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 July 3, 1998
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 Identification
incorporation or organization) 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
10,697,065 at July 31, 1998.
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QMS, INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(unaudited) as of July 3, 1998, and
October 3, 1997 3 - 4
Condensed Consolidated Statements of Operations
(unaudited) for the three and nine months ended
July 3, 1998, and June 27, 1997 5
Condensed Consolidated Statements of Cash Flows
(unaudited) for the nine months ended
July 3, 1998, and June 27, 1997 6
Notes to Condensed Consolidated Financial Statements
(unaudited) 7 - 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 12
PART II - OTHER INFORMATION 13
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior 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 14
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QMS, INC. AND SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
as of July 3, 1998, and October 3, 1997
(Unaudited)
<S> <C> <C>
July 3, October 3,
in thousands 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 1,416 $ 612
Trade Receivables (less allowance for doubtful
accounts of $615 at July 3, 1998, and $529
at October 3, 1997) 22,342 17,535
Note Receivable 722 443
Inventories:
Raw Materials 5,478 5,614
Work in Process 1,739 1,237
Finished Goods 15,363 18,251
Inventory Reserves (see Note 3) (3,452) (6,978)
------------- -------------
Total Inventories, Net 19,128 18,124
Other Current Assets 3,441 2,257
------------- -------------
Total Current Assets 47,049 38,971
------------- -------------
PROPERTY, PLANT, AND EQUIPMENT 36,035 38,290
Less Accumulated Depreciation 30,969 32,933
------------- -------------
Total Property, Plant, and Equipment, Net 5,066 5,357
CAPITALIZED AND DEFERRED SOFTWARE 7,940 8,897
NOTES RECEIVABLE, NET 2,933 3,433
PREPAID RENT (Note 4) 306 0
OTHER ASSETS, NET 945 1,931
------------- -------------
TOTAL ASSETS $ 64,239 $ 58,589
============= =============
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<TABLE>
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QMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
as of July 3, 1998, and October 3, 1997
(Unaudited)
<S> <C> <C>
July 3, October 3,
in thousands 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 10,694 $ 6,562
Revolving Credit Loan and Short-Term Debt 2,571 447
Current maturities of capital lease obligations 573 988
Other Current Liabilities:
Employment Costs 4,065 3,931
Deferred Service Revenue 8,491 9,536
Restructuring Reserves 514 1,747
Accrued Management Transition Expenses 931 621
Other 3,807 2,852
------------- -------------
Total Other Current Liabilities 17,808 18,687
------------- -------------
Total Current Liabilities 31,646 26,684
------------- -------------
CAPITAL LEASE OBLIGATIONS 438 898
OTHER LIABILITIES:
Deferred Service Revenue 882 1,033
Deferred Compensation 2,806 2,969
Accrued Management Transition Expenses 427 472
Other Liabilities 2,436 2,209
------------- -------------
Total Other Liabilities 6,551 6,683
------------- -------------
STOCKHOLDERS' EQUITY 25,604 24,324
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 64,239 $ 58,589
============= =============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
<TABLE>
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QMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended July 3, 1998, and June 27, 1997
(Unaudited)
<S> <C> <C> <C> <C>
Three Months Ended Nine Months Ended
- ------------------------------------------------------------------------------------------------------------------------
July 3, June 27, July 3, June 27,
in thousands, except per share amounts 1998 1997 1998 1997
- ------------------------------------------------------------------------------------------------------------------------
NET SALES
Printers and Supplies $ 26,421 $ 23,968 $ 71,131 $ 69,570
U.S. Service 8,942 8,415 27,430 25,168
----------- ----------- ----------- -----------
Total Net Sales 35,363 32,383 98,561 94,738
----------- ----------- ----------- -----------
COST OF GOODS SOLD
