-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LIBaUnWFXuC8jXTK+jTdNqOdTi/hH56f/EZoY1PqFL6RD4H4Y2Cldy24pX39WC5X Q1Gi7Ird3rLK5oUIGVBpBw== 0000950131-98-001765.txt : 19980318 0000950131-98-001765.hdr.sgml : 19980318 ACCESSION NUMBER: 0000950131-98-001765 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980218 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980317 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNICATIONS INSTRUMENTS INC CENTRAL INDEX KEY: 0001053916 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 561828270 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 333-38209 FILM NUMBER: 98567489 BUSINESS ADDRESS: STREET 1: 1396 CHARLOTTE HIGHWAY STREET 2: P O BOX 520 CITY: FAIRVIEW STATE: NC ZIP: 28730 BUSINESS PHONE: 7046281711 MAIL ADDRESS: STREET 1: 1396 CHARLOTTE HIGHWAY STREET 2: P O BOX 520 CITY: FAIRVIEW STATE: NC ZIP: 28730 8-K/A 1 FORM 8-K FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 18, 1998 COMMUNICATIONS INSTRUMENTS, INC. NORTH CAROLINA 56-182-82-70 KILOVAC CORPORATION CALIFORNIA 95-228-58-08 KILOVAC INTERNATIONAL, INC. CALIFORNIA 95-322-33-47 (Exact name of registrant as (State or other (I.R.S. Employer specified in its charter) jurisdiction of Identification No.) incorporation) 1396 CHARLOTTE HIGHWAY 28730 FAIRVIEW, NORTH CAROLINA (Zip Code) (Address of principal executive offices) (704) 628-1711 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name or former address, if changed since last report) The undersigned Registrants hereby amend the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K, dated February 18, 1998, relating to events occuring on December 1, 1997, as set forth on the pages attached hereto. Item 2. ACQUISITION OR DISPOSITION OF ASSETS (b) Assets of GRD acquired in the Acquisition that constitute plant, equipment or other physical property were used in the business of manufacturing relays and the Registrants intend to continue such use after the Acquisition. Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED The audited balance sheet for GRD for year ended December 29, 1996 and the unaudited balance sheet for GRD for the nine months ended September 29, 1997, and the audited statement of operations and changes in divisional equity and statement of cash flows for GRD for the year ended December 29, 1996, and the unaudited statements of operations and changes in divisional equity and statements of cash flows for GRD for the nine months ended September 28, 1997 and September 29, 1996, together with a report of independent public accountants, are hereby filed as part of this Report on Form 8-K/A in the form attached as Exhibit A. (b) PRO FORMA FINANCIAL INFORMATION The required pro forma financial information for the transaction that is the subject of this Report on Form 8-K/A is hereby filed as part of this Report in the form attached as Exhibit B. SIGNATURES 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. COMMUNICATIONS INSTRUMENTS, INC. DATE: MARCH 17, 1997 BY: /S/ DAVID HENNING ---------------------------- NAME: DAVID HENNING TITLE: CHIEF FINANCIAL OFFICER, ASSISTANT SECRETARY KILOVAC CORPORATION DATE: MARCH 17, 1997 BY: /S/ DAVID HENNING ---------------------------- NAME: DAVID HENNING TITLE: CHIEF FINANCIAL OFFICER KILOVAC INTERNATIONAL, INC. DATE: MARCH 17, 1997 BY: /S/ DAVID HENNING ---------------------------- NAME: DAVID HENNING TITLE: CHIEF FINANCIAL OFFICER EXHIBIT A [LOGO] Coopers & Lybrand L.L.P. a professional services firm INDEPENDENT ACCOUNTANTS' REPORT The Board of Directors and Stockholders of GENICOM Corporation: We have audited the accompanying balance sheet of GENICOM Corporation -- Relays Division (the "Division") as of December 29, 1996, and the related statements of operations and changes in divisional equity and cash flows for the year then ended. These financial statements are the responsibility of GENICOM Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. 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 audit provides a reasonable basis for our opinion. As described in Note 1, GENICOM Corporation -- Relays Division is a division of GENICOM Corporation and, as such, has no separate legal status or existence. Significant transactions with GENICOM Corporation, which include the financing of the Division's operations, are described in Note 1. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Division as of December 29, 1996, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand L.L.P. McLean, VA November 18, 1997 Coopers & Lybrand L.L.P., a registered limited liability partnership, is a member firm of Coopers & Lybrand International.
