ITEM 1. BUSINESS
GENERAL
TIE/communications, Inc. ("TIE", and together with its subsidiaries, the "Company") is engaged in the sale, installation and servicing of telecommunications products, services and software. The Company's principal products are multi-featured, fully electronic, digitally controlled key systems, private automated branch exchange ("PABX") systems and hybrid telephone systems, voice response and processing products with computer telephone integration hardware and software, video conferencing systems and network services including long distance products as well as preowned phone systems, which are primarily for business use. The Company's products also include other peripheral data and telecommunications products. In addition, the Company not only sells telecommunications equipment but offers a variety of lease and rental programs to its customers.
The Company sells, installs and services its products through a North American network of approximately 59 sales, service and warehouse facilities located throughout Canada and major U.S. metropolitan areas in Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Mexico, New Jersey, New York, North Carolina, Ohio, Oregon, Texas, Utah, Virginia and Washington. For certain financial information by geographic area, refer to Note 16 to the Consolidated Financial Statements included herein.
The Company's current business strategy focuses on its North American installation and service operations. In connection with implementing its business strategy, the Company is seeking to expand its business by offering customers and potential customers a broader range of products and through the acquisition of additional information distribution related businesses. Consistent with its business strategy, in 1991 the Company discontinued its sales to Distributors in all territories other than Canada, and in 1992 the Company discontinued its sales to Distributors in Canada, in connection with the NTK America Corporation ("NTK America") transactions described below under "Sales and Marketing". See also Item 7. This business strategy has resulted, and will likely continue to result, in a substantial decline in the Company's research and development activities, as the Company becomes primarily a seller and provider of service and software for the telecommunications and information distribution market place.
On September 17, 1993 TIE acquired substantially all of the non- Northern Telecom manufactured key/hybrid telephone equipment customer base of PacTel Meridian Systems ("PTMS"). The acquisition, which was effected pursuant to an asset purchase agreement, included the acquisition and assignment of contracts with customers and customer lists, together with inventory, vehicles and other equipment of PTMS appropriate to service the customer base. Certain liabilities of PTMS, directly related to the customer base, were also assumed by TIE at closing. The liabilities consisted primarily of prepaid maintenance contracts
and warranty reserves. TIE and PTMS are not related and have no other material relationship. It is TIE's understanding that PTMS is a California general partnership which is 80% owned by Northern Telecom, Inc. ("Northern Telecom").
Pursuant to the asset purchase agreement, the Company purchased the customer base, together with inventory and other equipment of PTMS for an aggregate purchase price of $7,047,472. The liabilities assumed by the Company of $3,653,271 directly reduced the amount of consideration paid to PTMS for the acquired assets. The net purchase price of $3,394,201, was effected by: (a) a cash payment to PTMS of $2,428,843 at the closing; (b) issuance of a note payable by the Company of $1,000,000 due to PTMS, and subsequently paid, one year from closing with interest at eight percent per annum; and (c) a subsequent payment of $34,642 by PTMS to the Company to reflect final adjustments to the purchase price.
As an inducement to complete the acquisition, Northern Telecom has guaranteed certain levels of revenue from the acquired customer base for a period of three years after closing. If those revenue levels are not achieved, and the Company purchases at least 75% of its volume commitment, as discussed below, Northern Telecom will provide TIE with equipment purchase credits up to $2,000,000, thus effectively reducing the purchase price of the acquisition. At the acquisition date, TIE anticipated that, at the historical and expected rate of deterioration of the customer base revenues, Northern Telecom would be required to provide TIE with equipment credits at the end of the third year. During the period from September 17, 1993 through December 31, 1994, revenue from the acquisition was below the guaranteed levels and minimum equipment purchases were achieved. In connection with the agreement, TIE became a Norstar key system distributor in conjunction with certain customer service requirements for the acquired base and in order to provide a distribution channel in connection with the equipment credit agreement. This acquisition complemented the Company's existing operations in California of 4,000 active customers by adding 14,000 new active customers and 22,000 inactive customers whose primary telephone equipment was TIE product and other products compatible with the business.
During 1993, the Company entered into a distribution agreement with Northern Telecom for its digital key system product through TIE's U.S. sales and service network. In connection with that agreement the Company entered into an annual equipment purchase agreement whereby the Company selects the volume of purchases and is able to receive discounts on those equipment purchases. The greater the purchase commitment, the larger the discount received by the Company. At December 31, 1994 the Company is required to purchase $7.5 million of equipment (net of product discounts) in 1995.
On June 15, 1994, the Company's Canadian subsidiary, TIE Telecommunications Canada, Limited ("TIE Canada"), through a tender offer, redeemed all of its outstanding 2.251 million minority-owned shares for approximately $2.6 million U.S. dollars in cash, making it a wholly-owned subsidiary of the Company.
TIE is a Delaware corporation, organized in 1971. Its principal executive offices are located at 8500 West 110th Street, Overland Park, Kansas 66210, and its telephone number is (913) 344-0400.
REORGANIZATION OF THE COMPANY
On April 8, 1991, TIE and 24 of its domestic subsidiaries (a 25th subsidiary filed on April 19, 1992) filed petitions under Chapter 11 of the United States Bankruptcy Code. By virtue thereof, the Company continued to manage its affairs and operate its business as a debtor-in-possession under supervision of the United States Bankruptcy Court for the District of Delaware ("Bankruptcy Court"). In connection with the bankruptcy filings, the Company solicited and obtained from HCR Partners, an Illinois general partnership and the Company's principal senior secured creditor ("HCR"), an agreement respecting reorganization of the Company as subsequently reflected in the First Amended Joint Plan of Reorganization (the "Plan"). The Plan, which was confirmed by the Bankruptcy Court and became effective on July 1, 1991, provided, among other things, for (i) the exchange by HCR Partners of a $31,593,750 principal amount senior secured note issued by the Company and guaranteed by certain of TIE's subsidiaries (the "HCR Note") for an approximate 75% fully diluted interest in TIE's new common stock, par value $0.10 per share (the "New Common Stock"); and (ii) the issuance to the holders of record of TIE's old common stock, par value $0.05 per share (the "Old Common Stock"), of one share of New Common Stock in exchange for every 35 shares of Old Common Stock held by such persons, with the New Common Stock thereby issued aggregating approximately 25% of the outstanding New Common Stock. The Plan further provided for the deferred payment of certain of the Company's tax liabilities over six years at statutory interest rates. Other than with respect to the deferred payment of state and federal tax liabilities and arrangements with HCR in respect of the HCR Note, all other bona fide prepetition liabilities of the Company were to be paid in full under the Plan.
The Plan was implemented by the Company following a strategic evaluation of alternatives, including the possible sale of the Company, restructuring of its existing debt outside proceedings under the Bankruptcy Code, or reorganization of the Company pursuant to filing under Chapter 11. The conclusion to seek a prepackaged reorganization under Chapter 11 was reached after a complete evaluation of these alternatives and was further based upon the Company's ability to meet its on-going operational costs, scheduled amortization of the HCR Note, and the timing for the probable payment of scheduled income tax liabilities.
Consummation of the Plan enabled the Company to reduce its indebtedness and permitted it to fund its ongoing business needs from operations through potential lines of credit secured by Company assets.
On the effective date of the Plan, by agreement between Marmon Holdings, Inc., a Delaware corporation ("Marmon"), and The Pritzker Family Philanthropic Fund (the "Fund"), the partners of HCR, HCR was liquidated. In conjunction therewith, the Company has been advised that the shares of New Common Stock which were to be distributed pro rata to the partners of
HCR were distributed 60% to Marmon and 40% to the Fund. Accordingly, Marmon currently beneficially owns 45% of the New Common Stock and the Fund currently beneficially owns 30% of the New Common Stock.
The Company and HCR entered into a Voting Agreement dated as of June 18, 1991 (the "Voting Agreement"), which provided, subject to certain limitations, that until July 1, 1994 all voting securities of the Company beneficially owned by HCR and its affiliates would, in connection with the election of "minority designees" (as defined in the Voting Agreement), be voted by such persons pro rata in the same manner and proportion that votes of other stockholders of the Company have been cast. In connection with the liquidation of HCR, Marmon and the Fund assumed HCR's obligations under the Voting Agreement. Inasmuch as the Voting Agreement has expired, all Directors of the Company are now nominated by the Nominating Committee of the Board of Directors.
