-----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, TT22s15FylBVH3VNPwgxyF6ZmkcmXcF9ym6vWGTAXXzlvl9Ybge7GcEgwDMZDAUn YG34iv6cdQV33S9xkKgVIA== 0000725282-96-000030.txt : 19960925 0000725282-96-000030.hdr.sgml : 19960925 ACCESSION NUMBER: 0000725282-96-000030 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960531 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 19960924 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXECUTONE INFORMATION SYSTEMS INC CENTRAL INDEX KEY: 0000725282 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TELEPHONE INTERCONNECT SYSTEMS [7385] IRS NUMBER: 860449210 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-11551 FILM NUMBER: 96633806 BUSINESS ADDRESS: STREET 1: 478 WHEELERS FARMS RD CITY: MILFORD STATE: CT ZIP: 06460 BUSINESS PHONE: 2038767600 MAIL ADDRESS: STREET 1: 478 WHEELERS FARMS RD CITY: MILFORD STATE: CT ZIP: 06460-1847 FORMER COMPANY: FORMER CONFORMED NAME: VODAVI TECHNOLOGY CORP DATE OF NAME CHANGE: 19880802 8-K/A 1 EXECUTONE INFORMATION SYSTEMS, INC. - 8-K/AMENDED SECURITIES AND EXCHANGE COMMISSION Washington DC 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): May 31, 1996 EXECUTONE INFORMATION SYSTEMS, INC. (Exact name of registrant as specified in its charter) Virginia 0-11551 86-0449210 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 478 Wheelers Farms Road, Milford, Connecticut 06460 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 876-7600 Item 2. Disposition of Assets. On May 31, 1996, the Company sold substantially all of the Direct Sales and Services Group, including its long-distance reseller business and National Service Center (the DSO Group) to Clarity Telecom Holdings, Inc. (Clarity), an acquisition company led by Bain Capital, Inc. The purchase price consisted of $61.5 million in cash, a $5.9 million note and warrants to purchase 8% of the common stock of the new company issued as of the closing, for $1.1 million, exercisable for three years. The attached pro forma condensed consolidated financial statements are based upon a purchase price valuation of $64.7 million, which includes the cash consideration and the fair value of the note and warrants. In addition to the transaction with Clarity, the pro forma condensed financial statements also reflect the disposition of the Company's Pittsburgh direct sales office and the impact of dispositions that the Company believes are probable of occurring, including the inmate calling business and the videoconferencing division, which are being sold separately to different purchasers. None of such businesses constituted a material portion of the Company's assets, revenues or income. Forward-Looking Statements In connection with initial announcement of the reported sale, the Company's management projected pro forma revenues in 1995 and pro forma pretax income, assuming certain expense eliminations, which was not intended to meet the requirements of Regulation S-X but was intended to provide a forward-looking estimate. The pro forma pretax income for 1995 included in this filing can be reconciled to the previously provided forward-looking estimate as follows (in millions of dollars): 1995 Pretax loss per pro forma $(21.1) Add: Estimated interest income on investment of sale proceeds 2.2 Add: Provision for restructuring 25.1 6.2 Forward-looking adjustments not included in pro forma: Acquisition costs 1.0 Goodwill amortization and other 0.8 1995 forward-looking pretax estimate $8.0
2 Item 7. Financial Statements and Exhibits. Page (b) Pro forma condensed financial information 4 Pro forma consolidated balance sheet at March 31, 1996 5 Pro forma consolidated statement of operations for the three-month period ended March 31, 1996 6 Pro forma consolidated statement of operations for the year ended December 31, 1995 7 (c) Exhibits 9 (2) Asset Purchase Agreement by and among Tone Holdings, Inc. and Tone Acquisition Corporation, Executone Network Services, Inc. and Executone Information Systems, Inc. dated as of April 9, 1996 and Amendment No. 1 to Asset Purchase Agreement dated as of May 31, 1996, by and among Clarity Telecom Holdings, Inc. (formerly known as Tone Holdings, Inc.), Clarity Telecom, Inc. (formerly known as Tone Acquisition Corporation), Executone Network Services, Inc. and Executone Information Systems, Inc. Incorporated by reference to the Company's Annual Report on Form 10-K/A filed August 29, 1996. 