<PAGE> 1
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FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
November 14, 1997
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 (Zip Code)
offices)
Registrant's telephone number, including area code: (703) 802-9200
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<PAGE> 2
GENICOM CORPORATION AND SUBSIDIARIES
FORM 8-K/A INDEX
<TABLE>
<S> <C> <C>
Item 7. Financial Statements and Exhibits
(a) Financial statements of operation acquired:
Reports of Independent Accountants. 2-3
Consolidated Balance Sheets as of December 31, 1995, December 31, 1996, and 4-17
September 30, 1997 (unaudited); Consolidated Statements of Operations,
Stockholders' Deficit and Cash Flows for the Years ended December 31, 1994,
1995, and 1996 and for the Nine Months ended September 30, 1996 (unaudited)
and 1997 (unaudited).
(b) Pro forma financial information: 18-23
Transaction Description
Pro Forma Consolidated Balance Sheet as of September 28, 1997 (unaudited)
Notes to Pro Forma Consolidated Balance Sheet (unaudited)
Pro Forma Consolidated Statements of Operations for the Year Ended December
29, 1996 (unaudited) and for the Nine Months Ended September 28, 1997
(unaudited)
Notes to Pro Forma Consolidated Statements of Operations (unaudited)
Signatures 24
</TABLE>
<PAGE> 3
Item 7 (a) - Financial Statements of Operation Acquired:
Consolidated Balance Sheets as of December 31, 1995, December 31, 1996, and
September 30, 1997 (unaudited); Consolidated Statements of Operations.
Stockholders' Deficit, and Cash Flows for the years ended December 31, 1994,
1995, and 1996 and for the nine months ended September 30, 1996 (unaudited) and
1997 (unaudited) and Reports of Independent Accountants.
<PAGE> 4
Report of Independent Accountants
To the Board of Directors and Stockholders of
GENICOM Corporation:
We have audited the accompanying consolidated balance sheets of Novadyne
Computer Systems, Inc., and Subsidiary (the Company) as of December 31, 1995
and 1996, and the related consolidated statements of operations, stockholders'
deficit and cash flows for the years then ended. These financial statements
are the responsibility of the Company's and GENICOM's management. Our
responsibility is to express an opinion on those financial statements 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 Novadyne Computer
Systems, Inc., and Subsidiary as of December 31, 1995 and 1996, and the
consolidated results of their operations and their cash flows for the years
then ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has suffered recurring losses
from operations and has a net capital deficiency that raise substantial doubt
about its ability to continue as a going concern. As discussed in Note 5 to
the financial statements, the Company also was in default of certain financial
covenants in connection with its credit agreement. As more fully disclosed in
Note 13 to the financial statements, the Company and the lender entered into a
forbearance agreement whereby the Company engaged an investment banker to sell
the business. On November 14, 1997, the Company sold certain of its assets,
net of certain liabilities, for approximately $12 million to GENICOM
Corporation. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
McLean, VA Coopers & Lybrand, L.L.P.
March 6, 1998
<PAGE> 5
The Board of Directors and Stockholders
Novadyne Computer Systems, Inc.
We have audited the accompanying consolidated statements of operations,
stockholders' deficit and cash flows of Novadyne Computer Systems, Inc. and
Subsidiary (the Company) for the year ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of the operations and the cash
flows of Novadyne Computer Systems, Inc. and Subsidiary for the year ended
December 31, 1994, in conformity with generally accepted accounting principles.
