United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 2, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
Commission file number: 0-9023
COMDIAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 94-2443673
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P. O. Box 7266
1180 Seminole Trail; Charlottesville, Virginia 22906-7266
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 978-2200
Securities registered pursuant to Section 12(g) of the Act:
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. Yes X No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of latest practicable date. 21,119,675 common shares as
of April 2, 1995.
<PAGE>
COMDIAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
Consolidated Balance Sheets as of
April 2, 1995 and December 31, 1994 3
Consolidated Statements of Operations
for the Three Months ended
April 2, 1995 and April 3, 1994 4
Consolidated Statements of Cash Flows
for the Three Months ended
April 2, 1995 and April 3, 1994 5
Notes to Consolidated Financial Statements 6-9
ITEM 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-14
PART II - OTHER INFORMATION
ITEM 5: Other Information 15
ITEM 6: Exhibits and Reports on Form 8-K 15
<PAGE>
COMDIAL CORPORATION AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<TABLE>
Consolidated Balance Sheets - (Unaudited)
(Unaudited) *
April 2, December 31,
In thousands except par value 1995 1994
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $62 $1,679
Accounts receivable - net 8,881 6,637
Inventories 17,366 16,869
Prepaid expenses and other current assets 1,445 1,014
Total current assets 27,754 26,199
Property - net 13,541 13,668
Other assets 2,434 2,393
Total assets $43,729 $42,260
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $7,629 $6,977
Accrued promotional allowances 1,028 1,592
Other accrued liabilities 2,926 3,533
Current maturities of debt 3,889 2,466
Total current liabilities 15,472 14,568
Long-term debt 3,988 4,737
Long-term employee benefit obligations 1,974 1,912
Commitments and contingent liabilities
Total liabilities 21,434 21,217
Stockholders' equity
Series A 7-1/2% preferred stock ($10.00 par value),
(Authorized shares 2,000; issued 750 shares) 7,500 7,500
Common stock ($0.01 par value) and paid-in capital (Authorized
30,000 shares; issued shares: 1995 = 21,120; 1994 = 20 100,517 100,320
Other (973) (942)
Accumulated deficit (84,749) (85,835)
Total stockholders' equity 22,295 21,043
Total liabilities and stockholders' equity $43,729 $42,260
Condensed from audited financial statements.
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
COMDIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations - (Unaudited)
April 2, April 3,
In thousands except per share amounts 1995 1994
Net sales $22,316 $17,639
Cost of goods sold 15,192 11,773
Gross profit 7,124 5,866
Operating expenses
Selling, general & administrative 4,344 3,739
Engineering, research & development 1,043 984
Operating income 1,737 1,143
Other expense (income)
Interest expense 273 392
Miscellaneous expense 194 114
Income before income taxes and extraordinary item 1,270 637
Income tax expense 40 22
Income before extraordinary item 1,230 615
Extraordinary item, write-off of debt issuance cost 0 389
Net income 1,230 226
Dividends on preferred stock 143 106
Net income applicable to common stock $1,087 $120
Earnings per common share and common equivalent share:
Primary:
Income before extraordinary item $0.05 $0.02
Extraordinary item 0.00 (0.01)
Net income per common share $0.05 $0.01
Weighted average common shares outstanding:
Primary 21,659 21,753
The accompanying notes are an integral part of these financial statements.
<PAGE>
COMDIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows - (Unaudited)
April 2, April 3,
In thousands 1995 1994
Cash flows from operating activities:
Cash received from customers $21,496 $17,456
Other cash received 236 430
Interest received 15 51
Cash paid to suppliers and employees (23,088) (17,364)
Interest paid on debt (223) (431)
Interest paid under capital lease obligations (50) (83)
Income taxes paid 0 (66)
Net cash used by operating activities (1,614) (7)
Cash flows from investing activities:
Proceeds from the sale of equipment 0 31
Capital expenditures (585) (453)
Net cash used by investing activities (585) (422)
Cash flows from financing activities:
Proceeds from borrowings 0 6,000
Net borrowings under revolver agreement 1,445 2,546
Proceeds from issuance of common stock 51 149
Principal payments on debt (608) (13,175)
Principal payments under capital lease obligations (163) (256)
Preferred dividends paid (143) (106)
Net cash provided (used) in financing activities 582 (4,842)
Net decrease in cash and cash equivalents (1,617) (5,271)
Cash and cash equivalents at beginning of year 1,679 5,474
Cash and cash equivalents at end of period $62 $203
Reconciliation of net income to net cash provided
by operating activities:
Net Income $1,230 $226
Depreciation and amortization 915 1,212
Increase in accounts receivable (2,244) (1,334)
Inventory provision 451 425
Increase in inventory (948) (1,692)
Increase in other assets (675) (874)
Increase in accounts payable 652 1,896
Decrease in other liabilities (1,109) (21)
Increase in paid-in capital and other equity 114 155
Total adjustments (2,844) (233)
Net cash provided by operating activities ($1,614) ($7)
The accompanying notes are an integral part of these financial statements.
