<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K/A
AMENDMENT NO. 2
CURRENT REPORT
---------------------
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
------------------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 2, 1997
------------------------
AXIOHM TRANSACTION SOLUTIONS, INC.
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
CALIFORNIA 0-13459 94-2917470
(State or jurisdiction of (Commission File Number) (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
15070 AVENUE OF SCIENCE
SAN DIEGO, CALIFORNIA 92128
---------------------------------------------------
(Address, including zip code, of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 451-3485
-------------------------------------------------------
(Former name or former address, if changed since last report)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
This Amendment No. 2 to the Registrant's Current Report on Form 8-K dated
October 2, 1997, originally filed with the Securities and Exchange Commission
(the "SEC") on October 17, 1997 and amended by Amendment No. 1 thereto dated
December 15, 1997 (collectively, the "Form 8-K"), is being filed solely for the
purpose of amending Item 7, Financial Statements and Exhibits, to the Form 8-K.
2
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants...................................................... 4
Consolidated Balance Sheet of Axiohm S.A. as of December 31, 1996 and December 31,
1995................................................................................. 5
Consolidated Statement of Income of Axiohm S.A. for the Years Ended December 31, 1996,
1995 and 1994........................................................................ 6
Consolidated Statement of Cash Flows of Axiohm S.A. for the Years Ended December 31,
1996, 1995 and 1994.................................................................. 7
Consolidated Statement of Shareholders' Equity of Axiohm S.A. for the Years Ended
December 31, 1996, 1995 and 1994..................................................... 8
Notes to the Consolidated Financial Statements......................................... 9
Unaudited Consolidated Balance Sheet of Axiohm S.A. as of June 30, 1997 and Audited
Consolidated Balance Sheet of Axiohm S.A. as of December 31, 1996.................... 25
Unaudited Consolidated Statement of Income of Axiohm S.A. for the Six Months Ended June
30, 1997 and 1996.................................................................... 26
Unaudited Consolidated Statement of Cash Flows of Axiohm S.A. for the Six Months Ended
June 30, 1997 and 1996............................................................... 27
Notes to the Unaudited Consolidated Financial Statements............................... 36
</TABLE>
3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Axiohm S.A.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of Axiohm S.A.
and its subsidiaries at December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with United States generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with United States generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of Axiohm S.A. and its subsidiaries for any
period subsequent to December 31, 1996.
/s/ PRICE WATERHOUSE
Paris, France
September 12, 1997, except as to Note 19, which is as of January 9, 1998
4
<PAGE>
AXIOHM S.A.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
NOTE 1995 1996
----- --------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................... $ 636 $ 1,839
Accounts receivable, net............................................................ 3 9,700 10,552
Inventories, net.................................................................... 4 13,506 13,900
Loan to related party............................................................... 17 -- 1,832
Other current assets................................................................ 2,435 1,454
--------- ---------
Total current assets.............................................................. 26,277 29,577
Property, plant and equipment, net.................................................... 5 11,002 11,235
Goodwill.............................................................................. 6 2,254 2,606
Other assets.......................................................................... 651 560
--------- ---------
Total assets...................................................................... $ 40,184 $ 43,978
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................................... $ 6,675 $ 7,480
Bank overdraft...................................................................... 545 --
Current portion of long-term debt................................................... 8 1,748 1,267
Current portion of capital lease and financing obligations.......................... 9 84 139
Current portion of government grant obligations..................................... 11 327 916
Other current liabilities........................................................... 7 4,185 5,703
--------- ---------
Total current liabilities......................................................... 13,564 15,505
Long-term debt........................................................................ 8 13,087 4,821
Capital lease and financing obligations............................................... 9 1,662 1,543
Government grant obligations.......................................................... 11 2,600 1,846
Deferred income taxes................................................................. 13 1,482 1,557
Other long-term liabilities........................................................... 14 1,812 2,273
--------- ---------
Total liabilities................................................................. $ 34,207 $ 27,545
--------- ---------
Commitments and contingencies......................................................... 10 -- --
Shareholders' equity:
Common stock, ordinary shares "A" par value FF 100 at December 31, 1995 and FF 500
at December 31, 1996; 38,000 shares authorized and outstanding at December 31,
1995; 38,405 shares authorized and outstanding at December 31, 1996............... 15 $ 616 $ 3,579
Common stock, ordinary shares "B" par value FF 500, 2,735 shares authorized and
outstanding at December 31, 1996.................................................. -- 262
Capital in excess of par value...................................................... 66 326
Retained earnings................................................................... 5,434 12,149
Foreign currency translation adjustment............................................. (139) 117
--------- ---------
Total shareholders' equity........................................................ 5,977 16,433
--------- ---------
Total liabilities and shareholders' equity........................................ $ 40,184 $ 43,978
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
AXIOHM S.A.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
NOTE 1994 1995 1996
----- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue:
Net sales........................................................ 3 $ 23,952 $ 72,155 $ 95,302
Other income..................................................... 12 858 -- --
---------- ---------- ----------
24,810 72,155 95,302
Costs and expenses:
Costs of products sold........................................... (15,095) (52,202) (66,390)
Selling, general and administrative.............................. (4,506) (9,200) (11,013)
Research and development......................................... (3,310) (5,836) (6,648)
Goodwill amortization............................................ 6 -- (161) (200)
---------- ---------- ----------
Total costs and expenses........................................... (22,911) (67,399) (84,251)
---------- ---------- ----------
Income from operations............................................. 1,899 4,756 11,051
Interest income.................................................... 90 158 158
Interest expense................................................... (244) (1,889) (1,032)
Other income....................................................... 12 167 -- 1,033
---------- ---------- ----------
Income before income taxes......................................... 1,912 3,025 11,210
Provision for income taxes......................................... 13 (482) (1,095) (4,406)
---------- ---------- ----------
Net income......................................................... $ 1,430 $ 1,930 $ 6,804
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE>
AXIOHM S.A.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
<S> <C> <C> <C>
1994 1995 1996
---------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $ 1,430 $ 1,930 $ 6,804
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................... 1,070 2,696 2,921
Deferred income taxes....................................................... 756 (155) 458
Provision for inventory obsolescence........................................ 57 1,040 87
Provision for long-term liabilities......................................... 94 184 461
Other....................................................................... -- 36 213
Effect on cash of changes in operating assets and liabilities:
Decrease/(increase) in accounts receivable.................................. 580 (4,659) (2,215)
Increase in inventories..................................................... (1,411) (1,896) (823)
Increase in other current assets............................................ (220) (248) (517)
(Decrease)/increase in accounts payable..................................... (437) 160 2,700
Increase in other current liabilities....................................... 720 1,371 1,137
(Decrease)/increase in income tax payable................................... (420) 678 618
Decrease in deferred revenue................................................ (58) (130) (107)
---------- --------- ---------
Net cash provided by operating activities....................................... $ 2,161 $ 1,007 $ 11,737
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
IPB acquisition, net of cash acquired (Note 2)................................ $ (15,644) $ -- $ --
Capital expenditures.......................................................... (2,190) (2,955) (3,056)
Proceeds from disposition of property, plant and equipment.................... -- 53 71
Other......................................................................... (203) (123) (12)
---------- --------- ---------
Net cash used in investing activities........................................... $ (18,037) $ (3,025) $ (2,997)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft................................................................ $ (540) $ 409 $ (545)
Net borrowings under lines of credit.......................................... 645 953 (128)
Proceeds from long-term debt.................................................. 15,301 1,000 --
Principal repayments under long-term debt..................................... (371) (4,992) (8,446)
Proceeds from government grants............................................... 716 2,204 338
Proceeds from financing arrangements (Note 9)................................. -- 1,600 --
Repayment of government grants................................................ -- (196) (308)
Principal repayments under financing obligations.............................. -- (36) (119)
Payment of dividends.......................................................... (342) -- (411)
Proceeds from stock issuance, net of issuance costs (Note 15)................. -- -- 3,807
Net loans/repayments to related parties....................................... 602 -- (1,851)
---------- --------- ---------
Net cash provided by/(used in) financing activities............................. $ 16,011 $ 942 $ (7,663)
---------- --------- ---------
Effect of foreign exchange rate changes on cash and cash equivalents............ $ 399 $ 216 $ 126
---------- --------- ---------
Change in cash and cash equivalents............................................. $ 534 $ (860) $ 1,203
Cash and cash equivalents at beginning of year.................................. 962 1,496 636
---------- --------- ---------
Cash and cash equivalents at end of year........................................ $ 1,496 $ 636 $ 1,839
---------- --------- ---------
---------- --------- ---------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
CASH PAID DURING THE YEAR FOR:
Interest...................................................................... $ 157 $ 1,649 $ 845
Income taxes, net of refunds.................................................. 140 604 3,245
NON-CASH TRANSACTIONS:
Capital lease obligations..................................................... -- $ 1,750 $ 163
Accrual for contingent purchase price consideration (Note 10)................. -- -- 552
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
7
<PAGE>
AXIOHM S.A.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NUMBER OF SHARES COMMON STOCK
-------------------- -------------------- CAPITAL
IN FOREIGN
CLASS CLASS EXCESS CURRENCY
-------------------- -------------------- OF PAR RETAINED TRANSLATION
A B A B VALUE EARNINGS ADJUSTMENT
--------- --------- --------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993................. 38,000 -- $ 616 $ -- $ 66 $ 2,416 $ (225)
Net income................................... -- -- -- -- -- 1,430 --
Dividends.................................... -- -- -- -- -- (342) --
Currency translation adjustment.............. -- -- -- -- -- -- 341
--------- --------- --------- --------- --------- ----------- ------
BALANCE AT DECEMBER 31, 1994................. 38,000 -- $ 616 $ -- $ 66 $ 3,504 $ 116
Net income................................... -- -- -- -- -- 1,930 --
Currency translation adjustment.............. -- -- -- -- -- -- (255)
--------- --------- --------- --------- --------- ----------- ------
BALANCE AT DECEMBER 31, 1995................. 38,000 -- $ 616 $ -- $ 66 $ 5,434 $ (139)
Issuance of Common Stock "A"................. 405 -- 8 -- 489 -- --
Issuance of Common Stock "B"................. -- 2,735 -- 52 3,297 -- --
Stock issuance costs......................... -- -- -- -- (39) -- --
Increases in nominal value of each share from
FF 100 to FF 500........................... -- -- 2,955 210 (3,165) -- --
Allocation to restricted reserves............ -- -- -- -- (322) 322 --
Dividends.................................... -- -- -- -- -- (411) --
Net income................................... -- -- -- -- -- 6,804 --
Currency translation adjustment.............. -- -- -- -- -- -- 256
--------- --------- --------- --------- --------- ----------- ------
BALANCE AT DECEMBER 31, 1996................. 38,405 2,735 $ 3,579 $ 262 $ 326 $ 12,149 $ 117
--------- --------- --------- --------- --------- ----------- ------
--------- --------- --------- --------- --------- ----------- ------
<CAPTION>
TOTAL
---------
<S> <C>
BALANCE AT DECEMBER 31, 1993................. $ 2,873
Net income................................... 1,430
Dividends.................................... (342)
Currency translation adjustment.............. 341
---------
BALANCE AT DECEMBER 31, 1994................. $ 4,302
Net income................................... 1,930
Currency translation adjustment.............. (255)
---------
BALANCE AT DECEMBER 31, 1995................. $ 5,977
Issuance of Common Stock "A"................. 497
Issuance of Common Stock "B"................. 3,349
Stock issuance costs......................... (39)
Increases in nominal value of each share from
FF 100 to FF 500........................... --
Allocation to restricted reserves............ --
Dividends.................................... (411)
Net income................................... 6,804
Currency translation adjustment.............. 256
---------
BALANCE AT DECEMBER 31, 1996................. $ 16,433
---------
---------
</TABLE>
The accompanying notes are integral part of the consolidated financial
statements.
8
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Axiohm S.A. ("Axiohm") designs, develops, manufactures and services printers,
printer components and printing systems utilizing thermal and impact
technologies. Axiohm's customers include major point-of-sale providers, gasoline
pump manufacturers, banking systems suppliers and other manufacturers of
equipment printing slips, tickets or receipts. Axiohm operates on a worldwide
basis with significant activities in North America and Europe.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION
The financial statements of Axiohm include the accounts of its wholly owned
subsidiaries in the United States, Hong Kong and Japan. All intercompany
accounts and transactions have been eliminated.
These accompanying financial statements have been presented in accordance with
accounting principles generally accepted in the United States of America ("US
GAAP").
B. USE OF ESTIMATES
The preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities as
of the date of the consolidated financial statements and the reported amount of
revenue and expenses during the reporting period. Actual results could differ
from estimates.
C. GOODWILL
Axiohm amortizes costs in excess of the fair value of net assets acquired using
the straight-line method over an estimated useful life of fifteen years.
D. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and depreciated using the
straight-line method over the following estimated useful lives of the related
assets:
<TABLE>
<S> <C>
Buildings....................................... 20 to 40
years
Machinery and equipment......................... 3 to 5 years
Molds and tooling............................... 3 to 5 years
Furniture and fixtures.......................... 3 to 7 years
Computer software............................... 1 to 3 years
</TABLE>
E. INVENTORIES
Inventories are valued at the lower of cost or market, cost being determined
using the first-in, first-out ("FIFO") method.
