United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1997
Commission file number 0-25492
IPC Information Systems, Inc.
(Exact Name of registrant as specified in its charter)
Delaware 58-1636502
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
Wall Street Plaza, 88 Pine Street, New York, NY 10005
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 212 825-9060
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding at January 26, 1998
Common Stock par value $0.01 10,739,446 shares
<PAGE>
IPC INFORMATION SYSTEMS, INC.
INDEX TO FORM 10-Q
PAGE
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements (unaudited)
Consolidated Balance Sheets at December 31, 1997
and September 30, 1997 2
Consolidated Statements of Operations for the
Three Months Ended December 31, 1997 and 1996 3
Consolidated Statements of Cash Flows for the
Three Months Ended December 31, 1997 and 1996 4
Notes to Consolidated Financial Statements 5 - 7
ITEM 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 12
PART II. OTHER INFORMATION 12
SIGNATURES 13
<PAGE>
IPC INFORMATION SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
(Dollar amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
---------- -------------
ASSETS:
<S> <C> <C>
Current assets:
Cash and cash equivalents .......................................... $ 3,655 $ 1,465
Trade receivables, less allowance of $1,515 ........................ 65,887 61,791
Inventories ........................................................ 36,883 33,557
Prepaid expenses and other current assets .......................... 13,333 13,426
-------- --------
Total current assets ............................. 119,758 110,239
Property, plant and equipment, net .................................... 40,420 38,314
Other assets, net ..................................................... 9,610 9,809
-------- --------
Total assets .......................................................... $169,788 $158,362
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Note payable ........................................................ $ -- $ 3,200
Accounts payable .................................................... 14,333 18,042
Accrued liabilities ................................................. 28,408 21,395
Customer advances and deferred revenue .............................. 23,843 17,682
Current portion of capital leases ................................... 3,363 2,987
-------- --------
Total current liabilities ........................ 69,947 63,306
Long-term debt, net of current portion ............................... 2,124 2,133
Lease obligations, net of current portion ............................ 11,085 10,336
Other liabilities .................................................... 5,318 5,677
-------- --------
Total liabilities ................................ 88,474 81,452
-------- --------
Commitments and contingencies
Stockholders' equity:
Preferred stock - $0.01 par value, authorized 10,000,000 shares,
none issued and outstanding
Common stock - $0.01 par value, authorized 25,000,000 shares; issued
10,979,964 and 10,932,675 shares; outstanding 10,737,779 and
10,690,490 at December 31, 1997 and September 30, 1997, respectively 110 109
Paid-in capital ..................................................... 48,600 47,922
Retained earnings ................................................... 33,322 29,597
Less treasury stock, at cost, 242,185 shares ..................... (718) (718)
--------- ---------
Total stockholders' equity ....................... 81,314 76,910
--------- ---------
Total liabilities and stockholders' equity ....... $ 169,788 $ 158,362
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
IPC INFORMATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Revenue:
Product sales and installation .................................. $ 38,441 $ 39,798
Service ......................................................... 28,611 19,613
-------- --------
67,052 59,411
-------- --------
Cost of revenue:
Product sales and installation .................................. 22,185 28,333
Service ......................................................... 18,240 13,504
-------- --------
40,425 41,837
-------- --------
Gross profit .................................. 26,627 17,574
Research and development expenses .................................. 2,404 2,372
Selling, general and administrative expenses ....................... 16,557 13,847
-------- --------
Income from operations ........................ 7,666 1,355
Interest income/(expense), net ..................................... (440) (463)
Other income/(expense), net ........................................ (39) 261
-------- --------
Income before provision for income taxes ...... 7,187 1,153
Provision for income taxes ......................................... 3,593 587
-------- --------
Net income .................................... $ 3,594 $ 566
======== ========
Basic earnings per share ........................................... $ 0.34 $ 0.05
-------- --------
Basic weighted average shares outstanding .......................... 10,711 10,647
-------- --------
Diluted earnings per share ......................................... $ 0.33 $ 0.05
-------- --------
Diluted weighted average shares outstanding ........................ 10,865 10,758
