FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to _
Commission File No.: 0-14685
GENICOM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 51-0271821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14800 Conference Center Drive
Suite 400, Westfields
Chantilly, Virginia 22021-3806
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (703)
802-9200
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the past
90 days. Yes X No
As of April 20, 1994, there were 10,626,699 shares of Common
Stock of the Registrant outstanding.
GENICOM Corporation and Subsidiaries
Form 10-Q Index
PART I - Financial Information
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Item 1. Financial Statements
Consolidated Balance Sheets - April 3, 1994 3
and January 2, 1994
Consolidated Statements of Income - Three
Months Ended
April 3, 1994 and April 4, 1993 4
Consolidated Statements of Cash Flows - Three
Months Ended
April 3, 1994 and April 4, 1993 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition
and Results of Operations 7- 11
PART II - Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security 12
Holders
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12-13
Signatur 14
es
/TABLE
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 3, January
2,
1994 1994
_______ _______
(In thousands, except share data) (Unaudit
ed)
ASSETS
Current assets:
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Cash and cash equivalents $ 921 $ 1,797
Accounts receivable, less allowance for
doubtful accounts of $1,596 and $1,480 37,987 35,932
Other receivables 4,604 7,202
Inventories 51,017 53,831
Prepaid expenses and other assets 1,328 1,594
_______ _______
Total current assets 95,857 100,356
Property, plant and equipment 27,697 24,869
Goodwill 9,932 10,180
Other assets, principally intangibles 5,947 5,754
_______ _______
$ 139,433 $ 141,159
_______ _______
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 25,182 $ 23,263
Accounts payable and accrued expenses 36,307 36,504
Deferred income 7,720 6,947
_______ _______
Total current liabilities 69,209 66,714
Long-term debt, less current portion 39,998 45,757
Other non-current liabilities 5,527 4,113
_______ _______
Total liabilities 114,734 116,584
Stockholders' equity: _______ _______
Common stock, $0.01 par value; 15,000,000
shares authorized, 10,626,699 and 106 106
10,621,699 shares issued
Additional paid-in capital 25,749 25,744
Retained earnings 1,875 1,781
Foreign currency translation adjustment (1,932) (1,957)
Pension liability adjustment (1,099) (1,099)
_______ _______
Total stockholders' equity 24,699 24,575
_______ _______
$ 139,433 $ 141,159
_______ _______
<FN>
The accompanying notes are an integral part of these financial
statements
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three
Months
Ended
(In thousands, except per share data) April 3, April 4,
1994 1993
_______ _______
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Revenues, net:
Products $ 43,484 $ 44,395
Services 11,852 12,282
_______ _______
55,336 56,677
_______ _______
Operating costs and expenses:
Cost of revenues:
Products 32,360 34,789
Services 8,365 6,423
Selling, general and administration 11,375 11,337
Engineering, research and
product development 1,914 2,559
_______ _______
54,014 55,108
_______ _______
Operating income 1,322 1,569
Interest expense, net 1,980 1,428
Other income 901
_______ _______
Income before income taxes 243 141
Income tax expense 149 58
_______ _______
Net income $ 94 $ 83
_______ _______
Earnings per common share
and common share equivalent: $ 0.01 $ 0.01
_______ _______
Weighted average number of common shares
and common
share equivalents outstanding 10,623 10,605
<FN>
The accompanying notes are an integral
part of these financial statements.
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three
month
s
ended
,
April 3, April 4,
(In thousands) 1994 1993
_______ _______
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Cash flows from operating activities:
Net income $ 94 $ 83
Adjustments to reconcile net income to cash
provided
by operating activities:
Depreciation 2,135 1,476
Amortization 683 609
Extraordinary gain 0
Effect of investment gain (901)
Effect of environmental recovery from G.E. 0
Changes in assets and liabilities:
Accounts receivable (1,935) (1,241)
Inventories (520) 480
Accounts payable and accrued expenses 1,170 (849)
Deferred income 774 1,023
Other 1,084 520
_______ _______
Net cash provided by operating activities 2,584 2,101
_______ _______
Cash flows from investing activities:
Additions to property, plant and equipment (2,306) (1,949)
Proceeds from sale of investment 3,436
Other (592) (465)
_______ _______
Net cash provided by (used in) investing activities 538 (2,414)
Cash flows from financing activities:
Borrowings from long-term debt 7,692 8,361
Payments on long-term debt (11,570) (10,066)
_______ _______
Net cash used in financing activities (3,878) (1,705)
_______ _______
Effect of exchange rate changes (120) 125
on cash and cash equivalents _______ _______
Net decrease in cash and cash equivalents (876) (1,893)
Cash and cash equivalents at beginning of year 1,797 3,001
_______ _______
Cash and cash equivalents at end of year $ 921 $ 1,108
_______ _______
<FN>
The accompanying notes are an integral part of these financial
statements
GENICOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying unaudited
consolidated financial statements of GENICOM Corporation and
subsidiaries (the "Company" or "GENICOM") contain all
adjustments (consisting only of normal recurring accruals)
necessary to present fairly the Company's consolidated
financial position as of April 3, 1994, and the results of
operations and cash flows for the periods indicated.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in
the Company's January 2, 1994, Annual Report. The results
of operations for the three months ended April 3, 1994, are
not necessarily indicative of the operating results to be
expected for the full year. Certain reclassifications have
been made to the 1993 condensed financial statements in
order to conform to the 1994 presentation.