GENICOM CORPORATION - RELAYS DIVISION BALANCE SHEETS (in thousands) September 28, December 29, 1997 1996 ------------- ------------ ASSETS (unaudited) Current assets: Accounts receivable, less allowance for doubtful accounts of $27and $29 $2,680 $1,748 Other receivables 15 24 Inventories 4,388 4,470 ------ ------ Total current assets 7,083 6,242 Property, plant and equipment, net 882 932 Other assets 691 691 Restricted cash 26 17 ------ ------ TOTAL ASSETS $8,682 $7,882 ====== ====== LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 463 $ 640 Accrued expenses 9 9 Capital lease obligations 56 65 Accrued employee liabilities 1,786 1,828 ------ ------ Total current liabilities 2,314 2,542 ------ ------ Capital lease obligations, noncurrent 78 110 ------ ------ Total liabilities 2,392 2,652 ------ ------ Commitments and contingencies Equity Divisional equity 6,290 5,230 ------ ------ TOTAL LIABILITIES AND EQUITY $8,682 $7,882 ====== ======
The accompanying notes are an integral part of these financial statements. 5
GENICOM CORPORATION - RELAYS DIVISION STATEMENTS OF OPERATIONS AND CHANGES IN DIVISIONAL EQUITY (In thousands) Nine Months Nine Months Twelve Months Ended Ended Ended September 28, 1997 September 29, 1996 December 29, 1996 ------------------ ------------------ ----------------- (unaudited) (unaudited) Revenues, net: Domestic sales $11,635 $ 9,861 $13,144 International sales 522 341 454 Government sales 28 44 53 ------- ------- ------- Total revenues 12,185 10,246 13,651 ------- ------- ------- Operating costs and expenses: Cost of revenues 9,644 10,380 13,076 Selling, general and administration 1,085 1,019 1,559 ------- ------- ------- Total operating costs and expenses 10,729 11,399 14,635 ------- ------- ------- Net income (loss) 1,456 (1,153) (984) Divisional equity, Beginning of period 5,230 5,413 5,413 Net transfer (to) from Parent (396) 976 801 ------- ------- ------- Divisional equity, End of period $ 6,290 $ 5,236 $ 5,230 ======= ======= =======
The accompanying notes are an integral part of these financial statements. 6 GENICOM CORPORATION - RELAYS DIVISION STATEMENTS OF CASH FLOWS (In thousands)
Nine Months Nine Months Twelve Months Ended Ended Ended September 28, September 29, December 29, 1997 1996 1996 ------------- ------------- ------------- (unaudited) (unaudited) Cash flows from operating activities: Net income (loss) $1,456 $(1,153) $ (984) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Depreciation 243 244 334 Prepaid pension costs -- (738) (984) Changes in operating assets and liabilities: Accounts and other receivables (923) (743) (305) Inventories 82 1,001 758 Accounts payable and accrued liabilities (219) 541 590 Other (9) -- -- ------ ------- ------ Net cash provided by (used in) operating activities 630 (848) (591) ------ ------- ------ Cash flows from investing activities: Additions to property, plant and equipment (9) (373) (456) ------ ------- ------ Net cash used in investing activities (9) (373) (456) ------ ------- ------ Cash flows from financing activities: Net transfers (to) from Parent (580) 1,239 1,069 Principal payments on capital leases (41) (18) (22) ------ ------- ------ Net cash (used in) provided by financing activities (621) 1,221 1,047 ------ ------- ------ Net change cash and cash equivalents 0 0 0 Cash and cash equivalents at beginning of period 0 0 0 ------ ------- ------ Cash and cash equivalents at end of period $ 0 $ 0 $ 0 ====== ======= ====== Supplemental cash flow information: Schedule of noncash investing and financing activities: Property, plant and equipment contributed to (received from) Parent $ (184) $ 263 $ 268 ====== ======= ======
The accompanying notes are an integral part of these financial statements. 7 GENICOM CORPORATION - RELAYS DIVISION NOTES TO FINANCIAL STATEMENTS Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations The GENICOM Corporation - Relays Division (the "Division" or "Relays") manufactures and sells relays used principally in signal switching applications requiring high functional reliability and product quality. The relays are sold primarily for aerospace and defense applications, automatic test equipment applications and, to a lesser extent, communication, industrial control and transportation control applications. The Division sells its products primarily in the United States. Basis of Presentation The Division has operated as a business activity of GENICOM Corporation ("GENICOM" or "Parent"). Historically, the Division has had no separate legal status as it is an integral part of the Parent's operations. The Parent has financed the Division's operations, and the Division's assets are pledged as collateral for certain indebtedness of the Parent. Fiscal Year The Division's fiscal year ends on the Sunday nearest December 31, which was the 52 week period ended December 29, 1996. Cash Management The Division's cash and cash advance activity with the Parent are included in the Parent's cash management system, whereby the Division's cash funds are combined with other Parent cash funds. Accordingly cash balances and advances due to or from the Parent are presented in the accompanying balance sheet as part of "Divisional Equity". The net cash transfers between the Division and the Parent appear in the accompanying statement of cash flows as "Net transfers (to) from Parent". Inventories Inventories are stated at the lower of cost, determined on the first-in first- out method, or market. