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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 1996
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 20151
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 802-9200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, $.01 par value
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
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained, to the best of the registrant's knowledge,
in definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K.
--
As of January 31, 1997, there were 10,984,439 shares of Common Stock of the
Registrant outstanding. The aggregate market value of the shares of Common
Stock held by non-affiliates (without admitting that any person whose shares
are not included in determining such value is an affiliate) was approximately
$49,429,975 based upon the closing price of the shares in the NASDAQ
over-the-counter market on January 31, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement with respect to the
Annual Meeting of Stockholders to be held on May 21, 1997: Part III
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GENICOM CORPORATION AND SUBSIDIARIES
FORM 10-K INDEX
<TABLE>
<S> <C>
PART I
Item 1. Business 3
Item 2. Properties 14
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security Holders 15
Executive Officers of the Registrant. 16
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters 17
Item 6. Selected Financial Data 18
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 19
Item 8. Financial Statements and Supplementary Data 25
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 47
PART III
Item 10. Directors and Executive Officers of the Registrant 47
Item 11. Executive Compensation 47
Item 12. Security Ownership of Certain Beneficial Owners and Management 47
Item 13. Certain Relationships and Related Transactions 47
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 47
Signatures 51
Index to Financial Statements and Schedules F-1
Index to Exhibits E-1
</TABLE>
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ITEM 1. BUSINESS
GENERAL
GENICOM Corporation ("GENICOM" or the "Company"), through its worldwide
operations, provides maintenance and repair services for computer systems
produced by multiple vendors, network planning, integration and optimization
services and develops and distributes printers and related products. Through
its acquisition of substantially all of the assets and certain liabilities of
Harris Adacom Network Services, Inc., the Company is developing into a fully
integrated provider of multivendor business services. GENICOM's service
businesses include (i) multivendor support (i.e. hardware installation and
repair and maintenance contracts) and (ii) network integration services (i.e.
software and network consulting services, system specification and evaluation,
hardware and software design and integration, documentation and contract
labor). GENICOM continues to design and distribute impact and page printers
for (i) use in cost sensitive environments; (ii) the printing of multi-part
forms and bar-codes; (iii) providing printing connectivity in proprietary
systems; and (iv) the travel industry. On September 30, 1996, GENICOM acquired
Texas Instruments' worldwide printer business which enabled the Company to
expand its printer product line in mid-range printers and products specifically
directed at the travel industry. The Company also provides spare parts and
supplies, such as, print heads, printed wire boards, ribbons and printer
cartridges for both the Company's as well other manufacturers' printers.
BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
The Company's businesses are reported in two business segments: Enterprising
Service Solutions and Document Solutions. Financial information by business
segment and geographic location appears on pages 42, 43 and 44 of this Annual
Report on Form 10-K. This information includes sales and service revenues,
operating income and identifiable assets for the years ended December 29, 1996
and December 31, 1995.
Operation of the Company's subsidiaries in Australia, Canada, and Europe is
subject to various risks associated with political and economic developments in
such countries, such as tariffs imposed to discourage imports, varying product
standards and specifications, and value added and excise taxes. In addition,
GENICOM is exposed to currency fluctuation risks as a result of its
international sales and sourcing of products from foreign vendors.
Accordingly, sales or cost of components may decrease or increase as the value
of the United States dollar appreciates or depreciates relative to the currency
of the source country. The Company usually hedges these currency risks through
the purchase of forward exchange contracts and expects to continue this
practice in the future.
In December 1994, the Mexican peso suffered a devaluation of approximately 30%.
The impact on the Company's financial position, results of operations and
liquidity was immaterial and was felt principally in the Company's subsidiary,
Genicom de Mexico, which was sold in June of 1996.
ENTERPRISING SERVICE SOLUTIONS
GENERAL
GENICOM performs a wide range of service solutions related activities through
its Enterprising Service Solutions company. These operations, which are
classified into the Company's Multivendor Services and Integrated Network
Services operations, include the provision of services for customers of both
other vendors' products and GENICOM products -
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Multivendor Services - and for customers in need of network consultation -
Integrated Network Services. Multivendor Services accounted for 86.7 percent
of Enterprising Service Solutions revenue while Integrated Network Services
provided the remaining 13.3 percent in 1996.
MULTIVENDOR SERVICES
Through its Multivendor Services operations, the Company performs a variety of
service related activities for customers utilizing not only GENICOM products
but also products manufactured by other vendors. Products serviced by
Multivendor Services include servers and midrange systems, personal computers,
workstations, networking products, controllers, routers, hubs, terminals,
printers, peripherals, and storage devices. Services are typically provided on
a subcontracted basis for major hardware vendors such as Computervision, IBM,
and Canon, or directly under contract with system users, such as NASDAQ or USX.
Service contracts, which comprise a major portion of Multivendor Services
revenue, typically extend for several years, with payment due monthly,
quarterly or annually, in advance. Services are generally available Monday
through Friday, during normal working hours, with response times ranging from 2
to 8 working hours in metro areas and less than 16 working hours outside metro
areas. Standard offsite (depot) repair time is five working days. Advanced
exchange offsite (depot) offers 24 hour repair time. The Company's service
activities include the following:
Preventive maintenance Regularly scheduled visits to customer sites
to provide routine maintenance.
Offsite (depot) repair Unit repair or refurbishment in GENICOM's
quality controlled repair facilities by
qualified depot technicians.
Onsite (field) support Service of equipment in need of repair
accomplished at customer's site by qualified
field engineers.
Technical support Phone service for customers and field
engineers providing technical and operating
information for products and software.
Installation Installation of hardware and software
products at customer's site.
Training Hands on training for customers, field
engineers, and partners at our training
facility or at customer's site.
Documentation Training and service manuals and videos for a
broad portfolio of hardware products.
Network integration Customer tailored solutions providing
hardware, software and services to meet
unique customer information technology needs
for LANs, WANs, internetworking applications
and client server environments.
Multivendor Services seeks to become a leading provider of information-related
services in those markets in which it competes. Thus, it strives to maintain a
strong focus on existing customers, while simultaneously developing growth
opportunities that become available. To that end, the Company significantly
expanded its presence in the multivendor services market by acquiring
substantially all of the assets and certain liabilities of Harris Adacom
Network
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Services, Inc. ("HANS"), including all of the stock of HANS' Canadian
subsidiary, Harris Adacom Inc., on March 1, 1995. Through this acquisition,
the Company added HANS' computer and peripherals field and depot repair service
operations to the Multivendor Services operation, significantly expanding the
Company's core competencies and improving its efficiency in these markets. In
1997, GENICOM is opening a new rapid turnaround depot in Louisville, Kentucky
and consolidating the depots in Bedford, Massachusetts and Waynesboro,
Virginia.
Multivendor Services operations now provide a "one stop" maintenance service
approach that includes hardware maintenance and repair, quality assurance,
configuration management, and asset management. Given the wide variety of
computer equipment brands used by individual customers, Multivendor Services
focuses on third party maintenance of hardware and peripheral equipment,
employing some of the most knowledgeable technicians in the industry who are
able to service a wide breadth of equipment.
As of February 1997, the Company services over 11,000 customers and 114,000
devices through its domestic Multivendor Services operations. Such operations
are classified into offsite (depot) and onsite (field) repair services.
Offsite (Depot) Repair
Offsite (depot) repair services are employed when, due either to complexity of
repair or cost related issues, the repair of a customer's defective hardware
cannot be completed in the field. The Company has utilized two facilities to
conduct domestic offsite (depot) repair operations, one in Waynesboro,
Virginia, where printers, keyboards, personal computers, controllers and other
network-related hardware are serviced, and another in Bedford, Massachusetts,
where workstations, systems and monitors are serviced. The Waynesboro facility
performs less complex, high volume services on both GENICOM and multivendor
products, whereas the Bedford facility primarily services multivendor products
which employ complex technologies. In 1996, the Bedford facilities and the
Waynesboro facilities were certified for compliance with the provisions of ISO
9002 International Quality System Standard, in recognition of the Depot Repair
operations consistent quality of service.
In 1997, the Company is planning to consolidate both the Bedford and Waynesboro
depots into a new rapid turn-around depot in Louisville, Kentucky. This new
depot will be located in close proximity to United Parcel Service's
transportation hub facilitating the Company's goal of 24 hour repair service.
Onsite (Field) Repair
Onsite (field) repair services are traditionally employed to repair equipment
which utilizes less complex technologies where it is more efficient to repair
the product in the field rather than to ship it to one of the Company's offsite
(depot) repair facilities. The Company segregates domestic onsite (field)
repair operations by geographic location, and within each service center by
field engineer skill type. The Company deploys over 331 field engineers and
160 service vans from 140 service centers in all 50 states, including all major
metro areas.
Onsite (field) repair and maintenance operations are, like offsite (depot)
repair work, typically performed under contract with hardware vendors such as
Computervision, Canon or provided directly to the hardware user. Field clients
and company engineers are categorized through an internal grading system. This
allows the Company to more efficiently assign Company repair engineers based on
their levels of expertise and cost, after GENICOM customer service
representatives assess the technical skill level required to adequately serve
the customer.
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Through such orderly scheduling of its field technicians, the Company attempts
to minimize its cost structure.
GENICOM provides its Canadian and European customers parts and services through
the Company's international subsidiaries. GENICOM services its Latin American,
Middle Eastern, African and Pacific Rim customers through authorized
distributors of GENICOM products.
Sales, Marketing and Competition
Multivendor Services has increased its sales and marketing efforts. Through
alliances with key OEM customers and the HANS acquisition, Multivendor Services
has been able to expand its offerings to meet a broader range of customer
needs.
Multivendor Services competes with, among others, independent providers of
repair services, in-house repair centers of OEMs and third party maintenance
organizations (TPMs). Multivendor Services believes that it offers
cost-effective maintenance and repair solutions to OEMs and TPMs and,
therefore, considers these entities potential customers.
The Company believes that Multivendor Services competes primarily on the basis
of price and the scope and quality of its services. Due in part to the capital
costs necessary to maintain adequate inventory and equipment as well as
geographic disbursement of need to service large OEMs and TPMs, Multivendor
Services believes the economic constraints of small maintenance and repair
companies preclude them from competing with Multivendor Services for large
programs. Multivendor Services also believes that the scope of its maintenance
and repair operations and capabilities provides it with competitive advantages
over many of its competitors.
INTEGRATED NETWORK SERVICES
Centralized network systems management and control solutions have evolved to
meet the needs of network managers responsible for the expanding corporate
distributed computing environments. Many companies now outsource their network
service activities to companies such as GENICOM which can provide total network
planning, integration and optimization services across a variety of software
and hardware platforms. Through the acquisition of HANS, the Company acquired
knowledgeable marketing personnel, a proven sales force, highly regarded
technicians and an established customer base, which have allowed the Company to
establish the Integrated Network Services operation and to expand its services
into the high growth market of network integration and management.
Integrated Network Services provides turnkey network solutions for clients
through system software and hardware planning, system installation, integration
and training, as well as post-implementation facilities management and
technical services. Integrated Network Services personnel essentially tailor
logical or physical network infrastructures to meet customers' information
gathering, processing and reporting system needs by recommending, selecting,
benchmarking and sometimes installing the requisite hardware, software and
computer services. Integrated Network Services often performs client need
assessments, then designs, selects and installs systems structured to meet
client needs, and then trains client personnel with respect to the use of such
systems. Typically, the Company contracts its Integrated Network Services
computer technicians and systems engineers to clients on a per diem basis.
Integrated Network Services also provides diagnostic services for the
evaluation of existing computer networks. Such services are primarily provided
on a contract labor basis or annual fees to support customers' existing
information technology systems, including concept
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formulation, system specification, system engineering design/development and
project management. Such services are important for managing the growth of and
optimizing usage from existing networks. Typically, Integrated Network
Services establishes and reports on an existing system's capabilities,
including usage, software and hardware inventory and network functionality.
The establishment of Integrated Network Services provides the Enterprising
Service Solutions company the opportunity to leverage its existing technical
capabilities and established customer base with additional value-added business
services. The Company generally can offer systems to customers to meet
configuration and capacity needs identified through the rendering of diagnostic
services. Thus, the establishment of Integrated Network Services operations
has provided the Company new opportunities to provide its customers a total
application solution through the Enterprising Service Solutions company. In
1997, the Company plans to apply the business strategies which have resulted in
revenue growth in Canada with regards to integrated network services in the
United States.
DOCUMENT SOLUTIONS
PRINTERS AND RELATED PRODUCTS
The Company offers a wide range of serial (one character at a time), line (one
or more lines at a time) and page (one page at a time) printers, with
performance features and prices suitable for a varied range of printing
applications. Besides offering a wide range of technologies and print speeds,
GENICOM's printers offer multiple combinations of features that make them
suitable for diverse applications. Such features include multiple copy and
extensive paper handling capabilities, multiple type styles (fonts) and bar
codes. GENICOM's printers are used with desktop workstations and with various
networks and stand alone configurations in conjunction with micro, mini,
super-mini and mainframe computers.
On September 30, 1996, the Company acquired the Texas Instruments printer
business. The Company acquired design rights, product intellectual property
rights, vendor and customer contracts, production equipment and working
capital, including inventory. The acquisition expanded the Company's product
lines in the mid-range client/server environment and enabled the Company to
provide custom applications in the travel industry.
Document Solutions also sells spare parts and supplies, for both GENICOM
products and those manufactured by other vendors. Supplies include items that
have a relatively short life such as printer ribbons and cartridges, while
spare parts include items that have generally a longer life such as print heads
and printed wire boards.
The following table reports the composition of Document Solutions revenue:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ----------
<S> <C> <C> <C>
Impact Printers 41.1 % 45.5 % 46.3 %
Nonimpact Printers 12.9 11.2 9.3
Spares 10.1 10.2 11.7
Supplies 35.9 33.1 32.7
--------- --------- ---------
TOTAL DOCUMENT SOLUTIONS 100.0 % 100.0 % 100.0 %
========= ========= =========
</TABLE>
The following table sets forth a summary of certain performance features of
GENICOM's principal printer products. Manufacturer's List Price Range is as of
January 1997. Sales price may vary depending on features installed,
customization, discounts and other factors.
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<TABLE>
<CAPTION>
Manufacturer's
Suggested
Printer Technology Draft List Price
Product Family Type Print Speed Features Options Range
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
IMPACT-SERIAL
83Xe series 9 wire serial 250 to 300 cps personal workstation pull tractor, serial $579-$829
matrix printer, ideal for small interface board, tabletop
footprint applications printer stand
2400 Series 9 wire serial 270 to 320 cps designed for attachment to $1,492-$1,658
matrix IBM 3270 controllers (coax
and IBM AS/400 twinax) with
versatile paper handling
880 Series 9 wire serial 300 cps heavy duty printer barcode kit, current loop $2,195-$2,320
matrix kit, RS-422 kit, acoustic
cover, pedestal and paper
handling options
885 Series 9 wire serial 300 cps 80 column, heavy duty barcode kit, current loop $2,295-$2,420
matrix printer kit, RS-422 kit, acoustic
cover, pedestal and paper
handling options
3400 Series 9, 18 or 24 400 to 840 cps mid-range and high-speed paper handling options, $1,395-$2,995
wire serial network printers, advanced colorkit and pedestal
matrix paper handling to include
dual tractors and auto
sheet feeder, postnet and
bar codes, with automatic
switching serial (parallel
interface)
3405 Series 18 wire 400 cps 80 column, tabletop, heavy barcode conversion kit, $2,079
serial matrix duty printer ideal for pedestal and paper
small footprint applications handling options
3500 Series (I) 9, 18 or 24 400-840 cps designed for attachment to paper handling options, $2,195 - $3,595
wire IBM 3270 controllers (coax colorkit and pedestal
serial matrix )and IBM AS/400 (twinax)
with additional
autoswitching parallel
interface, dual tractors
and sheet feeder and
resident bar codes
8900 Series 18 wire 400 cps heavy duty, mid-range bar code and font kits, $2,345-$2,859
serial matrix printers with the ability DEC LA 120 emulation,
to print on 9-part forms RS-422 kit, current loop
kit, MacAdapter kit,
acoustic cover, pedestal
and paper handling
options
3800 Series 18 wire 600 cps high-speed, heavy duty, QMS /IGP graphics, $2,125 - $3,168
serial matrix network printer, advanced RS-422 kit, pedestal and
paper handling and paper handling options
single/dual path, POSTNET
and bar codes
3900 Series 18 wire 600 cps designed for attachment to pedestal and paper $2,999 - $4,155
serial matrix IBM 3270 controllers (coax) handling options
and IBM Systems 3X or
AS/400 (twinax),
high-speed, advanced paper
handling, bar codes and
IPDS
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
IMPACT-LINE
4490 Series shuttle 1400 lpm heavy-duty cycle, additional fonts and $10,158 - $10,658
matrix line maintenance free features, paper motion detector,
printer advanced paper handling, QMS/IGP graphics
graphics and bar codes
4590 Series shuttle 1400 lpm designed for attachment to additional fonts and $11,158 - $11,658
matrix line IBM 3270 controllers paper motion detector,
printer (coax), IBM Systems 3X or QMS/IGP graphics
AS/400 (twinax) and bar
codes
4800 Series shuttle 400 to 800 lpm reliable, low cost of QMS & IGP graphics $5,995 - $8,995
matrix line ownership, printer designed IBM twinax and coax
printer for connectivity to
Ethernet, TCP/IP, Token
Ring, AT&T SSI and LANS
4900 Series shuttle 400 to 800 lpm designed for attachment to additional fonts $7,047 - $10,290
matrix line IBM 3270 controllers QMS/IGP bar codes
printer (coax), IBM Systems 3X or
AS/400 (twinax), bar codes
and IPDS
NONIMPACT LINE
7612 Series laser 12 ppm desktop, network and versatile input/output $1,649
printers multiuser environments, high paper handling devices and
resolution, multiple resident duplexing
fonts, PostScript level 2 &
PCL5E compatible. Supports
various paper sizes.