2. Inventories are stated at the lower of cost, determined on
the first-in, first-out method, or market. Inventories
consist of, in thousands:
April 3, January 2,
1994 1994
_______ _______
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Raw Materials $ 13,095 $ 13,768
Work in process 7,250 8,524
Finished goods 30,672 31,539
_______ _______
$ 51,017 $ 53,831
3. Earnings per share are based upon the weighted average
number of common shares and dilutive common share
equivalents (using the treasury stock method) outstanding
during the period.
4. During the first quarter ended April 3, 1994, the Company
adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 112 and No. 115, "Employers'
Accounting for Postemployment Benefits" and "Accounting for
Certain Investments in Debt and Equity Securities",
respectively. The implementation of SFAS No. 112 and No.
115 did not have a material effect on the Company's
financial condition or results of operations.
Item 2.Management's Discussion and Analysis of Results of
Operations and Financial Condition:
Results of Operations
Three Months
Ended
(in millions) 1st Quarter 1st Quarter
1994 Change 1993
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> > > >
Revenues $ 55.3 $ (1.4) $ 56.7
Percentage change (2.5) %
Year over year revenue growth in our Laser Printing Solutions and
Supplies businesses was offset by declines in other business
units. In particular, the unfavorable economic conditions in
Europe, from which approximately 23.9% of the Company's first
quarter 1994 revenues were derived, negatively affected first
quarter results. As a result, the Company experienced a revenue
decrease of $ 1.4 million or 2.5% in the first quarter of 1994 as
compared with the prior year quarter. GENICOM's most demanding
business challenge has been to grow revenues and profits while
responding to the declining market of impact printing,
historically the Company's principal business. The Company's
focus has been to introduce new impact products to increase
market share and to invest in the strategic growth businesses of
Laser Printing Solutions, Supplies and Enterprising Service
Solutions.
In the first quarter of 1994, printer revenues decreased $ 2.2
million or 2.9% compared to the prior year quarter. Printer
revenues from the Company's family of laser printers have
partially offset the declining revenues associated with mature
impact printers. Management expects revenues from its family of
laser printers to continue to grow in 1994 and offset declines in
other printer product lines.
Spares revenues decreased $ 0.4 million or 0.5% in the first
quarter of 1994 as compared to the prior year quarter. Spares
revenues continue to decrease due to new product designs that
have increased reliability and resulted in fewer replaceable
parts, and declines in sales of mature serial matrix and band
line printers requiring such spare parts. Management expects
that spares revenues will continue to decline.
Supplies revenues increased $ 2.4 million or 4.7% in the first
quarter of 1994 as compared to the prior year quarter. Supplies
revenue growth is attributable to increased market share achieved
by increasing the number of product offerings, including laser
printer supplies, and aggressive marketing in established
markets. Management anticipates that Supplies revenues will
continue to increase.
Enterprising Service Solutions ("ESSD") revenues in the first
quarter of 1994 decreased $ 1.1 million or 1.5% compared to an
exceptionally strong first quarter in 1993. But, on March 15,
1994, the Company announced a significant multi-year services
agreement with Computervision Corporation for logistics and depot
repair services. While this agreement did not materially impact
the first quarter ESSD business, 1994 revenues from the agreement
are expected to be approximately $ 17.0 million. In addition, on
April 11, 1994, the Company announced an expanded relationship
with Computervision Corporation for field support services which
is expected to generate approximately $ 9.0 million of revenues
for the Company over the first 12 months. Management anticipates
that 1994 ESSD revenue will be above fiscal 1993 levels due to
increased multivendor service activities.
Relay revenues increased by $ 0.1 million or 0.3% in the first
quarter of 1994 as compared to the prior year quarter.