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
IPC INFORMATION SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Three months ended December 31,
-------------------------------
1997 1996
---- -----
<S> <C> <C>
Cash flows from operating activities:
Net income ............................................................ $ 3,594 $ 566
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization expense .............................. 2,418 1,478
Other amortization ................................................. 369 229
Provision for doubtful accounts .................................... 267 5
Changes in operating assets and liabilities:
Trade receivables .................................................. (4,076) 1,859
Inventories ........................................................ (3,094) (5,792)
Prepaid expenses and other current assets .......................... 2,773 (159)
Other assets ....................................................... (152) (394)
Accounts payable ................................................... (3,877) 7,458
Accrued liabilities and other liabilities .......................... 4,603 (2,016)
Customer advances and deferred revenue ............................. 6,020 5,125
------- -------
Net cash provided by operating activities ......... 8,845 8,359
Cash flows from investing activities:
Capital expenditures ............................................... (2,212) (2,614)
Contingent acquisition payments to Bridge Electronics, Inc. ........ (375) (375)
------- -------
Net cash (used in) investing activities ........... (2,587) (2,989)
Cash flows from financing activities:
Net repayments of note payable ..................................... (3,200) (6,000)
Principal payments on capital leases ............................... (978) (431)
Repayment of long-term debt ........................................ (9) --
Proceeds from exercise of stock options ............................ 416 40
------- -------
Net cash (used in) financing activities ........... (3,771) (6,391)
Effect of exchange rate changes on cash ..................................... (297) (39)
------- -------
Net increase (decrease) in cash ............................................. 2,190 (1,060)
Cash and cash equivalents, beginning of period .............................. 1,465 2,306
------- -------
Cash and cash equivalents, end of period .................................... $ 3,655 $ 1,246
======= =======
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
IPC INFORMATION SYSTEMS, INC.
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(unaudited)
1. In the opinion of management, the accompanying unaudited consolidated
financial statements include all necessary adjustments (consisting of normal
recurring accruals) and present fairly IPC Information Systems, Inc.'s ("IPC" or
the "Company") financial position as of December 31, 1997, and the results of
its operations for the three months ended December 31, 1997 and 1996, and its
cash flows for the three months ended December 31, 1997 ("1997 period") and 1996
("1996 period"), in conformity with generally accepted accounting principles for
interim financial information applied on a consistent basis. The results of
operations for the 1997 period are not necessarily indicative of the results to
be expected for the full year. These financial statements should be read in
conjunction with IPC's Form 10-K for the fiscal year ended September 30, 1997.
2. Components of inventories:
<TABLE>
<CAPTION>
(Dollar amounts in thousands)
December 31, September 30,
1997 1997
--------------- ----------------
<S> <C> <C>
Parts, subassemblies and manufacturing work in process $11,090 $10,917
Inventory on customer sites awaiting installation 17,883 14,230
Parts and maintenance supplies in field 7,910 8,410
=============== ===============
$36,883 $33,557
=============== ===============
</TABLE>
3. The Company maintains short-term credit facilities with various banks up to
$35.0 million of which none was outstanding at December 31, 1997. The weighted
average interest rate was 6.63% during the 1997 period as compared to 6.43% in
the 1996 period.
5
<PAGE>
4. The following is a reconciliation of the numerators and denominators for the
computations of basic and diluted earnings per share:
<TABLE>
<CAPTION>
(Dollar amounts in thousands,
except per share amounts)
December 31, December 31,
1997 1996
---------- ----------
<S> <C> <C>
Basic earnings per share computation
Numerator $ 3,594 $ 566
--------- ----------
Denominator:
Weighted average common shares outstanding 10,711 10,647
--------- ----------
Total shares 10,711 10,647
--------- ----------
Basic EPS $ 0.34 $ 0.05
========= ==========
Diluted earnings per share computation
Numerator $ 3,594 $ 566
--------- ----------
Denominator:
Weighted average common shares outstanding 10,711 10,647
Common stock equivalent of stock options 154 111
--------- ----------
Total shares 10,865 10,758
--------- ----------
Diluted EPS $ 0.33 $ 0.05
========= ==========
</TABLE>
Approximately 150,000 and 65,500 options were outstanding for the 1997 period
and 1996 period, respectively, which were not included in the computation of
diluted EPS because the options exercise price exceeded the average market price
of the Company's common stock for each period.
