SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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 1-7960
TIE/communications, Inc.
(Exact name of registrant as specified in its charter)
Delaware 06-0872068
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8500 W. 110th Street, Overland Park, Kansas 66210
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (913) 344-0400
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 ____
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No ____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Date Class Shares Outstanding
- - - - ------------------ -------------------- ------------------
September 30, 1994 Common Stock, par 3,981,338
value $.10 per share
TIE/communications, Inc. and Subsidiaries
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1994 and
December 31, 1993 3 - 4
Consolidated Statements of Operations -
Nine Months Ended September 30, 1994 and 1993 5
Consolidated Statements of Operations -
Three Months Ended September 30, 1994 and 1993 6
Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1994 and 1993 7 - 8
Notes to Consolidated Financial Statements 9 - 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 11 - 14
PART II. OTHER INFORMATION 14
- 1 -
Part I. FINANCIAL INFORMATION
The condensed financial statements included herein have been provided by
Registrant, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, however, Registrant believes that the
disclosures are adequate to make the information presented not misleading.
These condensed financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Registrant's Annual
Report on Form 10-K/A for the fiscal year ended December 31, 1993.
The condensed interim financial statements included herein, which are unaudited,
include, in the opinion of management, all adjustments (consisting primarily of
normal recurring accruals) necessary to present fairly the consolidated
financial position and consolidated results of operations of the Registrant and
its subsidiaries (hereinafter sometimes collectively referred to as the
"Company") for the periods presented. The December 31, 1993 balance sheet is
derived from the audited financial statements presented in the Registrant's
Annual Report on Form 10-K/A.
- 2 -
Item 1. Financial Statements
TIE/communications, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993 (Note 6)
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 456,000 $ 8,133,000
Notes and accounts receivable, net
of allowance for doubtful accounts:
September 30, 1994 - $2,091,000
December 31, 1993 - $1,529,000 14,160,000 12,520,000
Inventories 15,735,000 14,223,000
Restricted cash equivalents 232,000 290,000
Current portion of long-term notes receivable 232,000 276,000
Current deferred tax assets, net 232,000 232,000
Prepaid expenses 1,124,000 1,053,000
Miscellaneous 2,594,000 2,154,000
----------- -----------
Total current assets 34,765,000 38,881,000
Property, net 2,007,000 1,874,000
Intangible assets, net 19,871,000 19,655,000
Long-term deferred tax assets, net 1,324,000 1,954,000
Long-term notes receivable 428,000 473,000
Other assets 154,000 157,000
----------- -----------
Total assets $58,549,000 $62,994,000
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 3 -
TIE/communications, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993 (Note 6)
------------- -------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Notes payable and current
maturities of long-term debt $ 2,500,000 $ 1,424,000
Accounts payable 5,327,000 7,802,000
Accrued expenses 11,479,000 10,665,000
Restructuring reserves 109,000 777,000
Deferred service revenue 9,595,000 10,207,000
Income taxes payable 2,108,000 2,353,000
----------- -----------
Total current liabilities 31,118,000 33,228,000
Other non-current liabilities 353,000 739,000
Long-term tax liability 3,397,000 4,370,000
Minority interest 144,000 1,735,000
----------- -----------
Total liabilities 35,012,000 40,072,000
----------- -----------
Stockholders' equity:
Common stock, par value $0.10 399,000 399,000
Authorized - 10,000,000 shares
Issued - 3,988,392 shares
Outstanding - 3,981,338 shares
Additional paid-in capital 19,217,000 19,217,000
Retained earnings 2,840,000 2,408,000
Common stock in treasury, at cost (60,000) (60,000)
----------- -----------
22,396,000 21,964,000
