<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-4
Amendment No. 1
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
POLK AUDIO, INC.
(Name of Issuer)
POLK AUDIO, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(Title of Class of Securities)
730900-10-7
(CUSIP Number of Class of Securities)
GEORGE M. KLOPFER
CHIEF EXECUTIVE OFFICER
POLK AUDIO, INC.
5601 METRO DRIVE,
BALTIMORE, MARYLAND 21215
410-358-3600
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of the Person(s) Filing Statement)
WITH A COPY TO:
LAWRENCE R. SEIDMAN, ESQ.
PIPER & MARBURY L.L.P.
36 SOUTH CHARLES STREET
BALTIMORE, MARYLAND 21201
410-576-5013
MARCH 30, 1999
(Date Tender Offer First Published, Sent or Given to Security Holders)
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CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
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Transaction Valuation(1) Amount of Filing Fee(2)
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<S> <C>
$10,320,000 $2,064
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</TABLE>
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form or
schedule and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: $2,064 Filing Party: Polk Audio, Inc.
Form or Registration No.: 5-372 26 Date Filed: March 30, 1999
</TABLE>
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(1) The total transaction value is based on a maximum aggregate offer price of
$12.00 based on the purchase of 860,000 Shares, pursuant to the terms of
the offer.
(2) Calculated as 1/50 of 1% of the transaction value.
<PAGE> 3
INTRODUCTION
This Amendment No. 1 to the Issuer Tender Offer Statement (the "Statement")
is being filed by Polk Audio, Inc., a Maryland corporation (the "Company"),
pursuant to Section 13(e) of the Securities Exchange Act of 1934, as amended,
and Rule 13e-4 thereunder in connection with the tender offer by the Company to
purchase up to 860,000 (or such lesser number as are properly tendered) of its
shares of common stock, $0.01 par value per share (the "Shares"), at a price of
$12.00 per Share (the "Purchase Price"), net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated March 30, 1999 (the "Offer to Purchase") and the related
Letter of Transmittal dated March 30, 1999 (which together with the Offer to
Purchase, each as amended or supplemented from time to time, constitute the
"Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively.
<PAGE> 4
ITEM 8. ADDITIONAL INFORMATION.
(d) On April 21, 1999, the Company was notified that it and each member of
the Company's Board of Directors had been sued in Circuit Court in Baltimore
City, Maryland by a stockholder of the Company. The plaintiff brought this
action individually and as a class action on behalf of stockholders of the
Company. The suit alleges that (i) the defendants breached their fiduciary duty
to the minority stockholders of the Company by attempting to "freeze-out" the
minority stockholders at an inadequate price, (ii) the Offer is improperly
designed to coerce public stockholders to tender their shares and is an improper
use of corporate funds, (iii) the Offer is grossly inadequate and does not
represent the fair value of the Company and (iv) the Offer to Purchase is
materially false and misleading. The plaintiff seeks the Court to (i) certify
the class action brought by the plaintiff, (ii) declare that the defendants
breached their fiduciary duties, (iii) preliminarily and permanently enjoin the
Offer and any Second-Step Transaction, (iv) if the transactions are consummated,
rescind them and set them aside and (v) award monetary damages against the
defendants. The plaintiff has filed a motion for a temporary restraining order
or, in the alternative, for a preliminary injunction. The Company believes that
this litigation is without merit and intends to vigorously defend the matter.
The Company has filed with the Court a memorandum opposing the plaintiff's
motion for temporary restraining order. On April 27, 1999, the Court denied
the plantiff's motion and declined to enjoin the Offer.
(e) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively, are incorporated in their entirety herein by reference.
The following amendments are set forth in this Item 8(e).
(1) Item 8(e) is hereby amended by adding the following after the second
sentence in the third bullet point contained in the seventh paragraph under
"Introduction" on page 2 and after the second sentence contained in the
second paragraph under "Special Factors-Background and Purpose of the Offer;
Certain Effects of the Offer; Plans of the Company After the Offer" on page
4 in the Offer to Purchase with the following:
The Company estimates such costs to be approximately $150,000 to
$200,000 annually.
(2) Item 8(e) is hereby amended by deleting and replacing in its entirety the
second paragraph under "Special Factors - Opinion of Ferris, Baker Watts,
Incorporated" on page 12 in the Offer to Purchase:
On December 4, 1998, in connection with the Board of Directors'
evaluation of a possible going private transaction, FBW made a presentation to
the Board of Directors with respect thereto (the "December Report"). On March
24, 1999, in connection with the Board of Directors' evaluation of the Initial
Offer, FBW made another presentation to the Board of Directors with respect
thereto (the "Report"). As part of their presentations, FBW reviewed with the
Board of Directors certain of the information and financial data described
below. Final copies of the December Report and the Report were delivered to the
Board of Directors in connection with the Board of Directors' evaluation of a
possible going private transaction and the Initial Offer, respectively.