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is calculated using the straight-line method based on estimated lives at acquisition date (generally 3 to 10 years for machinery and equipment). The cost of assets retired or otherwise disposed of and the accumulated depreciation thereon are removed from the accounts with any gain or loss realized upon sale or disposal charged or credited to operations. Significant improvements are capitalized, while repairs and maintenance costs are charged to operations. Income Taxes The Division is included in the consolidated tax return of the Parent. The Division provides for income taxes as if it filed a separate return. Income taxes are accounted 8 GENICOM CORPORATION - RELAYS DIVISION NOTES TO FINANCIAL STATEMENTS Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) for under the liability method in accordance with SFAS No. 109 "Accounting for Income Taxes". A valuation allowance reduces deferred tax assets when it is "more likely than not" that some portion or all of the deferred tax asset will not be realized. Concentrations of Credit Risk Financial instruments that potentially subject the Division to concentration of credit risk consist primarily of receivables. Credit is extended to various customers, however, ongoing credit evaluations are performed on customers and an allowance for doubtful accounts is established for specific customers when it is determined there is a significant credit risk. Generally, no collateral is required from customers nor has there been, historically, significant credit related losses. One customer, Group Technologies, accounted for 12.9 percent of revenues in 1996 and 19.0 percent of accounts receivable at year end. Revenue Recognition and Warranty Costs Revenues are recorded when products are shipped to customers. Estimated warranty costs for sales are provided for in the year of sale. Allocation of Expenses The Parent charges administrative expenses and other central operating costs, including health and retirement benefits, to its divisions on the basis of direct usage, when identifiable, with the remainder allocated based on estimates of costs on a stand-alone basis. In the opinion of management, these methods of allocation are reasonable. Such allocations total $962,000, exclusive of employee benefit plan expenses described in Note 4 "Employee Benefit Plans". Included in this allocation is $90,000 for rent expense. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Unaudited Interim Financial Statements The unaudited balance sheet as of September 28, 1997 and the unaudited statements of operations and changes in divisional equity and cash flows for the nine-month periods ended September 28, 1997 and September 29, 1996 have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 28, 1997 are not necessarily indicative of results that may be expected for the year ending December 28, 1997. 9 GENICOM CORPORATION - RELAYS DIVISION NOTES TO FINANCIAL STATEMENTS
Note 2: BALANCE SHEET INFORMATION Inventories consist of: Sept. 28, Dec. 29, (in thousands) 1997 1996 --------- -------- (unaudited) Raw materials $ 3,331 $ 3,522 Work in process 765 639 Finished goods 292 309 --------- -------- $ 4,388 $ 4,470 ========= ========
Property, plant and equipment consists of:
Dec. 29, (in thousands) 1996 -------- Buildings $ 116 Machinery and equipment 3,469 Construction in progress 149 -------- 3,734 Less: accumulated depreciation 2,802 -------- $ 932 ========
Note 3: EMPLOYEE BENEFIT PLANS Relays through GENICOM provides postretirement medical and life insurance benefits to hourly and salaried employees hired before March 22, 1993, who retire after attaining age 60 with at least 5 years of service. Under certain conditions, benefits may be extended to the retirees' spouse and dependents. Salaried employees hired after March 22, 1993 are eligible for postretirement medical and life insurance benefits only upon attainment of Social Security retirement age and completion of 10 years of service, and no spouse or dependent coverage is provided. The postretirement medical coverage is contributory, while the life insurance coverage is noncontributory. The components of net periodic postretirement benefit costs were:
Dec. 29, (in thousands) 1996 -------- Service cost-benefits attributed to service during the period $ 58 Interest cost on accumulated postretirement benefit obligation 174 Amortization of unrecognized transition obligation over 20 years 100 -------- Net periodic postretirement benefit cost $ 332 ========
10 GENICOM CORPORATION - RELAYS DIVISION NOTES TO FINANCIAL STATEMENTS The following table sets forth the combined funded status for the Division's postretirement benefit obligations as of the indicated actuarial valuation dates:
Dec. 29, (in thousands) 1996 -------- Accumulated postretirement benefit obligation $ 2,501 Unrecognized transition obligation (1,949) Unrecognized net gain 492 -------- Accrued postretirement benefit cost $ 1,044 --------
