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 September 29, 1996
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
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.
8,577,877 common shares as of September 29, 1996.
COMDIAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1: Financial Statements
Consolidated Balance Sheets as of
September 29, 1996 and December 31, 1995 3
Consolidated Statements of Operations
for the Three and Nine Months ended
September 29, 1996 and October 1, 1995 4
Consolidated Statements of Cash Flows
for the Nine Months ended
September 29, 1996 and October 1, 1995 5
Notes to Consolidated Financial Statements 6-11
ITEM 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-21
PART II - OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K 22
COMDIAL CORPORATION AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - (Unaudited)
Sept. 29, December 31,
In thousands except par value 1996 1995
Assets
Current assets
Cash and cash equivalents $271 $4,144
Accounts receivable - net 10,991 8,976
Inventories 18,108 17,925
Prepaid expenses and
other current assets 1,425 2,695
Total current assets 30,795 33,740
Property - net 14,597 13,943
Deferred tax asset - net 7,454 6,694
Goodwill 17,699 210
Other assets 3,511 2,105
Total assets $74,056 $56,692
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $7,345 $7,988
Accrued payroll and related
expenses 1,785 1,518
Other accrued liabilities 4,333 4,060
Current maturities of debt 6,718 1,903
Total current liabilities 20,181 15,469
Long-term debt 12,260 2,844
Deferred tax liability 2,215 2,191
Long-term employee benefit
obligations 2,181 1,894
Commitments and contingent liabilities
Total liabilities 36,837 22,398
Stockholders' equity
Common stock ($0.01 par value)
and paid-in "capital (Authorized
30,000 shares; issued shares:
1996 = 8,578; 1995 = 8,132) 114,120 111,625
Other (1,049) (1,014)
Accumulated deficit (75,852) (76,317)
Total stockholders' equity 37,219 34,294
Total liabilities and
stockholders' equity $74,056 $56,692
* Condensed from audited financial statements.
The accompanying notes are an integral part of these financial
statements.
COMDIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations - (Unaudited)
Three Months Ended Nine Months Ended
Sept. 29, Oct. 1, Sept. 29, Oct. 1,
In thousands except per share amounts 1996 1995 1996 1995
Net sales $28,874 $25,235 $74,484 $72,993
Cost of goods sold 18,013 17,181 47,993 49,561
Gross profit 10,861 8,054 26,491 23,432
Operating expenses
Selling, general & administrative 6,951 4,707 18,697 13,887
Engineering, research & development 1,262 1,048 4,184 3,107
Operating income 2,648 2,299 3,610 6,438
Other expense
Interest expense 483 242 1,209 797
Goodwill amortization expense 855 - 1,814 23
Miscellaneous expense 332 216 694 584
Income (loss) before income taxes 978 1,841 (107) 5,034
Income tax expense (benefit) 70 37 (572) (4,349)
Net income (loss) 980 1,804 465 9,383
Dividends on preferred stock - 65 - 350
Net income (loss) applicable to
common stock $980 $1,739 $465 $9,033
Earnings (loss) per common share and common equivalent share: (1)
Earnings (loss) per common share $0.11 - $0.06 -
Primary - $0.22 - $1.21
Fully diluted - $0.22 - $1.14
Weighted average common shares outstanding:
Weighted average per common share 8,578 - 8,444 -
Primary - 7,910 - 7,482
Fully diluted - 8,307 - 8,239
(1) All periods presented have been adjusted to reflect the 1 for 3 reverse
stock split.
The accompanying notes are an integral part of these financial statements.
COMDIAL CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows - (Unaudited)
Sept. 29, Oct. 1,
In thousands 1996 1995
Cash flows from operating activities:
Cash received from customers $77,850 $72,522
Other cash received 642 591
Interest received 59 21
Cash paid to suppliers and employees (74,355) (72,344)
Interest paid on debt (646) (585)
Interest paid under capital lease obligations (78) (141)
Income taxes paid (162) (154)
Net cash provided (used) by
operating activities 3,310 (90)
Cash flows from investing activities:
Purchase of Key Voice Technologies ("KVT") (8,528) -
Purchase of Aurora Systems ("Aurora") (1,901) -
Acquisition costs for KVT and Aurora (921) -
Proceeds from the sale of equipment 9 1
Capital expenditures (2,704) (1,498)
Net cash used by investing activities (14,045) (1,497)
Cash flows from financing activities:
Proceeds from borrowings 5,619 -
Net borrowings under revolver agreement 3,071 198
Proceeds from issuance of common stock 44 11,308
Principal payments on debt (1,432) (1,520)
Preferred stock redemption - (7,500)
Principal payments under capital
lease obligations (440) (482)
Preferred dividends paid - (350)
Net cash provided in
financing activities 6,862 1,654
Net increase (decrease) in cash and
cash equivalents (3,873) 67
Cash and cash equivalents at
beginning of year 4,144 1,679
Cash and cash equivalents at end of period $271 $1,746
Reconciliation of net income to net cash provided by operating activities:
Net income $465 $9,383
Depreciation and amortization 4,833 2,728
Change in assets and liabilities (for 1996,
net of effects from the purchase of
KVT and Aurora):
Decrease (increase) in accounts receivable(1,188) (4,151)
Inventory provision 1,318 1,990
Increase in inventory (1,196) (2,923)
Increase in other assets (304) (1,143)
Increase in deferred tax asset (736) (4,503)
Decrease in accounts payable (1,456) (621)
Increase in other liabilities 536 (355)
KVT asset value at acquisition 1,105 -
Aurora asset value at acquisition (121) -
Increase (decreas) in paid-in capital and
other equity 54 (495)
Total adjustments 2,845 (9,473)
Net cash provided by operating activities $3,310 $(90)
The accompanying notes are an integral part of these financial statements.
COMDIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 29, 1996 - (Unaudited)
Note A: CONSOLIDATED FINANCIAL STATEMENTS_______________________
The financial information included as of September 29, 1996
and for the nine months ended September 29, 1996 and October 1,
1995 included herein is unaudited. The financial information
reflects all normal recurring adjustments, except for Statement
of Financial Accounting Standards ("SFAS") No. 109 adjustments,
which are, in the opinion of management, necessary for a fair
statement of results for such periods. Accounting policies
followed by Comdial (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, 1995. The
consolidated financial statements for 1996 should be read in
conjunction with the 1995 financial statements, including notes
thereto, contained in the Company's Annual Report to the
Stockholders for the year ended December 31, 1995. Certain
amounts in the 1995 consolidated financial statements have been
reclassified to conform to the 1996 presentation. The results of
operations for the nine months ended September 29, 1996 are not
necessarily indicative of the results to be expected for the full
year. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Note B: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES______________
Under the Company's 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. Bank overdrafts of $1.3 million and $1.6
million are included in accounts payable at September 29, 1996
and December 31, 1995, respectively. Bank overdrafts are
outstanding checks that have not (1) cleared the bank and (2)
been funded by the revolving credit facility (see Note D). The
Company considers the outstanding checks to be a bank overdraft.
The Company is reporting the revolving credit facility activity
on a net basis on the Consolidated Statements of Cash Flows.
Note C: INVENTORIES_____________________________________________
Inventories consist of the following:
_________________________________________________________________
September 29, December 31,
In thousands 1996 1995_____
Finished goods $4,964 $3,808
Work-in-process 3,988 4,202
Materials and supplies 9,156 9,915
Total $18,108 $17,925
_________________________________________________________________
Note D: BORROWINGS______________________________________________
Since February 1, 1994, Fleet has held substantially all of
the Company's indebtedness.
Long-term Debt. Long-term debt consists of the following:
_________________________________________________________________
September 29, December 31,
In thousands 1996 1995______
Notes payable to Fleet
Term notes I & II $ - $4,030
Acquisition note 7,676 -
Equipment note 544 -
Revolving credit 3,071 -
Promissory note 7,000 -
Capitalized leases 375 717
Other debt 312 -
Total debt 18,978 4,747
Less current maturities on debt 6,718 1,903
Total long-term debt $12,260 $2,844
_________________________________________________________________
The Company and Fleet entered into a loan and security
agreement ("Loan Agreement") in 1994 pursuant to which Fleet
agreed to provide the Company with a $6.0 million term loan
represented by a note ("Term Note I"), a $9.0 million revolving
credit loan facility (total not to exceed $14.0 million), and a
$1.3 million term loan represented by a second term note ("Term
Note II"). Term Notes I and II carried interest rates of 1.50%
over Fleet's prime rate and were payable in equal monthly
principal installments aggregating $110,334, with the balance due
on February 1, 1998. The original Fleet revolving credit
facility carried an interest rate of 1.00% over Fleet's prime
rate with availability based on eligible accounts receivable and
inventory. Fleet's prime rate was 8.25% and 8.50% at March 31,
1996 and December 31, 1995, respectively.
On March 13, 1996, the Company and Fleet amended the Loan
Agreement to provide the Company with a $10.0 million acquisition
loan ("Acquisition Loan"), a $3.5 million equipment loan
("Equipment Loan"), and a $12.5 million revolving credit loan
facility ("Revolver"). The remaining balances of $2.9 million
and $0.7 million on Term Notes I and II, were paid by advances
from the new Revolver and Equipment Loan, respectively.
On March 20, 1996, the Company borrowed $8.5 million under
the Acquisition Loan which was used for a portion of the purchase
price of Aurora Systems, Inc. ("Aurora") and Key Voice
Technologies, Inc. ("KVT"). The Acquisition Loan is payable in
equal monthly principal installments of $142,142, with the
balance due on February 1, 2001.
The Equipment Loan is payable in equal monthly principal
installments of $27,000, with the balance due on June 1, 1998.
The Acquisition Loan, Equipment Loan, and Revolver carry
interest rates at either Fleet's prime rate or London Interbank
Offered Rate ("LIBOR") at the Company's option. The interest
rates can be adjusted annually based on a debt to earnings ratio
which will vary the rates from minus 0.50% to plus 0.50% of the
Fleet Prime Rate and from plus 1.50% to 2.50% of LIBOR. As of
September 29, 1996, the prime interest rate was 8.25% and LIBOR
rates were 5.42% and 5.49% with approximately 93% of the loans
based on LIBOR. As of September 29, 1996, the Company's
borrowing rate for loans based on the prime rate was 8.25%, and
for loans based on the LIBOR rates were 7.42% and 7.49%.
Availability under the Revolver is based on eligible accounts
receivable and inventory, less funds already borrowed.
On June 28, 1996, the Company and Fleet amended the Loan
Agreement to adjust availability under the Revolver by
establishing a special availability reserve of $4.0 million and
to modify certain covenants.
On September 27, 1996, the Company and Fleet amended the Loan
Agreement to modify certain covenants.
The Company's Promissory Note of $7.0 million, which was part of
the purchase price of KVT, carries an interest rate equal to the prime
rate with annual payments of $1.4 million plus accumulated interest
for five years starting on March 20, 1997.
Capital leases are with various financing entities and are
payable based on the terms of each individual lease.
Other debt consists of a mortgage acquired in conjunction
with the KVT acquisition which requires a monthly mortgage
payment of $2,817, including interest at a rate of 8.75%. The
final payment is due on August 01, 2005.
Scheduled maturities of Acquisition and Equipment Loans
(current and long-term debt) as defined in the Loan Agreement are
as follows:
_________________________________________________________________
Principal
In thousands Fiscal Years Installments_
Loans payable 1996 $507 *
1997 2,030
1998 1,845
1999 1,706
2000 2,132
__* The remaining aggregate for 1996.___________________________
Debt Covenants. The Company's indebtedness to Fleet is secured by
liens on the Company's accounts receivable, inventories,
intangibles, land, and other property. Among other restrictions,
the amended Loan Agreement contains certain financial covenants
that require specified levels of consolidated tangible net worth,
profitability, and other certain financial ratios. The amended
Loan Agreement also contains certain limits on additional
borrowings. As of September 29, 1996, the Company is in
compliance with all covenants and terms set forth in the amended
Loan Agreement.
Note E: EARNINGS PER SHARE______________________________________
For the three and nine months ended September 29, 1996,
earnings per share were computed by dividing net income by the
weighted average number of common shares outstanding. Stock
options were antidilutive for the three and nine months of 1996.