Printers and Supplies 19,047 18,930 51,574 53,520
U.S. Service 5,665 5,591 17,161 16,307
----------- ----------- ----------- -----------
Total Cost of Goods Sold 24,712 24,521 68,735 69,827
----------- ----------- ----------- -----------
GROSS PROFIT
Printers and Supplies 7,374 5,038 19,557 16,050
U.S. Service 3,277 2,824 10,269 8,861
----------- ----------- ----------- -----------
Total Gross Profit 10,651 7,862 29,826 24,911
----------- ----------- ----------- -----------
OPERATING EXPENSES
Selling, General and Administrative
Expenses 10,068 11,042 28,425 31,731
Management Transition Expense 0 2,168 0 2,168
----------- ----------- ----------- -----------
Total Operating Expenses 10,068 13,210 28,425 33,899
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 583 (5,348) 1,401 (8,988)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest Income 113 85 302 273
Interest Expense (167) (72) (360) (620)
Miscellaneous Income (Expense) (92) (117) 27 (441)
----------- ----------- ----------- -----------
Total Other Expense, Net (146) (104) (31) (788)
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 437 (5,452) 1,370 (9,776)
INCOME TAX PROVISION 16 0 70 0
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 421 $ (5,452) $ 1,300 $ (9,776)
=========== =========== =========== ===========
EARNINGS (LOSS) PER
COMMON SHARE (Note 2)
Basic and Diluted $ 0.04 $ (0.51) $ 0.12 $ (0.91)
SHARES USED IN PER SHARE
COMPUTATION (Note 2)
Basic 10,697 10,697 10,697 10,697
Diluted 11,040 10,697 10,871 10,697
See Notes to Condensed Consolidated Financial Statements
</TABLE>
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QMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended July 3, 1998, and June 27, 1997
(Unaudited)
July 3, June 27,
in thousands 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ 1,300 $ (9,776)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities:
Depreciation of Property, Plant and Equipment 1,633 3,577
Amortization of Capitalized and Deferred Software 5,977 4,898
Provision for Losses on Inventory 2,390 2,974
Other (233) 0
Net Change in Assets and Liabilities that Provided (Used) Cash:
Trade Receivables (4,807) 2,833
Inventories, Net (3,394) 792
Accounts Payable 4,132 348
Other (1,418) 538
------------- -------------
Net Cash Provided by Operating Activities 5,580 6,184
------------- -------------
Cash Flows from Investing Activities:
Collections of Notes Receivable 221 1,057
Purchase of Property, Plant and Equipment (1,540) (963)
Proceeds from Disposal of Property, Plant and Equipment 419 12,592
Additions to Capitalized and Deferred Software Costs (4,792) (6,442)
------------- -------------
Net Cash Provided by (Used in) Investing Activities (5,692) 6,244
------------- -------------
Cash Flows from Financing Activities:
Proceeds from Debt 2,124 0
Payments of Debt and Capital Lease Obligations (1,145) (12,501)
Other (63) 553
------------- -------------
Net Cash Provided by (Used in) Financing Activities 916 (11,948)
------------- -------------
Net Change in Cash and Cash Equivalents 804 480
Cash and Cash Equivalents at Beginning of Period 612 190
------------- -------------
Cash and Cash Equivalents at End of Period $ 1,416 $ 670
============= =============
See Notes to Condensed Consolidated Financial Statements
</TABLE>
QMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(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 July 3, 1998, the results of operations for the three and
nine months ended July 3, 1998, and June 27, 1997, and changes in cash flows
for the nine months ended July 3, 1998, and June 27, 1997. The results of
operations for the nine months ended July 3, 1998, are not necessarily
indicative of the results to be expected for the fiscal year ending October
2, 1998. Certain reclassifications have been made to fiscal 1997 amounts to
conform to the fiscal 1998 presentation.
2.EARNINGS PER SHARE
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share." Basic and diluted earnings per
share computations are based on the weighted average number of common shares
outstanding during the period and diluted earnings per share also includes
the dilutive effect of the assumed exercise of stock options.