For measurement purposes, a 9.5% annual rate of increase in the per capita cost of covered health care benefits was assumed for 1996; the rate was assumed to decrease gradually to 5.5% for 2001 and remain at that level thereafter. If the health care cost trend rate was to increase 1.0%, the accumulated postretirement benefit obligation as of December 29, 1996 would have increased by 9.7%. The effect of this change on the aggregate service and interest costs for 1996 would be increases of 7.6%. The weighted-average discount rate used in determining the accumulated postretirement benefit obligation was 7.75% in 1996. Relay's collective bargaining employees are covered by a contributory defined benefit pension plan (the "Pension Plan"). The Pension Plan benefits are based on years of credited service and the participant's compensation. Eligible employees must elect to participate and contribute 3.0% of compensation between $12,000 and $25,650 per calendar year. The Division makes contributions to the Pension Plan sufficient to meet federal funding requirements. Components of periodic pension cost were:
Dec. 29, (in thousands) 1996 -------- Service cost $ 208 Interest cost on projected benefit obligation 448 Actual return on plan assets (738) Net amortization and deferral $ 294 -------- Net periodic pension expense $ 212 --------
11 GENICOM CORPORATION -- RELAYS DIVISION NOTES TO FINANCIAL STATEMENTS The following table sets forth the Pension Plan's funded status as of the indicated date:
Dec. 29, (in thousands) 1996 -------- Projected benefit obligation $ 6,379 Fair value of plan assets 6,528 -------- Fair value of plan assets in excess of projected benefit obligation 149 Unrecognized net liability existing at January 1, 1987 113 Unrecognized net losses from actuarial experience 429 -------- Prepaid pension cost $ 691 ========
The Division's assumptions used in determining the pension cost and pension liability shown above were as follows:
Dec. 29, 1996 -------- Discount rate 7.75 Rate of compensation progression 4.00 Rate of return on plan assets 9.00
Pension Plan assets consist primarily of treasury notes, government and corporate bonds, corporate equities and cash equivalent funds. Note 4: INCOME TAXES The Division recorded no tax benefit for 1996 as the recoverability of any benefit is doubtful on a hypothetical stand-alone basis. Deferred tax assets and liabilities are recorded based on temporary differences between the tax basis of assets and liabilities reported in the financial statements and for income tax purposes. The major components of the Division's deferred tax assets and liabilities are as follows:
Dec. 29, (in thousands) 1996 --------- Deferred tax assets: Net operating loss carryforwards $ 525 Inventory valuation 24 Vacation accrual 166 Bad debt reserve 23 Employee benefits 530 Other 4 Valuation allowance (1,272) --------- Total deferred tax asset $ 0 =========
12 GENICOM CORPORATION - RELAYS DIVISION NOTES TO FINANCIAL STATEMENTS The deferred tax assets for 1996 are fully reserved due to uncertainties regarding their ultimate recoverability. Note 5: COMMITMENTS AND CONTINGENCIES Environmental The Division operates at the Parent's facility in Waynesboro, Virginia. The Parent and the former owner of the Waynesboro, Virginia facility, General Electric Company, have generated and managed hazardous wastes at the facility for many years as a result of their use of certain materials in manufacturing processes. The Parent and the United States Environmental Protection Agency have agreed to a corrective action order (the "Order"), which became effective September 14, 1990. The Order requires the Parent to undertake an investigation of solid waste management units at its Waynesboro, Virginia facility and to conduct a study of any necessary corrective measures that may be required. Any expenses related to the Order will be incurred by the Parent, and the Division assumes no liability. Lease Commitments The Division has two capital leases for equipment. Payments due under these leases are $65 thousand in 1997, $56 thousand in 1998, $39 thousand in 1999 and $15 thousand in 2000. 13 EXHIBIT B COMMUNICATIONS INSTRUMENTS, INC. UNAUDITED PRO FORMA FINANCIAL STATEMENTS The following unaudited pro forma financial statements (the "Pro Forma Financial Statements") are based on the historical financial statements of Communications Instruments, Inc., a North Carolina corporation (the "Company"), included in the Company's registration statement filed on Form S-4. On December 1, 1997, the Company acquired certain assets and assumed certain liabilities of the Genicom Relays Division ("GRD") of Genicom Corporation for approximately $4.8 million in cash less a purchase price adjustment of $115,000 (the "GRD Acquisition"). The payment of the purchase price was financed through the Company's Senior Credit Facility (as defined). On September 18, 1997 the Company consummated an offering of 95,000 of $1,000 principal amount of 10% Senior Subordinated Notes (the "Notes"), due 2004, Series B, (the "Offering"). Concurrent with the Offering, (i) Code, Hennessey & Simmons III, LP, certain members of management, and certain other investors (collectively, the "New Investors") acquired approximately 87% of the capital stock of CII Technologies Inc., a Delaware corporation and the holder of all of the outstanding capital stock of the Company ("Parent"), and certain of Parent's existing stockholders (the "Existing Stockholders"), including certain members of management, retained approximately 13% of Parent's capital stock (collectively, the "Recapitalization"); (ii) the Company borrowed approximately $2.7 million pursuant to a new senior secured credit facility providing for loans of up to $25.0 million (the "Senior Credit Facility"); (iii) the Company repaid approximately $29.3 million of outstanding obligations under its prior senior credit facility (the "Old Credit Facility") including a success fee of approximately $1.5 million in connection therewith and certain other liabilities (the "Refinancing"); (iv) the Company purchased for $4.5 million the remaining 20% of the outstanding capital stock of Kilovac Corporation ("Kilovac") that the Company did not then own (the "Kilovac Purchase"); and (v) the Company made a dividend of approximately $55.0 million to Parent, which was used to consummate the Recapitalization and repay certain indebtedness of Parent. Pursuant to the Recapitalization, the New Investors, including Code, Hennessy & Simmons, and certain Existing Stockholders, including members of senior management, invested approximately $25.0 million through a cash investment of approximately $21.7 million and the retention of capital stock of Parent which, for the purposes of the Recapitalization is valued at approximately $3.3 million. 14 The Offering, the Recapitalization, the Refinancing, the Kilovac Purchase, the Dividend and the initial borrowings under the Senior Credit Facility are collectively referred to herein as the "Transactions". In July 1996, the Company acquired the assets and certain liabilities of Hartman Electrical Manufacturing, a division of Figgie International, Inc., for $12.0 million, excluding expenses (the "Hartman Acquisition"). The unaudited pro forma balance sheet as of September 30, 1997 presents the financial position of the Company as if the GRD Acquisition had taken effect on that date. The unaudited pro forma statement of operations for the year ended December 31, 1996 gives effect to the Hartman Acquisition, the Transactions and the GRD Acquisition (as defined) as if such events were consummated on January 1, 1996. The unaudited pro forma statement of operations for the nine months ended September 30, 1997 gives effect to the Transactions and the GRD Acquisition as of such events were consummated on January 1, 1997. The pro forma adjustments are based on available information and certain assumptions that the Company believes are reasonable. The pro forma financial statements do not purport to be indicative of the results that would have been obtained had such transactions described above occurred as of the assumed dates. In addition, the pro forma financial statements do not purport to project the Company's results of operations for any future date or period. The pro forma financial statements should be read in conjunction with the financial statements of the Company, Kilovac and Hartman, and the notes thereto, contained in the Company's Registration Statement filed on Form S-4, and the financial statements of GRD included in this Form 8-K/A. 15 COMMUNICATIONS INSTRUMENTS, INC. UNAUDITED PRO FORMA BALANCE SHEET SEPTEMBER 30, 1997 (Dollars in Thousands)
Pro Forma Historical GRD (1) As Adjusted ---------- ------- -- ----------- ASSETS Current Assets: Cash $ 453 $ -- $ 453 Accounts receivable, net 11,600 -- 11,600 Inventories 15,573 3,755 (2) 19,328 Deferred income taxes 1,760 -- 1,760 Other current assets 752 2 754 -------- ------ -------- Total current assets 30,138 3,757 33,895 Property, plant and equipment, net 14,958 1,850 16,808 Other assets: Investments 85 -- 85 Goodwill 14,483 -- 14,483 Environmental receivable and restricted cash 1,646 -- 1,646 Intangible and other assets 7,170 24 7,194 -------- ------ -------- Total $ 68,480 $5,631 $ 74,111 ======== ====== ======== LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current Liabilities: Accounts payable $ 4,769 $ -- $ 4,769 Accrued interest 345 -- 345 Other accrued expenses 6,293 834 7,127 -------- ------ -------- Total current liabilities 11,407 834 12,241 Long term debt 96,200 4,683 (3) 100,883 Deferred income taxes 1,410 1,410 Lease obligation 114 114 Note payable to stockholders 694 -- 694 Other long term liabilities 2,714 -- 2,714 -------- ------ -------- Total Liabilities 112,425 5,631 118,056 Stockholders' deficit Common stock, $.01 par value, 1,000 shares authorized, -- -- -- 1,000 shares issued and outstanding Additional paid in capital 12,317 -- 12,317 Accumulated deficit (56,224) -- (56,224) Currency translation loss (38) -- (38) -------- ------ -------- Total stockholders' deficit (43,945) -- (43,945) -------- ------ -------- Total $ 68,480 $5,631 $ 74,111 ======== ====== ========
See notes to pro forma balance sheet (unaudited) 16 Notes to Pro Forma Balance Sheet (Unaudited) (1) The Company has accounted for the GRD Acquisition as a purchase applying the provisions of Accounting Principles Board Opinion No. 16. The purchase price has been allocated to the acquired assets and assumed liabilities based upon their relative fair values at closing. The following summarizes the purchase price allocation of the GRD Acquisition as of the date of the consummation of the acquisition (December 1, 1997): Current assets $ 3,757 Property & equipment 1,850 Intangibles & other assets 24 Liabilities assumed (948) -------- Purchase Price $ 4,683 ======== Such allocations are subject to final determination based on valuations and other studies not yet completed. Management believes there will be no material changes to the allocation of the purchase price. (2) Includes an adjustment ($63) to increase inventory to estimated fair value. (3) Reflects the increase in bank debt incurred to finance the Genicom Acquisition. 17 COMMUNICATIONS INSTRUMENTS, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS)
