<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM __________ TO _________
CII TECHNOLOGIES, INC.
(formerly known as
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.)
1200 Ridgefield Blvd., Suite 200, 28806
Asheville, North Carolina (Zip Code)
(Address of principal executive offices)
(828) 670-5300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [_] No
<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
CII TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands Except Share Amounts)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- -------------
(Unaudited) (1)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 377 $ 6,045
Accounts receivable (less allowance for doubtful accounts:
September 30, 2000 - $600, 1999 - $621) 27,484 23,658
Inventories 29,701 27,498
Deferred income taxes 2,472 2,471
Cash restricted for environmental remediation - 233
Environmental settlement receivable - 1,250
Other current assets 3,170 2,232
------------- -------------
Total current assets 63,204 63,387
------------- -------------
PROPERTY, PLANT AND EQUIPMENT, net 38,254 40,747
------------- -------------
OTHER ASSETS:
Goodwill (net of accumulated amortization: September 30, 2000 - $5,716
1999 - $3,985) 63,161 64,892
Intangible assets, net 27,966 30,537
Cash restricted for environmental remediation 1,483 -
Other noncurrent assets 537 462
------------- -------------
Total other assets 93,147 95,891
------------- -------------
TOTAL ASSETS $ 194,605 $ 200,025
============= =============
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
CURRENT LIABILITIES:
Accounts payable $ 16,597 $ 13,141
Accrued interest 1,833 4,192
Other accrued liabilities 9,115 7,842
Current portion of long-term debt 7,867 7,694
------------- -------------
Total current liabilities 35,412 32,869
LONG-TERM DEBT 176,231 182,975
ACCRUED ENVIRONMENTAL REMEDIATION COSTS 1,953 1,953
DUE TO PARENT 2,883 1,866
DEFERRED INCOME TAXES 12,833 13,733
OTHER LIABILITIES 407 455
------------- -------------
Total liabilities 229,719 233,851
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S DEFICIENCY:
Common stock, $.01 par value, 1,000 shares authorized,
issued and outstanding - -
Additional paid in capital 22,317 22,317
Accumulated deficit (57,173) (56,019)
Accumulated other comprehensive loss (258) (124)
------------- -------------
Total stockholder's deficiency (35,114) (33,826)
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIENCY $ 194,605 $ 200,025
============= =============
</TABLE>
(1) Derived from December 31, 1999 audited consolidated financial statements
See notes to unaudited condensed consolidated financial statements
<PAGE>
CII TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three months ended Nine Months Ended
---------------------------- -----------------------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 54,469 $ 45,560 $ 155,898 $ 128,689
Cost of sales 40,321 33,652 116,160 95,160
------------- ------------- ------------- -------------
Gross profit 14,148 11,908 39,738 33,529
------------- ------------- ------------- -------------
Operating expenses:
Selling expenses 3,685 2,940 10,434 9,173
General and administrative expenses 3,222 2,858 9,493 8,469
Research and development expenses 555 460 1,491 1,319
Amortization of goodwill and other intangibles 1,230 1,241 3,694 3,233
Facility relocation charges 21 320 821 685
------------- ------------- ------------- -------------
Total operating expenses 8,713 7,819 25,933 22,879
------------- ------------- ------------- -------------
Operating income 5,435 4,089 13,805 10,650
Interest expense, net (4,947) (4,676) (14,714) (13,027)
Other income, net 32 180 112 179
------------- ------------- ------------- -------------
Income (loss) before income taxes 520 (407) (797) (2,198)
Provision for (benefit from) income taxes 433 79 357 (221)
------------- ------------- ------------- -------------
Net Income (loss) 87 (486) (1,154) (1,977)
Other comprehensive (loss) income:
Foreign currency translation adjustment (76) 44 (134) (70)
------------- ------------- ------------- -------------
Other comprehensive (loss) income (76) 44 (134) (70)
------------- ------------- ------------- -------------
Comprehensive income (loss) $ 11 $ (442) $ (1,288) $ (2,047)
============= ============= ============= =============
</TABLE>
<PAGE>
CII TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
2000 1999
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,154) $(1,977)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 10,718 9,726
Deferred income taxes (900) (828)
Gain on sale of assets (66) -
Other (72) -
Changes in operating assets and liabilities, net of
effects of acquisitions:
(Increase) decrease in accounts receivable (3,826) 825
(Increase) decrease in inventories (2,203) 3,952
Increase in other current assets (938) (105)
Increase in accounts payable 3,456 507
Increase in accrued liabilities 2,275 415
Decrease in accrued interest (2,359) (2,087)
Changes in other assets and liabilities (268) (210)
---------- ----------
Net cash provided by operating activities 4,663 10,218
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business, net of cash received - (60,261)
Proceeds from sale of assets 189 -
Purchases of property, plant and equipment (3,818) (2,830)
Other investing activities (37) -
Investment in joint ventures - (144)
---------- ----------
Net cash used in investing activities (3,666) (63,235)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment under line of credit (825) (1,200)
Borrowings under long-term debt agreements - 55,000
Principal payments under long-term debt agreements (5,727) (3,512)
Payment of loan fees (213) (1,702)
Payment of capital lease obligations (19) (68)
Advances from parent 1,017 307
Repayments of amounts owed to former stockholders
of subsidiary (786) (450)
Additonal paid-in capital (from parent) - 5,000
Other (112) (25)
---------- ----------
Net cash (used in) provided by financing activities (6,665) 53,350
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (5,668) 333
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,045 469
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 377 $ (1,977)
========== ===========
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
CII Technologies, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(In thousands)
1. Basis of Presentation
The accompanying condensed consolidated financial statements include the
accounts of CII Technologies, Inc. (formerly known as Communications
Instruments, Inc.) and its wholly owned subsidiaries (the "Company"). The
Company's subsidiaries, Kilovac Corporation ("Kilovac"), which became a wholly
owned subsidiary on September 18, 1997, Electro-Mech S.A. ("Electro-Mech"),
Corcom, Inc. ("Corcom"), which became a wholly owned subsidiary on June 19,
1998, and Products Unlimited Corporation ("Products"), which became a wholly
owned subsidiary on March 19, 1999, operate facilities in Carpenteria,
California (Kilovac), Juarez, Mexico (Electro-Mech and Corcom), Libertyville,
Illinois (Corcom), Sterling and Prophetstown, Illinois (Products), Sabula and
Guttenburg, Iowa (Products) and Munich, Germany (Corcom).
The interim financial data as of and for the quarters and the nine months ended
September 30, 2000 and September 30, 1999 are unaudited and have been prepared
in accordance with generally accepted accounting principles for interim
financial information. Accordingly, it does not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In management's opinion, all adjustments (consisting only
of adjustments of a normal recurring nature) necessary for a fair presentation
have been included. The December 31, 1999 financial information was derived from
audited consolidated financial statements, but excludes certain disclosures
included in the Company's audited consolidated financial statements. Certain
reclassifications have been made to the 1999 financial information in order to
conform with the 2000 presentation.
These condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto for the
year ended December 31, 1999 as well as the other information included in the
Company's annual report filed on Form 10-K. The results of operations and cash
flows for the interim periods presented are not necessarily indicative of the
results for the year ending December 31, 2000 or any other interim period.
2. Recapitalization, Acquisitions and Joint Ventures
Recapitalization
On September 18, 1997, the Company entered into a series of recapitalization
transactions (collectively the "Transactions"). The Transactions are described
below.
Code, Hennessy & Simmons III, L.P., certain members of Company management and
certain other investors acquired approximately 87% of the capital stock of CIIT
Holdings, Inc. (formerly known as CII Technologies Inc.), a Delaware Corporation
(the "Parent"). CII Technologies, Inc. (formerly known as Communications
Instruments, Inc.) is a wholly owned subsidiary of the Parent. Certain of the
Parent's existing stockholders, including certain members of management,
retained approximately 13% of the Parent's capital stock (collectively, the
"Recapitalization").
Concurrently, the Company issued $95.0 million of 10% Senior Subordinated Notes
due 2004 (the "Old Notes") pursuant to an Indenture, dated September 18, 1997,
by and among CII Technologies, Inc. (formerly known as Communications
Instruments, Inc.), Kilovac, Kilovac International, Inc. ("Kilovac
International") and Norwest Bank Minnesota, National Association (the
"Indenture") through a private placement offering permitted by Rule 144A of the
Securities Act of 1933, as amended (the "Offering"). On January 30, 1998, the
Company filed a
<PAGE>
registration statement with the Securities and Exchange Commission for the
registration of its 10% Senior Subordinated Notes due 2004, Series "B" (the
"Notes") to be issued in exchange for the Old Notes (the "Exchange"). The
registration statement became effective on January 30, 1998 and the Exchange was
completed on March 9, 1998.
Also, on September 18, 1997, the Company borrowed approximately $2.7 million
pursuant to a senior credit facility with a syndicate of financial institutions
providing for revolving loans of up to $25.0 million that was subsequently
retired in connection with the acquisition of Corcom on June 19, 1998 (the "Old
Senior Credit Facility"). The Company repaid approximately $29.3 million of
outstanding obligations under the then existing credit facility (the "Old Credit
Facility"), including a success fee of approximately $1.5 million in connection
therewith and certain other liabilities (the "Refinancing").
