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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 27, 1999
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 0-16071
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CALCOMP TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-0888312
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
1 Centerpointe Drive, Suite 400, La Palma, California 90623
(Address of principal executive offices)
(714) 690-8330
(Registrant's telephone number, including area code)
2411 West La Palma Avenue, Anaheim, California 92801
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 Per Share
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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 twelve (12) months (or such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety (90) days. Yes [X] No [_]
The number of shares of Common Stock outstanding as of July 30, 1999: 47,120,650
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CALCOMP TECHNOLOGY, INC.
(In Process of Liquidation)
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Net Liabilities in Liquidation as of June 27, 1999
(Unaudited) and December 27, 1998 ............................................... 3
Unaudited Consolidated Statement of Changes in Net Liabilities in Liquidation
for the six months ended June 27, 1999 .......................................... 4
Notes to Unaudited Consolidated Financial Statements ............................. 5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations ...................................................................... 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ................................................................ 14
Item 2. Changes in Securities and Use of Proceeds ........................................ 14
Item 6. Exhibits and Reports on Form 8-K ................................................. 14
Signatures ................................................................................... 15
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CALCOMP TECHNOLOGY, INC.
(In Process of Liquidation)
CONSOLIDATED STATEMENTS OF NET LIABILITIES IN LIQUIDATION
(In thousands, except share and per share data)
June 27, December 27,
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ASSETS 1999 1998
------ ---- ----
(Unaudited)
Cash ............................................................... $ 8,825 $ 3,280
Accounts receivable ................................................ 579 7,775
Inventories ........................................................ 200 5,966
Prepaid expenses and other assets .................................. -- 1,033
Net assets held for sale ........................................... -- 1,430
Property, plant and equipment ...................................... 1,600 2,455
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Total assets ..................................................... 11,204 21,939
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LIABILITIES
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Accounts payable ................................................... 3,032 12,308
Commitment cancellation costs ...................................... 5,529 15,433
Accrued salaries and related expenditures .......................... 7,907 20,697
Administrative expenses during liquidation period .................. 13,157 21,647
Secured demand loan with Lockheed Martin ........................... 22,581 --
Other liabilities .................................................. 23,998 16,854
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Total liabilities ................................................ 76,204 86,939
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Net liabilities in liquidation ..................................... $ (65,000) $ (65,000)
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Contingencies (Note 2)
Number of common shares outstanding ................................ 47,120,650 47,120,650
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Net liabilities in liquidation per share ........................... $ (1.38) $ (1.38)
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See accompanying notes to unaudited consolidated financial statements.
3
CALCOMP TECHNOLOGY, INC.
(In Process of Liquidation)
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION
For the Six Months Ended June 27, 1999
(In thousands)
Net liabilities in liquidation, December 27, 1998 ......................................... $(65,000)
Net changes in estimated fair values and settlement amounts for assets and liabilities .... --
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Net liabilities in liquidation, June 27, 1999 ........................................... . $(65,000)
========
See accompanying notes to unaudited consolidated financial statements.
4
CALCOMP TECHNOLOGY, INC.
(In Process of Liquidation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Background and Summary of Significant Developments
The Company was a supplier of both input and output computer graphics
peripheral products consisting of (i) printers (including plotters), (ii)
cutters, (iii) digitizers and (iv) large format scanners. In general, the
Company's products were designed for use in computer aided design and
manufacturing ("CAD/CAM"), printing and publishing and graphic arts markets,
both domestically and internationally. The Company also maintained service,
product support and technical assistance programs for its customers and sold
software, supplies and after-warranty service.
In recent years, the Company had begun transitioning its traditional pen,
electrostatic and most thermal technology products to inkjet plotters and
printers. Generally, inkjet technology products provide increased user
productivity compared to traditional pen plotters and solid area fill capability
for applications requiring graphic imaging. By the end of 1997, the Company had
substantially completed its strategy to discontinue its non-inkjet printer and
plotter products.
