EXHIBIT 99
EXHIBIT (b)(6)
Investment Banking Presentation
to
THE SPECIAL COMMITTEE OF
THE BOARD OF DIRECTORS OF
WANDEL & GOLTERMANN TECHNOLOGIES, INC.
March 10, 1998
THE ROBINSON-HUMPHREY COMPANY
Investment Bankers Since 1894
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Introduction and Methodology
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o The special committee of the Board of Directors of Wandel & Goltermann
Technologies, Inc. ("WGTI") has asked Robinson-Humphrey to provide
information to the Special Committee in connection with its evaluation of
the proposal for the acquisition of WGTI shares currently held by persons
other than Wandel & Goltermann Management Holding GmbH ("WG Holding").
o In evaluating a per share purchase price range for the shares of WGTI
currently held by persons other than WG Holding, Robinson-Humphrey
conducted, among other analyses, a
(i) Review of the industry and the competitive climate in which WGTI
operates, and its competitive position;
(ii) Review of the business, historical financial performance and
future prospects of WGTI;
(iii) Review of the historical and current market prices and trading
patterns of the Common Stock of WGTI;
(iv) Review and analysis of the market prices of securities of, and
financial data of, other companies engaged in similar businesses
as WGTI;
(v) Review and analysis of prices and premiums paid in, and other
terms of, other recent "going private" acquisition transactions;
and a
(vi) Discounted cash flow analysis of WGTI.
o Robinson-Humphrey also held discussions with members of the senior
management of WGTI regarding the Company's past and current business
operations, financial condition and future prospects.
o Robinson-Humphrey relied without independent verification upon the accuracy
and completeness of all of the financial and other information reviewed by
it for purposes of its analysis. Robinson-Humphrey assumed that the
financial forecasts of WGTI were reasonably prepared on a basis reflecting
the best current available estimates and judgements of WGTI's senior
management as to the future financial performance of WGTI.
o See attached Exhibit A for the historical and projected financial
statements Robinson-Humphrey used in its analysis.
-1-
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Summary of Selected Comparable Company Analysis
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o Robinson-Humphrey reviewed and compared certain financial, operating and
stock market information of WGTI and two comparable groups of publicly
traded companies in the Network Solutions industry.
o The "Network Analysis" publicly-traded companies included in our analysis
were Applied Digital Access, Concord Communications, Digital Lightwave,
Hewlett-Packard, Network Associates, RADCOM, Tekelec and Tektronix. The
"Network Management and Equipment" publicly-traded companies included in our
analysis include the "Network Analysis" companies plus Dynatech, Fluke,
GenRad, Keithley Instruments, MicroTest, Objective Systems Integrators,
Retix, TCSI, Teradyne, Bay Networks, Cabletron, Cisco and 3Com.
o Robinson-Humphrey calculated current market price as a multiple of book
value and as a multiple of estimated earnings per share ("EPS") for calendar
1998 and 1999. The EPS estimates were based on the mean of publicly
available earnings estimates made by research analysts as provided by First
Call Investor Service. In addition, Robinson-Humphrey calculated firm value
(market capitalization plus debt minus cash) to calendar 1997 revenues for
each of the publicly traded companies.
o Robinson-Humphrey averaged the multiples of the comparable companies in
order to apply these multiples to WGTI's values. To accurately reflect
average values for statistical purposes, Robinson-Humphrey excluded certain
outlying values that differed from the relative groupings of the other
values. Robinson-Humphrey believes that these outlying values for certain
companies reflect temporary market aberrations that can skew mean values.
o With respect to the "Network Analysis" companies, the estimated calendar
1998 price/earnings ratios ranged from 87.9x to 10.0x, with an average of
31.8x, thus implying a value of $19.63 per share for WGTI. The estimated
calendar 1999 price/earnings ratios ranged from 43.3x to 10.5x, with an
average of 24.1x, thus implying a value of $24.75 per share for WGTI. The
current market value to book value multiples ranged from 12.7x to 1.8x, with
an average of 6.1x, thus implying a value of $27.13 per share for WGTI. The
firm value to calendar 1997 revenue multiples ranged from 7.53x to 1.08x,
with an average of 3.11x, thus implying a value of $32.39 per share for
WGTI.
-2-
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Summary of Selected Comparable Company Analysis
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o With respect to the "Network Management and Equipment" companies, the
estimated calendar 1998 price/earnings ratios ranged from 87.9x to 10.0x,
with an average of 24.5x, thus implying a value of $15.10 per share for
WGTI. The estimated calendar 1999 price/earnings ratios ranged from 43.5x to
10.5x, with an average of 21.9x, thus implying a value of $22.52 per share
for WGTI. The current market value to book value multiples ranged from
12.7x to 1.5x, with an average of 5.2x, thus implying a value of $23.09 per
share for WGTI. The firm value to calendar 1997 revenue multiples ranged
from 7.53x to 0.61x, with an average of 2.68x, thus implying a value of
$28.08 per share for WGTI.
o See attached Exhibit B for the implied valuation averages Robinson-Humphrey
used in its analysis.
