<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File No.: 0-14685
GENICOM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 51-0271821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14800 Conference Center Drive
Suite 400, Westfields
Chantilly, Virginia 22021-3806
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code:
(703) 802-9200
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
and (2) has been subject to such filing requirements for the past
90 days. Yes x No
As of July 18, 1994, there were 10,630,699 shares of Common
Stock of the Registrant outstanding.
<PAGE> 2
GENICOM Corporation and Subsidiaries
Form 10-Q Index
PART I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - July 3, 1994 and 3
January 2, 1994
Consolidated Statements of Income - Three and
Six Months Ended July 3, 1994 and July 4, 1993 4
Consolidated Statements of Cash Flows - Six
Months Ended July 3, 1994 and July 4, 1993 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
PART II - Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security 11
Holders
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Index to Exhibits E-1
<PAGE> 3
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 3, January 2,
(In thousands, except share data) 1994 1994
(Unaudited)
----------- ---------
<S> <<C> < <C>
C C
> >
ASSETS
Current assets:
Cash and cash equivalents $ 759 $ 1,797
Accounts receivable, less
allowance for doubtful
accounts of $1,631 and 35,804 35,932
$1,480
Other receivables 4,236 7,202
Inventories 50,117 53,831
Prepaid expenses and other assets 1,511 1,594
------ -------
Total current assets 92,427 100,356
Property, plant and equipment 27,473 24,869
Goodwill 9,721 10,180
Other assets, principally intangibles 5,262 5,754
------- -------
$ 134,883 $ 141,159
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,029 $ 23,263
Accounts payable and accrued 38,026 36,504
expenses
Deferred income 8,491 6,947
------ ------
Total current liabilities 47,546 66,714
Long-term debt, less current portion 55,443 45,757
Other non-current liabilities 5,463 4,113
------- -------
Total liabilities 108,452 116,584
Stockholders' equity:
Common stock, $0.01 par value;
15,000,000 shares authorized,
10,630,699 and 10,621,699 shares
issued 106 106
Additional paid-in capital 25,753 25,744
Retained earnings 3,377 1,781
Foreign currency translation (1,706) (1,957)
adjustment
Pension liability adjustment (1,099) (1,099)
------ ------
Total stockholders' equity 26,431 24,575
------- -------
$ 134,883 $ 141,159
======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE> 4
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
(In thousands, except July 3, July 4, July 3, July 4,
per share data)
1994 1993 1994 1993
------ ------ ------ ------
<S> < <C> < <C> < <C> < <C>
C C C C
> > > >
Revenues, net:
Products $ 41,490 $ 43,610 $ 84,974 $ 88,005
Services 17,835 11,433 29,687 23,715
------ ------ ------- -------
59,325 55,043 114,661 111,720
Operating costs and
expenses:
Cost of revenues:
Products 29,238 30,343 61,598 61,904
Services 13,807 9,156 22,172 18,807
Selling, general
and administration 10,966 10,783 22,341 22,120
Engineering,
research and
product development 2,118 2,570 4,032 5,129
------ ------ ------- -------
56,129 52,852 110,143 107,960
Operating income 3,196 2,191 4,518 3,760
Interest expense, net 1,928 2,103 3,908 3,531
Other income 734 1,635
----- ----- ----- -----
Income before income 2,002 88 2,245 229
taxes
Income tax expense 500 49 649 107
----- ----- ----- -----
Net income $ 1,502 $ 39 $ 1,596 $ 122
===== ===== ===== =====
Earnings per common share and common share equivalent:
Primary and Fully
Diluted $ 0.13 $ 0.00 $ 0.14 $ 0.01
Weighted average number of common shares and
common share equivalents outstanding:
Primary 11,252 11,271 11,086 11,643
Fully Diluted 11,480 11,271 11,200 11,644
<FN>
The accompanying notes are an integral part of these financial
statements.