(3) Item 8(e) is hereby amended by deleting in its entirety the last sentence of
the tenth paragraph under "Special Factors - Opinion of Ferris, Baker Watts,
Incorporated" on page 12 in the Offer to Purchase and adding the following
as a new paragraph immediately after such paragraph:
Subject to the foregoing, the following is a summary of the material
financial analyses presented by FBW to the Company's Board of Directors on
December 4, 1998:
FBW considered several methods to evaluate the fair market value of the
Shares. These methods included (i) the discounted future free cash flow of the
Company, and (ii) the earnings and multiple comparisons to publicly traded
comparable companies.
Discounted Free Cash Flow Analysis. A discounted cash flow analysis was
employed by FBW to establish an implied per share valuation for the Shares. This
methodology is premised on the assumption that a buyer purchases a time series
of free cash flows that are generated by the assets of a business. This analysis
separates and ascribes value only to the cash flows that can ultimately be taken
out of the business. Cash that is generated but used to sustain the business
(such as increases in working capital and capital expenditures) creates no
incremental value to the buyer. These free cash flows are then discounted to the
present at the firm's weighted average cost of capital. The weighted average
cost of capital can be described as the average price a company must pay to
attract both debt and equity to properly capitalize the firm's growth. It is
this series of free cash flows that, when discounted to the present, and after
subtracting claims by debt holders and others, represents the economic value of
a firm to its stockholders. The Offer value per Share is within the range of
$11.01 - $13.48 for the Offer value per share implied as determined by FBW's
discounted free cash flow analysis.
Projected financial and other information concerning the Company are not
necessarily indicative of future results. The Company provided the financial
projections that FBW utilized in this analysis. All projected financial
information is subject to numerous contingencies, many of which are beyond the
control of management of the Company.
Publicly Traded Comparable Companies Analysis. A comparable company
analysis was employed by FBW to establish implied ranges for the per share
valuation for the Shares. FBW analyzed publicly-available historical and
projected financial results, including multiples of net market capital to
earnings before interest and taxes ("EBIT"), price to earnings, price to forward
projected earnings, price to revenues and price to book ratios. FBW examined the
financial results and market multiplies of publicly traded comparable companies,
which consisted of selected manufacturers of audio components with market
capitalizations below $50 million and average daily trading volumes below 6,000.
All of the trading multiples of the comparable companies were based on closing
stock prices on December 3, 1998. The comparable companies were found to have
average multiples of 4.7x net market capital to EBIT, 6.5x price to earnings,
6.6x price to forward projected earnings, 0.6x enterprise value to revenues and
1.1x price to book ratios. Applying such multiples to the Company's historical
and projected operating results resulted in an implied range for the per share
valuation for the Shares of $11.09 to $23.97 per Share. The values derived from
the application of net earnings multiples ranged from $11.09 to $11.72. The
Offer value per Share to the Company's stockholders is within the range for the
Offer value per Share implied by FBW's publicly traded comparable companies
analysis.
Subject to the foregoing, the following is a summary of the material
financial analyses presented by FBW to the Company's Board of Directors on March
24, 1999:
<PAGE> 5
(4) Item 8(e) is hereby amended by adding the following paragraphs to the end of
"The Tender Offer - Certain Information Concerning the Company - Recent
Developments" on page 29 of the Offer to Purchase:
The proposed transaction with The Providers, Inc. pursuant to which the
Company was to dispose of its registered trademark "Eosone" along with certain
inventories and its entire holdings of common and preferred equity securities
of Genesis Technologies, Inc. in exchange for a barter package of promotional,
printing and advertising services has terminated. On December 14, 1998, the
Company decided to cancel this proposed transaction. Nevertheless, the Company
believes that it was appropriate to write-off the balance of its investment of
$400,000 in the third quarter of fiscal 1999 because the Company believed then,
and still believes now, that the value of its investment in the Genesis
Technologies, Inc. securities was completely unrecoverable. The Company reviews
long-lived assets and certain identifiable intangibles for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of assets exceed the fair value of the assets. In the case of the
securities of Genesis Technologies, Inc., the Company believed, during the
third quarter of fiscal 1999, that its investment in those securities were
worthless and, accordingly, recognized a charge during that quarter of $400,000
which represented the balance of the investment in those securities. As a
result of the termination of the proposed transaction with The Providers, Inc.,
the Company has retained the "Eosone" trademark. However, the Company believes
that the "Eosone" trademark will not have a material impact on the Company's
future operations or operating trends.
(5) Item 8(e) is hereby amended by deleting and replacing in its entirety the
first footnote following the table under "The Tender Offer - Certain
Information Concerning the Company - Summary Unaudited Pro Forma Condensed
Financial Information" on page 32 in the Offer to Purchase:
(1) Pro Forma adjustments reflect the effect of purchasing 860,000
Shares at $12.00 per Share. Expenses directly related to the
Offer are assumed to be $350,000, with $300,000 relating to the
cost of Shares Purchased and $50,000 relating to deferred
financing cost classified under "Other Assets" on the Company's
balance sheet. The purchase price for the Shares, including the
estimated transaction costs, are assumed to be financed using
available cash of $1,670,000 and through borrowings under the
Company's Credit Facility. An interest rate of 6.5% was assumed
for borrowings under the Company's Credit Facility based on a
current LIBOR rate of 5% plus 150 basis points, as provided under
the terms of the Company's Credit Facility. See "Financing of the
Offer and the Second-Step Transaction."