In the fourth quarter of 1997, the Company completed the development of a
new line of wide-format digital printers which was marketed under the
"CrystalJet(TM)" name and targeted at the graphic arts industry. Although volume
shipments to customers of CrystalJet products commenced in the second quarter of
1998 and increased during the remainder of the fiscal year, the projected
profitability of the CrystalJet products was dependent on achieving greater
production volumes and wider market acceptance than could reasonably be
anticipated to occur in the near term and would have required substantial
infusions of new capital which the Company was unable to obtain. The Company
believes that production delays, technical difficulties in the manufacturing
processes and a failure to gain timely market acceptance resulted in continuing
operating losses and negative cash flow, which materially and adversely affected
the Company's business plan for the CrystalJet technology and, in significant
part, resulted in the Company's liquidity crisis discussed further below.
In a letter dated December 23, 1998, Lockheed Martin Corporation ("Lockheed
Martin") notified the Company that it would not increase the Company's credit
availability, needed to fund the Company's operations, beyond the $43 million
then available under the Company's Revolving Credit Agreement and related Cash
Management Agreement (collectively, the "Credit Agreements") with Lockheed
Martin. At such date, the Company anticipated that, to fund operating
requirements, it would require the $4.9 million remaining under the Credit
Agreements in January 1999. On December 28, 1998, the Company indicated its
intent to accept Lockheed Martin's proposal to fund a non-bankruptcy orderly
shut-down of the Company's operations in accordance with a plan to be proposed
by the Company. On January 14, 1999, the Company's directors approved and
submitted the Company's plan ("Plan for Orderly Shutdown") to Lockheed Martin
for its review. As a result of this liquidity crisis and after considering its
lack of strategic alternatives, in particular, given the Company's inability to
obtain funding from sources other than Lockheed Martin, on January 15, 1999, the
Company announced that it would commence an orderly shutdown of its operations.
Under the Plan for Orderly Shutdown, the Company completed a Secured Demand Loan
Facility ("Secured Demand Loan") with Lockheed Martin, pursuant to which
Lockheed Martin agreed to provide, subject to the terms and conditions set forth
in such facility, funding to the Company in addition
5
CALCOMP TECHNOLOGY, INC.
(In Process of Liquidation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
to the $43 million available under the Credit Agreements. The purpose of the
Secured Demand Loan was to provide funds to assist the Company in the non-
bankruptcy shutdown of its operations pursuant to the Plan for Orderly Shutdown.
In addition, Lockheed Martin agreed to forebear from exercising its rights and
remedies to collect amounts outstanding under the Credit Agreements until the
Secured Demand Loan was terminated.
The Secured Demand Loan provided for Lockheed Martin to make loans to the
Company from time to time up to an aggregate maximum available amount (the
"Maximum Available Amount"), specified by Lockheed Martin, which could have
been increased by Lockheed Martin, in its sole and absolute discretion, upon
requests for borrowing that were in conformity with the cash requirements set
forth in the Plan for Orderly Shutdown. The Maximum Available Amount was subject
to a ceiling ("Maximum Available Amount Ceiling") of $51 million, an amount
based on the Company's initial estimate of loan proceeds needed to fully fund
the Plan for Orderly Shutdown. The Maximum Available Amount, initially, was set
at $11 million and subsequently increased to $28.9 million. Lockheed Martin had
the right to accept or reject, in whole or in part, any request for borrowing
based on its determination, in its sole discretion, as to whether the Company
was complying with, or making reasonable progress with respect to, the Plan for
Orderly Shutdown. Loans under the Secured Demand Loan were to be repaid not
later than August 6, 1999. Under the accompanying Security Agreement, the
Company granted to Lockheed Martin a security interest in all of the assets of
the Company and its principal domestic subsidiaries to secure the obligations
owing to Lockheed Martin under the Secured Demand Loan. The Secured Demand Loan
also provided for certain other obligations of the Company, including covenants
of the Company with respect to periodic notices, reports and forecasts relating
to the Plan for Orderly Shutdown.