5. On December 18, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") by and between the Company and Arizona
Acquisition Corp., a Delaware corporation ("AAC"), pursuant to which AAC will be
merged with and into the Company, with the Company being the surviving
corporation (the "Merger"). AAC is a subsidiary owned by Cable Systems Holding,
LLC, a Delaware limited liability company ("CSH LLC") and its subsidiaries,
including Cable Systems International, Inc., a Delaware corporation ("CSI"). CSH
LLC is a Delaware limited liability company, a majority of whose membership
interests are owned by Citicorp Venture Capital, Ltd., a New York corporation
("CVC"), officers and employees thereof, and members of management of CSH LLC
and CSI.
The Merger will be accounted for as a leveraged recapitalization. The
Merger Agreement is subject to regulatory review and approval by stockholders
representing a majority of outstanding shares at a meeting of stockholders
anticipated to be held shortly after the second fiscal quarter ending March 31,
1998. In accordance therewith, stockholders may elect to retain shares in the
surviving company (subject to a maximum aggregate share retention of 46% of
outstanding shares as of an election date to be determined) or to receive $21.00
cash for each outstanding share. Not more than 90% of outstanding shares may
receive cash consideration and the maximum total cash consideration to
stockholders, assuming no change to shares outstanding as of January 26, 1998,
will be $217.5 million.
6
<PAGE>
At the Merger, in accordance with certain commitments to the Company and
assuming the maximum number of shares electing cash consideration, AAC will be
capitalized with $72.0 million (the "Equity Financing Commitment"), to be
funded by CVC (together with affiliates) to purchase securities of CSH LLC and
then invested by CSH LLC into AAC. The Company will also raise $157.0 million
through the issuance of senior subordinated debt securities and up to $75.0
million through a revolving credit facility. Morgan Stanley & Co. Incorporated
and Goldman Sachs & Company, and Morgan Stanley Senior Funding, Inc. have
committed to CVC and AAC to provide the senior subordinated debt securities and
revolving credit facilities, respectively, subject to certain terms and
conditions (collectively, the "Debt Financing Commitments"). The Debt Financing
Commitments will be assigned to the Company which will borrow these funds to
consummate this transaction. The proceeds of the Debt Financing Commitments and
the Equity Financing Commitment will be used in part to pay stockholders who
elect to receive cash and will also provide working capital for the Company
after the Merger.
In connection with the execution of the Merger Agreement, AAC entered into
a Stockholders Agreement with Richard P. Kleinknecht, Peter J. Kleinknecht,
Russell G. Kleinknecht and certain family members and trusts controlled by said
persons, pursuant to which these individuals and trusts, subject to certain
conditions, have agreed to vote all of the 6,906,554 shares of Company common
stock owned or controlled by them in favor of the transaction and against
certain actions which can reasonably be expected to impede or adversely affect
the Merger. The 6,906,554 shares represent approximately 64.3% of the 10,739,446
shares of Company common stock outstanding on January 26, 1998. At December 31,
1997, the Company has deferred $3.4 million of cost related to the proposed
Merger and financing, of which approximately $1.0 million has been paid.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (unaudited)
Overview
IPC Information Systems, Inc. (together with its subsidiaries,
the "Company" or "IPC") is a leader in providing integrated telecommunications
equipment and services that facilitate the execution of transactions by the
financial trading community. Such transactions involve the trading of equity and
debt securities, commodities, currencies and other financial instruments. The
Company designs, manufactures, installs and services trading room voice
communication systems ("turret systems") and installs and services the cabling
infrastructure and networks which provide financial traders with desktop access
to time-sensitive communications and data. The Company's primary customers
include securities and investment banking firms, merchant and commercial banks,
interdealer brokers, foreign exchange and commodity brokers and dealers,
securities and commodity exchanges, mutual and hedge fund companies, asset
managers and insurance companies. The Company uses an integrated approach to
marketing its products and services, leveraging its established customer base
throughout the financial trading community. In addition, through its subsidiary,
International Exchange Networks, Ltd. ("IXnet"), the Company operates an
international voice and data network (the "IXnet Network"), providing a variety
of dedicated private line, managed data and switched services, which has been
specifically designed to meet the specialized telecommunications requirements of
the financial trading community.