Deloitte & Touche, LLP
Costa Mesa, CA
March 3, 1995
<PAGE> 6
NOVADYNE COMPUTER SYSTEMS, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands, except per share amounts)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1996 1995
----------------------------------------------------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 927 $ 435 $ 1,124
Accounts receivable, net of allowance for doubtful
accounts of $1,667, $1,553 and $1,372 4,248 5,043 5,342
Inventories 54 54 88
Prepaid expenses and other current assets 133 394 326
--------------- --------------- ---------------
Total current assets 5,362 5,926 6,880
Restricted cash 1,530 1,530 1,530
Field service spares, net 3,453 3,556 4,658
Property and equipment, net 1,131 1,039 1,488
Intangible and other assets, net 209 170 1,311
--------------- --------------- ---------------
Total assets $ 11,685 $ 12,221 $ 15,867
=============== =============== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current maturities of long term debt $ 29,509 $ 25,873 $ 5,449
Accounts payable 3,475 4,524 7,327
Accrued expenses 599 653 3,379
Accrued employee compensation 1,937 1,617 2,795
Deferred revenue 2,934 2,685 2,739
Other current liabilities 504 731 182
--------------- --------------- ---------------
Total current liabilities 38,958 36,083 21,871
Long term debt, net of current maturities - - 13,787
--------------- --------------- ---------------
Total liabilities 38,958 36,083 35,658
--------------- --------------- ---------------
COMMITMENTS AND CONTINGENCIES
Redeemable Series A preferred stock, $.001 par value -
1,000 shares issued and authorized 13,000 13,000 13,000
--------------- --------------- ---------------
STOCKHOLDERS' DEFICIT
Redeemable Series B preferred stock, $.001 par value -
1,000 shares authorized, issued and outstanding
Common stock, $.001 par value -
2,000,000 shares authorized, 1,000 shares
issued and outstanding
Additional paid-in capital 15,581 15,557 15,949
Accumulated deficit (55,854) (52,419) (48,740)
--------------- --------------- ---------------
Total stockholders' deficit (40,273) (36,862) (32,791)
--------------- --------------- ---------------
Total liabilties and stockholders' deficit $ 11,685 $ 12,221 $ 15,867
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 7
NOVADYNE COMPUTER SYSTEMS, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30 YEAR ENDED DECEMBER 31
1997 1996 1996 1995 1994
------------------------------------------------------------------- ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
NET REVENUES $ 26,056 $ 29,046 $ 38,274 $ 56,571 $ 67,101
-------------- -------------- ------------ ------------ ------------
COSTS AND EXPENSES
Direct operating expenses 21,023 20,093 28,143 46,170 54,000
Selling, general and administrative 6,124 7,749 10,476 13,412 15,655
Amortization of intangible assets 394 525 860 610
Loss on write down of assets 1,069 896
Gain on early termination of contract (2,284)
Gain on contract settlement (1,186)
-------------- -------------- ------------ ------------ ------------
Total costs and expenses 27,147 28,236 39,144 58,041 71,161
-------------- -------------- ------------ ------------ ------------
(LOSS) INCOME FROM OPERATIONS (1,091) 810 (870) (1,470) (4,060)
-------------- -------------- ------------ ------------ ------------
OTHER EXPENSES (INCOME):
Interest expense 1,909 1,565 2,881 1,798 2,637
Other expense (income) 340 361 (27) 189 144
-------------- -------------- ------------ ------------ ------------
Total other expenses 2,249 1,926 2,854 1,987 2,781
-------------- -------------- ------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS (3,340) (1,116) (3,724) (3,457) (6,841)
-------------- -------------- ------------ ------------ ------------
DISCONTINUED OPERATIONS (NOTE 2)
Loss from discontinued operations (676)
Loss on disposal of discontinued operations (3,738)
------------
Loss from discontinued operations (4,414)
-------------- -------------- ------------ ------------ ------------
NET LOSS $ (3,340) $ (1,116) $ (3,724) $ (3,457) $ (11,255)
============== ============== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 8
NOVADYNE COMPUTER SYSTEMS, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30 YEAR ENDED DECEMBER 31
1997 1996 1996 1995 1994
------------------------------- ----------------------------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,340) $ (1,116) $ (3,724) $ (3,457) $ (11,255)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 391 432 560 1,320 2,467
Amortization of field service spares 1,052 1,354 1,827 4,078 5,771
Amortization of deferred financing costs 394 525 860 610
Loss on write-down of assets 751 1,069 896
Loss on disposal of discontinued operations 4,088
Changes in assets and liabilities:
Accounts receivable 795 18 299 5,684 (2,023)
Inventories 87 34 (88) 167
Prepaid expenses and other current assets 261 (17) (68) 168 22
