8-K/A: Current report filing
Published on April 7, 2003
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) January 21, 2003
EMCORE CORPORATION
(Exact name of registrant as specified in charter)
New Jersey 0-22175 22-2746503
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State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation
145 Belmont Drive, Somerset, New Jersey 08873
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(Address of principal offices) (Zip Code)
Registrant's telephone number including area code (732) 271-9090
(Former name or former address, if changed since last report) NOT APPLICABLE
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K
originally filed with the Securities Exchange Commission on February 4, 2003 as
set forth in the pages attached hereto:
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
EXHIBITS
(a) Financial Statements of Business Acquired.
Based on the materiality of this Acquisition to the Registrant, Rule
3-05(b)(2)(ii) of Regulation S-X requires the Registrant to furnish audited
financial statements for the acquired business as specified in Rules 3-01 and
3-02.
The following audited financial statements are hereby included in this Form
8-K/A on pages F-1 to F-12.
o Independent Auditors' Report
o Statements of Certain Assets and Liabilities of the CATV Business
to be Sold as of September 30, 2002 and 2001
o Statements of Net Sales, Cost of Sales and Direct Operating
Expenses for the years ended September 30, 2002 and 2001 and for
the period from April 27, 2000 to September 30, 2000
o Notes to Financial Statements
(b) Pro Forma Financial Information.
The following unaudited condensed consolidated pro forma financial statements
are hereby included in this Form 8-K/A on pages F-13 to F-17. The Registrant
believes the provision of these unaudited condensed consolidated pro forma
financial statements to be in compliance with the requirements of Regulation S-X
as the most appropriate presentation under the circumstances:
o Unaudited Condensed Consolidated Pro Forma Balance Sheet as of September
30, 2002
o Unaudited Condensed Consolidated Pro Forma Statement of Operations for the
Year Ended September 30, 2002
o Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements
(c) Exhibits
Exhibit Description
2.1 Asset Purchase Agreement, dated as of January 21, 2002, by and
between Registrant and Agere.*
2.2 Intellectual Property Agreement, by and between Agere and Ortel
Corporation and Registrant.*
* Previously filed
Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to the above
exhibits have been omitted. Registrant agrees to supplementally furnish such
schedules upon request of the Securities and Exchange Commission.
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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.
EMCORE CORPORATION
(Registrant)
By: /s/ Thomas G. Werthan
-----------------------------------
Thomas G. Werthan
Chief Financial Officer
Dated: April 7, 2003
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INDEX TO FINANCIAL STATEMENTS
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Independent Auditors' Report F-1
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Statements of Certain Assets and Liabilities of the CATV
Business to be Sold as of September 30, 2002 and 2001 F-2
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Statements of Net Sales, Cost of Sales and Direct
Operating Expenses for the years ended September 30,
2002 and 2001 and for the period from April 27, 2000 to
September 30, 2000 F-3
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Notes to Financial Statements F-4
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Unaudited Condensed Consolidated Pro Forma Financial
Information F-13
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Notes to Unaudited Condensed Consolidated Pro Forma
Financial Statements F-14
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Unaudited Condensed Consolidated Pro Forma Balance
Sheet as of September 30, 2002 F-16
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Unaudited Condensed Consolidated Pro Forma Statement of
Operations for the Year Ended September 30, 2002 F-17
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Agere Systems Inc.
CATV Business
Financial Statements
As of September 30, 2002 and 2001, for the Years Ended
September 30, 2002 and 2001 and for the Period
from April 27, 2000 to September 30, 2000
Agere Systems Inc.
CATV Business
Index to Financial Statements
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Page
Independent Auditors' Report F-1
Financial Statements:
Statements of Certain Assets and Liabilities of the
CATV Business to be Sold as of September 30, 2002 and 2001 F-2
Statements of Net Sales, Cost of Sales and Direct
Operating Expenses for the Years Ended September 30,
2002 and 2001 and for the Period from April 27, 2000 to
September 30, 2000 F-3
Notes to Financial Statements F-4 - F-12
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Agere Systems Inc.