The Company and HCR also entered into a Revolving Credit Agreement, dated as of June 18, 1991, as thereafter amended (the "Credit Agreement"). Pursuant to the Credit Agreement, HCR agreed to make available to the Company up to $10,000,000 on a revolving basis through December 31, 1993. Advances under the Credit Agreement bore interest at the per annum rate of 1% plus the "reference rate" of Continental Bank N.A. (now Bank of America), and the Company also agreed to pay a quarterly fee of 1/4% per annum on any unused amounts available under the Credit Agreement. The Company also paid HCR a facilities fee (as defined in the Credit Agreement) of $100,000 in connection with the arrangement of the Credit Agreement. Advances under the Credit Agreement were secured by a priority lien on substantially all of the assets of the Company and such indebtedness was guaranteed by the Company's subsidiaries. The rights and obligations of HCR under the Credit Agreement were assigned to Marmon pursuant to the liquidation of HCR, and Marmon assumed HCR's obligations thereunder. Effective December 31, 1993, the term of the Credit Agreement was extended for an additional three year period ending December 31, 1996 upon substantially the same terms and conditions, except that the maximum credit available was reduced to $7,000,000. The Company paid a facilities fee of $75,000 in connection with the extension. The Company believes that the terms and conditions of the Credit Agreement as extended are competitive with the terms and conditions available from third parties.
In connection with the consummation of the Plan, the Company and HCR entered into a Registration Rights Agreement dated as of June 18, 1991 (the "Registration Agreement"). The Registration Agreement grants to HCR certain rights to have the Company register, on behalf of HCR, the shares of New Common Stock received by HCR under the Plan. In connection with the liquidation of HCR, rights in respect of the Registration Agreement were assigned to Marmon and the Fund.
PRODUCTS AND SERVICES
The Company markets a broad range of fully electronic and digital, multi-featured key telephone systems, hybrid switching systems and PABX systems, together with voice
response and processing products incorporating integrated hardware and software and related business products and services for commercial distribution. A key telephone system provides each telephone with direct access to multiple outside trunk lines and internal communications through intercom lines. A PABX system, through a central switching device, permits the connection of internal and external lines. A hybrid switching system provides, in a single system, both key telephone and PABX features. Key telephone equipment may be used with PABX equipment. Voice response and processing products include voice-mail and inter- active voice response systems, which allow via a single line instrument, access to computerized information. The Company also provides video conferencing, computer telephone integration and network services including long distance and network design with related commercial and proprietary software.
All of the Company's fully electronic systems are microprocessor based, digitally controlled systems. This enables the Company to readily incorporate a variety of additional features as well as the ability to expand a system's capacity through software enhancements. In addition, a number of the Company's advanced systems provide integrated voice and data communications in a single system. The Company's PABX systems utilize digital switching technology which allows them to be an integral part of data processing and communications networks. The Company also markets various telephone instruments and attendant consoles for use with such PABX systems.
The Company's products are intended principally for small to medium- sized business use. In connection with the sale and service of its products, the Company also markets peripheral data and telecommunications products obtained from other suppliers.
Through its network of sales and services facilities, the Company sells, installs, maintains and upgrades its communication and information distribution products and services.
SALES AND MARKETING
Purchasers of telephone systems and telephone instruments in the United States can be divided into five categories:
- Telephone operating companies (local exchange carriers), which provide telephone line services to telephone units in the United States and which also sell, install and service telephone equipment;
- Telephone and electrical supply companies, including subsidiaries of telephone operating companies, which sell telephone equipment at wholesale to telephone interconnect companies and affiliated and nonaffiliated telephone operating companies, but which typically do not provide any installation or service;
- Telephone interconnect companies which sell telephone equipment to users in competition with telephone operating companies and also install and service such equipment;
- Retail stores, including telephone specialty stores; and
- Telephone users.
The Company sells its products, services and software throughout the United States and Canada to telephone users. The Company is one of the largest telephone equipment service companies in Canada. One unit of TIE Canada also assembles and sells some of its proprietary products to telephone operating companies in Canada, as well as preowned equipment. In addition, the Company offers telecommunications equipment lease and rental programs to its customers.
Pursuant to agreements the Company entered into with NTK America on July 1, 1991, among other things, (i) the Company licensed on a non-exclusive basis all of its telephone equipment technology to NTK America for a period of five years for use in all territories not covered by the agreements with Century Electronics and Systems Co., Ltd. described below; (ii) NTK America granted to TIE an exclusive right to distribute certain equipment and a non-exclusive right to distribute certain other equipment manufactured by NTK America's parent, Nitsuko Corporation ("NTK"), in Canada, in each case for a period of five years (which right TIE is authorized to assign to its subsidiaries); (iii) NTK granted to the Company a non-exclusive right to distribute certain equipment manufactured by NTK in the United States; (iv) the Company sold specified inventory to NTK America at a price equal to the Company's carrying value for such inventory, which price equalled approximately $9 million; and (v) the Company consigned approximately $5 million of additional telephone inventory to NTK America for resale. If NTK America sells any of NTK's products in the United States, NTK America will pay the Company a royalty ranging from 3% to 7.5% of the purchase price of all equipment designed by the Company, depending on the distribution channel. In addition, the Company is provided with the most favorable purchase prices for NTK America products through July 1, 1996. NTK America's obligations have been guaranteed by NTK.
The agreements with NTK America and NTK are in the process of being extended until July 2001. It is anticipated that if NTK America does not invest in research and development to advance the technology and improve the cosmetics of the products, the marketability of these products will decline. Although the Company has agreed to provide an incentive (up to 3% of the Company's monthly purchases) to NTK America to invest in such research and development, the Company cannot guarantee that NTK America will perform future development on these products.
On August 31, 1992, the Company's Canadian subsidiary, TIE Canada, entered into agreements with NTK America pursuant to which, among other things, (i) TIE's distribution rights in Canada were modified, such that NTK America directly granted to TIE Canada an exclusive right to sell to end users certain equipment manufactured by NTK in Canada and a non-exclusive right to sell to end users other NTK products in Canada for a period of five years; and (ii) TIE Canada sold specified inventory to NTK America at a price equal to the Company's
carrying value for such inventory of approximately $207,100, which was part of a total price of $857,000. NTK America's obligations have been guaranteed by NTK. Accordingly, as a result of the transactions with NTK America, the Company has an exclusive right to distribute certain equipment manufactured by NTK in Canada and a non-exclusive right to distribute certain other equipment manufactured by NTK in the United States and Canada.
Pursuant to the Company's agreements with Century Electronics and Systems Co., Ltd., formerly known as Chinteik Electronic System Co. Ltd. ("Century"), entered into on April 10, 1990, Century has the exclusive right for a period of ten years to market the Company's products in Southeast Asia, Australia, New Zealand, Hong Kong and China as well as Europe. Pursuant to a Business Agreement, dated May 22, 1991, by and between the Company, NTK America and Century, Century was relieved of its obligations to pay royalties to the Company from the sale of its products by Century. The Company will continue to provide Century with access to all of the products developed by the Company for sale in those countries.
MAJOR CUSTOMERS AND BACKLOG
During 1994, 1993 and 1992, no customer accounted for 10% or more of the Company's net sales.
The Company had purchase orders and commitments from its customers for delivery of products into the following year of approximately $7.9 million and $8.4 million at December 31, 1994 and 1993, respectively. Because a high proportion of the Company's orders call for prompt delivery, the Company does not believe that its backlog position at any time is necessarily indicative of future sales. All orders at December 31, 1994, are expected to be filled within a year of such date or less.
SOURCE OF SUPPLY AND MANUFACTURING
The largest supplier of equipment is Mitel Corporation of Kanata, Canada which supplies PABX equipment and software. The Company understands that it is currently the largest Mitel dealer in North America.
The second largest portion of the Company's products are currently obtained from NTK America. A portion of the Company's key telephone systems from NTK America have been manufactured by NTK in Thailand. The products manufactured for the Company by NTK America have been based primarily upon the Company's product specifications and have been developed in cooperation with NTK.
The third largest provider of equipment is Northern Telecom which supplies the Norstar key system.
RESEARCH AND DEVELOPMENT AND PATENTS
The Company is engaged in product development aimed at expanding the Company's product lines to reflect advances in technology and an expansion of its telephone markets. During 1994, 1993 and 1992, the Company spent approximately $216 thousand, $233 thousand and $205 thousand, respectively, on Company-sponsored research and development. The Company's focus on its installation and service business has resulted, and will likely continue to result, in a substantial decline in the Company's research and development activities.
The Company believes that patents are one of the significant competitive factors in the conduct of its business. The Company owns a number of patents in its name and, with respect to certain products manufactured for the Company by NTK, in its name together with NTK.
The Company is continually exploring the development, manufacture and distribution of business communications products in addition to its present line of products, both by itself and with others.
WARRANTY AND MAINTENANCE
The Company generally provides customers with a warranty on equipment and installation for one year after the installation of a new system. The Company generally receives warranties on equipment from its suppliers similar to the warranties extended by the Company to its customers. The Company charges its customers for all repairs done subsequent to the warranty period.
The Company assists customers in the installation, maintenance and repair of the Company's products and provides training to the employees of such customers.