Management expects that 1994 relay revenues will approximate
those of fiscal 1993.
(in millions) 1st Quarter 4th Quarter 1st Quarter
1994 1993 1993
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Order backlog $ 43.4 $ 34.1 $ 39.3
Change - 1st Quarter 1994 compared to:
Amount 9.3 4.1
Percentage 27.3 % 10.4 %
The increase in order backlog from the 1993 fourth and first
quarter is primarily due to increased orders in the Company's
ESSD business, partially offset by a decline in the backlog from
the Company's printer and spares businesses. The Company's
backlog as of any particular date should not be the sole
measurement used in determining sales for any future period.
Three
Months
Ended
(in millions) 1st 1st Quarter
Quarte
r
1994 Change 1993
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Gross margin $ 14.6 $ (0.9) $ 15.5
As a % of revenue 26.4 % 27.3 %
Gross margin, as a percentage of revenue, declined for the first
quarter of 1994 as compared to the prior year quarter. This
decrease is attributable to margin pressures in the Company's
equipment business, the uncertain global business environment and
unfavorable foreign currency movements.
Three
Months
Ended
(in millions) 1st 1st Quarter
Quarter
1994 Change 1993
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> > > > > > >
Operating expenses:
Selling, general and
administrative $ 11.4 $ 0.1 $ 11.3
Engineering, research
and
product development 1.9 (0.7) 2.6
_______ _______ _______
Total $ 13.3 $ (0.6) $ 13.9
As a % of revenue 24.0 % 24.5 %
The first quarter 1994 selling, general and administrative and
engineering, research and product development costs were
favorably impacted by the Company's January 1994, cost reduction
program which included personnel, salary and benefit reductions
for the Company's worldwide operations and its third quarter 1993
reorganization of its sales and marketing, development and
administrative operations including the formation of an
application solutions function.
The January 1994, cost reduction program was implemented in
response to the Company's business challenges discussed above,
and the program, net of severance costs, favorably impacted the
1994 first quarter by $ 0.8 million.
Three
Months
Ended
(in millions) 1st Quarter 1st Quarter
1994 Change 1993
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> > > > > >
Interest expense, net $ 2.0 $ 0.6 $ 1.4
Percentage change 42.9 %
Other income $ 0.9 $ 0.9 $ 0.0
Percentage change 100.0 %
The increase in interest expense for the comparative first
quarter periods is a result of an interest payment received in
January 1993, from the Internal Revenue Service of $ 0.6 million
related to the settlement of prior period tax matters. On March
23, 1994, the Company's interest rate on its senior credit
facility increased from 8.25% to 8.50%, as result on a 0.25%
increase in the prime lending rate.
During the 1994 first quarter, the Company sold its remaining
investment in Xeikon N.V., a Belgian printer development and
manufacturing company and a pre-tax gain of $ 0.9 million was
recognized.
Three
Months
Ended
(in millions) 1st Quarter 1st Quarter
1994 Change 1993
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> > > > > >
Income tax expense $ $ 0.1 $ 0.0 $ 0.1
Percentage change 0.0 %
The Company's effective income tax rate for the first quarter of
1994 was 61.3% as compared to 41.1% for the year-ago period.
These rates are significantly affected by foreign income taxes
and the utilization of net operating losses.
Liquidity and Capital Resources
Three
Months
Ended
(in millions) 1st Quarter 1st Quarter
1994 1993
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Cash provided by operations $ 2.6 $ 2.1
Cash provided by (used in) investing 0.5 (2.4)
activities
Cash used in financing activities (3.9) (1.7)
(in millions) 1st Quarter 4th Quarter
1994 1993
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Working capital $ 26.6 $ 33.6
Inventories 51.0 53.8
Debt obligations 65.2 69.0
Debt to equity ratio 2.6 to 1 2.8 to 1
The Company was able to fund the initial inventory and equipment
costs associated with the March 15, 1994, Computervision
Corporation agreement and reduce its outstanding debt by $ 3.8
million or 5.6% from January 2, 1994, to April 3, 1994. This was
achieved in part, by the collection of the proceeds from the sale
of Xeikon, N.V. investment and reductions in the Company's
inventory.
Working capital decreased $ 7.0 million to $ 26.6 million as of
April 3, 1994, as compared to January 2, 1994. This decrease is
attributable primarily to an increase in debt classified as
current for the portion of the annual sinking fund requirement in
excess of the 12.5 % Senior Subordinated Notes ("Notes") held in
treasury. The Company does not have any material commitments of
funds for capital expenditures other than to support the current
level of operations.