9
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
F. CASH AND CASH EQUIVALENTS
Cash equivalents consist principally of short-term highly liquid money market
funds with original maturities of less than three months.
G. REVENUE
Revenue from product sales is recognized at the time of shipment. Service
revenue is recognized upon completion of the service activity and the shipment
of the repaired product to the customer.
H. RESEARCH & DEVELOPMENT COSTS
Research and development costs are expensed as incurred. Certain government
research grants, which are repayable in the event that the related research
project proves to be successful, are recognized as a deduction to expenses when
the research project has been determined to be unsuccessful and all other
conditions of the grant have been satisfied.
I. TRANSLATION OF FINANCIAL STATEMENTS
Axiohm's financial results have been reported in U.S. dollars. The functional
currencies of Axiohm's subsidiaries are the local currencies where the
subsidiaries operate. When translating local currency based financial statements
into U.S. dollars, assets and liabilities are translated at the year end rate
unless hedged by forward foreign exchange contracts, in which case the rates
specified in such forward contracts are used, while income and expenses are
translated using the average rate for the year. Translation differences are
presented as a component of shareholders' equity.
J. FOREIGN CURRENCY HEDGES
Axiohm uses financial instruments, primarily forward exchange contracts, to
hedge its exposure to foreign currency exchange rate fluctuations resulting from
the fact that most of its expenses are incurred in French francs while a
substantial portion of its revenues and receivables are denominated in U.S.
dollars.
In order to mitigate the associated risk resulting from increases in the
French franc compared to the U.S. dollar, Axiohm identifies on a monthly basis
its cash requirements denominated in each currency for the next quarterly
period. Based on these requirements, currency forwards are entered into and
designated as hedges of specific cash commitments. These contracts must be
designated at inception as a hedge and measured for effectiveness at both
inception and on an ongoing basis. Realized and unrealized gains and losses
arising from currency forwards are recognized in income in the same period as
gains and losses resulting from the underlying hedged transactions. For
contracts which do not meet Axiohm's criteria for hedge accounting, realized and
unrealized gain or losses will be recognized currently. Axiohm's hedging
activities have not had a material impact on its operations or cash flows.
Axiohm does not use or hold financial instruments for speculative trading
purposes.
10
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
K. CONCENTRATION OF CREDIT RISK
Axiohm sells products to various customers across several industries throughout
the world. Axiohm performs on-going credit evaluations of its customers and
maintains reserves for potential credit losses. Such losses have been within
management's expectations. Axiohm generally requires no collateral from its
customers.
L. INCOME TAXES
Axiohm follows Statement of Financial Accounting Standard No. 109 ("SFAS 109"),
ACCOUNTING FOR INCOME TAXES. Under SFAS 109, the tax provision is determined
under the liability method. Under this method deferred tax assets and
liabilities are recognized based on the differences between the financial
reporting and the tax bases of assets and liabilities using presently enacted
tax rates. Valuation allowances are established on deferred tax assets when
management estimates that it is more likely than not that some or all of
deferred tax benefits will not be realized.
M. GOVERNMENT GRANTS AND SUBSIDIES
Grants received from government agencies for the acquisition of property and
equipment are netted against the related capital expenditure. Grants for
investments in foreign countries are deferred and recognized as a deduction to
expenses if and when the conditions for the grant have been satisfied. Subsidies
received for employee training are recognized as a deduction to expenses during
the period in which the related costs are incurred.
N. FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1994, 1995 and 1996, the carrying amount of Axiohm's financial
instruments, including cash and cash equivalents, trade receivables, trade
payables and other accrued liabilities, approximates their fair value due to
their short-term maturities. Based on quoted market prices and rates of interest
available to Axiohm, the carrying amount of its debt instruments and other
long-term liabilities at December 31, 1994, 1995 and 1996 also approximates fair
value.
O. PROFIT SHARING AND RETIREMENT INDEMNITY PLANS
Substantially all Axiohm employees participate in statutory profit sharing and
retirement indemnity plans. Amounts owed under the profit sharing plan are based
on a formula prescribed by French law. Benefit obligations under the retirement
indemnity plan are determined based on length of service, annual remuneration
and job grade. These obligations and the related compensation expense are
recorded in the financial statements of the period during which the related
benefits are earned.
P. POST-RETIREMENT MEDICAL PLAN
Certain Axiohm employees participate in a defined benefit post-retirement
medical plan. Axiohm's projected benefit obligation relating to such benefits is
calculated and recorded in accordance with Statement of Financial Accounting
Standards No. 106 ("SFAS 106"), ACCOUNTING FOR POST-RETIREMENT BENEFITS.
11
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Q. NEW ACCOUNTING STANDARDS
In March 1995, Statement of Financial Accounting Standards No. 121 ("SFAS 121"),
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF was issued. This statement requires that long-lived assets held
and used by an entity be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of an asset may not be
recoverable. This statement was implemented for the year ended December 31,
1996. The adoption of this accounting standard had no significant impact on the
financial position or results of operations of Axiohm. Axiohm will continually
assess impairment of long-lived assets and certain identifiable intangibles
whenever changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.
Effective January 1, 1996, Axiohm adopted Statement of Accounting Standards No.
123 ("SFAS 123"), ACCOUNTING FOR STOCK-BASED COMPENSATION. This statement
defines a fair value based method of accounting for employee options or similar
equity instruments and encourages all entities to adopt that method of
accounting. However, it also allows an entity to continue to measure
compensation costs using the intrinsic value based method of accounting
prescribed by Accounting Principle Board Opinion No. 25 ("APB 25"), ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES. Axiohm has elected to account for its employee
stock compensation plan under the provisions of APB 25.
2. IPB ACQUISITION
On December 29, 1994, Axiohm acquired the net assets of the printer division of
NCR ("the Seller") (formerly AT&T Global Information Solutions Company). The
acquisition was accounted for using the purchase method and the results of the
division have been included since that date.
The aggregate purchase price of the net assets acquired was $15.6 million
including acquisition costs and was financed through 12 year term loans
subscribed for a total amount of approximately $15.0 million and credit line
facilities of approximately $0.6 million. The agreement also provides for
additional contingent consideration for up to $5.0 million for each of the three
years ending December 31, 1995, 1996 and 1997 to be paid to the Seller to the
extent that sales made by Axiohm to the Seller exceed certain minimums specified
in the purchase agreement. Any additional consideration is allocated to
goodwill. In the year ended December 31, 1996, sales of products to the Seller
did exceed such minimums and an adjustment of $552 was made to goodwill (See
Note 10).
The purchase price has been allocated to the assets acquired and liabilities
assumed based upon fair market values at the date of acquisition. The fair value
of assets acquired and liabilities assumed is as follows:
<TABLE>
<S> <C>
Current assets.................................................... $ 8,032
Property, plant and equipment..................................... 8,664
Other assets...................................................... 298
Goodwill.......................................................... 2,415
Current liabilities............................................... (2,568)
Long-term liabilities............................................. (1,197)
---------
$ 15,644
---------
---------
</TABLE>
12
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
2. IPB ACQUISITION (CONTINUED)
The following unaudited statement of revenue, gross margin, income from
operations and net income for the year ended December 31, 1994 is presented as
if the acquisition had been made at the beginning of the period. The financial
information utilized for the division in computing the following pro forma has
been derived from unaudited financial records carved out from the Seller's own
accounts and presented by the Seller to Axiohm at the time of acquisition. These
records include actual results for the nine-month period ended September 30,
1994 and an estimate of the results for the three-month period ended December
31, 1994 as provided by the Seller.
The unaudited pro forma information is not necessarily indicative of the
revenue, gross margin, income from operations or net income that would have
occurred had the purchase been made at the beginning of the period.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
PRO FORMA (UNAUDITED)
---------------------
<S> <C>
Revenue.................................................................................... $ 66,218
Gross margin............................................................................... 18,923
Income from operations..................................................................... 4,142
Net income................................................................................. 3,032
</TABLE>
In connection with this acquisition, Axiohm and the Seller entered into a three
year OEM purchase agreement under which the Seller undertakes to purchase at
least 75% of its requirements for certain products from Axiohm at prices
specified in the agreement. On September 2, 1997, Axiohm entered into a new
three-year contract with NCR. The New NCR contract does not obligate NCR to
purchase a minimum of 75% of its requirements for transaction printers of the
type manufactured by Axiohm, but does provide that NCR and Axiohm intend and
expect that NCR will purchase from Axiohm substantially all of its requirements
for transaction printers.
3. ACCOUNTS RECEIVABLE, NET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Trade accounts receivable.................................................................... $ 9,838 $ 10,690
Less: allowance for doubtful accounts........................................................ (138) (138)
--------- ---------
Accounts receivable, net..................................................................... $ 9,700 $ 10,552
--------- ---------
--------- ---------
</TABLE>
For the years ended December 31, 1994, 1995 and 1996, revenue in the amount of
$2,063, $46,278 and $49,502, respectively, came from sales to NCR representing
approximately 9%, 64% and 52%, respectively, of Axiohm's total net sales. At
December 31, 1995 and 1996, accounts receivable from this customer were $4,239
and $2,860, respectively. All amounts are due within one year.
13
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
4. INVENTORIES, NET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1995 1996
--------- ---------
Raw materials and components............................................ $ 11,992 $ 13,345
Work in process......................................................... 2,152 949
Semi-finished and finished goods........................................ 1,555 1,793
--------- ---------
15,699 16,087
Less: allowance for obsolescence........................................ (2,193) (2,187)
--------- ---------
Inventories, net........................................................ $ 13,506 $ 13,900
--------- ---------
--------- ---------
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT, NET
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Land.................................................................... $ 803 $ 755
Buildings............................................................... 5,085 5,355
Machinery and equipment................................................. 1,763 1,797
Molds and tooling....................................................... 5,788 6,471
Furniture, fixtures and fittings........................................ 3,845 4,704
--------- ---------
17,284 19,082
Less: accumulated depreciation.......................................... (6,282) (7,847)
--------- ---------
Property, plant and equipment, net...................................... $ 11,002 $ 11,235
--------- ---------
--------- ---------
</TABLE>
Depreciation expense for the years ended December 31, 1994, 1995 and 1996 was
$1,044, $2,421 and $2,721, respectively.
6. GOODWILL
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Goodwill................................................................ $ 2,415 $ 2,967
Less: accumulated amortization.......................................... (161) (361)
--------- ---------
Goodwill, net........................................................... $ 2,254 $ 2,606
--------- ---------
--------- ---------
</TABLE>
Amortization expense for the years ended December 31, 1994, 1995 and 1996 was
$0, $161 and $200, respectively.
14
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
7. OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Accrued salaries and benefits................................................ $ 2,172 $ 2,501
Customer advances............................................................ 654 989
Accrued warranty expenses.................................................... 485 718
Income taxes................................................................. 371 500
Other taxes.................................................................. 224 381
NCR earnout.................................................................. -- 552
Relocation accrual........................................................... 262 --
Other........................................................................ 17 62
--------- ---------
Total other current liabilities.............................................. $ 4,185 $ 5,703
--------- ---------
--------- ---------
</TABLE>
8. LONG-TERM DEBT
Axiohm has entered into borrowing arrangements with various banks for loans
denominated in French Francs ("FF"), U.S. Dollars ("USD") and Japanese Yen
("JPY").
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Revolving credit line up to $8,000, the first $3,000 at lender's prime rate
plus three quarters (9.75% at December 31, 1995 and 9.5% at December 31,
1996), the next $5,000 at lender's prime plus one quarter (9.25% at
December 31, 1995 and 9.00% at December 31, 1996), payable in full January
1, 1998, secured by inventory, accounts receivable, contract rights,
equipment and general intangibles.......................................... $ 1,302 $ 1,174
Revolving credit line in FF, USD or JPY up to an equivalent
amount of FF 4.5 million at the quarterly weighted average interest rate on
the Interbank Money Market plus 1.0% or lender's prime rate plus 1.0%
(5.75% at December 31, 1995 and 4.31% at December 31, 1996),
payable in full January 1, 1998, secured by Axiohm's accounts receivable... 301 --
Business loan at 10% collateralized by various assets; balance paid
in full in July 1996....................................................... 3,045 --
Bank mortgage loan at lender's prime rate plus three quarters (9.75% at
December 31, 1995 and 9.5% at December 31, 1996), payable in monthly
installments of $44 (including interest) through 1997, amortized on
twelve-year schedule beginning in 1998, with balloon for full outstanding
balance due January 1, 2000; payment collateralized by building, machinery
and equipment.............................................................. 4,019 3,868
Three bank loans in FF at rates between 4.6% and 7.25%, payable
from 1997 to 2002, secured by Axiohm's equipment........................... 1,328 1,046
Bank loan in FF to acquire IPB assets at PIBOR one year rate plus
1.2% payable in seven yearly installments through 2001, secured by
IPB shares; balance paid in full in 1996................................... 4,373 --
Five business loans in FF at rates between 5.75% and 8.75%, secured
by Axiohm's equipment; balance paid in full in 1996........................ 467 --
--------- ---------
$ 14,835 $ 6,088
Less current portion......................................................... (1,748) (1,267)
--------- ---------
Total long-term debt......................................................... $ 13,087 $ 4,821
--------- ---------
--------- ---------
</TABLE>
Commitment fees on the total amount of the revolving credit line in USD are
payable annually at an annual rate of 0.25%.
