<PAGE> 1
==============================================================================
FORM 8-K/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
March 1, 1995
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
===============================================================================
<PAGE> 2
GENICOM CORPORATION AND SUBSIDIARIES
FORM 8-K/A INDEX
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements of business acquired and pro forma financial information of its
Current Report on Form 8-K filed March 16, 1995 relating to an event dated
March 1, 1995, as set forth in the pages attached hereto:
Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired:
Consolidated Financial Statements for the
Year Ended December 31, 1994 and December
31, 1993 and Independent Auditors' Report
(b) Pro forma financial information:
Transaction Description
Pro Forma Consolidated Balance Sheet as of January 1, 1995
(unaudited)
Notes to Pro Forma Consolidated Balance Sheet (unaudited)
Pro Forma Consolidated Statements of Operations for the
Year Ended January 1, 1995 (unaudited)
Notes to Pro Forma Consolidated Statements of Operations
(unaudited)
Signatures
2
<PAGE> 3
Item 7 (a) - Financial Statements of Business Acquired:
Consolidated Financial Statements for the Year Ended December 31, 1994 and
December 31, 1993 and Independent Auditors' Report
3
<PAGE> 4
HARRIS ADACOM NETWORK SERVICES, INC.
(A SUBSIDIARY COMPANY OF HARRIS ADACOM
CORPORATION, B.V.)
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1994 AND 1993
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
We have audited the consolidated balance sheets of Harris Adacom Network
Services Inc. (a subsidiary company of Harris Adacom Corporation B.V.
("HAC B.V.") and subsidiary, Harris Adacom, Inc. (collectively, the
"Company") as of December 31, 1994 and 1993, and the related consolidated
statements of operations, stockholder's equity (deficit), and cash flows for the
years then ended. 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 did not audit the financial
statements of Harris Adacom, Inc. as of and for the years ended December 31,
1994, and 1993, which statements reflect total assets and revenues constituting
32% and 35%, respectively of the related consolidated totals for 1994, and 22%
and 21% respectively of the related consolidated totals for 1993. Those
statements were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to the amounts included for Harris
Adacom, Inc. as of and for the years ended December 31, 1994 and 1993 is based
solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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 statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, such
consolidated financial statements present fairly, in all material respects, the
financial position of Harris Adacom Network Services, Inc. and subsidiary as of
December 31, 1994 and 1993, and the result of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the financial statements, HAC B.V. is undergoing
bankruptcy proceedings. In conjunction with such proceedings the Company has
sold substantially all of its operating net assets to GENICOM Corporation as
of March 1, 1995.
As discussed in Note 8 to the financial statements, effective January 1, 1993
the Company changed its method of accounting for income taxes to conform with
Statement of Financial Accounting Standards No. 109.
Deloitte & Touche L.L.P.
Dallas, Texas
April 28, 1995
<PAGE> 6
HARRIS ADACOM NETWORK SERVICES, INC.
(A SUBSIDIARY COMPANY OF HARRIS ADACOM CORPORATION, B.V.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,1994 and 1993(THOUSANDS)
=============================================================================
<TABLE>
<CAPTION>
ASSETS
1994 1993
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,034 $
Trade accounts receivable - net of allowance
for doubtful accounts of $403 and $786, respectively 3,112 3,421
Accounts receivable from affiliates - net - 3,124
Current maturities of investment in sales-type leases,
less deferred interest of $17 179 165
Inventories - net of allowance for excess and
obsolete inventories of $58 and $163, respectively 1,083 600
Deferred tax asset 1,481 125
Deposits 156 352
Prepaid expenses and other current assets 290 538
--------- ---------
Total current assets 7,335 8,325
INVESTMENT IN SALES -TYPE LEASES
less deferred interest of $8 and $55 respectively - net
of current maturities 56 206
PROPERTY, PLANT AND EQUIPMENT:
Cost 8,099 6,706
Accumulated depreciation and amortization (3,949) (3,024)
--------- ---------
Net property, plant and equipment 4,150 3,682
DEFERRED TAX ASSET 642 648
OTHER ASSETS, principally deposits 61 86
--------- ---------
TOTAL ASSETS $12,244 $12,947
========= =========
</TABLE>
(continued)
3
<PAGE> 7
HARRIS ADACOM NETWORK SERVICES, INC.