Other assets (52) (59) (135) 438 73
Accounts payable (1,049) (2,981) (2,803) (1,437) 856
Accrued expenses (54) (3,130) (2,726) 1,334 128
Accrued employee compensation 320 328 (1,178) 220 (283)
Deferred revenue 249 (259) (54) (2,806) 1,711
Other current liabilities (227) 82 549 (107) 78
------------ ---------- ---------- ----------- ----------
Net cash (used in) provided by operating activities (1,654) (4,867) (6,143) 7,276 3,306
------------ ---------- ---------- ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of field service spares (949) (1,124) (725) (1,551) (2,350)
Purchase of property and equipment (470) (246) (291) (37) (580)
Acquisition of service contracts (1,365)
Sale of property and equipment 180
Proceeds from sale of field service spares 1,484
------------ ---------- ---------- ----------- ----------
Net cash used in investing activities (1,419) (1,370) (836) (104) (4,295)
------------ ---------- ---------- ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on revolving line of credit 3,636 5,587 6,637 2,149 2,091
Borrowings on long term debt 1,300
Repayment of capital lease obligation (306)
Principal payments on long term debt (1,848)
Restricted cash (1,530)
Increase in deferred financing costs (377)
Contribution from (distribution to) shareholder 24 (236) (392) (7,084)
------------ ---------- ---------- ----------- ----------
Net cash provided by (used in) financing activities 3,660 5,351 6,245 (6,465) 860
------------ ---------- ---------- ----------- ----------
Foreign currency translation adjustment (95) (3) 45 83
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 492 (889) (689) 790 (129)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 435 1,124 1,124 334 463
------------ ---------- ---------- ----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 927 $ 235 $ 435 $ 1,124 $ 334
============ ========== ========== =========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURE
Cash paid for interest $ 1,909 $ 1,566 $ 2,319 $ 1,812 $ 2,081
============ ========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 9
NOVADYNE COMPUTER SYSTEMS, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(In Thousands, except share amounts)
<TABLE>
<CAPTION>
Series B
Preferred Stock Common Stock
-------------------------- --------------------------
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
BALANCE, January 1, 1994 1,000 $ - 1,000 $ -
Net loss
------------ ---------- ----------- -----------
BALANCE, December 31, 1994 1,000 $ - 1,000 $ -
Foreign currency translation adjustment
Distributions to majority shareholder, net
Net loss
------------ ---------- ----------- -----------
BALANCE, December 31, 1995 1,000 - 1,000 -
Foreign currency translation adjustment
Distributions to majority shareholder, net
Net loss
------------ ---------- ----------- -----------
BALANCE, December 31, 1996 1,000 - 1,000 -
Foreign currency translation adjustment (unaudited)
Contributions from majority shareholder, net (unaudited)
Net loss (unaudited)
------------ ---------- ----------- -----------
BALANCE, September 30, 1997 (unaudited) 1,000 $ - 1,000 $ -
============ ========== =========== ===========
<CAPTION>
Additional
Paid in Accumulated
Capital Deficit Total
------------ ------------ ------------
<S> <C> <C> <C>
BALANCE, January 1, 1994 $ 23,033 $ (34,111) $ (11,078)
Net loss (11,255) (11,255)
------------ ----------- -----------
BALANCE, December 31, 1994 $ 23,033 $ (45,366) $ (22,333)
Foreign currency translation adjustment 83 83
Distributions to majority shareholder, net (7,084) (7,084)
Net loss (3,457) (3,457)
------------ ----------- -----------
BALANCE, December 31, 1995 15,949 (48,740) (32,791)
Foreign currency translation adjustment 45 45
Distributions to majority shareholder, net (392) (392)
Net loss (3,724) (3,724)
------------ ----------- -----------
BALANCE, December 31, 1996 15,557 (52,419) (36,862)
Foreign currency translation adjustment (unaudited) (95) (95)
Contributions from majority shareholder, net (unaudited) 24 24
Net loss (unaudited) (3,340) (3,340)
------------ ----------- -----------
BALANCE, September 30, 1997 (unaudited) $ 15,581 $ (55,854) $ (40,273)
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE> 10
NOVADYNE COMPUTER SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Description
Novadyne Computer Systems, Inc. (the Company or Novadyne) services computer
hardware and software, provides installation, monitoring and support of wide
area networks, and provides staff augmentation support through monthly and
annual maintenance contracts. The Company has approximately 50 field services
offices and an additional 58 offices through its authorized service provider
program in the United States and Canada.
The Company is a majority owned subsidiary of Novadyne Acquisition Company,
Inc. (Acquisition). Acquisition's only asset is the investment in the Company.
