Exhibit 99.5
Symmetricom, Inc. and Hewlett-Packard Company
Communications Synchronization Business
Pro Form Financial Data
On September 30, 1999, subsequent to the first fiscal quarter, Symmetricom, Inc.
("Symmetricom" or the "Company") acquired Hewlett-Packard Company's
Communications Synchronization Business ("Product Line Business") for $19.4
million in cash. The acquisition has been accounted for under the purchase
method of accounting. The estimated net purchase price of $19.8 million, which
includes cash paid of $19.0 million, transaction costs of $.4 million, assumed
liabilities of $.4 million was allocated to tangible assets acquired of $1.4
million, capitalized developed technology of $8.0 million, other intangible
assets of $6.9 million and in-process research and development of $3.5 million.
Additionally, an estimated $11.0 million will be paid to Hewlett-Packard Company
over the next 12 to 15 months as additional assets, primarily inventory, are
transferred to the Company. The purchase price allocation is subject to further
adjustment over the next quarter.
The following condensed consolidated pro forma financial data is based upon the
historical financial statements of Symmetricom for the three months ended
September 30, 1999 (unaudited) and the year ended June 30, 1999 and the
historical financial statements of the Product Line Business for the three
months ended July 31, 1999 (unaudited) and the year ended July 31, 1999. The
unaudited condensed consolidated pro forma financial data has been prepared to
present, on a pro forma basis, the combined results of the operations of the
Company and the Product Line Business.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet at September 30,
1999 combines the historical balance sheet of the Company and the Statement of
Tangible Assets Sold and Liabilities Assumed of the Product Line Business as if
the acquisition had occurred on September 30, 1999, after giving effect to
certain adjustments described in the accompanying Notes to Unaudited Pro Forma
Condensed Consolidated Balance Sheet.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the
year ended June 30, 1999 and for the three months ended September 30, 1999
present the combined results of operations of the Company and the Statement of
Net Sales, Cost of Sales and Direct Operating Expenses of the Product Line
Business as if the acquisition had occurred on September 30, 1999, after giving
effect to certain adjustments described in the accompanying Notes to Unaudited
Pro Forma Condensed Consolidated Statement of Operations. The following
Unaudited Pro Forma Condensed Consolidated Financial Information is presented
for illustrative purposes only. The Gross Margin of the Product Line Business
was significantly impacted by expenses for inventory writeoff, warranty retrofit
programs, the redeployment of resources and ramp up costs of offshore
manufacturing facilities for the year and quarter ended July 31, 1999. We do not
believe that this is indicative of the consolidated financial position or
results of operations for future periods or the results that actually would have
been realized had the Company and the Product Line Business been a consolidated
company during the specified periods.
The Unaudited Pro Forma Condensed Consolidated Financial Information, including
the notes thereto, is qualified in its entirety by reference to, and should be
read in conjunction with the historical consolidated financial statements and
the notes thereto, which were previously reported in the Company's Annual Report
on Form 10-K for the year ended June 30, 1999 and the Quarterly Report on Form
10-Q for the quarter ended September 30, 1999.
This report on Form 8-K contains forward-looking information within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and is subject to the safe harbor
created by those Sections. These forward-looking statements include statements
concerning additional payments as assets are transferred to
Symmetricom, purchase price allocation, and future operating results.
Symmetricom's actual results could differ materially from those projected or
suggested in these forward-looking statements. Factors that could cause future
actual results to differ materially from the results projected in or suggested
by such forward-looking statements include: transfer of the assets by
Hewlett-Packard Company; difficulties in integrating the Communications
Synchronization business, products and employees with those of Symmetricom;
reduced rates of growth of telecommunication services and high-bandwidth
applications; timing, cancellation or delay of customer orders; delays in new
product development, introduction and production startup; increased competition;
customer acceptance of new products, including new and existing Communications
Synchronization products; customer delays in qualification of key new products,
including new and existing Communications Synchronization products; and the risk
factors listed from time to time in Symmetricom's reports filed with the
Securities and Exchange Commission.