3.INVENTORY RESERVES
Inventory reserves at July 3, 1998, and October 3, 1997, are summarized as
follows (in thousands):
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July 3, October 3,
1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Standards revisions $ 551 $ 1,635
Excess and obsolete reserves 2,375 4,555
Spare parts valuation reserves 526 788
---------------- ---------------
TOTAL $ 3,452 $ 6,978
================ ===============
</TABLE>
Inventory reserves at July 3, 1998, consist primarily of excess and obsolete
reserves. Excess and obsolete reserves are calculated based on specific
identification of items. During fiscal 1998, the Company disposed of $4.2
million in excess and obsolete inventory, of which $3.2 million occurred in
the first two quarters.
4.PREPAID RENT
At October 3, 1997, the Company was not in compliance with Fixed Charge
Coverage and Net Worth covenants contained in the 1997 sale-leaseback
transaction for the Mobile headquarters. On December 8, 1997, the Company
obtained a one-year waiver of non-compliance through October 5, 1998, from
the lessor in exchange for $1.3 million in prepaid rent and an amendment to a
related warrant agreement. At the end of the waiver period, the Company may
be out of compliance with one or more covenants contained in the lease
agreement. Among the remedies available to the landlord are the acceleration
of all rent for the initial lease term, cancellation of the lease, or all
other remedies available at law. Management believes that prior to the
issuance of year-end financial statements an additional extension of the
waiver or a permanent revision of the covenant will be obtained through
further negotiations.
The $1.3 million prepaid rent covers the period from December 1, 1998, to
September 7, 1999. In addition, the Company pays rent quarterly, in advance.
At July 3, 1998, the Company had $1,260,000 in prepaid Mobile rent included
in other current assets and $306,000 reported as a non-current asset.
5.COMMITMENTS AND CONTINGENCIES
As of July 3, 1998, the Company had a commitment of approximately $24.5
million under contracts to purchase print engines and related components.
The Company is a defendant in various litigation and claims in the normal
course of business. Based on consultation with various counsel in these
matters, management is of the opinion that the ultimate resolution of such
litigation and claims will not materially affect the Company's financial
position, results of operations, or cash flows.
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
- ---------------------
Net income for the third quarter of fiscal 1998 was $421,000 on net sales of
$35.4 million. For the nine months ended July 3, 1998, net income was $1.3
million on net sales of $98.6 million. These 1998 results compare to a net loss
of $5.5 million on net sales of $32.4 million for the third quarter of fiscal
1997 and a net loss of $9.8 million on net sales of $94.7 million for the nine
months ended June 27, 1997.
In the first three quarters of 1998 the gain in net income was achieved
primarily through additional sales and higher profit margins. An additional
factor was cost reduction efforts begun by management in the fourth quarter of
fiscal 1997.
<TABLE>
Table 1 - Net Sales Comparisons for Key Product Groups
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Three Months Ended Nine Months Ended
- ---------------------------------------------------------------------------------------------------------------------
July 3, June 27, July 3, June 27,
(000's) 1998 1997 Difference 1998 1997 Difference
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Hardware $ 11,993 $ 8,532 $ 3,461 $ 30,602 $ 24,700 $ 5,902
Consumables 7,551 8,220 (669) 22,817 24,802 (1,985)
Service 8,942 8,985 (43) 27,430 26,858 572
Europe 6,493 3,475 3,018 14,516 9,181 5,335
Japan 217 1,475 (1,258) 2,346 4,803 (2,457)
All Other 168 1,696 (1,528) 851 4,394 (3,543)
--------------------------------------- ---------------------------------------
Total Net Sales $ 35,364 $ 32,383 $ 2,981 $ 98,562 $ 94,738 $ 3,824
======================================= =======================================
Table 2 - Hardware and International Sales Comparisons
Three Months Ended Nine Months Ended
- ---------------------------------------------------------------------------------------------------------------------
July 3, June 27, July 3, June 27,
(000's) 1998 1997 Difference 1998 1997 Difference
- ---------------------------------------------------------------------------------------------------------------------
Hardware Sales
- -------------------------
U.S./Canada - Direct $ 2,439 $ 5,514 $ (3,075) $ 12,684 $ 17,045 $ (4,361)
U.S./Canada - Reseller 7,768 2,682 5,086 14,076 6,653 7,423
Latin America & Other 445 336 109 1,529 1,002 527
OEM 1,341 0 1,341 2,313 0 2,313
--------------------------------------- ---------------------------------------
Total Hardware $ 11,993 $ 8,532 $ 3,461 $ 30,602 $ 24,700 $ 5,902
======================================= =======================================
Europe & Japan Sales
- -------------------------
Controller Boards 2,617 1,833 784 7,433 6,180 1,253
Commissions 4,093 3,117 976 9,429 7,804 1,625
--------------------------------------- ---------------------------------------
Total Europe & Japan $ 6,710 $ 4,950 $ 1,760 $ 16,862 $ 13,984 $ 2,878
======================================= =======================================
</TABLE>
Net sales for the third quarter of fiscal 1998 increased by 9.2% from net sales
for the third quarter of fiscal 1997 and by 4.0% in the nine-month comparison.