Principles of Consolidation
The consolidated financial statements include the accounts of Novadyne Computer
Systems, Inc. and its wholly-owned Canadian subsidiary, Omnibit Computer
Systems, Inc. All significant intercompany transactions and balances have been
eliminated.
Unaudited Interim Financial Statements
The unaudited balance sheet as of September 30, 1997 and the unaudited
statements of operations and stockholders' deficit and cash flows for the
nine-month periods ended September 30, 1997 and 1996 have been prepared in
accordance with generally accepted accounting principles and Article X of SEC
Regulation S-X for interim financial information. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles. In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine months ended
September 30, 1997 are not necessarily indicative of results that may be
expected for the year ended December 31, 1997.
Cash Equivalents
Cash equivalents are deemed to be highly liquid instruments purchased with an
original maturity of three months or less.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to concentrations
of credit risk consist of cash and cash equivalents and accounts receivable.
The Company places its cash and cash equivalents with high credit quality
institutions. At times cash and cash equivalents may be in excess of FDIC
insurance limits. The Company has not experienced any losses on its cash and
cash equivalents. The Company extends credit to various customers. 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, experienced credit related
losses within management's expectations.
<PAGE> 11
NOVADYNE COMPUTER SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Property and Equipment
Property and equipment are stated at cost and depreciated using the straight
line method over the estimated useful lives of the related assets, typically
five years. Leasehold improvements are amortized over the lesser of the life
of the related lease or the useful life of the improvements.
Field Service Spares
Field service spares consist of replacement and repair parts required to
service customer maintenance contracts. Field service spares are stated at
lower of cost (average cost) or market and amortized on a straight line basis
over five years.
Long-lived Assets
Management of the Company periodically monitors the carrying value of
long-lived assets for impairment. The impairment amount would be determined by
comparing the carrying value of these assets with their related expected future
net cash flows. Should the sum of the expected undiscounted future net cash
flows be less than the carrying value, an impairment loss would be measured by
the amount by which the carrying value of these assets exceeds the future
discounted cash flows.
Deferred Financing Costs
Deferred financing costs represent primarily fees and legal costs associated
with the Company's debt restructuring in 1993 and are included in intangible
and other assets in the accompanying consolidated balance sheets. In 1995 and
1996, these costs were amortized using the effective interest method over the
life of the related debt, principally five years. For the year ended December
31, 1996, the Company recorded a $751,000 adjustment to the carrying value of
deferred financing costs as interest expense.
Revenue Recognition
Revenue is generally recognized as services are rendered, pursuant to service
contracts, or when services are performed.
Federal and State Income Taxes
Deferred tax assets and liabilities represent the tax effects of temporary
differences in the bases of certain assets and liabilities for tax and
financial statement purposes, calculated at currently effective tax rates, of
future deductible or taxable amounts attributable to events that have been
recognized on a cumulative basis in the financial statements. Valuation
allowances are estimated when necessary to reduce deferred tax assets to the
amount reasonably expected to be realized.
<PAGE> 12
NOVADYNE COMPUTER SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 - DISCONTINUED OPERATIONS
In 1994, the Company exited its Independent Sales Organization (ISO) and
Catalog Sales business through a sale of certain assets to Apex, Inc., a
company related to Cerplex, Inc. (Cerplex) (Note 10), for $400,000 before costs
of $50,000. ISO's principal operation was the sale of Legacy systems to value
added resellers. Sales of these Legacy systems were essential to the
recoverability of related field service spares. Because of the discontinuation
of ISO, the Company wrote off these Legacy field service spares by $1,945,000.
The Company also wrote off ISO inventories of $1,328,000 and property and
equipment by $815,000, before giving effect to the proceeds from the sale.