EXHIBIT 00.5 - Part 2
SYMMETRICOM, INC.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
September 30, 1999
(In thousands)
Symmetricom, Hewlett-Packard
Inc. Product Line Adjustments Pro Forma
------------ --------------- ----------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 50,062 $ - $ (19,041) (1) $ 31,021
Short-term investments 12,256 12,256
Accounts receivable, net 10,640 - - 10,640
Inventories 11,087 734 (10) (2) 11,811
Other current assets 3,544 - - 3,544
------------ ------------- ---------- ----------
Total current assets 87,589 734 (19,051) 69,272
Property, plant and equipment, net 20,307 205 506 (4) 21,018
Other assets 1,236 15,804 (3) (5) 17,040
------------ ------------- ----------- ----------
Total assets $ 109,132 $ 939 $ (2,741) $ 107,330
============ ============= =========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,431 $ - $ - $ 3,431
Accrued liabilities 14,047 225 4,171 (6) (7) 18,443
Current maturities of long-term obligations 618 618
------------ ------------- ----------- ----------
Total current liabilities 18,096 225 4,171 22,492
Long-term obligations 7,978 - 7,978
Deferred income taxes 624 - - 624
------------ ------------- ----------- ----------
Total liabilities 26,698 225 4,171 31,094
------------ ------------- ----------- ----------
Shareholders' equity:
Preferred stock
Common stock 20,019 - - 20,019
Unrealized gain on securities 2,260 - - 2,260
Excess of tangible assets sold and
liabilities assumed - 714 (714) (9) -
Retained earnings 60,155 - (6,198) (3) (6) (8) 53,957
------------ ------------- ----------- ----------
Total shareholders' equity 82,434 714 (6,912) 76,236
------------ ------------- ----------- ----------
------------ ------------- ----------- ----------
Total liabilities and shareholders' equity $ 109,132 $ 939 $ (2,741) $ 107,330
============ ============= =========== ==========
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet
(1) Adjustment to reflect the financing of the acquisition. Total cash paid was
$19.0 million plus $.4 million of accrued transaction costs.
(2) Adjustment of inventories to reflect inventories not acquired.
(3) Adjustment to record deferred taxes due to timing differences resulting
from the amortization of in-process research and development for book
and tax purposes.
(4) Adjustment to record property, plant and equipment at its fair market
value.
(5) Adjustment to reflect the purchase price allocation to intangible assets
including developed technology of $8.0 million, workforce of $1.4 million,
customer list of $1.3 million, trademarks of $.9 million and goodwill of
$3.3 million.
(6) Adjustment to record the fair market value of liabilities assumed by the
Company, including $3.6 million for employee retention bonuses and an
additional $.2 million for warranty claims.
(7) Adjustment to record transaction costs of $.4 million.
(8) Adjustment to record the effect of the write-off of in-process
research and development of $4.3 million, net of income tax benefit of
$.9 million.
(9) Adjustment to eliminate the excess of tangible assets sold and liabilities
assumed.
SYMMETRICOM, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended June 30, 1999
(In thousands, except per share amounts)
Symmetricom, Hewlett-Packard
Inc. Product Line Adjustments Pro Forma
------------ --------------- ----------- ---------
Net sales $ 76,915 $ 48,888 $ - $ 125,803
Cost of sales 40,169 46,689 80 (2) 86,938
------------ --------------- ----------- ---------
Gross profit 36,746 2,199 (80) 38,865
Operating expenses:
Research and development 13,671 12,265 62 (2) 25,998
Selling, general and administrative 20,753 17,061 1,960 (1) 39,774
------------ --------------- ----------- ---------
Operating income (loss) 2,322 (27,127) (2,102) (26,907)
Interest income 1,917 - (1,000) (5) 917
Interest expense (715) - - (715)
------------ --------------- ----------- ---------
Earnings (loss) before income taxes 3,524 (27,127) (3,102) (26,705)
Income tax provision (benefit) 740 - (6,348) (4) (5,608)
------------ --------------- ----------- ---------
Earnings (loss) from continuing operations 2,784 (27,127) 3,246 (21,097)
Discontinued operations, net of tax:
Earnings (loss) from operations (73) - - (73)
Estimated loss on sale (3,906) - - (3,906)
------------ --------------- ----------- ---------
Earnings (loss) from discontinued operations (3,979) - - (3,979)
------------ --------------- ----------- ---------
Net earnings (loss) $ (1,195) $ (27,127) $ 3,246 $ (25,076)
------------ --------------- ----------- ---------
Earnings (loss) per share---basic:
Earnings from continuing operations $ 0.18 $ (1.77) $ 0.21 $ (1.38)
Earnings (loss) from discontinued operations (0.26) (0.26)
------------ --------------- ----------- ---------
Net earnings (loss) $ (0.08) $ (1.77) $ 0.21 $ (1.64)
============ =============== =========== =========
Weighted average shares outstanding---basic 15,301 15,301 15,301 15,301
============ =============== =========== =========
Earnings (loss) per share---diluted:
Earnings from continuing operations $ 0.18 $ (1.77) $ 0.21 $ (1.38)
Earnings (loss) from discontinued operations (0.26) (0.26)
------------ --------------- ----------- ---------
Net earnings (loss) $ (0.08) $ (1.77) $ 0.21 $ (1.64)
============ =============== =========== =========
Weighted average shares outstanding-diluted 15,395 15,301 15,301 15,301
============ =============== =========== =========
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
(1) Adjustment to reflect $2.0 million of amortization of goodwill and other
intangibles on a straight line basis over five to ten years.
