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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1996
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 20151
(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. YesX No -
-- --
As of November 1, 1996, there were 10,975,039 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 - September 29, 1996 and
December 31, 1995 3
Consolidated Statements of Income - Three and Nine Months Ended
September 29, 1996 and October 1, 1995 4
Consolidated Statements of Cash Flows - Nine Months Ended
September 29, 1996 and October 1, 1995 5
Notes to Consolidated Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8 - 12
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 Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
Index to Exhibits E-1
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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 29, DECEMBER 31,
(In thousands, except share data) 1996 1995
--------------- --------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,969 $ 4,271
Accounts receivable, less allowance for
doubtful accounts of $2,334 and $1,616 53,422 53,572
Other receivables 3,149 3,767
Inventories 30,474 43,079
Prepaid expenses and other assets 2,252 1,432
--------------- --------------
TOTAL CURRENT ASSETS 103,266 106,121
Property, plant and equipment 26,602 30,896
Goodwill 18,914 21,632
Intangibles and other assets 8,830 2,890
--------------- --------------
$ 157,612 $ 161,539
=============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Debt maturing within one year $ 3,923 $ 7,865
Accounts payable and accrued expenses 47,706 52,115
Deferred income 12,325 11,611
--------------- --------------
TOTAL CURRENT LIABILITIES 63,954 71,591
Long-term debt, less current portion 47,013 44,474
Other non-current liabilities 12,498 10,941
--------------- --------------
TOTAL LIABILITIES 123,465 127,006
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 18,000,000 shares
authorized, 10,975,139 and 10,839,399 shares issued 110 108
Additional paid-in capital 26,173 26,023
Retained earnings 9,965 10,503
Foreign currency translation adjustment (1,331) (1,331)
Pension liability adjustment (770) (770)
--------------- --------------
TOTAL STOCKHOLDERS' EQUITY 34,147 34,533
--------------- --------------
$ 157,612 $ 161,539
=============== ==============
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, NINE MONTHS ENDED,
SEPTEMBER 29, OCTOBER 1, SEPTEMBER 29, OCTOBER 1,
(In thousands, except per share data) 1996 1995 1996 1995
-------------- ----------- -------------- ------------
REVENUES, NET:
Products $ 38,888 $ 41,462 $ 122,190 $ 123,497
Services 29,923 37,044 89,313 94,985
------------ ------------ ------------ ------------
68,811 78,506 211,503 218,482
------------ ------------ ------------ ------------
OPERATING COSTS AND EXPENSES:
Cost of revenues:
Products 26,089 27,887 84,727 83,804
Services 26,201 30,645 77,789 76,622
Selling, general and administration 14,534 13,738 39,821 39,111
Engineering, research and
product development 1,937 2,166 5,834 6,430
Gain on sale of investment in subsidiary (1,481)
Environmental costs 1,479 1,479
Restructuring costs 4,183 4,183
Acquisition related costs 1,204
------------ ------------ ------------ ------------
74,423 74,436 212,352 207,171
------------ ------------ ------------ ------------
OPERATING (LOSS) INCOME (5,612) 4,070 (849) 11,311
Interest expense, net 1,147 2,069 3,299 5,714
Other income (63) (153)
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE INCOME TAXES (6,696) 2,001 (3,995) 5,597
Income tax (benefit) expense (4,467) 298 (3,876) 1,034
------------ ------------ ------------ ------------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM (2,229) 1,703 (119) 4,563
EXTRAORDINARY ITEM - LOSS ON EXTINGUISHMENT
OF DEBT, NET OF $258 TAX (422)
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (2,229) $ 1,703 $ (541) $ 4,563
============ ============ ============ ============
(Loss) earnings per common share
and common share equivalent
(primary and fully diluted) $ (0.20) $ 0.14 $ (0.05) $ 0.38
============ ============ ============ ============
Weighted average number of common shares
and common share equivalents outstanding
Primary 10,968 12,212 10,918 11,977
============ ============ ============ ============
Fully diluted 10,968 12,212 10,918 11,992
============ ============ ============ ============
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)
NINE MONTHS ENDED,
SEPTEMBER 29, OCTOBER 1,
(In thousands) 1996 1995
--------------- -------------
Cash flows from operating activities:
Net (loss) income $ (541) $ 4,563
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 10,856 10,360
Amortization 2,505 3,292
Gain on sale of Genicom de Mexico (1,481)