15
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
8. LONG-TERM DEBT (CONTINUED)
At December 31, 1996, annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -----------------------------------------------------------------------------------------
<S> <C>
1997..................................................................................... $ 1,267
1998..................................................................................... 391
1999..................................................................................... 750
2000..................................................................................... 3,427
2001..................................................................................... 165
2002 and thereafter...................................................................... 88
---------
Total................................................................................ $ 6,088
---------
---------
</TABLE>
9. CAPITAL LEASE AND FINANCING OBLIGATIONS
a. CAPITAL LEASES
Axiohm and its subsidiaries lease office equipment and vehicles under various
capital lease contracts with terms extending through December 31, 2000.
b. FINANCING ARRANGEMENT
In 1994, Axiohm negotiated a FF 8.0 million ($1.6 million) grant from various
agencies of the government of France to subsidize the purchase and improvement
of certain properties in France. The agreement is structured as a sale/leaseback
transaction in which title to the purchased property was sold to a government
agency in exchange for a cash payment of FF 16 million ($3.2 million) and
subsequently leased back for a fifteen year period. The terms of the agreement
provide for a bargain purchase option at the conclusion of the lease term, hence
the sale/leaseback transaction has been accounted for as financing arrangement
in which the related assets and a corresponding obligation are recorded in
Axiohm's financial statements. A financing obligation representing the proceeds
for the sale/leaseback component of the transaction has been netted against the
underlying capital expenditure. At December 31, 1996, Axiohm has a contingent
liability to repay, in whole or in part, grants received of approximately FF 8.0
million ($1.6 million), in the event Axiohm does not meet the requirements of
the grant including minimum employment levels through 1997, minimum capital
expenditures and continued use of the building throughout the lease term.
16
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
9. CAPITAL LEASE AND FINANCING OBLIGATIONS (CONTINUED)
Future minimum lease commitments under capital leases and the financing
arrangement at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
CAPITAL
YEAR ENDING DECEMBER 31, LEASES FINANCING TOTAL
- --------------------------------------------------------------- ----------- ----------- ---------
<S> <C> <C> <C>
1997........................................................... $ 102 $ 189 $ 291
1998........................................................... 102 189 291
1999........................................................... 47 189 236
2000........................................................... 19 189 208
2001........................................................... -- 189 189
2002 and thereafter............................................ -- 1,600 1,600
----- ----------- ---------
Total minimum lease payments................................... $ 270 $ 2,545 $ 2,815
----- -----------
----- -----------
Less: amounts representing interest............................ (1,133)
---------
Present value of minimum lease payments........................ 1,682
Current portion................................................ (139)
---------
Long-term portion of capital lease obligations................. $ 1,543
---------
---------
</TABLE>
Included in property, plant and equipment in the accompanying consolidated
balance sheets are the following assets under capital leases and the financing
arrangement:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Building at cost......................................................... $ 1,634 $ 1,527
Equipment at cost........................................................ 150 310
--------- ---------
1,784 1,837
Less: accumulated depreciation........................................... (64) (210)
--------- ---------
Assets under capital leases and financing arrangement, net............... $ 1,720 $ 1,627
--------- ---------
--------- ---------
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
In connection with the 1994 acquisition of what is now its Axiohm IPB
subsidiary, Axiohm is contingently liable to the Seller for up to $5.0 million
for each of the three years ending December 31, 1995, 1996 and 1997, for
additional purchase consideration (See Note 2). As of December 31, 1996, Axiohm
had accrued $552 for contingent payments resulting from 1996 sales performance.
17
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
11. GOVERNMENT GRANT OBLIGATIONS
French government agencies provide various long-term grants to promote
fundamental research programs and to encourage commercial implementation
overseas. The reimbursement of such grants is contingent upon the success of the
related program.
These grants are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Fundamental research........................................ $ 1,709 $ 1,488
Commercial implementation in Asia........................... 1,218 1,274
--------- ---------
2,927 2,762
Less: current portion....................................... (327) (916)
--------- ---------
Long-term portion........................................... $ 2,600 $ 1,846
--------- ---------
--------- ---------
</TABLE>
12. SUPPLEMENTARY INCOME STATEMENT DISCLOSURES
A. REVENUE
In 1994, Axiohm received revenue in respect of liquidation damages from
three customers for a total amount of $ 0.9 million. This amount represents
indemnities to Axiohm for the non-fulfillment of contractual terms by these
customers.
B. OTHER INCOME
At the end of 1995 and into 1996, Axiohm received insurance proceeds of
$ 1.0 million in compensation for the loss of revenue and commercial damage
caused by water in the thermal head clean room of the Puiseaux facility. The
insurance proceeds have been included in other income.
13. INCOME TAXES
Axiohm operates internationally and tax rates are subject to applicable tax
legislation in the country in which it operates. The domestic and foreign
components of pre-tax income are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Domestic (France) pre-tax income/(loss).......... $ 1,979 $(1,011) $ 4,780
Foreign pre-tax (loss)/income.................... (67) 4,036 6,430
------- ------- -------
Total............................................ $ 1,912 $ 3,025 $11,210
------- ------- -------
------- ------- -------
</TABLE>
18
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
13. INCOME TAXES (CONTINUED)
The provision for income tax consists of:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
CURRENT INCOME TAX EXPENSE/(CREDIT)
Domestic.......................................... $ (283) $ (359) $ 1,159
Foreign........................................... 9 1,609 2,789
--------- --------- ---------
Total............................................... $ (274) $ 1,250 $ 3,948
--------- --------- ---------
--------- --------- ---------
DEFERRED INCOME TAX EXPENSE/(CREDIT)
Domestic.......................................... $ 661 $ (280) $ 577
Foreign........................................... 95 125 (119)
--------- --------- ---------
Total............................................... $ 756 $ (155) $ 458
--------- --------- ---------
--------- --------- ---------
</TABLE>
A reconciliation of the differences between income tax expense computed at
the French statutory rate and Axiohm's reported income tax provision is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Statutory rate....................................... 33.3% 36.7% 36.7%
Tax research credit................................ (14.8) (11.9) --
Non utilized foreign entities losses............... 5.9 6.8 1.7
Effect of tax rate differences in foreign
jurisdictions.................................... 0.8 1.7 1.1
Effect of change in tax rate on domestic deferred
taxes............................................ -- 2.8 --
Other.............................................. -- 0.1 (0.2)
--------- --------- ---
Effective Tax Rate................................... 25.2% 36.2% 39.3%
--------- --------- ---
--------- --------- ---
</TABLE>
A tax research credit of approximately $285 and $359 was recorded at December
31, 1994 and 1995, respectively. The tax research credit was based on an
increase in research and development expenditure. Additionally, certain tax
losses in foreign jurisdictions were unavailable for offset against taxable
income.
19
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
13. INCOME TAXES (CONTINUED)
The components of deferred tax assets/(liabilities) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Post-retirement benefit obligation...................... $ 643 $ 677
Investment grants....................................... 578 504
Operating loss carry forwards........................... 815 388
Other................................................... 403 720
--------- ---------
Total deferred tax assets................................. 2,439 2,289
Less: valuation allowance............................... (260) (388)
--------- ---------
Net deferred tax assets................................... $ 2,179 $ 1,901
--------- ---------
--------- ---------
Deferred tax liabilities:
Long-term tax reserve................................... $ (1,756) $ (1,603)
Plant and equipment..................................... (576) (639)
Goodwill................................................ (436) (407)
Provisions.............................................. -- (304)
Other................................................... (27) (22)
--------- ---------
Total deferred tax/liabilities............................ $ (2,795) $ (2,975)
--------- ---------
--------- ---------
</TABLE>
Axiohm recorded a valuation allowance of $260 and $388 at December 31, 1995
and 1996, respectively, for net operating loss carry forwards in certain tax
jurisdictions since realization of these future benefits cannot be reasonably
assured. These net operating loss carry forwards expire at varying dates through
2001.
14. OTHER LONG-TERM LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Provision for post-retirement benefit....................... 1,341 1,436
Other....................................................... 471 837
--------- ---------
Total....................................................... 1,812 2,273
--------- ---------
--------- ---------
</TABLE>
Axiohm is currently obligated to provide certain post-retirement medical and
life insurance benefits to approximately 100 employees who have met certain
requirements as to age (generally 55) and length of service (generally 10 years,
which includes a minimum of 5 years after January 1, 1995). Axiohm accounts for
the cost of these benefits in accordance with SFAS 106. Axiohm funds these costs
on a pay-as-you-go basis. The post-retirement benefit expense for the years
ended December 31, 1994, 1995 and 1996 amounts to $0 to $144 and $96,
respectively.
20
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
14. OTHER LONG-TERM LIABILITIES (CONTINUED)
The total obligation recognized in the balance sheet at December 31, 1995
and 1996 was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Active--not fully eligible................................ $ 1,471 $ 374
Retired................................................... -- 66
--------- ---------
Total................................................. 1,471 440
Unrecognized prior service cost............................. -- 1,690
Unrecognized net loss....................................... (130) (694)
--------- ---------
Accrued post-retirement benefit obligation.................. $ 1,341 $ 1,436
--------- ---------
--------- ---------
</TABLE>
Significant assumptions employed in this valuation include a discount rate
of 7.25% at December 31, 1995, and 7.50% at December 31, 1996. The pre-Medicare
eligible healthcare cost trend rate is 8.0% for 1996 (6.0% for post-Medicare)
declining by one percent each year through the year 2000 (1998 for post-
Medicare), after which a rate of 5.0% is utilized for each year.
The annual costs of post-retirement benefits are based on assumed discount
rates set to reflect market conditions. If the healthcare cost trend rate was
increased by one percentage point, the net post-retirement benefit expense for
the year ended December 31, 1994, 1995 and 1996 and the accumulated post-
retirement benefit obligation, as of December 31, 1995 and 1996 would not
increase by a material amount.
Axiohm sponsors an employee savings plan for certain U.S. employees which
conforms to the provisions of Section 401(k) of the Internal Revenue Code.
Axiohm also provides certain defined pension benefits (based on years of
service) to certain categories of employees.
Axiohm's obligations under these plans for 1994, 1995 and 1996 were not
material.
15. SHAREHOLDERS' EQUITY
A. SHARE CAPITAL
On June 24, 1996, Axiohm completed a private offering of 405 Common
Shares "A," and 2,735 Common Shares "B" to an employee of Axiohm and two
institutional investors, respectively, from which it received total proceeds
of $3,807, net of offering costs of $39.
Common Shares "B" have substantially the same terms as Common Shares "A"
except for their economic rights (represented by CERTIFICATS
D'INVESTISSEMENTS) and their voting rights (represented by CERTIFICATS DE
DROIT DE VOTE) which can be separated and sold individually.
On the same date, Axiohm increased the par value of its Common Shares
from FF 100 to FF 500.
B. RETAINED EARNINGS
At December 31, 1996, Axiohm's distributable retained earnings amounted
to $11,025 and would be subject to $2,851 of additional withholding tax,
"PRECOMPTE," in case of distribution. The withholding tax would be recorded
in equity as part of the dividend paid to shareholders and shareholders
21
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
15. SHAREHOLDERS' EQUITY (CONTINUED)
receiving the dividend would be entitled to a tax credit "AVOIR FISCAL" at
least equal to the withholding tax paid, under conditions provided for in
relevant tax treaties under French law.
C. STOCK OPTIONS
On December 15, 1995, the shareholders of Axiohm implemented a stock
option plan authorizing the Board of Directors to issue stock options for
the subscription of a maximum of 1,583 shares of Axiohm's Common Stock.
On February 19, 1996, the Board of Directors granted all 1,583 options
(to acquire one share of Common Stock each) to an officer of Axiohm at an
exercise price of FF 6,050 which approximated the fair value of the
underlying shares on the date of grant.
The options are valid for ten years (until December 31, 2005) and become
exercisable ratably over five years. Non-vested options become void upon
termination of employment. The plan also allows for accelerated vesting upon
certain conditions and events including a public offering of Axiohm's stock
and specified changes in the existing ownership of Axiohm.
As of December 31, 1996, all 1,583 options (none of which are
exercisable) remained outstanding.
Had compensation costs for Axiohm's stock option plan been determined
consistent with the fair value approach set forth in SFAS No. 123, Axiohm's
net income for the year ended December 31, 1996 would have been reduced to
$6,726. The fair value of the options granted is estimated on the date of
grant using the minimum value method with the following assumptions: 3.9%
dividend yield, a risk free interest rate of 6.35%, an expected option life
of 10 years and no forfeitures.
16. FOREIGN CURRENCY HEDGES
At December 31, 1996, Axiohm's portfolio consisted of five foreign exchange
contracts to sell $4.5 million at an average rate of $1 = FF 5.17 and one option
to sell $3.0 million at August 29, 1997 at the rate of FF 5.15 for $1. The
option was acquired at a cost of $76.