-3-
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Summary of Selected Mergers and Acquisitions
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o Robinson-Humphrey reviewed and compared 21 selected recent mergers and
acquisitions in the network solutions industry, including (i) Bay Network's
proposed acquisition of Netsation; (ii) Clayton Dubilier's proposed
acquisition of Dynatech; (iii) McAfee Associates' acquisition of Network
General; (iv) Tivoli Systems' acquisition of Unison Software; (v) Network
General's acquisition of Cinco Networks; (vi) Ascend's acquisition of
Cascade; (vii) 3Com's acquisition of US Robotics; (viii) Network General's
acquisition of 3DV Technology; (ix) Compaq's acquisition of Microcom; (x)
Dynatech's acquisition of Itronix; (xi) McAfee Associates' acquisition of
FSA; (xii) Computer Sciences' acquisition of Continuum; (xiii) McAfee
Associates' acquisition of Vycor; (xiv) Dynatech's acquisition of
Synergistic Solutions; (xv) IBM's acquisition of Tivoli Systems; (xvi)
Microtest's acquisition of Hotware; (xvii) Adobe's acquisition of Frame
Technology; (xviii) McAfee Associates' acquisition of Saber Software; (xix)
Microcom's acquisition of Extension Technology; (xx) Sybase's acquisition of
Powersoft; and (xxi) McAfee Associates' acquisition of Brightwork
Development.
o For these selected mergers and acquisitions, Robinson-Humphrey calculated
purchase price as a multiple of book value and firm value as a multiple of
latest twelve months revenues. The purchase price to book value multiples
ranged from 13.0x to 2.4x, with an average of 7.7x, thus implying a value of
$34.68 per share for WGTI. The firm value to latest twelve months revenues
multiples ranged from 7.39x to 1.08x, with an average of 3.32x, thus
implying a value of $34.47 per share for WGTI.
o Robinson-Humphrey also specifically focused on the multiples to book value
and latest twelve months revenues for the recent acquisition by McAfee
Associates of Network General and the proposed acquisition by Clayton
Dubilier of Dynatech. These two acquisitions involved companies (Network
General and Dynatech) which are competitors of WGTI. The purchase price to
book value multiples for these two transactions ranged from 6.0x to 4.7x,
with an average of 5.3x, thus implying a value of $23.90 per share for WGTI.
The firm value to latest twelve months revenues multiples ranged from 3.21x
to 1.94x, with an average of 2.57x, thus implying a value of $27.07 per
share for WGTI.
o See attached Exhibit C for the implied valuation averages Robinson-Humphrey
used in its analysis.
-4-
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Summary of Discounted Cash Flow Analysis
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o Robinson-Humphrey performed a discounted cash flow analysis using detailed
projections developed by the Company for fiscal 1998 through fiscal 2001 as
the financial extension of its strategic planning process. It should be
noted that WG Holding was actively involved in this process and has approved
the validity of these projections.
o Robinson-Humphrey calculated a net present value of free cash flows (defined
as earnings before interest after taxes plus depreciation and amortization
less capital expenditures and any increase in net working capital) for
fiscal 1998 through 2002 using discount rates ranging from 15% to 27.5%.
Robinson-Humphrey calculated the Company's terminal values in fiscal 2002
based on multiples of fiscal 2002 projected EBIT ranging from 6.0x to 11.0x.
o Using a discount rate of 20% and a terminal value multiple of 8.0x fiscal
2002 EBIT, the discounted cash flow analysis provides a valuation of $18.89
per share for WGTI.
o See attached Exhibit D for the discounted cash flow analysis
Robinson-Humphrey used in its analysis.