For the three and nine months ended September 29, 1995, primary
earnings per share were computed by dividing income attributable
to common shareholders (net income less preferred stock dividend
requirements) by the weighted average number of common and common
equivalent shares outstanding during the period plus (in periods
in which they had a dilutive effect) the effect of common shares
contingently issuable, primarily from stock options.
Note F: INCOME TAXES____________________________________________
The components of income tax expense (benefit) for the nine
months ended are as follows:
_________________________________________________________________
September 29, October 1,
In thousands 1996 1995___
Current - Federal $63 $123
State 101 31
Deferred - Federal (714) (4,374)
State ( 22) (129)
Total provision ($572) ($4,349)
_________________________________________________________________
The income tax provision reconciled to the tax computed at
statutory rates for the nine months are summarized as follows:
_________________________________________________________________
September 29, October 1,
In thousands 1996 1995
Federal tax (benefit) at statutory
rate (35% in 1996 and 1995) ($38) $1,762
State income taxes (net of federal
tax benefit) 65 20
Nondeductible charges 45 28
Alternative minimum tax 65 116
Utilization of operating loss carryover 27 (1,772)
Adjustment of valuation allowance (736) (4,503)
Income tax provision ($572) ($4,349)
_________________________________________________________________
Net deferred tax assets of $7.5 million and $6.7 million have
been recognized in the accompanying Consolidated Balance Sheets at
September 29, 1996 and December 31, 1995, respectively. The
components of the net deferred tax assets are as follows:
_________________________________________________________________
September 29, December 31,
In thousands 1996 1995____
Total deferred tax assets $27,403 $28,091
Total valuation allowance (19,949) (21,397)
Total deferred tax asset - net 7,454 6,694
Total deferred tax liabilities (2,215) (2,191)
Total net deferred tax asset $5,239 $4,503_
_________________________________________________________________
The valuation allowance decreased $1.4 million during the
nine month period ended September 29, 1996 and this decrease was
primarily related to (1) the re-evaluation of the future
utilization of deferred tax assets and the utilization of
operating loss carryforwards of $27,000, and (2) the change in
temporary differences of deferred tax assets and liabilities of
$1.4 million. The Company periodically reviews the requirements
for a valuation allowance and makes adjustments to such allowance
when changes in circumstances result in changes in management's
judgment about the future realization of deferred tax assets.
Management believes that it is more likely than not that the
Company will realize these tax benefits.
The Company has net operating loss carryforwards and tax
credit carryovers of approximately $64.4 million and $2.8
million, respectively, which, if not utilized, will expire over
time until 2007.
Based on the Company's interpretation of Section 382 of the
Internal Revenue Code, the reduction of the valuation allowance
was calculated assuming a 50% ownership change, which could limit
the utilization of the tax net operating loss and tax credit
carryforwards in future periods starting at the time of the
change. An ownership change could occur if changes in the
Company's stock ownership exceeds 50% of the value of the
Company's stock during any three year period. Based on this
formula, as of September 29, 1996, an ownership change has not
occurred.
COMDIAL CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion is intended to assist the reader in
understanding and evaluating 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. Prior years have been reclassified to conform
to the 1996 reporting basis (see Note A to the Consolidated Financial
Statements).
General Development of the Business
Comdial Corporation (the "Company") is a Delaware corporation based
in Charlottesville, Virginia. The Company is engaged in the design,
development, manufacture, and distribution of advanced telecommunications
products and system solutions. The Company's Common Stock is traded
over-the-counter and is quoted on the National Association of Security
Dealers Automated Quotation National Market System ("Nasdaq National Market")
under the symbol: CMDL.
The Company's products serve organizations requiring up to
approximately 500 telephones. The Company believes that it is a
leading supplier to this market, with an installed base estimated
to be approximately 250,000 telephone systems and 2,500,000
telephones. The Company's products include digital and analog
telephone switches and telephones, as well as a wide range of
product enhancements to the Company's telephone systems. The
Company's growth has occurred principally as a result of digital
telephone systems introduced by the Company since 1992. These
digital products provide end users with the ability to utilize
evolving telecommunications technologies, including Computer-
Telephony Integration ("CTI").
In recent years, advances in technology and industry
deregulation have facilitated the development of technologically
advanced telephone systems and applications. Beginning in the
1970's, electronic telephone systems began displacing the
traditional electromechanical key sets that served as the basic
office telephone system since the 1930's. New telephone
applications are being introduced continuously, permitting
business users to improve communications within their
organizations and with their customers by using conference calls,
speaker phones, voice mail, automated attendants, and voice
processing applications, such as speech recognition.
A recent major industry advancement is the development of
computer telephony integration. CTI applications merge the power
of modern telephone systems with that of computers to provide
integrated solutions to broad communications problems, such as
proper queuing in call communications centers, and specific
vertical market applications (such as the real estate, law firm,
and food service markets). Because of the technological advances
that have arisen with digitization and open systems, more
flexible and useful telephone applications are being developed to
solve current communications problems.
In order to integrate computers and telecommunications
equipment, several standards have been developed. The Company
was among the first telephone manufacturing companies to commit
to the Novell standard, called Telephony Services Application
Programming Interface ("TSAPI"). The TSAPI standard provides a
stable platform for a Novell NetWare network to integrate with
the features and functionality of a telephone switch.
The Company distributes its products through a network of
approximately 7,500 independent dealers, of which approximately
1,500 have written agreements with the Company. This enables the
Company to achieve broad geographic penetration, as well as
access to some of the fastest growing markets in the country.
The Company markets its products through both direct and
indirect channels. Approximately 80% of the Company's sales flow
through wholesale supply houses which, in turn, sell the
Company's products to dealers. Accordingly, the Company's
reported sales may be influenced by supply house inventory levels
and stocking decisions. At times, sales by supply houses to the
end users may be strong while sales from the Company to supply
houses are relatively slow. Similarly, sales by supply houses to
end users may be slow at times, when sales by the Company to
supply houses are relatively strong.
The Company's strategy of selling through supply houses
enables it to virtually eliminate bad debt exposure and minimize
administration and credit checking expenses as well as inventory
levels. Wholesale supply houses in turn are able to sell related
products such as cable, connectors, and installation tools.