17. RELATED PARTY TRANSACTIONS
Axiohm purchased from Dardel Technologies, a significant shareholder (44%
ownership) of Axiohm, services including insurance coverage, telecommunications
and legal and management assistance. These services amounted to $1,029, $995 and
$991 in fiscal years 1994, 1995 and 1996, respectively. In addition, Dardel
Technologies sub-leases to Axiohm S.A. office space that it leases from a
company owned by three directors of Axiohm S.A. These sub-lease payments to
Dardel Technologies amounted to $130, $291 and $279 in 1994, 1995 and 1996,
respectively. This same company also provided office management services to
Axiohm S.A. for an amount of $202, $288 and $263 in 1994, 1995 and 1996,
respectively. The terms of such transactions approximate those of an arm's
length transaction with an unrelated party.
Axiohm provided selling and commercial services to Enerdis S.A., a
subsidiary of Dardel Technologies for an amount of $0, $93 and $132 in the years
ended December 31, 1994, 1995 and 1996, respectively. The terms of such
transactions approximate those of an arm's length transaction with an unrelated
party.
22
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
17. RELATED PARTY TRANSACTIONS (CONTINUED)
In 1994, 1995 and 1996, Axiohm participated in a cash pooling agreement with
Dardel Technologies allowing it to borrow or loan cash as considered necessary.
At December 31, 1996, Axiohm S.A. had an outstanding loan with Dardel
Technologies amounting to $1,832 and bearing interest at 6.42% which was
recorded in other current assets. This loan was reimbursed in April 1997 and the
cash pooling agreement has been subsequently terminated. The terms of such
transactions approximate those of an arm's length transaction with an unrelated
party.
18. GEOGRAPHICAL INFORMATION
Axiohm operates predominantly in a single industry as a manufacturer and
service provider of thermal and impact printing equipment. Axiohm has operations
in France, the United States, Hong Kong and Japan. Transfers between geographic
areas primarily represent intercompany export sales of approximately $3.7
million, $8.7 million and $17.3 million in 1994, 1995 and 1996, respectively.
These produced goods are accounted for based on established sales prices between
the related companies. In computing income from operations for foreign
subsidiaries, no allocations of general corporate expenses, interest or income
taxes have been made.
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
NORTH
EUROPE AMERICA ASIA ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers....................... $ 20,613 $ 3,339 $ -- $ -- $ 23,952
Other revenues........................................ 858 -- -- -- 858
Transfer between geographic areas..................... 3,188 507 21 (3,716) --
--------- --------- --------- ------------ ------------
Total revenues........................................ $ 24,659 $ 3,846 $ 21 $ (3,716) $ 24,810
--------- --------- --------- ------------ ------------
--------- --------- --------- ------------ ------------
Operating profit/(loss)............................... $ 1,889 $ 342 $ (332) $ -- $ 1,899
Net income/(loss)..................................... $ 1,499 $ 268 $ (337) $ -- $ 1,430
Total assets at December 31, 1994..................... $ 22,578 $ 21,327 $ 103 $ (9,255) $ 34,753
</TABLE>
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NORTH
EUROPE AMERICA ASIA ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers....................... $ 17,317 $ 54,099 $ 739 $ -- $ 72,155
Transfer between geographic areas..................... 8,716 -- -- (8,716) --
--------- --------- --------- ------------ ------------
Total revenues........................................ $ 26,033 $ 54,099 $ 739 $ (8,716) $ 72,155
--------- --------- --------- ------------ ------------
--------- --------- --------- ------------ ------------
Operating profit/(loss)............................... $ 68 $ 5,540 $ (528) $ (324) $ 4,756
Net income/(loss)..................................... $ (177) $ 2,862 $ (561) $ (194) $ 1,930
Total assets at December 31, 1995..................... $ 24,089 $ 26,184 $ 318 $ (10,407) $ 40,184
</TABLE>
23
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
18. GEOGRAPHICAL INFORMATION (CONTINUED)
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NORTH
EUROPE AMERICA ASIA ELIMINATIONS CONSOLIDATED
--------- --------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales to unaffiliated customers....................... $ 20,367 $ 73,625 $ 1,310 $ -- $ 95,302
Transfer between geographic areas..................... 17,335 -- -- (17,335) --
--------- --------- --------- ------------ ------------
Total revenues........................................ $ 37,702 $ 73,625 $ 1,310 $ (17,335) $ 95,302
--------- --------- --------- ------------ ------------
--------- --------- --------- ------------ ------------
Operating profit/(loss)............................... $ 4,075 $ 7,613 $ (445) $ (192) $ 11,051
Net income/(loss)..................................... $ 3,100 $ 4,265 $ (504) $ (57) $ 6,804
Total assets at December 31, 1996..................... $ 25,732 $ 28,640 $ 599 $ (10,993) $ 43,978
</TABLE>
19. SUBSEQUENT EVENTS: MERGER WITH DH TO COMBINE OPERATIONS
On August 12, 1997, Axiohm closed a tender offer to acquire approximately
7,000,000 shares of DH Technology Inc. ("DH"). The tender offer was made
pursuant to the Agreement and plan of Merger (the "Merger Agreement") dated July
14, 1997 between both companies. The Merger Agreement provided for the
subsequent merger of Axiohm into DH resulting in Axiohm becoming a wholly-owned
subsidiary of DH; however, as a result of the tender offer and related
transactions, the former shareholders of Axiohm assumed ownership of
approximately 85% of the merged entities and, therefore, for financial purposes,
the transaction has been accounted for in a manner similar to a reverse
acquisition whereby Axiohm was treated as the acquirer and DH as the acquired
company.
The ultimate merger of Axiohm into DH was consummated through a series of
transactions pursuant to the Merger Agreement on October 2, 1997. Subsequently,
the surviving legal entity, DH Technology, Inc. changed its name to "Axiohm
Transaction Solutions, Inc."
The Tender Offer was financed through the incurrence of $166.2 million of
senior indebtedness and the issuance of $24 million of preferred stock of Axiohm
IPB, a wholly owned subsidiary of Axiohm (collectively the "Tender Financing").
The Tender Financing was subsequently repaid with i) borrowings under an
$85.0 million credit facility placed with a syndicate of banks and ii) the
proceeds from a private placement of $120.0 million of 9 3/4% Senior
Subordinated Notes due 2007 (the "Senior Notes"). Obligations under the Senior
Notes are fully and unconditionally guaranteed, jointly and severally, on a
senior subordinated basis by certain of Axiohm's directly or indirectly
wholly-owned subsidiaries (the "Guarantor Subsidiaries") pursuant to guarantor
indenture arrangements.
Condensed financial information regarding the Guarantor Subsidiaries (Axiohm
S.A., which became Axiohm SARL in connection with the above merger transaction,
Axiohm IPB and Axiohm Inc. which was merged into Axiohm IPB effective January 1,
1997) and non-Guarantor subsidiaries (Axiohm Ltd. (Hong Kong) and Axiohm Japan
Inc.) as of December 31, 1996 and 1995 and for each of the three years in the
period ended December 31, 1996 is presented below for purposes of complying with
the reporting requirements of the Guarantor Subsidiaries. Separate financial
statements and other disclosures concerning each Guarantor Subsidiary have not
been presented because management has determined that such information is not
material to investors.
24
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------------------
GUARANTORS NON GUARANTORS ELIMINATIONS CONSOLIDATED
----------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash & cash equivalents............................... $ 1,724 $ 115 $ -- $ 1,839
Accounts receivable, net.............................. 10,258 294 -- 10,552
Inventories, net...................................... 13,811 89 -- 13,900
Other current assets.................................. 4,293 59 (1,066) 3,286
----------- ------- ------------ ------------
Total current assets.............................. 30,086 557 (1,066) 29,577
Property, plant and equipment, net...................... 11,213 22 -- 11,235
Other assets, including Goodwill........................ 3,454 20 (308) 3,166
----------- ------- ------------ ------------
Total Assets...................................... $ 44,753 $ 599 $ (1,374) $ 43,978
----------- ------- ------------ ------------
----------- ------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable...................................... $ 7,067 $ 413 $ -- $ 7,480
Bank overdraft........................................ -- -- -- --
Current portion of long-term debt..................... 1,250 17 -- 1,267
Current portion of financing obligations.............. 139 -- -- 139
Current portion of government grant obligations....... 916 -- -- 916
Other current liabilities............................. 5,660 1,109 (1,066) 5,703
----------- ------- ------------ ------------
Total current liabilities......................... 15,032 1,539 (1,066) 15,505
Long-term debt.......................................... 4,821 -- -- 4,821
Capital lease and financing obligations................. 1,543 -- -- 1,543
Government grant obligations............................ 1,846 -- -- 1,846
Other long-term liabilities............................. 3,829 1 -- 3,830
----------- ------- ------------ ------------
Total Liabilities................................. $ 27,071 $ 1,540 $ (1,066) $ 27,545
----------- ------- ------------ ------------
Commitments and contingencies -- -- -- --
Shareholders' equity:
Capital, par value.................................... $ 3,841 $ 308 $ (308) $ 3,841
Capital in excess of par value........................ 326 -- -- 326
Retained earnings..................................... 13,507 (1,358) -- 12,149
Foreign currency translation adjustment............... 8 109 -- 117
----------- ------- ------------ ------------
Total Shareholders' equity........................ 17,682 (941) (308) 16,433
----------- ------- ------------ ------------
Total Liabilities and Shareholders' equity.............. $ 44,753 $ 599 $ (1,374) $ 43,978
----------- ------- ------------ ------------
----------- ------- ------------ ------------
</TABLE>
25
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
CONDENSED CONSOLIDATING BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------------------
GUARANTORS NON GUARANTORS ELIMINATIONS CONSOLIDATED
----------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash & cash equivalents............................... $ 626 $ 10 $ -- $ 636
Accounts receivable, net.............................. 9,555 145 -- 9,700
Inventories, net...................................... 13,448 58 -- 13,506
Other current assets.................................. 3,106 50 (721) 2,435
----------- ------- ------------ ------------
Total current assets.............................. 26,735 263 (721) 26,277
Property, plant and equipment, net...................... 10,969 33 -- 11,002
Other assets, including Goodwill........................ 3,191 22 (308) 2,905
----------- ------- ------------ ------------
Total Assets...................................... $ 40,895 $ 318 $ (1,029) $ 40,184
----------- ------- ------------ ------------
----------- ------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable...................................... $ 6,538 $ 137 $ -- $ 6,675
Bank overdraft........................................ 545 -- -- 545
Current portion of long-term debt..................... 1,748 -- -- 1,748
Current portion of financing obligations.............. 84 -- -- 84
Current portion of government grant obligations....... 327 -- -- 327
Other current liabilities............................. 4,156 750 (721) 4,185
----------- ------- ------------ ------------
Total current liabilities......................... 13,398 887 (721) 13,564
Long-term debt.......................................... 13,087 -- -- 13,087
Capital lease and financing obligations................. 1,662 -- -- 1,662
Government grant obligations............................ 2,600 -- -- 2,600
Other long-term liabilities............................. 3,294 -- -- 3,294
----------- ------- ------------ ------------
Total Liabilities................................. $ 34,041 $ 887 $ (721) $ 34,207
----------- ------- ------------ ------------
Commitments and contingencies -- -- -- --
Shareholders' equity:
Capital, par value.................................... $ 616 $ 308 $ (308) $ 616
Capital in excess of par value........................ 66 -- -- 66
Retained earnings..................................... 6,288 (854) -- 5,434
Foreign currency translation adjustment............... (116) (23) -- (139)
----------- ------- ------------ ------------
Total Shareholders' equity........................ 6,854 (569) (308) 5,977
----------- ------- ------------ ------------
----------- ------- ------------ ------------
Total Liabilities and Shareholders' equity.............. $ 40,895 $ 318 $ (1,029) $ 40,184
----------- ------- ------------ ------------
----------- ------- ------------ ------------
</TABLE>
26
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------
GUARANTORS NON GUARANTORS ELIMINATIONS CONSOLIDATED
----------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenue................................................. $ 95,090 $ 1,310 $ (1,098) $ 95,302
Cost and expenses:
Cost of products sold................................. (66,290) (1,198) 1,098 (66,390)
Selling, general and administrative................... (10,456) (557) -- (11,013)
Research and development.............................. (6,648) -- -- (6,648)
Goodwill amortization................................. (200) -- -- (200)
----------- ------- ------------ ------------
Total costs and expenses................................ (83,594) (1,755) 1,098 (84,251)
Income from operations.................................. 11,496 (445) -- 11,051
Interest (expense)/income, net.......................... (817) (57) -- (874)
Other income............................................ 1,033 -- -- 1033
----------- ------- ------------ ------------
Income before income taxes.............................. 11,712 (502) -- 11,210
Provision for income taxes.............................. (4,404) (2) -- (4,406)
----------- ------- ------------ ------------
Net income.............................................. $ 7,308 $ (504) $ -- $ 6,804
----------- ------- ------------ ------------
----------- ------- ------------ ------------
</TABLE>
27
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------
GUARANTORS NON GUARANTORS ELIMINATIONS CONSOLIDATED
----------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue................................................. $ 71,929 $ 739 $ (513) $ 72,155
Cost and expenses:
Cost of products sold................................. (52,220) (495) 513 (52,202)
Selling, general and administrative................... (8,428) (772) -- (9,200)
Research and development.............................. (5,836) -- -- (5,836)
Goodwill amortization................................. (161) -- -- (161)
----------- ------- ----- ------------
Total costs and expenses................................ (66,645) (1,267) 513 (67,399)
Income from operations.................................. 5,284 (528) -- 4,756
Interest expense, net................................... (1,709) (22) -- (1,731)
Other income/(expense), net............................. 11 (11) -- --
----------- ------- ----- ------------
Income before income taxes.............................. 3,586 (561) -- 3,025
Provision for income taxes.............................. (1,095) -- -- (1,095)
----------- ------- ----- ------------
Net income.............................................. $ 2,491 $ (561) $ -- $ 1,930
----------- ------- ----- ------------
----------- ------- ----- ------------
</TABLE>
28
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
CONDENSED CONSOLIDATING STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------------------------------------
GUARANTORS NON GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ----------------- --------------- ------------
<S> <C> <C> <C> <C>
Revenue................................................. $ 24,808 $ 21 $ (19) $ 24,810
Cost and expenses:
Cost of products sold................................. (15,095) (19) 19 (15,095)
Selling, general and administrative................... (4,172) (334) -- (4,506)
Research and development.............................. (3,310) -- -- (3,310)
Goodwill amortization................................. -- -- -- --
----------- ----- --- ------------
Total costs and expenses................................ (22,577) (353) 19 (22,911)