</FN>
</TABLE>
<PAGE> 5
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
July 3, July 4,
(In thousands) 1994 1993
------- -------
<S> < <C> < <C>
C C
> >
Cash flows from operating activities:
Net income $ 1,596 $ 122
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation 4,513 3,330
Amortization 1,507 1,214
Effect of restructuring accrual (2,868)
Effect of investment gains (901)
Effect of gain on early
extinguishment of bonds (734)
Effect of environmental
recovery from G.E. (1,200)
Changes in assets and
liabilities:
Accounts receivable 756 17
Inventories 4,070 (3,394)
Accounts payable and
accrued expenses 2,539 3,468
Deferred income 1,472 1,054
Other 786 846
------ ------
Net cash provided by operating activities 15,604 2,589
Cash flows from investing activities:
Additions to property, plant and
equipment (7,288) (3,163)
Proceeds from sale of investment 3,436
Other (560) (894)
------- -------
Net cash used in investing activities (4,412) (4,057)
Cash flows from financing activities:
Borrowings from long-term debt 11,749 15,014
Payments on long-term debt (18,548) (15,146)
Purchases of senior subordinated
notes (5,059)
-------- --------
Net cash used in financing activities (11,858) (132)
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (372) 177
-------- --------
Net decrease in cash and cash
equivalents (1,038) (1,423)
Cash and cash equivalents at beginning
of year 1,797 3,001
------ -----
Cash and cash equivalents at end of
year $ 759 $ 1,578
====== =====
</TABLE>
<PAGE> 6
GENICOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management, the accompanying unaudited
consolidated financial statements of GENICOM Corporation and
subsidiaries (the "Company" or "GENICOM") contain all
adjustments (consisting only of normal recurring accruals)
necessary to present fairly the Company's consolidated
financial position as of July 3, 1994, and the results of
operations and cash flows for the periods indicated.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction
with the financial statements and notes thereto included in
the Company's January 2, 1994, Annual Report. The results
of operations for the six months ended July 3, 1994, are not
necessarily indicative of the operating results to be
expected for the full year. Certain reclassifications have
been made to the 1993 condensed financial statements in
order to conform to the 1994 presentation.
2. Inventories are stated at the lower of cost, determined on
the first-in, first-out method, or market. Inventories
consist of, in thousands:
<TABLE>
<CAPTION
July 3, January 2,
1994 1994
<S> < <C> <<C>
C C
> >
Raw Materials $ 11,174 $ 13,768
Work in process 9,276 8,524
Finished goods 29,667 31,539
------ ------
$ 50,117 $ 53,831
</TABLE>
3. Earnings per share are based upon the weighted average
number of common shares and dilutive common share
equivalents (using the treasury stock method) outstanding
during the period.
4. During the first quarter ended April 3, 1994, the Company
adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 112 and No. 115, "Employers'
Accounting for Postemployment Benefits" and "Accounting for
Certain Investments in Debt and Equity Securities",
respectively. The implementation of SFAS No. 112 and No.
115 did not have a material effect on the Company's
financial condition or results of operations.
<PAGE> 7
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition:
Results of Operations
<TABLE>
<CAPTION>
Three months ended Six months ended
(in millions)
2nd Qtr 2nd Qtr 2nd Qtr 2nd qtr
1994 Change 1993 1994 Change 1993
<S> < <C> < <C> < <C> < <C> < <C> < <C>
C C C C C C
> > > > > >
Revenues $ 59.3 $ 4.3 $ 55.0 $ 114.7 $ 3.0 $ 111.7
Percentage change 7.8 % 2.7 %
</TABLE>
In comparing the second quarter and first half of fiscal years
1994 and 1993, revenues were favorably impacted by growth in the
Company's Enterprising Service Solutions, Supplies and Laser
Printing Solutions businesses. Meanwhile declines in the
Company's impact printer business and unfavorable movements in
foreign currencies adversely impacted revenue in the same
periods. GENICOM's most demanding business challenge has been to
grow revenues and profits while responding to the declining
market of impact printing, historically the Company's principal
business. The Company's focus has been to invest in the
strategic growth businesses of Laser Printing Solutions,
Enterprising Service Solutions, Supplies and to introduce new
impact products to increase market share.
Printer revenues decreased $ 5.9 million and $ 8.1 million in the
three and six month periods ended July 3, 1994, respectively, as
compared to the year-ago period. The revenue decline is
attributable to the Company's impact printer product lines,
especially the shuttle matrix line printers, which experienced
year-to-year revenue declines of 32.0% and 21.5% in the second
quarter and first six months, respectively. The Company's sales
of laser printers increased 23.9% and 17.9% in the second quarter
and first six months, respectively, on a year-to-year comparison.