Environmental accrual 1,479
Restructuring charge 4,183
Effect of acquisition related costs 1,204
Changes in assets and liabilities net of effects from acquisitions:
Accounts receivable 4,391 (7,989)
Inventories 14,310 (5,008)
Accounts payable and accrued expenses (13,290) (1,546)
Deferred income 714 (571)
Other (6,691) 1,984
--------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 16,435 6,289
--------------- -------------
Cash flows from investing activities:
Payment for purchase of businesses, net of cash acquired (9,793)
Sale of Genicom de Mexico 3,950
Additions to property, plant and equipment (8,811) (11,628)
Other (259) (208)
--------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (5,120) (21,629)
--------------- -------------
Cash flows from financing activities:
Borrowings from long-term debt 63,806 27,867
Payments on long-term debt (63,934) (12,297)
Financing costs and transactions (1,509)
--------------- -------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,637) 15,570
--------------- -------------
Effect of exchange rate changes on cash and cash equivalents 20 (369)
--------------- -------------
Net increase (decrease) in cash and cash equivalents 9,698 (139)
Cash and cash equivalents at beginning of period 4,271 673
--------------- -------------
Cash and cash equivalents at end of period $ 13,969 $ 534
=============== =============
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 September 29, 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 and nine months ended September 29, 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:
SEPTEMBER 29, DECEMBER 31,
1996 1995
============== =============
Raw Materials $ 1,378 $ 2,594
Work in process 2,989 4,899
Finished goods 26,107 23,327
Atlantic Design inventory 12,259
-------------- -------------
$ 30,474 $ 43,079
-------------- -------------
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 NINE MONTHS ENDED
=================== ===================
SEPT. 29, OCT. 1, SEPT. 29, OCT. 1,
1996 1995 1996 1995
========= ======= ========== =======
SHARES USED IN COMPUTATION:
Weighted average common shares outstanding 10,968 10,809 10,918 10,733
Shares applicable to stock options, net of shares
assumed to be purchased from proceeds at
average market price 1,403 1,244
--------- ------- -------- -------
Total shares for earnings per common share
and common share equivalent (primary) 10,968 12,212 10,918 11,977
Shares applicable to stock options in addition to
those used in primary computation due to the
use of period-end market price when higher
than average market price 15
--------- ------- -------- -------
Total fully diluted shares 10,968 12,212 10,918 11,992
========= ======= ======== =======
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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 No. 121 did not have a material effect on the
Company's financial condition or results of operations in 1996.
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 $422,000, net of tax of $258,000.
On September 30, 1996, the Company amended the credit facilities with
NationsBank. This amendment redefined the financial covenants, the
interest rates and the principal payments of the agreement.
6. Following the end of the quarter, as of September 30, 1996, the
Company acquired certain assets of Texas Instruments worldwide printer
and related supplies business for the purchase price of approximately
$27 million. The acquisition was financed primarily through the
Company's credit facility with NationsBank and a note to Texas
Instruments payable over two years.
During a scheduled transition period of approximately six months,
Texas Instruments will manufacture on behalf of the Company the
products relating to the business acquired. The Company has entered
into an interim agreement with Atlantic Design Company, with whom the
Company has an existing outsourcing manufacturing agreement, for the
performance of manufacturing oversight and other functions during this
period. In conjunction therewith, all manufacturing equipment
acquired by the Company from Texas Instruments was transferred to
Atlantic Design as of September 30, 1996. Under this interim
agreement, and unlike the Company's existing agreement with Atlantic
Design pursuant to which Atlantic Design owns all inventory until
transfer to the Company as finished goods, the Company will own all
inventory (raw materials, work in process and finished goods) during
this period. The Company is negotiating to expand its existing, five
year outsourcing agreement with Atlantic Design under which Atlantic
Design would be the primary manufacturer of all value-added Genicom
printer products, including those relating to the business acquired
from Texas Instruments.
