Exhibit 99.1 Pro-Forma Financial Statements The following unaudited pro forma financial statements give effect to the disposition of Airshow, Inc. to be accounted for as a discontinued operation in accordance with FAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". On August 9, 2002, the Company consummated the sale of its Airshow business for $152 million in cash, net of disposition proceeds of approximately $8 million. The pro forma financial statements also give effect to the Company's repurchase of a portion of its outstanding Senior Subordinated Notes and a portion of its outstanding Senior Secured Credit Facility term loan borrowings. The unaudited pro forma condensed balance sheet assumes the disposition of Airshow, Inc. and the repurchase of the Senior Subordinated Notes and Senior Credit Facility term loan borrowings on June 30, 2002. Such pro forma information is based upon the historical balance sheet data of Acterna Corporation as of that date. The unaudited condensed statements of operations give effects to the disposition of Airshow, Inc. and the repurchase of the Senior Subordinated Notes and Senior Credit Facility term loan borrowings as if the transactions occurred on April 1, 1999. At the close of business on August 12, 2002, approximately $150 million principal amount of the Senior Subordinated Notes had been validly tendered. Approximately $106 million of the Notes will be retired. These unaudited pro forma financial statements should be read in conjunction with the historical consolidated financial statements and notes thereto of Acterna Corporation for the year ended March 31, 2002. Acterna Corporation Pro-Forma Condensed Balance Sheet (Unaudited) As of June 30, 2002 (Amounts in thousands) Acterna Adjustments Corporation Airshow Note 1 Pro Forma ----------- ------- ------ --------- Assets: Current Assets Cash and cash equivalents $ 49,090 $ 49,090 Accounts receivable, net 113,825 113,825 Inventories, net 110,080 110,080 Deferred income taxes 17,642 17,642 Income tax receivable 28,045 $ (17,016)(g) 11,029 Other current assets 36,750 36,750 Current assets of disc ops held for sale 13,654 $ (13,654) 0 ----------- --------- ---------- ------------- Total current assets 369,086 (13,654) (17,016) 338,416 Property, plant, and equipment, net 125,415 125,415 Other assets Goodwill and other intangibles, net 411,984 411,984 Deferred debt issuance costs, net 25,292 (5,319)(e) 19,973 Other 20,729 20,729 Long-term assets of disc ops held for sale 26,078 (26,078) 0 ----------- --------- ---------- ------------- Total Assets $ 978,584 $ (39,732) $ (22,335) $ 916,517 =========== ========= ========== ============ Liabilities and Stockholders' Deficit: Current Liabilities Notes payable $ 3,282 $ 3,282 Current portion of long term debt 33,486 33,486 Accounts payable 53,261 53,261 Accrued compensation and benefits 32,950 32,950 Deferred revenue 48,006 48,006 Accrued other expenses 77,769 $ (1,295)(f) 76,474 Accrued income taxes 32,608 19,984 (g) 52,592 Current liabilities of disc ops held for sale 10,539 $ (10,539) 0 ----------- --------- ---------- ------------ Total current liabilities 291,901 (10,539) 18,689 300,051 Long term debt 715,608 (128,617)(a) 586,991 Senior subordinated notes 275,000 (106,285)(b) 168,715 Long term notes payable 76,875 76,875 Deferred income taxes 15,967 15,967 Other long term liabilities 70,583 70,583 Stockholders deficit: Common stock and paid in capital Acterna Corporation 788,459 788,459 Airshow - Equity (29,193) 29,193 (c) 0 Accumulated deficit (1,210,550) 164,685 (d) (1,045,865) Other (45,259) (45,259) ----------- --------- ---------- ------------ Total stockholders' deficit (467,350) (29,193) 193,878 (302,665) ----------- --------- ---------- ------------ Total Liabilities and Stockholders' Deficit $ 978,584 $ (39,732) $ (22,335) $ 916,517 ============ ========= ========== ============ Note 1: The pro forma condensed balance sheet gives effects to the disposition of Airshow, Inc. for $152 million in cash, net of estimated disposition costs of $8 million. The pro forma balance sheet also assumes immediate use of net disposition proceeds of $152 million as follows: (1) retirement of $129 million of Senior Secured Credit facility term loan borrowings and (2) $23 million, to retire $106 million in principal amount of Senior Subordinated Notes and $1.3 million of