FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 No. 0-11551
EXECUTONE Information Systems, Inc.
(Exact name of registrant as specified in its charter)
Virginia 86-0449210
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
478 Wheelers Farms Road, Milford, Connecticut 06460
(Address of principal executive offices) (Zip Code)
(203) 876-7600
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
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
The number of shares outstanding of registrant's Common Stock,
$.01 par value per share, as of July 31, 1995 was 46,866,101.
<PAGE>
INDEX
EXECUTONE Information Systems, Inc.
Page #
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1995
and December 31, 1994. 3
Consolidated Statements of Operations -
Three Months and Six Months Ended June 30, 1995
and 1994. 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994. 5
Notes to Consolidated Financial Statements. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION 13
SIGNATURES 14
EXHIBIT 11. STATEMENT REGARDING COMPUTATION
OF PER SHARE EARNINGS 15
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EXECUTONE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
(In thousands, except for share amounts) 1995 1994
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,439 $ 7,849
Accounts receivable, net of
allowance of $1,590 and $1,335 48,230 46,675
Inventories (Note C) 33,314 40,300
Prepaid expenses and other current assets 7,379 7,358
Total Current Assets 96,362 102,182
PROPERTY AND EQUIPMENT, net 18,950 18,967
INTANGIBLE ASSETS, net (Note C) 4,245 38,415
DEFERRED TAXES 31,388 26,979
OTHER ASSETS 3,706 2,938
$ 154,651 $ 189,481
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 791 $ 777
Accounts payable 29,434 39,369
Accrued payroll and related costs 7,714 7,026
Accrued liabilities 8,900 9,192
Deferred revenue and customer deposits 19,830 18,757
Total Current Liabilities 66,669 75,121
LONG-TERM DEBT 36,038 24,698
LONG-TERM DEFERRED REVENUE 2,546 2,354
TOTAL LIABILITIES 105,253 102,173
STOCKHOLDERS' EQUITY:
Common stock: $.01 par value; 80,000,000 shares
authorized; 46,730,096 and 45,647,894 issued
and outstanding 467 456
Additional paid-in capital 74,198 72,303
Retained earnings (accumulated deficit) (25,267) 14,549
Total Stockholders' Equity 49,398 87,308
$ 154,651 $ 189,481
The accompanying notes are an integral part of these consolidated
balance sheets.
3
<PAGE>
<TABLE>
<CAPTION>
EXECUTONE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
(In thousands, June 30, June 30,
except for per share amounts) 1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES:
Product $ 36,504 $ 36,550 $ 68,453 $ 65,636
Base 41,913 40,062 80,772 76,283
78,417 76,612 149,225 141,919
COST OF REVENUES 46,711 44,781 89,438 84,169
Gross Profit 31,706 31,831 59,787 57,750
OPERATING EXPENSES:
Research, development and
engineering 2,946 2,339 5,873 4,501
Selling, general and
administrative 26,872 24,139 50,553 46,591
Provision for restructuring
and unusual items (Note C) 44,042 - 44,042 -
73,860 26,478 100,468 51,092
OPERATING INCOME (LOSS) (42,154) 5,353 (40,681) 6,658
INTEREST, AMORTIZATION AND
OTHER EXPENSES, NET:
Cash 959 678 1,533 1,190
Noncash 106 651 806 1,303
1,065 1,329 2,339 2,493
ACQUISITION COSTS (Note H) 1,006 - 1,006 -
INCOME (LOSS) BEFORE INCOME TAXES
FROM CONTINUING OPERATIONS (44,225) 4,024 (44,026) 4,165
PROVISION (BENEFIT) FOR INCOME TAXES:
Cash 100 100 200 200
Noncash (Note E) (4,389) 1,510 (4,409) 1,465
(4,289) 1,610 (4,209) 1,665
INCOME (LOSS) FROM CONTINUING
OPERATIONS (39,936) 2,414 (39,817) 2,500
INCOME FROM DISCONTINUED
OPERATIONS (net of income tax
provision of $102) - - - 153
GAIN ON DISPOSAL OF DISCONTINUED
OPERATIONS (net of income tax
provision of $403) - - - 604
NET INCOME (LOSS) $(39,936) $ 2,414 $(39,817) $ 3,257
EARNINGS (LOSS) PER SHARE:
Continuing Operations $ (0.86) $ 0.05 $ (0.86) $ 0.05
Discontinued Operations --- --- --- 0.02
Net Income (Loss) $ (0.86) $ 0.05 $ (0.86) $ 0.07
WEIGHTED AVG. COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 46,590 47,651 46,268 47,737
The accompanying notes are an integral part of these consolidated
statements.
