SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 30, 1994
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 number 1-9348
QMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 63-0737870
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
ONE MAGNUM PASS, MOBILE, AL 36618
(Address of principal executive offices) (Zip Code)
(334) 633-4300
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
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
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (x) No ( )
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number
of shares outstanding of the issuer's common stock, as of the
latest practicable date 10,676,815 at January 27, 1995.
QMS, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(unaudited) as of December 30, 1994 and
September 30, 1994 3-4
Condensed Consolidated Statements of Operations
(unaudited) for the three months ended
December 30, 1994 and December 31, 1993 5
Condensed Consolidated Statements of Cash
Flows (unaudited) for the three months ended
December 30, 1994 and December 31, 1993 6
Notes to Condensed Consolidated Financial
Statements (unaudited) for the three months
ended December 30, 1994 and December 31, 1993 7
Computation of Earnings Per Common Share 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-10
PART II - OTHER INFORMATION 11
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Securities
Item 4. Submission of Matters to a Vote of
Security Holders
Item 5. Other Information
Item 6. (a) Exhibits
(b) Reports on Form 8 - K
SIGNATURES 12
QMS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
as of December 30, 1994 and September 30, 1994
(Unaudited)
DECEMBER 30, September 30,
IN THOUSANDS 1994 1994
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 3,815 $ 4,956
Trade Receivables (less allowance
for doubtful accounts of $498
at December 1994 and $504 at
September 1994) 46,530 51,462
Inventories, Net (Note 3) 73,696 69,770
Other Current Assets 9,759 8,335
------- -------
Total Current Assets 133,800 134,523
------- -------
PROPERTY, PLANT AND EQUIPMENT 74,857 72,880
Less Accumulated Depreciation 43,803 42,054
------- -------
Property, Plant and Equipment, Net 31,054 30,826
------- -------
OTHER ASSETS 16,430 16,674
------- -------
TOTAL ASSETS $181,284 $182,023
======== ========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
as of December 30, 1994 and September 30, 1994
(Unaudited)
DECEMBER 30, September 30,
in thousands 1994 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts and Notes Payable $ 23,482 $ 20,791
Other 30,850 34,342
------- -------
Total Current Liabilities 54,332 55,133
------- -------
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS 35,780 35,687
------- -------
DEFERRED INCOME TAXES 2,189 2,201
------- -------
STOCKHOLDERS' EQUITY 88,983 89,002
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $181,284 $182,023
======== ========
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
DECEMBER 30, 1994 AND DECEMBER 31, 1993
(Unaudited)
Three Months Ended
DECEMBER 30, December 31,
in thousands, except per share amounts 1994 1993
NET SALES $70,520 $70,654
COST OF GOODS SOLD 47,846 46,822
------- -------
GROSS PROFIT 22,674 23,832
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 21,643 22,673
------- -------
OPERATING INCOME 1,031 1,159
------- -------
OTHER INCOME (EXPENSE)
Interest Income 13 17
Interest Expense (924) (872)
Miscellaneous Expense (20) (834)
------- -------
Total Other Expense (931) (1,689)
------- -------
INCOME (LOSS) BEFORE INCOME TAXES 100 (530)
INCOME TAX PROVISION (BENEFIT) 28 (164)
------- -------
NET INCOME (LOSS) $ 72 $ (366)
======= =======
EARNINGS (LOSS) PER COMMON
SHARE (Note 2)
Primary $ 0.01 $ (0.03)
Fully Diluted $ 0.01 $ (0.03)
SHARES USED IN PER SHARE COMPUTATION
(Note 2)
Primary 10,726 10,706
Fully Diluted 10,726 10,706
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 30, 1994 AND DECEMBER 31,
1993
(Unaudited)
DECEMBER 30, December 31,
in thousands 1994 1993
Cash Flows from Operating Activities:
Net Income (Loss) $ 72 $ (366)
Adjustments to Reconcile Net Income
to Net Cash Provided by
(Used in) Operating Activities:
Depreciation of Property, Plant and
Equipment 2,184 2,363
Amortization of Capitalized and
Deferred Software 2,783 2,017
Provision for Losses on Inventory 900 (663)
Other 4 (60)
Changes in Assets and Liabilities
that provided (used) cash:
Trade Receivables 4,892 (2,237)
Inventories (4,826) 3,574
Accounts Payable 2,69 5,844
Income Tax Payable (1,164) 0
Other (3,705) (1,989)
------- -------
Net Cash Provided by Operating
Activities 3,831 8,483
Cash Flows from Investing Activities:
Purchase of Property, Plant and
Equipment (2,499) (1,220)
Additions to Capitalized and Deferred
Software Costs (2,425) (1,842)
Other 46 0
------- -------
Net Cash Used in Investing
Activities (4,878) (3,062)
Cash Flows from Financing Activities:
Proceeds from Long-Term Debt and
Capital Leases 700 0
Payments of Long-Term Debt and Capital
Leases, including Current Maturities (709) (2,347)
Proceeds from Stock Options Exercised 30 9
Other 0 (244)
------- -------
Net Cash Provided by (used in)
Financing Activities 21 (2,582)
Effect of Exchange Rate Changes on Cash (115) (538)
------- -------
Net Change in Cash and Cash Equivalents (1,141) 2,301
Cash and Cash Equivalents at Beginning
of Period 4,956 3,582
------- -------
Cash and Cash Equivalents at End of
Period $ 3,815 $ 5,883
------- -------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED
DECEMBER 30, 1994 AND DECEMBER 31, 1993
(Unaudited)
1. MANAGEMENT OPINION
In the opinion of management, the condensed consolidated
financial statements reflect all adjustments necessary to
present fairly the financial position of the Company as of
December 30, 1994 and September 30, 1994 and the results of
operations and changes in cash flows for the three months
ended December 30, 1994 and December 31, 1993. The results
of operations for the three months ended December 30, 1994
are not necessarily indicative of the results to be expected
for the fiscal year ending September 29, 1995.