The Secured Demand Loan also required the Company to retain an independent
third-party liquidation specialist acceptable to Lockheed Martin to review,
validate and, to the extent deemed necessary by Lockheed Martin in its sole and
absolute discretion, implement the Plan for Orderly Shutdown. In March 1999,
Brincko Associates, Inc. was retained by the Company as the liquidation
specialist approved by Lockheed Martin, and Mr. John P. Brincko was appointed
the Chief Executive Officer of the Company. After his appointment, the Company
conducted an updated and more detailed analysis of the amount of funds needed to
fund the Plan for Orderly Shutdown, and revised its estimate of funding needed
to approximately $65 million.
Since the announcement of the Plan for Orderly Shutdown, the Company ceased
all manufacturing, sales and marketing activities and scaled back staffing to a
level designed to allow the Company to sell or liquidate its assets in a manner
that takes into account the interests of the Company's stockholders, creditors,
employees, customers and suppliers. The Company has now consummated sales of
substantially all of its non-Crystaljet assets and has begun the sale of its
Crystaljet assets. Additionally, pursuant to the Plan for Orderly Shutdown, the
Company issued notices to its domestic employees under the Worker Adjustment and
Retraining Notification Act (W.A.R.N.) and, as of July 23, 1999, has terminated
501 employees, or 97% of the Company's domestic workforce. Non-U.S. employees
have also been terminated or notified of their scheduled termination under
applicable foreign laws. A small administrative team will continue the wind up
of the Company's operations and finalize the liquidation and dissolution of the
Company. The Company's ability to make payments on any agreed settlement amounts
will depend on receiving sufficient cash from the sale of its remaining assets
and securing additional funding for the Plan for Orderly Shutdown.
6
CALCOMP TECHNOLOGY, INC.
(In Process of Liquidation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
On April 29, 1999, the Company's Board of Directors (a) authorized the
merger with and into CalComp Technology, Inc. of all the Company's subsidiaries
organized under the laws of any state of the United States and (b) approved and
adopted the Plan of Complete Liquidation and Dissolution (the "Plan of
Liquidation and Dissolution"). Lockheed Martin, as holder of a majority of the
outstanding shares of common stock and holder of all of the outstanding shares
of preferred stock, executed a written consent on May 12, 1999 approving the
Plan of Liquidation and Dissolution. The merger of the Company's domestic
subsidiaries into the Company was consummated on August 2, 1999. In addition, on
August 6, 1999, pursuant to the Plan of Liquidation and Dissolution, the Company
filed a Certificate of Dissolution with the Delaware Secretary of State.
Subsequent to the filing of the Certificate of Dissolution, the Company's stock
transfer books were closed. As a result, the Company's common and preferred
stock are no longer treated as outstanding. Based on the anticipated value of
the Company's remaining assets and the amounts owed to creditors of the Company,
the Company does not believe it will have any funds or assets remaining to make
distributions to either preferred or common stockholders. Therefore, it is
highly unlikely that any distributions will be made to stockholders.
On August 6, 1999, the Secured Demand Loan terminated in accordance with
its terms. As of that date, approximately $28.9 million was payable and no
additional amounts could be borrowed under the Secured Demand Loan. However,
effective the same date, the Company and Lockheed Martin entered into a
Subordinated Loan Agreement (the "Loan Agreement") under which Lockheed Martin
agreed to make loans to the Company to fund administrative expenses incurred in
connection with the Plan for Orderly Shutdown in an aggregate principal amount
of up to $5.0 million at any time prior to the Loan Agreement's termination. In
connection with the Loan Agreement, Lockheed Martin agreed, pursuant to a
letter agreement dated August 6, 1999, to forebear from pursuing its rights and
remedies to collect amounts outstanding under the Credit Agreements and the
Secured Demand Loan until the earlier of August 6, 2002 and the date on which
Lockheed Martin notifies the Company of termination which notice may be
delivered by Lockheed Martin in its sole and absolute discretion.
