Comdial Reports Fourth Quarter and Year End 2000 Results And Announces Amended Agreement with Bank of America.Business Editors SARASOTA Sarasota (sâr'əsō`tə), city (1990 pop. 50,961), seat of Sarasota co., SW Fla., on Sarasota Bay; settled c.1884, inc. 1914. , Fla.--(BUSINESS WIRE)--April 23, 2001 Comdial Comdial is a telecommunications company based in Sarasota, Florida. Comdial was a former manufacturer and current deisgner and developer of Telecommunications Systems, or telephone syestems. Corporation (Nasdaq:CMDL CMDL Climate Monitoring and Diagnostics Laboratory CMDL Common Mission Data Loader ) today announced results for the fourth quarter and fiscal year ending December 31, 2000 and the revised terms of its agreement with Bank of America
Bank of America (NYSE: BAC TYO: 8648 ) is the largest commercial bank in the United States in terms of deposits, and the largest company of its kind in the world. . Sales Revenue Revenues for the fourth quarter totaled $19.5 million, compared with revenues of $43.4 million for the same period in 1999. Revenues for fiscal year 2000 were $100.0 million compared to $150.3 million in 1999. Revenues were significantly impacted by the decision of Comdial and its supply houses to undertake a major reduction of inventory levels at the supply houses in light of the sudden slowdown For articles with similar titles, see Slow Down (disambiguation). A slowdown is an industrial action in which employees perform their duties but seek to reduce productivity or efficiency in their performance of these duties. of the market for telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. products in 2000. For the fourth quarter of 2000, the supply houses sold $4.5 million more than they purchased from Comdial of the Company's products. Altogether, Comdial end-customers purchased from the supply houses over $19 million more than the supply houses purchased from Comdial for the full fiscal year. Net Income and EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. The net loss for 2000 was $63.3 million or $6.89 per share compared to restated net income of $7.3 million or $0.82 per share for 1999. The net loss included a full valuation allowance reserve on its deferred tax assets of $34.1 million based on a change in management's estimate concerning the likelihood of such assets' future realization. The net loss for the year 2000, excluding the tax valuation allowance reserve, was $29.1 million or $3.17 per share. Amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. Agreement with Bank of America Comdial and Bank of America executed a letter agreement dated April 10, 2001 to amend Comdial's existing credit facility under the Amended and Restated Credit Agreement dated November 22, 2000. The credit facility consists of a working capital line of credit and a term loan. The letter agreement provides for an extension of the maturity date of Comdial's working capital line of credit to March 31, 2002. The agreement also increased the line of credit from $15.0 million to $16.5 million from March 31, 2001 to March 31, 2002, and lowered the collateral requirement by $3.0 million until September Until September is a 1984 romantic drama set in France. It stars Karen Allen as an American tourist in Paris who falls in love with a married Frenchman (Thierry Lhermitte). External links 30, $2.5 million until October 31, and $0.5 million until November 30, 2001. The term loan principal payment of $2.5 million due September 30, 2001 under the existing Credit Agreement has been changed to the amount necessary to reduce the term loan to $5.0 million. Currently, the outstanding balance of the term loan is $15.7 million. Comdial expects to utilize the proceeds from the $8.4 million note receivable note receivable A debt due from borrowers and evidenced by a written promise of payment. Note receivable, an entry on the asset side of many corporate balance sheets, indicates the dollar amount of loans due to be repaid by borrowers. from Seminole Properties, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control (pursuant to its sale of the land and building on March 9, 2001) to be paid by June 1, 2001 and proceeds of approximately $1.0 million from the April 12, 2001 equipment auction and furniture sale to reduce the required principal payment to approximately $1.3 million. The Funded Debt Funded Debt Long-term debt that matures after more than one year. Notes: This is usually issued as a bond or a long-term note. See also: Bond, Debt, Maturity, Note Funded debt Debt maturing after more than one year. to Total Capital Ratio covenant was waived for December 31, 2000 and March 31, 2001. The covenant thereafter will resume for the quarter ending June 30, 2001, but will be modified