  
 
—
 
   
 
—  
 
   
 
1,579
 
    
 
  
  
 
  
  
Operating loss
   
 
(11,141
)
  
 
(4,039
)
   
 
(201
)
   
 
(15,381
)
  
 
(8,704
)
   
 
(2,405
)
   
 
(26,490
)
Gain on sale of equity investments
   
 
1,487
 
  
 
—  
 
   
 
—  
 
   
 
1,487
 
  
 
—  
 
   
 
—  
 
   
 
1,487
 
Interest income
   
 
1,342
 
  
 
163
 
   
 
—  
 
   
 
1,505
 
  
 
130
 
   
 
—  
 
   
 
1,635
 
Interest expense
   
 
(661
)
  
 
(49
)
   
 
—  
 
   
 
(710
)
  
 
(265
)
   
 
—  
 
   
 
(975
)
    
 
  
  
 
  
  
Loss before taxes
   
 
(8,973
)
  
 
(3,925
)
   
 
(201
)
   
 
(13,099
)
  
 
(8,839
)
   
 
(2,405
)
   
 
(24,343
)
Income tax provision (benefit)
   
 
(3,278
)
  
 
364
 
   
 
(81
)
   
 
(2,995
)
  
 
(6,127
)
   
 
(974
)
   
 
(10,096
)
    
 
  
  
 
  
  
Net loss from continuing operations
   
$
(5,695
)
  
$
(4,289
)
   
$
(120
)
   
$
(10,104
)
  
$
(2,712
)
   
$
(1,431
)
   
$
(14,247
)
    
 
  
  
 
  
  
Loss per share from continuing operations—basic
   
$
(0.25
)
  
$
(0.72
)
            
$
(0.40
)
  
$
(0.44
)
            
$
(0.34
)
    
 
           
 
           
Weighted average shares outstanding—basic
   
 
22,572
 
  
 
5,950
 
            
 
25,172
 
  
 
6,209
 
            
 
42,313
 
    
 
           
 
           
Loss per share from continuing operations—diluted
   
$
(0.25
)
  
$
(0.72
)
            
$
(0.40
)
  
$
(0.44
)
            
$
(0.34
)
    
 
           
 
           
Weighted average shares outstanding—diluted
   
 
22,572
 
  
 
5,950
 
            
 
25,172
 
  
 
6,209
 
            
 
42,313
 
    
 
           
 
           
 
 
See notes to unaudited pro forma combined financial statements.

 
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
 
Basis of Presentation
 
The total purchase prices of TrueTime and Datum were allocated to the assets acquired and liabilities assumed, based on their respective fair value. The allocation of the aggregate purchase prices reflected in the pro forma financial statements for TrueTime and Datum is preliminary. The actual purchase price allocations to reflect the fair values of assets acquired and liabilities assumed will be based upon management’s evaluation of such assets and liabilities and, accordingly, the adjustments that have been included in the pro forma statements will change based upon the final allocations of the total purchase price (including any purchase price adjustment). Such allocations may differ significantly from the preliminary allocations included herein.
 
The pro forma statement of operations for the year ended June 30, 2002 gives effect to the mergers as if they had occurred on July 1, 2001. The pro forma statements have been prepared by management of Symmetricom based on the audited consolidated financial statements of Symmetricom as at and for the year ended June 30, 2002, the unaudited financial statements of TrueTime and Datum as at and for the twelve months ended June 30, 2002. We derived the statement of operations and the net loss per common share for TrueTime for the twelve months ended June 30, 2002 by adding the results for the nine months ended June 30, 2002 with the results for the three months ended September 30, 2001. We derived the statement of operations and the net loss per common share for Datum for the twelve months ended June 30, 2002 by adding the results for the six months ended June 30, 2002 with the results for the year ended December 31, 2001 and subtracting the results for the six months ended June 30, 2001. The accounting policies used in the preparation of the pro forma statements are those disclosed in Symmetricom’s audited and unaudited consolidated financial statements.
 
The pro forma statements also are not necessarily indicative of the results that actually would have been achieved if the transactions reflected therein had been completed on the dates indicated or the results which may be obtained in the future. In preparing these pro forma statements, the amounts allocated to in-process research and development will be expensed in the period the acquisitions are consummated but are excluded from the pro forma statements of operations as the amounts are non-recurring. No adjustments have been made to reflect transactions which have occurred since the dates indicated or to reflect the operating benefits and general and administrative cost savings expected to result from combining the operations of Symmetricom, TrueTime and Datum. Additionally, no adjustments for severance costs and other merger related expenses anticipated by Symmetricom’s management as a result of the merger have been included in the pro forma statements.
 