The Company's operations include turret systems, Information Transport
Systems ("I.T.S.") and network services (IXnet). The Company accounts for sales
of turret systems to distributors and direct sales and installations of turret
systems as "turret sales and installation." The Company accounts for revenue
from turret system maintenance, including annual and multi-year service
contracts, and from moves, additions and changes to existing turret system
installations as "turret service." The Company accounts for revenue from I.T.S.
design, integration and implementation projects, from sales of intelligent
network products, such as hubs, bridges and routers, from on-site maintenance of
customer I.T.S., including annual and multi-year contracts, and from the
provision of outsourcing services for the support, expansion and upgrading of
existing customer networks as "I.T.S. sales, installation and service."
Additionally, the Company accounts for revenue derived from the IXnet Network as
"network services."
Revenue from turret and I.T.S. sales and installation is recognized
upon completion of the installation, except for revenue from sales of turret
systems to distributors, which is recognized upon shipment of turret products by
IPC. Invoices representing progress payments are submitted during various stages
of the installation. The revenue attributable to such advance payments is
deferred until system installation is completed. In addition, contracts for
annual recurring turret and I.T.S. services are generally billed in advance, and
are recorded as revenue ratably (on a monthly basis) over the contractual
periods. Revenue from moves, additions and changes to turret systems is
recognized upon completion, which usually occurs in the same month or the month
following the order for services. Revenue from network services are recognized
in the month the service is provided.
Cost of revenue for turret systems and I.T.S. includes material and
labor associated with the installation of a project or service. Cost of revenue
for network services includes charges from carriers for bandwidth associated
with network services revenue.
8
<PAGE>
Due to the substantial sales price of the Company's large turret and
I.T.S. installations and the Company's recognition of revenue only upon
completion of installations, revenue and operating results could fluctuate
significantly from quarter to quarter. However, the Company's service business
generates a more consistent revenue stream than sales and installation and,
consequently, these fluctuations could be somewhat diminished in the future as
the Company's service business expands.
Results of Operations
Revenue. Total revenue increased by $7.7 million, or 12.9%, to $67.1 million in
the 1997 period from $59.4 million in the 1996 period.
Turret sales and installation and service revenue increased by $11.0
million, or 28.8%, to $49.0 million in the 1997 period from $38.0 million in the
1996 period. The revenue increase related to new installations was $9.5 million,
primarily from sales of the Company's Tradenet MX product. The increase in
service revenue in the 1997 period as compared to the comparable prior-year
period was $1.5 million, principally due to the Company's increasing customer
base.
Revenue from I.T.S. sales, installation and service decreased by $7.6
million, or 41.7%, to $10.7 million in the 1997 period from $18.3 million in the
1996 period. I.T.S. revenue from new installations decreased $10.8 million in
the 1997 period as compared with the 1996 period. The decrease is primarily due
to fewer new installation projects recognized as revenue in the current period
compared with the comparable prior-year period which management believes is due
to the timing of sales cycles and not a permanent market condition. Partially
offsetting the decrease in I.T.S. installation revenue was an increase in
service related revenue of $3.2 million in the 1997 period as compared to the
1996 period. The increase in service revenue is partially related to moves, adds
and changes from several large new installation projects which were recognized
as revenue in prior quarters.
Revenue from network services, classified as service revenue, increased
by $4.3 million, or 140.7%, to $7.4 million in the 1997 period from $3.1 million
in the 1996 period. The increase is related to the increased customer base and
increased customer utilization of IXnet's international telecommunication
network during the 1997 period. Annualized revenue for the month of December
1997 was $29.4 million, an increase in excess of 147% as compared with the 1996
period.
Cost of Revenue. Cost of revenue (as a percentage of revenue) of 60.3% for the
1997 period decreased as compared to 70.4% in the 1996 period. The decrease is
principally attributable to turret sales and installation and service revenue
which was partially offset by an increase in cost related to network services
revenue. The lower costs of turret revenue resulted from a higher percentage of
revenue from products manufactured by the Company (Tradenet MX) during the 1997
period as compared to the turret revenue mix during the 1996 period. Turret
sales and installation from manufactured products contain a lower cost of
revenue as compared to third party products, I.T.S. sales, installation and
service and network services.