Cumulative currency translation adjustment 1,141,000 958,000
----------- -----------
Total stockholders' equity 23,537,000 22,922,000
----------- -----------
Total liabilities and stockholders'
equity $58,549,000 $62,994,000
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 4 -
TIE/communications, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1994 (Note 6) 1993
------------- --------------
<S> <C> <C>
Net revenue:
Equipment sales $71,368,000 $53,714,000
Services provided 21,878,000 18,979,000
----------- -----------
93,246,000 72,693,000
----------- -----------
Cost of sales:
Equipment sales 39,770,000 28,693,000
Services provided 9,591,000 7,573,000
----------- -----------
49,361,000 36,266,000
----------- -----------
Gross margin:
Equipment sales 31,598,000 25,021,000
Services provided 12,287,000 11,406,000
----------- -----------
43,885,000 36,427,000
----------- -----------
47.1% 50.1%
Operating expenses 43,973,000 36,526,000
----------- -----------
Operating loss from
consolidated operations (88,000) (99,000)
Interest income 206,000 617,000
Interest expense (138,000) (466,000)
Other income, net 1,137,000 1,433,000
----------- -----------
Pretax income 1,117,000 1,485,000
Provision for income taxes 630,000 664,000
----------- -----------
Income before minority interest 487,000 821,000
Minority interest 55,000 88,000
----------- -----------
Net income $ 432,000 $ 733,000
=========== ===========
Primary and fully diluted income per share $ 0.11 $ 0.18
=========== ===========
Average shares outstanding 3,981,338 3,981,338
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 5 -
TIE/communications, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1994 1993
------------- --------------
<S> <C> <C>
Net revenue:
Equipment sales $24,269,000 $18,410,000
Services provided 7,560,000 6,523,000
----------- -----------
31,829,000 24,933,000
----------- -----------
Cost of sales:
Equipment sales 14,002,000 9,922,000
Services provided 3,358,000 2,912,000
----------- -----------
17,360,000 12,834,000
----------- -----------
Gross margin:
Equipment sales 10,267,000 8,488,000
Services provided 4,202,000 3,611,000
----------- -----------
14,469,000 12,099,000
----------- -----------
45.5% 48.5%
Operating expenses 14,629,000 12,252,000
----------- -----------
Operating loss from
consolidated operations (160,000) (153,000)
Interest income 54,000 173,000
Interest expense (26,000) (122,000)
Other income, net 422,000 693,000
----------- -----------
Pretax income 290,000 591,000
Provision for income taxes 155,000 292,000
----------- -----------
Income before minority interest 135,000 299,000
Minority interest (13,000) 64,000
----------- -----------
Net income $ 148,000 $ 235,000
=========== ===========
Primary and fully diluted income per share $ 0.04 $ 0.06
=========== ===========
Average shares outstanding 3,981,338 3,981,338
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 6 -
TIE/communications, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1994 (Note 6) 1993
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 432,000 $ 498,000
Adjustments to reconcile net income
to cash flows from operating activities:
Depreciation and amortization 2,075,000 1,031,000
Deferred income 11,000 (28,000)
Minority interest 55,000 24,000
Deferred income taxes 630,000 420,000
Changes in working capital, net of
acquisitions and divestitures:
Accounts receivable (1,683,000) 495,000
Inventories (1,562,000) (535,000)
Restricted cash equivalents 58,000 1,382,000
Other receivables (84,000) 191,000
Prepaid expenses and miscellaneous
current assets (437,000) (305,000)
Accounts payable (2,453,000) (1,441,000)
Accrued expenses 474,000 (378,000)
Restructuring reserves (667,000) (630,000)
Deferred service revenue (589,000) (498,000)
Taxes payable (243,000) 44,000
----------- -----------
Cash flows (used for) provided by
operating activities (3,983,000) 270,000
Cash flows from investment activities:
Capital expenditures, net of disposals (746,000) (194,000)
Assets of businesses acquired (1) (429,000) (399,000)
Purchase of minority interest in
consolidated subsidiary (2,596,000) (796,000)
Other 1,000 (62,000)
----------- -----------
Cash flows used for investment
activities (3,770,000) (1,451,000)
</TABLE>
(Continued)
See accompanying Notes to Consolidated Financial Statements.