The pro forma financial information, consisting of the pro forma statement of operations, pro forma balance sheet and the accompanying notes, should be read in conjunction with the historical consolidated financial statements and notes of Symmetricom and TrueTime and the historical financial statements and notes of Datum set forth in this Form 8-K/A.
 
Acquisition of TrueTime
 
On October 4, 2002, Symmetricom completed its acquisition of TrueTime, Inc. Under the terms of the merger agreement, each outstanding common share of TrueTime was exchanged for 0.43697 of a share of Symmetricom common stock and cash of $0.84. The merger agreement also called for the cancellation and surrender of all vested and unvested outstanding options to purchase TrueTime common stock in exchange for a cash payment, which totalled $34,000 in the aggregate. Symmetricom issued in the aggregate approximately 2.6 million shares of Symmetricom common stock and $5.0 million in cash in the merger.
 
Acquisition of Datum
 
On October 29, 2002, Symmetricom completed its acquisition of Datum Inc. Subject to the terms and conditions of that merger agreement, each share of Datum common stock outstanding was exchanged for 2.7609 shares of Symmetricom common stock. Symmetricom issued in aggregate approximately 17.4 million shares of its common stock, stock options and warrants to purchase shares of Symmetricom common stock in exchange for all of Datum’s outstanding equity interests. The acquisition of Datum is intended to qualify as a tax-free reorganization and is accounted for as a purchase.

 
Purchase Price—TrueTime
 
In determining the TrueTime purchase price, Symmetricom used the estimated value of Symmetricom common stock of approximately $6.20 per share based on the average closing price of Symmetricom’s common stock for the two trading days before the announcement and the two trading days after the announcement.
 
The purchase was estimated as follows (in thousands):
 
Fair value of common stock issued
   
$
16,276
Cash
   
 
5,000
Cash paid for canceled TrueTime options
   
 
34
Fair value of assumed TrueTime warrants
   
 
235
Estimated transaction costs
   
 
1,200
    
Total purchase price
   
$
22,745
    
 
The following is the preliminary allocation of the purchase price using TrueTime’s June 30, 2002 balances (in thousands):
 
Cash and cash equivalents
   
$
6,702
 
Property, plant and equipment
   
 
3,546
 
Other tangible assets
   
 
8,613
 
Other intangible assets
   
 
712
 
Existing technology
   
 
2,048
 
In-process research and development
   
 
405
 
Goodwill
   
 
4,405
 
Assumed liabilities
   
 
(3,686
)
    
Total purchase price
   
$
22,745
 
    
 
The actual purchase price allocation is dependent upon the fair values of the acquired assets and assumed liabilities as of the acquisition date of October 4, 2002 and the final valuation report. The $405,000 allocated to in-process research and development represents the purchased in-process technology that, as of the date of the acquisition, had not yet reached technological feasibility and had no alternative future use. Based on preliminary assessments, the value of these projects was determined by estimating the resulting net cash flows from the sale of the products resulting from the completion of the projects, reduced by the portion of the revenue attributable to developed technology and the percentage of completion of the project. The resulting cash flows were then discounted back to their present values at appropriate discount rates.
 
The nature of the efforts to develop the purchased in-process research and development into commercially viable products principally relates to the completion of all planning, designing, prototyping and testing activities that are necessary to establish that the product can be produced to meet its design specification including function, features and technical performance requirements. The resulting net cash flows from such products are based on estimates of revenue, cost of revenue, research and development costs, sales and marketing costs, and income taxes from such projects. The amounts allocated to in-process research and development will be charged to the statements of operations in the period the acquisition is consummated.
 
Purchase Price—Datum
 
In determining the Datum purchase price, Symmetricom used the estimated value of Symmetricom common stock of approximately $5.69 per share based on the average closing price of Symmetricom’s common stock the two trading days before the announcement and the two trading days after the announcement.
 