-5-
Exhibit A
Page 1
Project TroubleShooter
Historical Income Statement Information
(In Thousands, Except for Per Share Amounts)
Fiscal Year Ended September 30,
-----------------------------------------------------------------------------------------------------
1989 1990 1991 1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
Revenues:
Nonaffiliates $ 7,485 $10,421 $11,387 $14,438 $18,005 $21,785 $23,658 $33,186 $29,001
Affiliates 6,881 6,659 9,211 12,768 15,080 18,387 21,604 25,900 25,454
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Revenues 14,366 17,080 20,598 27,206 33,085 40,172 45,262 59,086 54,455
% Revenue Growth - 18.9% 20.6% 32.1% 21.6% 21.4% 12.7% 30.5% (7.8%)
Cost of Revenues 10,300 9,977 10,440 10,569 12,176 12,731 16,576 23,234 24,381
------- ------- ------- ------- ------- ------- ------- ------- -------
Gross Profit 4,066 7,103 10,158 16,637 20.909 27,441 28,686 35,852 30,074
Gross Profit Margin % 28.3% 41.6% 49.3% 61.2% 63.2% 68.3% 63.4% 60.7% 55.2%
Selling, General, and
Administrative Expenses 4,216 5,166 5,633 8,506 10,603 12,984 15,872 18,934 19,360
Product Development Expenses 2,963 3,414 3,504 5,033 6,545 9,059 10,469 9,804 10,712
Restructuring Change 0 0 0 0 0 0 1,279 0 0
------- ------- ------- ------- ------- ------- ------- ------- ------
Operating Income (Loss) (3,113) (1,477) 1,021 3,098 3,761 5,398 1,066 7,114 2
Operating Income Margin% (21.7%) (8.6%) 5.0% 11.4% 11.4% 13.4% 2.4% 12.0% 0.0%
Interest Expense (626) (834) (1,032) (688) (779) (460) 0 0 0
Interest Income 0 63 16 0 274 295 313 350 639
Foreign currency (74) (614) 491 34 498 213 (245) (104) (217)
Gains (Losses) ------- ------- ------- ------- ------- ------- ------- ------- -------
Income from Continuing
Operations Before
Income Taxes (3,813) (2,862) 496 2,444 3,754 5,446 1,134 7,360 424
Benefit from (Provisions
for) Income Taxes 89 188 0 1,103 867 (2,124) (98) (2,208) 0
------- ------- ------- ------- ------- ------- ------- -------- -------
Income (Loss) from
Continuing Operations (3,724) (2,674) 496 3,547 4,621 3,322 1,036 5,152 424
Income (Loss)from
Discontinued Operations 856 314 (3,885) (1,795) 135 204 0 0 0
------- ------- ------- ------- ------- ------- ------- ------- -------
Net Income ($2,868) ($2,360) ($3,389) $1,752 $4,756 $3,526 $1,036 $5,152 $424
======== ======= ======== ======= ======= ======== ======== ======= =======
Net Income Margin % (20.0%) (13.8%) (16.5%) 6.4% 14.4% 8.8% 2.3% 8.7% 0.8%
Per Share Data:
Income (Loss) from
Continuing Operations ($1.47) ($0.82) $0.15 $0.93 $1.23 $0.76 $0.20 $0.98 $0.08
======== ======== ======== ======= ======= ======== ======== ======= =======
Net Income ($1.13) ($0.72) ($1.04) $0.47 $1.27 $0.80 $0.20 $0.98 $0.08
======== ======== ======== ======= ======= ======== ======== ======= =======
Weighted Average Number
of Common Shares
Outstanding $2,537 3,264 3,265 3,750 3,750 4,398 5,245 5,231 5,359
======== ======== ======== ======= ======= ======== ======== ======= =======
Exhibit A
Page 2
Project TroubleShooter
Historical Income Statement Information
(In Thousands, Except for Per Share Amounts)
Fiscal 1995
-------------------------------------------
First Second Third Fourth
----- ------ ----- ------
Revenues:
Nonaffiliates $6,420 $5,735 $5,728 $6,225
Affiliates 5,396 5,881 5,106 5,221
- ---------- ------- ------- ------- -------
Total Revenues 11,816 11,616 10,384 11,446
Cost of Revenues 3,683 3,451 3,995 5,447
------- ------- ------- -------
Gross Profit 8,133 8,165 6,389 5,999
Gross Profit Margin % 68.8% 70.3% 61.5% 52.4%
Selling, General, and
Administrative Expenses 3,660 3,941 3,717 4,554
Product Development Expenses 2,379 2,519 2,642 2,929
Restructuring Charge 0 0 0 1,279
------- ------- ------- -------
Operating Income (Loss) 2,094 1,705 30 (2,763)
Operating Income Margin % 17.7% 14.7% 0.3% (24.1%)
Interest Income 93 80 68 72
Foreign Currency Gains(Losses) 83 (338) (24) 34
------- ------- ------- -------
Income Before Income Taxes 2,270 1,447 74 (2,657)
Benefit from (Provision for)
Income Taxes (726) (463) (23) 1,114
------- ------- ------- -------
Net Income $1,544 $984 $51 ($1,543)