Summary operating results of discontinued operations are as follows (in
thousands):
<TABLE>
<CAPTION>
1994
<S> <C>
Revenues $ 5,821
Cost of sales (5,294)
Operating expenses (1,203)
-------------
Loss from discontinued operations $ (676)
=============
Write-off of field service spares $ (1,945)
Write-off of inventories (1,328)
Write-off of property and equipment (815)
-------------
(4,088)
Net proceeds from sale 350
-------------
Loss on disposal of discontinued operations, net of proceeds $ (3,738)
=============
</TABLE>
<PAGE> 13
NOVADYNE COMPUTER SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
12/31/96 12/31/95
----------- ------------
<S> <C> <C>
Machinery and equipment $ 10,349 $ 10,599
Office furniture and fixtures 1,755 1,494
Purchased software 864 866
Leasehold improvements 524 519
----------- ------------
13,492 13,478
Less: Accumulated depreciation and amortization (12,453) (11,990)
----------- ------------
$ 1,039 $ 1,488
=========== ============
</TABLE>
NOTE 4 - INTANGIBLE AND OTHER LONG-TERM ASSETS
Intangible and other long-term assets consist of the following (in thousands):
<TABLE>
<CAPTION>
12/31/96 12/31/95
----------- -----------
<S> <C> <C>
Deferred financing costs $ - $ 1,698
Less: Accumulated amortization - (657)
----------- -----------
- 1,041
Refundable security deposits 94 115
Other 76 155
----------- -----------
Total intangible and other long-term assets $ 170 $ 1,311
=========== ===========
</TABLE>
During 1994, Novadyne entered into an agreement with Motorola whereby Novadyne
acquired the service contracts of Motorola Field Service operations. Novadyne
amortized the service contracts over their useful lives, which approximated
five years. During 1995, the contract was terminated and the unamortized
portion of the contract was written off.
<PAGE> 14
NOVADYNE COMPUTER SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - INDEBTEDNESS
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
12/31/96 12/31/95
--------- ---------
<S> <C> <C>
Revolving line of credit $ 9,988 $ 5,233
Term loan A 7,500 7,500
Term loan B 6,214 6,214
Other notes payable 2,171 289
--------- ---------
Total debt 25,873 19,236
Less: Current maturities (25,873) (5,449)
--------- ---------
Long-term debt $ - $ 13,787
========= =========
</TABLE>
In 1993, the Company entered into two term loans: Term Loan A for $7,500,000
and Term Loan B for $6,500,000. The Company is required under Term Loan A to
make quarterly principal payments beginning June 30, 1996, with the final
payment due December 31, 1997. Term Loan B requires the Company to make
quarterly principal payments beginning December 31, 1997, with the final
payment due November 30, 1998. The Company also has a revolving line of credit
of up to $6 million at December 31, 1995 and $7 million at December 31, 1996.
Pursuant to a forbearance agreement, the revolving line of credit was increased
to accommodate the amount outstanding. Interest under this credit agreement is
at the bank's prime rate plus 2% and is due monthly. The loans are
collateralized by substantially all assets of the Company. The credit
agreements also require that 80% of the excess cash flows as defined be used to
prepay the principal balances of the debt.
Substantially all of the Company's debt agreements contain various restrictive
covenants, the more significant of which limits or restricts capital
expenditures, future funded indebtness, future encumbrances on assets, and the
payment of dividends. The Company is also required to maintain a minimum level
of EBITDA. As of December 31, 1996, the Company was not in compliance with
the EBITDA covenants. These covenants have been waived pursuant to the
forbearance agreement (see Note 13).
NOTE 6 - INCOME TAXES
Components of deferred tax assets are:
<TABLE>
<CAPTION>
(In thousands) 12/31/96 12/31/95
----------- ------------
<S> <C> <C>
Net operating loss carryforwards $ 22,617 $ 18,563
Property and equipment (315) (515)
Allowance for doubtful accounts 1,553 1,372
Accrued vacation 395 520
Group health insurance 490 1,425
Other accured liabilities 592 1,419
Other 106 440
----------- ------------
25,438 23,224
Less: Valuation allowance (25,438) (23,224)
----------- ------------
Net deferred taxes $ - $ -
=========== ============
</TABLE>
<PAGE> 15
NOVADYNE COMPUTER SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's effective income tax rate for the years ended December 31, 1994,
1995 and 1996 was 0%. The difference between the enacted Federal income tax
rate and the Company's effective tax rate was the effect of the net operating
loss carryforward and the valuation allowance.
NOTE 7 - CAPITAL
Series A Preferred Stock
The Company's senior creditor exchanged $13 million of indebtness in exchange
for 1,000 shares of the Company's redeemable Series A preferred stock. The
Series A preferred stock can be redeemed for $13 million. If the Series A
preferred stock is not redeemed by December 2003, the balance becomes due and
payable. This preferred stock has a liquidation preference equal to the
outstanding indebtedness of the Company and Acquisition due to the senior
lender.