Additionally, the Company paid a dividend of approximately $59.4 million to the
Parent, which was used by the Parent in conjunction with the proceeds of
issuances of the Parent's common stock (approximately $9.8 million), the
Parent's preferred stock (approximately $2.0 million) and junior subordinated
debt of the Parent (approximately $12.7 million) as follows: approximately $71.5
million was used to purchase shares of the Parent's capital stock from existing
shareholders; approximately $3.5 million was used to pay Recapitalization and
other financing expenses; and approximately $7.6 million was used to repay
certain indebtedness of the Parent.
Acquisitions
Acquisitions, unless otherwise noted below, are accounted for as purchases. The
purchase prices are allocated to the assets acquired and liabilities assumed
based on their fair values, and any excess cost is allocated to goodwill. The
fair value of significant property, plant and equipment and intangibles and
other assets acquired are determined generally by appraisals.
Products Unlimited
On March 19, 1999, the Company purchased all of the outstanding equity
securities of Products (the "Products Acquisition"), a manufacturer and marketer
of relays, transformers, and definite purpose contactors primarily for the HVAC
industry. Pursuant to the Stock Purchase Agreement, the Company paid
approximately $59.4 million for the outstanding capital stock of Products. In
addition, if Products achieves certain sales targets for the years ending
December 31, 1999 and December 31, 2000, the Company will make additional
payments to the former shareholders of Products not to exceed $4.0 million in
the aggregate. For the year ended December 31, 1999, the Company accrued $786 in
accordance with the terms of the agreement, which was then paid in February
2000. For the year ending December 31, 2000, the Company could be required to
make an additional payment not to exceed approximately $3.2 million. The
payment of the purchase price and related fees was financed by the issuance of
$55.0 million of Tranche Term B loans, in accordance with an amendment to the
Senior Credit Facility (as defined), the contribution of $5.0 million in
additional paid in capital by the Parent, and a draw on the revolving loan
portion of the Company's Senior Credit Facility (as defined). Products has
manufacturing facilities in Sterling and Prophetstown, Illinois and Sabula and
Guttenberg, Iowa.
Cornell Dubilier
On July 24, 1998, the Company purchased certain assets and assumed certain
liabilities of the Cornell Dubilier electronics relay division ("CD") for $848
(the "CD Acquisition"). During 1998, CD was consolidated into the Company's
Midtex Division. The CD Acquisition was financed through a draw on the Company's
Senior Credit Facility.
<PAGE>
Corcom, Inc.
On June 19, 1998, the Company acquired all of the outstanding capital stock of
Corcom, an Illinois corporation, pursuant to the merger of RF Acquisition Corp.,
a newly formed wholly owned subsidiary of the Company, with and into Corcom (the
"Corcom Merger"). The Company paid $13.00 per share to the shareholders of
Corcom in exchange for the shares received in the Corcom 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, and $7.4 million in cash from Corcom to finance the
Merger, repay $7.4 million of debt under the Old Senior Credit Facility and fund
the related merger costs. Corcom is an electromagnetic interference filter
manufacturer located in Libertyville, Illinois.
Wilmar Electronics, Inc.
On May 6, 1998, the Company purchased certain assets and assumed certain
liabilities of Wilmar Electronics, Inc. ("Wilmar") for approximately $2.1
million (the "Wilmar Acquisition"). Wilmar was a producer of high performance
protective relays. Wilmar was consolidated into the Company's Kilovac subsidiary
in June 1998. The Wilmar acquisition was financed with a draw on the Company's
Old Senior Credit Facility.
Genicom Relays Division
On December 1, 1997, the Company acquired certain assets and assumed certain
liabilities of the Genicom Relays Division ("GRD") of Genicom Corporation
("Genicom") for approximately $4.7 million (the "GRD Acquisition"). GRD, which
was located in Waynesboro, Virginia, was a manufacturer of high performance
signal relays. The GRD Acquisition was financed by a draw on the Company's Old
Senior Credit Facility.
The Company finalized its plans to relocate the manufacturing in the Waynesboro,
VA facility to its facilities in North Carolina in 1998 and completed the
relocation in 1999. The costs of this facility relocation, including costs of
employee separation and preparing the North Carolina facilities for the
relocation, totaled approximately $1.1 million, of which approximately $911 was
expensed in 1999 and $865 was expensed in the third quarter of 1999.
Under the terms of the purchase agreement with Genicom, the Company was entitled
to recover up to $500 for inventory unsold or unused during the two years
following the acquisition. In December 1999, the Company submitted a claim
against Genicom for the $500. In March 2000, Genicom filed a Chapter 11
bankruptcy petition in Federal Bankruptcy Court. As a result, the Company
recorded a valuation reserve of $500 against this receivable in 1999.
ibex Aerospace Inc.
On October 31, 1997, the Company acquired certain assets and assumed certain
liabilities of ibex Aerospace Inc. ("ibex") for approximately $2.0 million (the
"ibex Acquisition"). Of the $2.0 million, approximately $1.3 million was paid at
closing. The Company issued a noninterest bearing note payable to the sellers in
the amount of $850 (discounted to $697) for the remainder of the purchase price.
This note was payable on October 31, 1999. ibex was a manufacturer and marketer
of high current electromechanical relays for critical applications in the
military and commercial aerospace markets. In 1998, ibex was consolidated into
the Company's Hartman Division. The transaction was financed through a draw on
the Company's Old Senior Credit Facility and the issuance of the note payable to
the sellers discounted to $697.
<PAGE>
In September 1999, the Company and the sellers agreed to adjust the purchase
price of ibex and reduce the note payable by $400. The remaining note payable of
$450 was repaid by the Company in September 1999. The reduction in purchase
price resulted in a reduction of goodwill.
Kilovac Corporation - 20% Purchase
On September 18, 1997, the Company purchased for approximately $4.5 million the
remaining 20% of the outstanding stock of Kilovac that the Company did not then
own (the "Kilovac Purchase"). The transaction was financed through proceeds from
the Recapitalization and the issuance of senior subordinated notes.
On October 11, 1995, the Company had purchased an 80% ownership interest in
Kilovac for an aggregate purchase price of approximately $15.7 million including
acquisition costs of approximately $1.3 million. Kilovac designs and
manufactures high voltage electromechanical relays. The Company was obligated to
purchase the remaining 20% interest in Kilovac at the option of the selling
shareholders on either December 31, 2000 or December 31, 2005, or upon the
occurrence of certain events, if earlier, at an amount determined in accordance
with the terms of the purchase agreement. An estimated $2.3 million ($468, net
of tax at September 30, 2000 and December 31, 1999) was initially payable to the
sellers upon the future realization of potential tax benefits associated with a
net operating loss carryforward.
The following summarizes the purchase price allocations as of the respective
dates of acquisitions:
<TABLE>
<CAPTION>
Kilovac ibex GRD Wilmar Corcom CD Products
Purchase Acquisition Acquisition Acquisition Merger Acquisition Acquisition
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets $ 47 $1,041 $ 3,887 $ 381 $ 12,904 $ 505 $ 14,320
Property, plant and equipment 169 150 2,045 80 7,374 82 21,427
Intangibles and other assets 4,577 1,493 24 2,023 35,777 380 40,692
Liabilities assumed (293) (965) (1,273) (356) (11,005) (119) (17,078)
------ ------ ------- ------- -------- ----- --------
Purchase price, net of
acquired cash $4,500 $1,719 $ 4,683 $ 2,128 $ 45,050 $ 848 $ 59,361
====== ====== ======= ======= ======== ===== ========
</TABLE>
The following unaudited nine months ended September 30, 1999 pro forma financial
information shows the results of operations as though the Products Acquisition
occurred as of January 1, 1999. These results include, but are not limited to,
the straight-line amortization of excess purchase price over the net assets
acquired over a thirty- year period and an increase in interest expense as a
result of the debt borrowed to finance the transactions.
Nine Months ended
September 30, 1999
------------------
Net sales $143,936
Operating income 12,475
Net loss (1,602)
The unaudited pro forma financial information presented above does not purport
to be indicative of either (i) the results of operations had the Products
Acquisition taken place on January 1, 1999 or (ii) future results of operations
of the combined businesses.
8
<PAGE>
Joint Ventures
In January 1999, the Company formed a joint venture, Shanghai CII Electronics
Co. Ltd. with Shanghai CI Electric Appliance Co. Ltd. (the "Chinese Joint
Venture"). Each party holds 50% of the shares of the new company. The Company
accounts for the Chinese Joint Venture using the equity method. The Chinese
Joint Venture is a manufacturer and marketer of relay components. The Company's
initial investment was approximately $144. The Chinese Joint Venture began
production in March 1999. The recorded value of the investment in the Chinese
Joint Venture at December 31, 1999 and September 30, 2000 was $164 and $ 206,
respectively.