7900 Series laser 10 to 16 ppm multiuser, IBM client server MarkNet internal network $2,582 - $5,665
printers environments, full IBM 4028 adapter connects up to 18
IPDS emulation, PCL5E & different operating
Postscript Level 2 compatible systems, versatile
up to 1200 dpi, bar codes, input/output paper
labels, graphics, electronic handling devices and
forms. duplexing, various memory
options
7930/40 Series page printers 30 to 40 ppm multi-user materials, IBM network connectivity $16,900 - $35,333
(LED array) client server environments, options, printer cabinet,
full IBM 4028 IPDS emulation, high capacity paper
PCL5E and PostScript Level 2 handling options
compatible, hard drive for
software upgradability and
storage of forms and fonts
6000 Series thermal 2 to 8 full range of bar code and additional memory, $705 - $6,560
transfer and inches per label printers designed for emulations, and media
direct second portable, desktop and handling
thermal industrial environments
printers
TRAVEL INDUSTRY
PRODUCTS LINE
BT201e Direct 4.9 Airlines baggage tag and memory $2138
thermal inches/sec. boarding pass thermal printer
GR122 Magnetic N/A Decodes magnetic data from pedestal $4605
coupon (not a ATB format coupons 2nd display
decoder printer)
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C> <C>
895e 9 wire serial 300 CPS Impact printing of TAT and bar code scanner $1763 - $3638
matrix ATB format pin fed stock
ATB1600 Direct 40 Thermal printing to magnetic memory $5922 - $6700
thermal coupons/min. encoding/decoding of ATB modem
format coupons
ATB1800 Thermal 40 Direct thermal and thermal memory $6488 - $7225
transfer & coupons/min. transfer printing magnetic modem
direct encoding/decoding of ATB
thermal format coupons
ATB2000 Electro- 40 Toner based printing, memory $6619 - $8031
photographic coupons/min. magnetic printing, magnetic modem
(laser) encoding/decoding of ATB
format non-thermal coupons
</TABLE>
The following are trademarks or registered trademarks of their respective
companies:
DEC of Digital Equipment Corporation; Geniscript of GENICOM Corporation; IBM
and IBM Proprinter of International Business Machines Corporation; PCL5 & PCL5E
of Hewlett-Packard Company, Postscript of Adobe Systems, Inc.
Definitions: cps-characters per second, lpm-lines per minute, ppm-pages per
minute
(1) Volume shipments for these products began in 1996.
Relay Products
The Company offers a line of relays that are used principally in signal
switching applications requiring high functional reliability and product
quality and are sold primarily for aerospace and defense applications,
automatic test equipment applications and, to a lesser extent, communication,
industrial control and transportation control applications. GENICOM believes
that its certified and proprietary designs should enable it to continue to
participate in future major space and weapons programs. Relay revenues have
declined since 1990 due to decreased spending by defense contractors. There
are relatively few competitors in the relay market that GENICOM serves. Relay
revenues, as a percentage of total revenues, were 4.5%, 4.0%, and 6.4% in 1996,
1995 and 1994, respectively. The Company is currently negotiating for the sale
of this product family.
Manufacturing
Document Solutions products are manufactured and assembled primarily at
facilities in Reynosa, Mexico and McAllen, Texas under an agreement with
Atlantic Design Company ("ADC") and to a lesser extent at the Company's
facility in Waynesboro, Virginia. The Reynosa facility assembles certain
impact printer product lines and produces printed circuit boards, high-speed
matrix printheads, ribbon cartridges and a variety of conventional
electromechanical assemblies. The Waynesboro facility is used primarily for
depot repair and relay manufacturing. In conjunction with the Company's
acquisition of Texas Instruments' worldwide printer business as of September
30, 1996, the Company entered into an agreement with Texas Instruments pursuant
to which Texas Instruments will continue to manufacture certain printer
products for an interim period not to exceed nine months.
In December of 1995, the Company entered into a five year agreement which was
extended an additional year in June 1996 (renewable annually after 6 years)
with Atlantic Design Company, a subsidiary of Ogden Services Corporation,
pursuant to which ADC acquired the Company's manufacturing operations in
McAllen, Texas and Reynosa, Mexico. Under the agreement, ADC is committed to
manufacturing substantially all of the Company's impact printer products,
printed circuit boards, related supplies and spare parts, while the Company
retains design, intellectual and distribution rights with respect thereto. As
part of the Texas Instruments acquisition, the Company entered into an
agreement with ADC pursuant to
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which ADC would manufacture the products acquired from Texas Instruments and to
assist in the transition of the manufacturing functions from Texas Instruments.
Ogden Services Corporation is attempting to divest ADC. The Company's contract
with ADC contains a clause requiring GENICOM's consent to the sale, which such
consent cannot be unreasonably withheld. The Company is currently evaluating
this situation as well as the ongoing performance of ADC under the agreement.
Sales and Marketing
The major portion of printer and relay sales are made pursuant to purchase
agreements, blanket purchase orders and similar arrangements whereby products
are deliverable only after the customer issues a purchase order, release or
schedule covering specific numbers of units and specifying firm delivery dates.
Such arrangements usually contain price protection provisions which provide
that if the Company decreases its prices, customers will receive the benefit of
such price decreases for products then held in inventory. The Company's
agreements with larger OEMs for printer sales generally require the customer to
provide GENICOM with continuously updated forecasts of its requirements and to
issue firm orders for deliveries for up to a twelve month period.
GENICOM markets its products and services through several domestic and
international channels. GENICOM's distribution channels consist of (i) national
and regional distributors who sell to value added resellers ("VARs"), dealers
and end users, and (ii) a direct sales force which sells to OEMs, end users and
value added resellers and dealers.
Most printers are available in several standard models, enabling Document
Solutions to serve a wide range of customer requirements. A combination of
accessories satisfies various printing applications. In addition, standard
models are customized for OEMs and end users using GENICOM's engineering design
capabilities. No customer accounted for more than 10% of GENICOM's total sales
in 1996.
GENICOM maintains international sales and marketing subsidiaries in Australia,
Canada, Sweden, Belgium, France, Germany, Italy and the United Kingdom. These
subsidiaries offer GENICOM products and services to distributors, small OEMs,
system houses, VARs and retail dealers in over 66 countries in primarily local
currencies. See "Business Segment and Geographic Information."
Competition
Document Solutions' printer products compete in markets characterized by rapid
technological change and strong competition. The Company competes primarily in
the medium and high-performance segments of the printer market where users
require reliable printers principally for word processing, shared network
printing, graphics, bar codes and other business applications. The Company
competes against many well-established companies, some with financial,
technical and operating resources greater than GENICOM. Such competitors
include large computer system manufacturers that produce printers for their own
product lines and, in certain cases, for sale to other suppliers or end users.
In addition, there are a number of independent printer manufacturers producing
printers that compete with those offered by GENICOM.
Competitive factors within the printer market include price, performance,
reliability, cost of ownership, versatility, ease of maintenance, applications
solutions support, after-sales service and support and marketing channels. As
the computer industry continues to move toward
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product standardization and relies less on proprietary designs, GENICOM will be
challenged to continue to differentiate its products based on these competitive
factors. The Company believes that its ability to maintain a competitive
market position depends on the following: development of applications solutions
to customer needs, continued growth of nonimpact printer technologies,
sustained migration to shared printing environments, effective channels to
market, continued enhancement of the Company's product line and improvements in
the Company's productivity. To enhance its competitive position in the impact
and nonimpact market, the Company purchased the printer assets of Texas
Instruments on September 30, 1996. The addition of Texas Instruments' printer
and supplies business complements GENICOM's current product offerings, globally
expands its customer base and, broadens the Company's offerings in the travel
industry. The addition of travel related products provides the Company with a
broad family of impact and nonimpact products targeted at specific applications
such as itinerary confirmation, ticketing, bag tag and boarding automation.
The Company has further expanded its nonimpact printer product line with the
introduction of thermal bar coding products as complementary offerings to its
impact bar coding products.
The Company believes that the market for impact printers has largely shifted to
shared-resource, application-specific environments such as bar coding and
multipart forms. As this occurs, the Company is narrowing its focus to these
niche markets, de-emphasizing or discontinuing low-end offerings and channeling
resources to markets where growth potential is greatest. As the market for
this technology has declined, the Company is also focusing on the replacement
market. By addressing connectivity issues and applications such as industrial
graphics and labels, the Company has designed products which appeal to the
existing user base as well as new customers. Impact printers continue to meet
customer application needs not yet satisfied by nonimpact technologies, in such
areas as multipart forms, high-volume reliability and low cost ownership.
GENERAL
ENVIRONMENTAL MATTERS
As a result of manufacturing processes, the Company generated and managed
hazardous wastes at its facilities. The Company does not believe that
compliance with Federal, State and local regulations will have a material
effect on its capital expenditures, financial condition or results of
operations. See "Legal Proceedings."
BACKLOG
The Company's order backlog at December 29, 1996 was approximately $56.7
million, compared with approximately $47.5 million at December 31, 1995.
GENICOM's reportable backlog reflects only fixed-price contracts for all orders
associated with service, systems integration and those orders for printers,
spare parts and supplies for which a delivery date within approximately six
months has been specified by the customer. The Company expects to ship
substantially all printer, spares and supplies orders in reported backlog
within fiscal year 1997. The Company normally experiences lower sales each
year in its third quarter due to European holidays.
GENICOM's working capital practices are consistent with the working capital
practices of the printer and service industry. GENICOM's customer payment
terms generally require invoices to be paid within thirty days of the date of
issue.
ENGINEERING, RESEARCH AND PRODUCT DEVELOPMENT
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<PAGE> 13
GENICOM incurs engineering, research and product development costs for the
following purposes: development of new products; applications solutions
development; modification, enhancement and achievement of cost reductions for
existing product lines; customization of products for OEMs; market research;
and development of process inspection criteria to ensure new products are built
to specification. GENICOM's expenditures for engineering, research and product
development were $8.5 million, $8.4 million, and $7.7 million in 1996, 1995 and
1994, respectively. In 1996, 1995, and 1994 the Company expended 4.7%, 5.0%,
and 4.6% of products revenue, respectively, in engineering, research and
product development.
GENICOM maintains in-house capabilities and facilities available to support its
engineering and design activities. The Company also engages a number of highly
specialized independent firms to supplement its own engineering capabilities
and to design certain software and components for its products.
PROPRIETARY RIGHTS
GENICOM relies on patent, copyright and trade secret laws to protect its
proprietary and technology rights. GENICOM obtained certain patents, licenses
and cross-licenses when it acquired the Data Communication Products Business
Department from General Electric Company (collectively "G.E.") in 1983, when it
acquired the Printer related assets of Ekco Group, Inc. (formerly Centronics
Data Computer Corporation, "Centronics") in 1987, and when it acquired Harris
Adacom Network Services, Inc. and Printer Systems Corporation in 1995, as well
as Texas Instruments' printer business which the Company acquired in 1996.
GENICOM continues to patent certain developments, holds certain patents pending
and retains numerous patents expiring at various times between 1996 and 2012.
In addition, the Company has a cross-licensing agreement with IBM that expires
17 years after the date of issue of certain patents pending prior to January 1,
1991.
"GENICOM" and certain other marks used in connection with the sale of the
Company's products are registered trademarks of GENICOM in the United States
and, in some cases, certain foreign countries. Under United States law, a
registered trademark remains valid for 10 years if affirmed at the end of the
sixth year. There is no limit to the number of times the registration may be
renewed for additional 10-year periods. Thereafter, each registration may be
renewed for additional 10 year periods; otherwise the registration will expire
automatically.
GENICOM's Document Solutions strategic business unit specializes in raster
imaging technology and has numerous related patents and trademarks which the
Company expects to assist in GENICOM's continued penetration into the
nonimpact market in 1997.
In connection with the acquisition of the printer-related assets of Centronics,
GENICOM acquired a license to use the name "Centronics" as a trademark,
tradename and service name.
HP Laserjet is a registered trademark of Hewlett-Packard Company.
SUPPLIERS
GENICOM currently purchases raw materials, components and printers from various
domestic and foreign suppliers. GENICOM utilizes supply agreements and other
arrangements whereby volume discounts can be obtained.
GENICOM purchases certain products - printers, options, supplies and component
parts, including print engines, from sole suppliers who have developed
proprietary processes that the Company incorporates into its products. In the
event that those suppliers were unable or
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<PAGE> 14
unwilling to supply these products, the Company believes it could establish
alternate sources for these products or similar products. The time required to
establish an alternate source could disrupt the manufacture or distribution of
these products, thus causing delays that could adversely affect revenues.
Currently, the Company considers its relationships with these vendors to be
good and does not anticipate any disruption in the supply of these products.
In 1996, GENICOM procured 64% of its total inventory purchases from ADC
pursuant to the agreement. No other supplier accounted for a significant
portion of GENICOM's total 1996 purchases. In 1995, GENICOM purchased 16% of
its total purchases from TEC Corporation which supplied the Company with
certain nonimpact printer products. In December 1995, the Company entered into
a five year, later extended an additional year, agreement with ADC pursuant to
which ADC took over the Company's manufacturing operations and employees in
McAllen, Texas and Reynosa, Mexico. ADC is committed to manufacturing all of
the Company's impact printer products, printed circuit boards, related supplies
and spare parts (See "Management's Discussion and Analysis").
EMPLOYEES
As of December 29, 1996, the Company and its subsidiaries employed 1,671
employees. The Company believes its relations with its employees are
satisfactory.
The Company's production and maintenance employees at its Waynesboro facility
are represented by the United Electrical, Radio and Machine Workers of America
Local 124, under a collective bargaining agreement which expires in July 1999.
Some of these employees will be affected by the relocation of the Waynesboro
depot to Louisville, Kentucky.
ITEM 2. PROPERTIES
The following table sets forth certain information with respect to the
Company's owned or leased property as of December 29, 1996:
<TABLE>
<CAPTION>
SQUARE OWNED OR YEAR LEASE
LOCATION PRINCIPAL USES FEET LEASED EXPIRES
========================= ==================================== ============ ============== ==============
<S> <C> <C> <C> <C>
Bedford, MA Service 53,000 Leased 1997
Chantilly, VA Corporate Headquarters 23,000 Leased 1998
Waynesboro, VA Service, Manufacturing, Office 377,000 Owned --
Jeffersontown, KY Service 66,000 Leased 1997
McAllen, TX (1) Distribution 37,500 Leased 1997
Bedford, MA Service 80,000 Leased 1998
New Carrollton, TX Service 105,000 Leased 2002
</TABLE>
(1) This facility is currently being subleased by Atlantic Design Company as
part of the manufacturing agreement mentioned above.
GENICOM's leased property is occupied under standard industrial and commercial
leases. Each lease generally contains an optional renewal provision.
ITEM 3. LEGAL PROCEEDINGS
The Company and the former owner of its Waynesboro, Virginia facility, General
Electric Company ("G.E."), have generated and managed hazardous wastes at the
facility for many years as a result of their use of certain materials in
manufacturing processes. The Company and the United States Environmental
Protection Agency ("EPA") have agreed to a corrective
14
<PAGE> 15
action consent order (the "Order"), which became effective on September 14,
1990. The Order requires the Company to undertake an investigation of solid
waste management units at its Waynesboro, Virginia facility and to conduct a
study of any necessary corrective measures that may be required. The
investigative work under the Order is expected to be completed by December
1997. Although not required by the Order, the Company has agreed to install
and operate an interim ground water stabilization system, subject to EPA
approval of the system design. The interim groundwater stabilization program
may be chosen as the final remedy for the site, or additional corrective
measures may eventually be required. It is not possible to reliably estimate
the costs that any such possible additional corrective measures would entail.
However, if additional corrective measures are required, the Company expects
that it will enter into discussion with EPA concerning their scope and a
further order for that purpose.
The Company has been notified by the EPA that it is one of 700 potentially
responsible parties ("PRPs") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, for necessary corrective action at a
hazardous waste disposal site in Greer, South Carolina. In prior years, the
Company arranged for the transportation of wastes to the site for treatment or
disposal. During 1995, the PRPs entered into an administrative consent order
with EPA under which they will undertake a remedial investigation and
feasibility study which is currently underway.
The Company has been named as a defendant in an Original Petition and Petition
for Injunctive Relief filed in August 1995 which alleges that the Company and
certain other defendants are strictly liable for damages allegedly suffered by
the plaintiffs as a result of contamination of groundwater at the
Linn-Faysville Aquifer, in Texas, due to the disposal of dangerous products and
materials at a landfill which is alleged to be the source of the contamination.
There is currently a settlement pending on this matter. The Company is fully
reserved for costs associated with this including attorney fees and settlement.
In 1996, the Company recorded a reserve for the above mentioned actions other
than for additional corrective measures equal to its best estimate of the
liability associated with its share of the costs. In the future there may be
other costs of investigation and any corrective action that may be required are
not likely to have a material effect upon the financial condition, results of
operations or liquidity of the Company.
During the third quarter of 1996, the Company accrued $1.5 million associated
with environmental charges. The environmental charge is the Company's best
estimate of remaining costs associated with certain environmental matters
including $0.6 million for pond closure and monitoring for ten years at the
Company's Waynesboro, Virginia facility and $0.9 million for litigation costs
associated with the Linns-Faysville Aquifer in Texas.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
15
<PAGE> 16
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
Company's executive officers as of December 29, 1996:
<TABLE>
<CAPTION>
NAME AGE TITLE
=========================== ======== ========================================================================
<S> <C> <C>
Paul T. Winn 52 Director, President and Chief Executive Officer
James C. Gale 54 Senior Vice President Finance and Chief Financial Officer
Raymond D. Stapleton 57 Senior Vice President, Marketing and Sales, Enterprising Service
Solutions Company
Karen M. Morinelli 41 Vice President, Human Resources
B. Garrett Buttner 48 Vice President and General Manager, Annuities
Harold L. McIlroy 58 Vice President, Operations and General Manager, Relays
Arthur D. Gallo 54 Corporate Vice President and General Manager, Document Solutions Company
Michael J. Shelor 48 Offsite Services Vice President and General Manager, Enterprising Service
Solutions Company
Michel Du Rang 50 Vice President and General Manager, International Subsidiaries
</TABLE>
Mr. Winn joined the Company in April 1990 as President and Chief Executive
Officer and became a director in May 1990. Previously, Mr. Winn was employed
by IBM Corporation, where he served for 22 years in various capacities, most
recently as Vice President of Graphics Systems in the Advanced Work Station
Division. Prior to that position, Mr. Winn served as Vice President of
Worldwide System Printers, responsible for technology, software, product
development and manufacturing.
Mr. Gale joined the Company as Senior Vice President Finance and Chief
Financial Officer in August 1991. Previously, Mr. Gale was employed by General
Foods Corporation, where he served for 25 years in various capacities, most
recently as Vice President of Finance for General Foods Corporation and in that
role acted as Chief Financial Officer of General Foods, USA.
Mr. Stapleton became Senior Vice President, Marketing and Sales, Enterprising
Service Solutions in October 1996 after serving the Company and its
predecessor, G.E., in various capacities for 30 years.
Ms. Morinelli was appointed Vice President, Human Resources in December 1996.
Previously Ms. Morinelli was employed by Brown and Williamson for two years and
two years with Charlotte County. Prior to that Ms. Morinelli was an attorney
in private practice specializing in employment law.
Mr. Buttner was appointed Vice President and General Manager, Annuities in
November 1995 after having served as Vice President and General Manager
Supplies Business Unit since April 1993. Prior to his appointment as a
corporate officer, Mr. Buttner had served in sales, marketing and business
management positions with GENICOM since 1988. Previously, Mr. Buttner was
employed by G.E. for 15 years.