(A SUBSIDIARY COMPANY OF HARRIS ADACOM CORPORATION, B.V.)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993 (THOUSANDS)
===============================================================================
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) 1994 1993
<S> <C> <C>
CURRENT LIABILITIES:
Revolving line of credit to banks $ 723 $ 1,168
Note payable 1,000
Trade accounts payable 5,200 4,261
Accrued and other current liabilities 3,065 3,497
Deferred revenue and unearned income 2,325 3,079
--------- ---------
Total current liabilities 12,313 12,005
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock ($.01 par value; 10,000,000 shares authorized,
9,000,000 issued and outstanding) 90 90
Preferred stock ($.01 par value; 1,000,000
shares authorized, issued and outstanding) 10 10
Capital in excess of par value 106 106
Excess of purchase price of assets over historical cost (86) (171)
Cumulative foreign currency translation adjustment (77) (62)
Retained earnings (deficit) (112) 969
--------- ---------
Total stockholder's equity (deficit) (69) 942
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT) $12,244 $12,947
========= =========
</TABLE>
(concluded)
See notes to consolidated financial statements.
4
<PAGE> 8
HARRIS ADACOM NETWORK SERVICES, INC.
(A SUBSIDIARY COMPANY OF HARRIS ADACOM CORPORATION, B.V.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(THOUSANDS)
===============================================================================
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
REVENUE $ 36,359 $ 36,389
COST OF REVENUE 27,246 24,164
----------- -----------
GROSS PROFIT 9,113 12,225
OPERATING EXPENSES:
Sales and marketing 3,637 5,190
General administrative 3,049 3,869
Technical support 213 898
Reorganization and other operating expenses 1,177 1,346
----------- -----------
Total operating expenses 8,076 11,303
----------- -----------
OPERATING INCOME 1,037 922
Interest expense 363 260
Other expenses 3,277
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE (2,603) 662
INCOME TAX EXPENSE (BENEFIT) (1,522) 926
----------- -----------
(1,081) (264)
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE 773
----------- -----------
NET INCOME (LOSS) $ (1,081) $ 509
=========== ===========
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 9
HARRRIS ADACOM NETWORK (SERVICES, INC.
(A SUBSIDIARY COMPANY OF HARRIS ADACOM CORPORATION, B.V.)
CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(Thousands Except Share Data)
===============================================================================
<TABLE>
<CAPTION>
Common Stock Preferred Stock Capital in
------------------------ -------------------------- Excess of
Shares Dollars Shares Dollars Par Value
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 9,000,000 $ 90 1,000,000 $ 10 $106
Amortization of excess
of purchase price of
assets over historical
cost
Cumulative foreign
currency translation
adjustment
Net income
----------- -------- ------------ -------- ---------
BALANCE, DECEMBER 31,
1993 9,000,000 90 1,000,000 10 106
Amortization of excess
of purchase price of
assets over
historical cost
Cumulative foreign
currency
translation adjustment
Net Loss
----------- -------- ------------ -------- ---------
BALANCE, DECEMBER 31,
1994 9,000,000 $ 90 1,000,000 $ 10 $ 106
=========== ======== ============ ======== =========
</TABLE>
<TABLE>
<CAPTION>
Cumulative
Excess of Foreign
Purchase Price Currency Retained
of Assets Over Translation Earnings
Historical Cost Adjustment (Deficit) Total
---------------- ---------- --------- -----
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $ (304) $ $ 460 $ 362
Amortization of excess
of purchase price of
assets over historical
cost 133 133
Cumulative foreign
currency translation
adjustment (62) (62)
Net income 509 509
--------- ---------- ---------- ---------
BALANCE, DECEMBER 31,
1993 (171) (62) 969 942
Amortization of excess
of purchase price of
assets over
historical cost 85 85
Cumulative foreign
currency translation
adjustment (15) (15)
Net Loss (1,081) (1,081)
--------- ---------- ---------- ---------
BALANCE, DECEMBER 31,
1994 $ (86) $ (77) $ (112) $ (69)
========= ========== ========== =========
</TABLE>
6
See notes to consolidated financial statements.
<PAGE> 10
HARRIS ADACOM NETWORK SERVICES, INC.