4
</TABLE>
<PAGE>
EXECUTONE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
(In thousands) June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations $ (39,817) $ 2,500
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation and amortization 3,355 3,877
Provision for restructuring and
unusual items (Note C) 44,042 ---
Provision (benefit) for income taxes not
currently payable (4,409) 1,465
Noncash expenses, including noncash
interest expense and provision for losses
on accounts receivable (138) 1,143
3,033 8,985
Change in working capital items:
Inventory (3,007) (3,358)
Accounts payable (9,935) 1,911
Other working capital items (648) (3,397)
(13,590) (4,844)
NET CASH (USED) PROVIDED BY CONTINUING
OPERATIONS (10,557) 4,141
Cash flows from discontinued operations --- (449)
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES (10,557) 3,692
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (2,270) (1,637)
Proceeds from sale of VCS --- 9,700
Receivable for emergency production costs --- (4,000)
Other 540 (27)
NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES (1,730) 4,036
CASH FLOWS FROM FINANCING ACTIVITIES:
Restructuring cost payments, net (117) (181)
Borrowings (repayments) under revolving
credit facility 11,012 (2,403)
Borrowings from Connecticut Development
Authority 750 ---
Repayment of term note under credit facility --- (2,768)
Repayments of other long-term debt (535) (682)
Repurchase of stock (88) (2,589)
Proceeds from issuance of stock 855 1,113
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 11,877 (7,510)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (410) 218
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 7,849 7,406
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 7,439 $ 7,624
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
EXECUTONE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - NATURE OF THE BUSINESS
EXECUTONE Information Systems, Inc. (the "Company") designs,
manufactures, sells, installs, supports and services voice
processing systems and provides cost-effective long-distance
telephone service. The Company is also a leading supplier of
specialized hospital communications equipment. Products are sold
under the EXECUTONE, INFOSTAR, IDS, LIFESAVER and INFOSTAR/ILS
brand names through a worldwide network of direct sales and
service offices and independent distributors.
NOTE B - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In
the opinion of management, all adjustments, which include normal
recurring adjustments, considered necessary for a fair
presentation of the results for the interim periods presented
have been included.
As of July 1, 1988, an accumulated deficit of approximately $49.7
million was eliminated.
NOTE C - PROVISION FOR RESTRUCTURING
In June 1995, the Company reorganized its business into five
divisions: Healthcare Communications, Call Center,
Videoconferencing, Network Services, and Computer Telephony. The
new strategic focus is on software applications in the
communications market. The business that was acquired in 1988
was a telephone equipment hardware company focused on customers
with small systems, with an emphasis on selling additional
hardware and service to generate add-on revenue. Under the new
strategy, the business acquired in 1988 will be de-emphasized.
The Company adopted FAS No. 121, which was issued in March 1995,
requiring impairment to be measured at the lowest level of
identifiable cash flows. The Company concluded there was an
impairment. As a result, the Company recorded a $44.0 million
provision for restructuring consisting of a $33.5 million
goodwill impairment, an $8.8 million writedown of inventory,
primarily service stock relating to the impaired assets and other
non-recurring inventory adjustments, $0.9 million related to the
shutdown of the Company's Scottsdale, Arizona facility and $0.8
million of other unusual items.
The intangibles generated by the acquisition of this business in
1988 were approximately $51 million, of which $46 million was
applicable to the telephony goodwill of the business described
above. In accordance with the provisions of FAS No. 121,
Accounting for the Impairment of Long-Lived Assets,
the Company prepared projections of future operating cash flows
relating to this business using historical trends and projections
based upon the Company's new strategic direction. These
projections indicated
6
<PAGE>
that this business would not generate sufficient operating cash
flows in the future. The amount of impairment loss is the entire
carrying value of the telephony goodwill of $33.5 million as of
June 30, 1995. The remaining intangibles on the Consolidated
Balance Sheet as of June 30, 1995 primarily relate to the
Company's Healthcare business.
The write-off of inventory consists of $1.3 million of raw
materials inventory and $7.5 million of finished goods inventory.
These amounts were determined based upon a review of specific
inventory parts along with current and projected usage,
incorporating the new strategic direction of the Company. The
Company will continue to maintain adequate levels of service
stock for the telephony hardware customer base and amortize it
over the estimated product/service life of the related systems.