In November 1995, the Company formed a joint venture in India with Guardian
Controls Ltd., an Indian Company, a bank and certain financial investors. The
Company has a 40% interest in the joint venture which was formed for the purpose
of manufacturing relays, relay components, and sub-assemblies in India for the
domestic Indian market and global markets. The Company accounts for the Indian
joint venture using the equity method. The joint venture started production
during the fourth quarter of 1996. The recorded value of the investment in the
joint venture at December 31, 1999 and September 30, 2000 was $116 and $147,
respectively.
3. Inventories
Components of inventory are as follows:
September 30, December 31,
2000 1999
---- ----
Finished goods $ 7,081 $ 7,446
Work-in-process 11,866 8,715
Raw materials and supplies 17,623 18,168
Reserve for obsolescence (6,869) (6,831)
-------- -------
Total $ 29,701 $27,498
======== =======
4. Long -Term Debt
On June 19, 1998, the Company retired the Old Senior Credit Facility and
borrowed approximately $48.1 million pursuant to a senior credit facility with a
syndicate of financial institutions providing for revolving loans of up to $25.0
million and term loans of $35.0 million (the "Senior Credit Facility"). On March
19, 1999 the Company was issued a Tranche B Term Loan of $55.0 million as an
amendment to the Senior Credit Facility.
The Company's long-term debt at September 30, 2000 consists primarily of the
$95.0 million Notes and revolving loans of $11.8 million and term loans of $77.2
million under the Senior Credit Facility. The Company and its wholly owned
subsidiaries, Kilovac, Kilovac International, Inc. Corcom, and Products have
guaranteed the Notes on a full, unconditional, and joint and several basis,
which guarantees are fully secured by the assets of such guarantors. CII
Technologies, Inc. (formerly known as Communications Instruments, Inc.), its
wholly owned subsidiaries, including Kilovac, Kilovac International, Inc.,
Corcom, Products and the Parent have guaranteed the Senior Credit Facility on a
full, unconditional, and joint and several basis which guarantees are fully
secured by the assets of such guarantors.
Interest on the 10% Senior Subordinated Notes is payable semi-annually in
arrears on March 15 and September 15 of each year. The Notes will mature on
September 15, 2004, unless previously redeemed, and the Company will not be
required to make any mandatory redemption or sinking fund payment prior to
maturity except in connection with a change in ownership. The Notes may be
redeemed, in whole or in part, at any time on or after September 15, 2001 at the
option of the Company, at the redemption prices set forth in the Indenture,
plus, in each
9
<PAGE>
case, accrued and unpaid interest and premium, if any, to the date of the
redemption. In addition, at any time prior to September 15, 2000, the Company
may at its option, with the net cash proceeds of an Equity Offering (as defined
in the Indenture), redeem up to 33.3% in aggregate principal amount of the Notes
at a redemption price of 110% of the principal amount thereof, plus accrued and
unpaid interest to the date of redemption, provided that not less than $63.4
million aggregate principal amount of the Notes remains outstanding immediately
after the occurrence of such redemption.
The Senior Credit Facility provides for a maximum credit facility of $115.0
million limited by outstanding indebtedness under the initial $90.0 million term
loan agreements (as amended) or availability on the borrowing base, as defined
in the loan agreement. All funds may be borrowed as either a base rate loan or
LIBOR loan. For base rate loans and LIBOR loans an applicable margin is added to
the base rate interest rate or the LIBOR interest rate based on a Consolidated
Senior Leverage Ratio Level (as defined in the Senior Credit Facility). The base
rate interest rate is the higher of a Reference Rate (as defined) or the federal
funds rate plus 1/2%. At September 30, 2000, LIBOR borrowing rates ranged from
9.375% to 10.1875%. At September 30, 2000, the base rate-borrowing rate was
11.25%. The weighted average borrowing rate, calculated based on borrowings
outstanding at September 30, 1999 and September 30, 2000 under base rate and
LIBOR loans was 8.36% and 9.973%, respectively.
The Senior Credit Facility provides a line of credit of $25.0 million due on
June 19, 2003, a Tranche A term loan with a remaining balance of $23.5 million
due in full by June 19, 2003, and a Tranche B Term Loan of $53.7 million due in
full by March 15, 2004. The Tranche A term loan is payable as follows: $1.7
million remaining in 2000, $7.7 million in 2001, $9.2 million in 2002, and $4.9
million in 2003. The Tranche B term loan is payable as follows: $136 remaining
in 2000, $544 in 2001, $544 in 2002, $26.4 million in 2003 and $26.1 million in
2004.
The terms of the Senior Credit Facility and the Indenture place certain
restrictions on the Company including, but not limited to, the Company's ability
to incur additional indebtedness, incur liens, pay dividends or make certain
other restricted payments (as defined), consummate certain asset sales, enter
into certain transactions with affiliates, merge or consolidate with any person
or sell, assign, transfer, lease, convey or otherwise dispose of the assets of
the Company and its subsidiaries. The Senior Credit Facility has a Mandatory
prepayment clause based upon a calculation of excess cash flow (as defined in
the Senior Credit Facility). The first excess cash payment was made on March
30, 2000 in the amount of $850. The Senior Credit Facility also contains
financial covenants including interest coverage ratios, leverage ratios,
limitations on capital expenditures and minimum levels of earnings before
interest, taxes, depreciation and amortization, as defined by the Senior Credit
Facility. As of September 30, 2000, the Company was in compliance with all of
the terms of the Indenture and the covenants of the Senior Credit Facility.
Letters of credit outstanding under the Senior Credit Facility were $100 at
September 30, 2000 and at December 31, 1999.
The Senior Credit Facility requires the Company to pay commitment fees at an
annual rate of 0.5% on the undrawn amount of the Senior Credit Facility, subject
to adjustment based on the Consolidated Senior Leverage Ratio of the Company.
As of September 30, 2000, the Company had available unused borrowing capacity of
approximately $13.1 million under the Senior Credit Facility.
5. Contingencies
From time to time the Company is a party to certain lawsuits and administrative
proceedings that arise in the conduct of its business. While the outcome of the
lawsuits and proceedings cannot be predicted with certainty, management believes
that the lawsuits and proceedings, either singularly or in the aggregate, will
not have a material adverse effect on the financial condition, results of
operations or cash flows of the Company.
<PAGE>
Environmental Remediation - The Company has been notified by the State of North
Carolina Department of Environment, Health & Natural Resources ("NCDHNR") that
its manufacturing facility in Fairview, North Carolina has sites containing
hazardous wastes resulting from activities by a prior owner (the "Prior Owner").
Additionally, the Company has been identified as a potentially responsible party
for remediation at two superfund sites which formerly were used by hazardous
waste disposal companies employed by the Company.
Several areas of soil and groundwater contamination had been noted at the
Fairview facility, the most serious of which is TCE contamination in the
groundwater. Remedial investigations have been undertaken at the facility and
the NCDHNR has placed the facility on the Inactive Hazardous Sites Inventory.
Soil remediation was completed in January 1996 and the groundwater remediation
system was formally set in operation on April 1, 1997.
On May 11, 1995, the Company reached a settlement with the Prior Owner. In
accordance with the Settlement Agreement, the Prior Owner has placed $1.75
million in escrow to fund further investigation, the remediation of contaminated
soils and the installation and start-up of a groundwater remediation system at
the Fairview facility. The Settlement Agreement further provides that after the
groundwater remediation system has been operating at 90% of its intended
capacity for three years, the Company will provide to the Prior Owner an
estimate of the then present value of the cost to continue operating and
maintaining the system for an additional 27 years. After receiving the estimate,
the Prior Owner is to deposit with the escrow agent an additional sum equal to
90% of the estimate, up to a maximum of $1.25 million, unless it provides a
substantially lower estimate. In that case, any substantial differences are to
be resolved through negotiation or expedited arbitration. The Prior Owner
provided a substantially lower estimate, and the parties took their differences
to arbitration. The Company received an arbitration award on July 17, 2000
requiring the Prior Owner to deposit the full amount into escrow. In August of
2000, the Prior Owner deposited the additional $1.25 million into the escrow
account bringing the total amount in escrow to $1.483 million as of September
30, 2000.
In October 1995, the Company released the selling shareholders from their
indemnity obligation. The environmental remediation liability is recorded at the
present value, discounted at 5%, of the current best estimate of the cash flows
to remediate and monitor the remediation over the estimated thirty-year
remediation period, which was developed by a third party environmental
consultant based on experience with similar remediation projects and methods and
taking inflation into consideration. On September 19, 2000, however, the State
of North Carolina substantially reduced monitoring requirements at the site.
That decision together with experience in the operation and maintenance of the
groundwater remediation system over the past three years has led the Company to
believe that long term costs of the remediation may be overestimated. It has
therefore requested new estimates to continue to run the remediation system that
will enable it to more accurately estimate those costs in the fourth quarter.
Total amounts estimated to be paid related to environmental liabilities are
approximately $3.6 million calculated as follows at September 30, 2000:
2000 $ 65
2001 130
2002 130
2003 130
2004 130
Thereafter 2,990
------
3,575
Discount to present value -1,622
------
Liability at present value $1,953
<PAGE>
Assets recorded in relation to the above environmental liabilities are
approximately $1.48 million at December 31, 1999 and September 30, 2000,
respectively.