Hardware and accessory sales for the third quarter of fiscal 1998 were $12.0
million, an increase of 40.6% over the third quarter of fiscal 1997. A
substantial portion of this increase relates to Original Equipment Manufacturer
("OEM") sales which have risen to $1.3 million in this quarter compared to no
OEM sales for the comparable period in fiscal 1997. Also, total U.S. and Canada
hardware sales have increased 24.5% for this quarter compared to the same period
in fiscal 1997 and 12.9% for the nine-month periods. U.S. and Canada direct
hardware sales for this quarter decreased 55.8% from the third quarter of fiscal
1997 and decreased 25.6% for the nine-month comparison while the U.S. and Canada
reseller and OEM sales increased 239.6% and 146.3% for the three- and nine-month
comparisons, respectively. This shift reflects the change implemented in
February 1998, to move from a direct sales force to distributors and value added
resellers, combining direct and reseller sales channels. Management expects
continued increases in the reseller and OEM distribution channels and a
corresponding decrease in the direct channel over the next several quarters.
Consumable sales decreased to $7.6 million this quarter from $8.2 million in the
third quarter of fiscal 1997 and decreased $2.0 million in the nine-month
comparison, from $24.8 million in 1997 to $22.8 million in 1998. This decrease
relates primarily to management's decision in the second quarter of fiscal 1997
to discontinue bulk sales of 8 page-per-minute monochrome consumables due to
eroding margins and the risk of maintaining large inventories of consumables for
aging products. Management expects sales of QMS-labeled hardware and
consumables for existing products and OEM sales to continue to increase with the
sale of additional units.
In the third quarter of fiscal 1998, service sales were $8.9 million, a decrease
of less than one half percent from the third quarter of fiscal 1997. The
decreasing cost of new printers and the tendancy to replace rather than repair
or maintain printers has affected the service sector of the business. Increases
in the sale of spare parts to OEMs and others, however, have offset this
reduction in sales.
Europe and Japan sales include both controller board sales at cost and
commissions earned on product sales. Controller board sales and commissions for
Europe and Japan increased 42.8% and 31.3%, respectively, in the third quarter
of fiscal 1998 from the third quarter of fiscal 1997 and 20.3% and 20.8%,
respectively, for the nine-month comparison.
The increase in Europe revenue is primarily from sales of the magicolor 2(R)
product. European demand for magicolor 2 product is expected to remain strong
through the next three quarters although a seasonal drop in sales in the fourth
quarter of fiscal 1998 is expected due to European holidays.
Japan revenue includes product and commission revenue for Japan, Korea and other
Pacific Rim countries. This revenue is generated through an independent
company, QMS Japan KK, which has exclusive rights to distribute QMS products
throughout these countries. QMS is currently evaluating how to improve Asian
revenue and profit. Alternatives include renegotiating the current exclusive
distribution agreement to allow QMS greater direct access to these markets in
exchange for reductions in minimum commission requirements. Sales to Japan
decreased $1.3 million from the third quarter of fiscal 1997 to the third
quarter of fiscal 1998 and decreased $2.5 million for the nine-month comparison
primarily due to the depressed Asian economy. Japan revenue is currently less
than 3% of Company revenue and is expected to continue at a low level. At July
3, 1998, the Company had accounts receivable from QMS Japan KK of $2.3 million
and a short- and long-term note receivable of $0.7 million and $0.8 million,
respectively.
