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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): February 2, 2001
COMPUTER NETWORK TECHNOLOGY CORPORATION
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(Exact Name of Registrant as Specified in Charter)
Minnesota 0-139944 41-1356476
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(State or Other (Commission (I.R.S. Employer
Jurisdiction File Number) Identification No.)
of Incorporation)
6000 Nathan Lane North, Minneapolis, MN 55442
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (763) 268-6000
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 2. Acquisition or Disposition of Assets.
On February 2, 2000, the Registrant consummated the sale of its wholly
owned subsidiary, IntelliFrame Corporation ("IntelliFrame"), pursuant to the
Agreement and Plan of Merger dated January 26, 2001 among webMethods, Inc.
("webMethods"), webMethods Acquisition, Inc. ("Merger Sub"), the Registrant and
IntelliFrame. The assets of IntelliFrame consist primarily of technology known
as "InVista," which is software that provides automated business process
management, by using a graphical environment that converts a business model into
a functional solution.
The Registrant received $8,834,000 in cash and 273,542 shares of common
stock of webMethods, par value $.01 per share, as consideration under the Merger
Agreement. Of that amount, $1,325,100 in cash and 41,031 shares of common stock
of webMethods will be held in escrow to satisfy any obligations that may arise
under the Merger Agreement. Subject to any then pending claims, seventy-five
percent of the amounts subject to escrow will be released from escrow 12 months
from the closing date and the remaining amounts 18 months from the closing date.
In connection with the transaction, webMethods also acquired the Registrant's
Boston-based InVista research and development team.
Prior to the closing, IntelliFrame granted a wholly owned subsidiary of
the Registrant a royalty free license to the InVista technology, subject to
certain terms and conditions. The terms and conditions prohibit bundling,
co-selling, integrating or embedding the InVista technology with competitive
products for two years from the closing date, and also prohibit marketing, OEM,
reseller, distributor or other agreements or arrangements with persons that
offer competitive products during the same two year period. The Registrant
retained the right to the name "InVista." In connection with the transaction,
the Registrant paid bonuses of $1,500,000 (less deductions required by law) to
each of Scott Opitz and Aleksandr Elkin in satisfaction of all further
obligations to make bonus payments under those individual's employment
agreements with IntelliFrame.
The words "may," "should," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "intend," "potential" or "continue" and similar
expressions are generally intended to identify forward-looking statements. These
forward-looking statements involve risks and uncertainties. Actual results could
differ materially from those expressed or implied by these forward-looking
statements as a result of certain risk factors, including but not limited to (i)
competitive factors, including pricing pressures; (ii) variability in quarterly
sales; (iii) economic trends in various geographic markets; (iv) relationships
with our strategic partners; (v) issues relating to implementation of SEC Staff
Accounting Bulletin 101; (vi) unanticipated risks associated with introducing
new products and features, including InVista; (vii) technological change
affecting our products; and (viii) other events and other important factors
disclosed previously and from time to time in our filings with the U.S.
Securities and Exchange Commission. In addition, there can be no assurance that
a change in a fiscal year will enhance predictability of operating results, or
that the divestiture of the EIS subsidiary can be completed on acceptable terms
and conditions. In addition, there can be no assurance the stock of webMethods
received in the transaction can be liquidated within any time frame or at a
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gain. We assume no obligation to update any forward-looking statements. These
statements are only predictions. Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The following unaudited pro forma information is being filed in order to
satisfy any pro forma information requirement that could be applicable.
Description of the Unaudited Pro Forma Financial Information of Computer
Network Technology Corporation giving effect to disposition of IntelliFrame
Corporation.
Unaudited Pro Forma Balance Sheet as of October 31, 2000.
Unaudited Pro Forma Statement of Operations for the Year Ended December
31, 1999.
Unaudited Pro Forma Statement of Operations for the Nine Months Ended
October 31, 2000.
Notes to Unaudited Pro Forma Financial Information.
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DESCRIPTION OF PRO FORMA FINANCIAL INFORMATION
OF
COMPUTER NETWORK TECHNOLOGY CORPORATION ("CNT")
GIVING EFFECT TO THE DISPOSITION OF
INTELLIFRAME CORPORATION ("INTELLIFRAME")
UNAUDITED PRO FORMA FINANCIAL INFORMATION
AS OF AND FOR THE NINE MONTHS ENDED OCTOBER 31, 2000
AND FOR THE YEAR ENDED DECEMBER 31, 1999
The following unaudited pro forma financial information and notes
present the effect of the disposition of IntelliFrame on CNT's historical
financial position and results of operations. The pro forma information has been
prepared utilizing the historical consolidated financial statements of CNT for
the year ended December 31, 1999 and the nine months ended October 31, 2000 and
estimated financial statement information for IntelliFrame for the same periods.
The pro forma financial information does not purport to be indicative of the
results that actually would have been obtained if the disposition had been
effected on the date indicated or of the results which may be obtained in the
future.
The unaudited pro forma balance sheet at October 31, 2000 is based on
the historical balance sheet of CNT at October 31, 2000 and the estimated
historical balance sheet of IntelliFrame at October 31, 2000.
The unaudited pro forma balance sheet was prepared assuming the
disposition took place on October 31, 2000. The unaudited pro forma statement of
operations for the year ended December 31, 1999 and the nine months ended
October 31, 2000 gives effect to the disposition as if it took place at the
beginning of the respective reporting periods.