Series B Preferred Stock
Pursuant to the Company's Certificate of Incorporation, this stock carries an
effective 10% equity interest and does not have a liquidation preference.
Common Stock
All of the issued and outstanding Common Stock is held by Acquisition and was
issued in conjunction with an investment made during 1993. Pursuant to the
Company's Certificate of Incorporation, this stock carries an 85.1% effective
equity interest.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Leases
The Company has operating and capital lease agreements, principally for field
service office facilities located throughout the United States, its corporate
offices and computer equipment. Future minimum lease commitments for
non-cancelable operating leases are $1.8 million in 1997, $1.5 million in 1998,
$0.6 million in 1999, $0.2 million in 2000 and $0.1 million in 2001.
The total rent expense was $1.8 million, $1.4 million and $2.9 million for the
years ended December 31, 1996, 1995 and 1994, respectively.
Litigation
The Company is involved in litigation, both as a plaintiff and defendant, in
matters arising out of the Company's normal business activities. Management
does not expect the outcomes of these lawsuits to have a material adverse
effect on the consolidated financial statements of the Company.
NOTE 9 - EMPLOYEE BENEFITS
Effective July 1, 1990, the Company adopted an employee savings plan qualifying
under Section 401(k) of the Internal Revenue Code (the Plan). Pursuant to the
Plan agreement,
<PAGE> 16
NOVADYNE COMPUTER SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
employees who complete 1,000 hours of service per year and are not part-time
employees scheduled to work less than 20 hours weekly are eligible to
participate. Subject to certain limitations, the Company will contribute 10%
of each employee's contribution to the plan. The Board of Directors, at its
discretion, may change the amount of the Company's contribution. Company
contributions were $53,366, $63,000 and $66,000 for the years ended December
31, 1996, 1995, and 1994, respectively.
NOTE 10 - RELATED PARTY TRANSACTIONS
During 1993, the Company and its affiliates entered into agreements with
Cerplex for the out-sourcing of the Company's repair depots in Santa Ana,
Dallas and Philadelphia areas. Cerplex was a holder of warrants to purchase
Series A preferred stock of Novadyne Holding Company, Inc., the sole
shareholder of Acquisition, Holding's only investment. Under the terms of the
agreements, Cerplex also assumed responsibility for the repair of electronic
components and the operations and management of the repair facilities.
The agreements also require Cerplex to sublease two of the facilities. Cerplex
assumed responsibility for Novadyne's inventory and equipment at these
facilities. Amounts charged by Cerplex for these services are based on a price
formula, a monthly maintenance fee of $83,333 and a cost-sharing agreement
which provides for sharing cost reductions. Total amounts paid to Cerplex were
$0.2 million, $2.5 million and $5.5 million for the years ended December 31,
1996, 1995 and 1994, respectively.
Subsequent to December 31, 1996, the Company and Cerplex terminated this
agreement (see Note 13).
NOTE 11 - SETTLEMENT OF TANDEM DISPUTE
In December 1995 the Company settled an outstanding dispute with Tandem
Corporation ("Tandem"). As part of the settlement, Novadyne assigned to Tandem
all of its existing contracts for servicing Tandem equipment in exchange for
which Novadyne received approximately $4.1 million. In conjunction with this
settlement, Novadyne also transferred to Tandem various inventory parts and
wrote-off approximately $633,000 of other parts that were no longer recoverable
under Novadyne's existing contracts. As a result of this transaction a net
gain of approximately $1.2 million was recorded in the accompanying 1995
financial statements. The proceeds from this sale were applied against
indebtedness (revolving line of credit and term loans). As of December 31,
1995, $1.5 million of these proceeds were held by the Company's senior lender
as restricted cash pending application against indebtedness.
NOTE 12 - EARLY TERMINATION OF MCI CONTRACT
In May 1995, MCI Corporation (MCI), the Company's largest customer, terminated
its contract. In exchange for the early termination of the contract, Novadyne
received approximately $3 million from MCI. In conjunction with the
termination of the contract, Novadyne transferred approximately 60 of its
employees along with various inventory parts to MCI. As result of this
transaction a net gain of approximately $2.3 million was recorded in the
accompanying 1995 financial statements. The proceeds from this sale were
applied against term loan indebtedness.