by including the deferred tax asset valuation allowance as part of the total capital component of the formula. The EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become covenant has been modified as follows: the minimum requirements are $1.9 million, $6.0 million, and $9.7 million as of June 30, September 30, and December 31, 2001 respectively and measured on a cumulative basis from April 1, 2001. The capital expenditures have been restricted to $0.3 million per quarter and $1.2 million per year. The interest rate has been adjusted from Libor plus 3% to Prime plus 3%. Corporate Restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). A complete review of the Company's operations has resulted in the significant restructuring of the organization to streamline operations, reduce costs, consolidate functions, outsource manufacturing and reduce headcount. In the fourth quarter of 2000, the Board of Directors approved management's plan ("the Plan") to restructure the Company. As a result of the Plan, the Company has taken a number of charges in the fourth quarter of 2000 associated with the restructuring. The Company has downsized the workforce by 152 employees in December and notified another 222 employees that their positions will be eliminated during 2001. This resulted in a $2.4 million restructuring charge restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. . In connection with the downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing of the Company's entire operations, Comdial abandoned an IT system implementation project that began in 1999 and switched to an IT system that was already operational at Key Voice Technologies, Inc., a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Comdial. Comdial wrote-off $3.9 million in 2000 related to this project. As a result of Comdial's decision to outsource the Company's manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. , the majority of the manufacturing equipment has been or will be sold. An impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. analysis of these assets resulted in a $0.4 million write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of their carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. as of December 31, 2000. In addition, the Company: -- reserved $2.4 million for a lower of cost or market inventory write-down as a result of the Company's decision to outsource manufacturing -- reserved $2.5 million for inventory obsolescence pursuant to its decision to discontinue a number of product lines -- increased the bad debt reserves by $2.0 million to reflect the declining economic situation in some areas that the Company markets; and -- wrote off $2.7 million for goodwill impairment associated with Array, a wholly-owned subsidiary acquired by Comdial in 1998. Restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. The Company has restated its consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge for the fiscal years 1999 and 1998 to reflect additional compensation expense associated with stock options awarded under its 1992 Incentive Stock Option Plan ("1992 Plan"). Management has determined that these option grants should be accounted for as variable, rather than fixed awards due to certain features, or lack of features, outlined in the 1992 Plan. The Board of Directors has since approved a 1992 Plan amendment to ensure that options granted under the 1992 Plan will be accounted for as fixed awards. The impact on sales, general and administrative ("SG&A") expenses was $0.5 million and $0.1 million for the years ended 1999 and 1998, respectively. There was also a related restatement of certain consolidated balance sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. categories including accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. payroll and related expenses, paid-in-capital and accumulated ac·cu·mu·late v. ac·cu·mu·lat·ed, ac·cu·mu·lat·ing, ac·cu·mu·lates v.tr. To gather or pile up; amass. See Synonyms at gather. v.intr. To mount up; increase. deficit (see attached consolidated financial statements). Gross Margin Gross margin for the fourth quarter was a negative $3.1 million, or 16% of sales, compared with a positive $20.7 million, or 48% of sales, for the same period in 1999. Gross margin for fiscal 2000 was $22.3 million, or 22% of sales, compared to $64.8 million, or 43% of sales in 1999. The negative gross margin in the fourth quarter of 2000, and the decreased gross margin for the fiscal year, are due primarily to the furloughing program that started during the third quarter of last year, and continued through the fourth quarter, a lower of cost or market lower of cost or market A method for determining an asset's value such that either the original