The acquisition is being accounted for as a purchase and the
allocation of the purchase price and related acquisition costs is
subject to adjustment based upon refinements in the application of
purchase method accounting and the final determination of the purchase
price.
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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition:
RESULTS OF OPERATIONS
====================================================================================================================
THREE MONTHS ENDED NINE MONTHS ENDED
================================== ===================================
(in millions) 3RD QTR. 3RD QTR. 3RD QTR. 3RD QTR.
1996 CHANGE 1995 1996 CHANGE 1995
- --------------------------------------------------------------------------------------------------------------------
Revenues - Enterprising Service Solutions $ 29.9 $ (7.1) $ 37.0 $ 89.3 $ (5.7) $ 95.0
Revenues - Document Solutions 38.9 (2.6) 41.5 122.2 (1.3) 123.5
------- ---------- ------- ------- ---------- -------
Total Revenues $ 68.8 $ (9.7) $ 78.5 $211.5 $ (7.0) $218.5
------- ---------- ------- ------- ---------- -------
Percentage change (12.4)% (3.2)%
====================================================================================================================
Revenue in the third quarter of 1996 decreased 12.4% compared to the year-ago
quarter primarily due to a revenue fall off in Enterprising Service Solutions.
Enterprising Service Solutions ("ESS") revenue declined $7.1 million or 19.2%
in the third quarter of 1996. The Multivendor Service revenue increased $0.2
million as a result of significant new business that has been partially offset
by the decline in legacy business. Integrated Network Service revenue
decreased $7.4 million over last year's third quarter due to unique customer
opportunities the Company realized in Canada and with Nasdaq in 1995. During
the initial growth phase and due to large contract values and long selling
cycles associated with the Integrated Network Services, the Company anticipates
that Integrated Network Services revenue may grow at an uneven rate. The
Company is continuing to invest in the business directed at the fast growing
network management market.
Document Solutions ("DS") revenues during the third quarter of 1996 decreased
$2.6 million from the same period last year. Printer sales declined 10.0% due
to laser printer sales being 25.1% lower than the same period a year ago.
Impact printer sales declined 6.6% for the third quarter of 1996 as compared to
the third quarter of 1995. Supply and part sales decreased 6.0% from the third
quarter of 1995.
Relay revenues, which are included as part of Document Solutions, increased by
$0.6 million or 21.1% in the third quarter of 1996 as compared to the prior
year quarter.
Revenues for the first nine months of 1996 decreased $7.0 million from the same
period in 1995 primarily as a result of the decline in Integrated Network
Service revenue and printer revenue which was partially offset by increased
relay and multivendor service revenue. Revenues for Enterprising Service
Solutions decreased $5.7 million for the period. This decrease is primarily
related to the decline in Integrated Network Management revenues previously
discussed. Document Solutions revenues were 1.1% lower for the first nine
months of 1996 as compared to 1995. While printer revenues declined for both
laser and impact printers, parts and supplies revenues increased 5.2% partially
offsetting the decline in printer sales. Relay revenues increased 13.6%.
==========================================================================================================
(in millions) 3RD QUARTER 4TH QUARTER 3RD QUARTER
1996 1995 1995
- ----------------------------------------------------------------------------------------------------------
Order backlog $ 39.5 $ 47.5 $ 49.3
Change: 3rd Quarter of 1996 compared to
Amount (8.0) (9.8)
Percentage (16.8)% (19.9)%
==========================================================================================================
The decrease in order backlog from the 1995 fourth quarter and the third
quarter of 1996 primarily reflects selected declining legacy business within
ESS and the certain systems integration contracts that
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were completed in 1995. In addition, new service contracts represent potential
revenue versus firm commitments. The backlog reflects only fixed-price
contracts for all orders associated with relays, service, systems integration,
network monitoring and those orders for printers, spare parts and supplies for
which a delivery date within approximately six months has been specified by the
customer. 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 NINE MONTHS ENDED
================================= ================================
(in millions) 3RD QTR. 3RD QTR. 3RD QTR. 3RD QTR.