COMPETITION AND GOVERNMENT REGULATION
The telecommunications equipment industry is characterized by intense competition and rapid change. The Company's products and services compete with similar products and services offered by a number of telephone equipment distributors, certain telephone operating companies and telephone interconnect companies. The principal telephone equipment distributor selling its products in the United States is AT&T Technologies Incorporated. Other major competitors include Northern Telecom Limited, Toshiba America, Inc. and Executone Information Systems, Inc.
Effective January 1, 1984, American Telephone and Telegraph Company, ("AT&T") was divested of the regional Bell Telephone operating companies (the "RBOCs"). The RBOCs are permitted to market, sell, install and service, pursuant to the antitrust consent decree in connection with the divestitures, but not manufacture for sale in the United States, telecommunications products of the type marketed by the Company. Since the restriction upon manufacture was adopted, efforts to lift the restriction have been taken periodically by
administrations of the President of the United States, by the Federal Communications Commission (the "FCC") and in the United States Congress, and similar efforts may be undertaken in the future.
These changes and changing regulations governing AT&T, the RBOCs and cable television companies, as well as regulatory changes in international markets, have substantially altered, and may continue to affect, the competition for and the pricing, marketing and distributing of certain telecommunications equipment, including the Company's products.
The FCC and the Canadian Radio-Television and Telecommunications Commission ("CRTC") have promulgated regulations setting installation and equipment standards for telecommunications products of the type marketed by the Company in the United States and Canada, respectively, and requiring that all such products be registered with, and meet standards adopted by, each of the FCC and the CRTC. The Company's products are designed to comply with these requirements and the Company has registered all of its current products. The FCC and the CRTC also require that all telephone operating companies provide nondiscriminatory interconnection for such products with local exchange services in order to promote the competitive provision of such products. In addition, the telephone operating companies must offer local exchange services on an unbundled basis from such products, again to promote the competitive provision of these products.
EMPLOYEE RELATIONS
As of December 31, 1994, the Company had approximately 1,100 full-time employees. The Company believes its relations with its employees are good.
ITEM 2.
ITEM 2. PROPERTIES
The Company's principal properties include a leased facility in Overland Park, Kansas, which is utilized for its principal executive offices, and a leased facility in West Haven, Connecticut, which is utilized as a local sales office and a repair facility, including the buying and selling of preowned communications equipment.
In addition to its principal properties, the Company utilizes leased space for office, sales, service, repair or warehouse operations at locations in 24 states and Canada. In addition, the Company owns a facility in Moline, Illinois, which is utilized for office, sales, service and warehouse operations.
As of December 31, 1994, the Company leased real property at an aggregate annual rental of approximately $3.3 million and leased equipment at an aggregate annual rental of approximately $1.4 million. For a schedule of the Company's lease commitments, see Note 12 to the Consolidated Financial Statements.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in a number of lawsuits which arose in the normal course of business. While any litigation has elements of uncertainty, the Company believes that none of such lawsuits are material to the Company's financial condition or results of operations.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is information with respect to the executive officers of TIE as of March 27, 1995: Has Served as Name Age Position an Officer Since ---- --- -------- ---------------- George N. Benjamin, III 57 President and Chief 1992 Executive Officer
Neal L. Brees 47 Treasurer 1994
Eric V. Carter 59 Executive Vice President 1984
Daniel E. Coomer 48 Chief Information Officer 1993
Robert H. Kalina 37 Vice President - Engineering 1993 & Operations
Edward F. Muehlberger 48 Vice President - Human Resources 1994
Randolph K. Piechocki 42 Executive Vice President, 1990 TIE/communications, Inc., and President, TIE Systems, Inc.
Robert W. Webb 55 Vice President, Secretary, 1993 General Counsel
George N. Benjamin, III has served as President and Chief Executive Officer of TIE since April 1, 1992. From August 1988 through April 1, 1992, he served as Group Vice President of The Marmon Group, Inc. From July 1987 to August 1988, Mr. Benjamin was President of Trig Systems, a telecommunications management consulting group founded by him. From December 1985 to July 1987 Mr. Benjamin was President of Ericsson, Inc., a wholly-owned subsidiary of Ericsson, N.A.
Neal L. Brees has served as Treasurer of TIE since January 31, 1994. From December 1988 to August 1993, he was Assistant Treasurer of The Marley Company. From
March 1981 to December 1988, he served as Manager, Financial Systems of The Marley Company.
Eric V. Carter has served as Executive Vice President of TIE since April 1, 1992. From April 9, 1991 through March 30, 1992, he served as President of the Company. Mr. Carter was Executive Vice President of TIE from June 1990 through April 1991, and he served as Vice President - Operations of TIE from December 1987 through June 1990.
Daniel E. Coomer has served as Chief Information Officer of the Company since September 1993. From September 1988 through August 1993 he was a private MIS consultant, and, in part, he acted as a consultant to the Company.
Robert H. Kalina has served as Vice President - Engineering and Operations of TIE since March 8, 1993. From June 6, 1991 through March 7, 1993, he served as Director of Engineering and Operations of TIE. Mr. Kalina was Director of Corporate Quality Assurance of TIE from March 1987 through May 1991.
Edward F. Muehlberger has served as Vice President - Human Resources of TIE since February 21, 1994. From March 1992 to December 1993, he served in the senior Human Resources position including Assistant Vice President - Human Resources and Quality for Southwire Company. From February 1984 to December 1991, he served as Vice President, Human Resources for Blue Circle America, Inc.
Randolph K. Piechocki has served as Executive Vice President of TIE since June 1994 and President of TIE Systems, Inc. since January 1990. From July 1988 through December 1989, he was Vice President of TIE Systems, Inc. From July 1981 to July 1988, he served as Vice President and Branch Manager of CTG/British Telecom, located in New York.
Robert W. Webb has served as Vice President and Secretary of the Company since June 1993 and June 1992, respectively, Vice President and Secretary of each of The Marmon Group, Inc., Marmon Industrial Corporation and Marmon Holdings, Inc. since prior to 1988, and General Counsel and Secretary of Union Tank Car Company since prior to 1988.
Although not an executive officer of the Company, Roy B. Henry has served as Interim Chief Financial Officer since February 1995, pursuant to the Administrative and Consulting Services Agreement dated as of January 1, 1995. Since September 1993 he has served as Corporate Controller of The Marmon Group, Inc. From June 1990 to August 1993, he served as Vice President and Controller for Remington Products Company.
All of the Company's executive officers are full-time employees of the Company with the exception of Mr. Carter and Mr. Webb. Mr. Carter, pursuant to an Employment Agreement dated July 1, 1992, devotes an average of 80 hours per calendar quarter to his duties as an Executive Vice President of the Company. See "Reorganization of the Company" under Item 1. None of the Company's directors or executive officers are related.
Additional information respecting executive officers as well as directors will be included in TIE's proxy statement prepared for use at its annual meeting of stockholders scheduled to be held on June 12, 1995 (the "Proxy Statement"). TIE intends to file a definitive copy of the Proxy Statement with the Securities and Exchange Commission not later than 120 days after the close of its fiscal year.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
TIE's Common Stock is traded on the American Stock Exchange and its symbol is TIE. The quarterly high and low trading prices for the Common Stock on the American Stock Exchange as set forth below are as reported by the American Stock Exchange.
The number of persons who were holders of record of the Company's Common Stock on February 28, 1995, was 7,495.
The Company has not paid any cash dividends on its Common Stock since its organization. For the foreseeable future, the Company expects that any earnings will continue to be retained for use in its business. The terms of certain agreements relating to the Company's financing restrict the amount of dividends which may be paid by the Company. Refer to Note 9 to the Consolidated Financial Statements for further details.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
After the effective date of the Plan, the operations of the Company have been treated for financial statement reporting purposes on a "Fresh Start Reporting" basis in accordance with the Statement of Position 90-7 of the American Institute of Certified Public Accountants, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" (see Note 2 to the Consolidated Financial Statements). Accordingly, all references to the Company with respect to operations and financial statements for any period prior to July 1, 1991 are referred to as the "Predecessor Company," while references to the Company for operations and financial statement purposes for periods from July 1, 1991, are referred to as the "Successor Company".
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated financial statements and notes thereto.
RESULTS OF OPERATIONS - 1994 COMPARED TO 1993:
For the year ended December 31, 1994, the Company incurred a net loss of $3.1 million or $0.78 per share as compared to net income of $1.4 million or $0.34 per share for the year 1993. The 1994 net loss included non-cash charges to income of $2.4 million consisting of a $1.5 million write-down of inventory and a $0.9 million write-down of intangible assets for the impairment of goodwill, as discussed in more detail in the following paragraphs. In addition to these non-recurring adjustments, the decline in earnings from 1993 was negatively affected by a significant deterioration in gross margin percentages and increases in operating expenses.