Mr. McIlroy was appointed Vice President in July 1995 after joining the Company
October 1991 and serving in various operations management capacities.
Previously Mr. McIlroy was employed by IBM for 30 years.
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<PAGE> 17
Mr. Arthur D. Gallo was appointed Corporate Vice President and General Manager,
Document Solutions Company in November 1995 after having been the President of
Printer Systems Corporation since 1985.
Mr. Shelor was appointed Offsite Services Vice President and General Manager,
Enterprising Service Solutions Company in November 1995 after serving the
Company and its predecessor, G.E., in various operating positions since 1969.
Mr. Du Rang was appointed Vice President and General Manager, International
Subsidiaries in September 1996 after 25 years with Texas Instruments.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Stock Trading:
GENICOM's common stock is quoted and traded on the Nasdaq National Market
System (Symbol: GECM). As of January 31, 1997 there were approximately 661
shareholders of record. The following table sets forth, for the periods
indicated, the high and low closing prices per share of GENICOM common stock as
reported by Nasdaq:
<TABLE>
<CAPTION>
1996 1995
------------------------------- -------------------------------
HIGH LOW High Low
<S> <C> <C> <C> <C>
First Quarter $ 6 3/8 $ 4 1/2 $ 2 7/8 $ 2
Second Quarter 7 1/8 4 1/4 4 3/4 2 1/8
Third Quarter 5 1/4 4 5 7/8 4 1/8
Fourth Quarter 5 1/8 3 3/8 5 3/8 4
</TABLE>
Additionally, GENICOM has not paid a cash dividend on its common stock. The
Company's current financing agreement with NationsBank, as agent for a group of
banks, prohibits the payment of dividends thus the Company does not anticipate
paying cash dividends in the forseeable future.
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<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA
The information is set forth below:
GENICOM CORPORATION AND SUBSIDIARIES
FIVE YEAR FINANCIAL HISTORY (UNAUDITED)
<TABLE>
<CAPTION>
Fiscal year, (1) 1996 1995 1994 1993 1992
------------- ------------- ------------- ------------ --------------
(In thousands, except per share and other data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues $ 303,258 $ 294,052 $ 233,797 $ 221,865 $ 222,692
Operating costs and expenses (2) 300,054 278,874 224,629 219,220 214,176
------------- ------------- ------------- ------------ --------------
Operating income 3,204 15,178 9,168 2,645 8,516
Interest expense, net 4,903 7,741 7,458 7,559 7,742
Other income (3) 122 1,908 1,741
------------- ------------- ------------- ------------ --------------
(Loss) income before income taxes and
extraordinary items (1,577) 7,437 3,618 (3,173) 774
Income tax (benefit) expense (3,658) 1,285 1,048 56 450
------------- ------------- ------------- ------------ --------------
Income (loss) before extraordinary items 2,081 6,152 2,570 (3,229) 324
Extraordinary (loss) gain (4) (422) 1,273
------------- ------------- ------------- ------------ --------------
Net income (loss) $ 1,659 $ 6,152 $ 2,570 $ (3,229) $ 1,597
============= ============= ============= ============ ==============
Earnings (loss) per share (fully diluted):
Income (loss) before extraordinary items $ 0.17 $ 0.51 $ 0.23 $ (0.30) $ 0.03
Extraordinary (loss) gain (0.03) 0.12
------------- ------------- ------------- ------------ --------------
Net income (loss) $ 0.14 $ 0.51 $ 0.23 $ (0.30) $ 0.15
============= ============= ============= ============ ==============
Weighted average shares (fully diluted) 12,168 12,056 11,416 10,621 10,833
============= ============= ============= ============ ==============
BALANCE SHEET DATA:
Working capital $ 36,091 $ 34,530 $ 40,780 $ 33,642 $ 54,915
Total assets 186,079 161,539 127,267 141,159 146,806
Total debt obligations 54,553 51,544 47,563 69,020 69,311
Stockholders' equity 37,591 34,533 28,083 24,575 28,524
OTHER DATA:
Employees (5) 1,671 1,638 2,382 2,147 2,488
Price range per common share:
Low $ 3 3/8 $ 2 $ 1 $ 1 1/8 $ 7/8
High 7 1/8 5 7/8 3 1/4 3 1/2 2
</TABLE>
(1) The Company's fiscal year ends on the Sunday nearest December 31.
Accordingly, the Company is reporting for 52-week periods for all years
presented, except for fiscal year 1992 which is a 53-week period.
(2) Includes restructuring costs of $1.0 million in 1993. In addition,
includes $1.2 million for acquisition related charges in 1995. In 1996, the
Company recognized $5.7 million for restructuring and environmental charges and
$1.5 million gain on the sale of its Mexican subsidiary.
(3) The company recognized a gain of $0.9 million and $1.7 million from the
sale of its investment in a Belgian printer development and manufacturing
company in 1994 and 1993, respectively. The Company also recognized a gain of
$1.0 million on the early extinguishment of $9.2 million principal amount of
its Senior Securities Subordinated Notes in 1994.
(4) The Company recognized extraordinary gains of $1.3 million, net of taxes
of $0.1 million, on the early extinguishment of $4.0 million principal amount
of it Senior Subordinated Notes in 1992. In 1996, the Company recognized an
extraordinary loss on extinguishment of the balance of its notes of $0.4
million, net of $0.3 million of taxes.
(5) Substantial staff reductions occurred in 1995 as a result of the service
agreement with ADC.
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<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
GENICOM Corporation ("GENICOM" or the "Company") is comprised of two distinct
operating companies. The Enterprising Service Solutions company provides logo
and multivendor product field support, depot repair, express parts,
professional services and network information technology and services. The
Document Solutions company designs and markets page and impact printers for a
variety of business applications as well as related supplies and spare parts.
The production and sales of relay products, which comprises less than 10% of
consolidated revenue, operating income and assets, are included with the
Document Solutions company.
NET REVENUE
For 1996, revenues were $303.3 million, an increase of 3.1% from 1995. The
increase in revenue resulted principally from the acquisition of the Texas
Instruments printer business as of September 30, 1996, which added
approximately $21.5 million in sales to the Company for the year. The Document
Solutions company's total revenue, excluding relays, was $169.1 million, an
increase of 9.2%, principally attributable to the Texas Instruments
acquisition. For Enterprising Service Solutions company, revenue declined $7.0
million to $120.6 million. This decline resulted primarily from of a decline
in the U.S. systems integration business that had benefited from a large
contract with NASDAQ in 1995 and declining legacy business which offset revenue
increases from multivendor services. Relay revenues were $13.6 million, an
increase of $1.9 million from 1995. Total consolidated revenue was $294.0
million and $233.8 million for the fiscal years ending December 31, 1995 and
January 1, 1995, respectively.
For the fiscal year ending December 31, 1995, revenue was 25.8% higher than
for the fiscal year ending January 1, 1995. The increase in revenue for 1995
was primarily attributable to service revenue which reflected the first quarter
1995 acquisition of Harris Adacom Network Services, Inc. Relay revenues
decreased $3.4 million in 1995 as compared to 1994.
ORDER BACKLOG
Order backlog was $56.7 million at December 29, 1996, an increase of $9.2
million or 19.4% from December 31, 1995. Order backlog decreased $1.4 million
or 2.8% in 1995 as compared with 1994. The increase in order backlog in 1996
is primarily attributable to printers with a slight increase for services. The
backlog reflects only fixed-price contracts for all orders associated with
relays, service, systems integration and those orders for printers, spare parts
and supplies for which a delivery date within approximately six months has been
specified by the customer. The Company's backlog as of any particular date
should not be the sole measurement used in determining sales for any future
period.
GROSS MARGIN
Gross margin, as a percentage of revenue, declined in 1996 as compared to 1995
due to several factors primarily the effect of declining legacy service
business causing, among other things, fixed costs associated with the Bedford
depot which performed the majority of this work to be absorbed by the Company,
the decapitalization of costs associated with inventory
19
<PAGE> 20
transferred to Atlantic Design pursuant to the outsourcing agreement, the
impact on operating efficiency of heavy snowfall in January 1996 at the service
depots in Virginia and Massachusetts and lower margins associated with certain
products acquired from Texas Instruments. In 1995 gross margin increased
slightly as compared to 1994 due to an improvement in sales of higher margin
printer products.
OPERATING EXPENSES
Operating expenses in 1996 increased in actual dollars and as a percentage of
revenue over 1995. The increased expenses were primarily attributable to costs
associated with the integration of the Texas Instruments printer business and
increased MIS costs as a result of the outsourcing of this business function.
The increase was partially offset by management's focus on cost controls. In
addition, in the third quarter of 1996, the Company accrued $1.5 million
associated with environmental charges and $4.2 million for restructuring the
worldwide service business. In July 1996, the Company reached a ten year
agreement with Electronic Data Systems ("EDS") to outsource its information
systems and data processing activities. Outsourcing of the MIS function is
directed at a long-term plan to upgrade systems and technology skills base
which the Company believes is necessary for the Company to remain competitive.
Under the agreement, EDS will operate and service the Company's systems as well
as design, install and service new business systems and global networks. The
agreement has an average base cost to the Company of $4.3 million per year.
The environmental charge mentioned is the Company's present best estimate of
the remaining costs associated with certain environmental matters (see
"Environmental Matters"). The restructuring charge for the service business
involves among other things, costs to facilitate the establishment of the
Company's new depot in Louisville, Kentucky, the consolidation of the depots in
Waynesboro, Virginia and Bedford, Massachusetts and other changes in the
delivery of services by the Enterprising Service Solutions company.
Operating expenses in 1995 as compared with 1994 increased overall but declined
as a percentage of revenue, due to the business growth as well as the result of
the Company's acquisition of Harris Adacom Network Services, Inc. This
comparison was affected by a $1.2 million non recurring charge in the second
quarter of 1995 for costs representing a proposed acquisition which was
terminated and non-capitalized costs associated with the two acquisitions in
1995.
OPERATING INCOME
The Company's operating income decreased $12.0 million in 1996 as compared to
1995 as a result of the increased costs and the declining legacy and network
integration revenues mentioned above as well as restructuring and environmental
reserves partially offset by the Mexican gain. Operating income increased $6.0
million in 1995 compared to 1994 as a result of increased revenues associated
with the acquisitions of Harris Adacom Network Services and Printer Systems
Corporation.
INTEREST EXPENSE
Interest expense decreased 36.7% or $2.8 million in 1996 as compared to 1995 as
a result of the retirement of the Company's outstanding 12.5% senior
subordinated notes in February 1996 and the refinancing of the Company's credit
facility through NationsBank of Texas, N.A., as agent for a group of banks in
January 1996 (see" Liquidity and Capital Resources").
The increase in interest expense of $0.3 million or 3.8% from 1994 to 1995
reflected increased borrowings by the Company under its senior credit
facilities necessitated by the
20
<PAGE> 21
1995 acquisitions and increased working capital requirements to support higher
business activity.
OTHER INCOME
The Company had no material other income in 1996 or 1995. In 1994, the Company
recognized a pre-tax gain of $0.9 million on the sale of its remaining
investment in Xeikon N.V., ("Xeikon"), a Belgian printer development and
manufacturing company and an additional pre-tax gain of $1.0 million from the
repurchase of the Company's senior subordinated notes.
INCOME TAX
The Company's effective income tax rate for fiscal year 1996 was (232.2)%
compared with 17.3% and 29.0% for fiscal years 1995 and 1994, respectively.
The rate in 1996 was affected by reversal of the balance of the U.S. valuation
allowance associated with the Company's deferred tax assets including certain
net operating loss carryforwards. Such assets were previously fully reserved
due to uncertainties regarding their ultimate recoverability. The benefits
were recorded in 1996 and 1995 based upon management's estimates of amounts
which are expected to be recoverable through future earnings or reversals of
temporary differences.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital increased to $36.1 million in 1996 as compared to
$34.5 million in 1995. The 1996 increase was primarily the result of
miscellaneous changes in working capital. The Company's current ratio was 1.4
to 1 at the end of fiscal year 1996 compared to 1.5 to 1 at the end of fiscal
year 1995. Cash and cash equivalents increased $1.6 million since December
31, 1995.
Net cash generated by operations was $33.1 million during 1996. The major
source of cash was earnings, depreciation and amortization in addition to
accruals for restructuring and environmental charges and inventory reduction
excluding the impact of the Texas Instruments acquisition.
During 1996, the Company invested $26.4 million through the acquisition of
Texas Instruments' printer business (see "Notes to Consolidated Financial
Statements") and in capital expenditures required to support operations. The
Company does not have any material commitments of funds for capital
expenditures other than to support the current level of operations and
installation of the new business systems and global networks previously
mentioned. With regards to restructuring of the service business, the Company
plans to spend approximately $5.7 million in cash in 1997. The Company
recorded approximately $10 million of goodwill as a consequence of the Texas
Instruments acquisition.
In 1996, the Company retired $36.4 million of its notes as part of the
refinancing with NationsBank (see "Other Matters").
Texas Instruments financed part of the Company's acquisition of the Texas
Instruments printer business with a note of approximately $9 million payable in
two years (see "Notes to Consolidated Financial Statements").
In December 1995, the Company received $14.5 million as a result of its
agreement with Atlantic Design Company, a subsidiary of Ogden Services
Corporation, ("ADC") (see "Other Matters"). Of the proceeds, $3.0 million was
payment for machinery and equipment which
21
<PAGE> 22
was sold to ADC and $11.5 million was related to the transfer of inventory to
ADC. The Company recognized in its financial statements the inventory of $12.3
million associated with the ADC agreement and a corresponding account payable
of $10.5 million as of December 31, 1995. As of the end of 1996, this
inventory was $0.7 million for which the Company was fully reserved. In
addition, $0.7 million is included in accounts payable related to this
inventory.
ENVIRONMENTAL MATTERS
The Company and the former owner of its Waynesboro, Virginia facility, General
Electric Company ("G.E."), have generated and managed hazardous wastes at the
facility for many years as a result of their use of certain materials in
manufacturing processes. The Company and the United States Environmental
Protection Agency ("EPA") have agreed to a corrective action consent order (the
"Order"), which became effective on September 14, 1990. The Order requires the
Company to undertake an investigation of solid waste management units at its
Waynesboro, Virginia facility and to conduct a study of any necessary
corrective measures that may be required. The investigative work under the
Order is expected to be completed by December 1997. Although not required by
the Order, the Company has agreed to install and operate an interim ground
water stabilization system, subject to EPA approval of the system design. The
interim groundwater stabilization program may be chosen as the final remedy for
the site, or additional corrective measures may eventually be required. It is
not possible to reliably estimate the costs that any such possible additional
corrective measures would entail. However, if additional corrective measures
are required, the Company expects that it will enter into discussion with EPA
concerning their scope and a further order for that purpose.
The Company has been notified by the EPA that it is one of 700 potentially
responsible parties ("PRPs") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, for necessary corrective action at a
hazardous waste disposal site in Greer, South Carolina. In prior years, the
Company arranged for the transportation of wastes to the site for treatment or
disposal. During 1995, the PRPs entered into an administrative consent order
with EPA under which they will undertake a remedial investigation and
feasibility study which is currently underway.
The Company has been named as a defendant in an Original Petition and Petition
for Injunctive Relief filed in August 1995 which alleges that the Company and
certain other defendants are strictly liable for damages allegedly suffered by
the plaintiffs as a result of contamination of groundwater at the
Linn-Faysville Aquifer, in Texas, due to the disposal of dangerous products and
materials at a landfill which is alleged to be the source of the contamination.
There is currently a settlement pending on this matter. The Company is fully
reserved for costs associated with this including attorney fees and settlement.
In 1996, the Company recorded a reserve for the above mentioned actions other
than for additional corrective measures equal to its best estimate of the
liability associated with its share of the costs. In the future there may be
other costs of investigation and any corrective action that may be required are
not likely to have a material effect upon the financial condition, results of
operations or liquidity of the Company.
During the third quarter of 1996, the Company accrued $1.5 million associated
with environmental charges. The environmental charge is the Company's best
estimate of remaining costs associated with certain environmental matters
including $0.6 million for pond closure and monitoring for ten years at the
Company's Waynesboro, Virginia facility and $0.9 million for litigation costs
associated with the Linns-Faysville Aquifer in Texas.
22
<PAGE> 23
OTHER MATTERS
On January 12, 1996, the Company reached an agreement with NationsBank of
Texas, N.A., as agent for a group of banks, ("NationsBank") on $75 million of
credit facilities. Under the agreement, NationsBank is providing a $35 million
revolving credit facility and two term loans totaling $40 million. In a
separate transaction, the Company entered into an interest rate swap
arrangement with NationsBank which fixes the interest rate for five years on a
substantial portion of the debt. The fixed rate at the time the agreement was
executed averaged 8.25%. In May 1996, the Company renegotiated the term of the
interest rate swap, decreasing the term from five to three years. As a result
of the term change, the Company received a payment of $530,000 resulting in a
gain which is being amortized to income over the remaining life of the Company
term loans. On September 30, 1996, the Company amended the credit facilities.
This amendment redefined the financial covenants, adjusted the interest rates
as well as principal payments under the agreement. As of December 29, 1996,
the Company had $20.9 million available for borrowing under the revolving
credit facility. Required principal payments on the term and Texas Instruments
loans are $4.2 million in 1997, $12.6 million in 1998, $4.6 million in 1999,
$4.2 million in 2000 and $7.7 million in 2001.
The Company used borrowing under this credit agreement to retire all the debt
associated with its former credit agreement with CIT and to retire all of the
Company's outstanding senior subordinated notes.
At the end of June 1996, the Company sold the stock of its Mexican subsidiary,
whose principal asset was a building in Reynosa, Mexico, receiving net proceeds
of $3.5 million and recognizing a gain of $1.5 million.
In December 1995, the Company entered into a five year agreement which was
extended an additional year in June 1996 (renewable annually after 6 years)
with Atlantic Design Company, a subsidiary of Ogden Services Corporation,
("ADC") in which ADC took over the Company's manufacturing operations and
employees in McAllen, Texas and Reynosa, Mexico. The agreement is
automatically renewed unless notice is given. ADC is committed to
manufacturing all of the Company's impact printer products, printed circuit
boards, related supplies and spare parts. The Company will retain design,
intellectual and distribution rights. As part of this agreement, the Company
will be a preferred provider of impact and page printers and multivendor
information technologies service to Ogden Services Corporation. As part of the
agreement, the Company agreed to purchase from ADC at least $54 million of
product by April 1997, a commitment the Company has already fulfilled.
Ogden Services Corporation is attempting to divest ADC. The Company's contract
with ADC contains a clause requiring GENICOM's consent to the sale, which such
consent cannot be unreasonably withheld. The Company is currently evaluating
this situation as well as the ongoing performance of ADC under the agreement.