Income from operations.................................. 2,231 (332) -- 1,899
Interest expense, net................................... (149) (5) -- (154)
Other income/(expense), net............................. 167 -- -- 167
----------- ----- --- ------------
Income before income taxes.............................. 2,249 (337) -- 1,912
Provision for income taxes.............................. (482) -- -- (482)
----------- ----- --- ------------
Net income.............................................. $ 1,767 $ (337) $ -- $ 1,430
----------- ----- --- ------------
----------- ----- --- ------------
</TABLE>
29
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
CONDENSED CONSOLIDATING STATEMENT OF CASH-FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------
GUARANTORS NON GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY/(USED IN) OPERATING
ACTIVITIES............................................ $ 12,093 $ (356) $ -- $ 11,737
----------- ----- ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES................... $ (2,989) $ (8) $ -- $ (2,997)
----------- ----- ------------ ------------
Principal repayments under long-term debt............... $ (8,446) $ -- $ -- $ (8,446)
Net proceeds from government grants..................... 30 -- -- 30
Proceeds from stock issuance, net of issuance costs..... 3,807 -- -- 3,807
Loans (to)/from related parties......................... (2,320) 469 -- (1,851)
Other................................................... (1,203) -- -- (1,203)
----------- ----- ------------ ------------
NET CASH (USED IN)/PROVIDED BY FINANCING
ACTIVITIES............................................ $ (8,132) $ 469 $ -- $ (7,663)
----------- ----- ------------ ------------
Effect of foreign exchange rate changes on cash and cash
equivalents........................................... $ 126 -- -- 126
----------- ----- ------------ ------------
Change in cash and cash equivalents..................... $ 1,098 $ 105 $ -- $ 1,203
Cash and cash equivalents at beginning of year.......... 626 10 -- 636
----------- ----- ------------ ------------
Cash and cash equivalents at end of year................ $ 1,724 $ 115 $ -- $ 1,839
----------- ----- ------------ ------------
----------- ----- ------------ ------------
</TABLE>
30
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
CONDENSED CONSOLIDATING STATEMENT OF CASH-FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------------
GUARANTORS NON GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY/(USED IN) OPERATING
ACTIVITIES............................................ $ 1,661 $ (654) $ -- $ 1,007
----------- ----- ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES................... $ (3,015) $ (10) $ -- $ (3,025)
----------- ----- ------------ ------------
Proceeds from long-term debt............................ $ 1,000 $ -- $ -- $ 1,000
Principal repayments under long-term debt............... (4,992) -- -- (4,992)
Net proceeds from government grants..................... 2,008 -- -- 2,008
Net proceeds from financing arrangements................ 1,564 -- -- 1,564
Loans (to)/from related parties......................... (650) 650 -- --
Other................................................... 1,362 -- -- 1,362
----------- ----- ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES............... $ 292 $ 650 $ -- $ 942
----------- ----- ------------ ------------
Effect of foreign exchange rate changes on cash and cash
equivalents........................................... $ 216 -- -- 216
----------- ----- ------------ ------------
Change in cash and cash equivalents..................... $ (846) $ (14) $ -- $ (860)
Cash and cash equivalents at beginning of year.......... 1,472 24 -- 1,496
----------- ----- ------------ ------------
Cash and cash equivalents at end of year................ $ 626 $ 10 $ -- $ 636
----------- ----- ------------ ------------
----------- ----- ------------ ------------
</TABLE>
31
<PAGE>
AXIOHM S.A.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT AS OTHERWISE STATED)
CONDENSED CONSOLIDATING STATEMENT OF CASH-FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
----------------------------------------------------------
GUARANTORS NON GUARANTORS ELIMINATIONS CONSOLIDATED
----------- ----------------- ------------ ------------
<S> <C> <C> <C> <C>
NET CASH PROVIDED BY/(USED IN) OPERATING
ACTIVITIES............................................ $ 2,492 $ (331) $ -- $ 2,161
----------- ----- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
NCR acquisition......................................... $ (15,644) $ -- $ -- $ (15,644)
Other................................................... (2,321) (72) -- (2,393)
----------- ----- ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES................... $ (17,965) $ (72) $ -- $ (18,037)
----------- ----- ------------ ------------
Proceeds from long-term debt............................ $ 15,301 $ -- $ -- $ 15,301
Principal repayments under long-term debt............... (371) -- -- (371)
Net proceeds from government grants..................... 716 -- -- 716
Proceeds from stock issuance, net of issuance costs..... (308) 308 -- --
Loans to related parties................................ 496 106 -- 602
Other................................................... (265) 28 -- (237)
----------- ----- ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES............... $ 15,569 $ 442 $ -- $ 16,011
----------- ----- ------------ ------------
Effect of foreign exchange rate changes on cash and cash
equivalents........................................... $ 414 (15) -- 399
----------- ----- ------------ ------------
Change in cash and cash equivalents..................... $ 510 $ 24 $ -- $ 534
Cash and cash equivalents at beginning of year.......... 962 -- -- 962
----------- ----- ------------ ------------
Cash and cash equivalents at end of year................ $ 1,472 $ 24 $ -- $ 1,496
----------- ----- ------------ ------------
----------- ----- ------------ ------------
</TABLE>
32
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------- SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 1,839 $ 36,248
Restricted cash................................................................... -- 8,594
Accounts receivable, net.......................................................... 10,552 32,295
Inventories....................................................................... 13,900 28,523
Prepaid expenses and other current assets......................................... 3,286 9,487
------------- -------------
Total current assets............................................................ 29,577 115,147
Fixed assets, net of accumulated depreciation..................................... 11,235 20,928
Intangible assets................................................................. 2,606 86,839
Other assets...................................................................... 560 5,240
------------- -------------
Total assets.................................................................... $ 43,978 $ 228,154
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................................................. $ 7,480 $ 15,082
Current portion of long-term debt................................................. 2,322 4,060
Accrued payroll, payroll taxes and benefits....................................... -- 4,877
Accrued expenses and other current liabilities.................................... 5,703 7,529
Income taxes payable.............................................................. -- 3,140
Deferred revenue.................................................................. -- 493
------------- -------------
Total current liabilities....................................................... 15,505 35,181
Non-current liabilities:
Senior subordinated debt.......................................................... -- 187,800
Other long-term debt and long-term liabilities.................................... 10,483 15,919
Deferred tax liability............................................................ 1,557 1,627
------------- -------------
Total liabilities............................................................... 27,545 240,527
------------- -------------
Shareholders' equity (deficit):
Preferred shares, no par value
Authorized: 1,000,000 shares, none issued....................................... -- --
Common shares:
Common stock, authorized: 28,500,000 shares; issued and outstanding: 6,512,926
shares in 1996 and 1997....................................................... 4,167 23,851
Foreign currency translation adjustment........................................... 117 (107)
Retained earnings (accumluated deficit)........................................... 12,149 (36,117)
------------- -------------
Total shareholders' equity (deficit)............................................ 16,433 (12,373)
------------- -------------
Total liabilities and shareholders' equity...................................... $ 43,978 $ 228,154
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
33
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1997
--------- ----------
(UNAUDITED)
<S> <C> <C>
Net sales.................................................................................. $ 71,965 $ 99,558
Cost of net sales.......................................................................... 49,792 66,978
--------- ----------
Gross margin............................................................................... 22,173 32,580
Operating expenses:
Selling, general and administrative...................................................... 8,303 13,878
Research and development................................................................. 4,702 6,198
In-process technology.................................................................... -- 50,831
--------- ----------
Total operating expenses................................................................... 13,005 70,907
Income (loss) from operations.............................................................. 9,168 (38,327)
Interest and other income.................................................................. 1,229 390
Interest and other expense................................................................. 946 3,077
--------- ----------
Income (loss) before income taxes.......................................................... 9,451 (41,014)
Income taxes............................................................................... 3,657 5,484
--------- ----------
Net income (loss).......................................................................... $ 5,794 $ (46,498)
--------- ----------
--------- ----------
Net income (loss) per share................................................................ $ 0.93 $ (7.14)
Weighted average number of shares outstanding
Per share (primary and fully diluted):..................................................... 6,243 6,513
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
34
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1996 1997
--------- ----------
(UNAUDITED)
<S> <C> <C>
CASHFLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................................................... $ 5,794 $ (46,498)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Write off of acquired in-process technology............................................. -- 50,831
Depreciation and amortization........................................................... 2,008 5,369
Other non-cash charges.................................................................. 939 450
Changes in assets and liabilities, net of effects of acquisition of business:
Accounts receivable..................................................................... (4,851) (8,909)
Inventory............................................................................... 1,738 (1,323)
Prepaid expenses and other assets....................................................... (501) 4,819
Accounts payable and accrued expenses................................................... 4,466 3,962
--------- ----------
Net cash provided by operating activities................................................... 9,593 8,701
CASHFLOWS FROM INVESTING ACTIVITIES:
Payment for acquisition of business, net of cash acquired................................. -- (148,074)
Capital expenditures...................................................................... (2,532) (3,670)
--------- ----------
Net cash used in investing activities....................................................... (2,532) (151,744)
--------- ----------
CASHFLOWS FROM FINANCING ACTIVITIES:
Proceeds from tender financing............................................................ -- 186,979
Net repayment under line of credit........................................................ (759) (1,051)
Principal repayments on long term debt.................................................... (8,216) (5,000)
Dividends................................................................................. (411) (1,768)
Proceeds from stock issuance, net of issuance costs....................................... 3,807 --
Debt issuance costs....................................................................... -- (2,799)
Loans to related parties.................................................................. (388) 1,713
--------- ----------
Net cash provided by (used in) financing activities......................................... (5,967) 178,074
--------- ----------
Effect of exchange rate changes on cash..................................................... 12 (622)
--------- ----------
Net increase in cash and cash equivalents................................................... 1,106 34,409
Cash and cash equivalents at beginning of period............................................ 636 1,839
--------- ----------
Cash and cash equivalents at end of period.................................................. $ 1,742 $ 36,248
--------- ----------
--------- ----------
SUPPLEMENTAL CASHFLOW DISCLOSURES:
Interest paid............................................................................. $ 848 $ 488
Income taxes paid net of refunds.......................................................... $ 2,224 $ 4,723
SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of business:
Fair value of assets acquired, net of cash acquired..................................... -- $ 134,480
In process technology................................................................... -- $ 50,831
Liabilities assumed..................................................................... -- $ (17,995)
Fair value of non-tendered stock........................................................ -- $ (19,242)
--------- ----------
Cash paid, net of cash acquired......................................................... -- $ 148,074
During 1996, the Company financed certain capital expenditures totaling $163,000 through
the incurrence of capital lease obligations.
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
35
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 1: UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of only normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the nine month period ended September
30, 1997 are not necessarily indicative of the results which may be expected for
the year ended December 31, 1997 or any other period. Reference is made to the
Consolidated Financial Statements and Notes thereto included in the AX
Acquisition Corporation's Schedule 14D-1 filing dated July 16,1997, for further
information.
NOTE 2: BASIS OF PRESENTATION
On August 21, 1997, pursuant to an Agreement and Plan of Merger dated as of
July 14, 1997 (the "Agreement of Merger"), AX Acquisition Corporation ("AX"), a
wholly-owned subsidiary of Axiohm S.A., acquired approximately 88%, or 7,000,000
shares, of the outstanding Common Stock of DH Technology, Inc. ("DH Technology")
through a public tender offer to the shareholders of DH Technology at a price of
$25 per share (the "Tender Offer").
On October 2, 1997, pursuant to the Agreement of Merger, AX acquired 100% of
the outstanding Common Stock of Axiohm S.A. in exchange for 5,518,524 shares of
DH Technology Common Stock and $12.2 million in cash (the "Share Exchange
Offer"). Simultaneous with the Share Exchange Offer, DH Technology purchased all
of the outstanding shares of AX in exchange for the assumption of approximately
$190 million of debt (the "Acquisition Financing") incurred by AX to finance the
Tender Offer. Immediately after the Share Exchange Offer, AX was merged with and
into DH Technology (the "Merger"), the surviving legal entity, and the company
changed its name from "DH Technology, Inc." to "Axiohm Transaction Solutions,
Inc". Immediately after the Merger, approximately 85% of DH Technology's
outstanding Common Stock was held by the former shareholders of Axiohm S.A. and
15% was held by the former public shareholders of DH Technology, Inc. Axiohm
S.A. and its subsidiaries and DH Technology and its subsidiaries are hereinafter
referred to collectively as the "Company".