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Computer Network Technology Corporation
as of October 31, 2000
Unaudited Pro Forma Balance Sheet
(In Thousands, Except Per Share Data)
October 31, Pro Forma
2000 Adjustments Pro Forma
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ASSETS
Current assets:
Cash and cash equivalents $ 67,318 $ 4,509(A) $ 71,827
Marketable securities 78,533 17,212(A) 95,745
Receivables, net 35,925 35,925
Inventories 18,524 18,524
Other assets 12,801 (734)(B) 12,067
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Total current assets 213,101 20,987 234,088
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Property and equipment, net 23,296 23,296
Other assets 8,407 4,025(A) 12,432
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$ 244,804 $ 25,012 $ 269,816
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 15,286 $ $ 15,286
Accrued liabilities 17,401 8,834(C) 26,235
Other current liabilities 13,743 13,743
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Total current liabilities 46,430 8,834 55,264
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Obligations under capital lease, less current
installments 2,028 2,028
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Total liabilities 48,458 8,834 57,292
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Shareholders' equity:
Common stock 290 290
Additional paid-in capital 184,176 184,176
Retained earnings 14,759 16,178(D) 30,937
Other equity items (2,879) (2,879)
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Total shareholders' equity 196,346 16,178 212,524
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$ 244,804 $ 25,012 $ 269,816
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See accompanying notes.
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Computer Network Technology Corporation
Unaudited Pro Forma
Statement of Operations
(In Thousands, Except Per Share Data)
Year Ended December 31, 1999
Pro Forma
Historical Adjustments Pro Forma
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Revenue:
Product sales $ 89,248 $ $ 89,248
Service fees 36,741 36,741
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Total revenue 125,989 125,989
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Cost of Revenue:
Cost of product sales 38,411 38,411
Cost of service fees 19,798 19,798
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Total cost of revenue 58,209 58,209
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Gross Profit 67,780 67,780
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Operating Expenses:
Sales and marketing 34,626 34,626
Engineering and development 18,456 18,456
General and administrative 6,922 6,922
Abandoned Facilities 1,331 1,331
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Total operating expenses 61,335 61,335
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Income from operations 6,445 6,445
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Other income (expense):
Interest Income 744 744
Other (634) (634)
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Other income 110 110
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Income from continuing operations
before income taxes 6,555 6,555
Provision for income taxes (2,229) (2,229)
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Income from continuing operations 4,326 4,326
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Income (loss) from discontinued
operations, net of tax 329 975(E) 1,304
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Net income $ 4,655 $ 975 $ 5,630
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Historical Pro Forma
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Basic income per share:
Continuing operations $ 0.19 $ 0.19
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Discontinued operations $ 0.01 $ 0.06
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Net income $ 0.20 $ 0.24
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Shares 23,137 23,137
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Diluted income per share:
Continuing operations $ 0.17 $ 0.17
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Discontinued operations $ 0.01 $ 0.05
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Net income $ 0.18 $ 0.22
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Shares 25,818 25,818
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See accompanying notes.
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Computer Network Technology Corporation
Unaudited Pro Forma
Statement of Operations
(In Thousands, Except Per Share Data)
Nine Months Ended October 31, 2000
Pro Forma
Historical Adjustments Pro Forma
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Revenue:
Product sales $ 92,279 $ $ 92,279
Service fees 36,867 36,867
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Total revenue 129,146 129,146
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Cost of Revenue:
Cost of product sales 38,597 38,597
Cost of service fees 21,920 21,920
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Total cost of revenue 60,517 60,517
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Gross Profit 68,629 68,629
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Operating Expenses:
Sales and marketing 30,741 30,741
Engineering and development 16,742 16,742
General and administrative 6,329 6,329
Abandoned Facilities (287) (287)
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Total operating expenses 53,525 53,525
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Income from operations 15,104 15,104
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Other income (expense):
Interest Income 1,526 1,526
Other (574) (574)
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Other income 952 952
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Income from continuing operations
before income taxes 16,056 16,056
Provision for income taxes (5,299) (5,299)
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Income from continuing operations 10,757 10,757
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Income (loss) from discontinued
operations,
net of tax (3,169) 1,133(E) (2,036)
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Net income $ 7,588 $ 1,133 $ 8,721
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Historical Pro Forma
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Basic income (loss) per share:
Continuing operations $ 0.44 $ 0.44
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Discontinued operations $ (0.13) $ (0.08)
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Net income $ 0.31 $ 0.36
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Shares 24,432 24,432
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Diluted income (loss) per share:
Continuing operations $ 0.40 $ 0.40
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Discontinued operations $ (0.12) $ (0.08)
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Net income $ 0.28 $ 0.33
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Shares 26,735 26,735
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See accompanying notes.
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Computer Network Technology Corporation
Notes to Unaudited Pro Forma Financial Information
(In thousands, except share information)
The following pro forma adjustments are reflected in the accompanying
unaudited pro forma balance sheet and statements of operations:
(A) To record the net proceeds from the sale of IntelliFrame consisting of
273,542 shares of WebMethods stock valued at $19,912 and cash of $8,834,
net of $3,000 in payments to settle the bonus obligations owed to the
founders of IntelliFrame. The stock received from WebMethods has been
discounted from its publicly reported trading price due to the
restrictions attached thereto. The portion of the consideration to be
placed in escrow for periods ranging from twelve to eighteen months has
been classified as other assets in the accompanying pro forma balance
sheet.
(B) To reflect disposal of the net assets of IntelliFrame.
(C) To accrue transaction related expenses and income tax expense from the
gain on sale of IntelliFrame at the 34 percent effective statutory tax
rate.
(D) To record the gain on sale of IntelliFrame and related tax expense.
(E) To reduce the loss from discontinued operations, net of tax to reflect
the operations of IntelliFrame that were sold to WebMethods. The
adjustment assumes the disposal occurred at the beginning of the period
presented.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 16, 2001 COMPUTER NETWORK
TECHNOLOGY CORPORATION
By /s/ Gregory T. Barnum
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Gregory T. Barnum
Chief Financial Officer
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