2. PER COMMON SHARE COMPUTATIONS
Per share computations are based on the weighted average
number of common shares outstanding during the period and
the dilutive effect of the assumed exercise of stock
options.
3. INVENTORIES
Inventories at December 30, 1994 and September 30, 1994 are
summarized as follows (in thousands):
DECEMBER 30, September 30,
1994 1994
Raw materials $ 23,577 $ 24,003
Work in process 4,757 5,842
Finished goods 51,808 46,733
Inventory reserve (6,446) (6,808)
--------- ---------
TOTAL $ 73,696 $ 69,770
========= =========
4. COMMITMENTS AND CONTINGENCIES
At September 30, 1994, the Company had a commitment of
approximately $13.7 million under contracts to purchase
print engines. As of December 30, 1994, the Company had a
commitment of approximately $20.9 million to purchase print
engines under purchase contracts.
The Company was contingently liable for approximately $3.8
million as of December 30, 1994. This was principally the
result of letters of credit issued in the normal course of
business for the purchase of inventory.
5. RECLASSIFICATIONS
Certain reclassifications have been made to fiscal 1994
amounts to conform to the fiscal 1995 presentation.
QMS, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(Unaudited)
Three Months Ended
DECEMBER 30, December 31,
in thousands, except per share amounts 1994 1993
Net income (loss) $ 72 $ (366)
======= =======
Shares used in this computation:
Weighted average common shares
outstanding 10,675 10,706
Shares applicable to stock options,
net of shares assumed to be purchased
from proceeds at average market 51 0
------- -------
Total shares for earnings per common
share computation (primary) 10,726 10,706
------- -------
Total fully diluted shares 10,726 10,706
------- -------
Earnings per common share - primary $ 0.01 $ (0.03)
======== ========
Earnings per common share -
fully diluted $ 0.01 $ (0.03)
======== ========
QMS, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Table 1: Net Sales Comparisons for Key Channels of Distribution
Quarter ended December 30, 1994
(000's) Q1, 1995 Q1, 1994 Difference
U.S. Direct $ 10,677 $ 10,572 $ 105
U.S. Reseller 4,780 12,144 (7,364)
QMS Europe 23,384 19,156 4,228
QMS Japan 6,851 5,744 1,107
All Other 24,828 23,038 1,790
-------- -------- --------
Total $ 70,520 $ 70,654 $ (134)
======== ======== ========
Net sales for the first fiscal quarter of 1995 were essentially
the same as net sales for the first fiscal quarter of 1994. The
sales by key distribution channels in the first quarter of fiscal
1995 (the three months ended December 30, 1994) compared to the
first quarter of fiscal 1994 (the three months ended December 31,
1993) are shown in Table 1 above. The United States direct
channel is the Company's primary method of distribution for the
higher end of the Company's product offerings to major corporate
accounts and governmental agencies. The net sales improvements
in the direct channel for the first quarter of fiscal 1995
compared to the first quarter of fiscal 1994 can be attributed to
sales of new products introduced into the channel during fiscal
1994, which include the QMS 3825 monochrome laser printer and the
magicolor(TM) color laser printer, in addition to increased sales
of the QMS 3225 and QMS 1725. Fiscal 1995 net sales through the
United States reseller channel for the first quarter are
significantly below the fiscal 1994 first quarter net sales
achievement. The United States reseller channel is the Company's
primary method of distribution for up to sixteen page-per-minute
monochrome laser printers and color laser printers. As was
experienced throughout fiscal 1994, new competition in these
product classes is the primary cause of the lower net sales. In
QMS Europe, net sales for the first quarter of fiscal 1995
increased 22.1% over the first quarter sales of fiscal 1994. The
increase in net sales is directly related to sales of the
magicolor(TM) color laser printer and the QMS 1060 and QMS 1660
monochrome laser printers which were introduced into this market
during the last quarter of fiscal 1994. Net sales in QMS Japan
increased 19.3% for the first quarter of fiscal 1995 compared to
the first quarter of fiscal 1994. The increased net sales came
from sales of the QMS 1660 and QMS 1060, which are sixteen and
ten page-per-minute monochrome laser printers, respectively, and
the magicolor(TM) color laser printer. These products were
introduced into this market during the fourth quarter of fiscal
1994.