ADJUSTMENTS FOR ADJUSTMENTS THE ADJUSTMENTS FOR FOR THE RECAPITALIZATION THE HARTMAN PRO KILOVAC AND THE COMPANY HARTMAN ACQUISITION (2) FORMA PURCHASE (8) INITIAL OFFERING PRO FORMA (15) ------- ------- --------------- ------- ------------ ---------------- --------- Net sales............... $66,336 $10,825 $ -- $77,161 $ -- $ -- $77,161 Cost of sales........... 46,779(1) 7,942 141 (3) 54,862 20 (9) -- 54,882 ------- ------- ----- ------- ----- ------- ------- Gross profit............ 19,557 2,883 (141) 22,299 (20) -- 22,279 Selling expenses........ 4,903 156 -- 5,059 -- -- 5,059 General and administrative expenses............... 5,464 578 (6)(4) 6,036 4 (10) 350 (13) 6,390 Research and development expenses............... 1,011 -- -- 1,011 -- -- 1,011 Amortization of goodwill and other intangible assets................. 543 -- 57 (5) 600 148 (11) -- 748 ------- ------- ----- ------- ----- ------- ------- Income (loss) from operations............. 7,636 2,149 (192) 9,593 (172) (350) 9,071 Interest expense, net... 5,055 791 (98)(6) 5,748 450 (12) 6,609 (14) 12,807 Other (income) expense, net.................... (201) 15 -- (186) -- -- (186) ------- ------- ----- ------- ----- ------- ------- Income (loss) before income taxes and minority interest...... 2,782 1,343 (94) 4,031 (622) (6,959) (3,550) Provision for (benefit from) income taxes (7). 1,120 536 (38) 1,618 (200) (2,784) (1,366) Income applicable to minority interest...... 33 -- -- 33 (33) -- -- ------- ------- ----- ------- ----- ------- ------- Net income (loss)....... $ 1,629 $ 807 $ (56) $ 2,380 $(389) $(4,175) $(2,184) ======= ======= ===== ======= ===== ======= =======
Adjustments for Pro Forma the GRD As GRD Acquisition (16) Adjusted (20) ------- --------------- ------------- Net sales............... $13,651 $ -- $90,812 Cost of sales........... 13,076 (404)(17) 67,554 ------- ----------- ------- Gross profit............ 575 404 23,258 Selling expenses........ 758 -- 5,817 General and administrative expenses............... 801 (163)(18) 7,028 Research and development expenses............... -- -- 1,011 Amortization of goodwill and other intangible assets................. -- -- 748 ------- ----------- ------- Income (loss) from operations............. (984) 567 8,654 Interest expense, net... -- 395(19) 13,202 Other (income) expense, net.................... -- -- (186) ------- ----------- ------- Income (loss) before income taxes and minority interest...... (984) 172 (4,362) Provision for (benefit from) income taxes (7). -- (325) (1,691) Income applicable to minority interest...... -- -- -- ------- ----------- ------- Net income (loss)....... ($984) $497 $(2,671) ====== ==== =======
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (1) The Company's historical cost of sales reflects the write-off of $903,000 related to the purchase accounting adjustment for the increase of inventories to estimated fair value in connection with the Hartman Acquisition. As a result of the sale of the inventories purchased in the Hartman Acquisition, the write-up of $903,000, associated with the acquired inventory was charged to cost of sales. (2) The Company has accounted for the Hartman Acquisition as a purchase, applying the provisions of Accounting Principles Board Opinion No. 16. The purchase price has been allocated to the acquired assets and assumed liabilities based upon their estimated relative fair values as of the closing of the Hartman Acquisition. (3) Adjustment reflects (i) increased depreciation expenses corresponding to a higher appraised value of certain equipment acquired in the Hartman Acquisition, of which $103,000 is attributable to the capitalization of tooling, and (ii) reclassification of building depreciation to rent expense since the Company is leasing Hartman's facility. The lease of the Hartman facility is a 10 year lease, terminable at the Company's option. The first 5 years have an average annual rent of approximately $85,000 and years 6-10 will have an annual rent of approximately $159,000. For pro forma purposes, it was assumed the lease would end in five years because management expects to relocate locally within the next five years. (4) Adjustment reflects reclassification of $6,000 of depreciation expense to cost of sales. 