1996 CHANGE 1995 1996 CHANGE 1995
- ------------------------------------------------------------------------------------------------------------------------------
Gross margin - Enterprising Service Solutions $ 3.7 $ (2.7) $ 6.4 $ 11.5 $ (6.9) $ 18.4
Gross margin - Document Solutions 12.8 (0.7) 13.5 37.5 (2.2) 39.7
--------- ---------- --------- --------- -------- --------
Total gross margin 16.5 (3.4) 19.9 49.0 (9.1) 58.1
--------- ---------- --------- --------- -------- --------
As a % of revenue 24.0 % 25.4 % 23.2 % 26.6 %
==============================================================================================================================
Gross margin, as a percentage of revenue, decreased in the third quarter of
1996 as compared to the prior year quarter. This decrease is principally
attributable to the fixed costs associated with the Massachusetts depot which
has been affected by the decline in the legacy service business. The Company
is restructuring its service business to better align costs to revenue.
For the first nine months of 1996, gross margin also declined as a percentage
of revenue when compared to 1995 principally due to the effect of the declining
legacy service business, the consumption of inventory transferred to Atlantic
Design pursuant to the outsourcing agreement, and increased costs associated
with the extreme snow conditions which impacted the service depots in Virginia
and Massachusetts for a full week of production in January 1996.
===========================================================================================================================
THREE MONTHS ENDED NINE MONTHS ENDED
========================================= ===========================================
(in millions) 3RD QTR. 3RD QTR. 3RD QTR. 3RD QTR.
1996 CHANGE 1995 1996 CHANGE 1995
- ---------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling, general and
administrative $ 14.5 $ 0.8 $ 13.7 $ 39.8 $ 0.7 $ 39.1
Engineering, research and
product development 2.0 (0.2) 2.2 5.8 (0.6) 6.4
--------- ---------- --------- ---------- --------- ----------
Total $ 16.5 $ 0.6 $ 15.9 $ 45.6 $ 0.1 $ 45.5
As a % of revenue 24.0 % 20.3 % 21.6 % 20.8 %
===========================================================================================================================
Operating expenses increased in the third quarter of 1996 as compared to the
year-ago period, due to a number of factors including employee costs and the
outsourcing of the Company's MIS function. This outsourcing of the MIS
function is directed at a long-term plan to upgrade systems and technology
skills base which the Company believes is necessary for the Company to remain
competitive. In July 1996, the Company reached an agreement with Electronic
Data Systems ("EDS") to outsource its information systems and data processing
activities. Under the agreement, EDS will operate and service the Company's
systems as well as design, install and service new business systems and global
networks. The agreement is for a period of ten years. Operating expenses were
flat for year-to-date 1996 compared to the first nine months of 1995 primarily
due to the management's focus on cost controls partially offset by MIS expenses
and the Texas Instruments acquisition costs.
In addition, in the third quarter of 1996, following Board of Directors review,
the Company accrued $1.5 million associated with environmental charges and $4.2
million for restructuring the worldwide service business. The environmental
charge is the Company's best estimate at the present time of the
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remaining costs associated with certain environmental matters including
$617,000 for pond closure and monitoring for ten years at the Company's
Waynesboro, Virginia facility and $862,000 for litigation costs associated with
the Linn-Faysville Aquifer in Texas. The restructuring charge for the service
business involves among other things, costs to facilitate the establishment of
the Company's new "end of runway" depot service center in Louisville, Kentucky
and other changes in the delivery of services by the Enterprising Service
Solutions group.
======================================================================================================
THREE MONTHS ENDED NINE MONTHS ENDED
================================ ================================
(in millions) 3RD QTR. 3RD QTR. 3RD QTR. 3RD QTR.
1996 CHANGE 1995 1996 CHANGE 1995
- ------------------------------------------------------------------------------------------------------
Interest expense, net $ 1.1 $ (1.0) $ 2.1 $ 3.3 $ (2.4) $ 5.7
Percentage change (47.6)% (42.1)%
======================================================================================================
The decrease in interest expense in the third quarter of 1996 as compared to
the year-ago quarter and for the nine months ended 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.
