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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 March 31, 1996
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
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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 offices) (Zip Code)
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 May 2, 1996, there were 10,927,799 shares of Common Stock of the
Registrant outstanding.
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FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996 and December 31, 1995 3
Consolidated Statements of Income - Three Months Ended
March 31, 1996 and April 2, 1995 4
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1996 and April 2, 1995 5
Notes to Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11-12
Signatures 13
Index to Exhibits E-1
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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31,
(In thousands, except share data) 1996 1995
================ ===============
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,737 $ 4,271
Accounts receivable, less allowance for
doubtful accounts of $1,739 and $1,616 52,479 53,572
Other receivables 3,130 3,767
Inventories 34,268 43,079
Prepaid expenses and other assets 1,746 1,432
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TOTAL CURRENT ASSETS 96,360 106,121
Property, plant and equipment 30,691 30,896
Goodwill 20,020 21,632
Intangibles and other assets 3,685 2,890
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$ 150,756 $ 161,539
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Debt maturing within one year $ 4,603 $ 7,865
Accounts payable and accrued expenses 47,156 52,115
Deferred income 12,545 11,611
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TOTAL CURRENT LIABILITIES 64,304 71,591
Long-term debt, less current portion 40,834 44,474
Other non-current liabilities 10,058 10,941
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TOTAL LIABILITIES 115,196 127,006
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 18,000,000 shares
authorized, 10,867,699 and 10,839,399 shares issued 109 108
Additional paid-in capital 26,053 26,023
Retained earnings 11,514 10,503
Foreign currency translation adjustment (1,346) (1,331)
Pension liability adjustment (770) (770)
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TOTAL STOCKHOLDERS' EQUITY 35,560 34,533
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$ 150,756 $ 161,539
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The accompanying notes are an integral part of these financial statements.
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GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
THREE MONTHS ENDED,
MARCH 31, APRIL 2,
(In thousands, except per share data) 1996 1995
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REVENUES, NET:
Products $ 42,596 $ 41,845
Services 30,957 26,289
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73,553 68,134
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OPERATING COSTS AND EXPENSES:
Cost of revenues:
Products 30,546 29,478
Services 25,700 20,241
Selling, general and administration 12,441 12,933
Engineering, research and
product development 1,931 1,965
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70,618 64,617
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OPERATING INCOME 2,935 3,517
Interest expense, net 1,152 1,758
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INCOME BEFORE INCOME TAXES 1,783 1,759
Income tax expense 362 458
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NET INCOME BEFORE EXTRAORDINARY ITEM 1,421 1,301
EXTRAORDINARY ITEM - LOSS ON EXTINGUISHEMENT
OF DEBT, NET OF $258 TAX (414)
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NET INCOME $ 1,007 $ 1,301
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Earnings per common share
and common share equivalent
(primary and fully diluted) $ 0.08 $ 0.11
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Weighted average number of common shares
and common share equivalents outstanding
Primary 12,279 11,624
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Fully diluted 12,295 11,624
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The accompanying notes are an integral part of these financial statements.
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GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED,
MARCH 31, APRIL 2,
(In thousands) 1996 1995
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Cash flows from operating activities:
Net income $ 1,007 $ 1,301
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 4,179 2,659
Amortization 915 987
Changes in assets and liabilities net of effects
from acquisitions:
Accounts receivable 1,730 (932)
Inventories 10,516 (1,948)
Accounts payable and accrued expenses (5,328) (891)
Deferred income 934 720
Other (2,146) 1,305
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NET CASH PROVIDED BY OPERATING ACTIVITIES 11,807 3,201
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Cash flows from investing activities:
Payment for purchase of businesses, net of cash acquired (5,030)
Additions to property, plant and equipment (3,847) (2,691)
Other (102) (158)
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NET CASH USED IN INVESTING ACTIVITIES (3,949) (7,879)
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Cash flows from financing activities:
Borrowings from long-term debt 49,091 10,833
Payments on long-term debt (54,718) (4,633)
Financing costs (1,789)
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NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (7,416) 6,200
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Effect of exchange rate changes on cash and cash equivalents 24 (185)
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Net increase in cash and cash equivalents 466 1,337
Cash and cash equivalents at beginning of period 4,271 673
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Cash and cash equivalents at end of period $ 4,737 $ 2,010
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The accompanying notes are an integral part of these financial statements
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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 March 31, 1996, 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 December 31, 1995 Annual Report. The results of operations
for the three months ended March 31, 1996, are not necessarily
indicative of the operating results to be expected for the full year.
Certain reclassifications have been made to the 1995 condensed
financial statements in order to conform to the 1996 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:
MARCH 31 DECEMBER 31,
1996 1995
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Raw Materials $ 1,802 $ 2,594
Work in process 3,624 4,899
Finished goods 24,569 23,327
Atlantic Design inventory 4,273 12,259
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$ 34,268 $ 43,079
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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.