The Company's latest estimate of funding needed to complete the Plan for
Orderly Shutdown and the Plan of Liquidation and Dissolution indicates estimated
net liabilities in liquidation to be $31.1 million in excess of the amount
currently outstanding under the Secured Demand Loan and the maximum amount
available under the Loan Agreement. There can be no assurance that the Company
will be able to settle with its creditors at amounts estimated in the Plan for
Orderly Shutdown, that estimated cash inflows from sales of remaining assets
will occur or that actual net cash funding requirements will not exceed current
estimates for other reasons. Accordingly, there is substantial uncertainty as to
whether the Company will be able to complete the Plan for Orderly Shutdown as
currently contemplated. If the Company is unable to obtain sufficient funds to
complete the Plan for Orderly Shutdown from asset sales proceeds and the Loan
Agreement or it is unable to reach acceptable settlements with all of its
creditors, the Company may be forced to seek protection from creditors under
Federal Bankruptcy law or may become subject to an involuntary bankruptcy
proceeding. In the event of a bankruptcy or insolvency proceeding, claims of
secured creditors, such as Lockheed Martin, may not be able to be repaid in full
and unsecured creditors may receive little, if anything, for their claims. In
any circumstance, it is highly unlikely the holders of the Company's preferred
and common stock will receive any distributions of funds or assets, and neither
the Plan for Orderly Shutdown nor the Plan of Liquidation and Dissolution
contemplates any such distributions.
On January 27, 1999, the Company's Common Stock was delisted from the
Nasdaq National Market System due to the Company's failure to maintain certain
listing requirements, and continued to trade on the over-the-counter bulletin
board market maintained by Nasdaq until August 6, 1999, the date of the filing
of the Certificate of Dissolution with the Delaware Secretary of State.
7
CALCOMP TECHNOLOGY, INC.
(In Process of Liquidation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Liquidation Basis of Accounting
As a result of the Board of Directors approving the Plan for Orderly
Shutdown, the accompanying consolidated financial statements have been presented
based on the liquidation basis of accounting to provide more relevant
information.
The liquidation basis of accounting requires that assets and liabilities be
stated at estimated fair value. Accordingly, the statements of net liabilities
in liquidation reflects assets and liabilities based on their estimated fair
values and estimated settlement amounts. Changes in the estimated liquidation
value of assets and liabilities are recognized in the period in which such
refinements are known.
The Company established the carrying values for its assets and liabilities
as reflected in the consolidated statement of net liabilities in liquidation as
of December 27, 1998, using estimates of the fair values of assets and
settlement amounts of liabilities developed in March 1999 giving consideration
to all information available at that time. The Company believes there is
insufficient additional information presently available to determine whether a
change to its estimate of the deficiency in the fair value of its assets as
compared to the estimated settlement amounts for its liabilities is necessary.
Accordingly, no refinement to this estimate was made in preparing the
consolidated statement of net liabilities in liquidation as of June 27, 1999.
Organization and Basis of Presentation
The consolidated financial statements included herein have been prepared by
the Company, without audit, and include all adjustments which, in the opinion of
management, are necessary for a fair presentation of the consolidated net
liabilities in liquidation as of June 27, 1999. Certain information and footnote
disclosures normally included in financial statements prepared on the
liquidation basis of accounting have been condensed or omitted in accordance
with principles for interim period financial reporting on Form 10-Q, although
the Company believes the disclosures in these financial statements are adequate
to make the information presented not misleading. These condensed financial
statements should be read in conjunction with the Company's consolidated
financial statements and notes thereto included in the Company's Annual Report
filed with the Securities Exchange Commission on Form 10-K for the year ended
December 27, 1998.