In connection with the Company's purchase of certain assets and certain
liabilities of Hartman Electrical Manufacturing ("Hartman"), a division of
Figgie International, Inc. ("Figgie") (the "Hartman Acquisition"), the Company
entered into an agreement pursuant to which it leased from a wholly-owned
subsidiary of Figgie a manufacturing facility in Mansfield, Ohio, (the
"Mansfield Property") at which Hartman has conducted operations (the "Lease").
The Mansfield Property may contain contamination at levels that will require
further investigation and may require soil and/or groundwater remediation. The
Company may become subject to liability for remediation of such contamination at
and/or from such property, which liability may be joint and several except under
certain circumstances. The Lease included an indemnity by the Lessor to the
Company, guaranteed by Figgie, for certain environmental liabilities in
connection with the Mansfield Property, subject to a dollar limitation of $12.0
million (the "Indemnification Cap"). In addition, in connection with the Hartman
Acquisition, Figgie had placed $515 in escrow for environmental remediation
costs at the Mansfield Property to be credited towards the Indemnification Cap
as provided in the lease (the "Escrowed Funds").
During January 2000, the Company entered into an agreement with the former
owners of the Mansfield Property in which the Company purchased the property and
certain equipment and released $515 of funds contributed by the former owners of
Hartman and held in escrow from the date the Company acquired Hartman. This
agreement followed the decision by the former owner's registered environmental
consultant that no further environmental remediation was needed at the property
as long as the property was restricted to industrial usage. The agreement
reduces the indemnity cap to $1.0 million over nine years if the former owner
does not seek and obtain a covenant not to sue from the Ohio EPA relating to the
site and reduces the cap to zero over ten years if the former owner obtains a
covenant not to sue relating to the site from the Ohio EPA. In either event,
the agreement leaves in place the Company's right to seek contribution or
indemnity under common law or statute from the former owners for environmental
issues and requires the former owners to complete some soil cleanup actions
within six months of closing. The former owners completed the agreed upon soil
cleanup actions in May 2000. The transaction was closed on January 7, 2000.
The Company believes that any further remediation costs will not exceed the
Indemnification Cap. If such costs exceed the Cap and the Company is unable to
obtain, or is delayed in obtaining indemnification or contribution for any
reason, the Company could be materially and adversely affected. The Company
does not maintain environmental impairment liability insurance.
6. Segment Disclosure
The Company has five business units which have separate management teams and
infrastructures that offer electronic products. These business units have been
aggregated into two reportable segments that are managed separately because each
operating segment represents a strategic business platform that offers different
products and serves different markets.
The Company's two reportable operating segments are: (i) the High Performance
Group ("HPG") and (ii) the Specialized Industrial Group ("SIG"). HPG includes
the Communications Instruments Division, Kilovac and Hartman. Products
manufactured by HPG include high performance signal level relays and power
relays, high voltage and power switching relays, solenoids and other electronic
products. SIG includes Corcom, Products and the Midtex Brand. The SIG group
manufactures RFI filters, general purpose relays, transformers and definite
purpose contactors.
The accounting policies of the operating segments are the same as those of the
Company. Intersegment sales, which are eliminated in consolidation, are recorded
at standard cost.
<PAGE>
In evaluating financial performance, management focuses on operating income as a
segment's measure of profit or loss. Operating income is before interest
expense, interest income, other income and expense, income taxes and
extraordinary items. Financial information for the Company's operating segments
and a reconciliation of reportable segment net sales, operating income, and
assets to the Company's consolidated totals are as follows:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales:
High Performance Group $ 20,873 $ 17,550 $ 60,782 $ 57,334
Specialized Industrial Group 33,628 28,126 95,511 71,858
Intersegment elimination (1) (32) (116) (395) (503)
---------- --------- ---------- ---------
$ 54,469 $ 45,560 $ 155,898 $ 128,689
========== ========= ========== =========
Operating income:
High Performance Group $ 3,240 $ 2,338 $ 9,114 $ 6,846
Specialized Industrial Group 3,134 2,370 7,341 5,984
Corporate (939) (619) (2,650) (2,180)
---------- --------- ---------- ---------
5,435 4,089 13,805 10,650
---------- --------- ---------- ---------
Interest expense, net (4,947) (4,676) (14,714) (13,027)
Other income (expense), net 32 180 112 179
---------- --------- ---------- ---------
Consolidated loss before income taxes $ 520 $ (407) $ (797) $ (2,198)
========== ========= ========== =========
Depreciation and amortization expense:
High Performance Group $ 2,913 $ 3,599
Specialized Industrial Group 6,933 5,373
Corporate 17 -
---------- ---------
9,863 8,972
Amortization of debt issuance costs (2) 855 754
---------- ---------
Consolidated depreciation and amortization expense $ 10,718 $ 9,726
========== =========
Purchases of property, plant and equipment:
High Performance Group $ 1,550 $ 1,397
Specialized Industrial Group 2,131 1,431
Corporate 137 2
---------- ---------
Consolidated capital expenditures $ 3,818 $ 2,830
========== =========
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---- ----
<S> <C> <C>
Assets:
High Performance Group $ 62,214 $ 59,769
Specialized Industrial Group 127,116 128,787
Corporate 5,275 11,469
---------- ---------
Consolidated assets $ 194,605 $ 200,025
========== =========
</TABLE>
(1) - represents net sales between HPG and SIG
(2) - included on the consolidated statements of cash flows as depreciation and
amortization and included in the consolidated statement of operations as
interest expense. Management does not consider these costs in managing the
operations of the reportable segments.
<PAGE>
7. New Accounting Pronouncements
The Financial Accounting Standards Board issued SFAS No. 133, as amended by SFAS
No. 137, Accounting for Derivative Instruments and Hedging Activities, effective
for all fiscal quarters of fiscal years beginning after June 15, 2000. The new
standard establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Company has not
determined at this time what impact, if any, that this new accounting standard
will have on its financial statements.
8. Other Matters
Facility Relocation: To improve operating efficiencies and achieve cost
reductions, the Company has decided to relocate the Midtex Product Lines from
one of its Juarez, Mexico facilities and on April 13, 2000, announced the
relocation plan to its Midtex employees. These product lines will be merged into
existing Company divisions and Joint Ventures. The relocations began in April
2000 and are expected to be completed by the quarter ended March 31, 2001. The
estimated costs of the product line relocations, including primarily employee
separation costs and preparing current facilities for the relocation, is
approximately $850, of which $821 was expensed during the nine months ended
September 30, 2000.
Item 2:
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Introduction
Some of the matters discussed below and elsewhere herein contain forward-looking
statements regarding the future performance of the Company and future events.
These matters involve risks and uncertainties that could cause actual results to
differ materially from the statements contained herein. The following discussion
and analysis provides information which management believes is relevant to an
understanding of the operations and financial condition of the Company. This
discussion and analysis should be read in conjunction with the condensed
consolidated financial statements and notes thereto included in this quarterly
report as well as in the Registrant's Annual Report for the year ended December
31, 1999 on Form 10-K.
Overview
In March 1999, the Company purchased all of the outstanding equity securities of
Products, a manufacturer and marketer of relays, transformers, and definite
purpose contactors primarily for the HVAC industry. Pursuant to the Stock
Purchase Agreement, the Company paid approximately $59.4 million for all of the
outstanding capital stock of Products. In addition, if Products achieves certain
sales targets for the years ending December 31, 1999 and December 31, 2000, the
Company will make additional payments to the former shareholders of Products not
to exceed $4.0 million in the aggregate. For the year ended December 31, 1999,
the Company accrued $786,000 in accordance with the terms of the agreement which
was then paid in February 2000. For the year ending December 31, 2000, the
Company could be required to make an additional payment not to exceed
approximately $3.2 million. The payment of the purchase price and related fees
was financed by the issuance of $55.0 million of Tranche Term B loans, in
accordance with an amendment to the Senior Credit Facility (as defined), the
contribution of $5.0 million in additional paid in capital by the Parent, and a
draw on the revolving loan portion of the Company's Senior Credit Facility (as
defined). Products has manufacturing facilities in Sterling and Prophetstown,
Illinois and Sabula and Guttenberg, Iowa.
In July 1998, the Company purchased certain assets and assumed certain
liabilities of Cornell Dublier's electronics relay division ("CD") for $848,000
(the "CD Acquisition"). During 1998, CD was consolidated into
<PAGE>
the Company's Midtex Division. The CD Acquisition was financed with a draw on
the Company's Senior Credit Facility.
In June 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 "Corcom 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 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, and $7.4 million in cash from Corcom to finance the
Merger, repay $7.4 million of debt (the "Old Senior Credit Facility") and fund
the related merger costs. Corcom is an electromagnetic interference filter
manufacturer located in Libertyville, Illinois.
In May 1998, the Company purchased certain assets and assumed certain
liabilities of Wilmar Electronics Inc. ("Wilmar") for approximately $2.1 million
(the "Wilmar Acquisition"). Wilmar was consolidated into the Kilovac Subsidiary
in June 1998. The Wilmar Acquisition was financed with a draw on the Company's
Old Senior Credit Facility.