We have audited the accompanying statements of certain assets and liabilities of
the CATV Business to be sold ("CATV") of Agere Systems Inc. ("Agere") as of
September 30, 2002 and 2001, and the related statements of net sales, cost of
sales and direct operating expenses for each of the two years in the period
ended September 30, 2002 and for the period from April 27, 2000 to September 30,
2000. These financial statements are the responsibility of Agere's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
The accompanying financial statements were prepared for the purpose of
presenting the certain assets and liabilities to be sold along with the net
sales, cost of sales and direct operating expenses of CATV and, as described in
Note 1, are not intended to be a complete presentation of CATV's financial
position, results of operations and cash flows.
In our opinion, the financial statements referred to above present fairly, in
all material respects, certain assets and liabilities of CATV as of September
30, 2002 and 2001, that are to be sold pursuant to the sales transaction
described in Note 1, and the related net sales, cost of sales and direct
operating expenses of CATV for each of the two years in the period ended
September 30, 2002 and for the period from April 27, 2000 to September 30, 2000,
in conformity with accounting principles generally accepted in the United States
of America.
Parsippany, New Jersey
April 4, 2003
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Agere Systems Inc.
CATV Business to be Sold
Statements of Certain Assets and Liabilities of the CATV Business to be Sold
As of September 30, 2002 and 2001 (Dollars in thousands)
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September 30,
2002 2001
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ASSETS
Inventories................................... $ 7,229 $ 22,899
Property, plant and equipment - net........... -- 60,505
Acquired intangibles - net -- 113,414
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TOTAL ASSETS............................. 7,229 196,818
LIABILITIES
Product warranties.......................... 2,143 2,143
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TOTAL LIABILITIES........................ 2,143 2,143
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NET ASSETS TO BE SOLD......................... $ 5,086 $ 194,675
========== ==========
The accompanying notes are an integral part of these financial statements.
-F-2-
Agere Systems Inc.
CATV Business to be Sold
Statements of Net Sales, Cost of Sales and Direct Operating Expenses
For the Years Ended September 30, 2002 and 2001 and for
the Period from April 27, 2000 to September 30, 2000 (Dollars in thousands)
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The accompanying notes are an integral part of these financial statements.
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Agere Systems Inc.
CATV Business to be Sold
Notes to Financial Statements
(Dollars in thousands)
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1. Background and Basis of Presentation
On January 21, 2003, Agere Systems Inc. ("Agere") sold the portion of its
optoelectronic components business that provides cable television transmission
systems, telecom access and satellite communications components ("CATV") to
EMCORE Corporation ("EMCORE") for $25 million in cash, pursuant to the Asset
Purchase Agreement dated January 21, 2003, (the "Agreement") between the
parties. The accompanying financial statements have been prepared for the
purpose of presenting the assets and liabilities of CATV to be sold pursuant to
the Agreement and its related net sales, cost of sales and direct operating
expenses. The financial statements do not reflect any effects of the sale of
CATV. See Note 12.
The sale includes the assets, products, product warranty liabilities,
technology and intellectual property related to CATV. As part of the sale,
approximately 210 of Agere's employees are to join EMCORE. Agere will continue
to supply some services to EMCORE for a short period under a transition services
agreement that expires March 31, 2003.
CATV was managed as part of Agere's Infrastructure Systems segment and
prior to Agere's separation from Lucent Technologies Inc. ("Lucent") effective
February 1, 2001, was managed as part of Lucent's Microelectronics and
Communications Technologies segment. CATV represents a portion of Ortel
Corporation ("Ortel") which was acquired by Lucent on April 27, 2000. See Note
4. Lucent was the majority stockholder and a related party of Agere until June
1, 2002 when Lucent distributed all of the Agere common stock it then owned to
its stockholders. Revenue from CATV products sold to Lucent in fiscal 2002,
through June 1, 2002, was $4,471. Revenue from CATV products sold to Lucent for
fiscal 2001 and for the period from April 27, 2000 to September 30, 2000 was
$3,649 and $3, respectively. There were no purchases of products from Lucent by
CATV.
Agere did not maintain CATV as a separate business unit nor did management
analyze CATV as a separate line of business and external financial statements
historically have not been prepared. The accompanying financial statements have
been derived from the historical records of Agere in order to present the
certain assets and liabilities of CATV to be sold as of September 30, 2002 and
2001 and the net sales, cost of sales and direct operating expenses for the
years ended September 30, 2002 and 2001 and for the period from April 27, 2000
to September 30, 2000 in accordance with accounting principles generally
accepted in the United States of America. These financial statements are not
intended to be a complete presentation of CATV's financial position, results of
operations and cash flows. The historical operating results of CATV may not be
indicative of its results in the future or what its results of operations,
financial position and cash flows would have been had it been a stand-alone
company.