(6) Item 8(e) is hereby amended by adding the following to the end of the fifth
footnote following the table under "The Tender Offer - Certain Information
Concerning the Company - Summary Unaudited Pro Forma Condensed Financial
Information" on page 32 in the Offer to Purchase:
The reduction in cash equivalents of $1,670 at an interest rate of 4% is
based on the Company's average interest income on cash balances during the
prior twelve months.
(7) Item 8(e) is hereby amended by deleting and replacing in its entirety the
last sentence in the second paragraph following the table and footnotes
under "The Tender Offer-Certain Information Concerning the Company - Certain
Estimates Prepared by the Company" on page 33 in the Offer to Purchase:
Neither the Company's independent auditors, nor any other independent
accountants or financial advisors, have compiled, examined, or performed
any procedures with respect to the prospective financial information
contained herein, nor have they expressed any opinion or any form of
assurance on such information or its achievability.
(8) Item 8(e) is hereby amended by adding the following immediately after the
seventh sentence of the first paragraph of "The Tender Offer - Certain
Information Concerning the Company - Certain Estimates Prepared by the
Company " on page 33 in the Offer to Purchase:
The principle assumptions that the Company relied upon in preparing the
projections include, but are not limited to, the United States economy
continuing at current levels of consumer consumption, no significant
changes in the competitive marketplace in terms of consolidation or
withdrawal of industry participants, no significant changes in the
levels of foreign currency exchange rates, no significant changes in
the channels of distribution of the Company's products and no
unanticipated developments in technologies that would be introduced
into the Company's marketplace.
(9) Item 8(e) is hereby amended by deleting and replacing in its entirety the
first sentence in the first paragraph under "The Tender Offer - Certain
Conditions of the Offer" on page 37 in the Offer to Purchase:
Notwithstanding any other provision of the Offer, the Company shall not
be required to accept for payment or pay for any Shares tendered
pursuant to the Offer, and may terminate or amend the Offer and may
postpone the acceptance for payment of, and payment for, Shares
tendered, if prior to the expiration date of the Offer, any of the
following conditions exist:
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of the Offer to Purchase dated March 30, 1999.*
(a)(2) Form of the Letter of Transmittal.*
(a)(3) Form of Notice of Guaranteed Delivery.*
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.*
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients.*
(a)(6) Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.*
(a)(7) Press Release issued by the Company on March 24, 1999.*
(a)(8) Letter to Stockholders from George M. Klopfer, Chief Executive
Officer of the Company, dated as of March 30, 1999.*
(b)(1) Commitment Letter from NationsBank, N.A. to the Company dated March
23, 1999.*
(b)(2) Form of Financing and Security Agreement between the Company and
NationsBank, N.A.*
(b)(3) Form of Security Agreement between the Company and NationsBank,
N.A.*
(c) None.
(d) None.
(e) Not applicable.
(f) None.
<PAGE> 6
(g) (1) Audited Consolidated Financial Statements of the Company as of and
for the fiscal years ended March 29, 1998 and March 30, 1997 (incorporated by
reference to the Company's Annual Report, filed as Exhibit 13.1 to and
incorporated by reference into the Company's Annual Report on Form 10-K for the
fiscal year ended March 29, 1998).
(g) (2) Unaudited Consolidated Financial Statements of the Company as of
and for the nine-month periods ended December 28, 1997 and December 27, 1998
(incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended December 27, 1998).
* previously filed
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: April 27, 1999
POLK AUDIO, INC.
By: /s/ George M. Klopfer
-----------------------------
Name: George M. Klopfer
Title: Chief Executive Officer
<PAGE> 8
EXHIBIT INDEX
(a)(1) Form of the Offer to Purchase dated March 30, 1999.*
(a)(2) Form of the Letter of Transmittal.*
(a)(3) Form of Notice of Guaranteed Delivery.*
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.*
(a)(5) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees to Clients.*
(a)(6) Form of Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9.*
(a)(7) Press Release issued by the Company on March 24, 1999.*
(a)(8) Letter to Stockholders from George M. Klopfer, Chief Executive
Officer of the Company, dated as of March 30, 1999.*
(b)(1) Commitment Letter from NationsBank, N.A. to the Company dated March
23, 1999.*
(b)(2) Form of Financing and Security Agreement between the Company and
NationsBank, N.A.*
(b)(3) Form of Security Agreement between the Company and NationsBank,
N.A.*
(c) None.
(d) None.
(e) Not applicable.
(f) None.
(g) (1) Audited Consolidated Financial Statements of the Company as of
and for the fiscal years ended March 29, 1998 and March 30, 1997 (incorporated
by reference to the Company's Annual Report, filed as Exhibit 13.1 to and
incorporated by reference into the Company's Annual Report on Form 10-K for the
fiscal year ended March 29, 1998).
(g) (2) Unaudited Consolidated Financial Statements of the Company as of
and for the nine-month periods ended December 28, 1997 and December 27, 1998
(incorporated by reference to the Company's Quarterly Report on Form 10-Q for
the quarterly period ended December 27, 1998).
* previously filed