======= ======= ======= =======
Net Income Margin % 13.1% 8.5% 0.5% (13.5%)
Earnings Per Share $0.30 $0.19 $0.01 ($0.39)
======= ======= ======= =======
Weighted Average Number of
Common Shares Outstanding 5,226 5,243 5,260 5,237
======= ======= ======= =======
Fiscal 1996
------------------------------------------
First Second Third Fourth
----- ------ ----- ------
Revenues:
Nonaffiliates $7,172 $8,154 $8,895 $8,965
Affiliates 6,291 6,342 6,528 6,739
- ---------- ------- ------- ------- -------
Total Revenues 13,463 14,496 15,423 15,704
Cost of Revenues 5,412 5,649 6,243 5,930
------- ------- ------- -------
Gross Profit 8,051 8,847 9,180 9,774
Gross Profit Margin % 59.8% 61.0% 59.5% 62.2%
Selling, General, and
Administrative Expenses 4,631 4,667 4,528 5,108
Product Development Expenses 2,621 2,413 2,445 2,325
Restructuring Charge 0 0 0 0
------- ------- ------- -------
Operating Income (Loss) 799 1,767 2,207 2,341
Operating Income Margin % 5.9% 12.2% 14.3% 14.9%
Interest Income 53 60 79 158
Foreign Currency Gains(Losses) (21) (93) (46) 56
------- ------- ------- -------
Income Before Income Taxes 831 1,734 2,240 2,555
Benefit from (Provision for)
Income Taxes (266) (553) (719) (670)
------- ------- ------- -------
Net Income $565 $1,181 $1,521 $1,885
======= ======= ======= =======
Net Income Margin % 4.2% 8.1% 9.9% 12.0%
Earnings Per Share $0.11 $0.23 $0.29 $0.36
======= ======= ======= =======
Weighted Average Number of
Common Shares Outstanding 5,218 5,155 5,275 5,273
======= ======= ======= =======
Fiscal
Fiscal 1997 1998
---------------------------------------------------
First Second Third Fourth First
----- ------ ----- ------ -----
Revenues:
Nonaffiliates $6,482 $7,247 $8,581 $6,691 $7,809
Affiliates 8,973 7,095 4,639 4,747 6,542
------- ------- ------- ------- -------
Total Revenues 15,455 14,342 13,220 11,438 14,351
Cost of Revenues 6,112 6,260 5,587 6,422 7,477
------- ------- ------- ------- -------
Gross Profit 9,343 8,082 7,633 5,016 6,874
Gross Profit Margin % 60.5% 56.4% 57.7% 43.9% 47.9%
Setting, General, and
Administrative Expenses 5,134 4,673 4,937 4,616 4,998
Product Development Expenses 2,450 2,482 2,686 3,094 2,604
Restructuring Charge 0 0 0 0 0
------- ------- ------- ------- -------
Operating Income (Loss) 1,759 927 10 (2,694) (728)
Operating Income Margin % 11.4% 6.5% 0.1% (23.6%) (5.1%)
Interest Income 148 172 155 164 188
Foreign Currency Gains(Losses) (7) (263) (19) 72 26
------- ------- ------- ------- -------
Income Before Income Taxes 1,900 836 146 (2,458) (514)
Benefit from (Provision for)
Income Taxes (570) (251) (44) 865 103
------- ------- ------- ------- -------
Net Income $1,330 $585 $102 ($1,593) ($411)
======= ======= ======= ======= =======
Net Income Margin % 8.6% 4.1% 0.8% (13.9%) (2.9%)
Earnings Per Share $0.25 $0.11 $0.02 ($0.30) ($0.08)
======= ======= ======= ======= =======
Weighted Average Number of
Common Shares Outstanding 5,361 5,427 5,285 5,274 5,277
======= ======= ======= ======= =======
Exhibit A
Page 3
Project TroubleShooter
Historical Balance Sheet Information
(In Thousands, Except for Per Share Amounts)
As of September 30, December 31, 1997
----------------------------- -----------------------
ASSETS 1995 1996 1997 Actual Pro Forms
------- -------- ------- --------- ----------
Current Assets:
Cash and Cash Equivalents $5,374 $10,286 $13,329 $13,395 $7,395 [1]
Accounts Receivable:
Nonaffiliates 5,378 8,148 7,038 5,870 5,870
Affiliates 3,934 5,068 3,964 6,226 6,226
Income Tax Receivable 1,464 720 1,367 363 363
Inventories 6,616 4,695 5,596 5,630 5,630
Deferred Tax Assets 1,946 1,079 1,448 1,585 1,585
Other Current Assets 395 349 927 849 849
------- -------- ------- --------- ----------
Total Current Assets $25,107 $30,345 $33,669 $33,918 $27,918
Property and Equipment
Machinery and Equipment 4,189 4,401 4,614 4,667 4,667
Furniture and Fixtures 5,764 5,186 5,993 6,151 6,151
------- -------- ------- --------- ----------
9,953 9,587 10,607 10,818 10,818
Accumulated Depreciation (6,213) (6,323) (7,721) (8,008) (8,008)
------- -------- ------- --------- ----------