(A SUBSIDIARY COMPANY OF HARRIS ADACOM CORPORATION, B.V.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,1994 AND 1993
(THOUSANDS)
===============================================================================
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ (1,081) $ 509
Adjustments to reconcile net income to net cash
generated by operating activities:
Depreciation and amortization 1,646 1,795
Change in deferred tax assets (1,350) (773)
Write off of intercompany receivables 3,277 -
Decrease (increase) in accounts receivable (309) 823
Decrease in sales-type lease receivables 136 474
Decrease (increase) in inventories (483) 390
Decrease in other assets 704 424
Increase (decrease) in accrued and other liabilities (247) 1,289
Change in amounts due to or from affiliates - net (153) (3,593)
---------- ----------
Net cash generated by operating activities 2,758 1,338
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net (2,264) (1,667)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) of revolving line of credit (445) 379
Proceeds from issuance of note payable 1,000
---------- ----------
Net cash provided by financing activities 555 379
NET INCREASE IN CASH 1,049 50
Effect of exchange rate changes on cash (15) (62)
CASH, Beginning of the period 12
---------- ----------
CASH, End of the period $ 1,034 $
========== ==========
CASH PAID DURING THE YEAR FOR:
Income taxes $ 203 $ 51
========== ==========
Interest $ 501 $ 350
========== ==========
</TABLE>
See notes to consolidated financial statements.
7
<PAGE> 11
HARRIS ADACOM NETWORK SERVICES, INC.
(A SUBSIDIARY COMPANY OF HARRIS ADACOM CORPORATION, B.V.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
- - - - - - - -----------------------------------------------------------------------------
1. ORGANIZATION
Harris Adacom Network Services, Inc. ("HANS" or the "Company"), a
Delaware corporation, was incorporated on June 25, 1992. The Company
is a wholly-owned subsidiary of HAC, B.V. (a Netherlands company).
HAC BV is currently undergoing bankruptcy proceedings. In conjunction
with such proceedings, the Company sold substantially all of its net
operating assets to GENICOM Corporation ("GENICOM") under the terms
of an Asset Purchase Agreement.
In February 1993, the number of outstanding shares of stock was
increased, and on April 3, 1993, Harris Adacom Corporation ("HAC")
transferred ownership of the stock of HANS to its newly formed foreign
subsidiary, HAC B. V., in exchange for the assumption of certain HAC
obligations.
HANS' principal business activities include equipment maintenance and
customer support operations and computer network integration services
and sales.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of HANS have been prepared in accordance with
generally accepted accounting principles. Accordingly, the consolidated
financial statements include the accounts of HANS and Harris Adacom,
Inc., ("HA - Canada") as appropriate. All significant intercompany
transactions and balances have been eliminated.
REVENUE RECOGNITION - Product revenue includes revenue from the sale and
lease of computer equipment and software. Revenues from equipment sales
are generally recognized upon shipment. Revenues from equipment lease
sales under a leasing arrangement are generally recognized after
shipment and an agreed-upon service date after delivery of the
equipment. Revenue arising from warranty and service contracts is
deferred and amortized over the term of the contracts.
INVENTORIES - Inventories are stated at the lower of cost or market.
Cost is determined by the first-in, first-out ("FIFO") basis. All
inventories are considered to be finished goods.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at
historical cost. Depreciation is provided on the straight-line method
over the following estimated useful lives from the date of original
acquisition:
<TABLE>
<S> <C>
Rental equipment and spare parts 3 to 5 years
Furniture, fixtures, machinery and equipment 3 to 10 years
Computer equipment 3 to 10 years
</TABLE>
8
<PAGE> 12
Leasehold improvements are amortized on a straight-line basis over the
shorter of the term of the lease or the estimated useful life of the
asset. Maintenance and repairs are expensed as incurred. Expenditures
which significantly increase the value or extend useful lives are
capitalized.
INCOME TAXES - Prior to January 1, 1993, the Company accounted for
income taxes under the provisions of SFAS No. 96. Effective January 1,
1993, the Company adopted SFAS No. 109, "Accounting for Income Taxes"
(SFAS No. 109). Deferred tax assets and liabilities are recorded based
on the difference between the tax basis of assets and liabilities and
their carrying amounts for financial reporting purposes, referred to as
temporary differences. Provision is made for deferred taxes relating to
temporary differences in the recognition of income and expense for
financial reporting and for income tax purposes.
PROVISION FOR DOUBTFUL ACCOUNTS - Such amounts are determined by
specific account identification and a general provision based on
historical information.
FOREIGN CURRENCY TRANSLATION - Asset and liability accounts of HA-Canada
are translated to U.S. dollars, using rates of exchange in effect at the
balance sheet date. Revenues and expenses are translated at exchange
rates which approximate the average rates prevailing during the year.