The Company is an 86.7% owned subsidiary of Lockheed Martin. The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles under the liquidation basis of accounting
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Significant
estimates have been made relative to the valuation of all assets and liabilities
of the Company, including, among others, estimates for warranties and settlement
of litigation and long-term lease commitments. Such estimates have been
developed pursuant to the provisions of the Plan for Orderly Shutdown. Actual
results may differ from amounts estimated.
8
CALCOMP TECHNOLOGY, INC.
(In Process of Liquidation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. CONTINGENCIES
Legal
Xaar. On July 8, 1998, Xaar Technology Limited ("Xaar") filed suit (the "U.S.
----
Action") in the U.S. District Court for the Northern District of California
against the Company and two of its wholly-owned subsidiaires, CalComp Inc. and
Topaz Technologies Inc. ("Topaz" and collectively the "Defendants"), alleging
that the Defendants' manufacture and sale of CrystalJet piezoelectric inkjet
printheads infringed Xaar's U.S. Pat. Nos. 4,879,568 and 5,003,679 which cover
certain pulsed droplet deposition apparatus and certain processes for
manufacturing pulsed droplet deposition apparatus. Xaar sought preliminary and
permanent injunctive relief against the alleged infringement of the Xaar
patents, increased damages for willful infringement of those patents, interest
and award of its attorneys' fees and costs. On April 20, 1999, the complaint was
amended to add Lockheed Martin as a party.
In a separate action, on July 6, 1998, Xaar filed suit (the "English Action")
in the English High Court of Justice ("High Court") alleging that the Defendants
and CalComp Ltd., a U.K. subsidiary of CalComp Inc., infringed or caused,
enabled, or assisted others to infringe, European patent (UK) number EP 0 277
703 ("703 Patent"), which covers certain pulsed droplet deposition apparatus and
certain processes for manufacturing pulsed droplet deposition apparatus, as a
result of sales of the Company's CrystalJet printers in the U.K. Xaar sought an
injunction and damages or profits resulting from the alleged infringement and,
among other things, interest and an award of its costs. In the English Action,
the Company counterclaimed for an order revoking the `703 Patent. On September
7, 1998, the Company, CalComp Inc. and CalComp Ltd. (collectively, the "CalComp
Parties"), filed an action (the "English Petition") in the High Court to revoke
Xaar's European Patent (UK) number EP 0 278 590 which also covers certain pulsed
droplet deposition apparatus and certain processes for manufacturing pulsed
droplet deposition apparatus and which involves technology similar to that in
the `703 Patent.
Pursuant to a Settlement Agreement dated June 29, 1999, by and among the
CalComp Parties, Topaz, Lockheed Martin and Xaar, the CalComp Parties
collectively paid an undisclosed amount to Xaar, and the U.S. Action, the
English Action and the English Petition were dismissed with prejudice. The
Settlement Agreement also expressly provides that it covers only liability for
past claims, which were based on events that took place prior to June 29, 1999.
Texas Lease. In March 1999, QRS 10-12 (TX), Inc. and QRS 11-5 (TX), Inc., the
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landlords under the lease for the Company's former Austin, Texas facility
(collectively, "Landlord"), filed suit against the Company in the U.S. District
Court for the Southern District Court of New York (the "New York Action")
claiming damages equal to the present value of rent due for the remaining term
of the lease based on an accelerated damages clause. The Company had ceased
paying rent in January 1999. The Company moved to dismiss for lack of personal
jurisdiction or alternatively to transfer venue of the case to Texas, but the
motion was denied.
9
CALCOMP TECHNOLOGY, INC.
(In Process of Liquidation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In a separate action, on April 30, 1999, the Landlord filed suit against the
Company in the Court of Chancery of the State of Delaware (the "Delaware
Action") claiming damages under the terms of the lease; claiming compensatory
and punitive damages from the Company for an alleged breach of fiduciary duty to
creditors; and requesting that the court void alleged fraudulent transfers of
assets since October 1, 1998, require the Company to provide a complete
accounting, and provide such additional relief as the court may determine. In
addition, under the Delaware Action, the Landlord sought an expedited hearing on
its claims, and injunctive relief to enjoin the Company and its subsidiaries
from paying any debt to any creditor and to require the Company to place in
escrow to be held by the court all proceeds obtained from sales of its assets.