- 7 -
TIE/communications, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1994 (Note 6) 1993
------------- --------------
<S> <C> <C>
Cash flows from financing activities:
Long-term and short-term borrowings $ 2,500,000 $ --
Long-term and short-term debt repayments (1,424,000) (430,000)
Payment of long-term tax liability (973,000) (308,000)
Other 79,000 213,000
----------- -----------
Cash flows provided by (used for)
financing activities 182,000 (525,000)
Impact of changes in foreign currency
translation (106,000) (36,000)
----------- -----------
Decrease in cash and cash equivalents (7,677,000) (1,742,000)
Cash and cash equivalents at the
beginning of period 8,133,000 14,052,000
----------- -----------
Cash and cash equivalents at the
end of period $ 456,000 $12,310,000
=========== ===========
- - - - ---------------------------------
Cash flow information:
Interest paid $ 163,000 $ 343,000
=========== ===========
Income taxes paid (excluding
payment of long term tax liability) $ 109,000 $ 108,000
=========== ===========
(1) Acquisitions:
Inventory $ -- $ (39,000)
Intangible assets (429,000) (368,000)
Other assets -- (3,000)
Accrued expenses -- 11,000
----------- -----------
$ (429,000) $ (399,000)
=========== ===========
(2) Non-cash activity:
Reduction of intangible assets
to establish deferred tax asset $ -- $ 2,660,000
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
- 8 -
TIE/communications, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Consolidation
The consolidated financial statements include the accounts of the Company and
its majority-owned domestic and foreign subsidiaries. All intercompany accounts
and transactions are eliminated. Certain amounts previously reported have been
reclassified to conform with revised classifications adopted in the first nine
months of 1994.
2. Inventories
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
Raw materials $ 1,249,000 $ 1,374,000
Work-in-process 2,099,000 1,538,000
Finished goods 12,387,000 11,311,000
----------- -----------
$15,735,000 $14,223,000
=========== ===========
</TABLE>
3. Property
The following is a schedule of property, plant and equipment:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
------------- ------------
<S> <C> <C>
Land $ 10,000 $ 10,000
Buildings 224,000 224,000
Equipment and tooling 15,041,000 15,591,000
Leasehold improvements 997,000 668,000
Furniture and fixtures 3,656,000 3,692,000
----------- -----------
19,928,000 20,185,000
Less accumulated depreciation and amortization 17,921,000 18,311,000
----------- -----------
$ 2,007,000 $ 1,874,000
=========== ===========
</TABLE>
4. Income Taxes
Effective January 1, 1993, the Company prospectively adopted SFAS No. 109 which
requires the recognition of deferred tax benefits to the extent it is more
likely than not that such benefits will be realized. In accordance with this
new statement, the Company recognized a net deferred tax asset of approximately
$2.7 million as of January 1, 1993, with a corresponding reduction of intangible
assets.
At December 31, 1993, the Company had a gross deferred tax asset of $37.1
million, primarily related to net operating loss carryforwards not recognized on
the tax return, and a valuation reserve of $35.1 million against that asset. At
September 30, 1994, the net deferred tax asset was reduced from approximately
$2.2 million at January 1, 1994 to $1.6 million due to the recognition of the
utilization of predecessor company net operating losses.
5. Investments
On June 15, 1994, the Company's Canadian subsidiary, TIE Telecommunications
Canada, Ltd., through a tender offer, redeemed all of the outstanding 2.251
million minority-owned shares for approximately $2.4 million U.S. dollars and
$0.1 million of related expenses. For accounting purposes the redemption will
be treated as a purchase. Goodwill of $1.2 million will be amortized over 20
years. The redemption was effected from internally available funds and no
borrowing was initiated.
- 9 -
6. Effect of Corrections
The Company has amended its financial statements for fiscal 1993 and the first
and second quarters of 1994 to correct accounting errors. These errors
principally relate to incorrect service billings to California customers who
previously had purchased service contracts from PacTel Meridian Systems (PTMS).