The Tender Offer, the Share Exchange Offer and the Merger (collectively the
"Acquisition") have been accounted for as a reverse acquisition, in which Axiohm
S.A. was treated as the acquiror for accounting purposes. Accordingly, the
historical financial information for periods prior to August 31, 1997 are those
of Axiohm S.A. The effective date of the Acquisition and Merger of DH Technology
for accounting purposes was August 31, 1997, and, accordingly, the capital
structure of the Company has been retroactively restated to reflect the number
of shares outstanding as a result of the Acquisition. The results of operations
for the nine month periods ended September 30, 1997 include the operations of DH
Technology for the month of September 1997.
36
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 3: ACQUISITION
The Acquisition of DH Technology has been accounted for using the purchase
method of accounting. The aggregate purchase price of $208.6 million was
allocated based on the fair values of tangible and intangible assets acquired
and consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Cash paid for DH Technology shares............................................ $ 175,000,000
Cash paid for DH Technology stock options..................................... 12,720,000
Transaction costs............................................................. 1,667,000
Fair value of DH Technology non-tendered shares (1)........................... 19,242,000
--------------
$ 208,629,000
--------------
--------------
</TABLE>
- ------------------------
(1) Recorded as an increase to common stock on the accompanying condensed
consolidated balance sheet.
The Company expects that the final purchase price allocation will be known
by December 31, 1997 and could differ from the preliminary allocation. A summary
of the preliminary purchase price allocation is as follows:
<TABLE>
<S> <C>
Net tangible assets acquired.................................. $76,152,000
In-process research and development........................... 50,831,000
Acquired technology........................................... 22,910,000
Customer lists................................................ 5,100,000
Workforce..................................................... 2,100,000
Goodwill...................................................... 51,536,000
-----------
Total......................................................... $208,629,000
-----------
-----------
</TABLE>
The purchased in-process research and development had not reached
technological feasibility, had no future uses, and was charged to operations
upon acquisition. Goodwill and other intangibles are being amortized over three
years using the straight line method, which is the period estimated to be
benefited.
Of the cash paid for the DH Technology stock options, $8.6 million was
funded to a Rabbi trust and is reflected on the balance sheet as restricted
cash.
The Acquisition Financing consisted of $166.2 million of senior indebtedness
under a credit facility with an institutional lender and $24 million of interim
preferred stock financing. Both of these amounts were fully repaid on October 2,
1997 with the proceeds from a private placement of $120 million of 9 3/4% Senior
Subordinated Notes due 2007 and borrowings under an $85 million Credit
Agreement. See Note 5 of the Notes to Condensed Consolidated Financial
Statements.
The following unaudited pro forma information has been prepared assuming
that the Acquisition and the Acquisition Financing had occurred at the beginning
of the periods presented. Pro forma adjustments included increased amortization
for the purchase price in excess of assets acquired; in-process research and
development expense; increased interest expense from the Acquisition Financing;
and related income tax
37
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 3: ACQUISITION (CONTINUED)
effects. The pro forma information does not reflect any potential cost savings
from combining the operations of DH Technology and Axiohm S.A.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------------
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
------------------ ------------------
<S> <C> <C>
Net sales............................................. $ 159,222,000 $ 158,289,000
Net loss.............................................. $ 67,156,000 $ 69,239,000
Net loss per share.................................... $ 10.76 $ 10.63
Weighted average number of shares outstanding......... 6,242,926 6,512,926
</TABLE>
The pro forma information is provided for information purposes only and does
not purport to be indicative of the Company's results of operations that would
actually have been achieved had the Acquisition and the Acquisition Financing
been completed at the beginning of the periods presented, or results that may be
obtained for the year ended December 31, 1997 or for any other period. See Note
5 of the Notes to Condensed Consolidated Financial Statements.
NOTE 4: INVENTORIES
The composition of inventories at December 31, 1996 and September 30, 1997
was as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
<S> <C> <C>
Raw materials.......................................... $ 13,345,000 $ 32,612,000
Work in process........................................ 949,000 512,000
Finished goods......................................... 1,793,000 3,015,000
----------------- ------------------
Totals................................................. $ 16,087,000 $ 36,139,000
----------------- ------------------
----------------- ------------------
</TABLE>
NOTE 5: SUBSEQUENT EVENTS
SENIOR SUBORDINATED NOTES
On October 2, 1997, the Company completed a private placement (the "Senior
Notes Offering") of $120 million of its 9 3/4% Senior Subordinated Notes due
2007 (the "Senior Notes"). The Senior Notes were placed with Lehman Brothers
Inc. as initial purchaser (the "Initial Purchaser") and were subsequently resold
by the Initial Purchaser in the United States to "qualified institutional
buyers" in reliance on Rule 144A under the Securities Act of 1933, as amended,
(the "Securities Act") and outside of the United States in offshore transactions
to foreign investors in reliance on Regulation S under the Securities Act. The
underwriting discount to the Initial Purchaser was 2.75% of the principal amount
of the Senior Notes purchased (or an aggregate of $3.3 million).
Interest on the Senior Notes is payable semi-annually on April 1 and October
1, commencing on April 1, 1998, until maturity on October 1, 2007. The Senior
Notes are redeemable at the option of the Company, in whole or in part, at any
time on or after October 1, 2002 at various premiums to original face value. The
Company's payment obligation under the Senior Notes is jointly and severally
fully and unconditionally guaranteed on a senior subordinated basis by certain
of the Company's subsidiaries ("the Guarantors"), all of which are directly or
indirectly wholly owned by the Company. The proceeds from the
38
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
sale of the Senior Notes, together with borrowings under the $85 million Credit
Agreement (see below) and existing cash were used to repay principal and accrued
interest under the Acquisition Financing.
Pursuant to a Registration Rights Agreement dated October 2, 1997 (the
"Registration Rights Agreement") among the Company, certain of the Company's
U.S. subsidiaries, as Guarantors, and the Initial Purchaser, the Company and the
Guarantors have agreed to use their best efforts to file a registration
statement no later than 60 days after the closing of the Senior Notes Offering,
with respect to an offer to exchange the Senior Notes for new senior
subordinated notes of the Company (the "New Notes") registered under the
Securities Act, with terms identical to those of the Senior Notes, and to cause
such registration statement to become effective no later than 120 days after the
closing of the Senior Notes Offering. The Senior Notes and the New Notes are
hereinafter referred to collectively as the "Notes". The holders of the Notes
are entitled to certain penalty payments from the Company under certain
circumstances if the Company and the Guarantors are not in compliance with their
obligations under the Registration Rights Agreement.
The following consolidating financial information is presented for purposes
of complying with the reporting requirements of the Guarantor Subsidiaries.
Separate financial statements and other disclosures with respect to the
Guarantor Subsidiaries are not presented because the Company believes that such
financial statements and other information would not provide additional
information that is material to investors.
The condensed consolidating financial information presents condensed
financial statements as of September 30, 1997 and for the nine months ended
September 30, 1997 of:
(a) the Company on a parent company only basis ("Parent") (carrying its
investments in the subsidiaries under the equity method),
(b) the Guarantor Subsidiaries (Axiohm S.A.R.L., Axiohm Investissements
S.A.R.L., Axiohm IPB, Inc., Cognitive L.L.C., Cognitive Solutions, Inc., and
Stadia Colorado Corp., but excluding Dardel Technologies E.U.R.L.),
(c) the Non-Guarantor Subsidiaries (DH Technology Plc, DH Technology Pty, DH
Technologia, Axiohm Ltd. (Hong Kong), and Axiohm Japan Inc.),
(d) elimination entries necessary to consolidate the Parent Company and its
subsidiaries, and
(e) the Company on a consolidated basis.
The condensed consolidating financial information also presents condensed
financial statements for the nine months ended September 30, 1996 of:
(a) the Guarantor Subsidiaries which were in existence and were within the
Company's consolidated structure as of September 30, 1996 (Axiohm S.A.R.L.
and Axiohm IPB, Inc., but excluding Dardel Technologies E.U.R.L.),
(b) The Non-Guarantor Subsidiaries which were in existence and were within the
Company's consolidated structure as of September 30, 1996 (Axiohm Ltd. (Hong
Kong) and Axiohm Japan Inc.),
(c) elimination entries necessary to consolidate such Guarantor and
Non-Guarantor Subsidiaries, and
(d) such Guarantor and Non-Guarantor Subsidiaries on a consolidated basis.
39
<PAGE>
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
AXIOHM TRANSACTION SOLUTIONS, INC.
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
(SEPTEMBER 30, 1997--UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash........................................ $ 41,151 ($ 5,455) $ 552 $ -- $ 36,248
Restricted cash............................. 8,594 -- -- -- 8,594
Accounts Receivable......................... 8,413 21,895 3,749 (1,762) 32,295
Inventories................................. 5,262 19,573 3,828 (140) 28,523
Other assets................................ (19,213) 34,610 1,073 (6,983) 9,487
---------- ----------- ------- ------------ ------------
Total current assets.................... 44,207 70,623 9,202 (8,885) 115,147
Fixed assets, net........................... 5,080 14,253 1,595 -- 20,928
Intangibles................................. 84,074 2,783 (18) -- 86,839
Other assets................................ 4,907 614 27 (308) 5,240
Investment in subsidiaries.................. 43,093 -- -- (43,093) --
---------- ----------- ------- ------------ ------------
Total assets............................ $ 181,361 $ 88,273 $ 10,806 $ (52,286) $ 228,154
---------- ----------- ------- ------------ ------------
---------- ----------- ------- ------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................ $ 2,159 $ 11,465 $ 3,220 ($ 1,762) $ 15,082
Current portion of long-term debt........... 2,915 1,109 36 -- 4,060
Accrued expenses and other liabilities...... 13,412 5,546 448 (7,000) 12,406
Income taxes payable........................ 1,087 1,680 373 -- 3,140
Deferred revenue............................ 269 224 -- -- 493
---------- ----------- ------- ------------ ------------
Total current liabilities............... 19,842 20,024 4,077 (8,762) 35,181
Senior subordinated debt.................... 163,800 24,000 -- -- 187,800
Other long term debt and other
obligations............................... 9,854 5,476 589 -- 15,919
Deferred tax liability...................... -- 1,627 -- -- 1,627
---------- ----------- ------- ------------ ------------
Total liabilities....................... 193,496 51,127 4,666 (8,762) 240,527
---------- ----------- ------- ------------ ------------
Shareholders' equity (deficit):
Common stock................................ 23,851 4,167 367 (4,534) 23,851
Foreign currency, translation adjustment.... 131 (253) 13 2 (107)
Retained earnings (accumulated deficit)..... (36,117) 33,232 5,760 (38,992) (36,117)
---------- ----------- ------- ------------ ------------
Total shareholders' equity (deficit).... (12,135) 37,146 6,140 (43,524) (12,373)
---------- ----------- ------- ------------ ------------
Total liabilities and shareholders'
equity................................ $ 181,361 $ 88,273 $ 10,806 ($ 52,286) $ 228,154
---------- ----------- ------- ------------ ------------
---------- ----------- ------- ------------ ------------
</TABLE>
40
<PAGE>
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
AXIOHM TRANSACTION SOLUTIONS, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
(FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997--UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
---------- ----------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales...................................... $ 6,166 $ 91,807 $ 4,040 ($ 2,455) $ 99,558
Cost of net sales.............................. 4,160 61,858 3,415 (2,455) 66,978
---------- ----------- ------ ------------ ------------
Gross margin................................... 2,006 29,949 625 -- 32,580
Operating expenses:
Selling, general and administrative.......... 3,457 9,399 730 292 13,878
Research and development..................... 322 5,832 44 -- 6,198
In-process technology........................ 50,831 -- -- -- 50,831
---------- ----------- ------ ------------ ------------
Total operating expenses....................... 54,610 15,231 774 292 70,907
---------- ----------- ------ ------------ ------------
Income (loss)from operations................... (52,604) 14,718 (149) (292) (38,327)
Interest and other income...................... 284 89 17 -- 390
Interest and other expense..................... (3,588) 512 (1) -- (3,077)
---------- ----------- ------ ------------ ------------
Income (loss) before income taxes.............. (55,908) 15,319 (133) (292) (41,014)
---------- ----------- ------ ------------ ------------
Income taxes................................... (201) 5,838 (51) (102) 5,484
---------- ----------- ------ ------------ ------------
Net income (loss).............................. ($ 55,707) $ 9,481 ($ 82) ($ 190) ($ 46,498)
---------- ----------- ------ ------------ ------------
---------- ----------- ------ ------------ ------------
</TABLE>
41
<PAGE>
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
AXIOHM TRANSACTION SOLUTIONS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION
(FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997--UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ----------- -------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
NET CASH FLOWS FROM OPERATING ACTIVITIES... 4,169 6,644 (1,997) (115) 8,701
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisition of business, net
of cash acquired....................... (147,522) 552 -- -- (148,074)
Capital expenditures..................... (15) 3,655 -- -- (3,670)
----------- ----------- ------- ----- ------------
Net cash used in investing
activities........................... (147,537) (4,207) -- -- (151,744)
----------- ----------- ------- ----- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from tender financing........... 186,979 -- -- -- 186,979
Net repayment under line of credit....... -- (1,017) (34) -- (1,051)
Principal payments under long-term
debt................................... -- (4,994) (6) -- (5,000)
Dividends................................ -- (1,768) -- -- (1,768)
Debt issuance costs...................... (1,050) (1,749) -- -- (2,799)
Loans to related parties................. (728) (33) 2,474 -- 1,713
----------- ----------- ------- ----- ------------
Net cash provided by financing
activities........................... 185,201 (9,561) 2,434 -- 178,074
----------- ----------- ------- ----- ------------
Effect of exchange rates on cash........... (682) (55) -- 115 (622)
----------- ----------- ------- ----- ------------
Net increase (decrease) in cash and
equivalents.............................. 41,151 (7,179) 437 -- 34,409
Cash and equivalents at beginning of
period................................... -- 1,724 115 -- 1,839
----------- ----------- ------- ----- ------------
Cash and equivalents at end of
period................................... 41,151 (5,455) 552 -- 36,248
----------- ----------- ------- ----- ------------
----------- ----------- ------- ----- ------------
</TABLE>
42
<PAGE>
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
AXIOHM TRANSACTION SOLUTIONS, INC.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
(FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996--UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES(1) SUBSIDIARIES(2) ELIMINATIONS CONSOLIDATED
-------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales.............................................. $ 71,944 $ 990 $ (969) $ 71,965
Cost of net sales...................................... 49,768 889 (865) 49,792
------- ------ ------------ ------------
Gross margin........................................... 22,176 101 (104) 22,173
Operating expenses:
Selling, general and administrative.................. 7,902 401 -- 8,303
Research and development............................. 4,806 -- (104) 4,702
------- ------ ------------ ------------
Total operating expenses............................... 12,708 401 (104) 13,005
------- ------ ------------ ------------
Income (loss)from operations........................... 9,468 (300) -- 9,168
Interest and other income.............................. 1,227 2 -- 1,229
Interest and other expense............................. (943) (3) -- (946)
------- ------ ------------ ------------
Income (loss) before income taxes...................... 9,752 (301) -- 9,451
------- ------ ------------ ------------
Income taxes........................................... 3,657 -- -- 3,657
------- ------ ------------ ------------
Net income (loss)...................................... $ 6,095 $ (301) $ -- $ 5,794
------- ------ ------------ ------------
------- ------ ------------ ------------
</TABLE>
- ------------------------
(1) Includes only Axiohm S.A.R.L. and Axiohm IPB, Inc.