<PAGE>
COMDIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED APRIL 2, 1995 - (Unaudited)
Note A: CONSOLIDATED FINANCIAL STATEMENTS_____________________________________
The financial information included as of April 2, 1995 and for the three
months ended April 2, 1995 and April 3, 1994 included herein is unaudited;
however, such information reflects all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for
a fair statement of results for such periods. Accounting policies followed by
the Company are described in Note 1 to the consolidated financial statements
in its Annual Report to the Stockholders for the year ended December 31, 1994.
The consolidated financial statements for 1995 should be read in conjunction
with the 1994 financial statements, including notes thereto, contained in the
Company's Annual Report to the Stockholders for the year ended December 31,
1994. Certain amounts in the 1994 consolidated financial statements have been
reclassified to conform to the 1995 presentation. The results of operations
for the three months ended April 2, 1995 are not necessarily indicative of the
results to be expected for the full year. See "Management's Discussion and
Results of Operations and Analysis of Financial Condition."
Note B: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES_________________________
Under the Company's current cash management policy, borrowings from the
revolving credit facility are used for operating purposes. The revolving
credit facility is reduced by cash receipts that are deposited daily. The
Company is reporting the revolving credit facility activity on a net basis on
the Consolidated Statements of Cash Flows. The Company considers outstanding
checks to be a bank overdraft. Bank overdrafts are outstanding checks that
have not cleared the bank or been funded by the revolving credit facility (see
Note D). At April 2, 1995, bank overdrafts increased accounts payable by
$2,236,000.
Note C: INVENTORIES__________________________________________________________
Inventories consist of the following:
______________________________________________________________________________
April 2, December 31,
In thousands 1995 1994
Finished goods $3,242 $2,936
Work-in-process 5,037 4,455
Materials and supplies 9,087 9,478
Total $17,366 $16,869
______________________________________________________________________________
Note D: BORROWINGS____________________________________________________________
As of February 1, 1994, Shawmut Capital Corporation ("Shawmut"), formerly
known as Barclays Business Credit, Inc., held substantially all of the
Company's indebtedness. Prior to February 1, 1994, PacifiCorp, through its
indirect subsidiary, PacifiCorp Credit, Inc. ("PCI"), held substantially all
of the Company's indebtedness.
Long-term Debt. Long-term debt consisted of the following:
______________________________________________________________________________
April 2, December 31,
In thousands 1995 1994
Notes payable to Shawmut
Term notes I and II $5,246 $5,854
Revolving credit 1,445 -
Capitalized leases 1,186 1,349
Total debt 7,877 7,203
Less current maturities on debt 3,889 2,466
Total long-term debt $3,988 $4,737
______________________________________________________________________________
On December 23, 1993, the Company and PCI entered into an agreement (the
"Equity Agreement"), pursuant to which, among other things, PCI agreed to
accept 850,000 shares of a newly designated Series A 7 1/2% Cumulative
Convertible Redeemable Preferred Stock ("Series A Preferred Stock") of the
Company in exchange for the cancellation of $8,500,000 of the Company's
existing indebtedness to PCI (which was a non-cash transaction).
On February 1, 1994, the Company and Shawmut entered into a loan and
security agreement ("Loan Agreement") pursuant to which Shawmut agreed to
provide the Company with a $6,000,000 term loan ("Term Note I") and a
$9,000,000 revolving credit loan facility. The Company's principal balance of
its indebtedness on February 1, 1994 to PCI was $21,209,453, which was paid by
using cash generated from operations of $6,000,000, cash borrowed from Shawmut
of $6,709,453, and the cancellation of the remaining debt of $8,500,000 with
the issuance of Preferred Stock. In December 1994, the Company received
proceeds of $1,000,000 from Cortelco International, Inc. ("Cortelco") relating
to the sale of the electromechanical product line in 1992. The Company used
the proceeds to purchase from PCI 100,000 shares of the Redeemable Preferred
Stock.
