<PAGE>
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): SEPTEMBER 4, 1998 (JUNE 19,
1998)
COMMUNICATIONS INSTRUMENTS, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-182-82-70
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1396 Charlotte Highway, Fairview, NC 28730
(Address of principal executive offices) (Zip Code)
(704) 628-1711
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name or former address, if changed since last report)
<PAGE>
The undersigned Registrant hereby amends the following item and exhibit of
its Current Report on Form 8-K, dated July 6, 1998, relating to events occurring
on June 19, 1998, as set forth on the pages attached hereto.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(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.
<PAGE>
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: SEPTEMBER 4, 1998
BY:
-------------------------------
NAME: DAVID HENNING
TITLE: CHIEF FINANCIAL OFFICER,
ASSITANT SECRETARY
<PAGE>
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 Form 10-K and the Company's quarterly report filed on Form 10-Q.
On June 19, 1998, the Company acquired all of the outstanding capital stock of
Corcom, Inc., an Illinois corporation ("Corcom") pursuant to the merger of RF
Acquisition Corp., a newly formed wholly-owned subsidiary of the Company, with
and into Corcom (the "Merger"). The Company paid $13.00 per share to the
shareholders of Corcom in exchange for the shares received in the Merger
(approximately $51.1 million in the aggregate). The Company used a portion of
the proceeds of $48.1 million of borrowings under a $60.0 million credit
facility entered into with the Bank of America National Trust and Savings
Association on June 19, 1998 (the "Senior Credit Facility"), additional paid in
capital of $5.0 million contributed by the Parent (as defined), and $7.4 million
in cash from Corcom to finance the Merger, repay $7.4 million of debt associated
with the Old Senior Credit Facility (as defined) and fund the related merger
costs. Corcom is an electromagnetic interference filter manufacturer located in
Libertyville, Illinois.
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 subsequent purchase price adjustment
of $115,000 (the "GRD Acquisition"). The payment of the purchase price was
funded through the Company's Old 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, Hennessy &
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 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 the 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 which was then retired on June 19, 1998 (the "Old
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 (the "Dividend"), which was used to consummate the
Recapitalization and repay certain indebtedness of Parent. Pursuant to the
Recapitalization, the New Investors, including Code, Hennessy and 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.
<PAGE>
The Offering, the Recapitalization, the Refinancing, the Kilovac Purchase, the
Dividend and the initial borrowings under the Old Senior Credit Facility are
collectively referred to herein as the "Transactions".
The unaudited pro forma statement of operations for the year ended December 31,
1997 gives effect to the Transactions, the GRD Acquisition and the Corcom Merger
as if such events were consummated on January 1, 1997. The unaudited pro forma
statement of operations for the six months ended June 30, 1998 gives effect to
the Corcom Merger as if such event was consummated on January 1, 1998. 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, 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 and Kilovac , and the notes thereto,
contained in the Company's Registration Statement filed on Form S-4, the
financial statements of GRD contained in the Company's Form 8-K/A filed on March
17, 1998, and the financial statements of Corcom contained in the Company's Form
8-K filed on July 6, 1998.
Statements made by the Company which are not historical facts are forward
looking statements that involve risks and uncertainties. Actual results could
differ materially from those expressed or implied in forward looking statements.
All such forward looking statements are subject to the safe harbor created by
the Private Securities Litigation Reform Act of 1995. Important factors that
could cause future financial performance to differ materially from past results
and from those expressed or implied in this document, include, without
limitation, the risks of acquisition of businesses (including limited knowledge
of the businesses acquired and potential misrepresentations from sellers),
changes in business strategy or development plans, dependence on independent
sales representatives and distributors, environmental regulations, availability
of financing, competition, reliance on key management personnel, ability to
manage growth, loss of customers and a variety of other factors.