=====================================================================================================
THREE MONTHS ENDED NINE MONTHS ENDED
================================== ======================================
(in millions) 3RD QTR. 3RD QTR. 3RD QTR. 3RD QTR.
1996 CHANGE 1995 1996 CHANGE 1995
- -----------------------------------------------------------------------------------------------------
Income tax expense $ (4.5) $ (4.8) $ 0.3 $ (3.9) $ (4.9) $ 1.0
Effective tax rate -66.7% 14.9% -97.0% 18.5%
======================================================================================================
The Company's effective income tax rate for the third quarter of 1996 was a
benefit of (66.7%) as compared to an expense of 14.9% for the year-ago period.
The tax rate for the nine months ended September 29, 1996 was a benefit of
(97.0%) as compared to an expense of 18.5% for the same period in 1995. In
1995, the rate was significantly affected by foreign income taxes and tax
credits and the utilization of net operating losses. In the third quarter of
1996, the Company took a tax benefit of $2.8 million associated with the
reversal of the deferred tax asset valuation allowance. Based on forecasts
including the expected positive effect of the Texas Instruments acquisition,
management estimates that these tax assets will be fully recoverable.
LIQUIDITY AND CAPITAL RESOURCES
==================================================================================================
NINE MONTHS ENDED
========================================
(in millions) 3RD QUARTER 3RD QUARTER
1996 1995
- --------------------------------------------------------------------------------------------------
Cash provided by operations $ 16.4 $ 6.3
Cash used in investing activities (5.1) (21.6)
Cash (used in) provided by financing activities (1.6) 15.6
==================================================================================================
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==================================================================================================
(in millions) 3RD QUARTER 4TH QUARTER
1996 1995
- --------------------------------------------------------------------------------------------------
Working capital $ 37.8 $ 34.5
Inventories 30.5 43.1
Debt obligations 50.9 52.4
Debt to equity ratio 1.5 to 1 1.5 to 1
==================================================================================================
The Company's working capital increased $3.3 million as of September 29, 1996
as compared to December 31, 1995 due primarily to the reduction in current
liabilities, as partially offset by a reduction in inventories. As of
September 29, 1996, the Company's current debt consists of payments due within
one year on its term notes with NationsBank and notes associated with the
purchase of Harris Adacom and Printer Systems in 1995. The acquisition of
Texas Instruments printer business was financed through facilities which did
not increase required debt payments in the year immediately following the
acquisition.
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%. In May 1996, the Company renegotiated the term of
the interest rate swap, decreasing the term from five to three years. As a
result of the term change, the Company received a payment of $530,000 resulting
in a gain which is being amortized to income over the remaining life of the
Company's term loans. On September 30, 1996, the Company amended the credit
facilities. This amendment redefined the financial covenants, adjusted the
interest rates as well as the principal payments of the agreement. As of
September 29, 1996, the Company had $15.0 million outstanding and $12.2 million
available for borrowing on the revolving credit facility and $34.8 million
outstanding in term loans.
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 senior subordinated notes. As part of the refinancing, the Company
recognized a loss on extinguishment of debt of $0.4 million net of tax.
At the end of June 1996, the Company sold the stock of its Mexican subsidiary,
whose principal asset was a building in Reynosa, Mexico, receiving net proceeds
of $3.5 million and recognizing a gain of $1.5 million.
Following the end of the quarter, as of September 30, 1996, the Company
acquired certain assets of Texas Instruments worldwide printer and related
supplies business for the purchase price of approximately $27 million. The
acquisition was financed primarily through the Company's credit facility with
NationsBank and a note to Texas Instruments payable over two years.