9
<PAGE>
Research and Development. Research and development expenses remained consistent
at $2.4 million for both the 1997 period and 1996 period. Research and
development expenses remained consistent due to initiatives taken by the Company
in fiscal 1997 to ensure research and development spending is focused on the
continued integration of the Tradenet MX turret with the IXnet Network as well
as the enhancement of existing features of the Tradenet MX family to sustain the
Company's leadership position in voice-based products.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses ("S,G&A") increased by $2.7 million, or 19.6%, to $16.6
million in the 1997 period from $13.9 in the 1996 period. Approximately, $2.1
million of the increase (of which $0.6 million is depreciation) is due to
infrastructure costs associated with the expansion of the IXnet Network, people
resources and other expenses required to build, manage and grow this business.
The Company intends to continue to invest in the IXnet Network. As the Company
deploys this network, management anticipates that S,G&A will increase. These
expenses will be incurred prior to the realization of revenue.
Interest Income/(Expense). Interest expense, net for the 1997 period decreased
slightly to $0.4 million from $0.5 million in the 1996 period. The decrease
resulted from lower utilization of the Company's revolving credit facilities
during the current period, partially offset by interest expense associated with
an increase in the Company's capital lease obligations.
Provision for Income Taxes. The Company's effective tax rate was 50.0% for the
1997 period compared to 50.9% for the 1996 period.
Liquidity and Capital Resources
Net cash provided by operating activities was $8.8 million in the 1997
period as compared to net cash provided by operating activities for the 1996
period of $8.4 million. Net cash provided by operating activities for the 1997
period reflects a significant improvement in income from operations and higher
depreciation expense as compared with the 1996 period, which was principally
related to working capital improvements. The increase in depreciation and
amortization expense is largely the result of increased capital expenditures, of
which $2.1 million was financed with capital lease obligations principally for
IXnet during the 1997 period as compared with $3.7 million in the similar period
of the prior-year.
Cash used in investing activities was $2.6 million in the 1997 period
as compared with $3.0 million in the 1996 period. Net cash used in investing
activities include expenditures related to the acquisition of IPC Bridge and for
property, plant and equipment, principally for the IXnet Network.
The Company maintains short-term credit facilities with various banks
up to $35.0 million of which none was outstanding at December 31, 1997. The
weighted average interest rate was 6.63% during the 1997 period as compared to
6.43% in the comparable prior year period.
10
<PAGE>
In April 1997, the Company purchased its sole manufacturing facility
and related land in Westbrook, Connecticut for $2.5 million using the Company's
short-term credit facility. In July 1997, this purchase was refinanced through a
mortgage agreement with a bank for $2.2 million. The term of the mortgage is for
eight years with a twenty year payout bearing interest at Libor plus 125 basis
points. The Company entered into an interest rate swap agreement with its bank
in order to fix the interest rate over the eight year term at an effective
interest rate of 7.85%.
In connection with the implementation of the IXnet Network, IXnet has
entered into capital lease agreements for certain network switching equipment,
aggregating approximately $2.1 million for the 1997 period as compared with $3.7
million for the similar period of the prior-year.
On December 18, 1997, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") by and between the Company and Arizona
Acquisition Corp., a Delaware corporation ("AAC"), pursuant to which AAC will be
merged with and into the Company, with the Company being the surviving
corporation (the "Merger"). AAC is a subsidiary owned by Cable Systems Holding,
LLC, a Delaware limited liability company ("CSH LLC") and its subsidiaries,
including Cable Systems International, Inc., a Delaware corporation ("CSI"). CSH
LLC is a Delaware limited liability company, a majority of whose membership
interests are owned by Citicorp Venture Capital, Ltd., a New York corporation
("CVC"), officers and employees thereof, and members of management of CSH LLC
and CSI.
