EX-99.1 3 d82524dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On October 23, 2015, Digi International (the Company), completed the sale of its wholly owned subsidiary, Etherios, Inc., to West Monroe Partners, LLC on the terms described in the Company’s Current Report on Form 8-K filed with the SEC on October 26, 2015.

The Company sold Etherios for $9.0 million. This is composed of (1) a payment equal to $4.0 million due at closing less certain transaction costs of approximately $1.1 million withheld for certain employee related liabilities, and (2) additional payments of $3.0 million due on the first anniversary of closing and $2.0 million due on the second anniversary of the closing.

The unaudited pro forma condensed consolidated financial information shown below is based on historical consolidated financial statements of the Company and shows the effect to the disposition of Etherios to be accounted for as a discontinued operation. The accompanying unaudited pro forma condensed consolidated balance sheet as of June 30, 2015 presents the Company’s historical consolidated statement of financial position, giving effect to the disposition as if it had been completed on June 30, 2015. The accompanying unaudited pro forma condensed consolidated statements of operations for the nine months ended June 30, 2015 and for the fiscal years ended September 30, 2014 and 2013 present the Company’s historical consolidated statements of operations, giving effect to the disposition as if it had been completed on October 1, 2012, the beginning of the earliest period presented. The fiscal year ended September 30, 2012 has not been included in the financial information shown below as Etherios was acquired by the Company on October 31, 2012.

The unaudited pro forma condensed consolidated financial statements include factually supportable assumptions and adjustments that are directly related to the disposition. These pro forma adjustments have been made to illustrate the anticipated financial effect of the disposition on the Company. The adjustments are based upon available information and assumptions that the Company believes are reasonable as of the date of this filing. However, actual adjustments may differ materially from the information presented. Assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma condensed consolidated financial information. The unaudited pro forma condensed consolidated financial statements, including notes thereto, should be read in conjunction with the historical financial statements and notes thereto of the Company included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2014.


DIGI INTERNATIONAL INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

As of June 30, 2015

 

(in thousands)

   As
Reported
     Etherios
Adjustment (A)
    Pro Forma
Adjustments
    Pro Forma
Consolidated
 

ASSETS

         

Current assets:

         

Cash and cash equivalents

   $ 53,755       $ —        $ 2,866   (B)    $ 56,621   

Marketable securities

     37,527             37,527   

Accounts receivable, net

     24,415         (1,639       22,776   

Inventories

     34,690             34,690   

Deferred tax assets

     3,072           (105 ) (C)      2,967   

Other

     2,912         (86     680   (C)      3,506   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total current assets

     156,371         (1,725     3,441        158,087   

Marketable securities, long-term

     9,471             9,471   

Property, equipment and improvements, net

     14,628         (113       14,515   

Identifiable intangible assets, net

     4,789         (1,652       3,137   

Goodwill

     102,497         (2,153       100,344   

Deferred tax assets

     5,708             5,708   

Other

     293           4,864   (B)      5,157   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 293,757       $ (5,643   $ 8,305      $ 296,419   
  

 

 

    

 

 

   

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

         

Current liabilities:

         

Accounts payable

   $ 7,048       $ (85     —        $ 6,963   

Accrued compensation

     10,464         (1,331     —          9,133   

Other

     3,372         (96     1,842   (C)      5,118   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total current liabilities

     20,884         (1,512     1,842        21,214   

Income taxes payable

     1,401             1,401   

Deferred tax liabilities

     151         (645       (494

Other noncurrent liabilities

     678         (96       582   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities

     23,114         (2,253     1,842        22,703   

Stockholders’ equity

     270,643         (3,390     2,271   (B)      273,716   
          575   (C)   
          3,617   (D)   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 293,757       $ (5,643   $ 8,305      $ 296,419   
  

 

 

    

 

 

   

 

 

   

 

 

 

See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements


DIGI INTERNATIONAL INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Nine Months Ended June 30, 2015

 

(in thousands, except per share data)

   As
Reported
    Etherios
Adjustment (A)
    Pro Forma
Adjustments
     Pro Forma
Consolidated
 

Revenue:

         

Hardware product

   $ 143,042      $ —        $ —         $ 143,042   

Service revenue

     13,370        (6,738     —           6,632   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total revenue

     156,412        (6,738     —           149,674   

Cost of sales:

         

Cost of product

     74,339        —          —           74,339   

Cost of service

     10,724        (6,205     —           4,519   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total cost of sales

     85,063        (6,205     —           78,858   
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     71,349        (533     —           70,816   

Operating expenses:

         

Sales and marketing

     30,525        (1,433     —           29,092   

Research and development

     23,715        (1,567     —           22,148   

General and administrative

     14,448        (850     —           13,598   

Restructuring charges, net

     509        (106     —           403   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total operating expenses

     69,197        (3,956     —           65,241   

Operating income

     2,152        3,423        —           5,575   

Other income, net:

         

Interest income

     137        —          —           137   

Interest expense

     (3     —          —           (3

Other income, net

     2,131        —          —           2,131   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total other income, net

     2,265        —          —           2,265   
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes

     4,417        3,423        —           7,840   

Income tax provision

     814        1,261        —           2,075   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income from continuing operations

   $ 3,603      $ 2,162      $ —         $ 5,765   
  

 

 

   

 

 

   

 

 

    

 

 

 

Earnings per share from continuing operations:

         