On April 29, 1994, the Company and Shawmut amended the Loan Agreement to
permit the Company to borrow an additional $1,300,000 under the Term Note
("Term Note II") to finance the purchase of additional surface mount
technology equipment. The Company will repay the additional advance in 44
consecutive monthly payments of $27,000 beginning on June 1, 1994 with the
balance due on February 1, 1998.
The Shawmut Term Notes I and II of $7,300,000 carry interest rates of 1
1/2% over the Shawmut's prime rate and are payable in equal monthly principal
installments of $152,000 for the next 14 months, and 23 equal monthly
principal installments of $110,334, with the balance due on February 1, 1998.
The Shawmut revolving credit facility carries an interest rate of 1% over
Shawmut's prime rate. Availability under the revolving credit facility is
based on eligible accounts receivable and inventory, less funds already
borrowed. The Company's total indebtedness to Shawmut (term notes plus
revolving credit facility) may not exceed $14,000,000.
Capital leases are with various financing facilities which are payable
based on the terms of each individual lease.
Scheduled maturities of Shawmut Term Notes (current and long-term debt)
as defined in the Loan Agreement are as follows:
______________________________________________________________________________
Principal
In thousands Fiscal Years Installments
Term Notes payable 1995 $1,216 *
1996 1,407
1997 1,324
1998 1,299
* The remaining aggregate for 1995._________________________________________
Debt Covenants. The Company's indebtedness to Shawmut is secured by liens on
the Company's accounts receivable, inventories, intangibles, land, and other
property. Among other restrictions, the Loan Agreement with Shawmut also
contains certain financial covenants that relate to specified levels of
consolidated tangible net worth, profitability, debt service ratio, and
current ratio. The Loan Agreement also limits additional borrowings and
payment of dividends, except for payments to PCI for their Series A Preferred
Stock. On January 23, 1995, the Company and Shawmut amended the Loan
Agreement (the second amendment) to modify the covenant restriction on leases
and profitability. The Company is currently in compliance with all the
covenants and terms as defined in the Loan Agreement.
Note E: EARNINGS PER SHARE__________________________________________________
For 1995 and 1994, earnings per common share were computed by dividing
the net income applicable to common stock by the weighted average number of
common shares outstanding and common equivalent shares.
Note F: INCOME TAXES________________________________________________________
Effective January 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method as required
by Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting
for Income Taxes". As permitted under the rules, prior years' financial
statements have not been restated. The components of the income tax expense
based on the liability method for the three months are as follows:
______________________________________________________________________________
April 2, April 3,
In thousands 1995 1994
Current - Federal $32 $18
State 8 4
Deferred - -
Total provision $40 $22
______________________________________________________________________________
The income tax provision reconciled to the tax computed at statutory
rates for the months are summarized as follows:
______________________________________________________________________________
April 2, April 3,
In thousands 1995 1994
Federal tax (benefit) at statutory rate
(35% in 1995 and 1994) $444 $217
State income taxes (net of federal tax benefit) 5 5
Nondeductible charges 14 23
Alternative minimum tax 32 20
Utilization of operating loss carryover (455) (243)
Income tax provision $40 $22
______________________________________________________________________________
There is no tax benefit for 1994 of the extraordinary item due to the
presence of tax operating loss carryovers.
No deferred taxes have been recognized in the accompanying Consolidated
Balance Sheet and the components are as follows:
______________________________________________________________________________
April 2, December 31,
In thousands 1995 1994
Total deferred tax liabilities $(2,087) $(1,981)
Total deferred tax assets 29,158 29,852
Total valuation allowance (27,071) (27,871)
$ - $ -
______________________________________________________________________________
The valuation allowance decreased $800,000 during the three month period
ended April 2, 1995 and the decrease was primarily related to benefits arising
from the utilization of operating loss carryforwards. The Company
periodically reviews the requirements for a valuation allowance and makes
adjustments to such allowance when changes in circumstances result in changes
in judgment about the future realization of deferred tax assets.
The Company has net operating loss carryforwards and tax credit
carryovers of approximately $70,445,000 and $3,059,000, respectively, which,
if not utilized, will expire at various years up until 2007.
Certain provisions of the tax law may limit the net operating loss and
tax credit carryforwards available for use in any given year in the event of a
significant change in ownership interest. If changes in the Company's stock
ownership exceed 50% of the value of the Company's stock during any three year
period, the utilization of the tax net operating loss and tax credit
carryforwards would be severely limited beginning with the year of ownership
change.