accrued interest expense at a discounted cost of $220 per $1,000 note. Total nonrecurring after tax gains of $165 million on the sale of Airshow and the retirement of the notes have been reflected in the balance sheet. The above pro forma balance sheet gives effect to the following: (a) To record retirement of Senior Secured Credit Facility term loan borrowings using estimated net disposition proceeds of $129 million. (b) To record retirement of $106 million in principal amount of Senior Subordinated Notes at a discounted cost of $220 per $1,000 note for $23 million. (c) To record sale of Airshow net assets of $29 million. (d) To record the total nonrecurring after tax gains of $165 million on the sale of Airshow and the retirement of the notes. (e) To record $5 million decrease in deferred debt issuance costs related to retired long term debt. (f) To record the relief of $1.3 million of accrued interest payable on the retired Senior Subordinated Notes. (g) To record the estimated taxes on the total gains on the sale of Airshow and the retirement of the notes. Exhibit 99.1 Acterna Corporation Pro-Forma Condensed Statement of Operations (Unaudited) For the quarter ended June 30, 2002 (Amounts in thousands, except per share data) Acterna Adjustments Corporation Note 1 Pro Forma ---------------- --------------- ---------------- Net sales $ 170,345 $ 170,345 Cost of sales 86,436 86,436 ---------------- --------------- ---------------- Gross profit 83,909 83,909 Selling, general, and administrative expense 81,117 81,117 Product development expense 30,614 30,614 Restructuring expense 6,156 6,156 Amortization of intangibles 263 263 ---------------- ---------------- 118,150 118,150 ---------------- --------------- ---------------- Operating loss (34,241) (34,241) Interest expense (22,296) $ 5,079 (a) (17,217) Interest income 72 72 Other expense, net (1,475) (1,475) ---------------- --------------- ---------------- Loss from before income taxes (57,940) 5,079 (52,861) Benefit for income taxes (16,917) 1,757 (b) (15,160) ---------------- --------------- ---------------- Net loss from continuing operations (41,023) 3,322 (37,701) Income from discontinued operations 1,112 (1,112) 0 ---------------- --------------- ---------------- Net loss $ (39,911) $ 2,210 $ (37,701) ================ =============== ================ Net income (loss) per common share - basic and diluted Continuing operations $ (0.22) $ (0.20) Discontinued operations 0.01 0.00 ---------------- ---------------- Net loss per common share - basic and diluted $ (0.21) $ (0.20) ================ ================ Weighted average number of common shares Basic and diluted 192,248 192,248 ================ ================ Note 1. The pro forma statements of operations give effect to the disposition of Airshow, Inc. and the retirement of a portion of Senior Secured Credit Facility term loan borrowings and Senior Subordinated Notes as if the transactions occurred on April 1, 1999. Total non-recurring after tax gains of $165 million on the sale of Airshow Inc. and the retirement of the Senior Subordinated Notes have not been included in the pro forma statements of operations but will be reflected in the historical statement of operations in the period when the transactions are consummated. The results of operations of Airshow, Inc. have been removed from the pro forma statements of operations. The above pro forma statements of operations give effect to the following pro forma adjustments necessary to reflect the disposition and the repayment of debt from the proceeds of the disposition: (a) To reflect a reduction of $2.3 million in quarterly interest expense on $129 million of Senior Secured Credit Facility term loan borrowings, a reduction of $2.6 million in quarterly interest expense on $106 million of Senior Subordinated Notes, and a $.2 million reduction in amortization of deferred debt issuance costs. Reduction in the quarterly interest expense on term loan borrowings was calculated based on the annual weighted-average interest rate of 7.0%. The reduction in the annual interest expense on the Senior Notes was calculated based on the actual interest rate of 9.75%. (b) To reflect $1.8 million income tax expense adjustment relating to $5.1 million interest expense reduction. Exhibit 99.1 Acterna Corporation Pro-Forma Condensed Statement of Operations (Unaudited) For the quarter ended June 30, 2001 (Amounts in thousands, except per share data) Acterna Adjustments Corporation Note 1 Pro Forma -------------- --------------- -------------- <s> <c> <c> <c> Net sales $ 338,920 $ 338,920 Cost of sales 147,520 147,520 -------------- --------------- -------------- Gross profit 191,400 191,400 Selling, general, and administrative expense 124,819 124,819 Product development expense 41,317 41,317 Amortization of intangibles 11,552 11,552 -------------- -------------- 177,688 177,688 -------------- --------------- -------------- Operating income 13,712 13,712 Interest expense (26,277) $ 5,980 (a) (20,297) Interest income 486 486 Other expense, net (1,832) (1,832) -------------- --------------- -------------- Loss from before income taxes (13,911) 5,980 (7,931) Benefit for income taxes (4,721) 2,112 (b) (2,609) -------------- --------------- -------------- Net loss from continuing operations (9,190) 3,868 (5,322) Income from discontinued operations 3,040 (3,040) 0 -------------- --------------- -------------- Net loss $ (6,150) $ 828 $ (5,322) ============== =============== ============== Net income (loss) per common share - basic and diluted Continuing operations $ (0.05) $ (0.03) Discontinued operations 0.02 0.00 -------------- -------------- Net loss per common share - basic and diluted $ (0.03) $ (0.03) ============== ============== Weighted average number of common shares Basic and diluted 191,186 191,186 ============== ============== Note 1. The pro forma statements of operations give effect to the disposition of Airshow, Inc. and the retirement of a portion of Senior Secured Credit Facility term loan borrowings and Senior Subordinated Notes as if the transactions occurred on April 1, 1999. Total non-recurring after tax gains of $165 million on the sale of Airshow Inc. and the retirement of the Senior Subordinated Notes have not been included in the pro forma statements of operations but will be reflected in the historical statement of operations in the period when the transactions are consummated. The results of operations of Airshow, Inc. have been removed from the pro forma statements of operations. The above pro forma statements of operations give effect to the following pro forma adjustments necessary to reflect the disposition and the repayment of debt from the proceeds of the disposition: (a) To reflect a reduction of $3.2 million in quarterly interest expense on $129 million of Senior Secured Credit Facility term loan borrowings, a reduction of $2.6 million in quarterly annual interest expense on $106 million of Senior Subordinated Notes, and a $.2 million reduction in amortization of deferred debt issuance costs. Reduction in the quarterly interest expense on term loan borrowings was calculated based on the annual weighted-average interest rate of 9.8%. The reduction in the quarterly interest expense on the Senior Notes was calculated based on the actual interest rate of 9.75%. (b) To reflect $2.1 million income tax expense adjustment relating to $6.0 million interest expense reduction. Exhibit 99.1 Acterna Corporation Pro-Forma Condensed Statement of Operations (Unaudited) For the year ended March 31, 2002 (Amounts in thousands, except per share data) Acterna Adjustments Corporation Airshow Note 1 Pro Forma ----------- --------- ----------- ---------- Net sales $ 1,132,661 $ (65,024) $1,067,637 Cost of sales 540,048 (28,774) 511,274 ----------- --------- ----------- ---------- Gross profit 592,613 (36,250) 556,363 Selling, general, and administrative expense 444,387 (15,881) 428,506 Product development expense 160,219 (10,497) 149,722 Amortization of intangibles 42,271 (250) 42,021 Restructuring expense 33,989 (1,952) 32,037 Impairment of net assets held for sale 17,918 17,918 Goodwill impairment 3,947 3,947 Impairment of acquired intangible assets 151,322 151,322 ----------- --------- ----------- ---------- 854,053 (28,580) 825,473 ----------- --------- ----------- ---------- Operating income (loss) (261,440) (7,670) (269,110) Interest expense (96,625) 3 $ 19,931 (a) (76,691) Interest income 1,625 1,625 Other expense, net (7,615) 20 (7,595) ----------- --------- ----------- ---------- Income (loss) from continuing operations before income taxes (364,055) (7,647) 19,931 (351,771) Provision for income taxes 799 - (b) 799 ----------- --------- ----------- ---------- Income (loss) from continuing operations (364,854) (7,647) 19,931 (352,570) Loss from discontinued operations (10,039) (10,039) ----------- --------- ----------- ---------- Net income (loss) $ (374,893) $ (7,647) $ 19,931 $ (362,609) =========== ========= =========== ========== Net income (loss) per common share - basic and diluted Continuing operations $ (1.90) $ (1.84) Discontinued operations (0.05) (0.05) ----------- ---------- $ (1.95) $ (1.89) =========== ========== Weighted average number of common shares Basic 191,868 191,868 Diluted 191,868 191,868 Note 1. The pro forma statements of operations give effect to the disposition of Airshow, Inc. and the retirement of a portion of Senior Secured Credit Facility term loan borrowings and Senior Subordinated Notes as if the transactions occurred on April 1, 1999. Total non-recurring after tax gains of $165 million on the sale of Airshow Inc. and the retirement of the Senior Subordinated Notes have not been included in the pro forma statements of operations but will be reflected in the historical statement of operations in the period when the transactions are consummated. The results of operations of Airshow, Inc. have been removed from the pro forma statements of operations. The above pro forma statements of operations give effect to the following pro forma adjustments necessary to reflect the disposition and the repayment of debt from the proceeds of the disposition: (a) To reflect a reduction of $8.6 million in annual interest expense on $129 million of Senior Secured Credit Facility term loan borrowings, a reduction of $10.4 million in annual interest expense on $106 million of Senior Subordinated Notes, and a $.9 million reduction in amortization of deferred debt issuance costs. Reduction in the annual interest expense on term loan borrowings was calculated based on the annual weighted-average interest rate of 6.7%. The reduction in the annual interest expense on the Senior Notes was calculated based on the actual interest rate of 9.75%. (b) No income tax adjustment is required. Exhibit 99.1 Acterna Corporation Pro-Forma Condensed Statement of Operations (Unaudited) For the year ended March 31, 2001 (Amounts in thousands, except per share data) Acterna Adjustments Corporation Airshow Note 1 Pro Forma ----------- ------- ------ --------- Net sales $ 1,366,257 $ (78,886) $ 1,287,371 Cost of sales 606,860 (32,648) 574,212 ------------ ---------- -------- ----------- Gross profit 759,397 (46,238) 713,159 Selling, general, and administrative expense 486,598 (19,622) 466,976 Product development expense 168,117 (10,367) 157,750 Amortization of intangibles 120,151 (926) 119,225 Recapitalization and other related costs 9,194 9,194 Purchased incomplete technology 56,000 56,000 -------- ------------ ---------- ----------- 840,060 (30,915) 809,145 ------------ ---------- -------- ----------- Operating income (loss) (80,663) (15,323) (95,986) Interest expense (102,158) $ 23,918 (a) (78,240) Interest income 3,322 3,322 Other expense, net (4,491) (4,491) ------------ ---------- -------- ----------- Income (loss) from continuing operations before income taxes and extraordinary item (183,990) (15,323) 23,918 (175,395) Provision (benefit) for income taxes (12,793) (6,079) 8,929 (b) (9,943) ------------ ---------- -------- ----------- Income (loss) from continuing operations before extraordinary item (171,197) (9,244) 14,989 (165,452) Income from discontinued operations 10,039 10,039 ------------ ---------- -------- ----------- Income (loss) before extraordinary item (161,158) (9,244) 14,989 (155,413) Extraordinary item, net of income tax benefit of $6,603 (10,659) (10,659) ------------ ---------- -------- ----------- Net income (loss) $ (171,817) $ (9,244) $ 14,989 $ (166,072) ============ ========== ======== =========== Net income (loss) per common share - basic and diluted Continuing operations $ (0.93) $ (0.90) Discontinued operations 0.06 0.06 Extraordinary loss (0.06) (0.06) ------------ ----------- $ (0.93) $ (0.90) ============ =========== Weighted average number of common shares Basic 183,881 183,881 Diluted 183,881 183,881 Note 1. The pro forma statements of operations give effect to the disposition of Airshow, Inc. and the retirement of a portion of Senior Secured Credit Facility term loan borrowings and Senior Subordinated Notes as