The statement of net sales, cost of sales and direct operating expenses for
CATV includes allocations for certain costs, including factory overhead and
support functions, such as, quality assurance, logistics, information
technology, and the global sales force. Management believes the methodologies
applied for the allocation of these costs are reasonable. There are certain
costs that have not been allocated including corporate-wide marketing, general
and administrative expenses, interest and income taxes. Agere also provides CATV
with various infrastructure and support services, which among other things
include real estate, computer and network systems, human resources, payroll,
accounting and cash management and legal support. These costs do not directly
support CATV and were not allocated to CATV or segregated for external financial
reporting purposes. Accordingly, the inclusion of these costs is not
practicable.
All cash flow activities were funded by Agere and, prior to the receipt by
Agere of the proceeds from its initial public offering in April 2001, by Lucent.
Therefore, a statement of cash flows, including cash flows from operating,
investing and financing activities is not presented, as CATV did not maintain a
cash balance. For supplemental cash flow information see Note 11.
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Agere Systems Inc.
CATV Business to be Sold
Notes to Financial Statements
(Dollars in thousands)
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2. Summary of Significant Accounting Policies
Revenue Recognition
Revenue is recognized when persuasive evidence of an arrangement exists,
the product has been delivered and title and risk of loss have been transferred,
the sales price is fixed or determinable and collection of the resulting
receivable is reasonably assured, with an appropriate provision for returns and
allowances. CATV recognizes revenue from product sales to distributors when all
obligations have been satisfied. CATV's distributor arrangements generally
provide for limited product returns and price protection.
Cost of Sales
Cost of sales includes direct manufacturing costs and allocated costs for
support functions such as quality assurance, factory accounting, logistics,
information technology, and supply chain and demand planning. These allocations
are based on the percentage of CATV's planned revenue compared to Agere's total
planned revenue.
Research and Development Expense
Research and development costs are charged to expense as incurred. Direct
research and development expenses include salaries and benefit costs of CATV
personnel that conduct applied or development research to develop new products,
technologies and software that are used in the design and manufacture of CATV's
products. These costs also include the direct materials and supplies used in
this research.
Marketing and Sales Expense
Marketing and sales expense includes direct costs of product management,
market planning, market operations, product line planning and management,
advertising and an allocation of the salary and benefit costs of Agere's global
sales force based on the nature of the sales effort. Costs associated with
Agere's corporate-wide advertising, business development, strategic planning and
other indirect support activities were not allocated to CATV.
Amortization of Goodwill and Other Acquired Intangibles
Goodwill and other acquired intangibles are amortized on a straight-line
basis over the periods benefited, principally in the range of four to nine
years. Goodwill is the excess of the purchase price over the fair value of
identifiable net assets acquired in business combinations accounted for as
purchases.
Inventories
Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market. Inventory provisions are reflected within cost of
sales and are calculated in accordance with Agere's inventory valuation policy,
which is based on a review of forecasted demand compared with existing inventory
levels. CATV recorded inventory provisions,
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Agere Systems Inc.
CATV Business to be Sold
Notes to Financial Statements
(Dollars in thousands)
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including purchase order cancellations, of $9,445, $11,625 and $1,142 in fiscal
2002 and 2001 and for the period from April 27, 2000 to September 30, 2000,
respectively. The following table shows inventory by category.
September 30,
2002 2001
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INVENTORIES
Completed goods.............................. $ 423 $ 5,541
Work in process.............................. 2,364 6,326
Raw materials................................ 4,442 11,032
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Inventories................................ $ 7,229 $ 22,899
========= =========
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated
depreciation. Depreciation and amortization is determined primarily using the
straight-line method over the estimated useful lives of the various asset
classes, which range from three to five years for machinery, electronic and
other equipment, and up to the life of the lease for leasehold improvements.
Major renewals and improvements are capitalized and minor replacements,
maintenance, and repairs are charged to current operations as incurred.