The contracts were acquired as part of the PTMS acquisition at the end of the
third quarter of 1993. Additionally, unrelated errors in the same periods were
discovered involving inventories and accruals at the Company's Northwest
operating unit. The effects of the corrections are as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1993
- - - - ----------------------------
As previously reported Corrections As restated
---------------------- ----------- ------------
<S> <C> <C> <C>
Revenues $102,531,000 $(420,000) $102,111,000
============ ========= ============
Pre-tax Income $ 3,002,000 $(466,000) $ 2,536,000
============ ========= ============
Net Income $ 1,682,000 $(317,000) $ 1,365,000
============ ========= ============
Earnings per share $ 0.42 $ (0.08) $ 0.34
============ ========= ============
<CAPTION>
Three Months Ended March 31, 1994
- - - - ---------------------------------
As previously reported Corrections As restated
---------------------- ----------- ------------
<S> <C> <C> <C>
Revenues $ 30,255,000 $(552,000) $ 29,703,000
============ ========= ============
Pre-tax Income (Loss) $ 691,000 $(747,000) $ (56,000)
============ ========= ============
Net Income (Loss) $ 295,000 $(437,000) $ (142,000)
============ ========= ============
Earnings(Loss) per share $ 0.07 $ (0.11) $ (0.04)
============ ========= ============
<CAPTION>
Three Months Ended June 30, 1994
- - - - --------------------------------
As previously reported Corrections As restated
---------------------- ----------- ------------
<S> <C> <C> <C>
Revenues $ 31,636,000 $ 78,000 $ 31,714,000
============ ========= ============
Pre-tax Income $ 993,000 $(110,000) $ 883,000
============ ========= ============
Net Income $ 467,000 $ (41,000) $ 426,000
============ ========= ============
Earnings per share $ 0.12 $ (0.01) $ 0.11
============ ========= ============
<CAPTION>
Six Months Ended June 30, 1994
- - - - ------------------------------
As previously reported Corrections As restated
---------------------- ----------- ------------
<S> <C> <C> <C>
Revenues $ 61,891,000 $(474,000) $ 61,417,000
============ ========= ============
Pretax Income $ 1,684,000 $(857,000) $ 827,000
============ ========= ============
Net Income $ 762,000 $(478,000) $ 284,000
============ ========= ============
Earnings per share $ 0.19 $ (0.12) $ 0.07
============ ========= ============
</TABLE>
- 10 -
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Nine Months and Three Months Ended September 30, 1994 versus September 30, 1993
For the quarter ended September 30, 1994, the Company generated net income of
$148 thousand or $0.04 per share as compared to net income of approximately $235
thousand or $0.06 per share for the third quarter of 1993. For the nine months
ended September 30, 1994, the Company generated net income of $432 thousand or
$0.11 per share as compared to net income of $733 thousand or $0.18 per share
for the comparable 1993 period. The reduction in net income for the nine months
ended September 30, 1994 over 1993 is due primarily to a decline in gross margin
percentages and less favorable exchange rates affecting the earnings of the
Company's Canadian subsidiary. Fiscal 1993 includes $400,000 in non-operating
revenue relating to the relocation of the Corporate offices to Overland Park,
Kansas.
Total net revenue for the third quarter of 1994 and the first nine months of
1994 increased $6.9 million or 27.7% and $20.6 million or 28.3%, respectively,
from the comparable 1993 periods. The increases occurred primarily in new
equipment sales with a $5.9 million or 31.8% increase over the third quarter
1993 and $17.7 million or 32.9% increase over the first nine months of 1993.
Net revenue from new equipment sales accounted for approximately 76.2% and 73.8%
of the total revenue for the third quarter of 1994 and 1993, respectively, and
76.5% and 73.9% of the total revenue for the first nine months of 1994 and 1993,
respectively. The service revenue increased $2.9 million or 15.3% in the first
nine months of 1994 over the comparable 1993 period with the increase primarily
from the PTMS acquisition base in California. Net revenues from services
provided accounted for approximately 23.8% of total revenue in the third quarter
of 1994 as compared to 26.4% of total revenue in the third quarter of 1993 and
23.5% of total revenue in the first nine months of 1994 as compared to 26.1% in
the comparable 1993 period. Revenue from service transactions is expected to
continue to comprise a significant portion of the Company's overall net revenue
in future periods, however, there are no assurances that the foregoing will
occur.
The gross margin percentage for the quarter and nine months ended September 30,
1994 was 45.5% and 47.1%, respectively, as compared to 48.5% and 50.1% for the
same periods of 1993. The decline in the gross margin percentage is due to the
change in sales mix with a higher proportion of revenue being generated from new
equipment sales and sales of proprietary products, which carry a lower margin
versus service transactions. Although new equipment sales carry lower margins,
these sales present future service business to the Company. The gross margin on
new equipment sales and service revenue has declined from 46.6% and 60.1% in the
first nine months of 1993 to 44.3% and 56.2% in the first nine months of 1994.