Dealers have the benefits of competitive sourcing and reduced
inventory carrying costs. These dealers market the Company's
products to small and medium sized organizations and to divisions
of larger organizations.
The Company's primary marketing emphasis is on the reseller
who buys from the supply houses. The goal is to create street
sales, so that the supply houses will, in turn, place orders with
the Company.
The Company is pursuing three fundamental business
strategies: (1) maintaining a leadership position in its core
business of delivering advanced telecommunications systems to the
U.S. domestic market through wholesale supply house distribution
channels, (2) achieving growth through expansion into
international markets, and (3) maintaining a leadership position
in the emerging market for systems solutions based on CTI. The
Company seeks to support these strategies through the following
approaches: (1) maintaining a broad and efficient distribution
network; (2) targeting small to medium sized organizations; (3)
offering a broad range of products; (4) developing strategic
alliances; (5) pursuing international opportunities; (6)
promoting computer telephony applications; (7) promoting industry
accepted interface standards; and (8) developing open application
interfaces ("OAI").
The market for the Company's products is highly competitive.
The Company competes with approximately twenty companies, many of
which, such as Lucent Technologies, Inc., Nortel Inc., and
Toshiba Corp., have significantly greater resources than the
Company. Key competitive factors in the sale of telephone
systems and related applications include performance, features,
reliability, service and support, name recognition, distribution
capability, place of operation, and price. The Company believes
that it competes favorably in its market with respect to the
performance, features, reliability, distribution capability, and
price of its systems, as well as the level of service and support
that the Company provides. In marketing its telephone systems,
the Company also emphasizes quality, as evidenced by its ISO 9001
certification, and high technology features. In addition, the
Company often competes to attract and retain dealers for its
products. The Company expects that competition will continue to
be intense in the markets it serves, and there can be no
assurance that the Company will be able to continue to compete
successfully in the marketplace or that the Company will be able
to maintain its current dealer network.
During the first quarter of 1996, the Company introduced
wideopen.office, the first universal CTI server designed for
local area networks ("LANS") as well as standalone personal
computers ("PCs"). The new server provides linkages between the
Company's DXP switch and PCs on a LAN.
During the third quarter of 1996, the Company introduced the
Impression products, a family of digital key telephone systems.
Impression can be expanded from four lines and eight phones to 24
lines and 48 phones. The Company also introduced the Voyager
voice mail/telephone system for small offices and home
businesses.
On March 20, 1996, the Company completed the acquisition of
two companies involved in CTI applications: Aurora Systems, Inc.
("Aurora") and Key Voice Technologies, Inc. ("KVT"). Aurora,
based in Acton, Massachusetts, is a leading provider of off-the-
shelf CTI products. KVT, based in Sarasota, Florida, develops,
assembles, markets and sells voice processing systems and related
products for business applications. Aurora and KVT are now
wholly-owned subsidiaries of the Company.
Management anticipates that these two acquisitions will have
a positive effect on revenues and profitability for all of 1996
and enhance the Company's position for future development
relating to the CTI market.
Results of Operations
Revenue and Earnings
Third Quarter 1996 vs 1995
The Company reported net income before taxes for the third
quarter of 1996 of $1.0 million as compared with net income
before taxes of $1.8 million for the same period in 1995. The
decrease in net income for the third quarter of 1996 compared
with same period of 1995 was primarily attributable to increased
selling, general and administrative, and engineering expenses.
Net sales for the third quarter of 1996 increased 14% to
$28.9 million, compared with $25.2 million in the third quarter
of 1995. CTI, DXP, and digital product sales during the third
quarter of 1996 increased substantially by $6.2 million over
sales during the same period in 1995. Such sales were offset,
however, with a decrease of $2.3 million in sales of analog
telephone systems and custom manufacturing sales in the third
quarter of 1996 as compared with the same period of 1995.
Gross profit as a percent of sales during the third quarter
of 1996, increased to 38%, compared with 32% in the third quarter
of 1995. This increase was primarily attributable to higher
sales of CTI and DXP products which have a higher gross profit
margin.
Selling, general and administrative expenses during the third
quarter of 1996 increased 48% to $7.0 million, compared with $4.7
million in the third quarter of 1995. This increase was primarily
due to: (1) an increase in expenses due to the Aurora and KVT
acquisitions of $1.0 million; (2) an increase in
personnel associated with domestic and international sales,
customer support, and the development and marketing of CTI
products; and (3) an increase in marketing efforts which resulted
in increased costs for travel, telephone, and trade shows.
Engineering, research and development expenses during the
third quarter of 1996 increased 20% to $1.3 million, compared
with $1.0 million in the third quarter of 1995. This increase
was primarily due to increased expenses relating to the Aurora
and KVT acquisitions of $179,000 and an increase in engineering
personnel to support additional product development.
Interest expense during the third quarter of 1996, increased
by 100% to $483,000, compared with $242,000 in the third quarter
of 1995. This increase was primarily attributable to additional
borrowings used to acquire Aurora and KVT.
Goodwill amortization expense was $855,000 for the third
quarter of 1996 which relates directly to the acquisitions of
Aurora and KVT.
Income tax expense (benefit) in the third quarter of 1996
increased to $70,000 compared with a tax of $37,000 for the same
period of 1995, primarily due to the recognition of taxes of
$32,000 which relate to KVT.
Nine Months 1996 vs 1995
The Company reported a loss before taxes for the first nine
months of 1996 of $107,000 as compared with income of $5.0
million for the comparable period in 1995. The weaker
performance of the Company was primarily attributable to (1)
increased costs associated with the increase in the selling and
engineering staffs; (2) declining sales of the Company's older
analog telephone systems; (3) declining sales relating to custom
manufacturing; (4) supply house inventory reductions; and (5)
continued decline in federal government sales. However, the
Company's performance with respect to its newer DXP and CTI
products improved.