In 1996, SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of" became effective. Adoption of this
standard did not have a material impact on the financial condition, results of
operations or liquidity of the Company. SFAS No. 123 "Accounting for
Stock-Based Compensation" was not adopted by the Company for accounting
purposes, however, the Company is required to disclose the effects of this
pronouncement on a pro forma basis.
This annual report on Form 10-K for the year ended December 29, 1996 as well as
other public documents of the Company contain forward-looking statements which
involve risks
23
<PAGE> 24
and uncertainties. The Company's actual results may differ materially from
those discussed in such forward-looking statements. Terms such as "believes",
"expects", "plans", "intends", "estimates" or "anticipates", and variations of
such words and similar expressions are intended to identify such forward
looking statements. In addition to factors that may be described in the
Company's filings with the Securities and Exchange Commission, including this
filing, the following factors, among others, could cause the Company's results
to differ materially from those expressed in any forward-looking statements
made by the Company: changes in hardware and software technology, changing
economic conditions in the North American and Western European markets, the
anticipation of growth of certain market segments and the positioning of the
Company's products and services in those segments, selective service customers
whose business is declining, seasonality in the buying cycles of certain of the
Company's customers, the timing of product announcements, the release of new or
enhanced products and services, the introduction of competitive products and
services by existing or new competitors, access to and development of product
rights and technologies, disruption in the ability of ADC to maintain its
production commitments to the Company, the management of growth, the
integration of acquisitions, including but not limited to the Company's
acquisition of the Texas Instruments printer business as of September 30, 1996,
the transitioning of the Bedford and Waynesboro depots to Louisville, Kentucky,
GENICOM's ability to retain highly skilled technical, managerial and sales and
marketing personnel, and possible litigation related to the Company's
operations, including litigation arising under various environmental laws.
24
<PAGE> 25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
DECEMBER 29, December 31, January 1,
Year Ended, 1996 1995 1995
------------- ----------- -------------
(In thousands, except per share data)
<S> <C> <C> <C>
REVENUES, NET:
Products $ 182,707 $ 166,469 $ 166,518
Services 120,551 127,583 67,279
------------- ----------- -------------
303,258 294,052 233,797
------------- ----------- -------------
OPERATING COSTS AND EXPENSES:
Cost of revenues:
Products 127,678 115,851 120,455
Services 104,611 101,762 53,439
Selling, general and administration 55,079 52,780 43,015
Engineering, research and product development 8,505 8,481 7,720
Restructuring charges 4,183
Environmental charges 1,479
Gain on sale of Mexican subsidiary (1,481)
------------- ----------- -------------
300,054 278,874 224,629
------------- ----------- -------------
OPERATING INCOME 3,204 15,178 9,168
Interest expense, net 4,903 7,741 7,458
Other income 122 1,908
------------- ----------- -------------
(LOSS) INCOME BEFORE INCOME TAXES (1,577) 7,437 3,618
Income tax (benefit) expense (3,658) 1,285 1,048
------------- ----------- -------------
NET INCOME BEFORE EXTRAORDINARY ITEMS 2,081 6,152 2,570
EXTRAORDINARY ITEM - LOSS ON EXTINGUISHMENT OF
DEBT, NET OF TAXES OF $258 (422)
------------- ----------- -------------
NET INCOME $ 1,659 $ 6,152 $ 2,570
============= =========== =============
EARNINGS PER COMMON SHARE AND COMMON SHARE
EQUIVALENT (PRIMARY AND FULLY DILUTED):
Income before extraordinary item $ 0.17 $ 0.51 $ 0.23
Extraordinary item (0.03)
------------- ----------- -------------
Net income $ 0.14 $ 0.51 $ 0.23
============= =========== =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING:
Primary 12,168 12,038 11,345
Fully diluted 12,168 12,056 11,416
============= =========== =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE> 26
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 29, December 31,
1996 1995
--------------- ------------------
(In thousands, except share data)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,866 $ 4,271
Accounts receivable, less allowance for
doubtful accounts of $3,270 and $1,616 65,404 53,572
Other receivables 1,835 3,767
Inventories 46,947 43,079
Prepaid expenses and other assets 5,395 1,432
--------------- ------------------
TOTAL CURRENT ASSETS 125,447 106,121
Property, plant and equipment 26,562 30,896
Goodwill 27,555 21,632
Other assets, principally intangibles 6,515 2,890
--------------- ------------------
$ 186,079 $ 161,539
=============== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 4,222 $ 7,070
Accounts payable and accrued expenses 72,040 52,910
Deferred income 13,094 11,611
--------------- ------------------
TOTAL CURRENT LIABILITIES 89,356 71,591
Long-term debt, less current portion 50,331 44,474
Other non-current liabilities 8,801 10,941
--------------- ------------------
TOTAL LIABILITIES 148,488 127,006
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value; 18,000,000 shares
authorized, 10,983,439 and 10,839,399 shares issued 110 108
Additional paid-in capital 26,440 26,023
Retained earnings 12,162 10,503
Foreign currency translation adjustment (1,121) (1,331)
Pension liability adjustment (770)
--------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 37,591 34,533
--------------- ------------------
$ 186,079 $ 161,539
=============== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 27
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended, DECEMBER 29, December 31, January 1,
(In thousands) 1996 1995 1995
-------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,659 $ 6,152 $ 2,570
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation 14,166 13,981 9,374
Amortization 3,706 4,125 3,149
Loss (gain) on early extinguishment of notes 422 (1,009)
Gain on sale of Genicom de Mexico (1,481)
Effect of investment gain (901)
Acquisition related costs 654
Restructuring accrual 4,183
Environmental accrual 1,479
Deferred tax benefit (7,186) (1,830)
Changes in assets and liabilities:
Accounts receivable 1,544 (9,406) 1,031
Inventories 10,916 3,348 10,882
Accounts payable and accrued expenses 3,489 (1,730) 2,521
Other 234 1,073 922
-------------- ------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 33,131 16,367 28,539
-------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for businesses, net of cash acquired (18,233) (10,309)
Additions to property, plant and equipment (11,809) (16,325) (11,067)
Proceeds from sale of investment 3,436
Proceeds from sale of Genicom de Mexico 3,950
Proceeds from sale of equipment 3,031
Other investing activities (259) (239) (581)
-------------- ------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (26,351) (23,842) (8,212)
-------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 70,609 31,594 21,537
Payments on long-term debt (76,120) (31,939) (33,985)
Bank overdraft 2,607
Proceeds from Atlantic Design agreement 11,502
Purchases of senior subordinated notes (8,123)
Other financing activities (2,372) 265 16
-------------- ------------- -------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (5,276) 11,422 (20,555)
-------------- ------------- -------------
Effect of exchange rate changes on cash and cash equivalents 91 (349) (896)
-------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents 1,595 3,598 (1,124)
Cash and cash equivalents at beginning of year 4,271 673 1,797
-------------- ------------- -------------
Cash and cash equivalents at end of year $ 5,866 $ 4,271 $ 673
============== ============= =============
SUPPLEMENTAL DATA:
Purchase of Texas Instruments printer business:
Total acquisition costs $ 29,468
Note to Texas Instruments (9,000)
Account payable to Texas Instruments (1,735)
Other accrued costs (500)
--------------
Cash paid $ 18,233
==============
Cash paid during the year for:
Income taxes $ 2,724 $ 1,483 $ 28
Interest 6,349 8,040 7,491
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 28
GENICOM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the years ended December 29, 1996, December 31, 1995 and January 1, 1995
<TABLE>
<CAPTION>
(In thousands)
Foreign
Common Stock Additional Currency Pension
------------------- Paid-in Retained Translation Liability
Shares Amount Capital Earnings Adjustment Adjustment
--------- -------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AS OF JANUARY 2, 1994 10,622 $ 106 $ 25,744 $ 1,781 $ (1,957) $ (1,099)
Exercise of stock options 16 16
Net income 2,570
Cumulative translation adjustment 522
Pension liability adjustment 400
--------- -------- ---------- ---------- ---------- -----------
BALANCE AS OF JANUARY 1, 1995 10,638 106 25,760 4,351 (1,435) (699)
Exercise of stock options 201 2 263
Net income 6,152
Cumulative translation adjustment 104
Pension liability adjustment (71)
--------- -------- ---------- ---------- ---------- -----------
BALANCE AS OF DECEMBER 31, 1995 10,839 108 26,023 10,503 (1,331) (770)
Exercise of stock options 144 2 417
Net income 1,659
Cumulative translation adjustment 210
Pension liability adjustment 770
--------- -------- ---------- ---------- ---------- -----------
BALANCE AS OF DECEMBER 29, 1996 10,983 $ 110 $ 26,440 $ 12,162 $ (1,121) $ 0
========= ======== ========== ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 29
GENICOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
GENICOM Corporation (the "Company") is an international supplier of network
integration services, multivendor service and printers. The Company's
Enterprising Service Solutions company provides integrated network solutions
which include network integration, professional services and help desk support,
in addition to logo and multivendor on site and off site product repair and
express parts. The Company's Document Solutions company designs and markets a
wide range of computer printer technologies for general purpose applications.
The Company markets its products and services through several domestic and
international channels including national and regional distributors, value
added resellers and direct sales forces. GENICOM has positioned its products
as mid-range solutions to corporate customers. Operating on a worldwide
basis, the Company has operations in the United States, Canada, Europe and
Australia.
Principles of Consolidation
The consolidated financial statements include the accounts of GENICOM
Corporation and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. The 1996 financial statements
include the results of Texas Instruments worldwide printer business since its
acquisition on September 30, 1996. The 1995 financial statements include the
results of two acquisitions, Printer Systems Corporation ("PSC") and Harris
Adacom Network Services, Inc. ("HANS") from their respective acquisition dates
of February 16, 1995 and March 1, 1995.
Fiscal Year
The Company's fiscal year ends on the Sunday nearest December 31. Accordingly,
the Company is reporting for the 52-week periods ended December 29, 1996,
December 31, 1995, and January 1, 1995 .
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less at the time of purchase to be cash equivalents.
Inventories
Inventories are stated at the lower of cost, determined on the first-in
first-out method, or market.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is calculated
using the straight-line method for financial reporting purposes based on
estimated lives at acquisition date (generally 10 to 25 years for buildings and
18 months to 10 years for machinery and
29
<PAGE> 30
equipment). The cost of assets retired or otherwise disposed of and the
accumulated depreciation thereon are removed from the accounts with any gain or
loss realized upon sale or disposal charged or credited to operations.
Significant improvements are capitalized, while repairs and maintenance costs
are charged to operations.
Goodwill and Intangibles
Goodwill includes the excess of acquisition costs over the fair market value of
net assets of acquired businesses and is being amortized on a straight-line
basis over 5 to 20 years. Intangible assets, including patents, copyrights,
trademarks, licenses and organization and financing costs, are amortized on a
straight-line basis over periods ranging from 2 to 15 years. The Company
assesses at each balance sheet date whether there has been a permanent
impairment in the value of the respective assets. This is accomplished by
determining whether projected undiscounted future cash flows from operations
over the remaining life exceed the net book value of the assets as of the
balance sheet date. The aggregate amount of accumulated amortization for
goodwill and intangibles was $18.8 million and $14.5 million at December 29,
1996 and December 31, 1995, respectively.
Research and Development Costs and Capitalized Software
Costs incurred in basic research and development are expensed as incurred.
Certain costs relating to software and product development are capitalized and
amortized over the estimated economic life of the product.
The Company capitalized software costs of $0.2 million and $0.1 million in 1996
and 1995, respectively. The related amortization expenses were $0.4 million,
$1.2 million and $1.0 million in 1996, 1995 and 1994, respectively. As of
December 29, 1996 and December 31, 1995, capitalized software, net of
amortization, was $0.2 million and $0.4 million, respectively.
Income Taxes
The Company accounts for income taxes under the liability method in accordance
with SFAS No. 109 "Accounting for Income Taxes". Certain expenses are
recognized in different periods for financial reporting and Federal income tax
purposes. Research and development credits are recognized as a reduction of
income tax expense in the year they are recognized for Federal tax purposes. A
valuation allowance reduces deferred tax assets when it is "more likely than
not" that some portion or all of the deferred tax asset will not be realized.
The Company does not provide deferred taxes on the undistributed earnings of
its foreign subsidiaries as such earnings are intended to be permanently
reinvested in those operations.
Foreign Operations
The consolidated balance sheets include foreign assets and liabilities of $53.7
million and $18.3 million as of December 29, 1996, respectively, and $54.4
million and $16.0 million as of December 31, 1995, respectively. The net
effects of foreign currency transactions reflected in income were immaterial in
fiscal years 1996, 1995, and 1994.
Assets and liabilities of most of the Company's foreign operations are
translated into U.S. dollars using exchange rates in effect at the balance
sheet date and results of operations are translated using the average exchange
rates prevailing throughout the period. The resulting translation adjustments
are recorded as a separate component of stockholders' equity. The
30
<PAGE> 31
Company's former Mexican subsidiary, which was sold at the end of June 1996,
remeasured its financial statements in U.S. dollars, as this is the currency of
the primary economic environment in which the entity operates.
Off-Balance Sheet Risk and Concentrations of Credit Risk
The Company periodically hedges against foreign currency fluctuations through
the use of forward exchange contracts. Gains and losses on contracts to hedge
foreign currency commitments are deferred and accounted for as part of the
commitment transaction except for losses expected to be incurred in future
periods which are recorded when identified.
The forward exchange contracts which the Company uses as hedges are subject to
off-balance sheet market risk. The Company believes that its risk due to
non-performance by the other parties to these contracts is remote. The Company
had $6.1 million and $4.4 million of forward exchange contracts outstanding as
of December 29, 1996 and December 31, 1995, respectively.
Financial instruments that potentially subject the Company to concentration of
credit risk consist primarily of receivables. The Company extends credit to
various customers that are primarily in the computer and computer peripherals
industries. These specific industries may be similarly affected by economic
factors, however, the Company performs ongoing credit evaluations of its
customers and establishes an allowance for doubtful accounts for specific
customers that it determines to have significant credit risk. Generally, the
Company does not require collateral from its customers and has, historically,
not experienced significant credit related losses.
In 1996, GENICOM procured 64% of its total inventory purchases from ADC
pursuant to the agreement. No other supplier accounted for a significant
portion of GENICOM's total 1996 purchases. In 1995, GENICOM purchased 16% of
its total purchases from TEC Corporation which supplied the Company with
certain nonimpact printer products. In December 1995, the Company entered into
a five year agreement, later extended one year, with ADC in which ADC took over
the Company's manufacturing operations and employees in McAllen, Texas and
Reynosa, Mexico. ADC is committed to manufacturing all of the Company's impact
printer products, printed circuit boards, related supplies and spare parts. No
customer accounted for 10% or more of external sales in 1996, 1995, or 1994.
Revenue Recognition and Warranty Costs
Revenues from the sales of products, which include printers and relays, are
recorded when products are shipped to customers. Revenues from services, which
include service and rentals, are recognized monthly as earned. Advance
billings for customer maintenance contracts are deferred and amortized over the
contract life on a straight-line basis. Estimated warranty costs for equipment
sales are provided for in the year of sale.
Net Income Per Share
Net income per common share and common share equivalent is computed by
dividing net income by the weighted average number of common shares and
dilutive common share equivalents outstanding during each year. Common share
equivalents include the weighted average number of shares issuable upon the
exercise of outstanding stock options, assuming the applicable proceeds from
such exercise are used to acquire treasury shares.
31
<PAGE> 32
Recent Accounting Pronouncements
In 1996, SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of" became effective. Adoption of this
standard did not have a material impact on the financial condition, results of
operations or liquidity of the Company. SFAS No. 123 "Accounting for
Stock-Based Compensation" was not adopted by the Company for accounting
purposes, however, the Company has disclosed the effects of this pronouncement
on a pro forma basis (Note 5).
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the dates of the financial statements
and the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
NOTE 2: BALANCE SHEET INFORMATION
Inventories consist of:
<TABLE>
<CAPTION>
DEC. 29, DEC. 31,
(in thousands) 1996 1995
------------ -------------
<S> <C> <C>
Raw materials $ 9,105 $ 2,594
Work in process 3,383 4,899
Finished goods 34,459 23,327
Atlantic Design inventory (see Note 8) 12,259
------------ -------------
$ 46,947 $ 43,079
============ =============
</TABLE>
Property, plant and equipment consists of:
<TABLE>
<CAPTION>
DEC. 29, Dec. 31,
(in thousands) 1996 1995
------------ -------------
<S> <C> <C>
Land $ 580 $ 714
Buildings 7,133 11,038
Machinery and equipment 83,567 77,372
Construction in progress 1,378 461
------------ -------------
92,658 89,585
Less: accumulated depreciation 66,096 58,689
------------ -------------
$ 26,562 $ 30,896
============ =============
</TABLE>
Accounts payable and accrued expenses consist of:
<TABLE>
<CAPTION>
DEC. 29, Dec. 31,
(in thousands) 1996 1995
------------ -------------
<S> <C> <C>
Trade accounts payable $ 42,905 $ 21,388
Atlantic Design inventory account payable (see Note 8) 676 10,500
Accrued liabilities: Accrued compensation and benefits 10,333 9,088
Restructuring accrual 4,183
Interest 176 1,867
Other 13,767 10,067
------------ -------------
$ 72,040 $ 52,910
============ =============
</TABLE>
32
<PAGE> 33
NOTE 3: DEBT OBLIGATIONS
Long term debt consists of:
<TABLE>
<CAPTION>
(in thousands) December 29, December 31,
1996 1995
------------ -------------
<S> <C> <C>
Revolving credit facilities $ 11,000 $ 11,510
Term loans 33,184 512
Note payable to Texas Instruments 9,000
Senior subordinated notes 36,364
Other 1,369 3,158
------------- -------------
54,553 51,544
Less: Current portion 4,222 7,070
------------- -------------
$ 50,331 $ 44,474
============= =============
</TABLE>
At December 29, 1996, future minimum principal payments on long term debt were
$4.2 million for 1997, $12.6 million for 1998, $4.6 million for 1999, $4.2
million for 2000 and $7.7 million for 2001.
On January 12, 1996, the Company reached an agreement with NationsBank of
Texas, N.A., as agent for a group of banks, ("NationsBank") on $75 million of
credit facilities. Under the agreement, NationsBank is providing a $35 million
revolving credit facility and two term loans totaling $40 million. The
revolver matures in five years, while the term loans are for five and seven
years, respectively. The rate of interest on the credit facilities is tied to
LIBOR or NationsBank prime rate and is also dependent upon the Company's
performance. On September 30, 1996, the Company amended the credit facilities.
