<PAGE>
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 March 31, 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 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:
<TABLE>
<CAPTION>
DATE CLASS SHARES OUTSTANDING
---- ----- ------------------
<S> <C> <C>
March 31, 1995 Common Stock, par 3,981,338
value $.10 per share
</TABLE>
<PAGE>
TIE/COMMUNICATIONS, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets - March 31, 1995 and
December 31, 1994 3 - 4
Consolidated Statements of Operations -
Three Months Ended March 31, 1995 and 1994 5
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 6 - 7
Notes to Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 9 - 10
PART II. OTHER INFORMATION 10
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<PAGE>
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 for the fiscal year ended December 31, 1994.
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, 1994
financial statements are derived from the audited financial statements
presented in the Registrant's Annual Report on Form 10-K.
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<PAGE>
ITEM 1. FINANCIAL STATEMENTS
TIE/COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
----------- -----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 302,000 $ 887,000
Notes and accounts receivable, net
of allowance for doubtful accounts:
March 31, 1995 - $1,978,000
December 31, 1994 - $2,172,000 14,265,000 13,780,000
Inventories, net 13,478,000 13,704,000
Restricted cash equivalents 232,000 232,000
Current portion of long-term notes
receivable 121,000 215,000
Current deferred tax assets, net 82,000 82,000
Prepaid expenses 964,000 952,000
Miscellaneous 1,178,000 1,683,000
----------- -----------
Total current assets 30,622,000 31,535,000
----------- -----------
Property, net 1,922,000 1,852,000
Intangible assets, net 19,260,000 19,735,000
Long-term deferred tax assets, net 563,000 563,000
Long-term notes receivable 388,000 385,000
Other assets 155,000 155,000
----------- -----------
Total assets $52,910,000 $54,225,000
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
TIE/COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
----------- -----------
(UNAUDITED)
<S> <C> <C>
Current liabilities:
Notes payable and current
maturities of long-term debt $ 2,100,000 $ --
Accounts payable 4,703,000 7,499,000
Accrued expenses 12,112,000 2,243,000
Relocation reserves 268,000 123,000
Deferred service revenue 9,392,000 9,297,000
Income taxes payable 2,123,000 2,127,000
----------- -----------
Total current liabilities 30,698,000 31,289,000
Other non-current liabilities 329,000 376,000
Long-term tax liability 2,468,000 2,741,000
Minority interest 69,000 79,000
----------- -----------
Total liabilities 33,564,000 34,485,000
----------- -----------
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 (deficit) (1,121,000) (711,000)
Common stock in treasury, at cost (60,000) (60,000)
----------- -----------
18,036,000 18,845,000
Cumulative foreign currency
translation adjustment 911,000 895,000
----------- -----------
Total stockholders' equity 19,346,000 19,740,000
----------- -----------
Total liabilities and
stockholders' equity $52,910,000 $54,225,000
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
TIE/COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Net revenue:
Equipment sales $24,627,000 $22,665,000
Services provided 6,865,000 7,038,000
----------- -----------
31,492,000 29,703,000
----------- -----------
Cost of sales:
Equipment sales 14,057,000 12,235,000
Services provided 3,034,000 3,282,000
----------- -----------
17,091,000 15,517,000
----------- -----------
Gross margin:
Equipment sales 10,570,000 10,430,000
Services provided 3,831,000 3,756,000
----------- -----------
14,401,000 14,186,000
----------- -----------
Operating expenses 14,947,000 14,612,000
----------- -----------
Operating loss from consolidated
operations (546,000) (426,000)
Interest income 47,000 67,000
Interest expense (23,000) (61,000)
Other income, net 265,000 329,000
----------- -----------
Pretax loss (257,000) (91,000)
Provision for income taxes 153,000 51,000
----------- -----------
Net loss $ (410,000) $ (142,000)
=========== ===========
Net loss per share $ (0.10) $ (0.04)
=========== ===========
Average shares outstanding 3,981,338 3,981,338
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