18 COMMUNICATIONS INSTRUMENTS, INC. NOTES TO UNAUDITED PRO FORMA--(CONTINUED) STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (5) Adjustment reflects the amortization of $57,000 of goodwill recorded in connection with the Hartman Acquisition. Goodwill is amortized over an estimated useful life of 30 years. (6) Adjustment reflects elimination of $791,000 of allocated debt service offset by additional interest expense associated with approximately $13.0 million of bank debt incurred to finance the Hartman Acquisition. The interest rate assumed on the $13.0 million of senior debt is 10.25% on the term debt ($9.0 million) and 9.75% on the revolving debt ($4.0 million). An increase in these rates of 1/8% would increase interest expense by $16,000 for the year ended December 31, 1996 and a decrease of 1/8% would decrease interest expense by $16,000 for the year ended December 31, 1996. All debt incurred for the Hartman Acquisition was paid with a portion of the proceeds from the Offering and the Recapitalization. (7) Adjustment assumes an effective tax rate of 40% for Hartman, 32.1% for Kilovac, 40% for the Recapitalization and Offering and 40% for the GRD Acquisition. The effective tax rate was computed based upon statutory rates adjusted for certain known permanent differences in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes." (8) Adjustments give effect to the Kilovac Purchase as adjusted to reflect the corresponding tax benefit and as if such transaction had occurred on January 1, 1996. The Kilovac purchase was financed through a portion of the proceeds from the Offering and the Recapitalization. Purchase price allocation for the additional 20% of Kilovac: Inventory....................................................... $ 47 Fixed Assets.................................................... 169 Intangible Assets............................................... 458 Minority Interest in Net Income of Subsidiary................... 123 Goodwill........................................................ 3,974 Liabilities assumed............................................. (271) ------ $4,500 ======
(9) Adjustment reflects $20,000 of depreciation expense related to the assets acquired in the Kilovac Purchase. (10) Adjustment reflects $4,000 of depreciation expense related to the assets acquired in the Kilovac Purchase. (11) Adjustment reflects $148,000 of amortization of goodwill and other intangible assets recorded in connection with the Kilovac Purchase. Goodwill is amortized over an estimated useful life of 30 years. (12) Adjustment reflects additional interest expense associated with the use of $4.5 million of the proceeds from the issuance of the Notes to effect the Kilovac Purchase at a 10% annual interest rate. (13) Adjustment reflects the new management agreement fees of $500,000 offset by the removal of old management fees of $150,000. (14) Adjustment reflects elimination of $3.4 million of the interest expense associated with the Old Credit Facility offset by (i) additional interest expense associated with the issuance of the Notes of approximately $90.5 million (net of $4.5 million used to effect the Kilovac Purchase, see Note 12) at a 10% annual interest rate and (ii) additional interest expense associated with borrowings against the New Credit Facility of approximately $2.7 million at an assumed interest rate of 9.75%. (15) Adjustments give effect to the Kilovac Purchase and the remaining Transactions as if such events occurred on January 1, 1996. (16) The Company has accounted for the GRD Acquisition as a purchase, applying the provisions of Accounting Principles Board Opinion No. 16. The purchase price has been allocated to the acquired assets and assumed liabilities based upon their estimated relative fair values as of the closing of the GRD Acquisition. (17) Adjustment reflects a lower depreciation expense based on the fair value of the assets purchased ($70) and the removal of corporate service charges ($612) offset by the estimated incremental costs the Company would incur to replace these services ($278). (18) Adjustment reflects the removal of corporate service charges ($350) offset by the estimated incremental costs the Company would incur to replace these services ($187). (19) Adjustment reflects the additional interest expense associated with approximately $4.7 million of bank debt incurred to finance the GRD Acquisition. Interest rates assumed with respect to such bank debt were 8.25% with respect to approximately $4 million of such debt and 9.5% with respect to approximately $700,000 of such debt. (20) Adjustments give effect to the GRD Acquisition as if such event had occurred on January 1, 1996. 19 COMMUNICATIONS INSTRUMENTS, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS For the Nine Months Ended September 30, 1997 (Dollars in Thousands)
Pro Forma Pro Forma Adjustments Adjustments for the for the Recapitalization Kilovac and the Initial Company Purchase (1) Offering Pro Forma (9) ------- -------- -------- --------- Net sales............................................ $67,454 $ -- $ -- $67,454 Cost of sales........................................ 44,704 14(2) -- 44,718 ------- ----- ------- ------- Gross profit......................................... 22,750 (14) -- 22,736 Selling Expense...................................... 4,506 -- -- 4,506 General and administrative expenses.................. 5,750 3 (3) 268 (6) 6,021 Research and development expenses.................... 878 -- -- 878 Amortization of goodwill and other intangible assets. 463 106 (4) -- 569 ------- ----- ------- ------- Income (loss) from operations........................ 11,153 (123) (268) 10,762 Interest expense, net................................ 3,859 338 (5) 4,579 (7) 8,776 Cancellation fees.................................... 800 -- -- 800 Other (income) expense, net.......................... 49 -- -- 49 ------- ----- ------- ------- Income (loss) before income taxes, minority interest and extraordinary item............................ 6,445 (461) (4,847) 1,137 Provision for (benefit from) income taxes (8)........ 2,570 (149) (1,939) 482 Income applicable to minority interest............... 55 (55) -- -- ------- ----- ------- ------- Net income (loss).................................... $ 3,820 $(257) $(2,908) $ 655 ======= ===== ======= =======