3,740 3,264 2,886 2,810 2,810
Other Assets 497 689 737 718 1,018 [1]
------- -------- ------- --------- ----------
Total Assets $29,344 $34,298 $37,292 $37,446 $31,746
======= ======== ======= ========= ==========
LIABILITIES AND SHAREHOLDERS EQUITY
Current Liabilities
Accounts Payable:
Nonaffiliates $1,579 $1,327 $1,530 $1,085 $1,085
Affiliates 258 950 1,789 2,856 2,856
Accrued Compensation 1,683 1,855 1,467 1,412 1,412
Other Accrued Liabilities 1,470 1,344 1,847 1,843 1,843
------- -------- ------- --------- ----------
Total Current Liabilities $4,990 $5,476 $6,633 $7,196 $7,196
Shareholders' Equity:
Common Stock 52 52 53 53 53
Additional Paid-in Capital 25,740 25,056 26,468 26,470 26,470
Retained Earnings
(Accumlated Deficit) (1,438) 3,714 4,138 3,727 (2,573)[1]
------- -------- ------- --------- ----------
24,354 28,822 30,659 30,250 23,950
------- -------- ------- --------- ----------
Total Liabilities and
Shareholders' Equity $29,344 $34,298 $37,292 $37,446 $31,146
======= ======== ======= ========= ==========
[1]Assumes $6.0 million paid in cash for technology acquisitions (Tinwald and Network Intelligence) with
a purchased technology write-off of $6.3 million with the difference going into goodwill under other assets.
Exhibit A
Page 4
Project TroubleShooter
Projected Income Statement Information
With Technology Acquisitions
(In Thousands, Except for Per Share Amounts)
Fiscal Year Ended September 30,
--------------------------------------------
1998 1999 2000 2001
-------- ------- -------- -------
Revenues:
Nonaffiliates $39,700 $56,000 $74,400 $96,700
Affiliates 29,100 34,500 44,200 53,500
-------- ------- -------- -------
Total Revenues 68,800 90,500 118,600 150,200
%Revenue Growth 26.3% 31.5% 31.0% 26.6%
Cost of Revenues 30,700 40,200 52,800 66,200
-------- ------- -------- -------
Gross Profit 38,100 50,300 65,800 84,000
Gross Profit Margin % 55.4% 55.6% 55.5% 55.9%
Selling, General, and
Administrative Expenses 23,300 28,500 35,900 45,000
Product Development Expenses 12,300 15,500 18,500 20,300
Purchased Technology Write-off 6,300 0 0 0
-------- ------- -------- -------
Operating Income (Loss) (3,800) 6,300 11,400 18,700
Operating Income Margin % (5.5%) 7.0% 9.6% 12.5%
Interest Income 300 500 800 1,200
Income (Loss) Before -------- ------- -------- -------
Income Taxes (3,500) 6,800 12,200 19,900
Provision for Income Taxes (500) (1,700) (3,300) (5,400)
-------- ------- -------- -------
Net Income ($4,000) $5,100 $8,900 $14,500
======== ======== ======== ========
Net Income Margin % (5.8%) 5.6% 7.5% 9.7%
Per Share Data:
Net Income ($0.76) $0.96 $1.68 $2.46
======== ======== ======== ========
Net Income Excluding
Purchase Technology Write-Off $0.44 $0.96 $1.68 $2.46
======== ======== ======== ========
Exhibit A
Page 5
Project TroubleShooter
Project Quarterly Income Statement Information
with Technology Acquisitions
(In Thousands, Except for Per Share Amounts)
Fiscal 1998
----------------------------------------
First Second Third Fourth
----- ------ ----- ------
Revenues:
Nonaffiliates $7,809 $9,400 $10,800 $11,700
Affiliates 6,542 6,500 7,700 8,300
------- ------- ------- -------
Total Revenues 14,351 15,900 18,500 20,000
Cost of Revenues 7,477 7,200 7,900 8,100
------- ------- ------- -------
Gross Profit 6,874 8,700 10,600 11,900
Gross Profit Margin % 47.9% 54.7% 57.3% 59.5%
Selling, General, and
Administrative Expenses 4,997 5,500 6,100 6,700
Product Development Expenses 2,604 3,000 3,300 3,400
Purchased Technology Write-Off 0 6,300 0 0
------- ------- ------- -------
Operating Income (Loss) (728) (6,100) 1,200 1,800
Operating Income Margin % (5.1%) (38.4%) 6.5% 9.0%
Interest Income 188 0 0 100
Foreign Currency Gains(Losses) (26) 0 0 0
------- ------- ------- -------
Income Before Income Taxes (513) (6,100) 1,200 1,900
Benefit from (Provision for)
Income Taxes 103 0 (300) (400)
------- ------- ------- -------
Net Income ($411) ($6,100) $900 $1,500
======= ======= ======= =======
Net Income Margin % (2.9%) (38.4%) 4.9% 7.5%
Per Share Data:
Net Income ($0.08) ($1.14) $0.17 $0.29
======= ======= ======= =======