In December 1997, the Company purchased certain assets and assumed certain
liabilities of Genicom Relays Division ("GRD") of Genicom Corporation
("Genicom") for $4.7 million (the "GRD Acquisition"). The Company financed the
GRD Acquisition with funds borrowed on the Old Senior Credit Facility. Under the
terms of the purchase agreement with Genicom, the Company was entitled to
recover up to $500,000 for inventory unsold or unused during the two years
following the acquisition. In December 1999, the Company submitted a claim
against Genicom for $500,000. In March 2000, Genicom filed a Chapter 11
bankruptcy petition in Federal Bankruptcy Court. As a result, the Company
recorded a valuation reserve of $500,000 against this receivable in 1999.
In October 1997, the Company purchased 100% ownership in ibex Aerospace Inc.
("ibex") for $2.0 million, excluding expenses (the "ibex Acquisition"). ibex was
a wholly owned subsidiary of SOFIECE of Paris, France. The ibex operation was
consolidated into the Company's Hartman division in 1998. Of the $2.0 million
purchase price, approximately $1.3 million was paid at closing, and the
remainder of the purchase price was paid by the Company through the issuance of
a non-interest bearing note in the amount of $850,000 to the sellers, which note
was payable on October 31, 1999. The Company financed the $1.3 million paid at
closing with funds borrowed on the Old Senior Credit Facility. In September
1999, the Company and the sellers agreed to adjust the purchase price of ibex
and reduce the note payable by $400,000. The remaining balance of $450,000 was
paid by the Company in September 1999. The reduction in purchase price resulted
in a reduction of goodwill.
Due to the Company's historical growth through acquisitions, the Company
believes that period-to-period comparisons of its financial results are not
necessarily meaningful and should not be relied upon as an indication of future
performance.
Results of Operations
The following table sets forth information derived from the condensed
consolidated statements of operations expressed as a percentage of net sales for
the periods indicated. There can be no assurance that the trends in operating
results will continue in the future.
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
-------------------------------------------------
2000 1999 2000 1999
----- ---- ----- -----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 74.0% 73.9% 74.5% 73.9%
Gross profit 26.0% 26.1% 25.5% 26.1%
Selling expenses 6.8% 6.4% 6.7% 7.1%
General and administrative expenses 5.9% 6.3% 6.1% 6.6%
Research and development expenses 1.0% 1.0% 1.0% 1.0%
Amortization of goodwill and other intangibles 2.3% 2.7% 2.4% 2.5%
Facility relocation charges 0.0% 0.7% 0.5% 0.5%
Operating income 10.0% 9.0% 8.8% 8.3%
</TABLE>
Discussion of Consolidated Results of Operations
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999
Net sales of the Company for the quarter ended September 30, 2000, increased
$8.9 million, or 19.6%, to $54.5 million from $45.6 million for the
corresponding period in 1999. This increase is due primarily to (i) strong
demand in the Company's served markets and (ii) the introduction of new
products, partially offset by (iii) the expected slowdown in the commercial
airframe market, (iv) continued price pressure in an increasingly competitive
global market place and (v) unfavorable exchange rates.
Gross profit of the Company for the quarter ended September 30, 2000, increased
$2.2 million, or 18.8%, to $14.1 million from $11.9 million for the
corresponding period in 1999. Gross profit as a percentage of net sales
decreased to 26.0% from 26.1% for the same period in 1999. The decrease in gross
profit as a percentage of net sales is due primarily to (i) a shift in demand of
product to higher volumes with lower price and lower standard margins, (ii)
unfavorable exchange rates and (iii) continued price pressure in an increasingly
competitive global market place partially offset by (iv) lower overhead costs in
2000 due to the relocation of the Waynesboro, VA facility, (v) higher sales
volumes and (vi) continued cost reductions.
Selling expenses for the Company for the quarter ended September 30, 2000,
increased $745,000, or 25.3%, to $3.7 million from $2.9 million for the
corresponding period in 1999. Selling expenses as a percentage of net sales
increased to 6.8% from 6.5% in the same period in 1999. This increase in selling
expenses as a percentage of net sales is due primarily to (i) higher commissions
on higher net sales and (ii) higher variable compensation based on higher volume
of new order bookings, partially offset by (iii) a restructuring of commissions,
(iv) higher sales volume and (v) the continued control of fixed costs.
General and administrative expenses for the Company for the quarter ended
September 30, 2000, increased $364,000, or 12.7%, to $3.2 million from $2.9
million in 1999. General and administrative expenses as a percentage of net
sales decreased to 5.9% from 6.3% for the corresponding period in 1999. This
decrease in general and administrative expenses as a percentage of net sales is
due primarily to higher sales volume with
<PAGE>
continuing control of fixed costs partially offset by higher variable
compensation costs resulting from the Company's growth.
Research and development expenses for the Company for the quarter ended
September 30, 2000, increased $95,000, or 20.7%, to $555,000 from $460,000 for
the corresponding period in 1999. Research and development expenses as a
percentage of net sales remained steady at 1.0%.
Amortization of goodwill and other intangibles for the Company for the quarter
ended September 30, 2000, remained the same at $1.2 million.
Facility relocation charges for the three months ended September 30, 2000 were
$21,000 as compared to $320,000 for the same period in 1999. The fiscal 2000
charges are in connection with the Company's relocation of its Midtex Facility
and the fiscal 1999 charges are in connection with the Company's relocation of
its Waynesboro, VA facility. The facility relocation charges include but are not
limited to employee separation charges and costs to relocate the product lines
to other of the Company's facilities or its Joint Ventures. The relocation of
the Waynesboro, VA facility was completed in 1999. The relocation of the Midtex
Facility is expected to be completed by the quarter ended March 31, 2001.
Interest expense of the Company for the three months ended September 30, 2000,
increased $271,000, or 5.8%, to $4.9 million from $4.7 million for the
corresponding period in 1999. The increase was due primarily to the increased
interest rates, partially offset by lower debt.
The income tax expense of the Company for the three months ended September 30,
2000 was 83.3% of income before income taxes as compared to an income tax
expense of 19.4% of loss before income taxes for the corresponding period in
1999. The expense is due primarily to income in the third quarter of 2000 as
compared to a loss for the same period in 1999.
Nine Months Ended September 30, 2000 Compared to Nine months Ended September 30,
1999
Net sales of the Company for the nine months ended September 30, 2000, increased
$27.2 million, or 21.1%, to $155.9 million from $128.7 million for the
corresponding period in 1999. Excluding Products for the period from March 19,
1999 to March 31, 1999 and January 1, 2000 to March 31, 2000, net sales of the
Company for the nine months ended September 30, 2000, increased $13.5 million,
or 10.6%, to $140.0 million from $126.6 million for the corresponding period in
1999. This increase is due primarily to (i) strong demand in the Company's
served markets and (ii) the introduction of new products, partially offset by
(iii) the expected slowdown in the commercial airframe market, (iv) continued
price pressure in an increasingly competitive global market place and (v)
unfavorable foreign exchange rates.
Gross profit of the Company for the nine months ended September 30, 2000,
increased $6.2 million, or 18.5%, to $39.7 million from $33.5 million for the
corresponding period in 1999. Gross profit as a percentage of net sales
decreased to 25.5% from 26.1% for the corresponding period in 1999. This
decrease in gross profit is due to the planned dilutive effect of the lower
margins of Products Unlimited. Excluding Products for the period from March 19,
1999 to March 31, 1999 and January 1, 2000 to March 31, 2000, gross profit of
the Company for the nine months ended September 30, 2000, increased $4.0
million, or 12.1%, to $37.1 million from $33.1 million for the corresponding
period in 1999. Excluding the effect of the Products Acquisition for the period
from March 19, 1999 to March 31, 1999 and January 1, 2000 to March 31, 2000,
gross profit as a percentage of net sales increased to 26.5% from 26.2% for the
corresponding period in 1999. The increase in gross profit as a percentage of
net sales is due primarily to lower overhead costs in 2000 due to the relocation
of the Waynesboro, VA facility, (ii)
<PAGE>
higher sales volume and (iii) continued cost reductions, partially offset by
(iv) continued price pressure in an increasingly competitive global market
place, (v) unfavorable exchange rates and (vi) a shift in demand of product to
higher volumes with lower price and lower standard margin.
Selling expenses for the Company for the nine months ended September 30, 2000,
increased $1.3 million, or 13.7%, to $10.4 million from $9.2 million for the
corresponding period in 1999. Selling expenses as a percentage of net sales
decreased to 6.7% from 7.1% in the same period in 1999. Excluding Products for
the period from March 19, 1999 to March 31, 1999 and January 1, 2000 to March
31, 2000, selling expenses for the Company for the nine months ended September
30, 2000, increased $617,000, or 6.8%, to $9.7 million from $9.1 million for the
corresponding period in 1999. Excluding Products for the period from March 19,
1999 to March 31, 1999 and January 1, 2000 to March 31, 2000, selling expenses
as a percentage of net sales decreased to 6.9% from 7.2% for the same period in
1999. This decrease in selling expenses as a percentage of net sales is due
primarily to (i) a restructuring of commissions, (ii) higher sales volumes and
(iii) continued control of fixed costs partially offset by (iv) higher
commissions on higher net sales and (v) higher variable compensation based on
high volume of new order bookings.