Total revenue for 1994 increased $22.8 million or 22.3% as compared to 1993. The increase occurred primarily in new equipment sales with a $20.2 million or 26.5% increase over 1993. Net revenue from new equipment sales accounted for approximately 77.1% and 74.5% of the total revenue for 1994 and 1993, respectively. The service revenue increased $2.6 million or 10.0% in 1994 over 1993 with the increase primarily from the PTMS acquisition base in California. Service revenue in the California region more than doubled with an increase of $3.4 million in 1994 as compared to 1993. An offsetting decrease of $0.8 million resulted from a shift in the service revenue mix from guaranteed revenue streams associated with maintenance contracts to time and material billings. Net revenues from services provided accounted for approximately 22.9% of total revenue in 1994 as compared to 25.5% of total revenue in 1993. 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 1994 was 44.7% as compared to 49.3% for 1993. The 1994 margin was negatively affected by the $1.5 million write-down of inventory charged to cost of sales for the excess of net book value over the estimated net realizable value. This charge resulted from a review of the carrying value of its inventories completed in the fourth quarter of 1994. The decline in the gross margin percentage is primarily due to a change in the sales mix with a higher proportion of revenue being generated in 1994 from new equipment sales and sales of proprietary products, as discussed above, which carry a lower margin versus service transactions. Although new equipment sales carry lower margins, these sales present future service business opportunities to the Company. The gross margin on new equipment sales and service revenue has declined from 45.9% and 59.5%, respectively, in 1993 to 41.6% and 55.2%, respectively, in 1994. The decline in new equipment margins is related to higher PABX sales which are lower in margin due to competitive pressure. However, PABX equipment provides more higher margin service business opportunities at the end of the warranty period. New equipment margins are also lower due to declining sales of the Company's proprietary design key system as compared to the newer Northern Telecom key system product. The decrease in gross margins on service revenue is primarily due to higher than expected service costs and increased competition. The Company expects competition will continue to affect the gross margin percentages in the future, although there are no assurances that this will occur.
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 is in the process of being extended until July 2001. It is anticipated that if NTK America does not invest in research and development to advance the technology and improve the cosmetics of the products, the marketability of these products will decline. Although the Company has agreed to provide an incentive to NTK America to invest in such research and development, the Company cannot guarantee that NTK America will perform future development on these products. Therefore, the Company cannot estimate the impact of the foregoing on future gross margin at this time.
Operating expenses in 1994 increased $9.9 million (19.8%) over 1993. Operating expenses as a percent of sales, however, decreased to 48.1% in 1994 as compared to 49.1% in 1993. The increase in operating expenses consists of additional expenses resulting from customer base acquisitions occurring in the latter part of 1993 and an increase in selling expenses consistent with the 22.3% increase in net revenue in 1994 over 1993. Operating expenses in 1994 were negatively affected by a $0.9 million non-cash charge for the write-down of intangible assets for the impairment of goodwill. The Company completed a review of the recoverability of its intangible assets during the fourth quarter of 1994. This review followed management's determination that, based on increased competition and the fact that certain operating efficiencies have not materialized as planned, an impairment of goodwill had occurred. The non-cash charge of $0.9 million included in operating expenses represents a write-down for the impairment of goodwill from the acquisition of the customer base in California in the third quarter of 1993. Additionally, operating expenses in 1994 include increased expenses incurred to support the new products and services being offered by the Company, predominantly in the new strategic business units of network services, videoconferencing products and services, as well as a new direct equipment sales program. The Company is continuing to monitor operating expenses and will seek to continue to control costs in future periods. It is not expected that operating expenses will increase significantly in the future without a corresponding significant increase in revenue.
Nonoperating income (expense) decreased $0.6 million in 1994 from 1993 represented by: (a) a decrease in interest income of $0.7 million resulting from declining cash balances in 1994; (b) a favorable decrease in interest expense of $0.3 million from the debt repayments in 1994; and (c) a decrease in other income, net of $0.2 million. Other income, net is substantially comprised of royalty income of $1.6 million and $1.5 million for the years 1994 and 1993, respectively, primarily from NTK America for its sale of equipment designed by the Company. Other income, net for both 1994 and 1993 also included nonrecurring gains from insurance settlements of $285 thousand and $350 thousand, respectively. Another nonrecurring item included in 1993 other income, net is the net gain of approximately $0.4 million relating to the relocation of the Corporate offices to Overland Park, Kansas.
In 1993, and continuing through 1994, TIE focused its efforts on maintaining its existing customer base and implementation of training and marketing programs related to its new strategic businesses. The purchase of certain assets of PTMS was consummated during the month of September 1993. Initially, performance in the California region was far below
expectations without a corresponding reduction in expenses which had a negative impact upon the Company's operating income. Unfortunately, this performance level continued through 1994. In addition, the Company expected that non- recurring expenses related to the absorption of that base would negatively affect the Company's results but not to the extent which occurred.
During March 1994, the Company entered into a one-year dial-tone referral agreement with the US West Small Business Group which is in the process of being extended for two years with an option exercisable by the Company for a third year wherein the Company sells and services telephone equipment for new customers referred to it by US West. The agreement provides for a lower sales expense to the Company while providing better qualified customer opportunities from the US West customer base. In return, the Company provides US West a royalty for the resulting sales. The equipment provided under this agreement is private labeled as US West.
RESULTS OF OPERATIONS - 1993 COMPARED TO 1992:
For the year ended December 31, 1993, the Company generated income from continuing operations of $1.4 million or $0.34 per share as compared to income from continuing operations of approximately $1.2 million or $0.31 per share for the year 1992. The increase in net income from 1992 is due to the net effect of a non-operating increase of $1.1 million in other income, net and a reduction in operating income of $0.6 million, as discussed in more detail in the following paragraphs. The operating results of the Company for 1993 were favorably affected by the change in the amortization period for intangible assets that was implemented on April 1, 1992.
Total net revenue for 1993 increased $1.0 million or 0.9% as compared to 1992. An increase of $1.6 million occurred in new equipment sales with a decline of $0.6 million in net revenue from services provided. Net revenue from new equipment sales accounted for approximately 74.5% of the total revenue for 1993, up slightly from approximately 73.7% for 1992. The remaining revenue was generated by service transactions.
The gross margin percentage for 1993 was 49.3% as compared to 49.9% for 1992. The decline in the gross margin percentage is due to the change in sales mix with a slightly higher proportion of revenue being generated from new equipment sales and sales of proprietary products, which carry a lower margin versus service transactions. Lower margins on new equipment sales are acceptable as these sales generate possible future service business. Additionally, the gross margin on service revenue has declined from 68.6% in 1992 to 59.5% in 1993 due to increased competition in the industry.
Operating expenses for 1993 remained relatively consistent with 1992. Operating expenses were favorably affected by a decline in amortization expense due to the change in the amortization period of intangible assets which was implemented on April 1, 1992. This change accounted for a reduction in operating expenses of approximately $268 thousand for 1993 as compared to 1992.
Other income, net of $2.0 million for 1993 increased $1.1 million as compared to 1992. Other income, net is substantially comprised of royalty income of $1.5 million and $1.3 million for the years 1993 and 1992, respectively, primarily from NTK America for its sale of equipment designed by the Company. Other income, net for 1993 also includes certain nonrecurring items
including the gain on the disposal of the Company's Connecticut headquarters facility of approximately $1.7 million which occurred in the third quarter of 1993, extinguishing all long-term debt except for statutory tax settlements. This gain was partially offset by the net cost of the relocation of the headquarters to Kansas of approximately $1.3 million. Additionally, the Company recorded approximately $0.4 million of income in December 1993 related to settlement of a property insurance claim and $0.2 million of expenses associated with the attempted privatization of its Canadian subsidiary. All other items included in other income, net increased $0.3 million in the aggregate in 1993 as compared to 1992.
In 1993, TIE focused its efforts on maintaining its existing customer base and implementation of training and marketing programs related to its new strategic businesses. The purchase of certain assets of PTMS was consummated during the month of September and the California region fourth quarter results were below expectations due to the logistics and non-recurring expenses related to the transition of that base into the domestic direct sales and service business. Earlier in the year the Company's Canadian subsidiary struck an alliance with Alberta Government Telephone.
In February, 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 109 - "Accounting for Income Taxes". SFAS No. 109 requires a change from the deferred method of accounting for income taxes to the asset and liability method of accounting for income taxes. Effective January 1, 1993, the Company prospectively adopted SFAS No. 109.
INFLATION Inflation has had a relatively minor impact on the Company as the rate of inflation has declined in recent reporting periods.
LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents at December 31, 1994 totalled $0.9 million, a decrease of $7.2 million from December 31, 1993. For the year ended December 31, 1994, the Company recorded a breakeven cash flow from operating activities as the 1994 net loss included non-cash inventory and goodwill write-downs aggregating $2.4 million and higher depreciation and amortization of $0.6 million over 1993. In June 1994, approximately $2.6 million was used to purchase all of the outstanding minority shares of the Company's Canadian subsidiary resulting in a 100% ownership interest by the Company. Additionally, the Company used approximately $1.6 million for payment of the long-term tax liability, $0.9 million for net capital expenditures, $1.4 million for debt repayments and $0.7 million to expand its service network.
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 prinicipal subsidiaries of the Company.
The Company believes sufficient cash resources exist to support its anticipated 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 December 31, 1994 and therefore was qualified to borrow the entire $7,000,000 available under the line. The Company borrowed under this line of credit during 1994 but no borrowings were outstanding as of December 31, 1994.
At December 31, 1994 the Company did not have any material commitments for capital expenditures.
RECENT ACCOUNTING PRONOUNCEMENTS The Company does not provide post-retirement or post-employment benefits and, therefore, there is no impact on the Company under SFAS 106, "Employers Accounting for Post-Retirement Benefits Other Than Pensions" and SFAS 112 "Employers Accounting for Post-Employment Benefits".
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
PAGE ----
Independent Auditors' Report 22
Financial Statements:
Consolidated Balance Sheets - December 31, 1994 and 1993 23 - 24
Consolidated Statements of Operations - Years Ended December 31, 1994, 1993 and 1992 25
Consolidated Statements of Stockholders' Equity - Years Ended December 31, 1994, 1993 and 1992 26
Consolidated Statements of Cash Flows - Years Ended December 31, 1994, 1993 and 1992 27 - 28
Notes to Consolidated Financial Statements 29 - 44
Schedule VIII: Valuation and qualifying accounts 45
All other schedules are either not required or the information is provided in the footnotes to the financial statements.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders TIE/communications, Inc.
We have audited the consolidated balance sheets of TIE/communications, Inc. and subsidiaries as of December 31, 1994 and 1993 and the related consolidated statements of operations, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 1994 and the related financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of TIE/communications, Inc. and subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1994, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As discussed in Note 10, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109 - "Accounting for income taxes", effective January 1, 1993. As discussed in Note 19, the Company's 1993 financial statements have been restated for the correction of errors.
KPMG Peat Marwick LLP March 10, 1995 Kansas City, Missouri
TIE/communications, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS
ASSETS
See accompanying Notes to Consolidated Financial Statements.
TIE/communications, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
See accompanying Notes to Consolidated Financial Statements.
TIE/communications, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS
See accompanying Notes to Consolidated Financial Statements.
TIE/communications, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1992, 1993 AND 1994
See accompanying Notes to Consolidated Financial Statements.
TIE/communications, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying Notes to Consolidated Financial Statements.
TIE/communications, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
See accompanying Notes to Consolidated Financial Statements.
TIE/Communications, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: On June 19, 1991, the Company's First Amended Joint Plan of Reorganization (the "Plan") was confirmed by the United States Bankruptcy Court for the District of Delaware. The confirmed Plan provided for the Company to issue Common Stock to HCR Partners in exchange for the principal portion of its secured debt to HCR Partners. Accrued interest on HCR Partners secured debt and warrants to purchase 1,000,000 shares of the Company's Common Stock held by HCR Partners were extinguished. As a result of this transaction, HCR Partners became the owner of 75% of the Common Stock of the Company. On the effective date of the Plan, by agreement between Marmon Holdings, Inc., a Delaware corporation ("Marmon"), and The Pritzker Family Philanthropic Fund (the "Fund"), the partners of HCR, HCR was liquidated. In conjunction therewith, the Company has been advised that the shares of New Common Stock which were to be distributed pro rata to the partners of HCR were distributed 60% to Marmon and 40% to the Fund. Accordingly, Marmon currently beneficially owns 45% of the New Common Stock and the Fund currently beneficially owns 30% of the New Common Stock.
The effective date of the Plan was July 2, 1991. However, for purposes of financial statement reporting the Plan was treated as being effective on June 30, 1991. Further, in accordance with the Statement of Position 90-7 of the American Institute of Certified Public Accountants, "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code", the Company was required to account for the reorganization using Fresh-Start Reporting. Accordingly, all financial information for any period prior to July 1, 1991 is referred to as that of the "Predecessor Company".
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its majority-owned domestic and foreign subsidiaries. All intercompany accounts and transactions have been eliminated. Certain amounts have been reclassified to conform with the current year presentation.
REVENUE: Revenue from equipment sales and service work to end users is recognized at the time of its completion. Deferred service revenue is recorded in equal increments over the term of the contract.
STATEMENTS OF CASH FLOWS: For purposes of reporting cash flows, the Company considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash equivalents.
INVENTORIES: Inventories are valued at the lower of cost or market (net realizable value), using the first-in, first-out method.
PROPERTY: Property, plant and equipment are stated at cost. Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets. At the time fixed assets are sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss, if any, is included in the determination of income. Maintenance and repair costs are expensed as incurred.
INTANGIBLE ASSETS: Intangible assets are being amortized on a straight-line basis over periods ranging from 7 to 20 years.
The Company assesses the recoverability of intangible assets, including goodwill, based on forecasted undiscounted future operating cash flows. Impairments are charged to operations as additional amortization.
TRANSLATION OF FOREIGN CURRENCIES: The financial statements of the Company's Canadian subsidiary are translated into U.S. dollars at current exchange rates with any resulting adjustment being charged or credited to stockholders' equity. Foreign currency transaction gains and losses, which are not material, are reflected in income.
RESEARCH AND DEVELOPMENT COSTS: New product development, product improvement and research costs are expensed as incurred. Such costs amounted to $216,000, $233,000 and $205,000 for the years ended December 31, 1994, 1993 and 1992, respectively.
NET INCOME (LOSS) PER SHARE: Net income (loss) per common share is based on the weighted average number of shares of common stock outstanding during the period.
2. FRESH-START REPORTING
In accordance with SOP 90-7, since the Company's stockholders prior to the confirmation of the Plan received less than 50% of Common Stock outstanding after confirmation of the Plan, the Company accounted for the reorganization using Fresh-Start Reporting. Accordingly, all assets and liabilities were restated to reflect their reorganization value at June 30, 1991, which approximated fair value at that date of reorganization.
Based upon an independent analysis of the Company performed in conjunction with the confirmation hearing on the Plan, a business value of $46,000,000 was established. The factors considered in determining the business value included cash flow projections, historical and current operations, future prospects and comparisons of the financial performance of the Company to other comparable companies. Based on that analysis, management calculated the portion of the reorganization value of the Company representing the estimated value of the net assets of the Company immediately after the reorganization at $21,096,000, after the adjustments to write down fixed assets, receivables and inventory to the best estimate of their respective fair market values at June 30, 1991 and to adjust liabilities to reflect their present value. Intangible assets were written down to reflect the reorganization value in excess of amounts allocable to identifiable assets.
3. CASH AND CASH EQUIVALENTS
Cash equivalents consist of overnight investments, commercial paper and time deposits which are carried at cost, which approximates fair value. The revolving cash account is an interest-bearing account held on deposit with the Marmon Corporation, (refer to Note 18 for further details). The following is a schedule of cash and cash equivalents:
Cash and cash equivalents do not include $232,000 and $290,000 of restricted cash equivalents at December 31, 1994 and 1993, respectively, which are classified separately on the balance sheet and represent collateral for a letter of credit on the corporate office lease.
04. INVENTORIES
A summary of inventories at December 31, 1994 and 1993 follows:
During the fourth quarter of 1994, the Company completed a review of the carrying value of its inventories. Included in cost of sales is a non-cash charge of $1,540,000 which primarily represents a write-down of inventory for the excess of net book value over the estimated net realizable value. Net realizable value is determined as estimated selling price based on current inventory levels and current market conditions less cost of disposal.
5. RELOCATION OF CORPORATE HEADQUARTERS/GAIN FROM DISPOSITION OF BUILDING
In August 1993, the Company relocated its corporate headquarters from Seymour, Connecticut to Overland Park, Kansas. The Company moved out of the Seymour facility and transferred the deed on that building to its mortgage holder resulting in a gain of $1,738,000 in 1993 which is included in other income, net. The costs associated with the relocation, principally transition and relocation expenses, were estimated at approximately $1,300,000. During 1994, approximately $640,000 of additional relocation costs were charged to operations. Costs incurred through December 31, 1994 approximated $1,800,000.
6. PROPERTY
The following is a schedule of property, plant and equipment:
Depreciation expense for the years ended December 31, 1994, 1993 and 1992 was $861,000, $1,011,000 and $1,168,000, respectively.