Adjustments for the Pro Forma GRD At GRD Acquisition (10) Adjusted (14) -------- ----------- -------- Net sales............................................ $12,185 $ -- $79,639 Cost of sales........................................ 9,644 (296) (11) 54,066 ------- ----- ------- Gross profit......................................... 2,541 296 25,573 Selling Expense...................................... 452 -- 4,958 General and administrative expenses.................. 633 (122) (12) 6,532 Research and development expenses.................... -- -- 878 Amortization of goodwill and other intangible assets. -- -- 569 ------- ----- ------- Income (loss) from operations........................ 1,456 418 12,636 Interest expense, net................................ -- 296 (13) 9,072 Cancellation fees.................................... -- -- 800 Other (income) expense, net.......................... -- -- 49 ------- ----- ------- Income (loss) before income taxes, minority interest and extraordinary item............................ 1,456 122 2,715 Provision for (benefit from) income taxes (8)........ -- 631 1,113 Income applicable to minority interest............... -- -- -- ------- ----- ------- Net income (loss).................................... $ 1,456 $(509) $ 1,602 ======= ===== =======
20 COMMUNICATIONS INSTRUMENTS, INC. NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (1) Adjustments give effect to the Kilovac Purchase as if such event occurred on January 1, 1997. The Kilovac purchase was financed through a portion of the proceeds from the Offering and the Recapitalization. Purchase price allocation for the additional 20% of Kilovac: Inventory....................................................... $ 47 Fixed Assets.................................................... 169 Intangible Assets............................................... 458 Minority Interest in Net Income of Subsidiary................... 123 Goodwill........................................................ 3,974 Liabilities assumed............................................. (271) ------ $4,500 ======
(2) Adjustment reflects $14,000 of depreciation expense related to the assets acquired in the Kilovac Purchase. (3) Adjustment reflects $3,000 of depreciation expense related to the assets acquired in the Kilovac Purchase. (4) Adjustment reflects $106,000 of amortization of goodwill and other intangible assets recorded in connection with the Kilovac Purchase. Goodwill is amortized over 30 years. (5) Adjustment reflects additional interest expense associated with the use of $4.5 million of the proceeds from the issuance of the Notes to effect the Kilovac Purchase at a 10% annual interest rate. (6) Adjustment reflects the nine months of the new management fees of $375,000 offset by the removal of old management fees of $107,000. (7) Adjustment reflects elimination of $2.5 million of the interest expense associated with the Old Credit Facility offset by (i) additional interest expense associated with the issuance of the Notes of approximately $90.5 million (net of $4.5 million used to effect the Kilovac Purchase, see Note 5) at a 10% annual interest rate and (ii) additional interest expense associated with borrowings against the New Credit Facility of approximately $2.7 million at an assumed interest rate of 9.75%. (8) Assumes an effective tax rate of 32.3% for Kilovac, 40.0% for the Recapitalization and Offering and 40% for the GRD Acquisition. The effective tax rate was computed based upon statutory rates adjusted for certain known permanent differences in accordance with Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes." (9) Adjustments give effect to the Kilovac Purchase and the remaining Transactions as if such events occurred on January 1, 1997. (10) The Company has accounted for the GRD Acquisition as a purchase, applying the provisions of Accounting Principles Board Opinion No. 16. The purchase price has been allocated to the acquired assets and assumed liabilities based upon their estimated relative fair values as of the closing of the GRD Acquisition. (11) Adjustment reflects a lower depreciation expense based on the fair value of the assets purchased ($45) and the reduction of corporate service charges ($459) offset by the estimated incremental costs the Company would incur to replace these services ($208). (12) Adjustment reflects the removal of corporate service charges ($263) offset by the estimated incremental costs the Company would incur to replace these services ($141). (13) Adjustment reflects the additional interest expense associated with approximately $4.7 million of bank debt incurred to finance the GRD Acquisition. Interest rates assumed with respect to such bank debt were 8.25% with respect to approximately $4 million of such debt and 9.5% with respect to approximately $700,000 of such debt. (14) Adjustments give effect to the GRD Acquisition as if such event had occurred on January 1, 1997. 21 -----END PRIVACY-ENHANCED MESSAGE-----