General and administrative expenses for the Company for the nine months ended
September 30, 2000, increased $1.0 million, or 12.1%, to $9.5 million from $8.5
million in 1999. General and administrative expenses as a percentage of net
sales decreased to 6.1% from 6.6% for the corresponding period in 1999.
Excluding Products for the period from March 19, 1999 to March 31, 1999 and
January 1, 2000 to March 31, 2000, general and administrative expenses for the
Company increased $529,000, or 6.2%, to $9.0 million from $8.4 million for the
corresponding period in 1999. Excluding Products for the period from March 19,
1999 to March 31, 1999 and January 1, 2000 to March 31, 2000, general and
administrative expenses as a percentage of net sales decreased to 6.4% from 6.7%
for the same period in 1999. This decrease in general and administrative
expenses as a percentage of net sales is due primarily to higher sales volume
with continuing control of fixed costs partially offset by higher variable
compensation resulting from the Company's growth.
Research and development expenses for the Company for the nine months ended
September 30, 2000, increased $172,000, or 13.0%, to $1.5 from $1.3 million for
the corresponding period in 1999. Research and development expenses as a
percentage of net sales remained the same at 1.0% for the same period in 1999.
Excluding Products for the period from March 19, 1999 to March 31, 1999 and
January 1, 2000 to March 31, 2000, research and development expenses for the
Company increased $92,000, or 7.0%, to $1.4 million from $1.3 million for the
corresponding period in 1999. This increase is due to the Company's focus on the
development of new products. Excluding Products for the period from March 19,
1999 to March 31, 1999 and January 1, 2000 to March 31, 2000, research and
development expenses as a percentage of net sales remained the same at 1.0% for
the same period in 1999.
Amortization of goodwill and other intangibles for the Company for the nine
months ended September 30, 2000, increased $425,000, or 13.0%, to $3.7 million
from $3.2 million for the corresponding period in 1999. Excluding Products for
the period from March 19, 1999 to March 31, 1999 and January 1, 2000 to March
31, 2000, amortization of goodwill and other intangibles decreased $57,000, or
1.8%, to $3.1 million from 3.2 million for the same period in 1999.
Facility relocation charges for the nine months ended September 30, 2000 were
$821,000 as compared to $685,000 for the same period in 1999. The fiscal 2000
charges are in connection with the Company's relocation of its Midtex facility
and the fiscal 1999 charges are in connection with the Company's relocation of
its Waynesboro, VA facility. The facility relocation charges include but are not
limited to employee separation charges and costs to relocate the product lines
to other of the Company's facilities or its Joint Ventures. The relocation of
the Waynesboro, VA facility was completed in 1999. The relocation of the Midtex
facility is expected to be completed by the quarter ended March 31, 2001.
<PAGE>
Interest expense of the Company for the nine months ended September 30, 2000,
increased $1.7 million, or 13.0%, to $14.7 million from $13.0 million for the
corresponding period in 1999. The increase was due primarily to the increased
debt levels associated with financing the Products Acquisition and increases in
interest rates partially offset by lower debt.
The income tax expense of the Company for the nine months ended September 30,
2000 was 44.8% of loss before income taxes as compared to an income tax benefit
of 10.1% of loss before income taxes for the corresponding period in 1999. The
decreased benefit is due primarily to the goodwill amortization not deductible
for tax purposes of the Products Acquisition.
Segment Discussion
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999
High Performance Group
Net sales of HPG increased by $3.3 million, or 18.9%, to $20.9 million from
$17.6 million for the corresponding period in 1999. This increase is due
primarily to (i) strong demand in the segment's served markets and (ii) the
introduction of new products, partially offset by (iii) the expected slowdown in
the commercial airframe market and (iv) continued price pressure in an
increasingly competitive global market place.
Operating income of HPG increased $902,000, or 38.6%, to $3.2 million from $2.3
million for the same period in 1999. Operating income of HPG as a percentage of
HPG net sales increased to 15.5% from 13.3% for the same period in 1999. The
increase in operating income as a percentage of net sales is due primarily to
(i) lower overhead costs in fiscal 2000 due to the relocation of the Waynesboro,
VA facility, (ii) higher sales volume, (iii) continued cost reductions, (iv) the
control of fixed costs and (v) the charges in fiscal 1999 of $320,000 due to the
relocation of the Waynesboro, VA facility, partially offset by (vi) continued
price pressure in an increasingly competitive global market place and (vii) a
shift in demand of product to higher volumes with lower price and lower standard
margins.
Specialized Industrial Group
Net sales of SIG increased $5.5 million, or 19.6%, to $33.6 million from $28.1
million for the same period in 1999. This increase is due primarily to (i)
strong demand in the segment's served markets and (ii) the introduction of new
products, partially offset by (iii) continued price pressure in an increasingly
competitive global market place and (iv) unfavorable foreign exchange rates.
Operating income of SIG increased $764,000, or 32.2%, to $3.1 million from $2.4
million for the same period in 1999. Operating income of SIG as a percentage of
SIG net sales increased to 9.3% from 8.4% for the same period in 1999. This
increase in operating income as a percentage of net sales is due primarily to
(i) higher sales volume and (ii) continued cost reductions, partially offset by
(iii) the charges in the third quarter of 2000 of $21,000 due to the relocation
of the Midtex facility, (iv) continued price pressure in an increasingly
competitive global market place, (v) unfavorable exchange rates and (vi) a shift
in demand of product to higher volumes with lower price and lower standard
margins.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
<PAGE>
High Performance Group
Net sales of HPG increased by $3.5 million, or 6.0%, to $60.8 million from $57.3
million for the corresponding period in 1999. This increase is due primarily to
(i) strong demand in the segment's served markets and (ii) the introduction of
new products, partially offset by (iii) the expected slowdown in the commercial
airframe market and (iv) continued price pressure in an increasingly competitive
global market place.
Operating income of HPG increased $2.3 million, or 33.1%, to $9.1 million from
$6.8 million for the same period in 1999. Operating income of HPG as a
percentage of HPG net sales increased to 15.0% from 11.9% for the same period in
1999. The increase in operating income as a percentage of net sales is due
primarily to (i) lower overhead costs in 2000 due to the relocation of the
Waynesboro, VA facility, (ii) higher sales volume, (iii) continued cost
reductions, (iv) the control of fixed costs and (v) the charges in 1999 of
$685,000 due to the relocation of the Waynesboro, VA facility, partially offset
by (vi) continued price pressure in an increasingly competitive global market
place and (vii) a shift in demand of product to higher volumes with lower price
and lower standard margins.
Specialized Industrial Group
Net sales of SIG increased $23.7 million, or 32.9%, to $95.5 million from $71.9
million for the same period in 1999. Excluding Products for the period from
March 19, 1999 to March 31, 1999 and from January 1, 2000 to March 31, 2000, net
sales of SIG increased $9.9 million, or 14.2%, to $79.6 million from $69.7
million for the same period in 1999. This increase is due primarily to (i)
strong demand in the segment's served markets and (ii) the introduction of new
products, partially offset by (iii) continued price pressure in an increasingly
competitive global market place and (iv) unfavorable foreign exchange rates.
Operating income of SIG increased $1.3 million, or 22.7%, to $7.3 million from
$6.0 million for the same period in 1999. Operating income of SIG as a
percentage of SIG net sales decreased to 7.7% from 8.3% for the same period in
1999. Excluding Products for the period from March 19, 1999 to March 31, 1999
and January 1, 2000 to March 31, 2000, operating income of SIG increased
$864,000, or 14.9%, to $6.7 million from $5.8 million for the corresponding
period in 1999. Excluding Products for the period from March 19, 1999 to March
31, 1999 and January 1, 2000 to March 31, 2000, operating income of SIG as a
percentage of SIG net sales increased to 8.4% from 8.3% for the same period in
1999. This increase in operating income as a percentage of net sales is due
primarily to (i) higher sales volume and (ii) continued cost reductions,
partially offset by (iii) the charges in 2000 of $821,000 due to the relocation
of the Midtex facility, (iv) continued price pressure in an increasingly
competitive global market place, (v) unfavorable exchange rates and (vi) a shift
in demand of product to higher volumes with lower price and lower standard
margins.
Liquidity and Capital Resources
Although there can be no assurances, the Company anticipates that its cash flow
generated from operations and borrowings under the Senior Credit Facility will
be sufficient to fund the Company's working capital needs, planned capital
expenditures, scheduled interest payments (including interest payments on the
Notes and amounts outstanding under the Senior Credit Facility) and its business
strategy for the next twelve months. However, the Company may require additional
funds if it enters into strategic alliances, acquires significant assets or
businesses or makes significant investments in furtherance of its growth
strategy. The ability of the Company to satisfy its capital requirements will
depend upon the future financial performance of the Company, which in turn will
be subject to general economic conditions and to financial, business, and other
factors, including factors beyond the
<PAGE>
Company's control. At September 30, 2000, the Company had available unused
borrowing capacity of $13.1 million under the Senior Credit Facility.