Depreciation and amortization expense for fiscal 2002 and 2001 and for the
period from April 27, 2000 to September 30, 2000 was $11,229, $10,078 and
$2,847, respectively. As of September 30, 2002, all property, plant and
equipment related to CATV were fully impaired. See Note 9 for details. Property,
plant and equipment consists of the following asset classes:
September 30,
2002 2001
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PROPERTY, PLANT AND EQUIPMENT--NET
Land and improvements............................. $ -- $ 1,795
Leasehold improvements............................ -- 36,205
Machinery, electronic and other equipment......... -- 61,315
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Total property, plant and equipment............ -- 99,315
Less: accumulated depreciation and amortization... -- (38,810)
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Property, plant and equipment--net................ $ -- $ 60,505
========== ===========
CATV recorded additional depreciation of $1,656 in fiscal 2002, $1,191 of
which is recorded within cost of sales and $465 of which is recorded within
restructuring and related charges. This additional depreciation was due to a
change in accounting estimate as a result of shortening the estimated useful
lives of certain assets in connection with restructuring activities. CATV did
not have any additional depreciation in fiscal 2001 or for the period from April
27, 2000 to September 30, 2000.
Product Warranties
The product warranties liability represents the estimated cost of known or
potential warranty claims based on historical experience.
Impairment of Long-lived Assets
Long-lived assets, including goodwill and other acquired intangibles, are
reviewed for impairment whenever events such as a significant industry downturn,
product discontinuance, plant closures, product dispositions, technological
obsolescence or other changes in circumstances indicate that the carrying amount
may not be recoverable. When such events occur, the carrying amount of the
assets is compared to the undiscounted expected future cash flows. If this
comparison indicates that there is an impairment, the amount of the impairment
is calculated using discounted expected future cash flows.
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Agere Systems Inc.
CATV Business to be Sold
Notes to Financial Statements
(Dollars in thousands)
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Use of Estimates
The preparation of financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent assets
and liabilities at the date of the financial statements, and revenue and
expenses during the period reported. Actual results could differ from those
estimates.
3. Recent Pronouncements
SFAS 144
In August 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long Lived-Assets to be Disposed of" ("SFAS 121"), and the accounting and
reporting provisions for the disposal of a segment of a business contained in
APB Opinion No. 30 "Reporting the Effects of a Disposal of a Segment of a
Business, and Extraordinary, Unusual, and Infrequently Occurring Events and
Transactions." SFAS 144 establishes a single accounting model for long-lived
assets to be disposed of by sale and broadens the presentation of discontinued
operations. Although Agere was not required to adopt SFAS 144 until the first
quarter of fiscal 2003, Agere elected to adopt this pronouncement effective
October 1, 2001. The impairment charges discussed in Note 9, for fiscal 2002,
were calculated in accordance with SFAS 144.
SFAS 146
In June 2002, the FASB issued SFAS No. 146, "Accounting for Exit or
Disposal Activities" ("SFAS 146"). SFAS 146 addresses significant issues
regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring activities
that are currently accounted for pursuant to the guidance that the Emerging
Issues Task Force ("EITF") set forth in EITF Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)" ("EITF 94-3").
The scope of SFAS 146 also includes (1) costs related to terminating a contract
that is not a capital lease, (2) termination benefits that employees who are
involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual
deferred-compensation contract and (3) costs to consolidate facilities or
relocate employees. SFAS 146 is effective for exit or disposal activities
initiated after December 31, 2002. Although the timing of the liability
recognition for new restructuring initiatives will change from the commitment
date to the date the liability is incurred, CATV does not expect any material
impacts on its financial condition or results of operations. This statement has
no effect on previously announced restructuring initiatives.
4. Acquisitions
The following table presents information about the acquisition of Ortel by
Lucent that occurred on April 27, 2000. Ortel was a developer and manufacturer
of optoelectronic components used in fiber optic systems for cable television
and data communications networks. The purchase price was paid in Lucent common
stock and options. The acquisition was accounted for under the purchase method
of accounting, and the acquired technology valuation included existing
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Agere Systems Inc.
CATV Business to be Sold
Notes to Financial Statements
(Dollars in thousands)
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technology, purchased in-process research and development ("IPRD") and other
intangibles. The financial statements include the results of operations and the
estimated fair value of assets and liabilities assumed from the date of
acquisition. Ortel is 100% owned.
Included in the purchase price for Ortel was IPRD, which was a non-cash
charge to earnings for technology that had not reached technological feasibility
and had no future alternative use. The remaining purchase price was allocated to
tangible assets and intangible assets, including goodwill and other acquired
intangibles, less liabilities assumed. The value allocated to IPRD was
determined utilizing an income approach that included an excess earnings
analysis reflecting the appropriate cost of capital for the investment.