<PAGE>
COMMUNICATIONS INSTRUMENTS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Twelve Months Ended December 31, 1997
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Adjustments
Adjustments for the
for the Recapitalization
Kilovac and the Initial
Company Purchase (1) Offering Pro Forma (9) GRD
------- ----------- ---------------- --------- -------
<S> <C> <C> <C> <C> <C>
Net sales $89,436 $ -- $ -- $89,436 $14,344
Cost of sales 59,601 14 (2) -- 59,615 11,458
------- ------ -------- ------- -------
Gross profit 29,835 (14) -- 29,821 2,886
Selling expense 6,077 -- -- 6,077 562
General and administrative expenses 7,432 3 (3) 268 (6) 7,703 797
Research and development expenses 1,090 -- -- 1,090 --
Amortization of goodwill and other intangible
assets 648 106 (4) -- 754 --
Special acquisition expenses 260 -- -- 260 --
------- ------ -------- ------- -------
Income (loss) from operations 14,328 (123) (268) 13,937 1,527
Interest expense, net 6,573 338 (5) 4,579 (7) 11,490 --
Cancellation fees 800 -- -- 800 --
Other expense, net 17 -- -- 17 --
------- ------ -------- ------- -------
Income (loss) before income taxes, minority
interest, and extraordinary item 6,938 (461) (4,847) 1,630 1,527
Provision for (benefit from) income taxes (8) 2,836 (149) (1,939) 748 --
Income applicable to minority interest 55 (55) -- -- --
------- ------ -------- ------- -------
Net income (loss) before extraordinary item $ 4,047 $ (257) $ (2,908) $ 882 $ 1,527
======= ====== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Adjustments
Adjustments for the Pro Forma
for the GRD Corcom as
Acquisition (10) Pro Forma (14) Corcom Merger (15) Adjusted (20)
----------- --------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 103,780 $ 36,788 $ -- $ 140,568
Cost of sales (362)(11) 70,711 23,434 (46)(16) 94,099
------ --------- -------- -------- ---------
Gross profit 362 33,069 13,354 46 46,469
Selling expense -- 6,639 3,637 -- 10,276
General and administrative expenses (149)(12) 8,351 4,707 (9)(17) 13,049
Research and development expenses -- 1,090 293 -- 1,383
Amortization of goodwill and other intangible
assets -- 754 -- 1,885 (18) 2,639
Special acquisition expenses -- 260 -- -- 260
------ --------- -------- -------- ---------
Income (loss) from operations 511 15,975 4,717 (1,830) 18,862
Interest expense, net 362 (13) 11,852 (296) 3,645 (19) 15,201
Cancellation fees -- 800 -- -- 800
Other expense, net -- 17 -- -- 17
------ --------- -------- -------- ---------
Income (loss) before income taxes, minority
Interest, and extraordinary item 149 3,306 5,013 (5,475) 2,844
Provision for (benefit from) income taxes (8) 670 1,418 2,010 (1,890) 1,538
Income applicable to minority interest -- -- -- -- --
------ --------- -------- -------- ---------
Net income (loss) before extraordinary item $ (521) $ 1,888 $ 3,003 $ (3,585) $ 1,306
====== ========= ======== ======== =========
</TABLE>
<PAGE>
COMMUNICATIONS INSTRUMENTS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 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.
<TABLE>
<CAPTION>
Purchase price allocation for the additional 20% of Kilovac (in thousands):
<S> <C>
Inventory $ 47
Fixed assets 169
Intangible assets 458
Minority interest in net income of subsidiary 123
Goodwill 3,974
Liabilities assumed (271)
--------
Total purchase price $ 4,500
========
</TABLE>
(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 due to the long life cycles of the
product.
(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 effect of the new management fees of $375,000
offset by the 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 Purchase, 40.0% for the
Recapitalization and Offering, 40.0% for the GRD Acquisition and 34.5% for
the Corcom Merger. 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".
<PAGE>
(9) Adjustments give effect to the Kilovac Purchase, the Recapitalization and
the Initial Offering 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 market values as of the closing of
the GRD Acquisition.
The GRD Acquisition was financed by a draw on the Company's Old Senior
Credit Facility. The purchase price was allocated to the assets of GRD
based on their relative fair value, as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 3,757
Property, plant and equipment 1,850
Intangibles and other assets 24
Liabilities assumed (948)
----------
Total purchase price $ 4,683
==========
</TABLE>
(11) Adjustment reflects a lower depreciation expense based on the fair value of
the assets purchased ($55,000) and the reduction of corporate service
charges allocated by GRD's former parent ($561,000) offset by the estimated
incremental costs the Company would incur to replace the charges for rent,
utilities and maintenance ($254,000).
(12) Adjustment reflects the removal of corporate service charges allocated by
GRD's former parent ($321,000) offset by the estimated incremental costs
the Company would incur to replace the services of human resources, finance
and MIS support ($172,000).
(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 $4.0 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.
(15) The Company has accounted for the Corcom Merger 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 market values as of the closing of
the Corcom Merger.
The Company used a portion of the proceeds of $48.1 million of borrowings
under the Senior Credit Facility, additional paid in capital of $5.0
million contributed by the Parent, and $7.4 million in cash from Corcom to
finance the Merger, repay $7.4 million of debt associated with the Old
Senior Credit Facility and fund the related merger costs.
<PAGE>
The purchase price was allocated to the assets of Corcom based on their
relative fair value, as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 12,541
Property, plant and equipment 7,374
Intangible and other assets 35,449
Liabilities assumed (10,314)
--------
Total purchase price $ 45,050
========
</TABLE>
Such allocations of purchase price are subject to final determination based
on valuations and other studies that will be completed after the closing.
