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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT TO APPLICATION OR REPORT
Filed pursuant to Section 12, 13 or 15(d) of
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-10355
COMMUNICATIONS SYSTEMS, INC.
................................................................................
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
................................................................................
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Current Report on Form 8-K (Date
of Report: November 18, 1996) as set forth in the pages attached hereto:
Item 7: Financial Statements and Pro Forma Financial Information.
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 SYSTEMS, INC.
by /s/ Paul N. Hanson
Paul N. Hanson
Vice President and Chief Financial Officer
November 19, 1996
Total Pages (6)
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Item 7: Financial Statements and Pro Forma Financial Information.
The information originally supplied under this item is supplemented by the
following:
Pro forma Financial Information (unaudited) Page Herein
Pro forma Consolidated Balance Sheet as of September 30, 1996 3
Notes to Pro forma Consolidated Balance Sheet 4
Pro forma Consolidated Income Statement for the year ended
December 31, 1995 and Notes to 1995 Pro forma Consolidated
Income Statement 5
Pro forma Consolidated Income Statement for the nine months
ended September 30, 1996 and Notes to 1996 Consolidated Pro
forma Condensed Income Statement 6
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following pro forma consolidated financial statements of income and
explanatory notes show the pro forma effect on operating results of
Communications Systems, Inc. (the Company) as if the sale of the assets of
Zercom Corporation to Nortech Systems, Inc. occurred as of the beginning of the
periods presented. The sale was completed on November 4, 1996.
The pro forma balance sheet and explanatory notes show the effect on the
Company's financial position as if the sale occurred January 1, 1996.
The pro forma financial information and explanatory notes are unaudited and
include adjustments which are based on management assumptions. The accompanying
pro forma financial statements should be read in conjunction with the historical
financial statements and notes thereto included in the Company's Quarterly
Report on Form 10-Q for the nine months ended September 30, 1996 and Annual
Report on Form 10-K for the year ended December 31, 1995. Management believes
these statements provide a reasonable basis for presenting the significant
effects of the sale and the pro forma adjustments are properly applied in the
pro forma statements.
The pro forma financial statements are not necessarily indicative of the results
of operations had the sale occurred at the beginning of the periods presented,
nor are they necessarily indicative of the results of future operations.
2
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PRO FORMA CONDENSED BALANCE SHEET (unaudited)
The following unaudited pro forma condensed balance sheet as of September 30,
1996 sets forth the effects of the sale of Zercom Corporation which was
completed on November 4, 1996, as if the sale had been completed September 30,
1996.
<TABLE>
<CAPTION>
COMMUNICATIONS SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA BALANCE SHEET
as of September 30, 1996
Historical Pro Forma
Balance Pro Forma Balance
Assets: Sheet Adjustments Sheet
____________ ____________ ____________
Current assets:
<S> <C> <C> <C>
Cash $14,892,182 $1,637,570 [a] [c] $16,529,752
Marketable securities 859,890 859,890
Receivables, net 11,121,364 1,975,075 [d] 13,096,439
Inventories 13,211,397 13,211,397
Prepaid expenses 618,163 618,163
Deferred income taxes 869,000 869,000
____________ ____________ ____________
Total current assets 41,571,996 3,612,645 45,184,641
Property, plant and equipment 23,744,102 23,744,102
less accumulated depreciation (15,044,851) (15,044,851)
____________ ____________ ____________
Net property, plant and equipment 8,699,251 0 8,699,251
Net assets of and advances to discontinued
Zercom operations 8,364,379 (8,364,379) [e] -
Other assets:
Investments in mortgage backed
and other securities 4,643,194 4,643,194
Excess of cost over net assets acquired 3,173,596 3,173,596
Deferred income taxes 354,044 354,044
Other assets 293,744 293,744
Notes receivable 5,000,000 [b] 5,000,000
____________ ____________ ____________
Total other assets 8,464,578 5,000,000 13,464,578
____________ ____________ ____________
Total Assets $67,100,204 $248,266 $67,348,470
____________ ____________ ____________
____________ ____________ ____________
Liabilities and Stockholders' Equity:
Current liabilities:
Notes payable
Accounts payable $3,157,698 $3,157,698
Accrued expenses 2,260,664 2,260,664
Dividends payable 740,278 740,278
Income taxes payable 2,615,638 2,615,638
Reserve for loss on discontinued
operations 248,266 [f] 248,266
____________ ____________ ____________
Total current liabilities 8,774,278 248,266 9,022,544
Stockholders' Equity 58,325,926 58,325,926
____________ ____________ ____________
Total Liabilities and Stockholders' Equity $67,100,204 $248,266 $67,348,470
____________ ____________ ____________
____________ ____________ ____________
</TABLE>
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NOTES TO PRO FORMA CONDENSED BALANCE SHEET (unaudited)
Pro forma adjustments reflect the Company's sale of the inventory, property,
plant, equipment and intangible assets of Zercom Corporation. to Nortech
Systems, Inc. The Company sold these assets in exchange for $1,500,000 of cash,
and a $5,000,000 note receivable at 8.25% annual interest. The Company retained
Zercom's cash and accounts receivable and remains obligated for Zercom's
liabilities.