3 Executone Information Systems, Inc. Unaudited Pro Forma Consolidated Financial Information The historical consolidated financial statements of Executone Information Systems, Inc. are as originally reported in its reports on Forms 10-K and 10-Q. The balance sheet and statements of operations of the telephony businesses sold to Clarity are based upon the historical financial results of the Direct Sales and Services Group, including the long-distance reseller business, for the respective periods. In addition, the Company previously announced that is was negotiating an agreement to sell its videoconferencing division. Although terms have not yet been finalized, the pro forma condensed statements assume that the disposition will result in a loss of approximately $2.5 million. The pro forma condensed statements also reflect the sale of the Pittsburgh direct sales office at its approximate book value and the disposal of the Company's inmate calling business which is expected to result in a loss of approximately $1 million. The pro forma condensed consolidated balance sheet as of March 31, 1996 has been prepared to reflect the use of a portion of the proceeds from these transactions to repay the Company's bank borrowings, assuming the transaction had taken place at that date. The pro forma condensed consolidated statements of operations for the year ended December 31, 1995 and for the three- month period ended March 31, 1996 have been prepared assuming these transactions occurred January 1, 1995 and January 1, 1996, respectively. The condensed statements of operations also reflect the impact of reductions in force which have already been made related to these dispositions. The pro forma information does not purport to represent the Company's actual results of operations if the transactions described above would have occurred at the beginning of the respective periods. In addition, the information may not be indicative of future results. 4 Executone Information Systems, Inc. and Subsidiaries Pro Forma Condensed Consolidated Balance Sheet March 31, 1996 Unaudited
(000s) Businesses Pro Forma EISI EISI Sold Adjustments Pro Forma ASSETS Current Assets: Cash and cash equivalents $ 6,280 $ 0 $39,288 (a,b) $45,568 Accounts receivable, net 43,718 (18,303) (1,000) (a) 24,415 Inventories 36,380 (16,625) (4,000) (a) 15,755 Prepaid expense and other current assets 4,587 (2,524) 0 2,063 Total Current Assets 90,965 (37,452) 34,288 87,801 Property & Equipment, Net 18,781 (7,650) (2,000) (a) 9,131 Intangibles, Net 19,990 0 0 19,990 Deferred Taxes 31,376 0 (14,937) (a,b) 16,439 Other Assets 3,199 (981) 3,323 (a,b) 5,541 Total Assets $164,311 $(46,083) $20,674 $138,902 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $30,869 $ (7,201) $ 0 $23,668 Deferred revenue and customer deposits 20,409 (19,564) 0 845 Other current liabilities 18,714 (5,684) 1,728 (a,b) 14,758 Total Current Liabilities 69,992 (32,449) 1,728 39,271 Long-Term Debt 28,879 (387) (15,312) (b) 13,180 Long-Term Deferred Revenue 2,780 (2,494) 0 286 Total Liabilities 101,651 (35,330) (13,584) 52,737 Stockholders Equity: Common stock 519 0 0 519 Preferred stock 7,300 0 0 7,300 Additional paid-in capital 79,716 0 100 (a) 79,816 Retained earnings (deficit)(24,875) (10,753) 34,158 (a,b) (1,470) Total Stockholders' Equity 62,660 (10,753) 34,258 86,165 Total Liabilities and Stockholders' Equity $164,311 $(46,083) $ 20,674 $138,902
(a)To reflect total proceeds of $65.5 million for the sale of all of the Company's direct sales and services offices, the videoconferencing division and the inmate calling business, estimated gain, net of audit, legal and other expenses directly related to the sales, and the impact of the utilization of net operating losses on the deferred tax asset. (b) To reflect the repayment of a portion of the Company's debt, primarily the revolving credit facility, using the proceeds from the sale. Also, writeoff of related deferred debt issue costs. 5 Executone Information Systems, Inc. and Subsidiaries Pro Forma Condensed Consolidated Statement of Operations Three-Month Period Ended March 31, 1996 Unaudited