Net sales for the first nine months of 1996 increased 2% to
$74.5 million, compared with $73.0 million for the same period of
1995. Business system sales increased by 11% or $6.9 million,
compared with the same period of 1995. CTI and DXP product sales
increased substantially but were offset with a decline in sales
of analog products. The Company anticipate a decline in sales in
analog telephone systems but not at the current level. Some of
the sales decline can be attributed to the inclement weather
during the first quarter of 1996 and the budget related
government slowdown. Other product sales declines occurred in
terminals and custom manufacturing. Custom manufacturing was
higher in 1995 primarily due to special projects which were
completed by the end of 1995. Sales by Aurora and KVT accounted
for approximately 9% of the Company's sales during the period.
Management anticipates that sales of analog telephone systems
and custom manufacturing will continue to decrease for the remainder
of 1996 when compared to 1995. However, the Company anticipates that
this decline will be offset by continued sales growth of DXP and CTI
products. The Company also plans to improve sales and income through:
(1) the introduction of the Impression, a fully-featured telephone
system which dealers can sell in place of the analog telephone systems,
and the Voyager voice mail/telephone system for small offices and home
businesses; and (2) the reduction of certain expenses which will
not affect sales, growth, or customer service.
The following table presents certain relevant net sales
information concerning the Company's principal product lines for
the periods indicated:
_________________________________________________________________
September 29, October 1,
In thousands 1996 1995
Sales
Business Systems
Digital $31,477 $31,654
DXP 12,978 9,268
CTI 13,786 5,435
Analog 12,809 17,755
Sub-total 71,050 64,112
Proprietary and Specialty Terminals 3,452 4,798
Sub-total 74,502 68,910
Custom Manufacturing 1,044 5,103
Gross Sales 75,546 74,013
Sales discount and allowances 1,062 1,020
Net Sales $74,484 $72,993
_________________________________________________________________
Gross profit for the first nine months of 1996 increased 13%
to $26.5 million, compared with $23.4 million for the same period
of 1995. Gross profit as a percent of sales increased to 36% for
the first nine months of 1996, compared with 32% for the same
period of 1995. This increase was primarily attributable to the
higher sales of DXP and CTI products which have a higher profit
margin.
Selling, general and administrative expenses during the first
nine months of 1996 increased 35% to $18.7 million, compared with
$13.9 million for the same period of 1995. This increase was primarily
due to: (1) an increase in expenses associated with the Aurora and KVT
acquisitions of $1.9 million; (2) an increase in personnel associated
with domestic and international sales, customer support, and development
and marketing of CTI products; and (3) increased marketing efforts also
resulted in increased costs for travel, telephone, promotional literature,
and trade shows.
Engineering, research and development expenses during the
first nine months of 1996 increased 35% to $4.2 million, compared
with $3.1 million for the same period of 1995. This increase was
primarily due to an increase in expenses of $472,000 associated
with the Aurora and KVT acquisitions as well as an increase in
engineering personnel to support additional product development.
Goodwill amortization expense during the first nine months of 1996
increased to $1.8 million, compared with $23,000 for the same period of
1995. The increase in goodwill was attributable to the acquisitions of
Aurora and KVT.
Income tax expense (benefit) in the first nine months of 1996 a net
tax benefit of ($572,000) was recognized in 1996 compared with ($4.3)
million for the same period of 1995. The tax benefits were a result of
reductions in the valuation allowance relating to the Company's federal
net operating loss carryforwards ("NOLS")(see Note F to the Consolidated
Financial Statements).
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").
Dividends for the first nine months of 1996 were zero, compared
with $350,000 for the same period of 1995. On August 11, 1995,
the Company paid PacifiCorp Credit, Inc. ("PCI") all dividends
associated with the Series A Preferred Stock and redeemed their
remaining 750,000 shares. Comdial will no longer have any
dividend payments associated with the Series A Preferred Stock.
Liquidity
The Company is indebted to Fleet which holds substantially
all of the Company's indebtedness. The Company and Fleet entered
into a loan and security agreement (the "Loan Agreement") on
February 1, 1994. Under the Loan Agreement, Fleet provided the
Company with term loans of $6.0 million evidenced by a note
("Term Note I"), $1.3 million evidenced by a second note ("Term
Note II"), and a revolving credit loan facility in an amount up
to $9.0 million ("Revolver") (see note D to Financial
Statements).
The Fleet Term Notes and Revolver on the original Loan
Agreement carried interest rates of 1.50% and 1.00% over Fleet's
prime rate, respectively. Fleet's prime rate was 8.25% and 8.50%
at September 29, 1996 and December 31, 1995, respectively.
On March 13, 1996, the Company and Fleet amended the Loan
Agreement to provide the Company with a $10.0 million acquisition
loan ("Acquisition Loan"), a $3.5 million equipment loan
("Equipment Loan"), and a $12.5 million revolving credit loan
facility ("Revolver"). The remaining balances on Term Notes I
and II were paid by advances from the Revolver and Equipment
Loan, respectively (see Note D to Financial Statements).
On March 20, 1996, the Company borrowed $8.5 million under
the Acquisition Loan which was used in connection with the
purchase of Aurora and KVT. The Acquisition Loan is payable in
equal monthly principal installments of $142,142, with the
balance due on February 1, 2001. The Equipment Loan is payable
in equal monthly principal installments of $27,000, with the
balance due on June 1, 1998.
The Acquisition Loan, Equipment Loan, and Revolver bear
interest at rates based on either Fleet's prime rate or the
London Interbank Offered Rate ("LIBOR"). The interest rates may
be adjusted annually based on the Company's debt to earnings
ratio. Depending on the ratio, the interest rates vary from
minus 0.50% to plus 0.50% of the Fleet prime rate and from plus
1.50% to 2.50% of LIBOR. Current interest rate margins on the
Company's indebtedness to Fleet are 0.00% and 2.00% for loans
based on the prime rate and the LIBOR rate, respectively.
Availability under the Revolver is based on eligible accounts receivable
and inventory, less funds already borrowed.
The Company's indebtedness to Fleet is secured by liens on
the Company's assets and also contains certain financial
covenants (see Note D to the Financial Statements).
On June 28, 1996, the Company and Fleet amended the Loan
Agreement to adjust availability under the Revolver by
establishing a special availability reserve of $4.0 million and
also modified certain covenants.
On September 27, 1996, the Company and Fleet amended the Loan Agreement
to modify certain covenants.