Net Income Excluding ($0.08) $0.04 $0.17 $0.29
Purchased Technology Write-off ======= ======= ======= =======
Fiscal 1999
----------------------------------------
First Second Third Fourth
----- ------ ----- ------
Revenues:
Nonaffiliates $12,000 $13,700 $14,500 $15,800
Affiliates 7,300 8,100 8,900 10,200
------- ------- ------- -------
Total Revenues 19,300 21,800 23,400 26,000
Cost of Revenues 8,700 9,700 10,300 11,500
------- ------- ------- -------
Gross Profit 10,600 12,100 13,100 14,500
Gross Profit Margin % 54.9% 55.5% 56.0% 55.8%
Selling, General, and
Administrative Expenses 6,300 6,800 7,400 8,000
Product Development Expenses 3,600 3,800 3,900 4,200
Purchased Technology Write-Off 0 0 0 0
------- ------- ------- -------
Operating Income (Loss) 700 1,500 1,800 2,300
Operating Income Margin % 3.6% 6.9% 7.7% 8.8%
Interest Income 200 100 100 100
Foreign Currency Gains(Losses) 0 0 0 0
------- ------- ------- -------
Income Before Income Taxes 900 1,600 1,900 2,400
Benefit from (Provision for)
Income Taxes (200) (400) (500) (600)
------- ------- ------- -------
Net Income $700 $1,200 $1,400 $1,800
======= ======= ======= =======
Net Income Margin % 3.6% 5.5% 6.0% 6.9%
Per Share Data:
Net Income $0.13 $0.23 $0.27 $0.34
======= ======= ======= =======
Net Income Excluding $0.13 $0.23 $0.27 $0.34
Purchased Technology Write-off ======= ======= ======= =======
Fiscal 2000
----------------------------------------
First Second Third Fourth
----- ------ ----- ------
Revenues:
Nonaffiliates $15,700 $18,000 $19,500 $21,200
Affiliates 9,800 10,500 11,500 12,400
------- ------- ------- -------
Total Revenues 25,500 28,500 31,000 33,600
Cost of Revenues 11,500 12,700 13,600 15,000
------- ------- ------- -------
Gross Profit 14,000 15,800 17,400 18,600
Gross Profit Margin % 54.9% 55.4% 56.1% 55.4%
Selling, General, and
Administrative Expenses 8,300 8,600 9,300 9,700
Product Development Expenses 4,400 4,500 4,700 4,900
Purchased Technology Write-Off 0 0 0 0
------- ------- ------- -------
Operating Income (Loss) 1,300 2,700 3,400 4,000
Operating Income Margin % 5.1% 9.5% 11.0% 11.9%
Interest Income 200 200 200 200
Foreign Currency Gains(Losses) 0 0 0 0
------- ------- ------- -------
Income Before Income Taxes 1,500 2,900 3,600 4,200
Benefit from (Provision for)
Income Taxes (400) (800) (1,000) (1,100)
------- ------- ------- -------
Net Income $1,100 $2,100 $2,600 $3,100
======= ======= ======= =======
Net Income Margin % 4.3% 7.4% 8.4% 9.2%
Per Share Data:
Net Income $0.21 $0.40 $0.49 $0.58
======= ======= ======= =======
Net Income Excluding $0.21 $0.40 $0.49 $0.58
Purchased Technology Write-off ======= ======= ======= =======
The Robinson-Humphrey Company, LLC Exhibit B
Page 1
Project TroubleShooter
Implied Valuation Analysis Utilizing Average of Network
Analysis Companies
(Dollars in Thousands)
Network Analysis Companies Average Multiple
-----------------------------------------------------------------------
TroubleShooter's Price/ Price/ Price/
Valuation Parameter Value Calendar 1998 Net Income Calendar 1999 Net Income Book Value
- ----------------------- ----------------- ------------------------ ------------------------- ----------
Calendar 1998 Net Income(1) $3,300 31.8 x
Calendar 1999 Net Income 5,500 24.1 x
Pro Forma 12/31/97 Book Value(1)23,950 6.1 x
Network Analysis Companies Average Multiple
-------------------------------------------
TroubleShooter's Firm Value(2)/ Less
Valuation Paramenter Value LTM Revenues Net Debt(3)
- ----------------------- ---------------- -------------------- ------------------
Calendar 1997 Revenues $53,351 3.11 x (7,395)
Implied
Implied Equity
Equity Value
Value Per Share (4)
-------- -------------
$104,949 $19.63
132,322 24.75
145,055 27.13
$173,175 $32.39
- ------------------------------------------
Average $138,875 $25.97
Median $138,689 $25.94
High $173,175 $32.39
Low $104,949 $19.63
- --------------------------
*Excluded from the average
(1) Based on projections including technology acquisitions and excludes $6.3
million in purchased technology write-downs for fiscal 1998. Book value is
adjusted for write-downs.