The Company is subject to certain financial covenants which will require the
Company, among other things, to maintain a minimum consolidated tangible net
worth, a funded debt coverage ratio of not more than 4.4-3.0 to 1 for 1997, a
fixed charges coverage ratio of at least 1.5-2.0 to 1 for 1997 and a debt to
capitalization ratio of less than .65-.60 to 1 for 1997.
As part of the acquisition of certain assets of Texas Instruments' worldwide
printer and related supplies business (see Note 11), the Company recorded a two
year balloon note payable of $9 million maturing in 1998 with an interest rate
of approximately 8.5% payable quarterly.
As part of the purchase agreement with Printer Systems Corporation ("PSC") (see
Note 11), the Company has recorded the present value of a note payable. The
note payable has an imputed interest rate of approximately 9% and requires
annual principal and interest payments through 1998.
The Company's international subsidiaries maintain various credit facilities for
their local operations. Borrowing under such credit facilities bear interest
at prevailing or negotiated rates.
During 1996, the proceeds from the NationsBank agreement were used to retire
the outstanding borrowings under the Company's prior credit facilities and
senior subordinated notes. The prior credit facility provided a credit line
with maximum borrowings of $35 million and an interest rate based on formulas
applied to certain adjusted asset balances (11.5% as of December 31, 1995).
The senior subordinated notes, which were issued in 1987 with an aggregate
principal value of $76.0 million, bore interest at 12.5%, required semi-annual
33
<PAGE> 34
interest payments and sinking fund requirements of $9 million annually
beginning in 1992 with maturity scheduled for February 15, 1997. The Company
recognized a $0.4 million after tax loss on the early extinguishment of the
senior subordinated notes in 1996. The Company recognized a $0.7 million after
tax gain in 1994 on the early extinguishment of approximately $9.2 million of
senior subordinated notes.
In a separate transaction, the Company entered into an interest rate swap
arrangement with NationsBank which fixes the interest rate for five years on a
substantial portion of the debt. The fixed rate at the time the agreement was
executed averaged 8.25%. In May 1996, the Company renegotiated the term of the
interest rate swap, decreasing the term from five to three years. As a result
of the term change, the Company received a payment of $530,000 resulting in a
gain which is being amortized to income over the remaining life of the term
loans.
NOTE 4: EMPLOYEE BENEFIT PLANS
The Company provides postretirement medical and life insurance benefits to
hourly and salaried employees hired before March 22, 1993, who retire after
attaining age 60 with at least 5 years of service. Under certain conditions,
benefits may be extended to the retirees' spouse and dependents. Salaried
employees hired after March 22, 1993 are eligible for postretirement medical
and life insurance benefits only upon attainment of Social Security retirement
age and completion of 10 years of service, and no spouse or dependent coverage
is provided.
The postretirement medical coverage is contributory, while the life insurance
coverage is noncontributory.
The components of net periodic postretirement benefit costs were:
<TABLE>
<CAPTION>
DEC. 29, Dec. 31, Jan. 1,
(in thousands) 1996 1995 1995
------------ ------------ ------------
<S> <C> <C> <C>
Service cost - benefits attributed to service during the period $ 349 $ 337 $ 396
Interest cost on accumulated postretirement benefit obligation 1,177 1,339 1,334
Amortization of unrecognized transition obligation over 20 years 653 840 878
------------ ------------ ------------
Net periodic postretirement benefit cost $ 2,179 $ 2,516 $ 2,608
============ ============ ============
</TABLE>
The following table sets forth the combined funded status for the Company's
postretirement benefit obligations as of the indicated actuarial valuation
dates:
<TABLE>
<CAPTION>
DEC. 29, Dec. 31,
(in thousands) 1996 1995
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 8,092 $ 7,280
Active plan participants 7,538 8,173
------------ ------------
15,630 15,453
Unrecognized transition obligation 12,180 14,926
Unrecognized net gain (3,072) (5,087)
------------ ------------
Accrued postretirement benefit cost $ 6,522 $ 5,614
============ ============
</TABLE>
For measurement purposes, 8.5% and 9.5% annual rates of increase in the per
capita cost of covered health care benefits were assumed for 1997 and 1996,
respectively; both rates were
34
<PAGE> 35
assumed to decrease gradually to 5.5% for 2001 and remain at that level
thereafter. If the health care cost trend rate was to increase 1.0%, the
accumulated postretirement benefit obligation as of December 29, 1996 and
December 31, 1995, would have increased by 9.7% and 5.3%, respectively. The
effect of this change on the aggregate service and interest costs for 1996 and
1995 would be increases of 7.6% and 5.8%, respectively. The weighted-average
discount rates used in determining the accumulated postretirement benefit
obligation was 7.75% and 7.25% in 1996 and 1995, respectively.
Substantially all domestic non-collective bargaining employees are eligible to
participate in the Company's retirement savings plan (the "Savings Plan"),
which qualifies under section 401(k) of the Internal Revenue Code. The Company
makes certain matching contributions which are allocated to the participants
and vest based on the employee's years of service. The Company's expense under
the Savings Plan was $0.8 million, $0.8 million and $0.5 million in fiscal
years 1996, 1995 and 1994, respectively.
The Company's domestic collective bargaining employees are covered by a
contributory defined benefit pension plan (the "Pension Plan"). The Pension
Plan benefits are based on years of credited service and the participant's
compensation. Eligible employees must elect to participate and contribute 3.0%
of compensation between $12,000 and $25,650 per calendar year. The Company
makes contributions to the Pension Plan sufficient to meet federal funding
requirements.
Components of periodic pension costs were:
<TABLE>
<CAPTION>
DEC. 29, Dec. 31, Jan. 1,
(in thousands) 1996 1995 1995
------------- ------------- -------------
<S> <C> <C> <C>
Service cost $ 416 $ 340 $ 445
Interest cost on projected benefit obligation 896 806 731
Actual return on plan assets (1,012) (2,277) 131
Net amortization and deferral 125 1,681 (673)
------------- ------------- -------------
Net periodic pension expense $ 425 $ 550 $ 634
============= ============= =============
</TABLE>
The following table sets forth the Pension Plan's funded status as of the
indicated actuarial valuation dates:
<TABLE>
<CAPTION>
DEC. 29, Dec. 31,
(in thousands) 1996 1995
------------- -------------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefits $ 11,661 $ 10,834
Non-vested benefits 639 664
------------- -------------
Total accumulated benefit obligation 12,300 11,498
Effect of projected future compensation levels 458 555
------------- -------------
Projected benefit obligation 12,758 12,053
Fair value of plan assets 13,056 10,912
------------- -------------
Fair value of plan assets in excess of (less than) projected benefit obligation 298 (1,141)
Unrecognized net liability existing at January 1, 1987 272
Unrecognized net losses from actuarial experience 1,084 1,477
Adjustment to recognize minimum liability (1,194)
------------- -------------
Prepaid (accrued) pension cost $ 1,382 $ (586)
============= =============
</TABLE>
35
<PAGE> 36
The Company's assumptions used in determining the pension cost and pension
liability shown above were as follows:
<TABLE>
<CAPTION>
DEC. 29, Dec. 31, Jan. 1,
1996 1995 1995
------------- ------------ -------------
<S> <C> <C> <C>
Discount rate 7.75 7.25 8.00
Rate of compensation progression 4.00 4.00 5.00
Rate of return on plan assets 9.00 9.00 9.00
</TABLE>
Pension Plan assets consist primarily of treasury notes, government and
corporate bonds, corporate equities and cash equivalent funds.
The Company makes contributions to various employee benefit plans for certain
of its foreign subsidiaries and the expense for these plans was not material in
fiscal years 1996, 1995 and 1994.
On January 3, 1994, the Company adopted the provisions of SFAS No. 112
"Employers' Accounting for Postemployment Benefits" which requires employers to
accrue costs of providing postemployment benefits other than pensions. The
implementation of SFAS No. 112 did not have a material effect on the Company's
financial condition, results of operations or liquidity.
36
<PAGE> 37
NOTE 5: STOCK OPTIONS
Under the Company's stock option plan, 1,968,228 shares of unissued common
stock are reserved for issuance pursuant to options outstanding and to be
granted. Stock option activity for the respective fiscal periods is as follows:
<TABLE>
<CAPTION>
Weighted
Number of Option Amount Average Price
Shares Per Share Per Share
--------------- ------------- ----------------
<S> <C> <C> <C>
OUTSTANDING,
January 2, 1994 1,482,567 1.00-7.50 $1.26
Granted 460,000 1.00-2.38 1.03
Exercised (16,600) 1.00 1.00
Cancelled (166,833) 1.00-7.50 1.18
--------------- ------------- ----------------
OUTSTANDING,
January 1,1995 1,759,134 1.00-7.50 1.21
Granted 410,000 1.75-4.50 1.96
Exercised (201,100) 1.00-2.13 1.32
Cancelled (195,467) 1.00-7.50 1.30
=============== ============= ================
OUTSTANDING,
December 31,1995 1,772,567 1.00-7.50 1.36
Granted 263,180 3.25-4.25 3.84
Exercised (144,040) 1.00-2.38 1.14
Cancelled (221,407) 1.00-7.50 2.20
=============== ============= ================
OUTSTANDING,
DECEMBER 29, 1996 1,670,300 $1.00-4.50 $1.66
=============== ============= ================
OPTIONS EXERCISABLE,
DECEMBER 29, 1996 876,660 $1.00-4.50 $1.16
=============== ============= ================
OPTIONS AVAILABLE
FOR FUTURE GRANTS 297,928
===============
</TABLE>
As of December 29, 1996, the Company has a non qualified stock option plan.
The Company applies APB Opinion 25 and related Interpretations in accounting
for its plan. No compensation cost has been recognized for the stock options.
Had compensation cost for the Company's stock option plan been determined based
on the fair value at the grant date for awards under the plan consistent with
the method of FASB Statement 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated below.
<TABLE>
<CAPTION>
1996 1995
Net income in thousands --------- --------
<S> <C> <C>
As reported $1,659 $6,152
Pro forma $1,109 $5,712
Primary and fully diluted
earnings per share
As reported $0.14 $0.51
Pro forma $0.09 $0.47
</TABLE>
37
<PAGE> 38
Options granted under the stock option plan are granted at prices not less than
85.0% of the fair market value of the common stock and become exercisable in
installments at dates ranging from one to ten years from the date of grant, as
determined by the Board of Directors or the Compensation Committee thereof.
The weighted average market value per share for options granted in 1996 and
1995 was $4.55 and $2.31, respectively.
The fair value of each option is estimated on the date of grant using a type of
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants during the years ended December 29, 1996 and
December 31, 1995, respectively: dividend yield of 0%, expected volatility
83.5%, risk free interest rate of 5.64% and 7.28% for 1996 and 1995,
respectively, on the grant date with the maturity equal to the expected term of
6 years.
As of December 29, 1996, the weighted average remaining contractual life of the
options is 7 years. As of December 29, 1996 and December 31, 1995, the pro
forma tax effects under SFAS 109 are $366,000 and $293,000, respectively.
In 1992 and 1993, the stockholders approved nonstatutory stock option grants of
100,000 and 10,000 shares of common stock, respectively, to certain members of
the Company's Board of Directors. The stock options become exercisable at a
rate of 33.3% per year beginning one year from grant date. However, the stock
options become fully exercisable upon the merger of the Company into another
entity or the acquisition of the Company by another entity or the sale or
transfer of substantially all assets of the Company to another entity. As of
December 29, 1996, none of these stock options had been exercised.
NOTE 6: INCOME TAXES
The components of (loss) income before income taxes were as follows:
<TABLE>
<CAPTION>
(in thousands) DEC. 29, Dec. 31, Jan. 1,
1996 1995 1995
---------- --------- ----------
<S> <C> <C> <C>
Domestic $ (1,225) $ 7,860 $ 4,524
Foreign (352) (423) (906)
---------- --------- ----------
$ (1,577) $ 7,437 $ 3,618
========== ========= ==========
</TABLE>
Income tax (benefit) expense consists of the following:
<TABLE>
<CAPTION>
(in thousands) DEC. 29, Dec. 31, Jan. 1,
1996 1995 1995
---------- --------- ----------
<S> <C> <C> <C>
Current:
Federal $ 2,103 $ 2,299 $ 164
State 800 557 568
Foreign 625 259 148
---------- --------- ----------
3,528 3,115 880
---------- --------- ----------
Deferred:
Federal (6,226) (1,414) 130
State (960) (416) 38
---------- --------- ----------
(7,186) (1,830) 168
---------- --------- ----------
$ (3,658) $ 1,285 $ 1,048
========== ========= ==========
</TABLE>
A reconciliation of the U.S. statutory Federal tax rate of 34.0% to the
Company's effective tax rate is as follows:
38
<PAGE> 39
<TABLE>
<CAPTION>
(in thousands) DEC. 29, Dec. 31, Jan. 1,
1996 1995 1995
---------- --------- ---------
<S> <C> <C> <C>
Tax (benefit) expense at statutory rate $ (536) $ 2,529 $ 1,230
(Decrease) increase related to:
State income taxes, net of
Federal tax benefit (106) 557 568
Foreign income taxes 323 259 148
Foreign operating losses
generating no current tax benefit 120 144 279
Domestic operating profit not taxed
due to carryfoward losses (383) (1,331)
Reduction in valuation allowance (3,570) (1,830)
Other, net 111 9 154
---------- --------- ---------
$ (3,658) $ 1,285 $ 1,048
---------- --------- ---------
(232.2)% 17.3% 29.0%
========== ========= =========
</TABLE>
Deferred tax assets and liabilities are recorded based on temporary differences
between earnings as reported in the financial statements and earnings for
income tax purposes. The major components of the Company's deferred tax assets
and liabilities are as follows:
<TABLE>
<CAPTION>
(in thousands) DEC. 29, Dec. 31,
1996 1995
------------- ------------
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards $ 7,181 $ 9,214
Inventory valuation 5,162 2,275
Vacation accrual 1,146 1,231
Bad debt reserve 796 701
Employee benefits 3,041 1,884
Restructuring reserve 1,673
Depreciation 1,040
Other 4,070 4,758
Valuation allowance (9,487) (12,521)
------------- ------------
Total deferred tax asset $ 14,622 $ 7,542
============= ============
DEFERRED TAX LIABILITIES:
Depreciation 263
Other intangible assets 3,780 5,364
Other long-term liabilities 3,045
Other 847 85
------------- ------------
Total deferred tax liability $ 7,672 $ 5,712
============= ============
</TABLE>
During 1996 and 1995, the Company recorded a deferred tax benefit of
approximately $3.6 and $1.8 million, respectively, relating to the reversal of
a portion of the Company's valuation allowance for its domestic deferred tax
assets. Such assets were previously fully reserved due to uncertainties
regarding their ultimate recoverability. The benefits were recorded in 1996
and 1995 based upon management's estimate of amounts which are expected to be
39
<PAGE> 40
recoverable through future earnings or reversals of temporary differences. The
remaining valuation allowance relates primarily to the Company's foreign net
operating losses.
The cumulative amount of undistributed earnings of foreign subsidiaries which
the Company intends to permanently invest and upon which no deferred U.S.
income taxes have been provided is $10.6 million. The Company cannot
practically determine the amount of deferred income tax liability that would
result had such earnings actually been remitted. The amount of foreign
withholding taxes, at current rates, that would have been due on the earnings
had they actually been remitted was $0.5 million.
NOTE 7: OTHER INCOME, ACQUISITION AND RESTRUCTURING COSTS
In 1996, following Board of Directors review, the company accrued $4.2 million
for restructuring its worldwide service business. The restructuring charge for
the service business involves, among other things, costs to facilitate the
establishment of the Company's new "end of runway" depot service center in
Louisville, Kentucky and other changes in the delivery of services by the
Enterprising Service Solutions group. The restructuring charge includes
approximately $2.3 million for severance and termination benefits for 321
employees at the Company's Bedford, Massachusetts and Waynesboro, Virginia
facilities.
The Company charged against pre-tax income for acquisitions and proposed
acquisitions $0.1 million and $1.2 million in 1996 and 1995, respectively.
During fiscal 1994 and 1993, the Company sold 35.0% and 65.0%, respectively, of
its investment in Xeikon N.V., a Belgian printer development and manufacturing
company. These transactions added approximately $0.9 million and $1.7 million
of pre-tax income to fiscal 1994 and 1993, respectively.
NOTE 8: COMMITMENTS AND CONTINGENT LIABILITIES
Leasing arrangements:
As lessee:
The Company leases certain manufacturing and warehousing properties. Rent
expense amounted to $6.7 million, $7.2 million and $6.7 million in 1996, 1995
and 1994, respectively.
Minimum future lease commitments for operating leases as of December 29, 1996,
are as follows: 1997 - $4.7 million, 1998 - $2.9 million, 1999 - $1.9 million,
2000 - $1.2 million, 2001 - $1.2 million, and $3.7 million thereafter.
As lessor:
The Company has rental agreements for the leasing of printers. Operating lease
terms vary, generally from one to sixty months. Rental revenue was $3.2
million, $2.3 million and $0.7 million for 1996, 1995 and 1994, respectively.
On December 29, 1996 and December 31, 1995, the cost of equipment leased was
$1.4 million and $3.0 million, respectively, which is included in property,
plant and equipment, net of accumulated depreciation of $1.8 million and $1.2
million, respectively.
40
<PAGE> 41
Environmental matters:
The Company and the former owner of its Waynesboro, Virginia facility, General
Electric Company ("G.E."), have generated and managed hazardous wastes at the
facility for many years as a result of their use of certain materials in
manufacturing processes. The Company and the United States Environmental
Protection Agency ("EPA") have agreed to a corrective action consent order (the
"Order"), which became effective on September 14, 1990. The Order requires the
Company to undertake an investigation of solid waste management units at its
Waynesboro, Virginia facility and to conduct a study of any necessary
corrective measures that may be required. The investigative work under the
Order is expected to be completed by December 1997. Although not required by
the Order, the Company has agreed to install and operate an interim ground
water stabilization system, subject to EPA approval of the system design. The
interim groundwater stabilization program may be chosen as the final remedy for
the site, or additional corrective measures may eventually be required. It is
not possible to reliably estimate the costs that any such possible additional
corrective measures would entail. However, if additional corrective measures
are required, the Company expects that it will enter into discussion with EPA
concerning their scope and a further order for that purpose.
The Company has been notified by the EPA that it is one of 700 potentially
responsible parties ("PRPs") under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, for necessary corrective action at a
hazardous waste disposal site in Greer, South Carolina. In prior years, the
Company arranged for the transportation of wastes to the site for treatment or
disposal. During 1995, the PRPs entered into an administrative consent order
with EPA under which they will undertake a remedial investigation and
feasibility study which is currently underway.