Overall, the Company's gross profit as a percentage of sales
declined from 33.7% in the first quarter of fiscal 1994 to 32.2%
in the first quarter of fiscal 1995. This decline is primarily
due to pricing pressure resulting from the increased competition
principally in the United States reseller channel and in Europe,
which resulted in the need to reduce some sales prices at the
lower end of the Company's product offerings. The introduction
of higher margin color and monochrome printers into several of
the Company's markets during the latter part of fiscal 1994 is
anticipated to help shift net sales towards higher margin print
systems. The Company purchases print engine mechanisms and
memory components from Japanese suppliers. Fluctuations in
foreign currency exchange rates will affect the prices of these
products. Negative impacts can be mitigated through yen-sharing
arrangements with suppliers, foreign exchange contracts, price
negotiations and the natural hedge provided by sales denominated
in the yen; however, severe price increases resulting from
exchange rate fluctuations could develop which would adversely
affect operating results.
Selling, general and administrative expenses declined 4.5% in the
first quarter of fiscal 1995 compared to the first quarter of
fiscal 1994. This improvement is a direct result of the
Company's continuing cost reduction efforts and expense
management practices.
Total other expense decreased by $.8 million in the first quarter
of fiscal 1995 compared to the first quarter of fiscal 1994.
This decrease resulted primarily from changes in the translation
of balance sheet elements that were denominated in foreign
currencies.
The Company's effective tax rate was 28% for the first quarter of
fiscal 1995 compared to 31% for the same period of fiscal 1994.
This decrease is due principally to the effect of the Company
being able to utilize tax credits and other carryovers not
previously available.
Liquidity and Capital Resources
During the first quarter of fiscal 1995 the Company's financing
came principally from operations and borrowings on the revolving
credit loan. The Company's net working capital was $79.5 million
at December 30, 1994 compared to $79.4 million at September 30,
1994.
Bank borrowings under the Company's secured revolving credit
agreement were $23.9 million at December 30, 1994.
The Company was not in compliance with certain of its revolving
credit agreement covenants at the end of the first quarter of
fiscal 1995 and requested and received a waiver of the non-
compliance. As discussed in the Company's annual report Form 10-K
for the year ended September 30, 1994, management is negotiating
to replace one of the three members of the revolving credit agreement
and belives the replacement will be accomplished in a timely manner.
Management believes that the Company's continuing working capital
and capital expenditure needs will be met by cash flow from
operations and by the secured revolving credit agreement.
Although management believes that the Company's relationship with
its lenders is good, future waivers from the lenders, if
necessary, will depend on the Company's performance.
QMS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company's annual report on Form 10-K for the year ended
September 30, 1994 reported the status of Sharon L. McNider v.
QMS, Inc., et. al. During the first quarter of 1995, a
continuance was granted and the case is now scheduled for trial
on March 27, 1995. No other material developments occurred in
this case during the first quarter of fiscal 1995.
The Company is a defendant in various litigation in the normal
course of business. Management is of the opinion that the
ultimate resolution of such claims will not materially affect the
Company's financial position or results of operations.
ITEM 2 - CHANGES IN SECURITIES - None.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on January
25, 1995. The results of the voting on the election of directors
were as follows:
Nominee For Withheld Total Votes Cast
James L. Busby 9,488,754 144,541 9,633,295
Lucius E. Burch, III 9,489,493 143,802 9,633,295
Accordingly, all nominees for the Board of Directors were
elected.
ITEM 5 - OTHER INFORMATION - None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit
Number Description
27 Financial Data Schedule
b) Reports: None.
QMS, INC. AND SUBSIDIARIES
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.
QMS, INC.
(Registrant)
Date: February 13, 1995 /s/ Charles D. Daley
CHARLES D. DALEY
Executive Vice President - Finance and
Administration, Chief Financial Officer
(Mr. Daley is the Principal Financial
Officer and has been duly authorized
to sign on behalf of the registrant.)
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