(2) Includes only Axiohm Ltd. (Hong Kong) and Axiohm Japan Inc.
43
<PAGE>
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
AXIOHM TRANSACTION SOLUTIONS, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW INFORMATION
(FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996--UNAUDITED)
(IN THOUSANDS OF U.S. DOLLARS)
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR
SUBSIDIARIES(1) SUBSIDIARIES(2) ELIMINATIONS CONSOLIDATED
-------------- -------------- ------------- ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES................. 9,791 (198) -- 9,593
CASH FLOWS FROM INVESTING ACTIVITIES--CAPITAL
EXPENDITURES....................................... (2,523) (9) -- (2,532)
------- ------- ----- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment under line of credit................. (795) 36 -- (759)
Principal payments under long-term debt............ (8,216) -- -- (8,216)
Dividends.......................................... (411) -- -- (411)
Proceeds from stock issuance....................... 3,807 -- -- 3,807
Loans to related parties........................... (598) 210 -- (388)
------- ------- ----- ------------
Net cash used in financing activities............ (6,213) 246 -- (5,967)
------- ------- ----- ------------
Effect of exchange rates on cash..................... 15 (3) -- 12
------- ------- ----- ------------
Net increase (decrease) in cash and equivalents...... 1,070 36 -- 1,106
Cash and equivalents at beginning of period.......... 626 10 -- 636
------- ------- ----- ------------
Cash and equivalents at end of
period............................................. 1,696 46 -- 1,742
------- ------- ----- ------------
------- ------- ----- ------------
</TABLE>
- ------------------------
(1) Includes only Axiohm S.A.R.L. and Axiohm IPB, Inc.
(2) Includes only Axiohm Ltd. (Hong Kong) and Axiohm Japan Inc.
44
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 5: SUBSEQUENT EVENTS (CONTINUED)
SENIOR BANK CREDIT AGREEMENT
On October 2, 1997, the Company entered into a Credit Agreement (the "Credit
Agreement") with a syndicate of banks (the "Banks"), led by Union Bank and
Lehman Brothers which acted as agent. Pursuant to the Credit Agreement, the
Banks have extended the Company a two tranche amortizing term loan in the
original principal amount of $50 million (the "Term Loan") and established a $35
million revolving line of credit (the "Revolver") available through October 2,
2002. The Term Loan consists of a Tranche A term loan in an aggregate principal
amount of $35 million, which has a maturity of five years, and a Tranche B term
loan in an aggregate principal amount of $15 million, which has a maturity of
six years. The Term Loan and Revolver are secured by a lien on substantially all
of the real and personal property of the Company and certain of its subsidiaries
and a pledge of capital stock of certain of its subsidiaries (provided that no
lien was or will be granted on the assets of Foreign Subsidiaries (as defined)
and no capital stock of Foreign Subsidiaries will be pledged to the extent that
the granting of such lien or the making of such pledge would result in
materially adverse United States federal income tax consequences to the Company
or would violate applicable law). The proceeds of the Term Loan and the initial
advance under the Revolver were used by the Company to repay principal and
accrued interest under the Acquisition Financing. Both the Term Loan and the
Revolver have interest rate options including an interest rate based on the
Eurodollar Rate plus a margin of between 2.5% to 3%. Such margins will vary
depending upon the relationship between the Company's earnings before interest,
taxes, depreciation and amortization ("EBITDA") and the then aggregate total
debt outstanding. The Company is required to pay a fee of 0.375% per annum on
the unused portion of the Revolver. Under the Credit Agreement, the Company is
required to enter into arrangements to provide interest protection for $20
million of this floating rate debt for two years. The Credit Agreement contains
various restrictive covenants with which the Company must comply. The more
significant covenants relate to: limitations of capital expenditures,
established maximum debt to EBIDTA ratios, minimum interest coverage ratios,
minimum fixed charge ratios, and limitations on indebtedness related to capital
leases and certain of the Company's subsidiaries. Required principal payments
under the New Credit Facility and Notes are as follows: $3.2 million in 1998;
$7.85 million in 1999; $7.85 million in 2000; $9.3 million in 2001; $9.3 million
in 2002; $12.5 million in 2003; and $120 million in 2007.
NOTE 6: SHAREHOLDERS' EQUITY
On June 24, 1996, Axiohm received net proceeds of $3.8 million from a
private placement of 421,200 shares of Common Stock to an employee of Axiohm and
two institutional investors.
On June 24, 1996, Axiohm declared a cash dividend of $0.4 million on Common
Stock which was paid to shareholders of record on June 24, 1996.
On May 14, 1997, Axiohm declared a cash dividend of $1.8 million on Common
Stock which was paid to shareholders of record on May 14, 1997.
In September 1997, in connection with the Acquisition an officer of the
Company was granted options to purchase 231,118 shares of the Company's Common
Stock at an exercise price of $7.15 per share. The fair market value of the
Company's common stock was $17 per share on the date of grant, resulting in
45
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(SEPTEMBER 30, 1997--UNAUDITED)
NOTE 6: SHAREHOLDERS' EQUITY (CONTINUED)
compensation expense totaling $2,277,000. Included in the accompanying condensed
consolidated statement of operations for the nine months ended September 30,
1997 is $455,000 of this total charge. The remaining $1,822,000 of compensation
expense will be recognized over a four year period coinciding with option
vesting schedule.
NOTE 7: COMMITMENTS AND CONTINGENCIES
In connection with the August 1994 acquisition by DH Technology of all of
the outstanding stock of Cognitive Solutions, Inc. ("Cognitive"), a designer,
manufacturer and marketer of thermal bar code printers and complementary label
media for use in automatic data collection systems, the Company is obligated to
pay $0.5 million on August 15 in each of 1998 and 1999. The Company also may be
required to make additional payments, not to exceed $3.0 million, to the former
shareholder of Cognitive, based upon net sales of a specified Cognitive product
line.
In connection with the December 1994 acquisition by Axiohm S.A. of the
transaction printer business of NCR Corporation ("NCR"), now known as Axiohm
IPB, for up to $30.6 million, of which $15.6 million was paid at closing, $0.5
million has been paid to date in earn-out payments and a final payment of up to
$5.0 million may be paid in additional earn-out payments based upon 1997 sales.
The Company estimates that the final payment will be less than approximately
$1.5 million and is anticipated to be paid in 1998. Axiohm S.A. recorded
approximately $3.0 million of goodwill in connection with this acquisition,
which was accounted for using the purchase method of accounting.
In connection with the March 1997 acquisition by DH Technology of certain
assets and liabilities of American Magnetics Corporation ("AMC"), a designer,
manufacturer, and marketer of card reader modules and stand-alone card readers,
and a wholly-owned subsidiary of Group 4 Securitas Holdings, a Netherlands
company, for $5.7 million, of which $4.85 million was paid at closing, an
additional $0.8 million will become payable in the years of 2000 and 2001. Based
upon attainment of specified net sales, an additional $1.6 million may also
become payable.
In connection with the purchase and improvement of manufacturing facilities
in France, Axiohm S.A. negotiated in 1994 a $1.6 million grant (the "Grant")
from various agencies of the French government. The Company is contingently
liable to those agencies for the repayment, in whole or in part, of the Grant in
the event that the Company does not meet the requirements of the Grant, which
include minimum employment levels through 1997, minimum capital expenditures and
continued use of the building throughout the lease term.
In connection with the resignation of the Company's President and Chief
Executive Officer, the Company entered into a resignation agreement and a
separate noncompetition agreement dated January 10, 1998. The resignation
agreement provides for payments to the former President of approximately
$1,525,000 pursuant to an option cancellation agreement dated August 10, 1997.
Additionally, the Company will pay the former President $1,350,000 in
consideration for his agreement not to compete with the Company for a period of
two years.
46
<PAGE>
(b) PRO FORMA FINANCIAL INFORMATION
INDEX TO PRO FORMA FINANCIAL INFORMATION
<TABLE>
<S> <C>
Unaudited Pro Forma Combined Balance Sheet as of September 30, 1997.................... 49
Unaudited Pro Forma Combined Statements of Operations for the Year Ended December 31,
1996................................................................................. 50
Unaudited Pro Forma Combined Statements of Operations for the Nine Months Ended
September 30, 1996...................................................................
Unaudited Pro Forma Combined Statements of Operations for the Nine Months Ended
September 30, 1997................................................................... 51
Notes to the Unaudited Pro Forma Combined Financial Statements......................... 52
</TABLE>
47
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The Unaudited Pro Forma Combined Financial Information set forth below is
based on the historical financial statements of Axiohm Transaction Solutions,
Inc. and DH after giving effect to the purchase method of accounting and other
adjustments relating to the Transactions (exclusive of the effect of the Tender
Financing) for the periods ended and as of the dates indicated. The Unaudited
Pro Forma Combined Balance Sheet gives effect to the Transactions (exclusive of
the effect of the Tender Financing) as of September 30, 1997. The Unaudited Pro
Forma Combined Statements of Operations for the fiscal year ended December 31,
1996 and the nine months ended September 30, 1997 are presented to give effect
to the Transactions (exclusive of the effect of the Tender Financing) as if each
had been consummated on January 1, 1996. The Unaudited Pro Forma Combined
Statement of Operations for the nine months ended September 30, 1997 are based
on the historical financial statements of Axiohm Transaction Solutions, Inc. for
the nine months ended September 30, 1997 and the historical financial statements
of DH for the period for the period from January 1, 1997 through August 31, 1997
(the effective date of the Transactions for accounting purposes).
The Unaudited Pro Forma Combined Financial Information set forth below
reflects pro forma adjustments that are based upon available information and
certain assumptions that the Company believes are reasonable. In preparing the
Unaudited Pro Forma Combined Financial Information, the Company believes it has
utilized reasonable methods to conform the basis of the presentation. The
Unaudited Pro Forma Combined Financial Information is intended for informational
purposes only and is not necessarily indicative of the future financial position
or results of operations of the Company had the Transactions described above
occurred on the indicated dates or been in effect for the periods presented.
The Unaudited Pro Forma Combined Financial Information should be read in
conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements of Axiohm Transaction Solutions, Inc. and DH,
including in each case, the related notes thereto, included elsewhere herein.
48
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AXIOHM
HISTORICAL TRANSACTION
AXIOHM SOLUTIONS,
TRANSACTION INC.