The Company has been named as a defendant in an Original Petition and Petition
for Injunctive Relief filed in August 1995 which alleges that the Company and
certain other defendants are strictly liable for damages allegedly suffered by
the plaintiffs as a result of contamination of groundwater at the
Linn-Faysville Aquifer, in Texas, due to the disposal of dangerous products and
materials at a landfill which is alleged to be the source of the contamination.
There is currently a settlement pending on this matter. The Company is fully
reserved for costs associated with this including attorney fees and settlement.
In 1996, the Company recorded a reserve for the above mentioned actions other
than for additional corrective measures equal to its best estimate of the
liability associated with its share of the costs. In the future there may be
other costs of investigation and any corrective action that may be required are
not likely to have a material effect upon the financial condition, results of
operations or liquidity of the Company.
During the third quarter of 1996, the Company accrued $1.5 million associated
with environmental charges. The environmental charge is the Company's best
estimate of remaining costs associated with certain environmental matters
including $0.6 million for pond closure and monitoring for ten years at the
Company's Waynesboro, Virginia facility and $0.9 million for litigation costs
associated with the Linns-Faysville Aquifer in Texas.
Atlantic Design:
In December 1995, the Company entered into an agreement for the term of five
years later extended one year with Atlantic Design Company, a subsidiary of
Ogden Services Corporation, ("ADC") in which ADC would take over the Company's
manufacturing operations and employees in McAllen, Texas and Reynosa, Mexico.
The agreement is automatically renewed unless notice is given. ADC is
committed to manufacturing all of the Company's
41
<PAGE> 42
impact printer products, printed circuit boards, related supplies and spare
parts. The Company will retain design, intellectual and distribution rights.
As part of this agreement, the Company will be a preferred provider of impact
and page printers and multivendor information technology services to Ogden
Services Corporation.
The Company as part of the agreement has agreed to purchase from ADC $54.0
million of product by April 1997. In the event the minimum purchase commitment
is not met, the Company would be required to pay ADC the lost profits on the
amount not achieved. The Company purchased the required amount of product
during 1996. At December 31, 1995, the Company had $12.3 million of inventory
and a related payable of $10.5 million associated with a commitment to
repurchase certain inventories which were transferred to ADC during December
1995. The remaining amounts of this inventory is not material and was fully
reserved at December 29, 1996.
Ogden Services Corporation is attempting to divest ADC. The Company's contract
with ADC contains a clause requiring GENICOM's consent to the sale, which such
consent cannot be unreasonably withheld. The Company is currently evaluating
this situation as well as the ongoing performance of ADC under the agreement.
Other matters:
In July 1996, the Company reached an agreement with Electronic Data Systems
("EDS") to outsource its information systems and data processing activities.
Under the agreement, EDS will operate and service the Company's systems as well
as design, install and service new business systems and global networks. The
agreement is for a period of ten years with an average base cost of $4.3
million per year.
In the ordinary course of business, the Company is party to various
environmental, administrative and legal proceedings. In the opinion of
management, the Company's liability, if any, in all pending litigation or other
legal proceedings, other than those discussed above, will not have a material
effect upon the financial condition, results of operations or liquidity of the
Company.
NOTE 9: RELATED PARTY TRANSACTIONS
G.E. is one of the principal stockholders of the Company. Sales by the Company
to G.E. and its affiliates amounted to $2.2 million, $2.4 million and $4.6
million in 1996, 1995 and 1994, respectively. Amounts receivable from G.E.
were $0.1 million and $0.1 million as of December 29, 1996 and December 31,
1995, respectively.
NOTE 10: SEGMENT AND GEOGRAPHIC INFORMATION
Industry Segments
The Company operates in the serial, line and page printer business where it
designs and markets printers as well as in the related supplies and spare parts
(Document Solutions company). The Company's operation in services provides
customers with a full range of network information technology and services with
field services, depot repair, parts, logistics and network products
(Enterprising Service Solutions company). The production and sales of relay
products comprise less than 10% of revenue, operating income and identifiable
assets and are included in the Document Solutions segment. Revenue between
industry segments are not material. The Company is reporting segment
information by industry group for 1996
42
<PAGE> 43
and 1995 as prior to 1995 and the acquisition of Harris Adacom Network
Services, Inc., the Company operated only in one segment, the computer
peripheral sales and service business.
<TABLE>
<CAPTION>
(in thousands) 1996 1995
----------- ----------
REVENUES
<S> <C> <C>
Document Solutions* $ 182,707 $ 166,469
Enterprising Service Solutions 120,551 127,583
----------- ----------
$ 303,258 $ 294,052
----------- ----------
OPERATING INCOME
Document Solutions+# $ 11,954 $ 7,415
Enterprising Service Solutions# (8,750) 7,763
----------- ----------
$ 3,204 $ 15,178
----------- ----------
ASSETS
Document Solutions $ 96,147 $ 85,130
Enterprising Service Solutions 53,248 49,264
Corporate and other 36,684 27,145
----------- ----------
$ 186,079 $ 161,539
----------- ----------
DEPRECIATION AND AMORTIZATION
Document Solutions $ 3,146 $ 4,471
Enterprising Service Solutions 13,239 9,487
Corporate and other 1,487 4,148
----------- ----------
$ 17,872 $ 18,106
----------- ----------
CAPITAL EXPENDITURES
Document Solutions $ 2,493 $ 2,970
Enterprising Service Solutions 8,961 11,680
Corporate and other 355 1,675
----------- ----------
$ 11,809 $ 16,325
----------- ----------
</TABLE>
*Includes relay revenues of $13,651 and $11,726 for 1996 and 1995,
respectively.
+Includes relay operating loss of $807 and $1,367 for 1996 and 1995,
respectively.
#Includes restructuring accrual of $4,183 included with Enterprising Services
and environmental accrual of $1,479 for Document Solutions in 1996.
Geographic Segments
Transfers (sales) between geographic areas are accounted for at prices
approximating market. Information regarding the Company's operations in the
Pacific Rim, which are not material relative to total operations, has been
combined with its European operations. Additionally, information regarding the
Company's former Mexican subsidiary has been combined with its U.S. operations
because of the vertical integration and its close proximity to the United
States.
43
<PAGE> 44
Financial information by geographic area:
<TABLE>
<CAPTION>
(in thousands)
United States
FISCAL YEAR 1996 and Canada Europe Eliminations Consolidated
-------------- --------- -------------- -------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 235,780 $ 67,478 $ 303,258
Transfers between
geographic areas 47,818 $ (47,818)
-------------- --------- -------------- -------------
Total sales $ 283,598 $ 67,478 $ (47,818) $ 303,258
-------------- --------- -------------- -------------
Operating income (loss) $ 3,479 $ (275) $ 3,204
-------------- --------- -------------- -------------
Identifiable assets $ 146,923 $ 39,156 $ 186,079
============== ========= ============== =============
</TABLE>
<TABLE>
<CAPTION>
United States
FISCAL YEAR 1995 and Canada Europe Eliminations Consolidated
-------------- --------- -------------- -------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 231,709 $ 62,343 $ 294,052
Transfers between
geographic areas 39,870 $ (39,870)
-------------- --------- -------------- -------------
Total sales $ 271,579 $ 62,343 $ (39,870) $ 294,052
-------------- --------- -------------- -------------
Operating income $ 15,021 $ 157 $ 15,178
-------------- --------- -------------- -------------
Identifiable assets $ 123,806 $ 37,733 $ 161,539
============== ========= ============== =============
</TABLE>
<TABLE>
<CAPTION>
United States
FISCAL YEAR 1994 and Canada Europe Eliminations Consolidated
-------------- --------- -------------- -------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 174,455 $ 59,342 $ 233,797
Transfers between
geographic areas 41,821 $ (41,821)
-------------- --------- -------------- -------------
Total sales $ 216,276 $ 59,342 $ (41,821) $ 233,797
-------------- --------- -------------- -------------
Operating income (loss) $ 9,262 $ (94) $ 9,168
-------------- --------- -------------- -------------
Identifiable assets $ 97,517 $ 29,750 $ 127,267
============== ========= ============== =============
</TABLE>
Total sales to customers outside the United States amounted to $94.2 million,
$84.7 million and $72.3 million for 1996, 1995 and 1994, respectively; these
amounts include export sales from the United States of $1.0 million, $1.1
million and $1.5 million in 1996, 1995 and 1994, respectively.
NOTE 11: BUSINESS ACQUISITIONS
TEXAS INSTRUMENTS WORLDWIDE PRINTER BUSINESS
On September 30, 1996, the Company acquired certain assets of Texas Instruments
worldwide printer and related supplies business for the purchase price of
approximately $29.5 million. The acquisition was financed primarily through
the Company's credit facility with NationsBank and a note of $9 million to
Texas Instruments with interest of approximately 8.5% payable over two years.
The goodwill of approximately $10 million associated with the purchase is being
amortized over seven years.
44
<PAGE> 45
PRO FORMA FINANCIAL INFORMATION
Presented below are the unaudited pro forma statements of operations as if the
acquired operations had been integrated into the Company effective January 1,
1995. Accounting adjustments have been made in the pro forma financial
information to include estimated costs of the combinations and to reflect the
integration and consolidation of facilities and personnel. Included in such
integration costs are relocation costs associated with facilities and employee
expenses. This pro forma information has been prepared for comparative
purposes only and does not purport to be indicative of the results that
actually would have been obtained if the acquired operations had been conducted
by the Company during the periods presented, and is not intended to be a
projection of future results. Presentation is in thousands except for earnings
per share amounts.
<TABLE>
<CAPTION>
Period Ended Period Ended
December 29, 1996 December 31, 1995
------------------- ------------------
<S> <C> <C>
Revenue $ 380,676 $ 418,778
Pre-Tax Income 3,863 13,714
------------- ------------
Net Income 5,249 10,295
------------- ------------
Earnings per share $ 0.43 $ 0.85
------------- ------------
Weighted average shares outstanding 12,168 12,038
------------- ------------
</TABLE>
PRINTER SYSTEMS CORPORATION
On February 16, 1995, the Company acquired Printer Systems Corporation ("PSC"),
a privately held company whose primary business is the design, manufacture,
distribution and support of printer networking products for commercial
customers. PSC had 1994 revenues of approximately $10.0 million. Pursuant to
the purchase agreement, the Company acquired all of PSC's outstanding common
and preferred shares for consideration aggregating to potentially $4.8 million.
Of the consideration $0.8 million was payable at closing and $1.2 million is
payable over the three subsequent years to closing. The remaining balance of
up to $2.8 million in consideration is contingent upon attainment of
performance objectives during the three years subsequent to closing, and will
be funded from the Company's cash flows from operations and credit facilities.
As of December 31, 1996, the maximum the Company would be required to pay is
$2.2 million. The acquisition has been accounted for as a purchase. The
goodwill associated with the purchase is being amortized over seven years.
HARRIS ADACOM NETWORK SERVICES, INC.
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 $7.3 million. The assets acquired relate to HANS' service depot
facility, field service operations, systems integration business, and network
baselining and monitoring operations. HANS had 1994 revenues of approximately
$36.1 million. The purchase price was funded from the Company's cash flows
from operations and credit facilities and the acquisition has been accounted
for as a purchase. The goodwill associated with the purchase is being
amortized over ten years.
45
<PAGE> 46
NOTE 12: SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
QUARTER
-----------------------------------------------
1996 FIRST SECOND THIRD FOURTH
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 73,553 $ 69,139 $ 68,811 $ 91,755
Gross Margin 17,307 15,159 16,521 21,982
Operating income (loss) 2,845 1,918 (5,612) 4,053
Income (loss) before
extraordinary items 1,421 689 (2,229) 2,200
Net income (loss) 1,007 681 (2,229) 2,200
Earnings (loss) per share:
before extraordinary item
Primary and fully diluted 0.11 0.06 (0.20) 0.18
Earnings (loss) per share:
after extraordinary item
Primary and fully diluted 0.08 0.06 (0.20) 0.18
</TABLE>
<TABLE>
<CAPTION>
Quarter
-----------------------------------------------
1995 First Second Third Fourth
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 68,134 $ 71,842 $ 78,506 $ 75,570
Gross margin 18,415 19,667 19,974 18,383
Operating income 3,517 3,724 4,070 3,867
Net income 1,301 1,559 1,703 1,589
Earnings per share:
Primary and fully diluted 0.11 0.13 0.14 0.13
</TABLE>
46
<PAGE> 47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information called for by this Item is incorporated by reference from
Genicom Corporation's Proxy Statement for its 1997 annual meeting of
stockholders, to be filed pursuant to Regulation 14A not later than 120 days
after the close of the Company's fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information called for by this Item is incorporated by reference from
Genicom Corporation's Proxy Statement for its 1997 annual meeting of
stockholders, to be filed pursuant to Regulation 14A not later than 120 days
after the close of the Company's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information called for by this Item is incorporated by reference from
Genicom Corporation's Proxy Statement for its 1997 annual meeting of
stockholders, to be filed pursuant to Regulation 14A not later than 120 days
after the close of the Company's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by this Item is incorporated by reference from
Genicom Corporation's Proxy Statement for its 1997 annual meeting of
stockholders, to be filed pursuant to Regulation 14A not later than 120 days
after the close of the Company's fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
The financial statement schedules filed as part of this report are
listed in the Index to Financial Statements and Schedules on page F-1
immediately following the signatures to this report.
47
<PAGE> 48
Exhibits Included in Response to Item 601 of Regulation S-K
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
============ =========================================================================================================
<S> <C>
3.1 Restated Certificate of Incorporation effective as of June 15, 1992, incorporated by reference to
Exhibit 4.1 to Form S-8 Registration Statement (No. 33-49472) filed with the Commission on July 10,
1992.
3.2 By-laws, dated June 1, 1983, as amended January 23, 1989 - incorporated by reference to Exhibit 3.2
to Form 10-K filed with the Commission on March 29, 1989.
4.1 Rights Agreement dated as of June 16, 1996 between the Registrant and First Union National Bank of
North Carolina, including Exhibit A thereto, Form of Rights Certificate - incorporated by reference
to Exhibit 4.1 to Form 8-A filed with the Commission July 5, 1996.
10.1 Financing agreement with NationsBank, dated January 12, 1996 - incorporated by reference to Exhibit
10.1 to Form 8-K filed with the Commission on March 12, 1996.
10.2 Third amendment to financing agreement with NationsBank, dated September 30, 1996 - incorporated by
reference to Exhibit 10.1 to Form 10-Q/A filed with the Commission on January 8, 1997.
10.3 Registration rights provisions contained in a Stock Purchase Warrant dated October 21, 1983 granted
by the Company in favor of General Electric Company, which Stock Purchase Warrant became void after
October 21, 1988 - incorporated by reference to Exhibit 10.6 to the June 25, 1986 Registration
Statement.
10.4# Stock Option Plan, as amended and restated, effective as of February 7, 1991- incorporated by
reference to Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q (File No. 0-14685) for the
quarter ended March 31, 1991 filed with the Commission on May 15, 1991. First Amendment to the
Registrant's Stock Option Plan, dated February 3, 1992 - incorporated by reference to Exhibit 4.2 to
Form S-8 Registration Statement (No. 33-49472) filed with the Commission on July 10, 1992. Second
Amendment to the Registrant's Stock Option Plan, dated January 17, 1994 - incorporated by reference
to Exhibit 4 to Form S-8 Registration Statement (No. 33-53843) filed with the Commission on May 27,
1994. Third Amendment to the Registrant's Stock Option Plan dated February 13, 1995 - incorporated
by reference to Exhibit 4 to Form S-8 Registration Statement (No. 333-01845) filed with the
Commission on March 21, 1996.
10.5# Amendment of Stock Option Plan, dated February 13, 1995 - incorporated by reference to Exhibit 10.5
to Form 10-K filed with the Commission on March 27, 1997 - filed herewith.
</TABLE>
48
<PAGE> 49
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
============ =========================================================================================================
<S> <C>
10.6# Amendment of Stock Option Plan, dated December 17, 1996 - incorporated by reference to Exhibit 10.6
to Form 10-K filed with the Commission on March 27, 1997 - filed herewith.
10.7# Deferred Compensation and Savings Plan, as amended and restated, effective as of January 2, 1989 -
incorporated by reference to Exhibit 10.8 to Form 10-K filed with the Commission on March 29, 1991.
First Amendment to the Deferred Compensation and Savings Plan, dated as of November 1, 1993 -
incorporated by reference to Exhibit 10.1 to Form 8-K filed with the Commission on March 30, 1995.
Second Amendment to the Deferred Compensation and Savings Plan, dated as of January 20, 1994 -
incorporated by reference to Exhibit 10.2 to Form 8-K filed with the Commission on March 30, 1995.
10.8# Fifth Amendment to the Deferred Compensation and Savings Plan, dated as of April 1, 1997 -
incorporated by reference to Exhibit 10.8 to Form 10K filed with the Commission on March 27, 1997 -
filed herewith.
10.9# Incentive Compensation Plan, as amended - incorporated by reference to Exhibit 10.13 to the June 25,
1986 Registration Statement.
10.10# Incentive Compensation Plan for 1996 - incorporated by reference to Exhibit 10.10 to Form 10-K filed
with the Commission on March 27, 1997 - filed herewith.
10.11 Lease of McAllen, Texas facility, dated January 20, 1992 - incorporated by reference to Exhibit
10.12 to Form 10-K filed with the Commission on March 24, 1992.
10.12# Terms of employment of Paul T. Winn dated March 26, 1990 - incorporated by reference to Exhibit
10.15 to Form S-1 Registration Statement (No. 33-23007) filed with the Commission on May 17, 1990.
10.13 Yen Agreement Between GENICOM Corporation and TOSHIBA Corporation Relating to Laser Printer G751, Laser
Printer G750 and Related Options, Supplies and Service Parts, dated March 31, 1992 - incorporated by
reference to Exhibit 10.17 to Form 10-K filed with the Commission on March 31, 1993.
10.14 Agreement with the General Electric Company regarding environmental matters at the Registrants'
Waynesboro, Virginia facility, dated December 9, 1993 - incorporated by reference to Exhibit 10.1 to
Form 8-K filed with the Commission on February 23, 1994.
10.15 Lease of Bedford and Framingham, Massachusetts facilities, dated March 11, 1994 - incorporated by
reference to Exhibit 10.1 and 10.2, respectively to Form 8-K filed with the Commission on May 31,
1994.
10.16 Sublease of McAllen, Texas facilities, dated December 18, 1995 - incorporated by reference to
Exhibit 10.16 to Form 10-K filed with the Commission on March 27, 1997 - filed herewith.
</TABLE>
49
<PAGE> 50
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
============ =========================================================================================================
<S> <C>
10.17 Agreement to purchase Harris Adacom Network Services, Inc., dated February 23, 1995 - incorporated
by reference to Exhibit 2.1 to Form 8-K filed with the Commission on March 16, 1995.