Management believes that there will be no material changes to the
allocation of the purchase price.
(16) Adjustment reflects a lower depreciation expense based on the fair value of
the assets purchased ($46,000). Does not give effect to the write-off of
$392,000 due to the purchase accounting adjustment for the increase of
inventories to estimated fair market value in connection with the Corcom
Merger.
(17) Adjustment reflects a lower depreciation expense based on the fair value of
the assets purchased ($9,000).
(18) Adjustment reflects $749,000 of amortization of goodwill and approximately
$1.1 million of amortization of other intangible assets recorded in
connection with the Corcom Merger. Goodwill is amortized over 30 years due
to the long life cycles of the products. Other intangible assets are
amortized over lives ranging from 2.5 years to 30 years.
(19) Adjustment reflects primarily the additional interest expense associated
with approximately $40.7 million of incremental bank debt incurred to
finance the Corcom Merger. The interest rate assumed with respect to such
bank debt is 8.125%. An increase in this rate of 1/8% would increase
interest expense by approximately $51,000 for the year and a decrease of
1/8% would lower interest expense by approximately $51,000 for the year.
(20) Adjustments give effect to the Corcom Merger as if such event had occurred
on January 1, 1997.
<PAGE>
COMMUNICATIONS INSTRUMENTS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Six Months June 30, 1998
<TABLE>
<CAPTION>
Pro Forma
Adjustments
for the
Corcom
Company Corcom Merger (1) Pro Forma (7)
------- -------- -------------- ------------
<S> <C> <C> <C> <C>
Net sales $53,652 $ 16,284 $ - $69,936
Cost of sales 36,217 11,032 (54)(2) 47,195
------- -------- ------- -------
Gross profit 17,435 5,252 54 22,741
Selling expense 3,571 1,741 - 5,312
General and administrative expenses 3,791 4,292 (2,049)(3) 6,034
Research and development expenses 599 183 - 782
Amortization of goodwill and other intangible assets 419 - 878(4) 1,297
------- ------- ------- -------
Income (loss) from operations 9,055 (964) 1,225 9,316
Interest expense, net 5,456 (198) 1,758(5) 7,016
Other income, net 3 - - 3
------- ------- ------- -------
Income (loss) before income taxes and extraordinary 3,602 (766) (533) 2,303
item
Provision for (benefit from) income taxes (6) 1,457 221 (414) 1,264
------- ------- ------- -------
Net income (loss) before extraordinary item $ 2,145 $ (987) $ (119) $ 1,039
======= ====== ======= =======
</TABLE>
<PAGE>
COMMUNICATIONS INSTRUMENTS, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(1) The Company has accounted for the Corcom Merger 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 market values as of the closing of
the Corcom Merger.
The Company used a portion of the proceeds of $48.1 million of borrowings
under the Senior Credit Facility, additional paid in capital of $5.0
million contributed by the Parent, and $7.4 million in cash from Corcom to
finance the Merger, repay $7.4 million of debt associated with the Old
Senior Credit Facility and fund the related merger costs.
The purchase price was allocated to the assets of Corcom based on their
relative fair value, as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Current assets $ 12,541
Property, plant and equipment 7,374
Intangible and other assets 35,449
Liabilities assumed (10,314)
--------
Total purchase price $ 45,050
========
</TABLE>
Such allocations of purchase price are subject to final determination based
on valuations and other studies that will be completed after the closing.
Management believes that there will be no material changes to the
allocation of the purchase price.
(2) Adjustment reflects a lower depreciation expense based on the fair value of
the assets purchased ($54,000). Does not give effect to the write-off of
$392,000 due to the purchase accounting adjustment for the increase of
inventories to estimated fair market value in connection with the Corcom
Merger.
(3) Adjustment reflects a lower depreciation expense based on the fair value of
the assets purchased ($9,000) and the removal of expenses associated with
the Merger (approximately $2.0 million).
(4) Adjustment reflects $349,000 of amortization of goodwill and $529,000 of
amortization of other intangible assets recorded in connection with the
Corcom Merger. Goodwill is amortized over 30 years due to the long life
cycles of the products. Other intangible assets are amortized over lives
ranging from 2.5 years to 30 years.
<PAGE>
(5) Adjustment reflects primarily the additional interest expense associated
with approximately $40.7 million of incremental bank debt incurred to
finance the Corcom Merger. The interest rate assumed with respect to such
bank debt is 8.125%. An increase in this rate of 1/8% would increase
interest expense by approximately $24,000 for the six months and a decrease
of 1/8% would lower interest expense by approximately $24,000 for the six
months.
(6) Assumes an effective tax rate of 77.7% for the Corcom Merger. 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".
(7) Adjustments give effect to the Corcom Merger as if such event had occurred
on January 1, 1997.