(000s) Businesses Pro Forma EISI EISI Sold Adjustments Pro Forma Revenues $66,966 $(47,630) $13,568 (a) $32,904 Cost of Revenues 40,486 (31,582) 12,984 (a) 21,888 Gross Profit 26,480 (16,048) 584 11,016 Operating Expenses: Product development and engineering 3,764 0 0 3,764 Selling, general and administrative 26,274 (16,635) (293) (c) 9,346 Total Operating Expenses 30,038 (16,635) (293) 13,110 Operating Income/(Loss) (3,558) 587 877 (2,094) Interest and Other Expenses, Net 592 1 (340) (b) 253 Income/(Loss) Before Income Taxes (4,150) 586 1,217 (2,347) Provision/(Benefit) for Income Taxes (1,660) 234 487 (d) (939) Net Income/(Loss) $(2,490) $ 352 $ 730 $(1,408) Earnings/(Loss) Per Share $ (0.05) $ (0.03) Weighted Average Shares Outstanding 51,853 52,754
(a)To addback revenue and cost impact of sales from Executone to the DSOs which originally were eliminated in consolidation. (b)To reflect the reduction of interest expense due to debt repayment using the sale proceeds. Estimated interest income of $550 generated by the investment of remaining proceeds is not reflected in the pro forma statement. (c) Impact of reduction in force associated with business dispositions. (d) To reflect the tax impact of pro forma adjustments at a 40% effective rate. 6 Executone Information Systems, Inc. and Subsidiaries Pro Forma Condensed Consolidated Statement of Operations Year ended December 31, 1995 Unaudited
(000s) Businesses Pro Forma EISI EISI Sold Adjustments Pro Forma (e) Revenues $296,393 $(202,048) $60,475 (a) $154,820 Cost of Revenues 173,536 (129,678) 59,287 (a) 103,145 Gross Profit 122,857 (72,370) 1,188 51,675 Operating Expenses: Product development and engineering 14,703 0 0 14,703 Selling, general and administrtaive 100,520 (67,080) (1,173) (c) 32,267 Provision for restructuring and unusual items 44,042 (18,907) 0 25,135 Total Operating Expenses 159,265 (85,987) (1,173) 72,105 Operating Income/(Loss) (36,408) 13,617 2,361 (20,430) Interest and Other Expenses, Net 2,813 (236) (1,861) (b) 716 Income/(Loss) Before Income Taxes (39,221) 13,853 4,222 (21,146) Provision/(Benefit) for Income Taxes (2,287) (1,236) 1,689 (d) (1,834) Net Income/(Loss) $(36,934) $ 15,089 $ 2,533 $(19,312) Earnings/(Loss) Per Share $ (0.79) $ ( 0.39) Weighted Average Shares Outstanding 46,919 49,148
(a)To addback revenue and cost impact of sales from Executone to the DSOs which originally were eliminated in consolidation. (b)To reflect the reduction of interest expense due to debt repayment using the sale proceeds. Estimated interest income of $2,200 generated by the investment of remaining proceeds is not reflected in the pro forma statement. (c) Impact of reduction in force associated with business dispositions. (d) To reflect the tax impact of pro forma adjustments at a 40% effective rate. (e) Refer to "Forward-Looking Statements" in Item 2. 7 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. EXECUTONE INFORMATION SYSTEMS, INC. By:__________________________________ Anthony R. Guarascio Vice President, Finance and Chief Financial Officer Date: September 24, 1996 8 EXHIBIT INDEX Exhibit Number Document 2 Asset Purchase Agreement by and among Tone Holdings, Inc. and Tone Acquisition Corporation, Executone Network Services, Inc. and Executone Information Systems, Inc. dated as of April 9, 1996 and Amendment No. 1 to Asset Purchase Agreement dated as of May 31, 1996, by and among Clarity Telecom Holdings, Inc. (formerly known as Tone Holdings, Inc.), Clarity Telecom, Inc. (formerly known as Tone Acquisition Corporation), Executone Network Services, Inc. and Executone Information Systems, Inc. Incorporated by reference to the Registrant's Annual Report on Form 10-K/A for the year ended December 31, 1995, filed August 29, 1996. 9 -----END PRIVACY-ENHANCED MESSAGE-----