<PAGE>
COMDIAL CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The following discussion attempts to explain the financial condition and
results of operations of the Company. This review should be read in
conjunction with the financial statements and accompanying notes. This
analysis attempts to identify trends and material changes that occurred during
the periods presented.
General Development of the Business
Comdial Corporation ("Comdial") is a Delaware corporation based in
Charlottesville, Virginia. Comdial is engaged in the design, development,
manufacture, distribution, and sale of advanced telecommunications products
and system solutions. Comdial was originally incorporated in Oregon in 1977.
In 1982, Comdial reincorporated in Delaware, and acquired substantially all of
the assets, and assumed substantially all of the liabilities, of General
Dynamics Telephone Systems Center, Inc., formerly known as Stromberg-Carlson
Telephone Systems, Inc. ("Stromberg-Carlson"), a wholly-owned subsidiary of
General Dynamics Corporation. Stromberg-Carlson's facilities, located in
Charlottesville, Virginia since 1955, had engaged in the manufacture of
telephones since 1894.
Comdial's core business is designing, manufacturing, and marketing a
broad line of voice communications systems to small and medium sized
organizations. These products are sold through a network of approximately 700
Preferred Dealers, 700 Associate Dealers, and several thousand independent
interconnects and contractors, who purchase Comdial products from authorized
wholesale distributors. End users served through this channel are typically
small businesses (under 100 employees), but may also include large businesses,
government agencies, and universities who are served by a host PBX or
telephone company supplied Centrex system. When a Comdial system is installed
behind the host system, it is commonly configured to serve specific
departments or call centers.
In the early 1980's Comdial was known as a manufacturer and supplier of
industry standard and decorative residential telephones. In the mid-1980's,
Comdial redirected its strategic focus to the small business market.
In 1992, Comdial introduced the Impact product, a high quality, digital
telephone family which functions on Comdial digital and private branch
exchange ("PBX") systems and provides a variety of sophisticated yet user-
friendly features. In 1993, Comdial introduced an Open Application Interface
("OAI") toolkit, known as the Enterprise Developer's Toolkit, allowing third-
party software developers to create application packages for specialized
markets.
In 1994, Comdial introduced several new products including: The QuickQ
Automatic Call Distributor ("ACD") which automatically answers and directs
incoming calls; Inntouch DXP specifically for hotel/motel customers which
automatically places wake up calls and costs customer telephone calls; and the
Tracker premises based paging system which alerts users to incoming calls (via
a alphanumeric pager), and instructs users how to retrieve and answer the
messages. The Tracker was the result of a strategic alliance between Comdial
and Motorola, Inc.
With the introduction of the Enterprise OAI on the DXP switch, Comdial
was able to become an early participant in the computer-telephony integration
("CTI") market. CTI merges the power of advanced telephone systems and
computers to provide integrated solutions to common communication needs for
various applications. The first turnkey CTI product from Comdial is the E911
emergency telephone system.
During the fourth quarter of 1994, Comdial announced two new products
which extend the power of CTI to local area network ("LAN") environments and
desktop personal computers. The first is connectivity software to link DXPs
to Novell NetWare (trademark of Novell Corporation) LANs. Later in 1995,
Comdial will ship special circuit cards to link personal computers ("PCs")
running on Microsoft Windows (trademark of Microsoft Corporation) operating
systems to Comdial's Impact and DXP. These two products will enable users to
utilize off-the-shelf applications software to enhance productivity and
improve customer service using computer-enhanced telephony services.
The Company sells its products primarily through supply house channels.
Supply houses are able to warehouse and efficiently route Comdial products to
Comdial-authorized dealers, interconnect companies, international companies,
major independent telephone companies, and large end-users (e.g. universities,
municipalities, and federal government agencies). In marketing its telephone
systems, Comdial emphasizes quality backed by the ISO-9001 certification,
state-of-the-art features, competitive pricing, commitment to customer and
dealer support, and a "Made right in the USA" theme.
Comdial's Common Stock is traded over-the-counter and is quoted in the
National Association of Security Dealers Automated Quotation System ("Nasdaq")
where Comdial's symbol is CMDL.
Results of Operations
Revenue and Earnings
(First Quarter 1995 vs 1994)
The Company's performance for the first quarter of 1995 improved
significantly over the comparable period of 1994. The Company reported net
income before income taxes and extraordinary item of $1,270,000 as compared
with $637,000 for the comparable period in 1994. The Company's improved
performance compared with the same period last year is primarily attributable
to the combined effects of the increase in sales and decrease in interest
expense.