The Company is in compliance with all the covenants and terms of the
amended Loan Agreement as of September 29, 1996.
The Company's Promissory Note of $7.0 million, which was part of the
purchase price for KVT, carries an interest rate based on prime with yearly
payments of $1.4 million over five years starting on March 20, 1997.
Capital leases are with various financing entities which are
payable based on the terms of each individual lease. Other debt
consists of a mortgage that was acquired as part of the KVT
acquisition and has a monthly mortgage payment of $2,817 which
includes interest at a rate of 8.75%. The final payment under
the mortgage is due on August 01, 2005.
The following table sets forth the Company's cash and cash
equivalents, current maturities on debt, and working capital at
the dates indicated.
_________________________________________________________________
September 29, December 31,
In thousands 1996 1995______
Cash and cash equivalents $271 $4,144
Current maturities on debt 6,718 1,903
Working capital 10,614 18,271
_________________________________________________________________
All operating cash requirements are currently being funded
through the Revolver. Cash decreased primarily due to the
acquisition of Aurora and KVT. Current maturities on debt
increased by $4.8 million primarily due to an increase in the
Revolver of $3.1 million and the Company's $7.0 million
promissory note of $1.4 million. Working capital at September
29, 1996, decreased by $7.7 million when compared to December 31,
1995. This decrease was due primarily to the decrease in
available cash and an increase in current maturities on debt
which relates directly to the acquisitions of Aurora and KVT that
occurred at the end of the first quarter of 1996.
Accounts receivable at September 29, 1996, increased by 22%
or $2.0 million when compared to December 31, 1995. This
increase was primarily due to the additional shipments that
occurred during the final month of the third quarter.
Prepaid expenses and other current assets at September 29,
1996, decreased by 47% or $1.3 million when compared to December
31, 1995. This decrease was primarily due to a miscellaneous
receivable which was paid in 1996 regarding custom manufacturing
inventory that had been returned to the original vendor in 1995.
Goodwill assets at September 29, 1996, increased by $17.5
million when compared to December 31, 1995. This increase was
due to the acquisitions of Aurora and KVT at the end of the first
quarter of 1996.
Other long-term assets at September 29, 1996, increased by
67% or $1.4 million, when compared to December 31, 1995. This
increase was primarily due to research and development costs
associated with the development of new products.
Current and long-term debt at September 29, 1996, increased
by $4.8 million and $9.4 million, respectively, when compared to
December 31, 1995. This increase was primarily due to the
acquisitions of Aurora and KVT (see Note D to the Financial
Statements).
During 1996 and 1995, all of the Company's sales, net income, and
identifiable net assets were attributable to the telecommunications
industry except sales relating to custom manufacturing.
The Company plans to fund all future costs through working
capital from Fleet and cash generated by operations. Management
expects these sources to provide the cash necessary for the near-
term future operations and future development of the Company.
Capital Resources
Capital expenditures in the first nine months of 1996 and for the
comparable period of 1995 were $2.1 million and $1.3 million, respectively.
Capital additions for 1996 and 1995 were provided by funds from operations,
capital leasing, and borrowings from Fleet. The Company anticipates spending
approximately $4.0 million on capital expenditures during 1996 which includes
equipment for manufacturing and technology.
The Company plans to fund all future capital expenditure
additions through working capital loans from Fleet and long-term
lease arrangements. Management expects these sources to provide
the capital assets necessary for near-term future operations and
future product development.
The Company has a commitment from Crestar Bank for the
issuance of letters of credit in amounts not to exceed $500,000
at any one time. At September 29, 1996, the amount of available
commitments under the letter of credit facility with Crestar Bank
was $327,000.
COMDIAL CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a)
3. Exhibits Included herein:
(10) Material Contracts:
10.1 Amendment No. 3 to the Loan And Security Agreement
dated September 27, 1996 among the Registrant and
Fleet 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.
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: November 12, 1996 By: /s/ Wayne R. Wilver
Wayne R. Wilver
Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000230131
<NAME> COMDIAL CORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-29-1996
<CASH> 271
<SECURITIES> 0
<RECEIVABLES> 10991
<ALLOWANCES> 136
<INVENTORY> 18108
<CURRENT-ASSETS> 30795
<PP&E> 42006
<DEPRECIATION> 27409
<TOTAL-ASSETS> 74056
<CURRENT-LIABILITIES> 20181
<BONDS> 18978
0
0
<COMMON> 87
<OTHER-SE> 37132
<TOTAL-LIABILITY-AND-EQUITY> 74056
<SALES> 73171
<TOTAL-REVENUES> 74484
<CGS> 47642
<TOTAL-COSTS> 47993
<OTHER-EXPENSES> 25405
<LOSS-PROVISION> (16)
<INTEREST-EXPENSE> 1209
<INCOME-PRETAX> (107)
<INCOME-TAX> (572)
<INCOME-CONTINUING> 465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 465
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
AMENDMENT NO. 3
TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT
("Amendment"), dated as of the 27th day of September, 1996,
made by and between
FLEET CAPITAL CORPORATION (formerly known as Shawmut
Capital Corporation and successor by assignment from
Barclays Business Credit, Inc.), a Rhode Island corporation
(the "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"), COMDIAL CUSTOM MANUFACTURING, INC. ("CCMI") COMDIAL
VIDEO TELEPHONY, INC. ("CVT"), COMDIAL TECHNOLOGY
CORPORATION ("CTC"), COMDIAL TELECOMMUNICATIONS, INC.
("CTI"), AURORA SYSTEMS, INC. ("ASI"), KEY VOICE
TECHNOLOGIES INC. ("KVTI"), and CTI's wholly. owned
subsidiaries, COMDIAL BUSINESS COMMUNICATIONS CORPORATION
("CBCC"), and COMDIAL CONSUMER COMMUNICATIONS CORPORATION
("CCCC"); Parent, ATC, APC, CES, CTII, STC, CCM, CVT, CTC,
CTI, ASI, KVTI, CBCC and CCCC being hereinafter referred to
collectively as the "Borrowers" and, individually, as a
"Borrower"), each a Delaware corporation, to the Loan and
Security, dated February 1, 1994 (as amended, modified,
restated or supplemented from time to time, the "Loan
Agreement"). All capitalized terms used herein without
definition shall have the meanings ascribed to such terms in
the Loan Agreement.