10.18 Manufacturing agreement between GENICOM Corporation and Atlantic Design Company - incorporated by
reference to Exhibit 10.21 to Form 10-K filed with the Commission on March 28, 1996 - filed
herewith.
11 Statement regarding the Company's computation of earnings per share - filed herewith.
22 Subsidiaries of the Registrant - filed herewith.
23 Consent of Independent Accountants - filed herewith.
27 Financial Data Schedule - Filed only with EDGAR version.
(b) Reports on Form 8-K
The Company filed a Form 8-K and Form 8-K/A on October 15, 1996 and December 13, 1996, respectively,
relating to the purchase of Texas Instruments' worldwide printer business.
</TABLE>
Yen Confidential treatment granted with respect to certain provisions
pursuant to 17 C.F.R. 200.80 (b) (4).
# Management contracts or compensatory plans.
50
<PAGE> 51
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) 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
BY: Paul T. Winn
-----------------------------------
Paul T. Winn
President and Chief Executive Officer
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------- ------------------------------------------- ---------------------
<S> <C> <C>
\s\Don E. Ackerman Chairman of the Board and Director March 27, 1997
- ---------------------------------
Don E. Ackerman
\s\Paul T. Winn President and Chief Executive Officer March 27, 1997
- --------------------------------- and Director (Principal Executive Officer)
Paul T. Winn
\s\James C. Gale Senior Vice President Finance and Chief March 27, 1997
- --------------------------------- Financial Officer (Principal Financial Officer)
James C. Gale
\s\Edward E. Lucente Director March 27, 1997
- ---------------------------------
Edward E. Lucente
</TABLE>
51
<PAGE> 52
GENICOM CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
========
<S> <C> <C>
Independents Accountants' Report F-2
Financial Statement Schedules:
Schedule II Valuation and Qualifying Accounts and Reserves F-3
</TABLE>
1. All other schedules have been omitted since the required information is not
present in amounts sufficient to require submission of the schedules.
F - 1
<PAGE> 53
INDEPENDENT ACCOUNTANTS' REPORT
The Board of Directors and Stockholders of GENICOM Corporation:
We have audited the accompanying consolidated balance sheets of GENICOM
Corporation and Subsidiaries (the "Company") as of December 29, 1996 and
December 31, 1995, and the related consolidated statements of income, changes
in stockholders' equity and cash flows for each of the three fiscal years in
the period ended December 29, 1996. We have also audited the financial
statement schedule listed in the index on page F-1 of this Form 10-K. These
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
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 statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of GENICOM
Corporation and Subsidiaries as of December 29, 1996 and December 31, 1995, and
the consolidated results of their operations and their cash flows for each of
the three fiscal years in the period ended December 29, 1996, in conformity
with generally accepted accounting principles. In addition, in our opinion,
the financial statement schedule referred to above, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
Coopers & Lybrand L.L.P.
McLean, VA
January 30, 1997
F - 2
<PAGE> 54
GENICOM CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS
DESCRIPTION BEGINNING CHARGED TO COSTS DEDUCTIONS FROM BALANCE AT END
OF PERIOD AND EXPENSES RESERVES OF PERIOD
==================================== ================ ==================== ==================== ================
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended:
JANUARY 1, 1995 $ 1,480 $ 365(1) $ 366 $ 1,479
DECEMBER 31, 1995 $ 1,479 $ 1,284(1) $ 1,147 $ 1,616
DECEMBER 29, 1996 $ 1,616 $ 1,985(1) $ 331 $ 3,270
ALLOWANCE FOR INVENTORY
OBSOLESCENCE
Year ended:
JANUARY 1, 1995 $ 6,737 $ 2,723(2) $ 3,302 $ 6,158
DECEMBER 31, 1995 $ 6,158 $ 2,292(2) $ 305 $ 8,145
DECEMBER 29, 1996 $ 8,145 $ 6,761(2) $ 3,337 $ 11,569
</TABLE>
1. "Additions" to the allowance for doubtful accounts include a foreign
currency translation adjustment of $(48), $46, and $56 in 1996, 1995 and
1994, respectively. Net bad debt expense for 1996, 1995 and 1994 was
$2,026, $1,238, and $309, respectively.
2. Foreign currency translation adjustments were immaterial in 1995, 1994 and
1993. 1996 includes $4,666 of reserve from the Texas Instruments
acquisition.
F - 3
<PAGE> 55
GENICOM CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS TO FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- ----------- ----
<S> <C> <C>
10.5 Amendment to the Genicom Corporation Stock Option Plan, dated February 13, 1995 E-2
10.6 Amendment to the Genicom Corporation Stock Option Plan, dated December 17, 1996 E-3
10.9 Fifth Amendment to the Genicom Corporation Retirement Savings Plan, dated April 1, 1997 E-4
10.10 Incentive Compensation Plan for 1996 E-5 - E-15
10.16 Sublease of McAllen, Texas Facilities, dated December 18, 1995 E-16 - E-21
11 Statement regarding computation of per share earnings E-22
22 Subsidiaries of the Registrant E-23
23 Consent of Independent Accountants E-24
27 Financial Data Schedule Filed only
with EDGAR
version
</TABLE>
E - 1
<PAGE> 1
Exhibit 10.5
AMENDMENT TO THE
GENICOM CORPORATION
STOCK OPTION PLAN
AMENDMENT to Genicom Corporation Stock Option Plan (the "Plan")
adopted by the Board of Directors of Genicom Corporation (the "Company") at a
meeting on February 13, 1995:
Section 6(d) of the Plan is hereby amended to read as follows:
In the event an Optionee shall cease to be employed by any Genicom Group
Company on a full-time basis for any reason other than as a result of his death
or "disability" (within the meaning of Section 105(d)(4) of the 1954 Code or
the 1986 Code, whichever is applicable), the unexercised portion of any Option
held by such Optionee at that time may only be exercised within one month, or
such other period greater than one month determined by the Board of Directors
(or the Committee), after the date on which the Optionee ceased to be so
employed, and only to the extent that his right to exercised such portion had
vested as of the date on which he ceased to be so employed.
<PAGE> 1
Exhibit 10.6
AMENDMENT TO THE
GENICOM CORPORATION
STOCK OPTION PLAN
AMENDMENT to Genicom Corporation Stock Option Plan (the "Plan")
ratified by the Board of Directors of Genicom Corporation (the "Company") by
written consent dated as of December 17, 1996:
RESOLVED, that the Board hereby ratifies and confirms the continuation of the
Plan since its original termination date and all issuances of shares of the
Company's Common Stock under options granted since such date and ratifies and
confirms an amendment to the Stock Option Plan to delete the present text of
the second sentence of Section 11 of the Stock Option Plan and replace it with
the following:
Unless the Plan shall theretofore have been terminated by the Board
of Directors, the Plan shall terminate on June 1, 1997.
<PAGE> 1
Exhibit 10.9
FIFTH AMENDMENT
TO THE
GENICOM CORPORATION
RETIREMENT SAVINGS PLAN
FIFTH AMENDMENT, dated as of April 1, 1997, to the Genicom Corporation
Retirement Savings Plan, by Genicom Corporation (the "Company").
Company maintains the Genicom Corporation Retirement Savings Plan, as
amended and restated effective as of January 2, 1989, and as subsequently
amended (the "Plan"). The Company has the power to amend the Plan and now
wishes to do so.
NOW, THEREFORE, the Plan is amended as follows:
I. The figure 2% in the second sentence of Section 3.2 is replaced
with 1%.
II. The following sentence is added to the end of Section 6.12(1):
Notwithstanding the foregoing, a Participant who is laid off by the
Company will not be considered in default of the loan so long as the
Participant makes the loan repayments as scheduled to the payroll
department of the Company.
III. Section 9.3(b) is amended in its entirety as follows:
Each Participant may obtain a description of each fund from
the Human Resources Department of the Company.
IV. The effective date of these amendments is April 1, 1997.
V. In all respects not amended, the Plan is hereby ratified and
confirmed.
* * * * *
To record the adoption of the Amendment as set forth above, the
Company has caused this document to be signed on this 19th day of March, 1997.
GENICOM CORPORATION
By: \s\ Paul Winn
-----------------
<PAGE> 1
EXHIBIT 10.10
[GENICOM LOGO]
1996 INCENTIVE COMPENSATION PLAN
<PAGE> 2
1996 INCENTIVE COMPENSATION PLAN
The progress of each employee, each segment of our business and the Corporation
depend significantly on the contributions employees make through their assigned
work. Employee contributions are influenced to a large extent by the
management of the Corporation's compensation plans. These plans determine the
appropriate type and amount of compensation employees receive for the work they
do and the compensation cost to the Corporation.
The Company's annual Salary Plan Program provides merit increases to recognize
individual effort and contributions, growth in position, as well as internal
and external market equity.
Additionally, it is the policy of GENICOM Corporation to provide an incentive
compensation plan which will encourage work situations in which maximum
employee contributions can be made and appropriately rewarded.
To this end, staff level executives will develop performance targets for
functions for which they are responsible. Functional performance targets must
support the Annual Operating Plan and be approved by the President and Chief
Executive Officer.
Incentive Compensation criterion should be objective, quantifiable, and
accepted as relevant by the CEO and the Board of Directors. Indices should
focus on activities that can be significantly affected by the participants and
should be as explicit as possible. Actual performance will be compared with
performance targets to determine level of incentive compensation.
For fiscal year ending December 27, 1996, the Incentive Compensation pool will
not exceed $800,000. The maximum award pool will consist of 4 increments each
of which will become individually available based upon meeting the following
Corporate objectives:
<TABLE>
<CAPTION>
CORPORATE OBJECTIVES WEIGHTING
- ---------------------------------------------------------------------------------------------------------
<S> <C>
1. Revenue Plan - $318M Revenue in FY1996, worldwide, consolidated; growth year to 25%
year
- ---------------------------------------------------------------------------------------------------------
2. Profit to Plan - $8.5M Pretax Income in FY1996, worldwide, consolidated; 25%
improvement year to year
- ---------------------------------------------------------------------------------------------------------
3. Inventory - $30M year end 25%
- ---------------------------------------------------------------------------------------------------------
4. ROI -22.9% 25%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Additionally, specific functional objectives will be established and weighted
relative to Corporate goal achievements. Corporate Objectives represent 70% of
the total Incentive Compensation potential; Functional Objectives represent 30%
of the total Incentive Compensation potential. Failure to obtain an objective
will result in a weighted reduction from the total Incentive Compensation pool.
Objectives will be measured semi-annually and awards measured according to
half-year target achievement. All payments of Incentive Compensation are
subject to the sole discretion of the Board of Directors and the CEO.
page 1
<PAGE> 3
1996 INCENTIVE COMPENSATION PLAN
TARGETS
<TABLE>
<CAPTION>
FIRST HALF 1996 CORPORATE OBJECTIVES - INCENTIVE COMPENSATION WEIGHTING
- ---------------------------------------------------------------------------------------------------------
<S> <C>
1. Revenue Plan - $151M Revenue in FH1996, worldwide, consolidated 25%
- ---------------------------------------------------------------------------------------------------------
2. Profit to Plan - $2.5M Pretax Income in FH1996, worldwide, consolidated 25%
- ---------------------------------------------------------------------------------------------------------
3. Inventory - $38.8M 25%
- ---------------------------------------------------------------------------------------------------------
4. ROI - 14.3% 25%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SECOND HALF 1996 CORPORATE OBJECTIVES - INCENTIVE COMPENSATION WEIGHTING
- ---------------------------------------------------------------------------------------------------------
<S> <C>
1. Revenue Plan - $167M Revenue in SH1996, worldwide, consolidated 25%
- ---------------------------------------------------------------------------------------------------------
2. Profit to Plan - $6.0M Pretax Income in SH1996, worldwide, consolidated 25%
- ---------------------------------------------------------------------------------------------------------
3. Inventory - 30.0M 25%
- ---------------------------------------------------------------------------------------------------------
4. ROI - 30.8% 25%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
page 2
<PAGE> 4
1996 INCENTIVE COMPENSATION PLAN
SECTION I OBJECTIVES
The objectives of the Executive Incentive Compensation Plan are as follows:
- - Reward management for achievement of short-term objectives which are geared
toward the growth and profitability of GENICOM.
- - Provide a program which is an integral part of the executive compensation
program.
- - Provide a program to assist in retention and motivation of senior
management.
The Executive Compensation Program consists of both short and long-term focused
elements:
- BASE SALARY Based on external market; individual
qualifications; position value
- MERIT INCREASES Based on individual performance and market
trends
- AWARDS Individual or group achievement of a
specific project/program
- SHORT TERM INCENTIVES Based on Corporate/Function/Individual
performance
- LONG TERM INCENTIVES Based on Corporate long-term growth and
performance
- PERQUISITES Based on market and position recognition
page 3
<PAGE> 5
1996 INCENTIVE COMPENSATION PLAN
SECTION II ELIGIBLE EMPLOYEES
Employees of the Corporation eligible for selection as participants shall be
those:
- - Whose positions are evaluated as Director level or above under the
Corporation's salaried employee salary structure at the end of the
applicable half-year, or at the end of their employment in the applicable
period or,
- - Whose positions in an Affiliate are evaluated as being equivalent in
responsibility to Position of Director level or above at the end of the
applicable period, or at the end of their employment in the applicable
half-year, and who shall have completed at least twelve months of
continuous service by the end of the applicable period or,
- - Who having on that date completed less than twelve months of such service,
are specifically approved for participation by the Chairman of the Board
and President/Chief Executive Officer or,
- - Who does not meet the above position level requirements but whose
contributions merit special consideration and who are specifically approved
for participation by the Chairman of the Board and President/Chief
Executive Officer, and, who are not participants in any other variable
compensation plan such as the variable compensation plan for Field Sales
personnel.
SECTION III GOAL ATTAINMENT
Achievement of Incentive Compensation is dependent upon achievement of
pre-established Corporate and Functional Objectives. The weight factor for
these objectives for 1996 are:
<TABLE>
<S> <C>
Corporate Goals/Objectives 70%
Business Segment or Functional Goal/Objectives 30%
</TABLE>
The objectives for 1996 are included with this package.
A Cooperative and Supportive team effort is a basic condition of employment for
all employees -- but particularly members of management. Proactive support of
Corporate goals, directions, priorities and a cooperative work effort to
achieve these objectives and goals. Teamwork is an expected condition of
employment. Full and pro-active support of Corporate goals and objectives,
(including those outside of a participant's area of responsibility) are implied
requirements.
page 4
<PAGE> 6
1996 INCENTIVE COMPENSATION PLAN
SECTION IV ADDITIONAL COMPENSATION OPPORTUNITY
The Board of Directors, upon recommendation of the President and CEO, may
approve additional executive compensation above targeted percentages. This
additional incentive compensation may be awarded if:
a. The Corporation exceeds the performance goals established for
the corporate portion of this plan and/or
b. a functional area exceeds the performance targets established
for that function.
The amount of additional incentive compensation awarded will be determined by
the Board of Directors, based on the recommendation of the President and CEO.
SECTION V SELECTION OF PARTICIPANTS AND DETERMINATION OF ALLOTMENTS
BOARD SELECTION
At the end of the applicable half-year period, the Board of Directors shall
select as participants from those in the following position in the Corporation
and determine the allotments to each such participant:
a. The employee occupying the position of President/Chief
Executive Officer and,
b. all other employees who are officers of the Corporation or
employees whose positions are in an Affiliate and evaluated as
being equivalent to an officer position of the Corporation.
BOARD DELEGATION
The Board of Directors has delegated authority to the officers of the
Corporation approved by the CEO to select as participants employees in
positions other than those covered above and to determine the allotments to
such participants. Such individual allotments are to be paid from a total
allotment which is determined by the Board.
BASIS OF SELECTION
Allotments to individual participants shall be determined on the basis of an
assessment of the participant's contribution to, and performance with, the
Corporation during the applicable period.
FUTURE ALLOTMENTS
The selection of an employee as a participant is not to be construed as an
assurance of an allotment for that half-year, or selection as a participant for
any future period.
page 5
<PAGE> 7
1996 INCENTIVE COMPENSATION PLAN
REMOVALS
A participant whose employment with the Corporation is terminated because of
death, retirement, or disability:
a. after the close of the applicable half-year, but prior to the
actual distribution of allotment for such period, may be
awarded a full allotment of that period,
b. after the beginning but prior to the end of the applicable
half-year period, may be awarded an allotment based upon the
actual period of employment with the Corporation within the
period.
Management initiated separation or voluntary separation constitutes removal
from this plan.
SECTION VI PAYMENT OF CURRENT ALLOTMENTS
TIME OF PAYMENT
Allotments will be paid semi-annually as soon as is practical after the Board
approves the allotments for the applicable period of the award year.
PAYMENT AFTER DEATH
If a participant dies prior to payment of his/her allotment, the entire
allotment shall be paid to his/her estate, less any benefit plan deductions and
taxes required to be withheld.
SECTION VII GENERAL CONDITIONS
Employee contributions to the Retirement Savings Plan 401(k) will be deducted
from the Incentive Compensation unless otherwise requesting (in writing) by the
participant prior to payment of Incentive Compensation.
page 6
<PAGE> 8
1996 INCENTIVE COMPENSATION PLAN
FUNCTIONAL PERFORMANCE INDICES
FIRST HALF 1996
<TABLE>
<S> <C>
NAME:
- ---------------------------------------------------------------------------------------------------------------
TITLE: DATE:
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Subject to the provisions of the 1996 Incentive Compensation Plan, your
incentive compensation for the first half of 1996 ending June 30, 1996 will be
based on a weighted achievement of corporate and functional performance
objectives. At the discretion of the Board of Directors, after reviewing
corporate performance as well as Functional performance, the amount of
incentive compensation will be determined. Listed below are your 1996 First
Half Functional goals. Corporate goals are tied to the January, 1996 Annual
Operating Plan commitments to the Board of Directors.
<TABLE>
<CAPTION>
Individual Award
Performance Indices Weight
- ----------------------------------------------------------------------------------------------
<S> <C>
1.
- ----------------------------------------------------------------------------------------------
2.
- ----------------------------------------------------------------------------------------------
3.
- ----------------------------------------------------------------------------------------------
4.
- ----------------------------------------------------------------------------------------------
5.