Net sales for the first quarter compared with the same period last year
increased by $4,677,000, or 27%. This increase is primarily due to the
increase in sales of newer product lines such as the DXP and Impact terminals.
Cost of goods increased by $3,419,000 or 29% compared with the same period of
1994, primarily due to the increase in sales.
Gross profit increased by $1,258,000 or 22% compared with the same period
of 1994. Gross profit as a percentage of sales for first three months of 1995
was approximately 32% compared with 33% for the same period of 1994. This
decrease was primarily due to product mix and a much higher content of Custom
Manufacturing work (contract work done for other companies) which is
manufactured at less than normal product margins.
Selling, general and administrative expenses increased by $605,000, or
16% primarily due to: (1) a more aggressive approach to sales promotions and
incentive programs; (2) an increase in sales support staff and activities; and
(3) an increase in employee benefit costs.
Interest expense decreased by $119,000, or 30% primarily due to
recapitaliza-tion, effective on February 1, 1994, that lowered the Company's
debt and interest rate (see Note D to Financial Statements).
Miscellaneous expense increased by $80,000 or 70% primarily due to: (1)
higher cash discounts which is a direct result of higher sales and (2) the
reduction of interest income which related to the Cortelco International, Inc.
("Cortelco") note for the sale of the electromechanical product line in 1992.
Extraordinary item, write-off of debt issuance cost, represents debt
restructuring costs that were written off during the first quarter of 1994 in
connection with the refinancing of the Company's indebtedness to PacifiCorp
Credit, Inc. ("PCI"), an affiliate of the Company.
Dividends on preferred stock represent quarterly dividends payable to the
holder of Series A 7 1/2% Cumulative Convertible Redeemable Preferred Stock
("Series A Preferred Stock"). The Company issued 850,000 shares of Series A
Preferred Stock to PCI on February 1, 1994, in exchange for the cancellation
of $8,500,000 of the Company's indebtedness to PCI. Dividends increased by
$37,000 or 35% primarily due to paying for a full quarter in 1995 compared
with only two months of a quarter in 1994.
Management believes that the factors which have led to significant
increases in sales and net income for the first three months of 1995 could
continue to influence performance positively for the majority of the year.
The Company hopes to continue to improve sales by: (1) expanding its market
through developing alliances with companies, such as Motorola Inc.; (2) the
release of new products and current-product enhancements, such as the Tracker,
InnTouch Hotel/Motel CTI System, Scout, and Automatic Call Distribution
software and a larger version of the DXP; (3) increasing sales of DXP, Impact,
and digital products; and (4) increasing international sales.
Liquidity
The Company is indebted to Shawmut Capital Corporation.("Shawmut"),
formerly known as Barclays Business Credit, Inc., which holds substantially
all of the Company's indebtedness. Prior to February 1, 1994, PacifiCorp,
through its indirect subsidiary, PacifiCorp Credit, Inc. ("PCI"), held
substantially all of the Company's indebtedness. The Company and Shawmut
entered into a loan and security agreement (the "Loan Agreement") on February
1, 1994. Under the Loan Agreement Shawmut agreed to provide the Company with
a $6,000,000 term loan (the "Term Note") and a revolving credit loan facility
in an amount up to $9,000,000 (the "Revolver"). The PCI indebtedness was paid
off through the use of funds generated from operations of $6,000,000, funds
borrowed from Barclays of $6,709,453, and the cancellation of the remaining
$8,500,000 of debt in exchange for the issuance of Series A Preferred Stock
(see note D to Financial Statements).
On April 29, 1994, the Company and Shawmut amended the Loan Agreement to
permit the Company to borrow an additional $1,300,000 under the Term Note to
finance the purchase of additional surface mount technology equipment. The
Company will repay the additional advance in 44 consecutive monthly payments
of $27,000 beginning on June 1, 1994 with the balance due on February 1, 1998.
The Shawmut term loans of $7,300,000 carry an interest rate 1 1/2% over
Shawmut's prime rate and is payable in equal monthly principal installments of
$152,000 up to February 1, 1996, and 23 equal monthly principal installments
of $110,334, with the balance due on February 1, 1998.
The Shawmut revolving credit facility carries an interest rate of 1% over
Shawmut's prime rate. As of April 2, 1995, the Company had borrowed
$1,445,000 under the revolving credit facility and had approximately
$5,951,000 of additional borrowing capacity (see Note D to Consolidated
Financial Statements).