THREE MONTHS ENDED
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MARCH 31, APRIL 2,
1996 1995
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Weighted average common shares
outstanding 10,858 10,657
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Dilutive common stock equivalents:
Options - Primary 1,421 967
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Shares outstanding - Primary 12,279 11,624
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Dilutive common stock equivalents:
Options - Fully diluted 1,477 967
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Shares outstanding - Fully diluted 12,335 11,624
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4. During the first quarter ended March 31, 1996 the Company adopted the
provisions of SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of". The
implementation of SFAS Nos. 121 did not have a material effect on the
Company's financial condition or results of operations.
5. On January 12, 1996, the Company reached an agreement with NationsBank
of Texas, N.A., as agent for a syndicate of banks, ("NationsBank") on
$75 million of credit facilities. The Company used this new credit
agreement with NationsBank to retire all the debt associated with its
former credit agreement with CIT and to retire all of the Company's
outstanding 12.5% Senior Subordinated Notes. As a result of the
retirement of this debt the Company recognized a loss on the
extinguishment of debt of $414,000, net of tax of $258,000.
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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition:
RESULTS OF OPERATIONS
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(In millions) 1ST QUARTER 1ST QUARTER
1996 CHANGE 1995
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Revenues-Enterprising Service Solutions $ 31.0 $ 4.7 $ 26.3
Revenues-Document Solutions 42.6 0.8 41.8
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Total Revenues $ 73.6 $ 5.5 $ 68.1
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Percentage change 8.1%
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Revenue in the first quarter of 1996 increased 8.0% compared to the year-ago
quarter primarily due to the revenue growth in Enterprising Service Solutions.
Enterprising Service Solutions ("ESS") revenue grew $4.7 million or 17.8% in
the first quarter of 1996. The Multivendor Service revenue increased $3.3
million, reflecting the acquisition of Harris Adacom Services in March 1995 and
new customers added since then. Integrated Network Service revenue increased
$1.3 million over last year's first quarter, also reflecting the Harris Adacom
acquisition. Revenue growth for Integrated Network Service was slower than
expected. As a result, the marketing approach for Integrated Network Service
has now been refocused to achieve increased coverage in the market by offering
the products to the indirect channels for resale to end user.
Document Solutions revenues during the first quarter of 1996 increased 1.6%
from the same period last year. Printer sales declined 5.8% due to impact
printer sales being 8.9% lower than the same period a year ago. Laser printer
sales, parts sales and supplies sales offset the decline of impact printer
sales with increases of 6.2%, 33.6% and 4.4%, respectively, compared to the
first quarter of 1995.
Relay revenues, which are included as part of Document Solutions, increased by
$0.1 million or 4.4% in the first quarter of 1996 as compared to the prior year
quarter.
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(in millions) 1ST QUARTER 4TH QUARTER 1ST QUARTER
1996 1995 1995
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Order backlog $ 45.5 $ 47.5 $ 49.7
Change: 1st Quarter of 1996 compared to
Amount (2.0) (4.2)
Percentage (4.2)% (8.5)%
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The decrease in order backlog from the 1995 fourth and first quarter primarily
reflects the end of life shipment of the 7170 product line and selected
declining legacy business within ESS. The Company's backlog as of any
particular date should not be the sole measurement used in determining sales
for any future period.
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(in millions) 1ST QUARTER 1ST QUARTER
1996 CHANGE 1995
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Gross margin - Enterprising Service Solutions $ 5.3 $ (0.7) $ 6.0
Gross margin - Document Solutions 12.1 (0.3) 12.4
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Total gross margin 17.4 (1.0) 18.4
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As a % revenue 23.6% 27.0%
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Gross margin, as a percentage of revenue, decreased in the first quarter of
1996 as compared to the prior year quarter. This decrease is primarily
attributable to the decapitalization of costs related to the reduction in
inventory levels and increased costs associated with the extreme snow
conditions which impacted the service depots in Virginia and Massachusetts for
a full week of production.
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(in millions) 1ST QUARTER 1ST QUARTER
1996 CHANGE 1995
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Operating expenses:
Selling, general and
administrative $ 12.4 $ (0.5) $ 12.9
Engineering, research and
product development 1.9 (0.1) 2.0
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Total $ 14.3 $ (0.6) $ 14.9
As a % of revenue 19.4% 21.9%
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Operating expenses decreased $0.6 million and as a percentage of sales in the
first quarter of 1996 as compared to the year-ago period, due primarily to
management's focus on controlling costs.
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(in millions) 1ST QUARTER 1ST QUARTER
1996 CHANGE 1995
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Interest expense, net $ 1.2 $ (0.6) $ 1.8
Percentage change (33.3)%
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The decrease in interest expense in the first quarter of 1996 as compared to
the year-ago quarter is primarily due to the Company's retirement of its
outstanding 12.5% senior subordinated notes in February 1996 and the
refinancing of the Company's credit facility through NationsBank of Texas,
N.A., as agent for a group of banks, in January 1996. The Company expects the
full impact of the refinancing on interest expense to be evident in the second
quarter of 1996.