Management expects revenues in the second half of 1994 from its
impact printer product lines and Laser Printing Solutions
Business to be below 1993 second half levels.
Enterprising Service Solutions ("ESS") revenues increased 58.8%
and 26.8 % in the three and six month periods ended July 3, 1994,
respectively, as compared to the year-ago period, primarily due
to the Company's recent strategic partnership relationship with
Computervision Corporation. As previously reported, on March 15,
1994 and April 11, 1994, the Company announced a multi-year
services agreement for logistics and depot repair services and
field support services, respectively, with Computervision
Corporation. Management anticipates that 1994 ESS revenue will
be above fiscal 1993 levels due to increased multivendor service
activities.
Supplies revenues increased 19.5% and 21.8% in the three and six
month periods ended July 3, 1994, respectively, as compared to
the year-ago period. Supplies revenue growth is attributable to
increased market share achieved by increasing the number of
product offerings, including laser printer supplies, and
aggressive marketing in established markets. Management
anticipates that Supplies revenues will continue to be above 1993
levels.
Spares revenues increased 23.7% and 6.7% in the three and six
month periods ended July 3, 1994, respectively, as compared to
the year-ago period. Spares revenues increased in the second
quarter due to the success of new printhead and print module
programs. Management does not expect further significant
increases in spares revenues as new product designs have
increased reliability and resulted in fewer replaceable parts,
and declines in sales of mature serial matrix and band line
printers will reduce the demand for such spare parts.
Relays revenues increased 2.0% and 2.1% in the three and six
month periods ended July 3, 1994, respectively, as compared to
the year-ago period. Management expects that 1994 relay revenues
will approximate those of fiscal 1993.
<PAGE> 8
<TABLE>
<CAPTION>
(in millions) 2nd Qtr 4th Qtr 2nd Qtr
1994 1993 1993
<S> < <C> < <C> <<C>
C C C
> > >
Order backlog $ 37.7 $ 34.1 $ 38.6
Change - 2nd Quarter 1994
compared to:
Amount 3.6 (0.9)
Percentage 10.6 % (2.3) %
</TABLE>
The order backlog increase compared to the 1993 fourth quarter is
due to increased orders in the Company's ESS business, partially
offset by a decline in the backlog from the Company's printer and
spares businesses. The order backlog decrease compared to the
1993 second quarter is due to the decline in the backlog from the
Company's printer and spares businesses, partially offset by the
increased orders in the Company's ESS business. As a result of
the growth in the ESS backlog, the Company's backlog includes a
higher percentage of orders for which a delivery date to a
specific customer exceeds six months. The Company's backlog as
of any particular date should not be the sole measurement used in
determining sales for any future period.
<TABLE>
<CAPTION>
(in millions)
Three Months Ended Six Months Ended
2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
1994 Change 1993 1994 Change 1993
<S> < <C> < <C> < <C> < <C> < <C> < <C>
C C C C C C
> > > > > >
Gross margin $ 16.3 $ 0.8 $ 15.5 $ 30.9 $ (0.1) $ 31.0
As a % of revenue 27.4 % 28.2 % 26.9 % 27.8 %
</TABLE>
Gross margin, as a percentage of revenue, declined in the three
and six month periods ending July 3, 1994, as compared to the
year-ago periods. This decrease is attributable to margin
pressures in the Company's equipment business, partially offset
by increased sales associated with the Company's higher margin
business activities, such as ESS and supplies.
<TABLE>
<CAPTION>
(in millions)
Three Months Ended Six Months Ended
2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
1994 Change 1993 1994 Change 1993
<S> < <C> < <C> < <C> <C> <C> < <C> < <C>
C C C C C
> > > > >
Operating expenses:
Selling, general
and administrative $ 11.0 $ 0.2 $ 10.8 $ 22.3 $ 0.2 $ 22.1
Engineering,
research and
product development 2.1 (0.5) 2.6 4.0 (1.1) 5.1
Total $ 13.1 $ (0.3) $ 13.4 $ 26.3 $ (0.9) $ 27.2
As a % of revenue 22.1 % 24.3 % 23.0 % 24.4 %
</TABLE>
Operating expenses decreased overall and as a percentage of
revenue during the three and six month periods ending July 3,
1994, due to the favorable impact of the Company's January 1994
cost reduction program which included personnel, salary and
benefit reductions for the Company's worldwide operations,
partially offset by the costs necessary to support the increase
in ESS operations. 1993 results reflect the favorable impact of the
1993 second quarter recognition of the recovery of $ 1.2 million due
from the General Electric Company relating to prior costs for
environmental matters at the Company's Waynesboro, Virginia
facility.