The impact of the recapitalization has improved (1) net income through
lower interest expense, (2) cash flow through lower principal and interest
payments, and (3) the Company's balance sheet through lower term debt and a
higher equity position. The total favorable impact has to some extent been
offset by the dividend payments required on the Series A Preferred Stock.
The Company's indebtedness to Shawmut is secured by liens on the
Company's accounts receivable, inventories, intangibles, land, and all other
assets. The Loan Agreement with Shawmut also contains certain financial
covenants that relate to specified levels of consolidated tangible net worth,
profitability, debt service coverage ratio, and current ratio. Among other
restrictions, the Loan Agreement limits additional borrowings and payment of
dividends, except for dividend payments to PCI for their Series A Preferred
Stock.
The following table sets forth the Company's cash and cash equivalents,
current maturities on debt and working capital at the dates indicated.
______________________________________________________________________________
In thousands April 2, 1995 December 31 ,1994
Cash and cash equivalents $62 $1,679
Current maturities on debt 3,889 2,466
Working capital 12,282 11,631
______________________________________________________________________________
Cash and cash equivalents decreased primarily due to the use of cash to
purchase additional material to meet the increased production rate. All
operating cash requirements are currently being funded through the Shawmut
Revolver. Current maturities on debt includes the Revolver balance of
$1,445,000, which was zero at December 31, 1994. Working capital increased
primarily due to the increase in accounts receivable and inventory which
relates directly to the increase in sales for the first quarter of 1995.
Accounts receivable is higher by $2,244,000 or 34% primarily due to the
increase in sales for the first quarter of $2,489,000 compared with the fourth
quarter 1994 and the timing of the shipments during each quarter.
Other current assets is higher by $431,000 or 43% primarily due to
prepaid cost relating to insurance, rental, and royalty.
Accrued promotional allowance decreased by $564,000 or 35% primarily due
to payments made to the Company's major distributors for volume rebates
relating to 1994 sales.
During 1995 and 1994, substantially all of the Company's sales, net
income and loss, and identifiable net assets are attributable to the
telecommunications industry except sales relating to custom manufacturing.
Capital Resources
The Company plans to fund all capital expenditure additions through
working capital from Shawmut and long-term lease arrangements. Management
expects these sources to provide the capital assets necessary for near-term
future operations and future product development.
<PAGE>
COMDIAL CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 5. Other Information
With reference to the Company's Registration Statement on Form S-3
(Registration No. 33-77140) (the "Form S-3"), the Company has been notified
that First Interstate Bank of California, one of the selling stockholders
identified in the Form S-3, has sold all of the 191,274, shares of the
Company's Common Stock held by First Interstate Bank of California.
ITEM 6. Exhibits and Reports on Form 8-K.
(a)
3. Exhibits Included herein:
(10) Material Contracts:
10.1 Amendment No. 2 to the Loan Restructuring Agreement dated
January 23, 1995 among Registrant and Shawmut Capital
Corporation
(11) Statement re Computation of Per Share Earnings.
(27) Financial Data Schedule.
(b) Reports on Form 8-K
The Registrant has not filed any Reports on Form 8-K during the
quarterly period.
__________________
Items not listed if not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Comdial Corporation
(Registrant)
Date: May 12, 1995 By: /s/ Wayne R. Wilver
Wayne R. Wilver
Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
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<TOTAL-REVENUES> 22316
<CGS> 15192
<TOTAL-COSTS> 15192
<OTHER-EXPENSES> 5610
<LOSS-PROVISION> (29)
<INTEREST-EXPENSE> 273
<INCOME-PRETAX> 1270
<INCOME-TAX> 40
<INCOME-CONTINUING> 1230
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 1230
<EPS-PRIMARY> 0.05
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</TABLE>
SECOND
AMENDMENT
TO
LOAN AND SECURITY
AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
("Amendment"), made and executed this z3RD day of January, 1995,
by and among BARCLAYS BUSINESS CREDIT, INC., a Connecticut
corporation ("Lender"); and COMDIAL CORPORATION ("Parent") and
its wholly-owned subsidiaries AMERICAN TELECOMMUNICATIONS
CORPORATION ("ATC"), AMERICAN PHONE CENTERS, INC. ("APC"),
COMDIAL ENTERPRISE SYSTEMS, INC. ("CES"), COMDIAL
TELECOMMUNICATIONS INTERNATIONAL, INC. ("CTII"), SCOTT
TECHNOLOGIES CORPORATION ("STC") and COMDIAL TELECOMMUNICATIONS,
INC. ("CTI") and CTI's wholly-owned subsidiaries, COMDIAL
BUSINESS COMMUNICATIONS CORPORATION ("CBCC") and COMDIAL CONSUMER
COMMUNICATIONS CORPORATION ("CCCC"; Parent, ATC, APC, CES, CTII,
STC, CTI, CBCC and CCCC being hereinafter referred to
collectively as "Borrowers" and individually as a "Borrower"),
each a Delaware corporation;
WITNESSETH:
WHEREAS, Borrowers and Lender are parties to that certain Loan
and Security Agreement, dated as of February 1, 1994, as amended
by First Amendment thereto, dated April 29, 1994 ( "Loan
Agreement" ), pursuant to which Lender, upon the terms and
subject to the conditions contained therein, has agreed to make
loans and extend credit to Borrowers;
WHEREAS, Borrowers have requested that Lender modify certain
covenants in the Loan Agreement, and Lender has agreed to such
request; and
WHEREAS, to accomplish the foregoing purpose, Borrowers and
Lender are mutually desirous of amending the Loan Agreement as
hereinafter set forth;
NOW, THEREFORE, for and in consideration of the premises and
other good and valuable consideration, the receipt and
sufficiency of which are hereby expressly acknowledged, Borrowers
and Lender do hereby agree as follows:
1. Capitalized Terms. All capitalized terms used herein without
definition shall have the meanings ascribed to such terms in the
Loan Agreement.
