Debt from acquisition of Network General refinanced
Integration proceeding as planned
WESTFORD, Mass.--(BUSINESS WIRE)--Jan. 14, 2008--NetScout Systems,
Inc. (NASDAQ: NTCT), an industry pacesetter for advanced network and
service assurance solutions, provided an update today on its recent
acquisition of Network General Corporation. On November 1, 2007
NetScout closed the acquisition of privately-held Network General, a
leader in packet-level network analysis and data mining. The combined
company, now doubled in size, will focus its resources, technology,
and intellectual property on new and enhanced solutions aimed at
reducing Mean Time To Resolution for enterprises, wireless providers
and government agencies. The acquisition enables NetScout to offer
customers best-of-breed solutions with early-warning capability,
real-time and historical application flow analysis, and deep packet
forensics.
The transaction was valued at approximately $213 million. The
purchase price consisted of a combination of six million shares of
NetScout common stock, $100 million of NetScout's senior secured
floating rate notes and approximately $57 million in cash.
On December 21, 2007 NetScout entered into a Credit and Security
Agreement for a $100 million five-year term loan and a $10 million
revolving credit facility. The proceeds of the term loan were used to
redeem all of the outstanding senior secured floating rate notes due
2012 issued as a result of the recent acquisition of Network General.
The new term loan and revolving facility was provided at favorable
rates by a banking syndicate led by KeyBank, including Silicon Valley
Bank, Wells Fargo Foothill, Comerica, Sovereign Bank and RBS Citizens.
"The original loan from the controlling stockholders of Network
General was valuable in facilitating the rapid close of the Network
General acquisition. This new term loan provides NetScout
significantly lower interest rates that decline over time as the loan
is paid down, along with other favorable terms including the
flexibility to make accelerated prepayments as our future operating
cash flow warrants," said David Sommers, Sr. VP and CFO of NetScout.
"Rather than issuing more equity and causing dilution, we have chosen
to continue our leveraged financial structure and retire the debt over
time based on our outlook for strong cash flow from the combined
company and to help us drive growth in earnings per share."
On January 14, 2008, NetScout filed related financial statements
and information relating to the acquisition of Network General in a
Form 8-K/A including historical financial statements for Network
General and pro forma combined results. The Company provided
discussion in Item 7.01 of the 8-K of its prior guidance issued on
September 20, 2007 when NetScout announced its intention to acquire
Network General.
The financial statements in the 8-K/A show Network General's
revenue growth for the nine month period ended October 31, 2007,
versus the comparable period a year ago. This growth was driven by
their newest product line, Infinistream. Infinistream is replacing
revenue from older product lines that have been in decline over the
past several years. The Infinistream product line is complementary to
NetScout's nGenius product line and was the basis for NetScout's
interest in acquiring Network General. NetScout announced the
potential acquisition of Network General on September 20, 2007 and
issued guidance that fiscal year 2009 revenue for the combined company
would be approximately double the then current run rate of NetScout's
standalone revenue. The guidance was based on the historical revenue
of Network General and was mitigated by the expectation that next
year's revenue may be dampened by customer hesitation and sales
disruption caused by the integration of the two companies' sales
forces. NetScout also announced guidance at that time that the
acquisition was expected to be accretive to earnings per share on a
non-GAAP basis for fiscal year 2009. That guidance was based on more
than $30 million of expense reductions from reduced headcount,
marketing programs and facilities in the combined company. To date,
the majority of those expense reductions have been achieved through
actions taken since the closing of the transaction and the remainder
is planned for implementation by the beginning of fiscal 2009.
NetScout expects to achieve pro forma profitability and cash flow from
combined operations sufficient to exceed the covenants and service
requirements of its outstanding debt.
"We are optimistic in our outlook for the future of the new,
larger NetScout. That outlook and our plans to achieve improved
profitability were the basis of the underwriting decisions of the
banks that refinanced the new term loan and revolving credit facility.