On May 12, 1999, the Landlord's motion for an expedited hearing was denied.
On August 5, 1999, the Company, the Landlord and W.P. Carey & Company, Inc., a
New York corporation and the parent corporation of the Landlord entered into a
Settlement Agreement. Under the terms of the Settlement Agreement, the Company
paid $2.5 million to the Landlord, and the New York Action and the Delaware
Action were dismissed with prejudice.
Kodak Litigation. On May 13, 1999, Eastman Kodak Company ("Kodak") filed suit
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against the Company and Lockheed Martin (collectively, the "Defendants") in the
Orange County Superior Court of the State of California claiming (i)
compensatory damages as a result of the Defendants' alleged breaches of a joint
development agreement between the Company and Kodak (the "Joint Development
Agreement") and the covenant of good faith and fair dealing, and the Defendants'
alleged negligent misrepresentation; (ii) compensatory and exemplary damages as
a result of the Defendants' alleged fraud in inducing Kodak to believe that
Lockheed Martin would support the Company and that the Company would remain a
viable entity throughout the term of the Joint Development Agreement; and (iii)
compensatory and exemplary damages as a result of Lockheed Martin's alleged
intentional interference with the contract between the Company and Kodak. In
each cause of action, Kodak is seeking compensatory damages in excess of $22
million. In addition, Kodak requests that (a) it be awarded a constructive trust
over the $22 million in funds it contributed to the project and any property
acquired therefrom; (b) the Defendants be required to provide an accounting of
all funds provided to and expended by the Defendants with respect to the
project; and (c) the court adjudge and declare the respective rights and duties
of the parties under the Joint Development Agreement. The Company intends to
defend itself vigorously. The Company has filed its answer to Kodak's complaint,
and it has filed a cross-complaint against Kodak relating to failure to make $5
million in milestone payments to the Company pursuant to the Joint Development
Agreement. The Company's cross-complaint contains causes of action for breach of
contract, breach of the implied covenant of good faith and fair dealing and
breach of fiduciary duty. The parties have recently commenced discovery.
The Company is also party to other legal actions arising from its Plan for
Orderly Shutdown. The Company believes that any such claims in material amounts
are without merit.
The Company does not believe that the disposition of any of these matters will
have a material adverse effect on its net liabilities in liquidation, nor will
the results of any lawsuits affect the Company's determination to proceed with
the Plan for Orderly Shutdown or the Plan of Liquidation and Dissolution.
10
CALCOMP TECHNOLOGY, INC.
(In Process of Liquidation)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Environmental Matters
In connection with the June 1997 sale of the Company's headquarters facility
in Anaheim, California, the Company agreed to remain obligated to address
certain environmental conditions which existed at the site prior to the closing
of the sale. In addition, Lockheed Martin has guaranteed the performance of the
Company under this environmental agreement.
In 1988, the Company submitted a plan to the California Regional Water Quality
Control Board ("the Water Board") relating to its facility in Anaheim,
California. This plan contemplated site assessment and monitoring of soil and
ground water contamination. In 1997, the Company, at the request of the Water
Board, submitted work plans to conduct off-site water investigations and on-site
soil remediation. In 1998, CalComp conducted an extensive aquifer
characterization and off-site plume delineation investigation. Afterwards, the
Board approved CalComp's work plans for Off-Site Plume Delineation and Source
Area Remediation. The Company has included in other liabilities, expenditures
which it considers to be adequate to cover the cost of investigations and tests
required by the Water Board, any additional remediation that may be requested
and potential costs of continued monitoring of soil and groundwater
contamination, if required.