NOTE D - SALE OF VODAVI COMMUNICATIONS SYSTEMS DIVISION
As of March 31, 1994, the Company sold its Vodavi Communications
Systems Division ("VCS"), which sold telephone equipment to
supply houses and dealers under the brand names STARPLUS and
INFINITE, for approximately $10.9 million. Proceeds of the sale
consisted of approximately $9.7 million in cash and a $1.2
million note, fully secured by a letter of credit and payable in
September 1995. The cash proceeds were received in April 1994 and
were used to reduce borrowings under the Company's credit
facility. The sale resulted in an after-tax gain of $604,000
(net of income tax provision of $403,000). The results of VCS
have been reported separately as a discontinued operation in the
Consolidated Statements of Operations.
NOTE E - INCOME TAXES
The Company accounts for income taxes in accordance with FAS 109,
Accounting for Income Taxes. The deferred tax asset represents
the benefits that are more likely than not to be realized from
the utilization of pre- and post-acquisition tax benefit
carryforwards, which include net operating losses, tax credits
and the excess of tax bases over the book value of net assets.
For the six-month periods ended June 30, 1995 and 1994, the
Company made cash payments for income taxes of approximately
$89,000 and $223,000, respectively.
NOTE F - EARNINGS PER SHARE
Earnings per share is based on the weighted average number of
shares of common stock and dilutive common stock equivalents
(which include stock options and warrants) outstanding during the
periods. Common stock equivalents and the convertible debentures
which are antidilutive have been excluded from the computations.
7
<PAGE>
NOTE G - INVENTORIES
Inventories are stated at lower of first-in, first-out ("FIFO")
cost or market and consist of the following at June 30, 1995 and
December 31, 1994:
(amounts in thousands) 6/30/95 12/31/94
Raw Materials $ 3,486 $ 3,082
Finished Goods 29,828 37,218
$ 33,314 $ 40,300
During the six-month period ended June 30, 1995, total
inventories before the noncash adjustment of $8.8 million (see
Note C) increased $1.8 million. However, since March 31, 1995,
total inventories before the noncash adjustment have been reduced
by $2.3 million.
NOTE H - OTHER MATTERS
The Company was recently involved in extensive negotiations to
acquire the Dictaphone division of Pitney Bowes. In April 1995,
the acquisition was awarded to another bidder. The Company
incurred approximately $1.0 million in fees and expenses relating
to the attempted acquisition which have been expensed during the
three-month period ended June 30, 1995.
For the six-month periods ended June 30, 1995 and 1994, the
Company made cash payments of approximately $1.9 million and $1.4
million, respectively, for interest expense on indebtedness.
There were no noncash financing activities for the six-month
period ended June 30, 1995. During the six-month period ended
June 30, 1994, noncash financing activities other than those
related to the sale of
VCS (See Note D) included capital lease obligations incurred in
connection with equipment acquisitions
of $0.5 million, noncash proceeds for issuances of stock from
application of credits under an option credit plan of $0.2
million and Common Stock Purchase Warrants exercised through bond
conversion of $1.1 million.
Refer to the Consolidated Statements of Cash Flows for
information on all cash-related operating, investing and
financing activities.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The Company's revenues are primarily derived from sales of its
products and services through a worldwide network of direct sales
and service offices and independent distributors. The Company's
end-user revenues are derived from two primary sources: (1) sales
of systems to new customers, which include sales of application-
specific software options ("product revenues"), and (2) servicing
the end-user base through the upgrade, expansion, enhancement
(which includes sales of application-specific software options)
and maintenance of previously installed systems, as well as
revenues from the INFOSTAR/LD+ program (commonly referred to as
"base revenues"). Base revenues usually generate higher
operating income margin than initial sales of systems, since the
Company's selling expenses for base revenues are lower than those
for initial system sales. Sales of the Company's application-
specific software options and related services generally produce
higher operating income margins than both system sales and base
revenues due to the added performance value and relatively low
production costs of such proprietary software and services.
Restructuring - Change in Business Strategy
In June 1995, the Company reorganized its business into five
divisions: Healthcare Communications, Call Center,
Videoconferencing, Network Services and Computer Telephony. The
new strategic focus will be toward software-oriented products and
away from smaller, hardware-based, non-application phone systems.
The Company adopted FAS No. 121 in the second quarter of 1995 and
recorded an impairment of the telephony goodwill that was
established as part of the 1988 acquisition, along with the
related service stock, based upon the commitment to move in this
new direction. This impairment is based upon the projected
future operating cash flows of that business.
