EX-99.4 5 c98479exv99w4.htm PRO FORMA FINANCIAL INFORMATION exv99w4
 

EXHIBIT 99.4

PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

For the nine months ended June 30, 2005
(unaudited)
(in thousands, except per share data)

                                   
      Digi                          
      International Inc.     Rabbit     Pro Forma     Pro Forma  
      Historical     Historical     Adjustments     Combined  
     
   
   
   
 
Net sales
   $ 88,989     $ 21,091             $ 110,080  
Cost of sales
     34,489       12,760               47,249  
 
  
   
           
 
Gross margin
     54,500       8,331       —       62,831  
 
  
   
           
 
Operating expenses:
                                
 
Sales and marketing
     19,300       3,348               22,648  
 
Research and development
     11,850       3,461               15,311  
 
General and administrative
     11,070       2,024     $ 1,263 (a)     14,357  
 
Acquired in-process research and development
     300       —               300  
 
  
   
   
   
 
Total operating expenses
     42,520       8,833       1,263       52,616  
 
  
   
   
   
 
Operating income (loss)
     11,980       (502 )     (1,263 )     10,215  
Other income (expense), net
     809       (302 )     (475 ) (b)     (341 )
 
                     (373 ) (c)        
 
  
   
   
   
 
Income (loss) before income taxes
     12,789       (804 )     (2,111 )     9,874  
Income tax benefit
     (1,455 )     (263 )     (697 ) (d)     (2,415 )
 
  
   
   
   
 
Net income (loss)
     14,244       (541 )     (1,414 )     12,289  
 
  
   
   
   
 
Net income per share, basic
   $ 0.64                     $ 0.55  
Net income per share, diluted
   $ 0.61                     $ 0.52  
Weighted average shares, basic
     22,381                       22,381  
Weighted average shares, diluted
     23,420                       23,420  

See accompanying notes to the pro-forma financial information.

 

PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

For the year ended September 30, 2004
(unaudited)
(in thousands, except per share data)

                                   
      Digi                          
      International Inc.     Rabbit     Pro Forma     Pro Forma  
      Historical     Historical     Adjustments     Combined  
     
   
   
   
 
Net sales
   $ 111,226     $ 27,294             $ 138,520  
Cost of sales
     43,443       13,480               56,923  
 
  
   
   
   
 
Gross margin
     67,783       13,814               81,597  
 
  
   
   
   
 
Operating expenses:
                                
 
Sales and marketing
     25,556       3,587               29,143  
 
Research and development
     17,159       3,578               20,737  
 
General and administrative
     13,287       4,672       1,894 (a)     19,853  
 
  
   
   
   
 
Total operating expenses
     56,002       11,837       1,894       69,733  
 
  
   
   
   
 
Operating income (loss)
     11,781       1,977       (1,894 )     11,864  
Other income (expense), net
     369       (93 )     (712 )(b)     (996 )
 
                     (560 )(c)        
 
  
   
   
   
 
Income (loss) before tax provision and discontinued operations
     12,150       1,884       (3,166 )     10,868  
Income tax provision (benefit)
     3,487       424       (887 )(d)     3,024  
 
  
   
   
   
 
Income (loss) before discontinued operations
   $ 8,663     $ 1,460     $ (2,279 )   $ 7,844  
 
  
   
   
   
 
Income per share from continuing operations, basic
   $ 0.41                     $ 0.37  
Income per share from continuing operations, diluted
   $ 0.39                     $ 0.36  
Weighted average shares, basic
     21,196                       21,196  
Weighted average shares, diluted
     22,031                       22,031  

See accompanying notes to the pro-forma financial information.

 

DIGI INTERNATIONAL INC. UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
On May 26, 2005, Digi completed the acquisition of Rabbit Semiconductor, Inc., (Rabbit) formerly Z-World, Inc. The unaudited pro forma combined condensed statements of operations for the nine months ended June 30, 2005 and the year ended September 30, 2004 give effect to the acquisition of Rabbit as if it had occurred on October 1, 2003. The unaudited pro forma information is based on the historical consolidated financial statements of Digi and those of Rabbit, as described in the pro forma financial statements, under the purchase method of accounting and the adjustments as described in the accompanying notes to the unaudited pro forma combined condensed financial statements. The pro forma combined condensed statements of operations and accompanying notes are qualified in their entirety and should be read in conjunction with the historical consolidated financial statements of Digi and those of Rabbit.
The pro forma adjustments are based on estimates and assumptions that Digi believes are reasonable. The fair value of the consideration has been allocated to the assets and liabilities acquired based upon the estimated fair values of such assets and liabilities at the effective date of the acquisition. This allocation is preliminary, pending detailed analysis and outside appraisals of the fair value of the assets acquired and liabilities assumed.
The pro forma combined condensed financial information has been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. The pro forma combined condensed financial information is intended for informational purposes only and is not necessarily indicative of the future results of operations of the consolidated company after the acquisition, or of the results of operations of the consolidated company that would have actually occurred had the acquisition been effected as of the date indicated above.
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
  1.   Basis of Pro Forma Presentation
     The unaudited pro forma combined condensed financial statements of Digi have been prepared on the basis of assumptions relating to the allocation of consideration paid to the acquired assets and liabilities of Rabbit based on their estimated fair values at the date of acquisition. The table below sets forth the preliminary purchase price allocation (in thousands):

 

 

         
Cash
   $ 49,000  
Direct acquisition costs
     274  
 
      
 
   $ 49,274  
 
      
Fair value of net tangible assets acquired
   $ 7,856  
Identifiable intangible assets:
        
Purchased and core technology
     8,000  
Customer relationships
     3,800  
Patents and trademarks
     2,300  
In-Process research and development
     300  
Goodwill
     32,517  
Deferred tax liabilities related to identifiable intangibles
     (5,499 )
 
      
 
   $ 49,274  
 
      
  2.   Pro Forma Adjustments:
  (a)   Adjustment represents amortization of acquired identifiable intangibles of Rabbit based on estimated lives ranging from five to thirteen years. Goodwill amortization is not recorded in accordance with the provisions of Statement of Financial Accounting Standards Board No. 141, “Business Combinations,” and No. 142, “Goodwill and Other Intangible Assets.”
 
  (b)   Adjustment represents interest expense incurred as a result of short-term borrowings of $21.0 million at an interest rate of 3.39%, the proceeds of which were used to partially finance the acquisition of Rabbit. The effect of a 1/8% variance in interest rates would have resulted in a change to net income of $19,000 for the year ended September 30, 2004 and $12,000 for the nine months ended June 30, 2005.
 
  (c)   Adjustments represent interest income assumed to be foregone at a weighted-average rate of 2% due to the cash paid from funds generated from operations for the acquisition of Rabbit.
 
  (d)   Adjustments to income tax provision relating to adjustments (a), (b), and (c) assuming a blended U.S. federal and state income tax rate of 28% for the year ended September 30, 2004 and 33% for the nine months ended June 30, 2005.