The cumulative translation gains and losses relating to HA-Canada are
included in stockholder's equity (deficit).
STATEMENT OF CASH FLOWS - Disbursements made by HANS on behalf of HAC
were recorded as an intercompany receivable (see also Note 9 - Related
Party Transactions).
3. TRADE ACCOUNTS RECEIVABLE
The Company sells certain trade receivables to a third-party under the
terms of a factoring agreement. HANS paid to the third-party a
commitment fee of one percent (1%) of the commitment ($40,000) on the
date of the first purchase. HANS also paid to the third-party a fee
based on an annual rate of prime plus 8% on each day's outstanding
balance.
4. LEASES
The Company is the lessor under sales-type leases. Systems under leases
that do not qualify as sales-type leases are accounted for as operating
leases. The Company retains the residual interest in certain leased
assets that were sold to a third party by the Company and its
predecessor.
During 1993, the Company sold leases and related equipment to a third
party for $1.5 million plus a profit participation after certain returns
are met. Many of the leases involved equipment under operating leases
on month-to-month terms.
Future minimum lease payments receivable as of December 31, 1994, and
1993 net of amounts sold with a limited recourse to a third party of
approximately $1,129,000 are as follows (thousands):
<TABLE>
<CAPTION>
Sales-Type Operating
<S> <C> <C>
1995 $188 $296
1996 37 31
1997 35 4
----- -----
$260 $331
===== =====
</TABLE>
9
<PAGE> 13
At December 31, 1994 and 1993, $125,000 and $236,000, respectively was
on deposit with the third party buyer of sales-type lease receivables.
Information pertaining to the Company's net investment in sales-type
leases is as follows (thousands):
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Future minimum lease payments receivable $ 260 $443
Unearned interest income (computed using
a discount rate of 13%) (25) (72)
------ -----
Net investment in sales-type leases 235 371
Less: current portion (179) (165)
------ -----
Long-term portion $ 56 $206
====== =====
</TABLE>
During 1993 certain sales-type leases acquired from HAC were cancelled by the
customer. As a result, a reduction to revenue of $220,136 was recorded in 1993.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31,
1994 and 1993 (thousands):
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Machinery and equipment $ 216 $ 97
Furniture and fixtures 108 44
Computer equipment 1,760 1,346
Leasehold improvements 1,144 1,144
Rental equipment and spare parts 4,871 4,075
------- -------
8,099 6,706
Less: accumulated depreciation (3,949) (3,024)
------- -------
$4,150 $ 3,682
======= =======
</TABLE>
6. REVOLVING LINE OF CREDIT TO BANKS
As of December 31, 1994 and 1993, HA-Canada had approximately $723,000
and $1,168,000 respectively outstanding (in U.S. dollars) under a line
of credit bearing interest at the bank's prime rate, plus 3/4% per annum.
The debt is due on demand, is secured by the assets (approximately
$2,670,000 at December 31, 1994) of HA-Canada and has covenants
restricting dividend payments. All amounts due under the line of credit
are classified as current on the consolidated balance sheets. HA-Canada
was not in compliance with certain covenants under its line of credit
agreement.
7. NOTE PAYABLE
10
<PAGE> 14
GENICOM advanced $1 million to the Company in December, 1994 in
anticipation of the sale of substantially all of its net operating
assets to GENICOM described in Note 1. This advance is reflected as a
note payable at December 31, 1994.
8. INCOME TAXES
HANS is a U.S. taxpayer which will file a consolidated return with its
former parent, HAC through the date of its transfer to HAC B.V. (April
1, 1993). It is anticipated that the 1993 return will include a
substantial tax liability, for which HANS and HAC would each be
severally liable.
Effective January 1, 1993, the Company changed its accounting for income
taxes from the provision of SFAS No. 96 to the provisions of SFAS No.
109. There was no deferred tax asset recorded at December 31, 1992
since, under SFAS No. 96, such an asset could not be recorded in excess
of deferred tax liabilities. A cumulative effect adjustment of $773,000
was recorded at January 1, 1993 to reflect the adoption of SFAS No.
109. Such cumulative effect adjustment represents the amount of
temporary differences that management believes is more likely than not
to be realized as of January 1, 1993.