The Company believes that it has adequately projected any future expenditures
in connection with environmental matters and does not believe that the
disposition of any of these matters will have a material adverse effect on its
net liabilities in liquidation, nor will any such expenditures affect the
Company's determination to proceed with the Plan for Orderly Shutdown or the
Plan of Liquidation and Dissolution.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Report on Form 10-Q contains statements which, to the extent that they
are not recitations of historical facts, constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All
forward looking statements involve risks and uncertainties. The forward looking
statements in this Report on Form 10-Q have been made subject to the safe harbor
protections provided by Sections 27A and 21E.
Liquidity and Capital Resources
On January 14, 1999, the Board of Directors approved a Plan for Orderly
Shutdown which has been substantially completed. On April 29, 1999, the
Company's Board of Directors approved the Plan of Liquidation and Dissolution.
For further information see "Note 1. Summary of Significant Accounting
Policies--Background and Summary of Significant Developments" of the Notes to
Unaudited Consolidated Financial Statements in Part I which is incorporated
herein by reference.
During the six months ended June 27, 1999, the Company's sources of cash
consisted primarily of proceeds from the sale of its assets of $23.1 million,
proceeds from the Secured Demand Loan with Lockheed Martin of $22.6 million and
collections from trade accounts receivable of $18.3 million.
The Company's uses of cash during the six months ended June 27, 1999,
consisted primarily of salaries and related benefits of $27.0 million,
administrative expenses during the liquidation period of $23.5 million, and
commitment cancellation costs related to open purchase orders as of January 14,
1999, of $8.9 million.
Pursuant to the Plan for Orderly Shutdown, the Company has to date consummated
sales of substantially all of its non-Crystaljet assets including, but not
limited to, those sales described as follows: On February 1, 1999, the Company,
through certain domestic and foreign subsidiaries, sold substantially all of the
assets relating to its input device business to GTCO Corporation ("GTCO") for an
aggregate of $6,500,000 in cash and the assumption by GTCO of certain
liabilities relating to the input device business. On February 19, 1999, the
Company sold its cutter business to WestComp Incorporated ("WestComp") for
$600,000 in cash and the assumption by WestComp of certain liabilities relating
to the cutter business. The asset sale to WestComp principally included the
shares of CalComp Display Products N.V., a Belgian company and an indirect
subsidiary of the Company, and the cutter related products held as inventory by
the other subsidiaries of the Company. In connection with the sale, CalComp
Technology Europe N.V. sold the principal facility of the cutter business,
located in Gistel, Belgium, to an affiliate of WestComp at a purchase price of
$924,000 on March 31, 1999. On March 24, 1999, the Company sold its non-
CrystalJet consumables business (excluding the territories of Europe and Africa)
to Budde International, Inc. for a purchase price of $833,000 in cash. On April
30, 1999, the Company sold the European and African supplies business to CalComp
European Supplies Limited, a subsidiary of RES Holdings Limited, for a purchase
price of $1,089,000 in cash. On April 1, 1999, the Company sold the assets and
liabilities relating to its worldwide parts distribution business and its North
American service business to CalGraph Technology Services, Inc., a wholly-owned
subsidiary of Tekgraf Inc., for a purchase price of $400,000 in cash. On May 31,
1999, the Company sold all of its shares of Common Stock in NS CalComp
Corporation to Oce N.V. for the net adjusted purchase price of $6,180,000 in
cash.
No assurances can be given that the proceeds from the remaining asset sales
and the funding from Lockheed Martin under the Loan Agreement will allow the
Company to successfully complete the Plan for Orderly Shutdown and the Plan of
Liquidation and Dissolution, in which case the Company may be forced to seek
protection from its creditors under Federal Bankruptcy law or may become the
subject of an involuntary bankruptcy proceeding.
12
The Company believes that even if the Plan for Orderly Shutdown and the Plan
of Liquidation and Dissolution are successfully completed, it is highly unlikely
that there will be any funds or assets available for distribution to its
preferred or common stockholders, and neither the Plan for Orderly Shutdown nor
the Plan of Liquidation and Dissolution contemplates any such distributions.