7. INTANGIBLE ASSETS
Intangible assets include the Reorganization Value In Excess Of Amounts Allocable To Identifiable Assets which resulted from the application of Fresh-Start Reporting in 1991. This intangible asset is being amortized on a straight-line basis over a 20-year period. In connection with the implementation of Statement of Financial Accounting Standards ("SFAS") No. 109, intangible assets relating to the reorganization have been adjusted and will continue to be adjusted as Predecessor Company deferred tax assets are recognized.
Intangible assets also include the excess of consideration paid over the fair value of net tangible assets of domestic businesses acquired since July 1, 1991, and of all businesses acquired by the Company's Canadian subsidiary at the time of acquisition. These intangible assets are being amortized on a straight-line basis over their estimated useful lives ranging from 7 to 20 years. The excess of consideration paid over fair value of net tangible assets in the years ended December 31, 1994 and 1993 totalled $1,792,000 and $7,426,000, respectively (see Note 8).
Intangible assets consist of:
Amortization expense for the years ended December 31, 1994, 1993 and 1992 was $1,951,000, $1,224,000 and $1,376,000, respectively.
During the fourth quarter of 1994, the Company completed a review of the recoverability of its intangible assets. This review followed management's determination that, based on increased competition and the fact that certain revenues and operating efficiencies have not materialized as planned, an impairment of goodwill related to California operations acquired in late 1993 had occurred. Included in operating expenses is a non-cash charge of $850,000 which represents a write-down for the impairment of goodwill arising from the acquisition of certain customer bases in California.
In determining the amount of impairment, management made its best estimates of future undiscounted operating cash flows during the remaining amortization period (approximately six years).
During the quarter ended June 30, 1992, the Company reevaluated the period of amortization for intangible assets resulting from the reorganization in 1991 and concluded that the estimated useful life of certain intangible assets should be extended from 10 years to 20 years. The conclusion was reached based upon extensive evaluation of several factors including the future outlook of the Company and to make the financial results of the Company more comparable to its main competitors. The effect of this change in accounting estimate was to increase the Company's net income for the year ended December 31, 1992 by $723,000 (or $0.18 per share).
8. ACQUISITIONS AND TENDER OFFER
On June 15, 1994, the Company's Canadian subsidiary, TIE/Telecommunications Canada, Ltd., through a tender offer, redeemed all of its outstanding 2.251 million minority-owned shares for approximately $2.6 million U.S. dollars in cash. The redemption was treated as a purchase and goodwill of $1.3 million will be amortized over 20 years.
On September 17, 1993 the Company acquired substantially all of the non- Northern Telecom manufactured key-hybrid telephone equipment customer base of PacTel Meridian Systems ("PTMS"), a California general partnership which the Company understands is 80% owned by Northern Telecom, Inc. ("Northern Telecom") and 20% owned by Pacific Bell. The acquisition, which was effected pursuant to an asset purchase agreement, included the acquisition and assignment of contracts with customers and customer lists, together with inventory, vehicles and other equipment of PTMS appropriate to service the customer base. Certain liabilities of PTMS, directly related to the customer base, were also assumed by the Company at closing. The liabilities consisted primarily of prepaid service contracts and warranty reserves.
Pursuant to the asset purchase agreement, the Company purchased the customer base, together with inventory and other equipment of PTMS for an aggregate purchase price of $7,047,472. The liabilities assumed by the Company of $3,653,271 directly reduced the amount of consideration paid to PTMS for the acquired assets. The net purchase price of $3,394,201, was effected by: (a) a cash payment to PTMS of $2,428,843 at the closing; (b) issuance of a note
payable by the Company of $1,000,000 due to PTMS one year from closing with interest at eight percent per annum; and (c) a subsequent payment of $34,642 by PTMS to the Company to reflect final adjustments to the purchase price. The operating results of PTMS have been included in the consolidated results of the Company since the date of acquisition. Company sales during 1993 relating to the PTMS acquisition totalled approximately $2,800,000. The pro forma effects of the acquisition on the results of operations are not determinable.
As an inducement to complete the acquisition, Northern Telecom has guaranteed certain levels of revenue from the acquired customer base for a period of three years after closing. If those revenue levels are not achieved, and the Company purchases at least 75% of its volume commitment, as discussed below, Northern Telecom will provide TIE with equipment purchase credits up to $2,000,000, thus effectively reducing the purchase price of the acquisition. At the acquisition date, TIE anticipated that, at the historical and expected rate of deterioration of the customer base revenues, Northern Telecom would be required to provide TIE with equipment credits at the end of the third year.
In connection with the PTMS acquisition, the Company entered into an annual equipment purchase agreement whereby the Company selects the volume of purchases and is able to receive discounts on those equipment purchases. The greater the purchase commitment, the larger the discount received by the Company. At December 31, 1994 the Company is required to purchase $7.5 million of equipment (net of product discounts) in 1995.
In the fourth quarter of 1990, the Company's Canadian subsidiary acquired the business of CTG, Inc. a Toronto based telephone interconnect company which operates in various locations throughout Canada. The Company's Canadian subsidiary received cash of $3,361,000 in exchange for liabilities assumed in connection with this acquisition. The consideration to be paid for this acquisition is a royalty based on sales with a minimum consideration of approximately $3,000,000. The minimum amount is to be paid in equal quarterly installments over five years. The minimum royalty was recorded as a liability. Future adjustments to the minimum royalty are recorded as an adjustment to intangibles which amounted to approximately $671,000 and $385,000 for the years ended December 31, 1994 and 1993.
9. LONG TERM DEBT, NOTES PAYABLE AND AVAILABLE CREDIT FACILITIES
At December 31, 1993, variable rate term loans represented secured debt of the Company's direct sales operations which was assumed at acquisition or incurred to finance the acquisitions made prior to July 1, 1991. Interest rates on these loans were 9% per annum at December 31, 1993. The variable rate term loans matured during 1994.
In connection with the acquisition of the customer base from PTMS in September 1993, the Company issued a note payable at an interest rate of 8% per annum in the amount of $1,000,000 which was repaid on September 17, 1994.
Upon confirmation of the Company's Plan of Reorganization, HCR Partners made available a $10.0 million revolving line of credit through December 31, 1993. The Company agreed that in connection with the liquidation of HCR Partners, the revolving line of credit agreement could be assigned to and assumed by Marmon. Effective December 31, 1993, the term of the Credit Agreement was extended by Marmon for an additional three year period ending December 31, 1996 upon substantially the same terms and conditions, except that the maximum credit available was reduced to $7,000,000. The Company paid a facilities fee of $75,000 in connection with the extension. 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 is required to pay a commitment fee of 1/4% per annum on any unused amounts available under this line of credit. The Company may draw down on this line at any time 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 provided that the aggregate principal amount outstanding at any time under this line does not exceed the "Borrowing Base" (which is based on inventory and receivables). The Company is also restricted from declaring or paying dividends under the provisions of the Revolving Credit Agreement without the written consent of the lender. The Company was in compliance with or had received a waiver of the covenants as of December 31, 1994 and therefore was qualified to borrow the entire $7,000,000 available under the line. The Company borrowed under this line of credit during 1994, but no borrowings were outstanding as of December 31, 1994. The Company believes that the terms and conditions of the Credit Agreement as extended are competitive with the terms and conditions available from third parties.
10. INCOME TAXES
The Company accounts for income taxes under SFAS No. 109 - "Accounting for Income Taxes". SFAS No. 109 requires a change from the deferred method of accounting for income taxes to the asset and liability method of accounting for income taxes. Under the asset and liability method of SFAS No. 109, deferred tax assets and liabilities are recognized for the future tax benefits or consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax benefits are recognized to the extent it is more likely than not that such benefits will be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
In accordance with Fresh-Start Reporting, the reversal of temporary differences and utilization of tax benefits attributed to the Predecessor Company will be recognized through the reduction of intangible assets. Alternatively, temporary differences and tax benefits relating to the Company will be recognized through the Statement of Operations as such items are expected to be recovered or settled.
Effective January 1, 1993, the Company prospectively adopted SFAS No. 109 recognizing a deferred tax asset of approximately $38,100,000 with a corresponding valuation allowance of $35,400,000 million. The net amount of $2,700,000 was allocated as a reduction of goodwill, therefore, there was no cumulative effect on income related to the change in accounting for income taxes.
The components of pretax income (loss) of consolidated companies are as follows:
The components of the income tax provision are as follows:
The following table is a reconciliation of the provision for income taxes reported in the Consolidated Statements of Operations to the provision as calculated at the statutory U.S. Federal income tax rate:
The significant components of deferred income tax expense for the years ended December 31, 1994 and 1993 are as follows:
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets at December 31, 1994 and 1993 are presented below. The Company did not have any deferred tax liabilities at December 31, 1994 and 1993.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company, in determining the net deferred tax asset to be recognized at December 31, 1994, analyzed the past earnings history and the future projected pretax book income and taxable income. In order to fully realize the deferred tax asset reflected at December 31, 1994, the Company's Canadian subsidiary will need to generate future taxable income of approximately $1,475,000. Management believes it is more likely than not the subsidiary will realize the benefits of deductible differences and other tax attributes, net of existing valuation allowances at December 31, 1994.