Estimates of future cash flows related to IPRD were made for each project based
on Lucent's estimates of revenue, operating expenses and income taxes from the
project. These estimates were consistent with historical pricing, gross margins
and expense levels for similar products.
Management is primarily responsible for estimating the fair value of the
assets and liabilities acquired and has made estimates and assumptions that
affect the reported amounts of assets, liabilities and expenses resulting from
this acquisition. Actual results could differ from those amounts.
5. Impairment of Goodwill and Other Acquired Intangibles
Goodwill and other acquired intangibles associated with the Ortel
acquisition were evaluated for impairment in the period in which Agere became
aware of events or occurrences that indicated an impairment may exist.
Impairment assessments were performed as a result of weakening economic
conditions and decreased current and expected future demand for products in the
markets in which CATV operates. The fair value of Ortel was determined using a
discounted cash flow model based on growth rates and margins reflective of lower
demand for its products, as well as anticipated future demand. Discount rates
used were based upon Agere's weighted average cost of capital adjusted for
business risks. These amounts were based on management's best estimate of future
results.
As a result of these assessments, Agere determined that an impairment of
goodwill and other acquired intangibles existed. During fiscal 2002 and 2001,
CATV recorded a charge of $113,000 and $2,220,000, respectively; to reduce
goodwill and other acquired intangibles related to the acquisition of Ortel.
6. Employee Benefit Plans
CATV participates in various employee benefit plans that are sponsored by
Agere, including pension, savings, postretirement and postemployment plans.
Prior to January 1, 2002 the savings, postretirement and postemployment plans
and prior to June 1, 2002 the pension plan were sponsored by Lucent. The
specific charges and obligations under these plans related to CATV are not
separately identifiable, but related costs were allocated to CATV.
Agere has stock-based compensation plans under which employees of CATV
receive stock options. Agere applies Accounting Principals Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock option plan. At this time it is not practicable to
determine pro forma expense in accordance with SFAS No. 123, "Accounting for
Stock-Based Compensation."
-F-9-
Agere Systems Inc.
CATV Business to be Sold
Notes to Financial Statements
(Dollars in thousands)
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7. Leases
Rental expense under operating leases related to CATV was $2,537, $2,235
and $1,464 for fiscal 2002 and 2001 and for the period from April 27, 2000 to
September 30, 2000, respectively. EMCORE will sublease Agere's Alhambra,
California facility for a period of one year, with the option to extend the
sublease. EMCORE's annual rental expense will be $617 under the sublease. Agere
will remain primarily liable for the non-cancelable operating lease of this
facility.
8. Certain Risks and Concentrations
CATV's sales are concentrated in the optoelectronic components market for
cable television transmission systems, telecom access and satellite
communications, which is competitive and rapidly changing. Significant
technological changes in the market or customer requirements, changes in
customer buying behavior, or the emergence of competitive products with new
capabilities or technologies could adversely affect operating results. Also,
portions of CATV's net sales are derived from customers that individually
accounted for greater than 10% of net sales. A customer represented
approximately 20%, 11% and 18% of CATV's net sales in fiscal 2002 and 2001 and
for the period from April 27, 2000 to September 30, 2000, respectively. The loss
of these customers could have a material adverse effect on CATV's operations.
9. Restructuring and Related Charges
Beginning in fiscal 2001 and continuing through fiscal 2002, Agere
announced restructuring and consolidation actions to improve gross profit,
reduce expenses and streamline operations. These actions included workforce
reductions, rationalization of manufacturing capacity, the exit of the
optoelectronic components business and other restructuring related activities.
These actions affected the operations of CATV as described below.
CATV recorded restructuring and related charges of $67,889 in fiscal 2002
and $6,275 in fiscal 2001. All liabilities related to these actions remain the
responsibility of Agere.
During fiscal 2002, CATV recorded restructuring charges of $9,233 related
to workforce reductions of approximately 350 employees. Of the total workforce
reduction charges, $3,728 represents non-cash charges for termination benefits
to certain U.S. employees funded through Agere's and Lucent's qualified pension
plans.