2. Amendment to Loan Agreement. The Loan Agreement is hereby
amended as follows:
(a) Section 9.2(W), Leases, is amended by deleting from line 6
thereof the figure "$1,350,000" and substituting in lieu therefor
the figure "$1,750,000".
(b) Section 9.3(B) is amended in its entirety to read as follows:
(B) Profitability. Achieve Consolidated Adjusted Earnings From
Operations of not less than the amount shown below for the period
corresponding thereto:
Consolidated Adjusted Period
Earnings From Operations
First and second fiscal $ 650,000
quarters of fiscal year
ending December 31, 1994
First, second and third $2,100,000
fiscal quarters of fiscal
year ending December 31, 1994
Fiscal year ending $2,900,000
December 31, 1994
First fiscal quarter of $ 175,000
fiscal year ending
December 31, 1995
First and second fiscal $1,050,000
quarters of fiscal year
ending December 31, 1995
First, second and third $2,350,000
fiscal quarters of fiscal
year ending December 31, 1995
Fiscal Year ending $2,550,000
December 31, 1995
First fiscal quarter of $ 325,000
fiscal year ending
December 31, 1996
First and second fiscal $1,250,000
quarters of fiscal year
ending December 31, 1996
First, second and third $2,400,000
fiscal quarters of fiscal
year ending December 31, 1996
Fiscal year ending $3,050,000
December 31, 1996
First fiscal quarter of $ 350,000
fiscal year ending
December 31, 1997
First and second fiscal $1,250,000
quarters of fiscal year
ending December 31, 1997
First, second and third $2,400,000
fiscal quarters of fiscal
year ending December 31, 1997
Fiscal year ending $3,050,000
December 31, 1997
3. Representations and Warranties. To induce Lender to execute
and deliver this Amendment, each Borrower hereby reaffirms all
covenants, representations and warranties made in the Loan
Agreement and the other Loan Documents to the extent the same are
not amended hereby and agrees that all such covenants,
representations and warranties shall be deemed to have been
remade as of the date of this Amendment except for any changes in
the nature of any Borrower's business or operations or which
occur in the ordinary course of business that would render the
information contained in any such representation or warranty
either inaccurate or incomplete in any material respect, so long
as (a) Lender has consented to such changes, (b) such changes are
not expressly prohibited by this Agreement, or (c) with respect
to matters Borrowers are required to notify Lender of pursuant to
Sections 4.9(E) or 9.1(K) or the Loan Agreement, Borrowers have
given notice as required by such Sections. Any default by any
Borrower in its warranties and representations made in this
Amendment shall constitute an Event of Default under the Loan
Agreement.
4. Reference to and Effect Upon Loan Agreement. Each reference in
the Loan Agreement to "this Agreement", "hereunder", "hereof", or
words of like import, and each reference in the other Loan
Documents to the Loan Agreement, shall hereafter mean and be a
reference to the Loan Agreement, as amended hereby. Except as
specifically amended hereby, the Loan Agreement and each of the
other Loan Documents, and each and every term and provision
thereof, shall remain in full force and effect and are hereby
ratified and confirmed. The execution, delivery and effectiveness
of this Amendment shall not operate as a waiver of any right,
power or remedy of Lender under the Loan Agreement or the other
Loan Documents or constitute a waiver of any provision of the
Loan Agreement or the other Loan Documents, except as
specifically set forth herein.