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(in millions) 1ST QUARTER 1ST QUARTER
1996 CHANGE 1995
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Income tax expense $ 0.4 $ (0.1) $ 0.5
Effective tax rate 20.3% 26.0%
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The Company's effective income tax rate for the first quarter of 1996 was 20.3%
as compared to 26.0% for the year-ago period. In 1995, the rate was
significantly affected by foreign income taxes and the utilization of net
operating losses. In 1996, the rate was affected by the anticipated use of
certain tax credits as well as foreign net operating losses.
LIQUIDITY AND CAPITAL RESOURCES
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(in millions) 1ST QUARTER 1ST QUARTER
1996 1995
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Cash provided by operations $ 11.8 $ 3.2
Cash used in investing activities (3.9) (7.9)
Cash (used in) provided by financing activities (7.4) 6.2
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(in millions) 1ST QUARTER 4TH QUARTER
1996 1995
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Working capital $ 32.1 $ 34.5
Inventories 34.3 43.1
Debt obligations 45.4 52.4
Debt to equity ratio 1.3 to 1 1.5 to 1
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The Company's working capital decreased $2.4 million as of March 31, 1996 as
compared to December 31, 1995 due primarily to the reduction in inventory. The
reduction in inventory was partially offset by a reduction in accounts payable
and debt classified as current. The Company's current debt consists of
payments due within the next year on its term notes with NationsBank and notes
associated with the purchase of Harris Adacom and Printer Systems in 1995. In
the first quarter of 1996, the Company used cash generated by operations to
reduce its outstanding debt.
On January 12, 1996, the Company reached an agreement with NationsBank of
Texas, N.A., as agent for a syndicate of banks, ("NationsBank") on $75 million
of credit facilities. Under the agreement, NationsBank is providing a $35
million revolving credit facility and two term loans totaling $40 million. In
a separate transaction, the Company entered into an interest rate swap
arrangement with NationsBank which fixes the interest rate for five years on a
substantial portion of the debt. The fixed rate at the time of the agreement
was executed averaged 8.25%. As of March 31, 1996, the Company had $3.5
million outstanding and $25.3 million available for borrowing on the revolving
credit facility and $40 million outstanding in term loans. Of the four
coverage ratios the Company is required to meet quarterly as part of the
agreement, the Company fell short of meeting the Consolidated Fixed Charges
Coverage Ratio for the fiscal quarter ended March 31, 1996 due principally to
elevated capital expenditures. NationsBank waived the requirement for the
quarter.
The Company used the new credit agreement to retire all the debt associated
with its former credit agreement with CIT and to retire all of the Company's
outstanding Notes. As part of the refinancing, the Company recognized a loss
on extinguishment of debt of $0.4 million net of tax.
GENICOM provides an array of services and products addressing different niches
of the information processing industry, competing against a wide range of
companies from large multinationals to small
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domestic entrepreneurs. Except for the historical information contained
herein, the matters discussed in this 10Q include forward-looking statements
that involve a number of risks and uncertainties. There are certain important
factors and risks, including the change in hardware and software technology,
economic conditions in the North American and Western European markets, the
anticipation of growth of certain market segments and the positioning of the
Company's products and services in those segments, selective service customers
whose business is declining, seasonality in the buying cycles of certain of the
Company's customers, the timing of product announcements, the release of new or
enhanced products and services, the introduction of competitive products and
services by existing or new competitors, access to and development of product
rights and technologies, the management of growth, GENICOM's ability to retain
highly skilled technical, managerial and sales and marketing personnel,
possible litigation related to the Company's operations, including litigation
arising under various environmental laws, and the other risks detailed from
time to time in the Company's SEC reports, including reports on Form 10K, that
could cause results to differ materially from those anticipated by the
statements contained herein.
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 May 1,
1996.
(c) At said annual meeting, stockholders reelected the Company's three
directors and approved the appointment of Coopers & Lybrand L.L.P.
as the Company's independent accountants.
Directors
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Director Votes for Withheld Broker Non-Votes
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Don E. Ackerman 6,833,371 44,905 0
Edward E. Lucente 6,833,376 44,900 0
Paul T. Winn 6,726,425 151,851 0
Accountants
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Abstentions or
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Votes for Votes Against Broker Non-Votes
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6,863,834 2,856 11,586
Item 5. Other Information:
Not applicable.
Item 6. Exhibits and Reports on Form 8-K:
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(a) Exhibits
NUMBER DESCRIPTION
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27.1 Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K on January 12, 1996,
amended March 12, 1996, which reported that it had executed a
credit agreement with a syndicate led by NationsBank on $75
million in new credit facilities. A copy of the agreement was
included as Exhibit 10.1 to the Form.
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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 15, 1996
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)
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GENICOM CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
EXHIBIT
NUMBER DESCRIPTION PAGE
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27.1 Financial Data Schedule Filed only with
EDGAR version
E - 1