TIE/COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1994
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (410,000) $ (142,000)
Adjustments to reconcile net income
to cash flows from operating activities:
Depreciation and amortization 724,000 684,000
Deferred income (18,000) (19,000)
Minority interest (10,000) 79,000
Deferred income taxes 141,000 51,000
Relocation Expense 150,000 300,000
Changes in working capital, net
of acquisitions and divestitures:
Accounts receivable (477,000) 54,000
Inventories 237,000 (1,617,000)
Other receivables 239,000 157,000
Prepaid expenses and miscellaneous
current assets 257,000 (396,000)
Accounts payable (2,801,000) (2,527,000)
Accrued expenses (166,000) 798,000
Relocation reserves (5,000) (234,000)
Deferred service revenue 90,000 142,000
Taxes payable (4,000) 22,000
---------- -----------
Cash flows used for operating
activities (2,053,000) (2,648,000)
Cash flows from investment activities:
Capital expenditures, net of disposals (301,000) (264,000)
Assets of businesses acquired (152,000) (181,000)
Other (1,000) --
---------- -----------
Cash flows used for investment activities (454,000) (445,000)
</TABLE>
(Continued)
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
TIE/COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1994
---------- -----------
<S> <C> <C>
Cash flows from financing activities:
Long-term and short-term borrowings $2,100,000 $ --
Long-term and short-term debt repayments -- (424,000)
Payment of long-term tax liability (273,000) --
Other 91,000 51,000
---------- -----------
Cash flows from (used for) financing
activities 1,918,000 (373,000)
Impact of changes in foreign currency
translation 4,000 (194,000)
---------- -----------
Decrease in cash and cash equivalents (585,000) (3,660,000)
Cash and cash equivalents at the
beginning of period 887,000 8,133,000
---------- -----------
Cash and cash equivalents at the
end of period $ 302,000 $ 4,473,000
========== ===========
- - - - ---------------------------------
Cash flow information:
Interest paid $ 56,000 $ 31,000
========== ===========
Income taxes paid (excluding
payment of long term tax liability) $ 10,000 $ 43,000
========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
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 quarter of 1995.
2. Inventories
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Spare parts and jobs in progress 3,800,000 3,058,000
Finished goods 9,678,000 10,646,000
----------- -----------
$13,478,000 $13,704,000
=========== ===========
</TABLE>
3. Property
The following is a schedule of property, plant and equipment:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Land $ 10,000 $ 10,000
Buildings 224,000 224,000
Equipment and tooling 14,943,000 14,665,000
Leasehold improvements 658,000 729,000
Furniture and fixtures 3,565,000 3,475,000
19,400,000 19,103,000
----------- ----------
Less accumulated depreciation
and amortization 17,478,000 17,251,000
$ 1,922,000 $ 1,852,000
=========== ===========
</TABLE>
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1995 VERSUS MARCH 31, 1994
For the quarter ended March 31, 1995, the Company incurred a net loss of $410
thousand or $0.10 per share as compared to a net loss of approximately $142
thousand or $0.04 per share for the first quarter of 1994. The increase in
net loss of $268 thousand in the 1995 first quarter is due primarily to a
decline in gross margin percentages to 45.7% in the first quarter of 1995
from 47.8% in the same period of 1994.
Total net revenue for the first quarter of 1995 increased $1.8 million or
6.0% as compared to the comparable 1994 period. The increase occurred in new
equipment sales with a $2.0 million or 8.7% increase over the first quarter
1994. Net revenue from new equipment sales accounted for approximately 78.2%
and 76.3% of the total revenue for the first quarter of 1995 and 1994,
respectively. The service revenue decreased $0.2 million or 2.5% over the
1994 first quarter with the decrease primarily in the direct sales and
service division with a decline in both revenue associated with maintenance
contracts and time and material billings. Net revenues from services provided
accounted for approximately 21.8% of total revenue in the first quarter of
1995 as compared to 23.7% of total revenue in the first quarter of 1994.