<PAGE> 9
The January 1994, cost reduction program was implemented in
response to the Company's business challenges discussed above,
and the program, net of severance costs, favorably impacted the
three and six month periods ending July 3, 1994, by $ 0.9 million
and $ 1.4 million, respectively.
<TABLE>
<CAPTION>
(in millions)
Three Months Ended Six Months Ended
2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
1994 Change 1993 1994 Change 1993
<S> < <C> < <C> < <C> < <C> < <C> < <C>
C C C C C C
> > > > > >
Interest expense, $ 1.9 $ (0.2) $ 2.1 $ 3.9 $ 0.4 $ 3.5
net
Percentage change (9.5) % 11.4 %
Other income $ 0.7 $ 0.7 $ 0.0 $ 1.6 $ 1.6 $ 0.0
Percentage change N/A N/A
</TABLE>
The decrease in interest expense for three months ended July 3,
1994, is a result of the decrease in the Company's borrowings
from its senior credit facility, partially offset by the increase
in the Company's interest rate on its senior credit facility.
The increase in the interest expense for the six months ending
July 3, 1994, as compared to the year-ago period, is due to an
increase in the interest rate paid on the senior credit facility
and an interest payment received in January 1993 from the
Internal Revenue Service of $ 0.6 million related to the
settlement of prior period tax matters partially offset by the
decrease in the borrowings from the senior credit facility in
1994.
During the 1994 second quarter, the Company recognized a pre-tax
gain of $ 0.7 million from the purchase of the Notes described
above. During the 1994 first quarter, the Company sold its
remaining investment in Xeikon N.V., a Belgian printer
development and manufacturing company and a pre-tax gain of $ 0.9
million was recognized.
<TABLE>
<CAPTION>
(in millions)
Three Months Ended Six Months Ended
2nd Qtr 2nd Qtr 2nd Qtr 2nd Qtr
1994 Change 1993 1994 Change 1993
<S> < <C> < <C> < <C> < <C> < <C> < <C>
C C C C C C
> > > > > >
Income tax expense $ 0.5 $ 0.5 $ 0.0 $ 0.6 $ 0.5 $ 0.1
Effective tax rate 25.0 % 55.7 % 28.9 % 46.7%
</TABLE>
The Company's effective income tax rate for the six months ended
July 3, 1994 was 28.9% as compared to 46.7% for the year-ago
period. These rates are significantly affected by foreign income
taxes, the utilization of net operating losses and alternative
minimum income taxes.
<PAGE> 10
Liquidity and Capital Resources
<TABLE>
<CAPTION>
(in millions)
Six Months Ended Six Months Ended
2nd Qtr 2nd Qtr
1994 1993
<S> <C> <C> <C> <C>
Cash provided by operations $ 15.6 $ 2.6
Cash used in investing activities (4.4) (4.1)
Cash used in financing activities (11.9) (0.1)
</TABLE>
<TABLE>
<CAPTION>
(in millions)
2nd Qtr 4th Qtr
1994 1993
<S> <C> <C> <C> <C>
Working capital $ 44.9 $ 33.6
Inventories 50.1 53.8
Debt obligations 56.5 69.0
Debt to equity ratio 2.1 to 1 2.8 to 1
</TABLE>
The Company strengthened its financial position in the first six
months of 1994 by reducing its outstanding debt $ 12.5 million,
or 18.2% by using cash provided by operating activities and the
collection of the proceeds from the sale of the Xeikon N.V.
investment.
Net cash provided by operations in the first six months of 1994
increased $ 13.0 million compared to the year-ago period.
Profitable operations, improved inventory management and the
lower spending for restructuring programs provided the major
sources of cash. The Company's current ratio rebounded to 1.9 to
1 at the end of the second quarter of 1994 as compared to 1.5 to
1 at the end of fiscal year 1993. This increase is attributable
primarily to the decrease in debt classified as current for the
senior credit facility, partially offset by the purchase of the
Notes in the second quarter of 1994. The Company does not have
any material commitments of funds for capital expenditures other
than to support the current level of operations.