cost or the current replacement cost, whichever is lowest, is used for financial reporting purposes. adjustment recorded against raw materials pursuant to the Company's outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. of its manufacturing operations, additional obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. provisions related to products discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: in the fourth quarter 2000, as well as competitive pressures which resulted in lower prices for certain products. Operating Expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. In comparison to 1999, operating expenses increased for both the fourth quarter and the fiscal year 2000. SG&A expenses for the year 2000 increased by 18 percent to $47.1 million compared with $39.9 million for 1999. For the fourth quarter 2000, SG&A expenses increased by .4 percent to $12.5 million compared with $12.4 million in 1999. This increase was primarily due to an increase in bad debt reserves associated with the decline in collections experience in certain markets in which Comdial does business, increased personnel costs for national accounts, and increased administration costs. Balance Sheet Current and long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. was reduced from $42.2 million at the end of the third quarter of 2000 to $38.4 million by year-end. Accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying decreased from $23.3 million to $13.8 million over the same period. $2.0 million of the change was due to increased bad debt reserves. The inventory levels were reduced from $25.4 million to $15.4 million. This reduction included $2.4 million in the adjustment for a lower of cost or market write-down as a result of the decision to outsource the manufacturing operation and a $2.5 million write-down for other product obsolescence. Comments of Nick Branica Commenting on the results, Nick Branica, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Comdial, stated, "We are very disappointed by the 2000 operating results of the Company, but we believe we have quickly taken the necessary steps required to position the Company for future growth. We have accomplished a tremendous amount over the last several months as part of our aggressive restructuring plan. We have successfully reduced the inventory levels at the key supply houses that sell to our dealers to the 60-day level. During the first quarter of 2001, the Company entered into an agreement to outsource a majority of its manufacturing operations. In addition, the Company's manufacturing facility in Charlottesville, Virginia Charlottesville is an independent city located within the confines of Albemarle County in the Commonwealth of Virginia, United States, and named after Princess Sophia Charlotte of Mecklenburg-Strelitz, the wife of King George III of the United Kingdom. was sold in March 2001, which should enable the Company to reduce its bank debt by $11.4 million. During the first quarter of 2001, Comdial's corporate headquarters were relocated re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. to Sarasota, Florida Sarasota is a city located in Sarasota County on the central west coast of Florida, USA. Its official limits include Sarasota Bay and several barrier islands between the bay and the Gulf of Mexico. and are now fully operational. We have streamlined our product portfolio and have announced several new products including the FX-II(TM) and DX-80(TM). We have had good success during the introduction of these two new products and the initial demand has well exceeded our expectations. We have increased the production of these products to meet the sales opportunities that are now emerging. We believe that these products, together with our other current and new sophisticated product offerings including unified messaging Having access to e-mail, voice mail and faxes via a common computer application or by telephone. For example, unified messaging may send faxes and digitized voice mail to a mail server that turns them into e-mail attachments. , IP Networking and our IP phones will enable us to successfully create a new platform from which the Company expects to grow in the future. We are very pleased with the steps that we have been able to implement in a very short period of time to restructure the Company and the way we do business to meet the demands of a changing market. I am happy to report that we have now successfully completed approximately eighty percent of our restructuring plan. We firmly believe that the actions that we have taken and the additional actions in process will result in significant cost savings, improved customer satisfaction and position Comdial for success and new growth."