HANS' formation was a nontaxable event and, accordingly, HANS' tax basis
in the assets and liabilities transferred is carried over from the
predecessor (HAC) cost basis. The tax basis of HANS' net assets
exceeded its financial accounting basis at the date of formation;
however, no deferred tax asset was recognized due to an absence of
refundable income taxes.
An analysis of the provision for income taxes is as follows (thousands):
<TABLE>
<CAPTION>
1994 1993
-------- ----
<S> <C> <C>
Federal:
Current income taxes $ (173) $926
Deferred income taxes (1,077)
State deferred income taxes (272)
-------- ----
Total $(1,522) $926
======== ====
</TABLE>
A reconciliation of income tax computed at the U.S. federal statutory
tax rate to the income tax expense (benefit) is as follows (thousands):
<TABLE>
<CAPTION>
1994 1993
-------- ----
<S> <C> <C>
Tax at U.S. statutory rate at 34% $ (885) $225
Change in valuation allowance (751) 491
State income taxes (130) 152
Other - net 244 58
-------- ----
Income tax expense (benefit) $(1,522) $926
======== ====
</TABLE>
11
<PAGE> 15
Following is a summary of the types and amounts of the tax effect
related to existing temporary differences (calculated at the rates in
effect, 39% which includes the effect of state taxes of 5%) and
valuation allowances as of December 31, 1994 and 1993 (thousands):
<TABLE>
<CAPTION>
1994 1993
-------- -------
<S> <C> <C>
Fixed assets $ 197 $ 656
Investment in subsidiary 544 544
Other assets (98) 85
Accrued liabilities 146 239
Net operating loss carryforward 1,334
-------- -------
Gross assets and liabilities 2,123 1,524
Less: Valuation allowance (751)
-------- -------
Net asset 2,123 773
Less: Current portion (1,481) (125)
-------- -------
Long-term portion $ 642 $ 648
======== =======
</TABLE>
The valuation allowance decreased $751,000 during 1994 and increased
$353,000 during 1993.
9. RELATED PARTY TRANSACTIONS
The Company was formed by companies under common control and transacts
business and shares resources with affiliates. Accordingly, the results
of operations may not be indicative of results that would be obtained if
all transactions were with nonaffiliates.
HANS provided HAC and HASI, Inc. ("HASI") with a number of essential
services for the year ended December 31, 1993 including purchasing,
accounting and information services, for which it allocated charges of
$40,000 to HASI in 1993. HANS and HASI agreed to share equally the
expenses of two field offices through December 31, 1993. HANS and HASI
were each allocated $240,000 for the year ended December 31, 1993 for
the shared field offices. Intercompany agreements also provide for
allocation of administrative office rent between HANS, HAC and HASI.
HASI and HANS entered into a warranty agreement under which HANS
provides warranty to HASI customers for a fixed fee based on each
product sold by HASI as specified in the agreement. The warranty
agreement was modified in 1993 so that the payment made to HANS by HASI
is intended to reimburse HANS for warranty costs related to warranty
calls which require replacement of a part. All other costs are absorbed
by HANS. The warranty reimbursement was $63,000 for 1994 and $148,000
for 1993.
As of December 31, 1992, HANS acquired the future lease payment streams
related to certain operating leases of HAC. HANS recorded a payable to
HAC of $1 million, which represented the present value of the future
lease payment streams. The leased assets had a net book value of
$696,000. In accordance with generally accepted accounting principles,
the leased assets were recorded at their historical cost resulting in a
net reduction to additional paid-in capital of $304,000 and are being
amortized to income over three years, the estimated useful life of the
intangible assets acquired.
Sales of product to affiliates resulted in revenue and cost of revenue
of $537,505 and $386,402 for year ended December 31, 1994 and
$1,064,562 and $706,297 for the year ended December 31, 1993.
HA-Canada purchased inventory from affiliates during 1994 and 1993
totaling $338,000 and $1,682,000, respectively.
12
<PAGE> 16
Certain HANS transactions have been and continue to be executed in the
name of HAC, and assignments were executed between the two entities
allowing HANS to be an agent of HAC.
In October 1994, the Company wrote-off approximately $3.6 million of
receivables due it from affiliates and former affiliates, including over
$2.8 million of receivables from HAC and HAC, B.V. The Company charged
$400,000 of this write-off against the allowance for doubtful accounts,
with the additional amount recorded in the statement of operations as
"other expenses".
The remaining related party transactions are discussed elsewhere in the
financial statement footnotes.