RECITALS
A. Pursuant to the Loan Agreement, the Lender has
agreed to make loans and extend credit to the Borrowers
secured by the Collateral and the Realty.
B. The Loan Agreement was previously amended by a
certain Consolidated Amendment No. 1 thereto, dated March
13, 1996, and a certain Amendment No. 2 thereto, dated June
28, 1996.
C. The Borrowers and the Lender now desire to further
amend the Loan Agreement as set forth herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby expressly acknowledged, the
Borrowers and the Lender hereby agree as follows:
ARTICLE I
AMENDMENTS TO LOAN AGREEMENT
The Loan Agreement is hereby amended as follows:
1. 1. Minimum Consolidated Adjusted Table Net Worth.
Section 9.3(A) is amended in its entirety to read as
follows:
(A) Minimum Consolidated Adjusted Tangible Net Worth.
Maintain a Consolidated Adjusted Tangible Net Worth of not
less than the amount shown below at all times during the
period corresponding thereto:
Consolidated Adjusted
Period Tangible Net Worth
First fiscal quarter of fiscal year $21,500,000
ending December 31, 1996
Second fiscal quarter of fiscal year $21,000,000
ending December 31, 1996
Third fiscal quarter of fiscal year $18,750,000
ending December 31, 1996
Fourth fiscal quarter of fiscal year $20,200,000
ending December 31, 1996
First fiscal quarter of fiscal year $24,950,000
ending December 31, 1997
Second fiscal quarter of fiscal year $26,500,000
ending December 31, 1997
Third fiscal quarter of fiscal year $28,300,000
ending December 31, 1997
Fourth fiscal quarter of fiscal year $28,750,000
ending December 31, 1997
First fiscal quarter of fiscal year $29,000,000
ending December 31, 1998
Second fiscal quarter of fiscal year $30,500,000
ending December 31, 1999
Third fiscal quarter of fiscal year $32,350,000
ending December 31, 1998
Fourth fiscal quarter of fiscal year $32,750,000
ending December 31, 1998 and at
all times thereafter"
1.2 Profitability. Section 9.3(B) is amended in its
entirety to read as follows:
(B) Profitability, Achieve a 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 fiscal quarter of fiscal year ($1,000,000)
ending December 31, 1996
First and second fiscal quarters of ($1,500,000)
fiscal year ending December 31, 1996
First, second and third fiscal quarters (S 450,000)
of fiscal year ending December 31, 1996
Fiscal year ending December 31, 1996 $ 200,000
First fiscal quarter of fiscal year ending S 350,000
December 31, 1997 and the first quarter
of each fiscal year thereafter
First and second fiscal quarters of fiscal $2,250,000
year ending December 31, 1997 and the
first and second fiscal quarters of each
fiscal year thereafter
First, Second and third fiscal quarters of $4,500,000
fiscal year ending December 31, 1997 and
the first second and third fiscal quarters
of each fiscal year thereafter
Fiscal year ending December 31, 1997 and $5,000,000
each fiscal year thereafter
1.3 Consolidated Debt Service Coverage Ratio. Section
9.3(C) is amended in its entirety to read as follows:
(C) Consolidated Debt Service Coverage Ratio. Maintain a
Consolidated Debt Service Coverage Ratio of not less than
the ratio shown below for the period corresponding thereto:
Consolidated Debt
Period Service Coverage Ratio
First fiscal quarter of fiscal year ending. 75 to 1.0
December 3 1, 1996 "the first fiscal
quarter of each fiscal year thereafter
First and second fiscal quarters of fiscal. 75 to 1.0
year ending December 31, 1996 and the
first and second fiscal quarters of each
fiscal year thereafter
First, second and third fiscal quarters of 1.5 to 1.0
fiscal year ending December 31, 1996 and
the first, second and third fiscal quarters
of each fiscal year thereafter
Fiscal year ending December 31, 1996 and 1.7 to 1.0
each fiscal year thereafter
1.4 Minimum Current Ratio. Section 9.3 (D) is amended in
its entirety to read as follows:
"(D) Minimum Current Ratio. Maintain a ratio of
Consolidated Current Assets to Consolidated Current
Liabilities of not less than 1.4 to 1.0 for each of the
first and second fiscal quarters in each fiscal year; 1.45
to 1.0 for each of the third and fourth quarters of fiscal
year 1996; and 1.65 to 1.0 for each of the third and fourth
fiscal quarters of fiscal year 1997 and each fiscal year
thereafter."
1.5 Debt/EBITDA. Section 9.3(E) is amended in its entirety
to read as follows:
"(E) Debt/EBITDA. Maintain for each period of four (4)
consecutive fiscal quarters, commencing with the fiscal
quarter ending September 29, 1996, a ratio of (a)
indebtedness for Money Borrowed of Parent and its
Subsidiaries at the end of such period calculated on a
Consolidated basis to (b) the sum of (i) EBITDA for such
period less (ii) the greater of the amount of Capital
Expenditures made by Parent and its Subsidiaries during such
period or $1,500,000, of not greater than the ratio shown
below for the period corresponding thereto:
Four (4) Consecutive
Fiscal Quarters Ending With Debt/EBITDA Ratio
Third fiscal quarter of fiscal year 7.0 to 1.0
ending December 31, 1996
Fourth fiscal quarter of fiscal year 4.0 to 1.0
ending December 31, 1996
First fiscal quarter of fiscal year 3.45 to 1.0
ending December 31, 1997
Second fiscal quarter of fiscal year 3.2 to 1.0
ending December 31, 1997
Third fiscal quarter of fiscal year 3.0 to 1.0
ending December 31, 1997
Fourth fiscal quarter of fiscal year 3.0 to 1.0
ending December 31, 1997
First fiscal quarter of fiscal year 2.9 to 1.0
ending December 31, 1998 and each
fiscal year thereafter
Second fiscal quarter of fiscal year 2.75 to 1.0
ending December 31, 1998 and each
fiscal year thereafter
Third fiscal quarter of fiscal year 2.5 to 1.0
ending December 31, 1998 and each
fiscal year thereafter
Fourth fiscal quarter of fiscal year 2.5 to 1.0
ending December 31, 1998 and each
fiscal year thereafter"
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Each Borrower hereby represents and warrants to the Lender
that:
2.1. Compliance with the Loan Agreement and Other Loan
Documents. As of the execution of this Amendment, each
Borrower is in compliance with all of the terms and
provisions set forth in the Loan Agreement and in the other
Loan Documents to be observed or performed by such Borrower,
except where the failure of such Borrower to comply has been
waived in writing by the Lender.