The business that was acquired in 1988 was a telephone equipment
hardware company that focused its selling effort on the small non-
application systems, with an emphasis on selling additional
hardware to generate revenues in the form of move, adds and
changes ("MAC") and service, mainly on a time and material basis.
The strategy the Company is now pursuing is in a software
solutions orientation versus the hardware orientation purchased
in the 1988 acquisition. In addition, the Company's IDS platform
(IDS Systems 108, 228, 432 and 648), which was developed post-
acquisition, incorporates a switching bus to provide everything
from basic communication to sophisticated software applications
including Integrated Voice Mail, Call Center Applications (ACD,
IVRs and Predictive Dialers), Variable Band Width Cards for Video
Products, Locating Devices, Nurse Call and Computer Port
Interfaces which drive the computer telephony products. The
change in strategic focus has also resulted in changes in the way
we market our products. Due to the sophistication of these
products, the Company has divisionalized its sales effort with
specialists who will be experts in the products that they sell
effective July 1, 1995.
9
<PAGE>
The Company's analysis indicates that the smaller system,
hardware-oriented telephony business will not generate sufficient
future operating cash flows to support the related telephony
goodwill. Therefore, in accordance with the provisions of FAS
No. 121, the Company has determined that this goodwill is
impaired and that the entire carrying value of $33.5 million has
been written off during the three-month period ended June 30,
1995. The Company believes this write-off is appropriate for the
following reasons:
1. The change in the Company's strategic focus and the
establishment of five new operating divisions that will focus on
sales to different markets.
2. A software versus hardware product orientation.
3. The determination that the new criteria of FAS No. 121,
which provides more guidance regarding the conditions for and measurement
of impairment of long-term assets, have been met. This includes the
requirement to use the lowest level of identifiable cash flow to determine
impairment.
We have also reviewed our service stock inventory required to
support this business and concluded that an additional $8.8
million provision is required (See Note C for further discussion
of the provision for restructuring).
Results of Operations
Overall, the Company had record revenues for the three-month
period ended June 30, 1995, but operating income before the
provision for restructuring decreased from the comparable 1994
period. The Company continues to be affected by the longer than
anticipated sales cycles experienced for some of its new call
center management and videoconferencing products. However, the
continued strength in revenues from the healthcare business
indicate that while the timing of the revenue streams from our
new products has been slower than anticipated, the Company's
strategy has been reaffirmed and it is expected that the new call
center and videoconferencing businesses will begin to realize
similar growth by the end of 1995. The Company also expects that
the full benefits of the new divisional structure, discussed
above, including the specialization of the sales force to
concentrate on specific products, will be realized in 1996 as the
changes become fully effective by the end of 1995.
Total revenues for the three-month and six-month periods ended
June 30, 1995 were 2% and 5% higher, respectively, than the
comparable 1994 periods. Product revenues were unchanged for the
three-month period ended June 30, 1995 and increased 4% for the
six-month period ended June 30, 1995 versus the comparable 1994
periods. During both periods, revenue from new installations of
healthcare communications systems increased by approximately 20%.
Base revenues increased 5% and 6% for the three-month and six-
month periods ended June 30, 1995, respectively, primarily due to
increased sales of systems upgrades and expansions.
For the three-month periods ended June 30, 1995 and 1994, gross
profit as a percentage of sales was 40.4% and 41.5%,
respectively. For the six-month periods ended June 30, 1995 and
1994, gross profit as a percentage of sales was 40.1% and 40.7%,
respectively. The Company expects gross profits to remain in the
40.5% to 41.5% range, dependent upon the revenue mix for the
remainder of the year.
10
<PAGE>
Operating income before the provision for restructuring as a
percentage of total revenues for the three-month periods ended
June 30, 1995 and 1994 was 2.4% and 7.0%, respectively. For the
six-month periods ended June 30, 1995 and 1994, operating income
before the provision for restructuring as a percentage of total
revenues was 2.3% and 4.7%, respectively. Research, development
and engineering expenses increased compared to both the three-
month and six-month periods in 1994 as the Company continues to
invest in engineering for new product development and application-
specific software products. SG&A increased due to higher selling
expenses, which reflect the impact of costs incurred to
specialize the sales force to sell specific products and
implement the Company's new strategy within the new corporate
structure, along with higher sales volume. The Company expects
SG&A expenses to decrease in both the third and fourth quarters
of this year as the benefits of the new divisional structure are
realized. Research, development and engineering expenditures are
expected to remain at current levels for the remainder of the
year.