10. COMMITMENTS AND CONTINGENCIES
HANS, HASI and HAC have agreed to share certain offices in the United
States. HANS has been assigned a portion of the rental obligations of
HAC under these operating leases commensurate with the proportion of the
office space utilized by HANS. Rental expense amounted to $1,308,000
and $1,465,000 for 1994 and 1993 respectively.
At December 31, 1994, HANS has future minimum lease commitments as
follows (thousands):
<TABLE>
<S> <C>
1995 $1,267
1996 1,107
1997 970
1998 912
1999 764
Thereafter 2,676
-----
$7,696
=======
</TABLE>
The Company has an agreement with HASI to provide warranty service. The
warranty contracts under which HANS provides service are for three-year
terms on terminals and monitors, and one-year terms on controllers (see
Note 9). HASI is primarily liable for warranty service and has prepaid
negotiated amounts to cover future warranty service (see Note 9).
Additionally, warranty obligations existing at July 1, 1992, were not
transferred by HAC upon HANS' formation. However, HANS is the ultimate
provider of warranty service under the pre-existing contracts. The
Company believes that its incremental cost of providing warranty service
for HAC's customers are immaterial.
11. STOCKHOLDER'S EQUITY (DEFICIT)
In February 1993, the Board of Directors increased the authorized number
of shares of the Company to 10 million shares of common stock and one
million shares of preferred stock. Concurrently, the outstanding
shares of common stock (all of which were owned by HAC) were cancelled
and nine million shares of common stock and 1 million shares of
preferred stock were issued in its stead. All capital presentations
have been restated to reflect this recapitalization.
The preferred stock is equivalent to common stock with respect to voting
rights, dividends and liquidation preference.
In March 1993, the Board of Directors adopted the 1992 Long Term
Performance Incentive Plan of Harris Adacom Network Services, Inc.
Pursuant to this plan, 1,000,000 shares of common stock are reserved for
issuance to any officer or other employee of the Company or any
subsidiary, including officers who are members of the Board of Directors
of the Company.
Options have been granted at option prices of $0.41 and $0.85 per share,
the fair value established by the Board of Directors at the dates of
grant. Options have been granted for a term of five years.
13
<PAGE> 17
Options issued as replacements for options held by employees to purchase
the shares of HAC were issued with the same vesting schedules as were
applicable with respect to the HAC option grants.
Options issued to employees other than as described above have a
three-year vesting schedule with one-third of the shares under option
being vested each year. The following table reflects the activity in
the options under the plan:
<TABLE>
<CAPTION>
1994 1993
--------- --------
<S> <C> <C>
Options granted and outstanding at beginning of the year
($.41/share as of January 1, 1993) 480,000 637,000
Options cancelled ($.41 - $.85/share) (47,000) (256,000)
Options granted($.41 - $.85/share) 275,000 99,000
--------- --------
Options outstanding as of December 31 708,000 480,000
========= ========
Exercisable at December 31 708,000 209,640
========= ========
</TABLE>
Subsequent to the sale to GENICOM described in Note 1 these options were
redeemed for $100,000 shared pro rata plus applicable employer payroll
tax matching. Such amount was accrued in the statement of operations.
12. OTHER EXPENSES
Other expenses consists of the write-off of intercompany receivables as
described in Note 9.
13. REORGANIZATION AND OTHER OPERATING EXPENSES
The Company has classified certain 1993 expenses as nonrecurring as
management does not believe that such expenses will be incurred in
future years. Included in the 1993 amount is approximately $731,000 for
the expenses related to a strategic reorganization of the Company's
field network undertaken during 1993. Additionally, approximately
$444,000 represents an expense related to several executives of the
former parent Company which were allocated to the Company in 1993. Such
allocation was made as these executives were performing tasks which
directly benefited the Company. It is not anticipated that such
allocation of expenses will occur in future years, unless additional
services are performed by such executives or others.
14. EMPLOYEE BENEFITS
All HANS full-time employees are eligible to participate in a 401(k)
plan maintained by HAC ("the Plan"). The Plan provides that eligible
employees may contribute to the plan up to 15% of their basic
compensation. The Company makes matching contributions of up to
one-half of the first 6% of the participants' basic compensation
contributed depending on the years of service. The expense for 1994 and
1993 was approximately $219,000 and $180,000, respectively. The Company
intends to terminate the Plan after the sale to GENICOM is completed.