The decrease in gross margins on new equipment sales for the nine months of 1994
compared to 1993 is due to the change in sales mix of new equipment. The
decrease in gross margins on service revenue for the nine months of 1994
compared to 1993, is primarily due to higher than expected service costs and
increased competition. The Company expects competition will continue to affect
the gross margin percentages in the future but not cause a significant
deterioration, although there are no assurances that this will occur.
- 11 -
Another factor that may affect the Company's gross margin percentage in the more
distant future relates to the Company's agreement with NTK America. Under that
agreement, the Company is provided with the most favorable purchase prices on
NTK America products for the duration of the agreement. The agreement has been
extended until July 2001. It is anticipated that if NTK America does not invest
in research and development to advance the technology and improve the cosmetics
of the products, the marketability of these products will decline. Although the
Company has agreed to provide an incentive to NTK America to invest in such
research and development, the Company cannot guarantee that NTK America will
perform future development on these products. Therefore, the Company cannot
estimate the impact of the foregoing on future gross margin at this time.
Operating expenses in the third quarter and the first nine months of 1994
increased $2.4 million (19.4%) and $7.4 million (20.4%), respectively, over the
comparable 1993 periods. Operating expenses as a percent of sales, however,
decreased to 46.0% and 47.1%, respectively, in the third quarter of 1994 and the
first nine months of 1994 as compared to 49.1% and 50.3% in both comparable
periods of 1993. The increase in operating expenses consists of additional
expenses resulting from customer base acquisitions occurring in the latter part
of 1993 and an increase in selling expenses consistent with the increases in net
revenue of 27.7% and 28.3% in the quarter and year-to-date periods,
respectively, over the same periods of 1993. Additionally, operating expenses
for the third quarter and first nine months of 1994 also include increased
expenses incurred to support the new products and services being offered by the
Company, predominantly in the new strategic business units of network services,
videoconferencing products and services, as well as a new direct equipment sales
program. The Company is continuing to monitor operating expenses and will seek
to continue to control costs in future periods. It is not expected that
operating expenses will increase significantly in the future without a
corresponding significant increase in revenue.
Other income, net decreased $296 thousand for the first nine months of 1994 as
compared to the same period of 1993. Other income, net is substantially
comprised of royalty income primarily from NTK America for its sale of equipment
designed by the Company. The NTK royalty agreement is in effect through July,
1996. Royalty income for the nine months ended September 30, 1994 and 1993 is
$1,211,000 and $1,067,000, respectively. Also included in 1993 other income,
net is the net gain of approximately $400,000 relating to the relocation of the
Corporate offices to Overland Park, Kansas.
In 1993, and continuing into the third quarter of 1994, TIE focused its efforts
on maintaining its existing customer base and implementation of training and
marketing programs related to its new strategic businesses. The purchase of
certain assets of PacTel Meridian Systems (PTMS) was consummated during the
month of September 1993. Initially, and continuing into the third quarter of
1994, the California region performance was far below expectations which had a
negative impact upon the Company's operating income. In addition, the Company
expected that non-recurring expenses related to the absorption of that base
would negatively affect the Company's results but not to the extent which
occurred.
Inflation
Inflation has had a relatively minor impact on the Company as the rate of
inflation has declined in recent reporting periods. If operating expenses
increase, then the Company, to the extent permitted by competition, may attempt
to recover these increased costs by increasing sales prices to customers.
- 12 -
Liquidity and Capital Resources
Cash and cash equivalents at September 30, 1994 totalled $0.5 million, a
decrease of $7.6 million from December 31, 1993. During the first nine months
of 1994, the Company used approximately $4.0 million of cash for operating
activities, including inventory purchases, reduction of accounts payable and
$0.6 million in legal settlements. In the first nine months of 1994,
approximately $2.5 million was used to purchase all of the outstanding 2.251
million minority shares of the Company's Canadian subsidiary resulting in a 100%
ownership interest by the Company. Additionally, the Company used approximately
$1.0 million for payment of long-term tax liability, $0.7 million for net
capital expenditures, $0.4 million to expand its service network and $1.4
million for debt repayments, including $1.0 million payment of the note payable
to PTMS in the third quarter 1994 related to the 1993 acquisition of certain
assets of PTMS. In the third quarter of 1994, $2.5 million was provided from
borrowing funds under its revolving line of credit as discussed below.