Cash Provided by Operating Activities
For the nine months ended September 30, 2000, cash provided by operating
activities was $4.7 million, compared to $10.2 million for the same period in
1999. The decrease in cash provided by operations is due primarily to an
increase in accounts receivable due to higher revenues, an increase in interest
expense, an increase in inventory to support higher volumes and turns improving
at a slower rate than in 1999, partially offset by an increase in accounts
payable and accrued expenses.
The days' sales outstanding for accounts receivable was approximately 45.0 trade
days at September 30, 2000 and approximately 47.0 at December 31, 1999. The
average days' sales outstanding decreased due to the Company's continued focus
on improving its collection efforts.
The Company's inventories increased from $27.5 million at December 31, 1999 to
$29.7 million at September 30, 2000. Inventory turns were 5.3 at September 30,
2000 and 4.6 at December 31, 1999. The Company continually focuses on improving
its inventory management.
The Company's accounts payable increased from $13.1 million at December 31, 1999
to $16.6 million at September 30, 2000.
Cash Used in Investing Activities
Capital expenditures were $3.8 million for the nine months ended September 30,
2000 and $2.8 million for the corresponding period in 1999. Acquisition spending
totaled $60.3 million for the nine months ended September 30, 1999 due to the
Products Acquisition. Investment in joint ventures was $144,000 for the nine
months ended September 30, 1999. Capital expenditures increased due to the
Products Acquisition and expenditures to support higher volume, cost reductions,
and new product development.
Cash Flows from Financing Activities
Cash used in financing activities for the nine months ended September 30, 2000
was $6.7 million compared to cash provided by financing activities of $53.3
million for the same period in 1999. This change is due primarily to financing
the Products Acquisition through additional borrowings under the amended Senior
Credit Facility as well as additional paid-in capital from the Parent in the
first nine months of 1999 and the Company's commitment to working capital
management that allowed a significant reduction of debt in the first nine months
of 2000.
Adjusted EBITDA
Adjusted EBITDA represents income (loss) before interest expense (net), income
taxes, depreciation and amortization, and before any gain (loss) on disposal of
assets, adjusted for extraordinary, unusual, and nonrecurring items, the non
cash charges resulting from the Parent stock options granted in 1999 and in
2000, facility relocation charges, and additional charges to cost of sales and
general and administrative costs resulting from the fair value adjustments to
inventory and fixed assets pursuant to Accounting Principles Board Opinion Nos.
16 and 17. Adjusted EBITDA is not intended to represent cash flow from
operations or net income as defined by generally accepted accounting principles
and should not be considered as a measure of liquidity or an alternative to, or
more meaningful than, operating income or operating cash flow as an indication
of the Company's operating performance. Adjusted EBITDA is included herein
because management believes that certain investors find it a useful tool for
measuring the Company's ability to service its debt. There are no
<PAGE>
significant commitments for expenditures of funds not contemplated by this
measure of adjusted EBITDA. Adjusted EBITDA as presented may not be comparable
to other similarly titled measures presented by other companies and could be
misleading unless substantially all companies and analysts calculate adjusted
EBITDA the same.
Adjusted EBITDA increased to $24.5 million for the nine months ended September
30, 2000 from $20.0 million for the corresponding period in 1999. Adjusted
EBITDA increased to $8.7 million for the three months ended September 30, 2000
from $7.5 million for the corresponding period in 1999.
Inflation
---------
Historically, the Company does not believe inflation had any material effect on
the Company's business. However, the Company does believe that inflation began
to have an unfavorable impact on the Company's business during 1999 and 2000 due
to a tighter US labor market which the Company believes has caused labor costs
to increase at a higher percentage level than in previous years.
Disclosure Regarding Forward-Looking Statements
-----------------------------------------------
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.
Item 3:
Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to market risks from changes in interest rates and
foreign currency exchange rates which may adversely affect its results of
operations and financial condition. The Company seeks to minimize these risks
through its regular operating and financing activities.
The Company engages in neither speculative nor derivative financial or trading
activities.
Interest Rate Risk
The Company has exposure to interest rate risk related to certain instruments
entered into for other than trading purposes. Specifically, the Company has in
place the Senior Credit Facility, which consists of two term loans, Tranche A
with a balance of $23.5 million at September 30, 2000, Tranche B with a balance
of $53.7 million at September 30, 2000 and $11.8 million outstanding on the
Revolving Credit Facility, all of which bear interest at variable rates.
Borrowings under the Senior Credit Facility bear interest based on the Lenders'
Reference Rate (as defined in the credit agreement) or Eurodollar Rate plus an
applicable margin. While changes in the Reference Rate or the Eurodollar Rate
could affect the cost of funds borrowed in the near future, only $1.8 million of
the Revolving Credit Facility at September 30, 2000 was carried at a variable
rate, with the remainder of the Senior Credit Facility on short term fixed
rates. The Company, therefore, believes the effect, if any, of reasonable
possible near-term changes in interest rates on the Company's consolidated
financial position, results of operations and cash flows would not be material.
<PAGE>
In September 1997, the Company consummated an offering of $95,000,000 aggregate
principal amount of 10% Senior Subordinated Notes (the "Notes:), due 2004, (the
"Offering"). Interest on the Notes is payable semi-annually in arrears on March
15 and September 15 of each year. The Notes will mature on September 15, 2004,
unless previously redeemed, and the Company will not be required to make any
mandatory redemption or sinking fund payment prior to maturity except in
connection with a change in ownership. The Notes may be redeemed, in whole or in
part at any time, on or after September 15, 2001 at the option of the Company,
at the redemption prices set forth in the Indenture, plus, in each case, accrued
and unpaid interest and premium, if any, to the date of redemption.
The Company's Notes are at a fixed interest rate of 10%. As a result, a change
in the fixed rate interest market would change the estimated fair market value
of its fixed rate long term bond debt. The Company believes that a 10% change in
the long term interest rates would not have a material effect on the Company's
financial conditions, results of operations or cash flows.
While the Company historically has not used interest rate swaps, it may, in the
future, use interest rate swaps to assist in managing the Company's overall
borrowing costs and reduce exposure to adverse fluctuations in interest rates.
Foreign Currency Exchange Risk
The Company has seven foreign subsidiaries or divisions, located in Mexico,
Germany, Jamaica, Barbados and Hong Kong as well as Joint Ventures in India and
China. The Company generates about 18% of its net sales from customers located
outside the United States. The Company's ability to sell its products in these
foreign markets may be affected by changes in economic, political or market
conditions in the foreign markets in which it does business.
The Company experiences foreign currency translations gains and losses, which
are reflected in the Company's consolidated statement of operations and
comprehensive income and loss, due to the strengthening and weakening of the US
dollar against the currencies of the Company's foreign subsidiaries or divisions
and the resulting effect on the valuation of the intercompany accounts and
certain assets of the subsidiaries which are denominated in US dollars. The net
loss resulting from foreign currency translations was $134,000 in the nine
months ended September 30, 2000 compared to a net loss of $70,000 in the
comparable period of 1999.
The Company anticipates that it will continue to have exchange gains or losses
from foreign operations in the future.
Part II - Other Information
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
See Index of Exhibits.
<PAGE>
On October 6, 2000, the Company filed a Current Report on Form 8-K to report a
change in the registrant's certifying accountant.
SIGNATURES
CII Technologies, Inc.
(formerly known as
Communications Instruments, Inc.)
November 9, 2000 /s/ Michael A. Steinback
---------------------- -----------------------------------------------
Date Michael A. Steinback
President and Chief Executive Officer
November 9, 2000 /s/ Richard L. Heggelund
---------------------- -----------------------------------------------
Date Richard L. Heggelund
Vice President and Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------------------------------------------------------------------------------
2.1+ Agreement and Plan of Merger, dated as of March 10, 1998, by and
among the Company, RF Acquisition Corp. and Corcom, Inc. is
incorporated herein by reference to Report on Form 8-K
(File Number 333-38209).