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 ended March 31, 1995 was 45.7% as
compared to 47.8% for the same period of 1994. 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. The
product mix included in new equipment sales has shifted to an increased
volume of lower margin products. Although new equipment sales carry lower
margins, these sales present future service business to the Company. Gross
margin on service revenue has increased from 53.4% in the first quarter of
1994 to 55.8% in the first quarter of 1995. The increase in gross margin on
service revenue is primarily due to increased service efficiencies.
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 through June 2001, with a five-year option to
renew through June 2006. 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 increased $0.3 million (2.3%) in the first quarter of 1995
versus 1994. Operating expenses as a percent of sales, however, decreased to
47.5% in the first quarter of 1995 as compared to 49.2% in 1994. The increase
in operating expenses consists of an increase in selling expenses of $0.4
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<PAGE>
million consistent with the 6.0% increase in net revenue. 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.
Nonoperating income (expense) decreased only $46 thousand in the first
quarter of 1995 from 1994 represented by: (a) a decrease in interest income
of $20 thousand resulting from declining cash balances in 1995; (b) a
favorable decrease in interest expense of $38 thousand from the debt
repayments in 1994; and (c) a decrease in other income, net of $64 thousand.
Other income, net is substantially comprised of royalty income of $397
thousand and $413 thousand for the first quarter of 1995 and 1994,
respectively, primarily from NTK America for its sale of equipment designed
by the Company.
The Company continues to focus its efforts on maintaining its existing
customer base and implementation of training and marketing programs related
to its new strategic businesses.
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.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at March 31, 1995 totalled $0.3 million, a decrease
of $0.6 million from December 31, 1994. For the first quarter of 1995, the
Company used approximately $2.0 million of cash for operating activities
primarily from reduction of accounts payable. Additionally, the Company used
approximately $0.3 million for payment of the long-term tax liability, $0.3
million for net capital expenditures and $0.2 million to expand its service
network. The Company borrowed $2.1 million under its revolving line of
credit as discussed below.
The Company has a $7,000,000 line of credit with Marmon Holdings, Inc. which
expires December 31, 1996. The indebtedness under the line of credit is
secured by substantially all of the Company's assets and has been guaranteed
by the principal subsidiaries of the Company.
The Company believes sufficient cash resources exist to support its 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 March 31,
1995 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
first quarter 1995 and $2.1 million of borrowings were outstanding as of
March 31, 1995.
At March 31, 1995 the Company did not have any material commitments for
capital expenditures.
PART II. OTHER INFORMATION
Not applicable.
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<PAGE>
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: May 15, 1995 By: /s/ George N. Benjamin, III
------------------------------------
George N. Benjamin, III
President and Chief Executive Officer
Dated: May 15, 1995 By: /s/ John W. Wellhausen
------------------------------------
John W. Wellhausen
Chief Financial Officer
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 302,000
<SECURITIES> 0
<RECEIVABLES> 16,243,000
<ALLOWANCES> 1,978,000
<INVENTORY> 13,478,000
<CURRENT-ASSETS> 30,622,000
<PP&E> 19,400,000
<DEPRECIATION> 17,478,000
<TOTAL-ASSETS> 52,910,000
<CURRENT-LIABILITIES> 30,698,000
<BONDS> 0
<COMMON> 399,000
0
0
<OTHER-SE> 18,947,000
<TOTAL-LIABILITY-AND-EQUITY> 52,910,000
<SALES> 24,627,000
<TOTAL-REVENUES> 31,492,000
<CGS> 14,057,000
<TOTAL-COSTS> 17,091,000
<OTHER-EXPENSES> 14,947,000
<LOSS-PROVISION> 344,000
<INTEREST-EXPENSE> (23,000)
<INCOME-PRETAX> (257,000)
<INCOME-TAX> 153,000
<INCOME-CONTINUING> (410,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (410,000)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