The following is a summary of the adjustments required in accordance with
generally accepted accounting principles:
a. Record cash receipt from Nortech Systems, Inc.
from sale of Zercom $1,500,000
b. Record note receivable from Nortech from sale of Zercom 5,000,000
c. Record net cash retained from Zercom following payment
of outstanding liabilities 137,570
d. Record Zercom receivables retained by the Company 1,975,075
e. Eliminate net assets of and advances to Zercom Operations
as result of the sale 8,364,379
f. Record reserve established for future adjustments to
sales agreement 248,266
4
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PRO FORMA CONDENSED INCOME STATEMENT (unaudited)
The following unaudited pro forma consolidated condensed income statement for
the twelve months ended December 31, 1995 sets forth the effects of the sale of
Zercom Corporation as if it had occurred effective January 1, 1995. The pro
forma condensed income statement should be read in conjunction with the
historical consolidated financial statements and related notes thereto of
Communications Systems, Inc.
<TABLE>
<CAPTION>
COMMUNICATIONS SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF INCOME
Twelve Months Ended December 31, 1995
Discontinued Historical
Historical Operations Continuing Pro Forma Pro Forma
Statements Adjustments Operations Adjustments Results
____________ ____________ ____________ ____________ ____________
<S> <C> <C> <C> <C> <C>
Sales $85,614,365 ($19,610,049) $66,004,316 $66,004,316
Costs and expenses:
Cost of sales 64,393,055 (17,095,977) 47,297,078 47,297,078
Selling, general and
administrative expenses 10,777,137 (2,258,493) 8,518,644 8,518,644
____________ ____________ ____________ ____________ ____________
Total costs and expenses 75,170,192 (19,354,470) 55,815,722 0 55,815,722
____________ ____________ ____________ ____________ ____________
Operating income 10,444,173 (255,579) 10,188,594 0 10,188,594
Other income and (expenses):
Investment income 975,263 (58,226) 917,037 $412,500 [a] 1,329,537
Interest expense (35,283) 17,477 (17,806) (17,806)
____________ ____________ ____________ ____________ ____________
Other income, net 939,980 (40,749) 899,231 412,500 1,311,731
Income before income taxes 11,384,153 (296,328) 11,087,825 412,500 11,500,325
Income taxes 2,300,000 (136,000) 2,164,000 165,000 [b] 2,329,000
____________ ____________ ____________ ____________ ____________
Net income 9,084,153 (160,328) 8,923,825 $247,500 9,171,325
____________ ____________ ____________ ____________ ____________
____________ ____________ ____________ ____________ ____________
Net income per share $.99 $ (.02) $.97 $.99
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
Average common and common
equivalent shares outstanding 9,217,000 9,217,000 9,217,000 9,217,000
____________ ____________ ____________ ____________
____________ ____________ ____________ ____________
</TABLE>
NOTES TO PRO FORMA CONDENSED INCOME STATEMENT (unaudited) Twelve Months Ended
December 31, 1995
The following is a summary of the adjustments required in accordance with
generally accepted accounting principles:
a. Interest income from note receivable from
Nortech Systems, Inc. $412,500
b. Income tax expense (40% rate) 165,000
5
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<TABLE>
<CAPTION>
COMMUNICATIONS SYSTEMS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF INCOME
Nine Months Ended September 30, 1996
Historical Pro Forma Pro Forma
Statements Adjustments Results
____________ ____________ ____________
<S> <C> <C> <C>
Sales from continuing operations $50,618,464 $50,618,464
Costs and expenses:
Cost of sales 35,504,434 35,504,434
Selling, general and
administrative expenses 7,884,875 7,884,875
____________ ____________ ____________
Total costs and expenses 43,389,309 0 43,389,309
____________ ____________ ____________
Operating income from continuing operations 7,229,155 0 7,229,155
Other income and (expenses):
Investment income 490,719 $309,375 [a] 800,094
Interest expense (16,499) (16,499)
____________ ____________ ____________
Other income, net 474,220 309,375 783,595
Income before income taxes 7,703,375 309,375 8,012,750
Income taxes 1,600,000 123,750 [b] 1,723,750
____________ ____________ ____________
Income from continuing operations 6,103,375 185,625 6,289,000
Discontinued operations:
Loss from discontinued Zercom
operations, net of income taxes (355,124) (355,124)
Loss on disposal of Zercom operations,
including provision of $30,000 for
operating losses during disposal
period (net of tax benefit of $133,000) (393,000) (393,000)
____________ ____________ ____________
Net income $5,355,251 $185,625 $5,540,876
____________ ____________ ____________
____________ ____________ ____________
Net income per share:
Continuing operations $.65 $.67
Discontinued operations (.08) (.08)
____________ ____________
$.57 $.59
____________ ____________
____________ ____________
Average common and common
equivalent shares outstanding 9,393,000 9,393,000
____________ ____________
____________ ____________
</TABLE>
NOTES TO PRO FORMA CONDENSED INCOME STATEMENT (unaudited) Nine Months Ended
September 30, 1996
The following is a summary of the adjustments required in accordance with
generally accepted accounting principles:
a. Interest income from note receivable from
Nortech Systems, Inc. $309,375
b. Income tax expense (40% rate) 123,750
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