Upon confirmation of the Company's Plan of Reorganization, HCR Partners made
available to the Company a $10.0 million revolving line of credit through
December 31, 1993. The Company agreed that in connection with the liquidation
of HCR Partners, the revolving line of credit agreement could be assigned to and
assumed by Marmon Holdings, Inc. No funds were borrowed under this line of
credit. Substantially all of the Company's assets are secured under this
agreement and the indebtedness under this line of credit has been guaranteed by
certain of the Company's subsidiaries. Effective December 31, 1993, the term of
the Credit Agreement was extended for an additional three year period ending
December 31, 1996 upon substantially the same terms and conditions, except that
the maximum credit available was reduced to $7,000,000.
The Company believes sufficient cash resources exist to support its short-term
needs through currently available cash, cash expected to be generated from
future operations, or from the line of credit previously mentioned. The Company
can borrow against this line of credit if needed, assuming no breach of any of
the covenants (which include restrictions on asset purchases and require
specified levels of working capital and net worth to be maintained) and that the
aggregate principal amount outstanding at any time under the credit agreement
does not exceed the "Borrowing Base" (which is based on inventory and
receivables) set forth in the credit agreement. The Company was in compliance
with or had received a waiver of the covenants as of September 30, 1994 and
therefore was qualified to borrow the entire $7,000,000 available under the
line. The Company borrowed under this line of credit during the third quarter
and $2,500,000 of borrowings were outstanding as of September 30, 1994.
Although the Company's operating results have improved significantly since the
reorganization, the industry in which the Company is engaged is characterized by
intense competition and this factor, coupled with the effect of an uncertain
economic recovery, makes the future results of the Company extremely difficult
to predict.
The Company does not anticipate a need for long-term financing at this time. If
the need for long- term financing should arise, management believes it could be
available if the Company continues a trend of profitability. The Company is not
certain of the cost, terms and conditions upon which such financing might be
available.
At September 30, 1994 the Company did not have any material commitments for
capital expenditures.
- 13 -
Recent Accounting Pronouncements
The Company does not provide post-retirement or post-employment benefits and,
therefore, there is no impact on the Company under SFAS 106, "Employers
Accounting for Post-Retirement Benefits Other Than Pensions" and SFAS 112
"Employers Accounting for Post-Employment Benefits".
Part II. OTHER INFORMATION
Not applicable.
- 14 -
SIGNATURES
Pursuant to the requirement 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.
TIE/communications, Inc.
Dated: November 14, 1994 By: /s/ George N. Benjamin, III
George N. Benjamin, III
President and Chief Executive Officer
Dated: November 14, 1994 By: /s/ Jane E. Closterman
Jane E. Closterman
Corporate Controller
- 15 -
EXHIBIT INDEX
Exhibit No.
- - - - -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 456,000
<SECURITIES> 0
<RECEIVABLES> 16,251,000
<ALLOWANCES> 2,091,000
<INVENTORY> 15,735,000
<CURRENT-ASSETS> 34,765,000
<PP&E> 19,928,000
<DEPRECIATION> 17,921,000
<TOTAL-ASSETS> 58,549,000
<CURRENT-LIABILITIES> 31,118,000
<BONDS> 0
<COMMON> 399,000
0
0
<OTHER-SE> 23,138,000
<TOTAL-LIABILITY-AND-EQUITY> 58,549,000
<SALES> 71,366,000
<TOTAL-REVENUES> 93,246,000
<CGS> 39,770,000
<TOTAL-COSTS> 49,361,000
<OTHER-EXPENSES> 43,973,000
<LOSS-PROVISION> 1,104,000
<INTEREST-EXPENSE> (138,000)
<INCOME-PRETAX> 1,117,000
<INCOME-TAX> 630,000
<INCOME-CONTINUING> 487,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 432,000
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