At December 31, 1994, the Company has total net operating loss carryforwards for federal income tax purposes of approximately $168,000,000; however, the Company's ability to utilize the net operating losses has been materially limited under Internal Revenue Code Section 382 and Section 383. Due to these limitations, the amount of future taxable income which can be offset by federal net operating losses incurred prior to July 1, 1991 is approximately $2,700,000 annually ($41,800,000 in the aggregate). Federal net operating losses incurred after June 30, 1991 approximate $23,000,000 and are available to offset future income without limitation. Federal and state net operating loss carryforwards will expire between 1995 and 2009. The Company will first utilize Predecessor Company NOL's to the extent available and will thereafter utilize the Company's NOL's.
The Company also has foreign net operating loss carryforwards of approximately $14,880,000 at December 31, 1994, which expire between 1996 and 1999. Additionally, there are foreign investment income tax credits of approximately $487,000 which expire in 1996 through 2004 and foreign research and development tax deductions of approximately $2,443,000 which do not expire.
For the year ended December 31, 1992, deferred tax expense of $1,305,000 represents taxes that would have been paid to the respective tax authorities in the absence of operating loss carryforwards from prior periods. Since these loss carryforwards are Predecessor Company losses, the Company is unable to realize the benefit for accounting purposes, and, accordingly, intangible assets have been reduced by the amount of taxes not paid.
The Internal Revenue Service ("IRS") completed its examination of the Company's consolidated Federal income tax returns through the taxable year ended December 31, 1986. As a result of such examination, the IRS proposed certain adjustments that would increase the Company's consolidated taxable income and tax liability for certain years. The Company negotiated a settlement of these proposed adjustments which was approved by the Joint Committee of Taxation on January 17, 1991. In addition to the Federal income tax liability arising from the negotiated adjustments to the Company's consolidated taxable income for those years, the adjustments arising from the settlement will result in additional state income tax liabilities. On April 26, 1991, the Company received a formal demand for payment of the Federal income tax liability resulting from the settlement. As a consequence of the Chapter 11 proceedings and applicable law, the Company is entitled to defer payment of the Federal and state tax liabilities over a period of six years, with payment thereof to be made quarterly from October 1, 1991 for the Federal liability and annually for the state liability from July 1, 1992. The outstanding balance accrues interest at the six month U.S. Treasury Bill rate.
11. OTHER NON-CURRENT LIABILITIES
Included in other non-current liabilities at December 31, 1994 is a long- term rental payable of $107,000 assumed by the Company's Canadian subsidiary in connection with the 1994 acquisition of a certain Canadian rental base. At December 31, 1993, other non-current liabilities included long-term obligations assumed by the Company's Canadian subsidiary in connection with an acquisition made in 1990 including a minimum royalty payable for that acquisition which totalled $440,000 at December 31, 1993.
12. LEASE AND PURCHASE COMMITMENTS
The Company leases office and warehouse space under noncancellable operating leases expiring at various dates through the year 2000, and leases certain equipment under operating lease agreements expiring at various dates through 1997. Minimum annual rentals on these lease commitments are as follows:
Rent expense charged to operations for the years ended December 31, 1994, 1993 and 1992 was $4,741,000, $4,442,000 and $4,505,000, respectively. In the ordinary course of business, leases expire and are replaced or renewed, therefore, the rent expense in future periods is not expected to be less than the amount shown for 1994. Additionally, the Company is committed to purchase certain amounts of equipment (refer to Note 8).
13. EMPLOYEE BENEFIT PLANS
The Company's Profit Sharing and Savings Plan was amended on January 1, 1985 to allow participating employees to authorize payroll deferrals of up to 10 percent of their total compensation and to contribute such amounts to the plan. From January 1, 1992 until May 31, 1992, the Company matched a participant's contribution by making contributions equal to 100% of that portion of a participant's deferred compensation which did not exceed 3% of the compensation payable to such participant. From June 1, 1992 to December 31, 1994, the Company matched a participant's contribution by making contributions equal to 50% of that portion of a participant's deferred compensation which did not exceed 6% of the compensation payable to such participant. During the years ended December 31, 1994, 1993 and 1992, the Company's contributions amounted to $341,000, $307,000 and $370,000, respectively.
14. OTHER INCOME, NET
Net royalty income is substantially comprised of royalty income from NTK America for its sale of equipment designed by the Company in the amounts of $1,658,000, $1,378,000 and $1,298,000 for the years 1994, 1993 and 1992, respectively. The NTK royalty agreement was originally to be in effect through July 1996 and is in the process of being extended until July 2001. In December 1994 and 1993, the Company recorded income of $285,000 and $350,000 related to settlements of property insurance claims for inventory losses.
15. DISCONTINUED OPERATIONS
On May 14, 1991, the Company entered into an agreement with Nitsuko America Corporation ("NTK America") to sell specified inventory that it owns to NTK America at a price equal to the Company's carrying value of such inventory. This transaction, which closed on July 1, 1991, resulted in the sale of inventory to NTK America. Additionally, the Company licensed on a nonexclusive basis all of its telephone equipment technology to NTK America for a period of five years through June 1996, during which, the Company has an exclusive right to distribute certain equipment manufactured by NTK America's parent, Nitsuko Corporation ("NTK") in Canada, and a nonexclusive right to distribute certain other NTK products in the United States and in Canada. If NTK America sells any of NTK's products in the United States, NTK America will pay the Company a royalty ranging from 3% to 7.5% of the purchase price of all equipment designed by the Company (depending on the distribution channel). In addition, the Company will be provided with the most favorable purchase prices available for NTK America's products during the period of the agreement. As a result of the foregoing, the Company commenced discontinuance of its distribution operations in 1991.
During the third quarter of 1992, the Company's Canadian subsidiary sold its key telephone system distribution business to NTK America for approximately $857,000. The Canadian subsidiary received $762,000 of this amount in cash during 1992. The remaining amount was paid in January 1993. This transaction completed the Company's discontinuation (which was begun in 1991) of its sales to Distributors. The operating loss of $13,000 on the Company's distribution operations is included in other income, net for the year 1992.
As part of the sales agreement with NTK America, the Canadian subsidiary will be provided with the most favorable purchase prices available for NTK America's products during the period of the agreement which is similar to the U.S. agreement in place with NTK America.
16. BUSINESS SEGMENT AND GEOGRAPHIC AREAS
The Company operates primarily in the telecommunications equipment industry. The Company primarily sells, installs and services its products through a domestic and Canadian network of sales and service facilities primarily to small to medium sized customers. An analysis of the Company's operations by geographic location is as follows:
Identifiable assets for each geographic area are those assets associated with the operations in each area. Eliminations include amounts for internal sales between geographic areas, profit in inventory and investments in foreign operations.
17. SELECTED QUARTERLY DATA (UNAUDITED)
Set forth below is selected quarterly information for the years ended December 31, 1994 and 1993:
18. RELATED PARTY TRANSACTIONS
The Company entered into an Administrative and Consulting Agreement dated as of January 1, 1995 with Marmon, pursuant to which Marmon provides certain centralized administrative and consulting services to the Company. In consideration of such services, the Company has agreed to pay to Marmon a monthly amount of $36,000. Under the agreement, the Company has also agreed to reimburse Marmon for all reasonable expenses it incurs in connection with the provision of services to the Company. Reimbursements are not considered material.
Additionally, in 1992 the Company began depositing its excess cash in a revolving cash account with the Marmon Corporation (refer to Note 3). The Company earns interest on the amounts deposited in this account at rates that are at least comparable to third party rates available for equivalent overnight investments.
19. EFFECT OF CORRECTIONS
In November 1994, the Company amended its financial statements for 1993 and the first and second quarters of 1994 to correct accounting errors principally relating to incorrect service billings to California customers who previously had purchased service contracts. The contracts were acquired as part of the PTMS acquisition at the end of the third quarter of 1993. Additionally, unrelated errors in the same periods were discovered involving inventories and accruals at the Company's Northwest operating unit. The effect of the corrections were as follows:
TIE/communications, Inc. and Subsidiaries
SCHEDULE VIII: VALUATION AND QUALIFYING ACCOUNTS
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information as to directors required by this item is incorporated by reference to information under the caption "Election of Directors" in the Proxy Statement. The information as to executive officers is included in Part 1 of this report, "Executive Officers of the Registrant".