(2) Adjustment to reflect $.1 million increase in depreciation on property,
plant and equipment at fair market value.
(3) Nonrecurring costs include $3.6 million of employee retention bonuses and
$3.5 million, net, of in-process research and development. These costs
will be charged to operations in the second fiscal quarter of 2000, the
quarter in
which the deal was consummated. The effects of these costs have not been
reflected in the unaudited pro forma condensed consolidated statements of
operations as they are nonrecurring in nature.
(4) No tax benefit has been recorded by Hewlett-Packard Company for the
Communications Synchronization business. Adjustment to record a tax
benefit at the estimated Symmetricom rate of 21%.
(5) Adjustment to reflect a $1.0 million decrease in interest income related
to the decrease in cash due to the acquisition.
SYMMETRICOM, INC.
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Quarter Ended September 30, 1999
(In thousands, except per share amounts)
Symmetricom, Hewlett-Packard
Inc. Product Line Adjustments Pro Forma
------------ --------------- ----------- ---------
Net sales $ 19,617 $ 6,399 $ - $ 26,016
Cost of of sales 10,578 8,689 20 (2) 19,287
------------ --------------- ----------- ---------
Gross profit 9,039 (2,290) (20) 6,729
Operating expenses:
Research and development 3,303 2,571 16 (2) 5,890
Selling, general and administrative 5,057 2,498 490 (1) 8,045
------------ --------------- ----------- ---------
Operating income (loss) 679 (7,359) (526) (7,206)
Interest income 677 - (250) (5) 427
Interest expense (176) - - (176)
------------ --------------- ----------- ---------
Earnings (loss) before income taxes 1,180 (7,359) (776) (6,955)
Income tax provision (benefit) 295 - (2,034) (4) (1,739)
============ =============== =========== =========
Net earnings (loss) $ 885 $ (7,359) $ 1,258 $ (5,216)
============ =============== =========== =========
Earnings (loss) per share---basic: $ 0.06 $ (0.49) $ 0.08 $ (0.35)
============ =============== =========== =========
Weighted average shares outstanding---basic 15,005 15,005 15,005 15,005
============ =============== =========== =========
Earnings (loss) per share---diluted: $ 0.06 $ (0.49) $ 0.08 $ (0.35)
============ =============== =========== =========
Weighted average shares outstanding---diluted 15,412 15,005 15,005 15,005
============ =============== =========== =========
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
(1) Adjustment to reflect $0.5 million of amortization of goodwill and other
intangibles on a straight line basis over five to ten years.
(2) Adjustment to reflect $36 thousand increase in depreciation on property,
plant and equipment at fair market value.
(3) Nonrecurring costs include $3.6 million of employee retention bonuses and
$3.5 million, net, of in-process research and development. These costs
will be charged to operations in the second fiscal quarter of 2000, the
quarter in which the deal was consummated. The effects of these costs have
not been reflected in the unaudited pro forma condensed consolidated
statements of operations as they are nonrecurring in nature.
(4) No tax benefit has been recorded by Hewlett-Packard Company for the
Communications Synchronization business. Adjustment to record a tax
benefit at the estimated Symmetricom rate of 25%.
(5) Adjustment to reflect a $250 thousand decrease in interest income related
to the decrease in cash due to the acquisition.