In February 1994, the Company retired $ 9.0 million principal
amount of its previously purchased Notes in fulfillment of its
annual sinking fund requirement. The Company intends to apply
the remaining $ 3.3 million of the Notes held in treasury toward
a portion of the 1995 sinking fund requirement. Pursuant to the
terms of the Notes, the Company is required to maintain a minimum
net worth of $ 22.8 million, without regard to foreign currency
translation adjustments, at the end of any two consecutive
quarters. Should the Company not be able to maintain the
required net worth or to make additional sinking fund payments
which would then be due, the Company would be subject to the
default provisions of the Notes which could result in
acceleration of amounts due under the Notes. In such
circumstance, the Company would seek negotiation with the holders
of the Notes to waive or reduce the net worth requirements.
While the Company is currently in compliance with this covenant
and expects to remain in compliance, there is no assurance that
the Company will be able to maintain the required net worth, make
any additional sinking fund payments, or be successful in
negotiations with the holders of the Notes to waive or reduce the
net worth requirement.
As of April 3, 1994, the Company had $ 19.2 million outstanding
and $ 9.8 million available for borrowing under its senior credit
facility. The senior credit facility's initial term expires on
September 23, 1994, but renews annually unless certain notice
provisions are exercised. The Lender has not informed the
Company that it intends to terminate the credit facility and is
currently negotiating a two-year fixed extension with the
Company. Because a final agreement has not been reached on such
extension, the Company has classified amounts due under the
credit facility as current. The Company is considering other
financing transactions to provide additional liquidity, including
credit lines collateralized by accounts receivable and inventory
of certain of its foreign subsidiaries. While management
believes it will be successful in negotiating an extension to its
current credit facility and obtaining other credit lines, it
cannot make any assurances that they will be successful in such
efforts.
The Company has maintained cash flow through strict controls over
working capital and discretionary spending. As discussed
previously, management initiated a number of programs to improve
the financial performance of the Company. Management has also
continued to strive for continued revenue growth by investing in
its strategic growth areas of ESSD, Laser Printer Solutions and
Supplies. Nevertheless, there is no assurance that the Company's
initiatives will continue to be successful or that sales volume
will not materially decline. Management believes that a material
decline in sales volume could have a material adverse impact on
its operations.
As described in further detail in the Company's 1993 Annual
Report, the Company is required to adopt SFAS No. 107
"Disclosures about Fair Value of Financial Instruments" on or
before fiscal year 1996, SFAS No. 114 "Accounting by Creditors
for Impairment of a Loan" on or before fiscal year 1995.
Management believes such standards will not have a material
effect on the Company's financial condition or results of
operations.
Part II. - OTHER INFORMATION
Item 1. Legal Proceedings:
Not applicable.
Item 2. Changes in Securities:
Not applicable.
Item. 3 Defaults Upon Senior Securities:
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
(a) The Company's annual meeting of stockholders was held on
April 27, 1994.
(c) At said annual meeting, stockholders reelected the
Company's four directors, amended the Company's Stock
Option Plan to increase the number of Common Stock
issuable under the Plan by 400,000 shares and approved the
appointment of Coopers & Lybrand as the Company's
independent accountants.
Directors
Director Votes for Withheld Broker Non-Votes
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Don E. Ackerman 7,463,943 92,391 1,529,805
Bruce K. Anderson 7,464,143 92,191 1,529,805
Edward E. Lucente 7,464,746 91,588 1,529,805
Paul T. Winn 7,463,958 92,376 1,529,805
Stock Option Plan
Abstentions or
Votes for Votes Broker Non-Votes
Against
7,339,236 210,246 1,536,656
Accountants
Abstentions or
Votes for Votes Broker Non-Votes
Against
7,507,496 12,555 1,566,087
Item 5. Other Information:
Not applicable.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
No exhibits were filed with this report.
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K on March 11, 1994,
which reported that it had published a press release that
announced that was unable to come to terms with the
prospective purchaser of the Company's Relay business
unit. A copy of the press release was included as
Exhibit 28.1 to the Form.
The Company filed a report on Form 8-K on March 15, 1994,
which reported that it had published a press release that
announced that it had signed a multi-year services
agreement with Computervision Corporation. A copy of the
press release was included as Exhibit 28.1 to the Form.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GENICOM Corporation
Registrant
Date: May 12, 1994
James C. Gale
Signature
James C. Gale
Senior Vice
President Finance
and Chief Financial
Officer
(Mr. Gale is the
Chief Financial
Officer and has been
duly authorized to
sign on behalf of
the Registrant)