Additionally, the Company provides health, disability and life insurance
programs to its employees. Provisions have been made for known claims
and claims incurred but not reported at each balance sheet date. Benefits
payable under these programs are funded as claims are processed.
15. SUPPLEMENTAL INCOME STATEMENT INFORMATION
Revenues and cost of revenues are further analyzed below (thousands):
<TABLE>
<CAPTION>
Cost of
Revenues Revenues
-------- --------
<S> <C> <C>
Product $15,670 $13,673
Service 20,689 13,573
------- -------
Total $36,359 $ 27,246
======= ========
</TABLE>
***
14
<PAGE> 18
Item 7 (b) - Pro Forma Financial Information:
On March 1, 1995, the Company acquired substantially all of the assets and
certain liabilities of Harris Adacom Network Services, Inc. ("HANS"),
including all of the stock of its Canadian subsidiary, Harris Adacom Inc. for
cash and notes totaling a preliminary purchase price of $7.3 million.
Determination of the final purchase price is subject to the audit of HANS's
February 28, 1995 closing date balance sheet.
The assets acquired relate to HANS's service depot facility, field service
operations, systems integration business and network baselining and monitoring
operations. The purchase price will be funded from the Company's cash flows
from operations and credit facilities and the acquisition will be accounted for
as a purchase.
The pro forma financial information presented herein is based on the historical
financial statements of the Registrant and HANS giving effect to the
transaction pursuant to the purchase method of accounting and the assumptions
and adjustments set forth in the accompanying notes to the pro forma financial
statements. The allocation of the purchase price and related acquisition costs
is subject to adjustment based upon refinements in the application of purchase
method accounting and the final determination of the purchase price.
The pro forma financial statements have been prepared by the Registrant's
management based upon the financial statements of HANS included in this Form
8-K/A. These pro forma financial statements may not be indicative of the
results that actually would have occurred if the combination had been in effect
on the dates indicated or which may be obtained in the future. The pro forma
financial statements should be read in conjunction with the audited financial
statements and footnotes included in the Registrant's Annual Report on Form
10-K for the year ended January 1, 1995 and the HANS audited financial
statements and footnotes for the year ended December 31, 1994 contained in this
Form 8-K/A.
The pro forma consolidated balance sheet (unaudited) as of January 1, 1995
presents the financial position of the Registrant as if HANS had been acquired
as of January 1, 1995.
The pro forma consolidated statements of operations (unaudited) for the year
ended January 1, 1995 present the results of operations as if HANS had been
acquired as of January 3, 1994, taking into consideration only those
transactions known to be occurring, and having continuing impact to operations,
as a result of the acquisition.
4
<PAGE> 19
GENICOM CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JANUARY 1, 1995
(UNAUDITED)
(In thousands, except share data)
<TABLE>
<CAPTION>
Pro Forma
GENICOM HANS Adjustments Pro Forma
--------- ------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 673 $ 1,034 $ $ 1,707
Accounts receivable, less allowance for
doubtful accounts of $1,854 37,846 3,112 40,958
Inventories 43,368 1,083 44,451
Prepaid expenses and other assets 5,040 2,106 (1,481)(1) 5,665
------------- -------------- -------------- --------------
TOTAL CURRENT ASSETS 86,927 7,335 (1,481) 92,781
Property, plant and equipment, net 26,215 4,150 2,000 (2) 32,365
Intangibles and other assets 14,125 759 (642)(1) 23,606
9,364 (2)
------------- -------------- -------------- --------------
$ 127,267 $ 12,244 $ 9,241 $ 148,752
============= ============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Debt maturing within one year $ 371 $ 1,723 $ 3,300 (3) $ 5,394
Accounts payable and accrued expenses 37,540 8,265 (371)(1) 47,677
2,243 (2)
Deferred income 8,236 2,325 10,561
------------- -------------- -------------- --------------
TOTAL CURRENT LIABILITIES 46,147 12,313 5,172 63,632
Long-term debt, less current portion 47,192 0 4,000 (3) 51,192
Other non-current liabilities 5,845 5,845
------------- -------------- -------------- --------------
TOTAL LIABILITIES 99,184 12,313 9,172 120,669
STOCKHOLDERS' EQUITY:
Common stock 106 90 (90)(2) 106
Preferred stock 10 (10)(2) 0
Additional paid-in capital 25,760 106 (106)(2) 25,760
Retained earnings 4,351 (198) (1,752)(1) 4,351
1,950 (2)
Foreign currency translation adjustment (1,435) (77) 77 (2) (1,435)
Pension liability adjustment (699) (699)
------------- -------------- -------------- --------------
TOTAL STOCKHOLDERS' EQUITY 28,083 (69) 69 28,083
------------- -------------- -------------- --------------
$ 127,267 $ 12,244 $ 9,241 $ 148,752
============= ============== ============== ==============
</TABLE>
See notes to pro forma consolidated financial statements.