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to information under the caption "Executive Compensation" in the Proxy Statement.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to information under the caption "Security Ownership of Certain Beneficial Owners" in the Proxy Statement.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to information under the caption "Executive Compensation" in the Proxy Statement.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements and Schedules: See Item 8.
2. Exhibits: See Exhibit Index on Page 48.
(b) Reports on Form 8-K: No reports on Form 8-K were filed during the last fiscal quarter.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
TIE/communications, Inc.
By: /s/ George N. Benjamin, III ------------------------------------- March 27, 1995 George N. Benjamin, III, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Position or Office Date ------------------ ---- /s/ George N. Benjamin, III President, Chief Executive March 27, 1995 ------------------------------- George N. Benjamin, III Officer and Director
/s/ Eric V. Carter Director March 27, 1995 ------------------------------- Eric V. Carter
/s/ Robert C. Gluth Director March 27, 1995 ------------------------------- Robert C. Gluth
/s/ Thomas L. Kelly, Jr. Director March 27, 1995 ------------------------------- Thomas L. Kelly, Jr.
/s/ Robert E. LaBlanc Director March 27, 1995 ------------------------------- Robert E. LaBlanc
/s/ Robert A. Pritzker Director March 27, 1995 ------------------------------- Robert A. Pritzker
/s/ Robert W. Webb Director March 27, 1995 ------------------------------- Robert W. Webb
/s/ Roy B. Henry Interim Chief Financial March 27, 1995 ------------------------------- Roy B. Henry Officer
EXHIBIT INDEX
2 -- Joint Plan of Reorganization of the Debtors, filed with the United States Bankruptcy Court for the District of Delaware on April 8, 1992. (8)
3 -- Restated Certificate of Incorporation(1) and By-Laws. (2)
3.1 -- Amendment to the Restated Certificate of Incorporation. (4)
3.2 -- Amendment, dated June 10, 1987, to the Restated Certificate of Incorporation. (5)
3.3 -- Certificate of Correction, dated September 1, 1987, to the Restated Certificate of Incorporation. (5)
10.4 -- Stock Purchase Agreement dated as of March 24, 1990, by and between TIE and Chinteik ("Chinteik Agreement"). (6)
10.5 -- License Agreement, exhibit to Chinteik Agreement. (6)
10.6 -- Form of Separation Agreement executed between TIE and Randolph K. Piechocki. (6)
10.7 -- "Standstill" Letter Agreement, dated April 10, 1990, by and between HCR Partners and TIE. (6)
10.9 -- Exchange Agreement, dated April 7, 1991, by and between HCR Partners and TIE. (7)
10.10 -- Amendment, dated April 8, 1991, to Separation Agreement, dated December 11, 1985, between TIE and Eric V. Carter. (8)
10.11 -- Severance Agreement, dated April 9, 1991, between TIE and Thomas L. Kelly, Jr. (8)
10.12 -- Separation Agreement and General Release, dated February 13, 1992, between TIE and Barry D. Schumaker. (11)
10.13 -- Separation Agreement and General Release, dated March 6, 1992, between TIE and Roger L. Crossland. (11)
10.14 -- Administrative and Consulting Service Agreements, dated January 1, 1995, between The Marmon Group, Inc. and TIE. *
10.15 -- Business Agreement, dated May 22, 1991, by and between TIE, Nitsuko America Corporation and Century Electronics and Systems Co., Ltd. (11)
10.16 -- Inventory and Equipment Transfer Agreement between TIE and Nitsuko America Corporation, dated May 14, 1991. (11)
10.17 -- License and Royalty Agreement between TIE and Nitsuko America Corporation, dated July 1991. (11)
10.18 -- Consignment Agreement between TIE and Nitsuko America Corporation, dated July 1991. (11)
10.19 -- Distribution Agreement between TIE and Nitsuko America Corporation dated July 1991. (11)
10.20 -- Revolving Credit Agreement, dated June 18, 1991, by and among TIE and certain of its subsidiaries and HCR Partners. (9)
10.21 -- Registration Rights Agreement, dated June 18, 1991, by and between HCR Partners and TIE. (9)
10.22 -- Voting Agreement, dated June 18, 1991, between TIE and HCR Partners. (9)
10.23 -- Amendment to and Assignment of Revolving Credit Agreement, entered into as of July 1, 1991, by and among TIE and certain of its subsidiaries, HCR Partners and Marmon Holdings, Inc. (10)
10.24 -- Distribution Agreement between TIE/communications Canada, Inc. and Nitsuko America Corporation dated August 31, 1992. (12)
10.25 -- Inventory and Equipment Transfer Agreement, dated July 24, 1992, by and between Nitsuko America Corporation and TIE/communications Canada, Inc. (12)
10.26 -- Employment Agreement between Eric V. Carter and TIE, dated January 14, 1992. (12)
10.27 -- Letter Agreement between George N. Benjamin, III and TIE, dated April 29, 1992. (12)
10.28 -- Revolving Funds Agreement between TIE and The Marmon Corporation, dated January 1, 1992. (12)
10.29 -- Asset Purchase and Sale Agreement by and between PacTel Meridian Systems and TIE/communications, Inc., dated September 17, 1993. (13)
10.30 -- Agreement between Mark Amatrudo and TIE, dated November 1, 1993. (14)
10.31 -- Agreement and Release between Mark Amatrudo and TIE, dated November 19, 1993. (14)
10.32 -- Agreement between Anthony T. Guiterman and TIE, dated December 8, 1993. (14)
10.33 -- Agreement and Release between Anthony T. Guiterman and TIE dated December 9, 1993. (14)
10.34 -- Agreement between Anthony T. Guiterman and TIE, dated November 9, 1993. (14)
10.35 -- Agreement and Release between Brian J. Kelley and TIE, dated February 10, 1994. (14)
10.36 -- Agreement and Release between Russell J. Melita and TIE, dated December 28, 1993. (14)
10.37 -- Second Amendment dated March 1, 1992, to the Revolving Credit Agreement, dated June 18, 1991 among TIE and certain of its subsidiaries and Marmon Holdings, Inc. (14)
10.38 -- Amendment dated March 31, 1993 to the Revolving Credit Agreement, dated June 18, 1991, by and between TIE and various of its subsidiaries and Marmon Holdings, Inc. (14)
10.39 -- Fourth Amendment dated December 31, 1993 to the Revolving Credit Agreement, dated June 18, 1991, by and between TIE and various of its subsidiaries and Marmon Holdings, Inc. (14)
10.40 -- Retirement and Savings Stock Trust between TIE/communications and Neal L. Brees, Trustee dated January 3, 1995.*
21 -- List of Subsidiaries. *
27 -- Financial Data Schedule. *
---------------------------- * Filed herewith
COPIES OF EXHIBITS WILL BE PROVIDED TO SHAREHOLDERS UPON REQUEST
(1) Filed as an exhibit to TIE's Registration Statement on Form S-1, No. 2-72010, which was declared effective by the Commission on May 14, 1981, and incorporated herein by reference.
(2) Filed as an exhibit to TIE's Registration Statement on Form S-1, No. 2-69860, which was declared effective by the Commission on December 4, 1980, and incorporated herein by reference.
(3) Filed as an exhibit to TIE's Registration Statement on Form S-1, No. 2-75271, which was declared effective by the Commission on December 18, 1981, and incorporated herein by reference.
(4) Filed as an exhibit to TIE's Annual Report on Form 10-K, dated March 29, 1984, and incorporated herein by reference.
(5) Filed as an exhibit to TIE's Annual Report on Form 10-K for the fiscal year ended December 31, 1987, and incorporated herein by reference.
(6) Filed as an exhibit to TIE's Annual Report on Form 10-K for the fiscal year ended December 31, 1989, and incorporated herein by reference.
(7) Filed as an exhibit to TIE's Report on Form 8-K, dated April 8, 1991, reporting the filing by the Debtors for reorganization relief under Chapter 11 of the United States Bankruptcy Code, and incorporated herein by reference.
(8) Filed as an exhibit to TIE's Annual Report on Form 10-K for the fiscal year ended December 31, 1990, and incorporated herein by reference.
(9) Filed as an exhibit to TIE's Report on Form 8-K, dated July 1, 1991, and incorporated herein by reference.
(10) Filed as an exhibit to TIE's Current Report on Form 8-K, dated August 26, 1991, and incorporated herein by reference.
(11) Filed as an exhibit to TIE's Annual Report on Form 10-K for the fiscal year ended December 31, 1991, and incorporated herein by reference.
(12) Filed as an exhibit to TIE's Annual Report on Form 10-K for the fiscal year ended December 31, 1992, and incorporated herein by reference.
(13) Filed as an exhibit to TIE's Current Report on Form 8-K, dated September 30, 1993, and incorporated herein by reference.
(14) Filed as an exhibit to TIE's Annual Report on Form 10-K for the fiscal year ended December 31, 1993, and incorporated herein by reference.