Basic

   $ 0.15           $ 0.24   

Diluted

   $ 0.14           $ 0.23   

Weighted average common shares:

         

Basic

     24,525             24,525   

Diluted

     25,085             25,085   

See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements


DIGI INTERNATIONAL INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal Year Ended September 30, 2014

 

(in thousands, except per share data)

   As
Reported
    Etherios
Adjustment (A)
    Pro Forma
Adjustments
     Pro Forma
Consolidated
 

Revenue:

         

Hardware product

   $ 172,846      $ —        $ —         $ 172,846   

Service revenue

     19,855        (9,528     —           10,327   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total revenue

     192,701        (9,528     —           183,173   

Cost of sales:

         

Cost of product

     85,737        —          —           85,737   

Cost of service

     16,480        (9,421     —           7,059   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total cost of sales

     102,217        (9,421     —           92,796   
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     90,484        (107     —           90,377   

Operating expenses:

         

Sales and marketing

     40,576        (1,825     —           38,751   

Research and development

     29,789        (877     —           28,912   

General and administrative

     19,913        (1,669     —           18,244   

Restructuring charges, net

     81        —          —           81   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total operating expenses

     90,359        (4,371     —           85,988   

Operating income

     125        4,264        —           4,389   

Other income, net:

         

Interest income

     176        —          —           176   

Interest expense

     (5     —          —           (5

Other income, net

     501        —          —           501   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total other income, net

     672        —          —           672   
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes

     797        4,264        —           5,061   

Income tax provision

     (954     1,522        —           568   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income from continuing operations

   $ 1,751      $ 2,742      $ —         $ 4,493   
  

 

 

   

 

 

   

 

 

    

 

 

 

Earnings per share from continuing operations:

         

Basic

   $ 0.07           $ 0.18   

Diluted

   $ 0.07           $ 0.17   

Weighted average common shares:

         

Basic

     25,345             25,345   

Diluted

     25,730             25,730   

See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements


DIGI INTERNATIONAL INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Fiscal Year Ended September 30, 2013

 

(in thousands, except per share data)

   As
Reported
    Etherios
Adjustment (A)
    Pro Forma
Adjustments
     Pro Forma
Consolidated
 

Revenue:

         

Hardware product

   $ 173,078      $ —        $ —         $ 173,078   

Service revenue

     22,303        (10,961     —           11,342   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total revenue

     195,381        (10,961     —           184,420   

Cost of sales:

         

Cost of product

     82,276        —          —           82,276   

Cost of service

     12,982        (6,163     —           6,819   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total cost of sales

     95,258        (6,163     —           89,095   
  

 

 

   

 

 

   

 

 

    

 

 

 

Gross profit

     100,123        (4,798     —           95,325   

Operating expenses:

         

Sales and marketing

     40,513        (1,284     —           39,229   

Research and development

     30,327        (1,245     —           29,082   

General and administrative

     21,423        (2,006     —           19,417   

Restructuring charges, net

     313        —          —           313   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total operating expenses

     92,576        (4,535     —           88,041   

Operating income

     7,547        (263     —           7,284   

Other income, net:

         

Interest income

     210        —          —           210   

Interest expense

     (42     4        —           (38

Other income, net

     523        —          —           523   
  

 

 

   

 

 

   

 

 

    

 

 

 

Total other income, net

     691        4        —           695   
  

 

 

   

 

 

   

 

 

    

 

 

 

Income before income taxes

     8,238        (259     —           7,979   

Income tax provision

     2,433        (103     —           2,330   
  

 

 

   

 

 

   

 

 

    

 

 

 

Net income from continuing operations

   $ 5,805      $ (156   $ —         $ 5,649   
  

 

 

   

 

 

   

 

 

    

 

 

 

Earnings per share from continuing operations:

         

Basic

   $ 0.22           $ 0.22   

Diluted

   $ 0.22           $ 0.22   

Weighted average common shares:

         

Basic

     25,956             25,956   

Diluted

     26,237             26,237   

See Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements


DIGI INTERNATIONAL INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

As of June 30, 2015 and for the Nine Months Ended June 30, 2015

and the Fiscal Years Ended September 30, 2014 and 2013

Pro Forma Adjustments to the Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2015

 

(A) To eliminate the assets and liabilities sold in the disposition of the Etherios business.
(B) To record the estimated fair value of the consideration received of $7.8 million. The $7.8 million is comprised of cash proceeds of $2.9 million ($4.0 million of initial selling price less $1.1 million withheld for certain employee related liabilities) and $4.9 million of payments due to the Company during the next two years. The remaining $4.9 million is the discounted value of the $3.0 million due on the first anniversary of closing and the additional $2.0 million due on the second anniversary of closing.
(C) To record additional expenses of $1.8 million related to facility costs, professional service fees, severance and other employee costs that are directly attributed to the disposition of Etherios and related income tax benefit.
(D) To record the estimated gain of $5.4 million on disposition, less additional expenses of $1.8 million incurred as described in Note C above. The estimated gain and the additional expenses have not been reflected in the unaudited pro forma condensed consolidated statement of operations as they are considered to be nonrecurring in nature.

Pro Forma Adjustments to the Unaudited Pro Forma Condensed Consolidated Statements of Operations for the Nine Months Ended June 30, 2015 and the Fiscal Years ended September 30, 2014 and 2013

 

(A) To eliminate the revenues and direct expenses of Etherios, including the estimated income tax effect of the pro forma adjustments.