5
<PAGE> 20
GENICOM CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(1) This pro forma adjustment reflects the elimination of the assets and
liabilities not acquired by the Registrant.
(2) This pro forma adjustment reflects the acquisition of HANS's net
liabilities of $1,821,000 by the Registrant at a preliminary purchase
price of $7,300,000 plus estimated acquisition and integration costs,
comprised primarily of personnel severance and excess facility costs,
of $553,000 and $1,690,000, respectively. The acquisition of HANS is
to be accounted for as a purchase. Under the purchase method of
accounting, the assets and liabilities of the acquired business are
required to be adjusted to their estimated fair values. The estimated
fair value adjustments have been preliminarily determined by
management of the Registrant based upon available information. There
can be no assurance that such estimated adjustments reflect fair
values as may ultimately be determined by the Registrant. Pending
such determination, solely for the purposes of the pro forma financial
statements, it has been assumed that the purchase price will be
allocated to the assets purchased and liabilities assumed based on
HANS's book value except that $2,000,000 of the excess paid over book
value will be added to property, plant and equipment for HANS's
service parts and rental equipment and $9,364,000 will be allocated to
intangibles and other assets.
(3) This pro forma adjustment reflects the assumed borrowings under the
Registrant's credit facilities of $7,300,000 to finance the purchase
price of the HANS acquisition. The Registrant has classified the
$4,000,000 closing purchase price payment as long-term since the
Registrant does not anticipate that amount will be recuperated from
the acquired businesses cashflows within the next twelve months.
6
<PAGE> 21
GENICOM CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JANUARY 1, 1995
(UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Year Ended, GENICOM HANS Adjustments Pro Forma
--------- ------ ------------- -----------
<S> <C> <C> <C> <C>
REVENUES, NET: $233,797 $36,359 270,156
OPERATING COSTS AND EXPENSES:
Cost of revenues 173,894 27,246 201,140
Selling, general and administration 43,015 7,863 (4,328)(1) 48,482
588 (2)
1,344 (3)
Engineering, research and product development 7,720 213 7,933
------------- ------------ ---------- --------------
224,629 35,322 (2,396) 257,555
------------- ------------ ---------- --------------
OPERATING INCOME 9,168 1,037 2,396 12,601
Interest expense, net 7,458 363 718 (4) 8,539
Other income/(expense) 1,908 (3,277) 3,277 (5) 1,908
------------- ------------ ---------- --------------
INCOME (LOSS) BEFORE INCOME TAXES 3,618 (2,603) 4,955 5,970
Income tax expense/(benefit) 1,048 (1,522) 2,204 (6) 1,730
------------- ------------ ---------- --------------
NET INCOME (LOSS) $ 2,570 (1,081) 2,751 $ 4,240
============= ============ ========== ==============
EARNINGS PER COMMON SHARE AND COMMON
SHARE EQUIVALENT (PRIMARY AND FULLY DILUTED) $ 0.23 $ 0.37
============= ==============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING
Primary 11,345 11,345
============= ==============
Fully diluted 11,416 11,416
============= ==============
</TABLE>
See notes to pro forma consolidated financial statements.
7
<PAGE> 22
GENICOM CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(1) Recognition of cost savings resulting from elimination of redundant
personnel and facility costs.
(2) Amortization of the step-up to fair market value of $1.0 million for
both service parts and rental equipment over a 4 and 3 year period,
respectively.
(3) Amortization over 7 years of the excess purchase price over net assets
acquired.
(4) Incremental interest expense on acquisition related borrowings at an
effective average interest rate of approximately 9.8%.
(5) Elimination of the non-recurring HANS's write-off of the intercompany
receivable from its former parent company. This non-recurring item
contributed to a shortfall in cashflow resulting in the parent's sale
of the HANS business.
(6) To recognize a consolidated pro forma income tax provision at an
effective rate of 29%.
8
<PAGE> 23
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: May 12, 1995
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)
9