Interest, amortization and other expenses, net for the three-
month and six-month periods ended June 30, 1995 decreased versus
the comparable periods in 1994, primarily due to the reduction in
the amortization of goodwill resulting from the restructuring,
partially offset by increased interest expense due to a higher
level of borrowings under the Company's credit facility.
For the three-month period ended June 30, 1995, the Company
recorded an income tax benefit of $4.3 million, based upon the
loss before income taxes, reduced by the impaired goodwill write-
off. The Company believes it will generate sufficient taxable
income in future years to realize the additional tax benefit.
Due to the Company's substantial tax benefit carryforwards,
minimal taxes will be paid in the near future.
In December 1993, a fire occurred at the Company's main
subcontractor's production facility in Shinzen, China, causing
inventory shortages during the first six months of 1994. The
production problems were largely alleviated by the Company's
ability to increase its own production and find alternative
manufacturing sources. In July 1994, the Company recovered $4
million from its insurance carrier for additional direct costs
related to the emergency production situation.
As of March 31, 1994 the Company sold its Vodavi Communications
Systems Division ("VCS"), which sold telephone equipment to
supply houses and dealers under the brand names STARPLUS and
INFINITE, for approximately $10.9 million. Proceeds of the sale
consisted of approximately $9.7 million in cash and a $1.2
million note, fully secured by a letter of credit and payable in
September 1995. The cash proceeds were received in April 1994 and
were used to reduce borrowings under the Company's credit
facility. The sale of VCS resulted in an after-tax gain of
$604,000 (net of income tax provision of $403,000). The results
of VCS have been reported separately as a discontinued operation
in the Consolidated Statement of Operations. Net revenues of the
discontinued operation for the six-month period ended June 30,
1994 were $8.6 million.
The Company was recently involved in extensive negotiations to
acquire the Dictaphone division of Pitney Bowes, an acquisition
that would have more than doubled the Company's size. This
business had similar products, markets and geographic locations,
along with synergies in research and development. The Company
was able to obtain commitments for a financial package supporting
a bid of $450 million. However, in April 1995, the acquisition
was awarded to another bidder. The Company incurred
approximately $1 million in fees and expenses relating to the
attempted acquisition which have been expensed during the three-
month period ended June 30, 1995. The Company is continuing its
efforts to look for opportunities to complement its product lines
and expand its markets.
11
<PAGE>
Liquidity and Capital Resources
The Company's liquidity is represented by cash, cash equivalents
and cash availability under its existing credit facilities. The
Company's liquidity was approximately $23 million and $30 million
as of June 30, 1995 and December 31, 1994, respectively. The $44
million provision for restructuring is a noncash charge that will
not significantly effect the Company's current or future
liquidity.
At June 30, 1995 and December 31, 1994, cash and cash equivalents
amounted to $7.4 million and $7.8 million, respectively. The
Company generated $3.9 million of cash, primarily from
operations, increased bank borrowings by $11.0 million, received
the proceeds of a $0.8 million loan from the Connecticut
Development Authority and other receipts of $0.6 million during
the six-month period ended June 30, 1995. The cash was primarily
used to fund $13.6 million of working capital and to purchase
$2.3 million of capital assets. For the comparable period in
1994, the Company generated $10.1 million of cash, primarily from
operations, and funded approximately $8.8 million in working
capital and other costs relating to the emergency production
requirements. The increase in the funding of working capital
over the comparable period in 1994 is primarily due to the
rebuild of inventory depleted during the emergency production
situation and the change in the Company's inventory planning to
have more inventory on hand to more easily deal with any
potential supply interruptions in the future. Excluding the
impact of the adjustment to inventory during the quarter (see
Note C), inventory decreased by $2.3 million during the three-
month period ended June 30, 1995. The decrease in accounts
payable for the six-month period ended June 30, 1995 is the
result of the timing of payments for inventory purchases over the
last six to nine months. The Company expects to reduce its
working capital requirements from these levels over the next
three to six months.
Total debt at June 30, 1995 was $36.8 million, an increase of
$11.3 million from $25.5 million at December 31, 1994. As
previously noted, the increase was a result of additional
borrowings to fund working capital.
As of July 31, 1995, approximately $12 million of direct
borrowings was available under the Company's credit facility.