(2) Firm value equals market capitalization plus total debt and preferred stock
minus cash and marketable securities.
(3) Net debt equals debt plus preferred stock less cash and marketable
securities. Assumes cash outlay of $6.0 million for acquisitions (Tinwald
and Network Intelligence) to be completed in the second quarter of fiscal
1998.
(4) Assumes 5,346,739 shares outstanding (including options using the
treasury stock method).
The Robinson-Humphrey Company, LLC
Exhibit B
Page 2
Project TroubleShooter
Implied Valuation Analysis Utilizing Combined Average of Network Management
and Equipment Companies
(Dollars in Thousands)
Combined Average Multiple
----------------------------------------------------------------------------
TroubleShooter's Price/ Price/ Price/
Valuation Parameter Value Calendar 1998 Net Income Calendar 1999 Net Income Book Value
- ------------------------ ----------------- -------------------------- ------------------------ --------------
Calendar 1998 Net Income(1) $3,300 24.5 x
Calendar 1999 Net Income 5,500 21.9 x
Pro Forma 12/31/97 Book Value(1) 23,950 5.2 x
Combined Average Multiple
---------------------------------
TroubleShooter's Firm Value(2)/ Less
Valuation Paramenter Value LTM Revenues Net Debt(3)
- ---------------------- ----------------- --------------- ------------
Calendar 1997 Revenues $53,351 2.68 x ($7,395)
Implied
Implied Equity
Equity Value
Value Per Share (4)
-------- -------------
$80,731 $15.10
120,388 22.52
123,458 23.09
$150,162 $28.08
- ----------------------------------------
Average $118,685 $22.20
Median $121,923 $22.80
High $150,162 $28.08
Low $ 80,731 $15.10
- ------------------------------
*Excluded from average
(1) Based on projections including technology acquisitions and excludes $6.3
million in purchased technology write-downs for fiscal 1998. Book value is
adjusted for write-downs.
(2) Firm value equals market capitalization plus total debt and preferred stock
minus cash and marketable securities.
(3) Net debt equals debt plus preferred stock less cash and marketable
securities. Assumes cash outlay of $6.0 million for acquisitions (Tinwald
and Network Intelligence) to be completed in the second quarter of fiscal
1998.
(4) Assumes 5,346,739 shares outstanding (including options using the
treasury stock method).
The Robinson-Humphrey Company, LLC
Exhibit C
Page 1
Project TroubleShooter
Implied Valuation Analysis Utilizing Network Solution M&A Transaction Multiples
-------------------------------------------------------------------------------
(Dollars in Thousands)
TroubleShooter's Average Multiple
-----------------
Valuation Parameter Value Equity Value/Book
- -------------------- ----------------- ------------------------------
Pro Forma 12/31/97
Book Value (1) 23,950 7.7 x
Average Multiple
--------------------------------
TroubleShooter's Firm Value(2)/ Less
Valuation Parameter Value LTM Revenues Net Debt(3)
- ----------------------- ---------------- --------------- -------------
Calendar 1997 Revenues $53,351 3.32 x ($7,395)
Implied
Implied Equity
Equity Value
Value Per Share (4)
------- -----------
$185,421 $34.68
$184,293 $34.47
- ----------------------------------------
Average: $184,857 $34.57
High: $185,421 $34.68
Low: $184,293 $34.47
- -----------------------------
*Excluded from average.
(1) Adjusted $6.3 million for contemplated write-downs of purchased technology.
(2) Firm value equals equity value plus debt assumed minus cash and marketable
securities, if disclosed.
(3) Net debt equals debt plus preferred stock less cash and marketable
securities. Assumes cash outlay of $6.0 million for acquisitions (Tinwald
and Network Intelligence) to be completed in the second quarter of fiscal
1998.
(4) Assumes 5,346,739 shares outstanding (includes outstanding options using the
treasury stock method).