Consolidated Statements of Operations
Years Ended December 31,
2000 1999
In thousands except per share amounts (As restated -
See 1999
Restatement
below)
Net sales $ 100,042 $ 150,335
Cost of goods sold 77,715 85,554
Gross profit 22,327 64,781
Operating expenses
Selling, general & administrative 47,099 39,914
Engineering, research & development 6,283 9,735
Goodwill amortization 3,195 3,180
Restructuring 2,355 -
Impairments of long-lived assets 7,425 -
Operating income (loss) (44,030) 11,952
Other expense
Interest expense 2,902 1,633
Miscellaneous expense - net 932 286
Income (loss) before income taxes (47,864) 10,033
Income tax expense 15,400 2,690
Net income (loss) $ (63,264) $ 7,343
Earnings (loss) per share:
Basic $ (6.89) $ 0.82
Diluted $ (6.89) $ 0.82
Weighted average common shares outstanding:
Basic 9,188 8,948
Diluted 9,188 8,989
Consolidated Statements of Operations
Fourth Quarter 2000/Fourth Quarter 1999
In thousands except per share amounts
Fourth Fourth
Quarter Quarter
2000 1999
(As restated -
See 1999
Restatement
below)
Net Sales $ 19,456 $ 43,435
Gross profit (3,104) 20,723
Goodwill amortization 799 799
Interest expense 934 475
Net income (loss) (50,946) 3,541
Net earnings (loss) per common share:
Basic (5.53) 0.39
Diluted (5.53) 0.39
1999 Restatement
A summary of the significant effects on the 1999 financial statements
is as follows:
As Previously As
Reported Restated
As of December 31, 1999:
Accrued payroll and related expenses $ 2,652 $ 3,652
Paid-in-capital 116,535 119,199
Accumulated deficit (43,781) (47,445)
Total stockholders' equity 71,608 70,608
For the year ended December 31, 1999:
Selling, general & administrative expenses 40,229 40,740
Net income applicable to common stock 7,854 7,343
Earnings per share:
Basic $ 0.88 $ 0.82
Diluted $ 0.87 $ 0.82
Consolidated Balance Sheets
December 31,
2000 1999
(As Restated)
In thousands except par value
Assets
Current assets
Cash and cash equivalents $2,428 $1,917
Accounts receivable (less allowance
for doubtful accounts: 2000
- $2,834; 1999 - $302) 13,829 39,700
Inventories 15,431 22,827
Prepaid expenses and other current
assets 3,240 7,633
Total current assets 34,928 72,077
Property - net 16,684 19,458
Net deferred tax asset - 11,980
Goodwill 5,276 11,207
Other assets 16,066 18,352
Total assets $72,954 $133,074
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $7,522 $15,135
Accrued payroll and related expenses 4,391 3,652
Accrued promotional allowances 1,324 2,322
Other accrued liabilities 2,570 2,253
Current maturities of debt 24,848 471
Total current
liabilities 40,655 23,833
December 31,
2000 1999
(As Restated)
Long-term debt 13,561 31,795
Net deferred tax liability 2,266 2,622
Long-term employee benefit obligations 4,957 4,216
Commitments and contingent liabilities - -
Total liabilities 61,439 62,466
Stockholders' equity
Common stock, $0.01 par value,
(Authorized 30,000 shares; issued
shares outstanding: 2000 - 9,197;
1999 - 8,940) 93 91
Paid-in capital 123,427 119,199
Treasury stock (1,296) (1,237)
Accumulated deficit (110,709) (47,445)
Total stockholders' equity 11,515 70,608
Total liabilities and
stockholders' equity $72,954 $133,074
Conference Call Comdial will hold a conference call on Monday, April 23, 2001 at 10:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . The access telephone number for the conference call is (800) 576-7247. Please call in 5 minutes prior to the scheduled start of the call. About Comdial Comdial provides integrated communications solutions that address the needs of the business environment. Comdial is committed to researching and developing leading edge, fully integrated communications solutions and customer applications for small to medium-sized businesses, government, assisted living as·sist·ed living n. A living arrangement in which people with special needs, especially older people with disabilities, reside in a facility that provides help with everyday tasks such as bathing, dressing, and taking medication. , hospitality and call centers. For additional information about Comdial and its communications solutions, please visit our web site at www.comdial.com. Forward Looking Statements Certain statements in press release, including Comdial's expectations to grow the business, successfully develop and introduce new products, achieve cost savings, complete the restructuring, continued compliance with a renegotiation of applicable bank covenants, and successfully utilize outsourcing are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are subject to risks and uncertainties and assumptions including, but not limited to, general economic conditions, availability of capital, the impact of competitive products, product demand and market acceptance risks, reliance on key strategic alliances, fluctuations in operating results, delays in development of highly complex products, industry conditions and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. These risks could cause the Company's actual results for 2001 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of, the Company. Words like "expects", "believes", "anticipates", "intends", "plans" and similar expressions as they relate to Comdial or its management, are intended to identify forward-looking statements which reflect management's analysis as of the date they are made. For the forward-looking statements Comdial claims the protection of the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions for forward-looking statements provided for in the private Securities Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Act of 1995. |
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