The Company believes that borrowings available under the credit
facility and cash flow from operations will be sufficient to meet
working capital and other requirements for the next twelve
months.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Registrant's Annual Meeting of Shareholders was held on
June 27, 1995.
b) Proxies were solicited by the Registrant's management
pursuant to Regulation 14 under the Securities Act of 1934;
there was no solicitation in opposition to management's
nominees listed in the Proxy Statement dated April 28, 1995
and all such nominees were elected pursuant to the vote of
the shareholders.
c) The amendment of the Registrant's Articles of Incorporation
described under "Proposal 2" in the Proxy Statement dated
April 28, 1995, which section is incorporated herein by
reference, was approved by a vote of the majority of the
Registrant's outstanding Common Stock as follows:
For: 36,498,107
Against 2,178,189
Abstain: 134,389
d) The amendment of the Registrant's Bylaws described under
"Proposal 3" in the Proxy Statement dated April 28, 1995,
which section is incorporated herein by reference, was
approved by a vote of the majority of the Registrant's
outstanding Common Stock as follows:
For: 37,156,561
Against: 888,408
Abstain: 178,374
e) The amendment of the Registrant's Articles of Incorporation
described under "Proposal 4" in the Proxy Statement dated
April 28, 1995, which section is incorporated herein by
reference, was approved by a vote of the majority of the
Registrant's outstanding Common Stock as follows:
For: 36,959,949
Against: 1,108,583
Abstain: 154,811
f) The amendment of the Registrant's 1986 Employee Stock Option
Plan described under "Proposal 5" in the Proxy Statement
dated April 28, 1995, which section is incorporated herein
by reference, was approved by a vote of the majority of the
Registrant's outstanding Common Stock as follows:
For: 26,718,731
Against: 2,428,638
Abstain: 183,617
g) The total number of shares of the Registrant's Common Stock,
$.01 par value, outstanding as of April 26, 1995, the record
date for the Annual Meeting, was 46,955,005, and 38,857,135
shares were represented in person or by proxy at the
Meeting.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
11 - Statement Regarding Computation of Per Share Earnings
b) Reports on Form 8-K
Not applicable.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
EXECUTONE Information Systems, Inc.
Dated: August 21, 1995 /s/ Alan Kessman
Alan Kessman
Chairman, President and
Chief Executive Officer
Dated: August 21, 1995 /s/ Anthony R. Guarascio
Anthony R. Guarascio
Vice President Finance and
Chief Financial Officer
14
<TABLE>
<CAPTION>
EXHIBIT 11
EXECUTONE INFORMATION SYSTEMS, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
INCOME (LOSS) FROM CONTINUING
OPERATIONS $(39,936,000) $2,414,000 $(39,817,000) $2,500,000
DISCONTINUED OPERATIONS:
INCOME FROM OPERATIONS,
NET OF INCOME TAXES --- --- --- 153,000
GAIN ON DISPOSAL,
NET OF INCOME TAXES --- --- --- 604,000
NET INCOME (LOSS) $(39,936,000) $2,414,000 $(39,817,000) $3,257,000
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 46,590,000 43,718,000 46,268,000 43,221,000
COMMON STOCK EQUIVALENT
SHARES ASSUMED TO BE
ISSUED FOR DILUTIVE STOCK
OPTIONS AND WARRANTS --- 3,933,000 --- 4,516,000
TOTAL WEIGHTED AVERAGE COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING 46,590,000 47,651,000 46,268,000 47,737,000
EARNINGS (LOSS) PER COMMON SHARE:
Continuing Operations $ (0.86) $ 0.05 $ (0.86) $ 0.05
Discontinued Operations --- --- --- 0.02
Net Income (Loss) $ (0.86) $ 0.05 $ (0.86) $ 0.07
15
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 7439
<SECURITIES> 0
<RECEIVABLES> 49820
<ALLOWANCES> 1590
<INVENTORY> 33314
<CURRENT-ASSETS> 96362
<PP&E> 48200
<DEPRECIATION> 29250
<TOTAL-ASSETS> 154651
<CURRENT-LIABILITIES> 66669
<BONDS> 0
<COMMON> 467
0
0
<OTHER-SE> 48931
<TOTAL-LIABILITY-AND-EQUITY> 154651
<SALES> 149225
<TOTAL-REVENUES> 149225
<CGS> 89438
<TOTAL-COSTS> 89438
<OTHER-EXPENSES> 101474
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2339
<INCOME-PRETAX> (44026)
<INCOME-TAX> (4209)
<INCOME-CONTINUING> (39817)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39817)
<EPS-PRIMARY> (0.86)
<EPS-DILUTED> (0.86)
</TABLE>