2.2. Representations in the Loan Agreement and Other
Loan Documents. The representations and warranties of each
Borrower set forth in the Loan Agreement and the other Loan
Documents are true and correct in all material respects
except for any changes in the nature of any Borrower's
business or operations which have occurred in the ordinary
course of business that would render the information
contained in any exhibit attached to the Loan Agreement
either inaccurate or incomplete in any material respect, so
long as (a) the Lender has consented to such changes, (b)
such changes are not expressly prohibited by the Loan
Agreement, or (c) with respect to matters Borrowers are
required to notify Lender of pursuant to Sections 4.9(E) or
9. I(A), Borrowers have given notice as required by such
sections.
2.3. No Event of Default. After giving effect to this
Amendment, no Default or Event of Default exists.
ARTICLE III
MODIFICATION OF LOAN DOCUMENTS
3.1. Loan Documents. The Loan Agreement and each of the
other Loan Documents are amended to provide that any
reference to the Loan Agreement in the Loan Agreement or any
of the other Loan Documents shall mean the Loan Agreement as
amended by this Amendment, and as it is further amended,
restated, supplemented or modified from time to time.
ARTICLE IV
GENERAL
4.1. Full Force And Effect. As expressly amended hereby,
the Loan Agreement shall continue in full force and effect
in accordance with the provisions thereof. As used in the
Loan Agreement, "hereinafter", "hereto", "hereof" or words
of similar import, shall, unless the context otherwise
requires, mean the Loan Agreement as amended by this
Amendment.
4.2 Applicable Law. This Amendment shall be governed by and
construed in accordance with the internal laws and judicial
decisions of the State of North Carolina.
4.3 Counterparts. This Amendment may be executed in one or
more counterparts, each of which shall constitute an
original, but all of which when taken together shall
constitute but one and the same instrument.
4.4 Expenses. Borrowers shall reimburse the Lender for all
reasonable fees and expenses original or otherwise) incurred
by the Lender in connection with the preparation,
negotiation, execution and delivery of this Amendment and
all other agreements and documents or contemplated hereby.
4.5. Headings. The headings in this Amendment are for the
purpose of reference only and shall not affect the
construction of this Amendment.
4.6 Waiver OF Jury Trial. TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, EACH BORROWER AND THE LENDER, EACH WAIVES
THE RIGHT TO BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO THIS
AMENDMENT, OR THE LOAN AGREEMENT OR THE OTHER LOAN DOCUMENTS
OR THE TRANSACTIONS RELATED HERETO OR THERETO.
IN WITNESS OF, the parties hereto have caused this
Amendment to be executed and delivered on the date first
above written.
BORROWERS:
ATTEST COMDIAL CORPORATION
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST AMERICAN TELECOMMUNICATIONS
CORPORATIONS
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST AMERICAN PHONE CENTERS, INC.
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST COMDIAL ENTERPRISE SYSTEMS,
INC.
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST COMDIAL TELECOMMUNICATIONS
INTERNATIONAL, INC.
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST SCOTT TECHNOLOGIES
CORPORATION
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST COMDIAL CORPORATION
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST COMDIAL CUSTOM MANUFACTURING,
INC.
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST COMDIAL VIDEO TELEPHONY, INC.
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST COMDIAL TECHNOLOGY
CORPORATION
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST COMDIAL TELECOMMUNICATIONS,
INC.
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST AURORA SYSTEMS, INC.
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST KEY VOICE TECHNOLOGIES, INC.
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST COMDIAL BUSINESS
COMMUNICATIONS CORPORATION
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
ATTEST COMDIAL CONSUMER
COMMUNICATIONS CORPORATION
/s/ Keith Johnstone By: /s/ Wayne R. Wilver
Vice President Wayne R. Wilver
Senior Vice President
LENDER:
FLEET CAPITAL CORPORATION
BY: \S\ Jimmy G. Ramsey
Title: Vice President
<TABLE>
COMDIAL CORPORATION AND SUBSIDIARIES
<CAPTION>
Exhibit 11
Statement re Computation of Per Share Earnings
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
September 29, October 1, September 29, October 1,
1996 1995 1996 1995
PRIMARY
Net income applicable to common shares: $908,000 $1,739,000 $465,000 $9,033,000
Weighted average number of common:
shares outstanding during the period 8,577,667 7,650,398 8,444,399 7,242,802
Add - common equivalent shares (determined
using the ""treasury stock"" method) repre-
senting shares issuable upon exercise of:
Stock options 58,760 260,011 113,137 238,927
Weighted average number of shares used in cal-
culation of primary earnings per
common share 8,636,427 7,910,409 8,557,536 7,481,729
Earnings per common share: $0.11 $0.22 $0.05 $1.21
FULLY DILUTED
Net income applicable to common shares $908,000 $1,739,000 $465,000 $9,033,000
Adjustments for convertible securities:
Dividends paid on convertible
preferred stock - 65,000 - 350,000
"Net income applicable to common shares
assuming conversion of above securities $908,000 $1,804,000 $465,000 $9,383,000
Weighted average number of shares used in
calculation of primary earnings per
common share 8,636,427 7,910,409 8,557,536 7,481,729
Add (deduct) incremental shares representing:
Shares issuable upon exercise of stock
options included in primary calculation (58,760) (260,011) (113,137) (238,927)
Shares issuable based on period-end market
price or weighted average price:
Convertible preferred stocks - 394,745 - 703,342
Stock options 57,474 262,350 112,100 292,688
Weighted average number of shares used in
calculation of fully diluted earnings
per common share 8,635,141 8,307,493 8,556,499 8,238,832
Fully diluted earnings per common share $0.11 $0.22 $0.05 $1.14
</TABLE>