Also during fiscal 2002, CATV recorded other restructuring and related
charges of $58,656, of which $49,181 was for property, plant and equipment
impairments, $4,840 for non-cancelable facility leases, $4,170 for facility
restoration and $465 for additional depreciation. The additional depreciation
charges were recognized due to a change in accounting estimate as a result of
shortening the estimated useful lives of certain leasehold improvements in
connection with restructuring activities. There was no additional depreciation
in fiscal 2001 or for the period from April 27, 2000 to September 30, 2000. As
of September 30, 2002, all property, plant and equipment related to CATV were
fully impaired.
During fiscal 2001, CATV recorded restructuring charges of $6,275 of which
$5,938 related to property, plant and equipment impairments and $337 related to
non-cancelable facility leases and related costs associate with certain leased
facilities in Alhambra, California.
10. Intangible Assets
Effective October 1, 2002, Agere adopted SFAS No. 142, "Goodwill and Other
Intangible Assets" ("SFAS 142"). SFAS 142 provides guidance on the financial
accounting and reporting for goodwill and other acquired intangible assets.
Under SFAS 142, goodwill and indefinite lived intangible assets are no longer
amortized. Intangible assets with finite lives will continue to be amortized
over their useful lives, which are no longer limited to a maximum life of forty
years. SFAS 142 also requires that goodwill be tested for impairment at least
annually. The adoption of SFAS 142 did not
-F-10-
result in the recording of an impairment charge or any adjustments to amounts
previously recorded by CATV. There were also no changes to the classification
and useful lives of previously acquired goodwill and other intangible assets.
Intangible asset amortization expense was $11,317, $26,108 and $12,421 for
fiscal 2002 and 2001 and for the period from April 27, 2000 to September 30,
2000, respectively.
The following table reflects the impact of SFAS 142 on the deficiency of
net sales over cost of sales and direct operating expenses had SFAS 142 been in
effect for all periods presented.
11. Cash Flow Information
Provided below is supplemental cash flow information for CATV:
12. Subsequent Event
On January 21, 2003, Agere completed the sale of CATV to EMCORE for $25,000
in cash. Agere and EMCORE entered into the following agreements in connection
with the sale of CATV.
Transition Services Agreement - Agere agreed to provide EMCORE certain
temporary transition services in order to continue the operations of
CATV. These transition services include, among other services,
manufacturing and engineering services, purchasing and logistics
support, facilities operations support, information technology
services and use of Agere facilities.
Intellectual Property Agreement - Agere assigned, licensed or
transferred to EMCORE certain intellectual property unique to CATV.
-F-11-
Agere Systems Inc.
CATV Business to be Sold
Notes to Financial Statements
(Dollars in thousands)
- --------------------------------------------------------------------------------
Sublease Agreement - EMCORE will sublease Agere's Alhambra, California
facility for a period of one year, with the option to extend the
sublease. Agere will remain primarily liable for the non-cancelable
operating lease of this facility.
-F-12-
Unaudited Condensed Consolidated
Pro Forma Financial Information
The following unaudited condensed consolidated pro forma financial statements
have been prepared to give effect to EMCORE Corporation's ("EMCORE") acquisition
of certain assets and liabilities of the Agere System Inc.'s cable television
transmission systems, telecom access and satellite communications components
business ("CATV"). These pro forma statements are presented for illustrative
purposes only.
The pro forma adjustments are based upon available information and assumptions
that EMCORE believes are reasonable. A preliminary allocation of the purchase
price for the above transactions has been made to major categories of assets and
liabilities in the accompanying pro forma statements based on currently
available information. The actual allocation of purchase price and the resulting
effect on income from operations are not expected to differ materially from the
pro forma amounts included herein. The unaudited condensed consolidated pro
forma financial statements do not purport to represent what the consolidated
results of operations or financial position of EMCORE would actually have been
if the acquisition had occurred on the dates referred to below, nor do they
purport to project the results of operations or financial position of EMCORE for
any future period.
The unaudited condensed consolidated pro forma balance sheet as of September 30,
2002 was prepared by combining the historical cost balance sheet at September
30, 2002 for EMCORE with the Statement of Certain Assets and Liabilities of the
CATV Business to be Sold at September 30, 2002 giving effect to the acquisition
as though it was completed on that date.
The unaudited condensed consolidated pro forma statement of operations was
prepared by combining EMCORE's statement of operations for the year ended
September 30, 2002 with CATV's statement of Net Sales, Cost of Sales and Direct
Operating Expenses for the year ended September 30, 2002, giving effect to the
acquisition as though it occurred on October 1, 2001.