The Robinson-Humphrey Company, LLC
Exhibit C
Page 2
Project TroubleShooter
Implied Valuation Analysis Utilizing Network General and
Dynatech Transaction Multiples
----------------------------------------------------------------
(Dollars in Thousands)
TroubleShooter's Equity Value/
Valuation Parameter Value Book
- -------------------- ----------------- ----------------
Pro Forma 12/31/97
Book Value (1) 23,950 5.3 x
TroubleShooter's Firm Value(2)/ Less
Valuation Parameter Value LTM Revenues Net Debt(3)
- ----------------------- ---------------- ------------------ -------------
Calendar 1997 Revenues $53,351 2.57 x ($7,395)
Implied
Implied Equity
Equity Value
Value Per Share (4)
------- -----------
$127,780 $23.90
$144,717 $27.07
- ----------------------------------------
Average: $136,249 $25.48
High: $144,717 $27.07
Low: $127,780 $23,90
- -----------------------------
*Excluded from average
(1) Adjusted $6.3 million for contemplated write-downs of purchased technology.
(2) Firm value equals equity value plus debt assumed minus cash and marketable
securities, if disclosed.
(3) Net debt equals debt plus preferred stock less cash and marketable
securities. Assumes cash outlay of $6.0 million for acquisitions (Tinwald
and Network Intelligence) to be completed in the second quarter of fiscal
1998.
(4) Assumes 5,346,739 shares outstanding (includes outstanding options using the
treasury stock method).
PROJECT TROUBLESHOOTER
EBIT MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS
(DOLLARS IN THOUSANDS)
- -----------------------------------------------
SUMMARY:
- -----------------------------------------------
WACC: 20.00%
Multiple: 8.00
EBIT Terminal Value: $22,440
Present Value of Cash Flows: $14,540
Present Value of Terminal Value: $79,045
----------
Total Value: $93,585
==========
Plus: Cash (1) $7,395
Less: Debt $0
----------
Equity Value $100,980
==========
Equity Value per share $18.89
- -----------------------------------------------
(1) Pro Forma as of 12/31/97.
PROJECT TROUBLESHOOTER
EBIT MULTIPLE METHODOLOGY FOR DISCOUNTED CASH FLOW ANALYSIS
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 15.00% 17.50% 20.00% 22.50% 25.00% 27.50%
- -------------------------------------------------------------------------------------------------------------------------
Present Value of Cash Flows: $16,635 $15,535 $14,540 $13,637 $12,816 $12,067
- -------------------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
6.0 x $71,798 $65,175 $59,284 $54,030 $49,335 $45,129
7.0 $83,765 $76,038 $69,165 $63,035 $57,557 $52,650
Multiple 8.0 $95,731 $86,900 $79,045 $72,041 $65,780 $60,171
9.0 $107,698 $97,763 $88,926 $81,046 $74,002 $67,693
10.0 $119,664 $108,626 $98,806 $90,051 $82,225 $75,214
11.0 $131,631 $119,488 $108,687 $99,056 $90,447 $82,736
- -------------------------------------------------------------------------------------------------------------------------
Total Value:
6.0 x $88,433 $80,710 $73,824 $67,667 $62,151 $57,196
7.0 $100,400 $91,573 $83,704 $76,672 $70,373 $64,717
Multiple: 8.0 $112,366 $102,435 $93,585 $85,677 $78,596 $72,239
9.0 $124,332 $113,298 $103,466 $94,683 $86,818 $79,760
10.0 $136,299 $124,161 $113,346 $103,688 $95,041 $87,282
11.0 $148,265 $135,023 $123,227 $112,693 $103,263 $94,803
- -------------------------------------------------------------------------------------------------------------------------
Equity Value:
6.0 x $95,829 $88,106 $81,219 $75,063 $69,546 $64,591
7.0 $107,795 $98,968 $91,100 $84,068 $77,769 $72,113
Multiple: 8.0 $119,761 $109,831 $100,980 $93,073 $85,991 $79,634
9.0 $131,728 $120,694 $110,861 $102,078 $94,214 $87,156
10.0 $143,694 $131,556 $120,742 $111,083 $102,436 $94,677
11.0 $155,661 $142,419 $130,622 $120,088 $110,658 $102,198
- -------------------------------------------------------------------------------------------------------------------------
Implied Total Value/Fiscal 1998 EBIT Multiple:
6.0 x 35.4 x 32.3 x 29.5 x 27.1 x 24.9 x 22.9 x
7.0 40.2 36.6 33.5 30.7 28.1 25.9
Multiple: 8.0 44.9 41.0 37.4 34.3 31.4 28.9
9.0 49.7 45.3 41.4 37.9 34.7 31.9
10.0 54.5 49.7 45.3 41.5 38.0 34.9
11.0 59.3 54.0 49.3 45.1 41.3 37.9
- -------------------------------------------------------------------------------------------------------------------------