Assets and Liabilities following the Adoption of the Plan for Orderly Shutdown
As a result of the Board of Directors approving the Plan for Orderly Shutdown,
the Company adopted the liquidation basis of accounting which requires assets
and liabilities to be stated at estimated fair value. Accordingly, the
consolidated statements of net liabilities in liquidation reflect assets and
liabilities based on their estimated fair values and estimated settlement
amounts. Changes in the estimated liquidation value of assets and liabilities
are recognized in the period in which such refinements are known.
The Company established the carrying values for its assets and liabilities as
reflected in the consolidated statement of net liabilities in liquidation as of
December 27, 1998, using estimates of the fair values of assets and settlement
amounts of liabilities developed in March 1999 giving consideration to all
information available at that time. The Company believes there is insufficient
additional information presently available to determine whether a change to its
estimate of the deficiency in the fair value of its assets as compared to the
estimated settlement amounts for its liabilities is necessary. Accordingly, no
refinement to this estimate was made in preparing the consolidated statement of
net liabilities in liquidation as of June 27, 1999.
Year 2000 Compliance
Many existing computer systems and applications, and other control devices,
use only two digits to identify a year in the date field, without considering
the impact of the upcoming change in the century. Others do not correctly
process "leap year" dates. As a result, such systems and applications could
fail or create erroneous results unless corrected to process data related to the
year 2000 and beyond. The problems are expected to increase in frequency and
severity as the year 2000 approaches, and are commonly referred to as the "Year
2000 Problem." The Company intends to complete an orderly shutdown of its
operations before the end of calendar year 1999; therefore, no additional
funding will be expended on the assessment process. Year 2000 issues are not
expected to impact the shutdown of Company operations.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For a discussion of legal proceedings, see "Note 2. Contingencies - Legal" of
the Notes to Unaudited Consolidated Financial Statements in Part I, which is
incorporated herein by reference.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On August 6, 1999, pursuant to the Plan of Liquidation and Dissolution adopted
by the Company's Board of Directors and approved by the Company's majority
stockholder, the Company filed a Certificate of Dissolution with the Secretary
of State of the State of Delaware. Subequent to the filing of the Certificate
of Dissolution, the Company's stock transfer books were closed. As a result,
the Company's common and preferred stock are no longer treated as outstanding.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits--The Following Exhibits Are Included Herein:
10.36 Plan of Complete Liquidation and Dissolution of CalComp Technology, Inc.
10.37 Share and Purchase Agreement by and among Oce N.V., CalComp Pacific, Inc. and Nippon Steel Corporation
10.38 Subordinated Loan Agreement dated August 6, 1999 between the Company and Lockheed Martin Corporation
10.39 Letter agreement dated August 6, 1999 between the Company and Lockheed Martin Corporation regarding
the Secured Demand Loan Facility dated January 14, 1999 and amended July 15, 1999 and the Security
Agreement dated January 14, 1999
27 Financial Data Schedule
(b) Reports on Form 8-K
Reports on Form 8-K filed by the Company during the Company's fiscal
quarter ended June 27, 1999 were as follows:
Form 8-K/A dated February 1, 1999, filed on April 19, 1999, reporting under
Item 7 information related to the Company's sale of the operating assets of
its input device business to GTCO Corporation ("GTCO"), a Maryland corporation
and the assumption by GTCO of certain of the liabilities relating to the input
device business.
Form 8-K dated May 31, 1999, filed on May 31, 1999, reporting under Item 2
the sale of the Company's shares in NS CalComp Corporation, a Japanese
corporation to Oce N.V., a Dutch corporation.
14
CALCOMP TECHNOLOGY, INC.
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.
CALCOMP TECHNOLOGY, INC.
(Registrant)
Date: August 11, 1999
/s/ JOHN P. BRINCKO
John P. Brincko
Chief Executive Officer
(Principal Financial Officer)
15