During the second quarter of 1994, the Company purchased $ 5.8
million of its Notes in the open market at favorable terms, thus
realizing a gain of $ 0.5 million, net of taxes. The purchased
Notes together with the $ 3.3 million of the Notes held in
treasury from prior period purchases satisfy the Company's 1995
sinking fund requirement. In the first quarter of 1994, the
Company retired $ 9.0 million principal amount of its previously
purchased Notes in fulfillment of its annual sinking fund
requirement.
As of July 3, 1994, the Company had $ 16.4 million outstanding
and $ 8.0 million available for borrowing under its senior credit
facility. On June 9, 1994, the Company and its senior creditor
amended the Company's senior credit facility by extending its
term to fiscal 1997, changing the rate of interest to prime plus
3.0% and providing for early termination of the facility by the
Company under certain circumstances.
The Company has maintained cash flow through strict controls over
working capital and discretionary spending. As discussed
previously, management initiated a number of programs to improve
the financial performance of the Company. Management has also
continued to strive for continued revenue growth by investing in
its strategic growth areas of ESS, Laser Printer Solutions and
Supplies. Nevertheless, there is no assurance that the Company's
initiatives will continue to be successful or that sales volume
will not materially decline. Management believes that a material
decline in sales volume could have a material adverse impact on
its operations.
<PAGE> 11
As described in further detail in the Company's 1993 Annual
Report, the Company is required to adopt SFAS No. 107
"Disclosures about Fair Value of Financial Instruments" on or
before fiscal year 1996, SFAS No. 114 "Accounting by Creditors
for Impairment of a Loan" on or before fiscal year 1995.
Management believes such standards will not have a material
effect on the Company's financial condition or results of
operations.
Part II. - OTHER INFORMATION
Item 1. Legal Proceedings:
Not applicable.
Item 2. Changes in Securities:
Not applicable.
Item. 3 Defaults Upon Senior Securities:
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
Not applicable.
Item 5. Other Information:
Not applicable.
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit included in Response to Item 601 of Regulation S-K
Number Description
----- --------------------------------------------
11.1 Statement regarding the Company's computation
of earnings per share
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K on March 15, 1994,
which reported that it had signed two lease agreements
pursuant to the signing of the multi-year services
agreement with Computervision Corporation. A copy of the
lease agreements were included as Exhibits 10.1 and 10.2
to the Form.
The Company filed a report on Form 8-K/A on June 9, 1994,
which reported that it had published a press release that
announced that it had extended its senior credit facility
and had acquired $ 5.8 million of its Notes. Copies of
the credit facility extension agreement and the press
release were included as Exhibits 10.1 and Exhibit 99.1,
respectively, to the Form.
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GENICOM Corporation
-----------------------
Registrant
Date: August 8, 1994
James C. Gale
----------------------
Signature
James C. Gale
Senior Vice
President Finance
and Chief Financial
Officer
(Mr. Gale is the
Chief Financial
Officer and has been
duly authorized to
sign on behalf of
the Registrant)
GENICOM Corporation and Subsidiaries
INDEX TO EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JULY 3, 1994
<TABLE>
<CAPTION>
Exhibit
Number Description Page
- - ------- --------------------------------- -----
<S> <C> <C>
11.1 Statement regarding the Company's E - 2
computation of earnings per share.
</TABLE>
E - 1
<PAGE>
Exhibit 11.1
GENICOM Corporation and Subsidiaries
STATEMENT REGARDING THE COMPANY'S COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Six
Months Ended Months Ended
July 3, July 4, July 3, July 4,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Shares used in this computation:
Weighted average common shares
outstanding 10,627 10,606 10,625 10,606
Shares applicable to stock
options, net of shares
assumed to be purchased from
proceeds at average market 625 665 461 1,037
------ ------ ------ ------
Total shares for earnings per
common share and common share
equivalents (primary) 11,252 11,271 11,086 11,643
Shares applicable to stock
options in addition to those
used in primary computation
due to the use of period-end
market price when higher than
average 228 0 114 1
------ ------ ------ ------
Total fully diluted shares 11,480 11,271 11,200 11,644
====== ====== ====== ======
</TABLE>
E - 2