5. Governing Laws; Binding Effect. This Amendment shall be
construed, interpreted and enforced in accordance with the laws
of the State of North Carolina; and shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns.
6. Expenses. Borrowers shall pay all fees and expenses incurred
by Lender in connection with the preparation, negotiation,
execution and delivery of this Amendment and all other agreements
and documents required or contemplated hereby, including, without
limitation, legal fees and expenses.
7. Section Titles. The section titles contained in this Amendment
are and shall be without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the
parties hereto.
8. Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH BORROWER AND LENDER EACH WAIVE THE RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF
ANY KIND ARISING OUT OF OR RELATED TO THIS AMENDMENT, THE LOAN
AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
duly executed under seal in their corporate names by their duly
authorized corporate officers on the day and year first above
written.
ATTEST: COMDIAL CORPORATION
________*___________ By:__________*____________
Secretary Wayne R. Wilver,
Senior Vice President
[CORPORATE SEAL]
ATTEST: AMERICAN TELECOMMUNICATIONS
CORPORATION
________*____________ By:__________*___________
Secretary Wayne R. Wilver,
Senior Vice President
[CORPORATE SEAL]
ATTEST: AMERICAN PHONE CENTERS, INC.
________*____________ By: ________*____________
Secretary Wayne R. Wilver,
Senior Vice President
[CORPORATE SEAL]
ATTEST: COMDIAL ENTERPRISE SYSTEMS, INC.
________*___________ By:_________*_____________
Secretary Wayne R. Wilver,
Senior Vice President
[CORPORATE SEAL]
ATTEST: COMDIAL TELECOMMUNICATIO~S, INC.
______*_________ By:________*__________
Secretary Wayne R. Wilver,
Senior Vice President
[CORPORATE SEAL]
ATTEST: COMDIAL TELECOMMUNICATIONS
INTERNATIONAL, INC.
______*________ By:________*___________
Secretary Wayne R. Wilver,
Senior Vice President
[CORPORATE SEAL]
ATTEST: SCOTT TECHNOLOGIES CORPORATION
______*___________ By:__________*____________
Secretary Wayne R. Wilver,
Senior Vice President
[CORPORATE SEAL]
ATTEST: COMDIAL BUSINESS COMMUNICATIONS
CORPORATION
______*________ By:________*______________
Secretary Wayne R. Wilver,
Senior Vice President
[CORPORATE SEAL]
ATTEST: COMDIAL CONSUMER COMMUNICATIONS
CORPORATION
______*________ By:_________*_________
Secretary Wayne R. Wilver,
Senior Vice President
[CORPOPATE SEAL]
BARCLAYS BUSINESS CREDIT, INC.
By:_________*___________
Title:________*__________
* Manual signatures not available for transfer.
COMDIAL CORPORATION AND SUBSIDIARIES
Exhibit 11
Statement re Computation of Per Share Earnings
April 2, April 3,
1995 1994
PRIMARY
Net income applicable to common shares:
Income before extraordinary item $1,087,000 $509,000
Extraordinary item 0.00 (389,000)
Net income $1,087,000 $120,000
Weighted average number of common
shares outstanding during the period 21,054,066 20,772,491
Add - common equivalent shares (determined
using the "treasury stock" method) representing
shares issuable upon exercise of:
Stock options 604,567 980,832
Weighted average number of shares used in calcula-
tion of primary earnings per common share 21,658,633 21,753,323
Earnings per common share:
Income before extraordinary item $0.05 $0.02
Extraordinary item 0.00 (0.01)
Net income $0.05 $0.01
FULLY DILUTED
Net income applicable to common shares $1,087,000 $120,000
Adjustments for convertible securities: Dividends
paid on convertible preferred stock 143,000 106,000
Net income applicable to common shares, assuming
conversion of above securities $1,230,000 $226,000
Weighted average number of shares used in calcula-
tion of primary earnings per common share 21,658,633 21,753,323
Add (deduct) incremental shares representing:
Shares issuable upon exercise of stock options
included in primary calculation (604,567) (980,832)
Shares issuable based on year-end market price
or weighted average price:
Convertible preferred stocks 2,570,782 1,942,382
Stock options 610,512 981,070
Weighted average number of shares used in calcula-
tion of fully diluted earnings per common share 24,235,360 23,695,943
Fully diluted earnings per common share $0.05 $0.01