Overall, the Company's gross profit as a percentage of sales increased from
24.3% to 30.1% in the three-month comparison of fiscal 1997 and 1998 and from
26.3% to 30.3% in the nine-month comparison. The principal reasons for this
increase include the introduction of magicolor 2 in the first quarter of fiscal
1998, favorable manufacturing volume variances, favorable purchase price
variances caused by lower yen values, and lower excess and obsolete inventory
reserve requirements.
The three- and nine-month selling, general, and administrative ("SG&A") numbers
for fiscal 1997 include a $2,168,000 charge for management transition charges
related to the resignation and severance of the Company's former president and
chief executive officer. Excluding these charges, the SG&A expenses decreased
$974,000 (8.8%) in the three-month comparison and decreased $3,306,000 (10.4%)
in the nine-month comparison. SG&A as a percentage of sales (excluding the
fiscal 1997 third quarter charge of $2,168,000) decreased from 34.1% to 28.5%
for the three-month comparison of fiscal 1997 and 1998 and decreased from 33.5%
to 28.8% for the nine-month comparison. The SG&A decreases reflect the cost
reduction efforts begun in the fourth quarter of fiscal 1997. During 1997, QMS
reduced its headcount by 20% to approximately 700 employees and closed its QMS
Circuits, Inc. subsidiary.
Total other expense (net of other income) of $31,000 for the first nine months
of fiscal 1998 compared to a net expense of $788,000 in the first nine months of
fiscal 1997. This $757,000 increase to net profit was due primarily to lower
interest expenses and gains on the sale of assets.
Income taxes reflect estimated foreign and domestic income taxes required by
foreign tax treaties and federal alternative minimum taxes. The Company has
available operating loss carryforwards and income tax credits which reduce the
effective alternative-minimum tax rate to 2%.
Financial Condition
- -------------------
Current and long-term notes receivable decreased by approximately $221,000 from
the October 3, 1997, balances, reflecting the continued reduction of these notes
associated with the 1995 sale of the Company's Japanese subsidiary. Accounts
receivable increased $4.8 million and accounts payable increased $4.1 million in
the nine-month period ending July 3, 1998, due to the introduction of magicolor
2 in the first quarter of fiscal 1998. The accounts payable increase reflects
the additional production volumes related to magicolor 2 and a 45% increase in
raw material purchases between the fourth quarter of fiscal 1997 and the third
quarter of fiscal 1998.
The company expects accounts receivable and accounts payable to remain at higher
levels than the October 3, 1997, balances because of higher sales.
Liquidity and Capital Resources
- -------------------------------
During the first two quarters of fiscal 1998, the Company's working capital and
capital expenditure requirements came principally from operations. The
Company's net working capital as of July 3, 1998, improved to $15.4 million
compared to $12.3 million at October 3, 1997. This increase is primarily due
to the fiscal 1998 earnings, increased inventory turns, and increased accounts
receivable.
At July 3, 1998, the Company had borrowings of $2,571,000 under the revolving
credit facility and cash on hand totaled $1,416,000. Total borrowing capacity
under this credit facility is $30.0 million although availability at any given
point in time is a function of eligible accounts receivable and inventory
levels. At July 3, 1998, total availability was $13.3 million.
The Company's current and long-term lease liability has decreased from
$1,886,000 at October 3, 1997, to $1,011,000 at July 3, 1998, due to the
expiration of capital leases and management's decision to fund new capital
acquisitions from operational cash flow.
Management expects that existing cash reserves and available credit under the
credit facility will be sufficient to meet cash flow requirements during the
coming year.
Foreign Currency Exchange Rates
- -------------------------------
The Company purchases print engine mechanisms and memory components from several
Japanese suppliers. Fluctuations in Japanese yen currency exchange rates will
affect the prices of these products. The Company attempts to mitigate some
negative impacts through yen-sharing arrangements with suppliers; however,
material price increases resulting from unfavorable exchange rate fluctuations
would adversely affect operating results.