These unaudited condensed consolidated pro forma statements of operations do not
give effect to any restructuring costs or any potential cost savings or other
operating efficiencies that could result from the acquisition, or any
non-recurring charges or credits resulting from the transaction such as
in-process research and development charges.
The unaudited condensed consolidated pro forma financial statements should be
read in conjunction with the historical financial statements of (i) EMCORE
included in its Annual Report on Form 10-K for the year ended September 30, 2002
(filed December 30, 2002), and (ii) CATV beginning on page F-2 hereof.
-F-13-
EMCORE Corporation
Notes to Unaudited Condensed Consolidated Pro Forma Financial Statements
(Dollars in thousands)
1. Basis of Pro Forma Presentation
On January 21, 2003 (the "Closing Date"), EMCORE Corporation ("EMCORE")
finalized the acquisition ("Acquisition") of Agere System Inc.'s ("Agere")
cable television transmission systems, telecom access and satellite
communications components business ("CATV") pursuant to an Asset Purchase
Agreement between Agere and EMCORE.
As of the Closing Date, EMCORE paid Agere $25.0 million from its
immediately available cash. The purchase price and other terms of the
transaction were determined by arms length negotiations between EMCORE and
Agere. Prior to the Closing Date of the Acquisition, none of EMCORE, its
affiliates, officers or directors had any material relationship with Agere
or any affiliate, officer or director of Agere.
The effects of the Acquisition have been presented using the purchase
method of accounting. The total estimated purchase price of the transaction
has been allocated to assets and liabilities based on management's
preliminary estimate of their fair values.
The preliminary allocation of the purchase price will be subject to further
adjustments, which are not anticipated to be material, as EMCORE finalizes
its allocation of purchase price in accordance with accounting principles
generally accepted in the United States of America.
The following represents the preliminary allocation of the purchase price
over the estimated fair values of the acquired assets and assumed
liabilities of CATV at January 21, 2003 and is for illustrative purposes
only.
Cash $25,000
Acquisition costs 1,200
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Total purchase consideration $26,200
=======
Allocation of purchase consideration based on fair values:
Assets acquired:
Inventories $ 6,473
Property, plant and equipment 8,570
Identifiable intangible assets 3,274
Goodwill 9,983
Less: Warranty reserve (2,100)
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Net assets acquired $26,200
=======
2. Depreciation
An adjustment was made to depreciation expense resulting from the
adjustment of the book value of CATV assets acquired to fair market value.
The increase in depreciation expense is based on the allocated fair value
of the fixed assets and was calculated on the straight-line basis over the
-F-14-
estimated life of five years for the equipment, four years for the
machinery, two years for the motor vehicles and one year for the computer
hardware and software.
3. Goodwill Amortization
Goodwill amortization was adjusted for elimination of historical goodwill.
4. Impairment and Restructuring Charges
Adjustment was made to eliminate the various impairment and restructuring
charges recorded by CATV during the periods related to the acquired assets.
The acquired assets are valued at fair market value. Therefore, there would
be no impairment and restructuring charges in the condensed consolidated
pro forma financial statements, as the acquired assets would be recorded in
purchase accounting at their fair market value upon the Acquisition.
5. Allocated Costs
The historical financial statements of CATV included certain allocated
costs from Agere. No adjustments were made to the condensed consolidated
pro forma financial statements related to these allocations as there was no
supportable evidence of the amounts that may have been incurred had this
transaction taken place as of the beginning of the periods presented. Refer
to the historical financial statements and related footnotes of CATV for a
summary of the allocated costs for the periods presented.
6. Amortization of Identifiable Intangible Assets Acquired
Adjustment was made to recognize amortization expense of identifiable
intangible assets primarily consisting of purchased technology and
trademarks acquired in the transaction. Amortization expense was calculated
on the straight line basis over the expected life of four to five years for
the purchased technology and fifteen years for the trademarks.
-F-15-
Unaudited Condensed Consolidated Pro Forma Balance Sheet
September 30, 2002
(Dollars in thousands)
-F-16-
Unaudited Condensed Consolidated Pro Forma Statement of Operations
Year Ended September 30, 2002
(Dollars in thousands, except per share date)
-F-17-