3.1 Articles of Incorporation of the Company is incorporated herein by
reference to Registration Statement on Form S-4
(File Number 333-38209)
3.2 By-laws of the Company is incorporated herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
3.3 Articles of Incorporation of Kilovac Corporation ("Kilovac") is
incorporated herein by reference to Registration Statement on
Form S-4
(File Number 333-38209)
3.4 By-laws of Kilovac Corporation is incorporated herein by reference
to Registration Statement on Form S-4
(File Number 333-38209)
3.5 Articles of Incorporation of Kilovac International, Inc. ("Kilovac
International") is incorporation herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
3.6 By-laws of Kilovac International is incorporated herein by
reference to Registration Statement on Form S-4
(File Number 333-38209)
3.7 Amended and Restated Articles of Incorporation of Corcom, Inc. is
incorporated herein by reference to Report on Form 10-K
(File Number 333-38209)
3.8 By-laws of Corcom, Inc. is incorporated herein by reference to
Report on Form 10-K
(File Number 333-38209)
4.1 Indenture dated as of September 18, 1997 by and among the Company,
Kilovac, Kilovac International and Norwest Bank Minnesota,
National Association, is incorporated herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
4.2 Purchase Agreement dated as of September 12, 1997 between the
Company, Kilovac and Kilovac International and BancAmerica
Securities, Inc. and Salomon Brothers, Inc., is incorporated
herein by reference to Registration Statement on Form S-4
(File Number 333-38209)
<PAGE>
4.3 Registration Rights Agreement dated as of September 18, 1997
between the Company, Kilovac and Kilovac International and
BancAmerica Securities, Inc. and Salomon Brothers, Inc., is
incorporated herein by reference to Registration Statement on
Forms S-4
(File number 333-38209)
4.4 Supplemental Indenture, dated as of June 18, 1998 between Corcom,
Inc. and Norwest Bank Minnesota, National Association is
incorporated herein by reference to Report on Form 10-K
(File Number 333-38209)
10.1 Employment Agreement dated as of May, 1993 between the Company and
Ramzi A. Dabbagh is incorporated herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
10.2 Employment Agreement dated as of May, 1993 between the Company and
G. Dan Taylor is incorporated herein by reference to Registration
Statement on Form S-2
(File Number 333-38209)
10.3 Employment agreement dated as of May, 1993 between the Company and
Michael A. Steinback is incorporated herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
10.4 Employment Agreement dated as of January 7, 1994 between the
Company and David Henning is incorporated herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
10.5 Management Agreement, dated as of September 18, 1997 among the
Company, parent and CHS Management III, L.P. is incorporated by
reference to Registration Statement on Form S-4
(File Number 333-38209)
10.6 Tax Sharing Agreement dated as of September 18, 1997 between the
Company, Parent, Kilovac International and Kilovac International
FSC Ltd. is incorporated herein by reference to Registration
Statement on Form S-4
(File Number 333-38209)
10.7+ Credit Agreement dated as of September 18, 1997 between the
Company, Parent, various banks, Bank of America National Trust and
Savings Association and BancAmerica Securities, Inc., is
incorporated herein by reference to Registration Statement on
Forms S-4
(File Number 333-38209)
10.8 Pledge Agreements dated as of September 18, 1997 by parent, the
Company, Kilovac and Kilovac International in favor of Bank of
America Trust and Savings Association, is incorporated herein by
reference to Registration Statement on Form S-4
(File Number 333-38209)
<PAGE>
10.9 Subsidiary Guarantee dated as of September 18, 1997 by Kilovac and
Kilovac International in favor of Bank of America National Trust
and Savings Association, is incorporated herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
10.10 Security Agreement dated as of September 18, 1997 among Parent,
the Company, Kilovac and Kilovac International in favor of Bank of
America National Trust and Savings Association is incorporated
herein by reference to Registration Statement on Form S-4
(File Number 333-3820)
10.11 Stock Subscription and Purchase Agreement dated as of September
20, 1995, by and among the Company, Kilovac and the stockholders
and optionholders of Kilovac name therein, is incorporated herein
by reference to Registration Statement on Form S-4
(File Number 333-38209)
10.12+ Asset Purchase Agreement dated as of June 27, 1996 between the
Company and Figgie International Inc., is incorporated herein by
reference to Registration Statement on Form S-4
(File Number 333-38209)
10.13 Environmental Remediation and Escrow Agreement, dated as of July
2, 1996, is incorporated herein by reference to Registration
Statement on Form S-4
(File Number 333-38209)
10.14 Lease Agreement dated as of July 2, 1996 by and between Figgie
Properties, Inc. and Communications Instruments, Inc. d/b/a
Hartman Division of CII Technologies Inc. is incorporated herein
by reference to Registration Statement on Form S-4
(File Number 333-38209)
10.15 Second Amendment to Stock Subscription and Purchase Agreement
dated as of August 26, 1996, by and among the Company, Kilovac and
certain selling stockholders, is incorporated herein by reference
to Registration Statement on Form S-4
(File Number 333-38209)
10.16+ Recapitalization Agreement dated as of August 6, 1997 and among
Parent, certain investors and certain selling stockholders, is
incorporated herein by reference to Registration Statement on Form
S-4
(File Number 333-38209)
10.17 Amendment to the Recapitalization Agreement dated as of September
18, 1997 by and among Parent, certain investors and certain
selling stockholders, is incorporated herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
10.18 Indemnification and Escrow Agreement dated as of September 18,
1997 by and among Parent, certain investors, certain selling
stockholders and
<PAGE>
American National Bank and Trust Company of Chicago, is
incorporated herein by reference to Registration Statement on Form
S-4
(File Number 333-38209)
10.19 Stockholders Agreement dated September 18, 1997 by and among
Parent and certain of its stockholders, is incorporated herein by
reference to Registration Statement on Form S-4
(File Number 333-38209)
10.20 Registration Agreement dated as of September 18, 1997 by and among
Parent and certain of its stockholders is incorporated by
reference to Registration Statement on Form S-4
(File Number 333-38209)
10.21 Form of Junior Subordinated Promissory Note of Parent is
incorporated herein by reference to Registration Statement on Form
S-4
(File Number 333-38209)
10.22 Employment Agreement dated as of October 11, 1995 between Kilovac
and Dan McAllister is incorporated herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
10.23 Employment Agreement dated as of October 11, 1995 between Kilovac
and Pat McPherson is incorporated herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
10.24 Employment Agreement dated as of October 11, 1997 between Kilovac
and Rick Danchuk is incorporated herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
10.25 Employment Agreement dated as of October 11, 1997 between Kilovac
and Robert A. Helman is incorporated herein by reference to
Registration Statement on Form S-4
(File Number 333-38209)
10.26 Asset Purchase Agreement dated as of November 30, 1997 by and
between the Company and Genicom Corporation is incorporated by
reference to Report on Form 8-K
(File number 333-38209)
10.27+ Stock Purchase Agreement dated as of October 31, 1997 by and
between the Company and Societe Financiere D'Investissements Dans
L'Equipement et la Construction Electrique, S.A., the sole
stockholder of IBEX Aerospace Technologies, Inc. is incorporated
herein by reference to Report on Form 10-K
(File Number 333-38209)
10.28+ Asset Purchase Agreement dated May 6, 1998, between Kilovac
Corporation, Zerubavel Heifetz, Cesar Marestaing and Wilmar
Electronics, Inc. is incorporated herein by reference to Report on
Form 10-K
(File Number 333-38209)
<PAGE>
10.29+ Asset Purchase Agreement dated as of July 24, 1998, by and between
the Company and Cornell-Dubilier Electronics, Inc.
10.30 Voting Agreement dated as of March 10, 1998, by and among RF
Acquisition Corp., Werner E. Neuman and James A. Steinback is
incorporated herein by reference to Report on Form 10-K
(File Number 333-38209)
10.31+ Credit Agreement dated as of June 19, 1998, among the Company,
Parent, Bank of America National Trust and Savings Association and
certain other lending institutions from time to time a party
thereto is incorporated herein by reference to Report on Form 10-K
(File Number 333-38209)
10.32+ Pledge Agreement dated as of June 19, 1998, among Parent, the
Company, Kilovac and Kilovac International in favor of Bank of
America National Trust and Savings Association is incorporated
herein by reference to Report on form 10-K
(File Number 333-38209)
10.33+ Subsidiary Guarantee dated as of June 19, 1998 by Kilovac, Kilovac
International and Corcom, Inc. in favor of Bank of America
National Trust and Savings Association is incorporated herein by
reference to Report on Form 10-K
(File Number 333-38209)
10.34+ Security Agreement dated as of June 19, 1998, among Parent, the
Company, Kilovac, Kilovac International and Corcom, Inc. in favor
of Bank of America National Trust and Savings Association is
incorporated herein by reference to Report on Form 10-K
(File Number 333-38209)
10.35+ Stock Purchase Agreement dated March 19, 1999, by and among
Products Unlimited Corporation, the Stockholders of Products
Unlimited Corporation and the Company is incorporated herein by
reference to Report on Form 8-K
(File Number 333-38209)
10.36+ Amended and restated Credit Agreement among Parent, the Company,
various lenders, NationsBank, N.A., as an Issuing Lender and
Swingline Lender, and NationsBank, N. A., as the Administrative
Agent, is incorporated herein by reference to Report on Form 8-K
(File Number 333-38209)
10.37+ Amended and restated Subsidiary Guaranty by certain subsidiaries
of the Company in favor of NationsBank, N.A. is incorporated
herein by reference to Report on Form 8-K
(File Number 333-38209)
10.38+ Amended and restated Security Agreement among Parent, the Company,
certain subsidiaries of the Company and Bank of America National
Trust and Savings Association, as collateral agent, is
incorporated herein by reference to report on Form 8-K
(File Number 333-38209)
<PAGE>
10.39+ Amended and restated Pledge Agreement by Parent, the Company and
certain subsidiaries of the Company in favor of Bank of America
National Trust and Savings Association, as collateral agent, is
incorporated herein by reference to Report on Form 8-K
(File Number 333-38209)
11.1 Statement re-Computation of Per Share Earnings. Not required
because the relevant computations can be clearly determined from
the material contained in the financial statements included
herein.
27 Financial Data Schedule
99.1 Press release dated March 22, 1999, published by the registrant is
incorporated herein by reference to Report on Form 8-K
(File Number 333-38209)
+ The Company agrees to furnish supplementally to the Commission a copy of any
omitted schedule to such agreement upon the request of the Commission in
accordance with Item 601 of Regulation S-K.