The purchase was estimated as follows (in thousands):
 
Fair value of common stock issued
   
$
98,071
Fair value of assumed Datum options
   
 
13,100
Fair value of assumed Datum warrants
   
 
1,780
Estimated transaction costs
   
 
6,300
    
Total purchase price
   
$
119,251
    

 
The following is a preliminary allocation of the purchase price using Datum’s June 30, 2002 balances (in thousands)
 
Cash and cash equivalents
   
$
2,471
 
Property, plant, and equipment
   
 
14,730
 
Other tangible assets
   
 
54,065
 
Existing technology
   
 
13,095
 
In-process research and development
   
 
1,067
 
Other intangible assets
   
 
233
 
Deferred compensation
   
 
5
 
Goodwill
   
 
53,379
 
Deferred tax liability
   
 
(5,331
)
Assumed liabilities
   
 
(14,463
)
    
Total purchase price
   
$
119,251
 
    
 
The actual purchase price allocation is also dependent upon the fair values of acquired assets and assumed liabilities as of the acquisition date and the finalization of the preliminary valuation report. The $1,067,000 allocated to in-process research and development represent the purchased in-process technology that, as of the date of acquisition, had not yet reached technological feasibility and had no alternative future use. Based on preliminary assessments, the value of these projects was determined by estimating the resulting net cash flows from the sale of the products resulting from the completion of the projects, reduced by the portion of the revenue attributable to developed technology and the percentage of completion of the project. The resulting cash flows were then discounted back to their present values at appropriate discount rates.
 
The nature of the efforts to develop the purchased in-process research and development into commercially viable products principally relates to the completion of all planning, designing, prototyping and testing activities that are necessary to establish that the product can be produced to meet its design specification including function, features and technical performance requirements. The resulting net cash flows from such products are based on estimates of revenue, cost of revenue, research and development costs, sales and marketing costs, and income taxes from such projects. The amounts allocated to in-process research and development will be charged to the statements of operations in the period the acquisition is consummated.
 
Symmetricom is in the process of determining the amount of any integration or restructuring costs associated with the acquisition. These costs are expected to include expenses associated with involuntary employee terminations, employee relocations, noncancelable lease costs and other costs associated with the integration and/or exit of certain business activities.
 
Weighted Average Shares Outstanding
 
The pro forma number of Symmetricom common shares used in computing net income (loss) from continuing operations was calculated as follows:
 
    
Year Ended
June 30, 2002
    
Basic
   
Diluted
    
(in thousands)
Historical weighted average common shares outstanding
   
22,572
   
22,572
Increase in common shares attributable to the purchase of TrueTime stock
   
2,600
   
2,600
    
  
Subtotal—Symmetricom/TrueTime
   
25,172
   
25,172
Increase in common shares attributable to the purchase of Datum stock
   
17,141
   
17,141
    
  
Total pro forma weighted average common shares outstanding
   
42,313
   
42,313
    
  
 

 
Pro Forma Adjustments
 
The unaudited pro forma combined financial statements give effect to the following pro forma adjustments:
 
(1)    to reflect the acquisition of TrueTime based on the preliminary purchase price allocation described above;
 
(2)    to reflect amortization of existing technology and other intangible assets over their estimated useful life of five years as if the acquisition occurred on July 1, 2001. The $405,000 amount allocated to in-process research and development has not been included in the unaudited pro forma combined statements of operations as it is nonrecurring, but is included as an adjustment to retained earnings in the unaudited pro forma combined balance sheet. This amount will be expensed in the period the acquisition is consummated;
 
(3)    to eliminate historical goodwill amortization as a result of Symmetricom adopting Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS No. 142) as of July 1, 2001;
 
(4)    to eliminate the acquisition costs of TrueTime related to the merger, as they are non recurring in nature;
 
(5)    to reflect the acquisition of Datum based on the preliminary purchase price allocation described above. Included in the $6,300,000 estimated transaction costs is $1,700,000 related to a certain termination agreement with Datum officer, Eric van der Kaay; and
 
(6)    to reflect the amortization of existing Datum technology and other intangible assets over their estimated useful lives of approximately five years and one year, respectively, as if the acquisition occurred on July 1, 2001. The $1,067,000 amount allocated to in-process research and development has not been included in the unaudited pro forma combined statements of operations as it is nonrecurring, but is included as an adjustment to retained earnings in the unaudited pro forma combined balance sheet. This amount will be expensed in the period the acquisition is consummated.
 
Items Not Adjusted
 
The pro forma statements do not reflect any operating efficiencies, cost savings and other benefits, or severance costs and other merger related expenses anticipated by Symmetricom’s management as a result of the merger.
 
Common Shares Outstanding
 
The number of pro forma common shares outstanding after giving effect to the transaction for purposes of the pro forma June 30, 2002 balance sheet are:
 
      
(in thousands)
Symmetricom’s common shares outstanding at June 30, 2002
     
22,132
Increase in common shares attributable to the purchase of TrueTime stock
    (5,950,000 shares x 0.43697)
     
2,600
      
Subtotal—Symmetricom/TrueTime
     
24,732
Increase in common shares attributable to the purchase of Datum stock
    (6,289,000 shares x 2.7609)
     
17,363
      
Total pro forma common shares outstanding
     
42,095