Sale-Leaseback Agreement
- ------------------------
At October 3, 1997, the Company was not in compliance with Fixed Charge Coverage
and Net Worth covenants contained in the 1997 sale-leaseback transaction for the
Mobile headquarters. On December 8, 1997, the Company obtained a one-year
waiver of non-compliance from the lessor through October 5, 1998, in exchange
for $1.3 million in prepaid rent and an amendment to a related warrant
agreement. At the end of the waiver period, the Company expects to be in
compliance with the Fixed Charge Coverage Ratio but to be out of compliance with
the Net Worth covenant. Among the remedies available to the landlord is the
acceleration of all rent for the initial lease term, cancellation of the lease,
or all other remedies available at law. Management believes that prior to the
issuance of year-end financial statements an additional extension of the waiver
or a permanent revision of the covenant will be obtained through further
negotiations.
Year 2000 Compliance
- --------------------
The Company has developed and begun implementing plans to review its purchased
and developed software for year 2000 compliance. The design of the Company's
products precludes the possibility of Year 2000 errors. Date and time
information are passed to the QMS printer by the host computer in real time.
All QMS hardware and software are designed to function properly at the turn of
the century and beyond without any interruption in business.
QMS plans to have all Year 2000 issues for business and development applications
and systems resolved by the end of December 1998 and is currently ahead of that
schedule. The Company has completed the assessment portion of this project and
most of the required upgrades have been performed. The Company has also begun
communications with its critical vendors and customers to determine their Year
2000 status; no final assessment date has yet been established. The Company
expects to spend externally approximately $138,000 for component upgrades in
connection with the Year 2000 remediation and has spent approximately $61,700 to
date. Testing of business and development applications and systems has begun
and is being performed in accordance with industry standards and thus far has
produced successful results without any Year 2000 errors.
Although the Company has not identified any specific areas of risk, general
market Year 2000 problems outside of the Company's control could have an adverse
effect on the Company's operating results. At this time, the Company does not
believe it is necessary to have a formal Year 2000 contingency plan in place.
QMS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
- --------------------------------------------------------------------------------
ITEM 1. LEGAL PROCEEDINGS
- ---------------------------
The Company is a defendant in various litigation and claims in the normal course
of business. Based on consultation with various counsel in these matters,
management is of the opinion that the ultimate resolution of such litigation and
claims will not materially affect the Company's financial position, results of
operations, or cash flows.
ITEM 2. CHANGES IN SECURITIES - None.
- ------------------------------
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None.
- ----------------------------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.
- ------------------------------------------------------------
ITEM 5. OTHER INFORMATION - None.
- --------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------------------------------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
(b) Reports: None.
QMS, INC. AND SUBSIDIARIES
<TABLE>
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.
<S> <C>
QMS, INC.
(Registrant)
Date: August 14, 1998 /s/ Edward E. Lucente
----------------------------- ----------------------------------------------
Edward E. Lucente
President and Chief Executive Officer
Date: August 14, 1998 /s/ Llyod E. Adams
----------------------------- ----------------------------------------------
Lloyd E. Adams
Corporate Controller
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-2-1998
<PERIOD-END> JUL-3-1998
<CASH> 1,416
<SECURITIES> 0
<RECEIVABLES> 22,957
<ALLOWANCES> 615
<INVENTORY> 19,128
<CURRENT-ASSETS> 47,049
<PP&E> 36,035
<DEPRECIATION> 30,969
<TOTAL-ASSETS> 64,239
<CURRENT-LIABILITIES> 31,646
<BONDS> 0
0
0
<COMMON> 118
<OTHER-SE> 25,486
<TOTAL-LIABILITY-AND-EQUITY> 64,239
<SALES> 98,561
<TOTAL-REVENUES> 98,561
<CGS> 68,735
<TOTAL-COSTS> 68,735
<OTHER-EXPENSES> 28,425
<LOSS-PROVISION> 2,390
<INTEREST-EXPENSE> 360
<INCOME-PRETAX> 1,370
<INCOME-TAX> 70
<INCOME-CONTINUING> 1,300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,300
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
