<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): 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)
<PAGE>
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.
<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: 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
<PAGE>
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.
<PAGE>
<TABLE>
<CAPTION>
GENICOM CORPORATION - RELAYS DIVISION
BALANCE SHEETS
(in thousands)
September 28, December 29,
1997 1996
------------- ------------
ASSETS (unaudited)
<S> <C> <C>
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
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
GENICOM CORPORATION - RELAYS DIVISION
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Nine Months Twelve Months
Ended Ended Ended
September 28, September 29, December 29,
1997 1996 1996
------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C>
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
====== ======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
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
<PAGE>
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
<PAGE>
GENICOM CORPORATION - RELAYS DIVISION
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Note 2: BALANCE SHEET INFORMATION
Inventories consist of:
Sept. 28, Dec. 29,
(in thousands) 1997 1996
--------- --------
<S> <C> <C>
(unaudited)
Raw materials $ 3,331 $ 3,522
Work in process 765 639
Finished goods 292 309
--------- --------
$ 4,388 $ 4,470
========= ========
</TABLE>
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
Dec. 29,
(in thousands) 1996
--------
<S> <C>
Buildings $ 116
Machinery and equipment 3,469
Construction in progress 149
--------
3,734
Less: accumulated depreciation 2,802
--------
$ 932
========
</TABLE>
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:
<TABLE>
<CAPTION>
Dec. 29,
(in thousands) 1996
--------
<S> <C>
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
========
</TABLE>
10
<PAGE>
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:
<TABLE>
<CAPTION>
Dec. 29,
(in thousands) 1996
--------
<S> <C>
Accumulated postretirement benefit obligation $ 2,501
Unrecognized transition obligation (1,949)
Unrecognized net gain 492
--------
Accrued postretirement benefit cost $ 1,044
--------
</TABLE>
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:
<TABLE>
<CAPTION>
Dec. 29,
(in thousands) 1996
--------
<S> <C>
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
--------
</TABLE>
11
<PAGE>
GENICOM CORPORATION -- RELAYS DIVISION
NOTES TO FINANCIAL STATEMENTS
The following table sets forth the Pension Plan's funded status as of the
indicated date:
<TABLE>
<CAPTION>
Dec. 29,
(in thousands) 1996
--------
<S> <C>
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
========
</TABLE>
The Division's assumptions used in determining the pension cost and pension
liability shown above were as follows:
<TABLE>
<CAPTION>
Dec. 29,
1996
--------
<S> <C>
Discount rate 7.75
Rate of compensation progression 4.00
Rate of return on plan assets 9.00
</TABLE>
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:
<TABLE>
<CAPTION>
Dec. 29,
(in thousands) 1996
---------
<S> <C>
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
=========
</TABLE>
12
<PAGE>
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
<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 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
<PAGE>
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
<PAGE>
COMMUNICATIONS INSTRUMENTS, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Pro Forma
Historical GRD (1) As Adjusted
---------- ------- -- -----------
<S> <C> <C> <C> <C>
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
======== ====== ========
</TABLE>
See notes to pro forma balance sheet (unaudited)
16
<PAGE>
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
<PAGE>
COMMUNICATIONS INSTRUMENTS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
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)
------- ------- --------------- ------- ------------ ---------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
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)
======= ======= ===== ======= ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Adjustments for Pro Forma
the GRD As
GRD Acquisition (16) Adjusted (20)
------- --------------- -------------
<S> <C> <C> <C>
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)
====== ==== =======
</TABLE>
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
<PAGE>
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.
<TABLE>
<S> <C>
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
======
</TABLE>
(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
<PAGE>
COMMUNICATIONS INSTRUMENTS, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Pro Forma
Pro Forma Adjustments
Adjustments for the
for the Recapitalization
Kilovac and the Initial
Company Purchase (1) Offering Pro Forma (9)
------- -------- -------- ---------
<S> <C> <C> <C> <C>
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
======= ===== ======= =======
</TABLE>
<TABLE>
<CAPTION>
Adjustments
for the Pro Forma
GRD At
GRD Acquisition (10) Adjusted (14)
-------- ----------- --------
<S> <C> <C> <C>
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
======= ===== =======
</TABLE>
20
<PAGE>
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.
<TABLE>
<S> <C>
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
======
</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.
(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