We were pleased that the new financing generated significant interest
and was substantially oversubscribed despite the recent turmoil in the
credit markets," said Anil Singhal, President and CEO of NetScout.
"Our integration plans are on track. In addition to the $30 million of
expense reductions we expect to achieve additional cost synergies from
the integration of manufacturing operations during FY 2009. Our
product integration road map is progressing smoothly and we are happy
that our customers are excited and receptive to the product plans we
have shared with them to date. We look forward to sharing the details
of our outlook for the balance of the 2008 and the 2009 fiscal years
in our scheduled earnings release and conference call on February 4th
at 4:30 pm."
About NetScout Systems
NetScout Systems, Inc. (NASDAQ: NTCT) has been an industry leader
for advanced network and service assurance solutions for over twenty
years. NetScout's breakthrough technology solutions provide trusted,
comprehensive real-time and historical performance intelligence,
including advanced early warnings and rapid, definitive problem
analysis. These capabilities are vital to IT operators who are
accountable for reducing the Mean Time to Resolution. The world's
largest enterprises, government agencies, and service providers depend
upon NetScout's nGenius and Sniffer (formerly Network General) brand
solutions to assure service levels to their users by reducing or
preventing disruptions and degradations. More information about
NetScout is available at http://www.netscout.com.
Safe Harbor:
Forward-looking statements in this release are made pursuant to
the safe harbor provisions of Section 21E of the Securities Exchange
Act of 1934 and other federal securities laws. Investors are cautioned
that statements in this release, which are not strictly historical
statements, including the Company's reference to prior guidance that
the FY 2009 revenue for the combined company will be twice the then
current run rate for NetScout, the Company's belief that it will
realize further expense reductions and or maintain already realized
reductions with respect to Network General, the Company's expectation
of maintaining pro forma profitability and strong cash flow, and its
outlook that combined company performance will be accretive on a
non-GAAP basis to NetScout in FY 2009, constitute forward-looking
statements which involve risks and uncertainties. Actual results could
differ materially from the forward-looking statements. Risks and
uncertainties which could cause actual results to differ include,
without limitation, risks and uncertainties associated with the
Company's acquisition of Network General, including the ability to
integrate the acquisition successfully, costs associated with the
acquisition, the ability to achieve market introduction and acceptance
of new products from the acquisition, difficulties in managing
geographically dispersed operations and in achieving expected
synergies and expense reductions, and other factors relating to
acquisitions generally, as well as the Company's relationships with
strategic partners, dependence upon broad-based acceptance of the
Company's network performance management solutions, the Company's
ability to achieve and maintain a high rate of growth, introduction
and market acceptance of new products and product enhancements, the
ability of the Company to take advantage of service provider
opportunities, competitive pricing pressures, reliance on sole source
suppliers, successful expansion and management of direct and indirect
distribution channels and dependence on proprietary technology, and
risks of slowdowns or downturns in economic conditions generally and
in the market for network performance management solutions
specifically. For a more detailed description of the risk factors
associated with the Company, please refer to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 2007 and
Quarterly Report on Form 10-Q for the quarter ended September 30, 2007
on file with the Securities and Exchange Commission. NetScout assumes
no obligation to update any forward-looking information contained in
this press release or with respect to the announcements described
herein.
(C)2008 NetScout Systems, Inc. All rights reserved. NetScout and
the NetScout logo and nGenius are registered trademarks of NetScout
Systems, Inc.
(C)2008 Network General Corporation. All Rights Reserved. Network
General and the Network General logo are registered trademarks or
trademarks of Network General Corporation and/or its affiliates in the
United States and/or other countries. Only Network General Corporation
makes Sniffer(R) brand products.
CONTACT: NetScout Systems, Inc.
Catherine Taylor, 978-614-4286
Director of Investor Relations
IR@netscout.com
SOURCE: NetScout Systems, Inc.