- ----------------------------------------------------------------------------------------------
Additional Accomplishments
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
Total Individual Award Weight:
- ----------------------------------------------------------------------------------------------
Prepared by: Date:
--------------------------------------------------- -------------------
Approved by: Date:
--------------------------------------------------- -------------------
Date:
--------------------------------------------------- -------------------
</TABLE>
page 7
<PAGE> 9
1996 INCENTIVE COMPENSATION PLAN
FUNCTIONAL FIRST HALF RESULTS
<TABLE>
<S> <C>
NAME:
- -------------------------------------------------------------------------------------------------
TITLE: DATE:
- -------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Percent of Goal
Results Achieved: Attained
- -------------------------------------------------------------------------------------------------
<S> <C>
1. %
- -------------------------------------------------------------------------------------------------
2. %
- -------------------------------------------------------------------------------------------------
3. %
- -------------------------------------------------------------------------------------------------
4. %
- -------------------------------------------------------------------------------------------------
5. %
- -------------------------------------------------------------------------------------------------
Additional First Half 1996 Accomplishments
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Approved by: Date:
--------------------------------------------------- -------------------
Vice President
Date:
--------------------------------------------------- -------------------
President/CEO
</TABLE>
page 8
<PAGE> 10
1996 INCENTIVE COMPENSATION PLAN
RETIREMENT SAVINGS PLAN WITHHOLDING DESIGNATION
AS IT PERTAINS TO INCENTIVE COMPENSATION
- --------------------------------------------------------------------------------
Name Social Security # Work location Work phone
- --------------------------------------------------------------------------------
Your Retirement Savings Plan contribution will automatically be withheld from
any incentive compensation disbursement you may receive, unless you designate
otherwise. Please indicate your election below and return with your Incentive
Compensation Plan receipt confirmation.
[ ] Yes, I want my normal Retirement Savings Plan contribution withheld
from any 1996 incentive compensation disbursement I may receive.
[ ] No, I do not want my normal Retirement Savings Plan contribution
withheld from any 1996 incentive compensation disbursement I may
receive.
[ ] I do not participate in the Retirement Savings Plan.
Signature: Date:
-------------------------------------------- ------------------
page 9
<PAGE> 11
1996 INCENTIVE COMPENSATION PLAN
I have received a copy of the GENICOM 1996 Incentive Compensation Plan and a
copy of my Functional objectives for 1996.
Attached is my completed Retirement Savings Plan contribution designation form.
Participant: Date:
----------------------------------------- ------------------
page 10
<PAGE> 1
Exhibit 10.16
SUBLEASE
This Sublease ("Sublease") is dated as of the 18th day of December,
1995 ("Effective Date"), by and between GENICOM CORPORATION, a Delaware
corporation ("Sublandlord"), and ATLANTIC DESIGN COMPANY, INC., a New York
corporation ("Subtenant").
RECITALS:
A. 1016 Partnership, as landlord ("Landlord"), and Sublandlord,
as tenant, entered into that certain lease for approximately 52,500 (originally
37,500) rentable square feet of space ("the Premises") of the building located
on Lot 2-D, McAllen Southwest Industrial District Unit 4 (the "Building"),
which lease was dated January 20, 1992 ("Prime Lease"). A true and correct
copy of the Prime Lease is attached hereto as Exhibit A and made a part hereof.
B. Landlord constructed the Building and Premises as required by
Article I of the Prime Lease. Sublandlord exercised its right under Article
II(1) of the Prime Lease to increase the size of the Premises from 37,500
square feet to 52,500 square feet.
C. Sublandlord desires to sublease to Subtenant all of the
Premises, and Subtenant desires to sublease the same from Sublandlord, upon the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby agreed
by and between the parties hereto as follows:
D. Premises. Sublandlord hereby subleases to Subtenant, and
Subtenant hereby subleases from Sublandlord, the Premises upon the terms and
conditions set forth herein.
E. Term.
1. Term. The term of this Sublease shall be
approximately two (2) years, commencing as of the date hereof and expiring at
12:00 midnight at the end of the term of the Prime Lease (July 31, 1997).
2. Early Termination. In the event that the Services
Agreement of even date herewith among Sublandlord, Subtenant, and Ogden
Services Corporation ("Services Agreement") terminates and Sublandlord is
required to or elects to comply with the Reacquisition Conditions, as defined
in the Services Agreement, then this Sublease shall terminate on the date
agreed to by Sublandlord and Subtenant pursuant to the Services Agreement, but
no later than the expiration date specified in subsection (a) above or, if a
renewal term is then in progress, no later than the expiration date of such
renewal term.
3. Option to Renew. Provided that Subtenant is not in
default hereunder, Subtenant shall have the option to renew this Sublease for
additional terms consistent with Article XV of the Prime Lease by giving notice
to Sublandlord of its intention to exercise such option at least 120 days prior
to the expiration of the then current term of this Sublease. If Subtenant
gives Sublandlord such notice, Sublandlord shall exercise its option to renew
the Prime Lease pursuant to Article XV of the Prime Lease.
<PAGE> 2
F. Condition and Acceptance of Premises. At the commencement of
the Sublease term, Subtenant shall accept the Premises in their existing
condition and state of repair. Subtenant acknowledges that no representations,
statements or warranties, express or implied, have been made by or on behalf of
the Sublandlord in respect to their condition, or the use or occupation that
may be made thereof, except that Sublandlord represents that it has used the
Premises from the inception of the Prime Lease to the date hereof as a
warehouse and distribution center and Sublandlord has received no notice and
has no knowledge that its use of the Premises is not permitted under the Prime
Lease or any applicable law, regulation or ordinance.
G. Rent.
1. Basic Rent. Subtenant covenants and agrees to pay
Landlord rent for the Premises as provided in Article III, Article VI and
Article XV of the Prime Lease. The current rent is $189,450.67 annually,
$15,787.56 monthly.
2. Additional Charges. All Additional Charges under the
Prime Lease attributable to the Premises shall be passed through as additional
rent to Subtenant, who shall pay such charges to Landlord.
3. Payments. All rent payable pursuant to this Sublease
shall be payable to Landlord at the address set forth in Article III of the
Prime Lease.
H. Assumption of Obligations. To the fullest extent allowed by
law, Subtenant agrees to assume and perform, according to the terms of the
Prime Lease, all of the duties, covenants, agreements and obligations of
Sublandlord under the Prime Lease, as and when required by the Prime Lease,
with respect to the Premises. Subtenant further agrees to keep and obey,
according to the terms of the Prime Lease, all of the rules, restrictions,
conditions and provisions which pertain to the Premises, and are imposed by the
terms of the Prime Lease upon Sublandlord with respect to the Premises or upon
the use of the Premises. Subtenant agrees that it will take good care of the
Premises, and will commit no waste, and will not do, suffer, or permit to be
done any injury to the same. It is hereby understood and agreed that
Subtenant's rights to use, possess and enjoy the Premises are subject to the
terms, conditions, rules and regulations of the Prime Lease and the rights and
remedies of Landlord thereunder. Subtenant agrees to indemnify, defend and
protect Sublandlord against, and to hold Sublandlord harmless from, any
liability, damages, costs or expenses of any kind or nature, including court
costs and reasonable attorneys' fees, resulting from any failure by Subtenant
to perform, keep and obey the terms of this Sublease and the requirements of
the Prime Lease with respect to the Premises. Any failure by Subtenant to
perform, keep and obey the same shall be a default by Subtenant hereunder.
I. Sublease and Assignment. Subtenant shall not assign this
Sublease or further sublease all or any portion of the Premises without the
prior written consent of Sublandlord and Landlord. Subtenant shall not pledge
its interest hereunder, or allow liens to be placed on such interest, or suffer
this Sublease or any portion thereof to be attached or taken upon execution.
If consent is once given by Sublandlord to the assignment of this Sublease or
sublease of the Premises or any interest therein, Sublandlord shall not be
barred from subsequently refusing to consent to any further assignment or
sublease. Any attempt to sell, assign or sublet without the consent of
Sublandlord and Landlord shall be deemed a default by Subtenant.
J. Default by Subtenant. If any rent reserved or other monetary
payment referred to herein, or any part thereof, whether the same be demanded
or not, shall remain unpaid for a period of ten (10) days from the date when
-2-
<PAGE> 3
due hereunder; or if any other term, condition or covenant of this Sublease,
express or implied on the part of Subtenant to be kept or performed, shall be
violated or neglected, and if Subtenant shall fail to cure the same within
twenty (20) days from the date of written notice from Sublandlord to Subtenant
specifying the violation; or if the Premises or Subtenant's interest therein
shall be taken on execution or other process of law; or in the event of
bankruptcy, receivership, insolvency, liquidation, dissolution or similar
proceedings with respect to Subtenant, or if Subtenant shall enter into a
general assignment for the benefit of creditors; or if Subtenant is in default
under the Services Agreement beyond any applicable cure period; or if any
default under the Prime Lease shall occur with respect to Subtenant or the
performance by Subtenant of any of its covenants and obligations under this
Sublease, then and in any of such cases, Subtenant shall be deemed in default,
and Sublandlord shall have the following rights and remedies against Subtenant
(in addition to all other rights and remedies provided by law or in equity):
(i) to terminate this Sublease, (ii) to cure or attempt to cure the default,
whereupon Subtenant shall upon demand reimburse Sublandlord for all costs thus
expended together with interest thereon at the prime rate as published in the
Wall Street Journal (the "Interest Rate") on the first date of such expenditure
by Sublandlord, (iii) to sue for Subtenant's performance, whereupon Subtenant
shall upon demand reimburse Sublandlord for all costs thus expended together
with interest thereon at the Interest Rate on the first date of such
expenditure by Sublandlord, (iv) to exercise all remedies set forth in the
Prime Lease as if Sublandlord were the Landlord and Subtenant were the Tenant
thereunder, or (v) to reenter and take possession of the Premises, and to
remove any property therein, without liability for damage to, and without the
obligation to store such property, but may store same at Subtenant's expense.
8. Default by Sublandlord. If any covenant of this Sublease on
the part of Sublandlord to be kept or performed, shall be violated or
neglected, and if Sublandlord shall fail to cure the same within twenty (20)
days from the date of written notice from Subtenant to Sublandlord specifying
the violation; or if the Premises or Sublandlord's interest therein shall be
taken on execution or other process of law; or in the event of bankruptcy,
receivership, insolvency, liquidation, dissolution or similar proceedings with
respect to Sublandlord, or if Sublandlord shall enter into a general assignment
for the benefit of creditors; or if Sublandlord is in default under the
Services Agreement beyond any applicable cure period; then and in any of such
cases, Sublandlord shall be deemed in default, and Subtenant shall have the
following rights and remedies against Sublandlord (in addition to all other
rights and remedies provided by law or in equity): (i) to terminate this
Sublease, but only if the Services Agreement is also terminated, (ii) to cure
or attempt to cure the default, whereupon Sublandlord shall upon demand
reimburse Subtenant for all costs thus expended together with interest thereon
at the Interest Rate on the first date of such expenditure by Subtenant, or
(iii) to sue for Sublandlord's performance, whereupon Sublandlord shall upon
demand reimburse Subtenant for all costs thus expended together with interest
thereon at the Interest Rate on the first date of such expenditure by
Subtenant.
9. Default by Landlord. If the Landlord defaults in the
performance of its obligations under the Prime Lease, Sublandlord shall, at the
written request and sole expense of Subtenant, seek to enforce its rights,
including, without limitation, through the institution of legal proceedings, if
necessary and specifically requested by Subtenant, to obtain such performance
from Landlord for the benefit of Subtenant.
10. Notices. Any notice or communication required or permitted to
be given or served by either party here to upon the other shall be deemed given
or served in accordance with the provisions of this Sublease when mailed in a
sealed wrapper by United States registered or certified mail, return receipt
requested, or delivered to a nationally recognized overnight courier, postage
prepaid, properly addressed as follows:
-3-
<PAGE> 4
If to Sublandlord: Genicom Corporation
14800 Conference Center Drive
Suite 400, Westfields
Chantilly, Virginia 22021-3806
Attention: President
With a copy to: McGuire, Woods, Battle & Boothe, L.L.P.
One James Center
901 East Cary Street
Richmond, VA 23219-4030
Attention: Jane Whitt Sellers, Esquire
If to Subtenant: Atlantic Design Company, Inc.
5601 Wilkinson Boulevard
Charlotte, North Carolina 28208
Attention: President
With a copy to: Ogden Services Corporation
Two Pennsylvania Plaza
New York, New York 10121
Attention: General Counsel
Each mailed notice or communication shall be deemed to have been given to, or
served upon, the party to which addressed on the date the same is deposited in
the United States registered or certified mail, postage prepaid, or delivered
for overnight delivery to such courier, properly addressed in the manner above
provided. Any party hereto may change its address for the service of notice
hereunder by serving written notice hereunder upon the other party hereto, in
the manner specified above, at least ten (10) days prior to the effective date
of such change.
11. Surrender of Premises. Upon the expiration of the term of
this Sublease, or upon any earlier termination of this Sublease, Subtenant
shall quit and surrender possession of the Premises to Sublandlord in as good
order and condition as the same are now or hereafter may be improved by
Landlord or Subtenant, reasonable wear and tear and repairs which are
Landlord's obligation excepted, and shall, without expense to Sublandlord,
remove or cause to be removed from the Premises all debris and rubbish, all
furniture, equipment, business and trade fixtures, free-standing cabinet work,
movable partitioning and other articles of personal property owned by Subtenant
or installed or placed by Subtenant at its expense in the Premises, and all
similar articles of any other persons claiming under Subtenant, and Subtenant
shall repair all damage to the Premises resulting from such removal. Upon the
expiration of this Sublease, or if Sublandlord or Landlord re-enters or
re-takes possession of the Premises prior to the normal expiration of this
Sublease, Sublandlord or Landlord shall have the right, but not the obligation,
to remove from the Premises all personal property located therein belonging to
Subtenant, and either party may discard such debris, rubbish and personal
property or place such personal property in storage in a public warehouse, all
at the expense and risk of Subtenant.
12. Termination of Prime Lease. It is understood and agreed by
and between the parties hereto that the existence of this Sublease is dependent
and conditioned upon the continued existence of the Prime Lease and this
Sublease shall automatically terminate on the termination, cancellation or
expiration of the Prime Lease.
13. Relationship of Parties. This Sublease does not and shall not
create the relationship of principal and agent, or of partnership, or of joint
venture, or of any other association between Sublandlord and Subtenant, except
that of sublandlord and subtenant.
14. Severability. In the event any part of this Sublease is held
to be unenforceable or invalid, for any reason, the balance of this Sublease
-4-
<PAGE> 5
shall not be affected and shall remain in full force and effect during the term
of this Sublease.
(BALANCE OF PAGE INTENTIONALLY LEFT BLANK)
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Sublease to be
executed as of the day and year first above written.
WITNESS/ATTEST: SUBLANDLORD:
Genicom Corporation, a Delaware
\s\H.L. McIlroy corporation
- ---------------------
Name:H.L. McIlroy
By: \s\ J. C . Gale [SEAL]
--------------------
Name: J.C. Gale
--------------
Title: Senior Vice President
---------------------
WITNESS/ATTEST: SUBLANDLORD:
\s\ Jane W. Sellers
- ------------------- Atlantic Design Company, Inc.
Name: Jane W. Sellers a New York corporation
---------------
By: \s\Brad Palmer
--------------
Name: Brad Palmer
-----------
Title: Vice President
--------------
LANDLORD JOINS IN THIS SUBLEASE FOR THE PURPOSE OF CONSENTING TO THE TERMS AND
CONDITIONS HEREOF:
WITNESS/ATTEST: LANDLORD:
\s\ Karen S. Hunke 1016 Partnership, a Texas partnership
- ------------------
Name: Karen S. Hunke
-------------- By: \s\ Philip H. Hunke
------------------
Name: Philip H. Hunke
---------------
Title: Partner
-------
-6-
<PAGE> 1
Exhibit 11
GENICOM Corporation and Subsidiaries
STATEMENT REGARDING THE COMPANY'S COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
------------------------------
DECEMBER 29, DECEMBER 31,
1996 1995
--------- ----------
<S> <C> <C>
SHARES USED IN THIS COMPUTATION:
Weighted average common shares outstanding 10,933 10,760
Shares applicable to stock options, net of shares
assumed to be purchased from proceeds at
average market 1,235 1,278
--------- ----------
TOTAL SHARES FOR EARNINGS PER COMMON SHARE
AND COMMON SHARE EQUIVALENTS (PRIMARY) 12,168 12,038
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 0 18
--------- ----------
TOTAL FULLY DILUTED SHARES 12,168 12,056
========= ==========
</TABLE>
E-22
<PAGE> 1
Exhibit 22
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION
SUBSIDIARY OF INCORPORATION
---------------------------------------------------------------------- --------------------------
<S> <C>
GENICOM International Holdings Corporation Delaware
GENICOM International Sales Corporation Delaware
Enterprising Service Solutions Corporation Delaware
Delmarva Technologies Corporation Delaware
Rastek Corporation Delaware
Rastek Japan Ltd. Japan
Printer Systems Corporation Virginia
Printer Connection, Inc. Virginia
Printer Systems International, Inc. Virginia
GENICOM Canada, Inc. Canada
GENICOM Foreign Sales Corporation U.S. Virgin Islands
GENICOM Euro Holdings B.V. The Netherlands
GENICOM Belgium Belgium
GENICOM International Limited England
GENICOM (No. 1) Limited England
GENICOM Ltd. England
GENICOM S.A.R.L. France
GENICOM S.A. France
GENICOM GmbH Germany
GENICOM S.p.A. Italy
GENICOM (Australia) PTY LTD. Australia
GENICOM Pty Limited Australia
GENICOM Sweden AB Sweden
</TABLE>
E-23
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
GENICOM Corporation and Subsidiaries on Form S-8 (FILE Nos. 33-29388, 33-41148,
33-49472, 33-53843 and 333-01845) of our report dated January 30, 1997, on our
audits of the consolidated financial statements and financial statement
schedule of GENICOM Corporation and Subsidiaries as of December 29, 1996 and
December 31, 1995 and for the three fiscal years in the period ended December
29, 1996, which report is included on page F-2 in this Annual Report on Form
10-K.
Coopers & Lybrand, L.L.P.
McLean, Virginia
March 27, 1997
E - 24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE YEAR ENDED DECEMBER 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 5,688
<SECURITIES> 0
<RECEIVABLES> 65,404
<ALLOWANCES> (3,270)
<INVENTORY> 46,947
<CURRENT-ASSETS> 125,447
<PP&E> 92,658
<DEPRECIATION> (66,096)
<TOTAL-ASSETS> 186,079
<CURRENT-LIABILITIES> 89,356
<BONDS> 0
0
0
<COMMON> 110
<OTHER-SE> 37,481
<TOTAL-LIABILITY-AND-EQUITY> 186,079
<SALES> 182,707
<TOTAL-REVENUES> 303,258
<CGS> 127,678
<TOTAL-COSTS> 232,289
<OTHER-EXPENSES> 67,765
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,903
<INCOME-PRETAX> (1,577)
<INCOME-TAX> (3,658)
<INCOME-CONTINUING> 2,081
<DISCONTINUED> 0
<EXTRAORDINARY> (422)
<CHANGES> 0
<NET-INCOME> 1,659
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