if the transactions occurred on April 1, 1999. Total non-recurring after tax gains of $165 million on the sale of Airshow Inc. and the retirement of the Senior Subordinated Notes have not been included in the pro forma statements of operations but will be reflected in the historical statement of operations in the period when the transactions are consummated. The results of operations of Airshow, Inc. have been removed from the pro forma statements of operations. The above pro forma statements of operations give effect to the following pro forma adjustments necessary to reflect the disposition and the repayment of debt from the proceeds of the disposition: (a) To reflect a reduction of $12.6 million in annual interest expense on $129 million of Senior Secured Credit Facility term loan borrowings, a reduction of $10.4 million in annual interest expense on $106 million of Senior Subordinated Notes, and a $.9 million reduction in amortization of deferred debt issuance costs. Reduction in the annual interest expense on term loan borrowings was calculated based on the annual weighted-average interest rate of 9.8%. The reduction in the annual interest expense on the Senior Subordinated Notes was calculated based on the actual interest rate of 9.75%. (b) To reflect $8.9 million income tax expense adjustment relating to $23.9 million interest expense reduction. Exhibit 99.1 Acterna Corporation Pro-Forma Condensed Statement of Operations (Unaudited) For the year ended March 31, 2000 (Amounts in thousands, except per share data) Acterna Adjustments Corporation Airshow Note 1 Pro Forma ----------- --------- ----------- --------- Net sales $ 656,601 $ (70,960) $ 585,641 Cost of sales 285,531 (22,026) 263,505 ----------- --------- ----------- --------- Gross profit 371,070 (48,934) 322,136 Selling, general, and administrative expense 192,286 (19,859) 172,427 Product development expense 75,398 (8,303) 67,095 Amortization of intangibles 12,326 (812) 11,514 Recapitalization and other related costs 27,942 (736) 27,206 ----------- --------- ----------- --------- 307,952 (29,710) 278,242 ----------- --------- ----------- --------- Operating income 63,118 (19,224) 43,894 Interest expense (51,949) 7 $ 21,410 (a) (30,532) Interest income 2,373 (15) 2,358 Other expense, net (720) (720) ----------- --------- ----------- --------- Income from continuing operations before income taxes 12,822 (19,232) 21,410 15,000 Provision for income taxes 6,810 (7,540) 7,989 (b) 7,259 ----------- --------- ----------- --------- Net income $ 6,012 $ (11,692) $ 13,421 $ 7,741 =========== ========= =========== ========= Net income per common share Basic and diluted $ 0.04 $ 0.05 =========== ========= Weighted average number of common shares Basic 148,312 148,312 Diluted 162,273 162,273 Note 1. The pro forma statements of operations give effect to the disposition of Airshow, Inc. and the retirement of a portion of Senior Secured Credit Facility term loan borrowings and Senior Subordinated Notes as if the transactions occurred on April 1, 1999. Total non-recurring after tax gains of $165 million on the sale of Airshow Inc. and the retirement of the Senior Subordinated Notes have not been included in the pro forma statements of operations but will be reflected in the historical statement of operations in the period when the transactions are consummated. The results of operations of Airshow, Inc. have been removed from the pro forma statements of operations. The above pro forma statements of operations give effect to the following pro forma adjustments necessary to reflect the disposition and the repayment of debt from the proceeds of the disposition: (a) To reflect a reduction of $10.1 million in annual interest expense on $129 million of Senior Secured Credit Facility term loan borrowings, a reduction of $10.4 million in annual interest expense on $106 million of Senior Subordinated Notes, and a $.9 million reduction in amortization of deferred debt issuance costs. Reduction in the annual interest expense on term loan borrowings was calculated based on the annual weighted-average interest rate of 7.85%. The reduction in the annual interest expense on the Senior Subordinated Notes was calculated based on the actual interest rate of 9.75%. (b) To reflect $8.0 million income tax expense adjustment relating to $21.4 million interest expense reduction.