The Merger will be accounted for as a leveraged recapitalization. The
Merger Agreement is subject to regulatory review and approval by stockholders
representing a majority of outstanding shares at a meeting of stockholders
anticipated to be held shortly after the second fiscal quarter ending March 31,
1998. In accordance therewith, stockholders may elect to retain shares in the
surviving company (subject to a maximum aggregate share retention of 46% of
outstanding shares as of an election date to be determined) or to receive $21.00
cash for each outstanding share. Not more than 90% of outstanding shares may
receive cash consideration and the maximum total cash consideration to
stockholders, assuming no change to shares outstanding as of January 26, 1998,
will be $217.5 million.
At the Merger, in accordance with certain commitments to the Company and
assuming the maximum number of shares electing cash consideration, AAC will be
capitalized with $72.0 million (the "Equity Financing Commitment"), to be
funded by CVC (together with affiliates) to purchase securities of CSH LLC and
then invested by CSH LLC into AAC. The Company will also raise $157.0 million
through the issuance of senior subordinated debt securities and up to $75.0
million through a revolving credit facility. Morgan Stanley & Co. Incorporated
and Goldman Sachs & Company, and Morgan Stanley Senior Funding, Inc. have
committed to CVC and AAC to provide the senior subordinated debt securities and
revolving credit facilities, respectively, subject to certain terms and
conditions (collectively, the "Debt Financing Commitments"). The Debt Financing
Commitments will be assigned to the Company which will borrow these funds to
consummate this transaction. The proceeds of the Debt Financing Commitments and
the Equity Financing Commitment will be used in part to pay stockholders who
elect to receive cash and will also provide working capital for the Company
after the Merger.
11
<PAGE>
In connection with the execution of the Merger Agreement, AAC entered
into a Stockholders Agreement with Richard P. Kleinknecht, Peter J. Kleinknecht,
Russell G. Kleinknecht and certain family members and trusts controlled by said
persons, pursuant to which these individuals and trusts, subject to certain
conditions, have agreed to vote all of the 6,906,554 shares of Company common
stock owned or controlled by them in favor of the transaction and against
certain actions which can reasonably be expected to impede or adversely affect
the Merger. The 6,906,554 shares represent approximately 64.3% of the 10,739,446
shares of Company common stock outstanding on January 26, 1998. At December 31,
1997, the Company has deferred $3.4 million of cost related to the proposed
Merger and financing, of which approximately $1.0 million has been paid.
The Company believes that cash flows from operations and credit
facilities will be sufficient to meet its working capital and capital
expenditure needs for the near future. The Company does not rule out seeking
additional debt or equity for other corporate purposes.
With respect to any forward-looking comments contained herein, the
Company refers readers to the cautionary statement under the Private Securities
Litigation Reform Act of 1995, contained in the Company's Report on Form 10-K
for the fiscal year ended September 30, 1997.
Part II - Other Information
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibit Number 27 Financial Data Schedule
(b) Form 8-K - On December 24, 1997, the Company filed a Form 8-K
reporting under Item 5. Other Events that the Company had entered into an
Agreement and Plan of Merger by and between the Company and Arizona Acquisition
Corp.
12
<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.
IPC INFORMATION SYSTEMS, INC.
Dated: February 3, 1998 By: /s/ TERRY CLONTZ
--------------------
Terry Clontz
President and
Chief Executive Officer
Dated: February 3, 1998 By: /s/ BRIAN REACH
--------------------
Brian L. Reach
Vice President, Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 3655
<SECURITIES> 0
<RECEIVABLES> 65887
<ALLOWANCES> 0
<INVENTORY> 36883
<CURRENT-ASSETS> 119758
<PP&E> 40420
<DEPRECIATION> 0
<TOTAL-ASSETS> 169788
<CURRENT-LIABILITIES> 69947
<BONDS> 0
0
0
<COMMON> 110
<OTHER-SE> 81204
<TOTAL-LIABILITY-AND-EQUITY> 169788
<SALES> 67052
<TOTAL-REVENUES> 67052
<CGS> 40425
<TOTAL-COSTS> 59386
<OTHER-EXPENSES> 39
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 440
<INCOME-PRETAX> 7187
<INCOME-TAX> 3593
<INCOME-CONTINUING> 3594
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3594
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.33
</TABLE>