SOLUTIONS, PRO FORMA PRO FORMA
INC. ADJUSTMENTS COMBINED
------------- ----------- -------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (including short-term investment
securities held to maturity).................................. $ 36,248 $ (36,248) (1) $ --
Restricted cash................................................. 8,594 -- 8,594
Accounts receivable, net........................................ 32,295 -- 32,295
Inventories..................................................... 28,523 -- 28,523
Other........................................................... 9,487 -- 9,487
------------- ----------- -------------
Total current assets.......................................... 115,147 (36,248) 78,899
Fixed assets, net................................................. 20,928 -- 20,928
Intangible assets................................................. 86,839 -- 86,839
Other assets...................................................... 5,240 -- 5,240
------------- ----------- -------------
Total assets.................................................. $ 228,154 $ (36,248) $ 191,906
------------- ----------- -------------
------------- ----------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................................................ 15,082 -- 15,082
Accrued payroll, payroll taxes and benefits..................... 4,877 -- 4,877
Current portion of long-term debt and other long-term
obligations................................................... 4,060 -- 4,060
Accrued expenses and other current liabilities.................. 7,529 -- 7,529
Income taxes payable............................................ 3,140 -- 3,140
Deferred revenue................................................ 493 -- 493
------------- ----------- -------------
Total current liabilities..................................... 35,181 -- 35,181
Senior Subordinated debt.......................................... 187,800 (24,048) (1) 163,752
Other long-term debt and long-term liabilities.................... 15,919 -- 15,919
Deferred tax liability............................................ 1,627 -- 1,627
------------- ----------- -------------
Total liabilities............................................. 240,527 (24,048) 216,479
------------- ----------- -------------
Shareholders' equity (deficit):
Common Stock.................................................... 23,851 -- 23,851
Retained earnings (accumulated deficit)......................... (36,117) (12,200) (1) (48,317)
Foreign currency translation adjustment......................... (107) -- (107)
------------- ----------- -------------
Total shareholders' equity (deficit).......................... (12,373) (12,200) (1) (24,573)
------------- ----------- -------------
Total liabilities and shareholders' equity (deficit).......... $ 228,154 $ (36,248) $ 191,906
------------- ----------- -------------
------------- ----------- -------------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
49
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL AXIOHM TRANSACTION
------------------------------ SOLUTIONS, INC.
AXIOHM TRANSACTION PRO FORMA PRO FORMA
SOLUTIONS, INC. DH ADJUSTMENTS COMBINED(2)
------------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C>
Net sales.................................. $ 95,302 $ 115,784 $ -- $ 211,086
Costs and expenses:
Cost of net sales........................ 66,390 74,847 -- 141,237
Selling, general and administrative...... 11,013 15,207 -- 26,220
Research and development................. 6,648 5,805 -- 12,453
Amortization of goodwill................. 200 790 27,215(3) 28,205
------- ---------- ------------ --------
Total costs and expenses................... 84,251 96,649 27,215 208,115
------- ---------- ------------ --------
Income (loss) from operations.............. 11,051 19,135 (27,215) 2,971
Other income............................... 1,033 -- -- 1,033
Interest income............................ 158 1,491 (1,649) (4) --
Interest expense........................... (1,032) (149) (16,132) (5) (17,313)
------- ---------- ------------ --------
Income (loss) before income taxes.......... 11,210 20,477 (44,996) (13,309)
Income taxes (benefit)..................... 4,406 7,450 (7,468) (6) 4,388
------- ---------- ------------ --------
Net income (loss).......................... $ 6,804 $ 13,027 $ (37,528) $ (17,697)
------- ---------- ------------ --------
------- ---------- ------------ --------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
50
<PAGE>
AXIOHM TRANSACTION SOLUTIONS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL AXIOHM TRANSACTION
----------------------------- SOLUTIONS, INC.
AXIOHM TRANSACTION PRO FORMA PRO FORMA
SOLUTIONS, INC. DH ADJUSTMENTS COMBINED(2)
------------------ --------- ----------- ------------------
<S> <C> <C> <C> <C>
Net sales....................................... $ 99,558 $ 58,731 $ -- $ 158,289
Costs and expenses:
Cost of net sales............................. 66,978 39,473 -- 106,451
Selling, general and administrative........... 11,428 12,009 -- 23,437
Research and development...................... 6,198 3,928 -- 10,126
Amortization of goodwill...................... 2,450 420 18,144(3) 21,014
In-process technology, acquisition and other
charges..................................... 50,831 11,290 (50,831) (4) 11,290
-------- --------- ----------- --------
Total costs and expenses........................ 137,885 67,120 (32,687) 172,318
-------- --------- ----------- --------
Loss from operations............................ (38,327) (8,389) 32,687 (14,029)
Interest and other income....................... 390 1,138 (1,528) (5) --
Interest and other expense...................... (3,077) (117) (10,797) (6) (13,991)
-------- --------- ----------- --------
Loss before income taxes........................ (41,014) (7,368) 20,362 (28,020)
Income taxes (benefit).......................... 5,484 (1,151) (5,177) (7) (844)
-------- --------- ----------- --------
Net loss........................................ $ (46,498) $ (6,217) $ (25,539) $ (27,176)
-------- --------- ----------- --------
-------- --------- ----------- --------
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Financial Statements.
51
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The Unaudited Pro Forma Combined Financial Statements have been prepared
using the following facts and assumptions:
(1) Existing cash at September 30, 1997 was used to retire $24.0 million of the
Tender Financing and fund the $12.2 million payment made to Axiohm S.A.
shareholders in conjunction with Transactions on October 2, 1997.
(2) The Unaudited Pro Forma Combined Statements of Operations for the year
ended December 31, 1996 do not reflect the write-off of the anticipated
$50.8 million of in-process technology that was recorded in the financial
statements of Axiohm Transaction Solutions, Inc. on August 31, 1997 in
conjunction with the Transactions. The Unaudited Pro Forma Combined
Financial Statements for the year ended December 31, 1996 do not reflect
the $2.3 million anticipated charge related to the settlement of common
stock options of Axiohm S.A. outstanding immediately prior to the Merger,
which will be incurred ratably over a five-year period commencing at the
Merger date. The Unaudited Pro Forma Combined Statement of Operations for
the nine months ended September 30, 1997 includes $0.5 million of the
anticipated charge.
(3) Amortization of goodwill calculated on a straight line basis over three
years.
(4) Removes the effect of the one-time in-process research and development
charge recorded in conjunction with the Acquisition.
(5) Since a portion of the acquisition was funded by existing cash, a pro forma
adjustment is required to adjust for the interest income lost. Interest
income not earned as a result of the use of cash to partially fund the
transaction was approximately $1.6 million and $1.5 million for the year
ended December 31, 1996 and the nine months ended September 30, 1997,
respectively.
(6) Adjustment to interest expense:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
-----------
<S> <C>
For the Year Ended December 31, 1996:
Interest expense on historical Axiohm S.A. debt repaid in the Merger............. $ (450)
Interest on New Credit Facility and Senior Subordinated Notes (at an assumed
weighted average interest rate of 9.4%)........................................ 15,618
Amortization of deferred debt issuance costs..................................... 964
-----------
Pro forma total adjustment....................................................... $ 16,132
-----------
-----------
For the Nine Months Ended September 30, 1997:
Interest expense on historical Axiohm S.A. debt repaid in the Merger............. $ (338)
Interest on New Credit Facility and Senior Subordinated Notes (at an assumed
weighted average interest rate of 9.4%)........................................ 10,412
Amortization of deferred debt issuance costs..................................... 723
-----------
Pro forma total adjustment....................................................... 10,797
-----------
-----------
</TABLE>
A 0.125% increase or decrease in the assumed weighted average interest rate
would change annual pro forma interest expense by $200,000. The pro forma
net losses would change by $116,000.
(7) Income tax effects of pro forma adjustments. Income taxes have been
provided for all applicable adjustments at an assumed rate of 42% assuming
that the amortization of goodwill is not deductible for tax purposes.
52
<PAGE>
(c) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of July 14, 1997, among the Registrant, Axiohm S.A. and AX
Acquisition Corporation--incorporated by reference to Exhibit (c)(1) of the Registrant's Schedule 14D-9
dated July 16, 1997.
2.2* Purchase and Assumption Agreement, dated October 2, 1997, among Axiohm IPB, Purchaser and the
Registrant.
3.1* Certificate of Ownership of the Registrant filed with the California Secretary of State on October 2,
1997.
3.2* Amended and Restated Bylaws of the Registrant.
4.1* Indenture, dated as of October 2, 1997 among the Registrant, the Guarantors named therein and The Bank
of New York, as trustee.
4.2* $117,300,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary Guarantee.
4.3* $2,350,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary Guarantee.
4.4* $350,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary Guarantee.
10.1* Registration Rights Agreement, dated as of October 2, 1997 among the Registrant, Axiohm S.A., Axiohm
IPB, Inc., Dardel Technologies S.A., Stadia Colorado Corp., Cognitive Solutions, Inc. and Lehman
Brothers Inc.
10.2* Purchase Agreement, dated September 25, 1997, among the Registrant, Axiohm IPB Inc., Cognitive
Solutions, Inc., Stadia Colorado Corp. and Lehman Brothers Inc.
10.3* Employment Agreement between the Registrant and William H. Gibbs dated as of July 14, 1997.
10.4* Employment Agreement between the Registrant and Walter Sobon dated as of July 14, 1997.
10.5* Employment Agreement between the Registrant and Janet Shanks dated as of July 14, 1997.
10.6* Employment Agreement between the Registrant and David Ledwell dated as of July 14, 1997.
10.7 Global Amendment and Assignment and Acceptance, dated as of October 20, 1997, among the Registrant, the
several lenders and other financial institutions listed on the signature pages thereto, Union Bank of
California, N.A., as successor administrative agent, Lehman Brother Inc., as arrangers, and Lehman
Commercial Paper Inc. as resigning administrative agent and as Syndication agent and as a
Lender--incorporated by reference to Exhibit 10.7 of the Registrant's registration statement on Form S-4
(No. 333-41245) filed on November 28, 1997.
10.8* Guarantee and Collateral Agreement, dated as of October 2, 1997, between the Registrant, Lehman Brothers
Inc., Lehman Commercial Paper Inc. and certain of Registrant's subsidiaries.
23.1 Consent of Independent Accountants.
</TABLE>
- ------------------------
*Previously filed.
<PAGE>
SIGNATURE
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 hereunto duly authorized.
<TABLE>
<S> <C> <C>
AXIOHM TRANSACTION SOLUTIONS, INC.
By: /s/ JANET W. SHANKS
-----------------------------------------
Janet W. Shanks
Dated: February 12, 1998 Chief Accounting Officer
</TABLE>
<PAGE>
INDEX TO EXHIBITS FILED WITH THE CURRENT REPORT ON FORM 8-K
DATED OCTOBER 2, 1997
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger dated as of July 14, 1997, among the Registrant, Axiohm S.A. and AX
Acquisition Corporation--incorporated by reference to Exhibit (c)(1) of the Registrant's Schedule 14D-9
dated July 16, 1997.
2.2* Purchase and Assumption Agreement, dated October 2, 1997, among Axiohm IPB, Purchaser and the
Registrant.
3.1* Certificate of Ownership of the Registrant filed with the California Secretary of State on October 2,
1997.
3.2* Amended and Restated Bylaws of the Registrant.
4.1* Indenture, dated as of October 2, 1997 among the Registrant, the Guarantors named therein and The Bank
of New York, as trustee.
4.2* $117,300,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary Guarantee.
4.3* $2,350,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary Guarantee.
4.4* $350,000 9 3/4% Senior Subordinated Note due 2007 and Subsidiary Guarantee.
10.1* Registration Rights Agreement, dated as of October 2, 1997 among the Registrant, Axiohm, Axiohm IPB,
Dardel Technologies S.A., Stadia Colorado Corp., Cognitive Solutions, Inc. and Lehman Brothers Inc.
10.2* Purchase Agreement, dated September 25, 1997, among the Registrant, Axiohm IPB, Cognitive Solutions,
Inc., Stadia Colorado Corp. and Lehman Brothers Inc.
10.3* Employment Agreement between the Registrant and William H. Gibbs dated as of July 14, 1997.
10.4* Employment Agreement between the Registrant and Walter Sobon dated as of July 14, 1997.
10.5* Employment Agreement between the Registrant and Janet Shanks dated as of July 14, 1997.
10.6* Employment Agreement between the Registrant and David Ledwell dated as of July 14, 1997.
10.7 Global Amendment and Assignment and Acceptance, dated as of October 20, 1997, among the Registrant, the
several lenders and other financial institutions listed on the signature pages thereto, Union Bank of
California, N.A., as successor administrative agent, Lehman Brother Inc., as arrangers, and Lehman
Commercial Paper Inc. as resigning administrative agent and as Syndication agent and as a
Lender--incorporated by reference to Exhibit 10.7 of the Registrant's registration statement on Form S-4
(No. 333-41245) filed on November 28, 1997.
10.8* Guarantee and Collateral Agreement, dated as of October 2, 1997, between the Registrant, Lehman Brothers
Inc., Lehman Commercial Paper Inc. and certain of Registrant's subsidiaries.
23.1 Consent of Independent Accountants.
</TABLE>
- ------------------------
*Previously filed.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No 333-02499 and No 33-50532) of Axiohm Transactions
Solutions, Inc. (formerly DH Technology, Inc.) of our report dated September 12,
1997 (except as to Note 19, which is as of January 9, 1998) relating to the
consolidated financial statements of Axiohm S.A. which appears in Amendment No.
2 to the Current Report on Form 8-K of Axiohm Transaction Solutions, Inc., dated
February 12, 1998.
Price Waterhouse
/s/ Price Waterhouse
Paris, France
February 12, 1998