During a scheduled transition period of approximately six months, Texas
Instruments will manufacture on behalf of the Company the products relating to
the business acquired. The Company has entered into an interim agreement with
Atlantic Design Company, with whom the Company has an existing outsourcing
manufacturing agreement, for the performance of manufacturing oversight and
other functions during this period. In conjunction therewith, all
manufacturing equipment acquired by the Company from Texas Instruments was
transferred to Atlantic Design as of September 30, 1996. Under this interim
agreement, and unlike the Company's existing agreement with Atlantic Design
pursuant to which Atlantic Design owns all inventory until transfer to the
Company as finished goods, the Company will own all inventory (raw materials,
work in process and finished goods) during this period. The Company is
negotiating to
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expand its existing, five year outsourcing agreement with Atlantic Design under
which Atlantic Design would be the primary manufacturer of all value-added
Genicom printer products, including those relating to the business acquired
from Texas Instruments.
As a result of this acquisition, the Company anticipates that it will add
scale, products and customers to its existing printer business. The printer
business now includes Texas Instruments ticketing printer product line which is
directed at the transportation industry. In addition to the ticketing
printers, the Company acquired mid-range laser products, high-end serial
products and the supplies related to each respective product line. This
acquisition was driven by the Company's strategy of focusing on the mid-range
printer market.
The acquisition is being accounted for as a purchase and the allocation of the
purchase price and related acquisition costs is subject to adjustment based
upon refinements in the application of purchase method accounting and the final
determination of the purchase price.
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 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
changes in hardware and software technology, changing 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, the integration of acquisitions,
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:
Not applicable.
Item 5. Other Information:
Following the end of the quarter, as of September 30, 1996, the Company
acquired certain assets of Texas Instruments worldwide printer and related
supplies business for the purchase price of
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approximately $27 million. The acquisition was financed primarily through the
Company's credit facility with NationsBank and a note to Texas Instruments
payable over two years.
During a scheduled transition period of approximately six months, Texas
Instruments will manufacture on behalf of the Company the products relating to
the business acquired. The Company has entered into an interim agreement with
Atlantic Design Company, with whom the Company has an existing outsourcing
manufacturing agreement, for the performance of manufacturing oversight and
other functions during this period. In conjunction therewith, all
manufacturing equipment acquired by the Company from Texas Instruments was
transferred to Atlantic Design as of September 30, 1996. Under this interim
agreement, and unlike the Company's existing agreement with Atlantic Design
pursuant to which Atlantic Design owns all inventory until transfer to the
Company as finished goods, the Company will own all inventory (raw materials,
work in process and finished goods) during this period. The Company is
negotiating to expand its existing, five year outsourcing agreement with
Atlantic Design under which Atlantic Design would be the primary manufacturer
of all value-added Genicom printer products, including those relating to the
business acquired from Texas Instruments.
As a result of this acquisition, the Company anticipates that it will add
scale, products and customers to its existing printer business. The printer
business now includes Texas Instruments ticketing printer product line which is
directed at the transportation industry. In addition to the ticketing
printers, the Company acquired mid-range laser products, high-end serial
products and the supplies related to each respective product line. This
acquisition was driven by the Company's strategy of focusing on the mid-range
printer market.
The acquisition is being accounted for as a purchase and the allocation of the
purchase price and related acquisition costs is subject to adjustment based
upon refinements in the application of purchase method accounting and the final
determination of the purchase price.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
NUMBER DESCRIPTION
=========== =======================================================================
10.1 Credit Agreement dated as of January 12, 1996, Third Amendment to Credit
Agreement and Security Agreement
27.1 Financial Data Schedule
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K on October 15, 1996, which
reported the Company's acquisition of the Texas Instruments
printer business. A copy of the purchase agreement is included as
Exhibit 2.1 to the form.
PAGE 13
14
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: November 13, 1996
/s/ Harold L. McIlroy
===================================
Signature
Harold L. McIlroy
Vice President, Quality &
Customer Satisfaction, General Manager,
Operations
(Mr. McIlroy is a Corporate Vice
President and has been duly authorized
to sign on behalf of the Registrant)
PAGE 14
15
GENICOM CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 29, 1996
EXHIBIT
NUMBER DESCRIPTION PAGE
=========== ================================================================= =============================
10.1 Credit Agreement dated as of January 12, 1996, Third Amendment to E-2 - E-27
Credit Agreement and Security Agreement
27.1 Financial Data Schedule Filed only with EDGAR version
E - 1