<PAGE> 17
NOVADYNE COMPUTER SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - SUBSEQUENT EVENTS
On March 10, 1997, the Company entered into a Settlement and Release agreement
with The Cerplex Group, Inc. whereby disputed amounts owing between the two
companies were resolved, and Cerplex's warrant to acquire stock in the Company
was cancelled in exchange for 92,000 shares of common stock of Holding. The
disputed amounts owing were settled with the Company issuing a note to pay
Cerplex $1.8 million plus interest and transferring ownership of certain repair
center fixtures with a value of approximately $50,000 to Cerplex. The note
issued to Cerplex is a five year note bearing interest at 8% with earned
interest only to be paid monthly during the first three years of the note with
the remaining balance to be amortized over the last two years. This note is
collateralized by certain field spares and inventory of the Company. In
conjunction with the merger of Holding into Acquisition as described below.
Cerplex's 92,000 common shares of Holding were converted to 66,773 common
shares of Acquisition.
On April 29, 1997, Holding was merged into Acquisition. Prior to the merger,
Holding was the sole holder of Acquisition's common stock. This stock was the
only asset of Holding prior to the merger. No liabilities were assumed in
connection with this merger. Pursuant to this merger, the common shares of
Acquisition were redistributed pro rata to the respective equity interests in
Holding prior to the merger. These equity interests are primarily held by the
management of Acquisition and the Cerplex Group.
On May 21, 1997, the Company retained Trenwith Securities, Inc. of Newport
Beach, California for a one year term as its investment banker to facilitate
the sale of the business. In exchange for its services, Trenwith will receive
a success fee that is variable with the value of the sale transaction.
On May 22, 1997, the Company entered into a forbearance agreement with its
senior lender whereby the lender will temporarily forbear from exercising its
rights with respect to payment and other existing defaults provided the Company
retain and work with an investment banker to sell the business. Pursuant to
this agreement, the authorized revolving line of credit was increased to $9.3
million plus certain accrued interest amounts. On July 23, 1997, the
forbearance agreement was amended. Pursuant to this amendment, the authorized
revolving line of credit was increased to $9.7 million plus certain accrued
interest amounts and the expiration date was extended to March 31, 1999. Given
the intent of this forbearance agreement, the Company classified all debt of
the senior lender as current as of December 31, 1996.
On November 14, 1997, the Company sold certain of its assets, net of certain
liabilities for approximately $12 million to Genicom Corporation. The proceeds
of the sale were used to repay the Company's senior lender and other vendors.
<PAGE> 18
Item 7 (b) - Pro Forma Financial Information:
On November 14, 1997, the Registrant purchased certain assets of Novadyne
Computer Systems, Inc. for approximately $12 million including the assumption
of certain liabilities. The transaction was financed through the Registrant's
credit facility with NationsBank of Texas, as agent for a group of lenders.
The Registrant expects to pay any additional purchase price from cash provided
by operations.
The assets acquired include primarily accounts receivable, field service
spares, equipment and inventory. The acquisition is being accounted for as a
purchase and the allocation of the purchase price and related acquisition costs
is subject to adjustment based upon refinements in the application of purchase
method accounting and the final determination of the purchase price.
The pro forma financial statements have been prepared by the Registrant's
management based upon the financial statements of Novadyne Computer Systems,
Inc. included in this Form 8-K/A. These pro forma financial statements may not
be indicative of the results that actually would have occurred if the
combination had been in effect on the dates indicated or which may be obtained
in the future. The pro forma financial statements should be read in
conjunction with the audited financial statements and footnotes included in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1996
and the Novadyne Computer Systems audited Consolidated Balance Sheets as of
December 31, 1995 and 1996, and Consolidated Statements of Operations,
Stockholders' Deficit and Cash Flows for the years ended December 31, 1994,
1995 and 1996, and footnotes contained in this Form 8-K/A.
The pro forma consolidated balance sheet (unaudited) as of September 28, 1997
presents the financial position of the Registrant as if the assets and
liabilities of Novadyne Computer Systems had been acquired as of that date.
The assets acquired did not differ materially between September 28,
1997 and November 14, 1997.
The pro forma consolidated statements of operations (unaudited) for the year
ended December 29, 1996 and the nine months ended September 28, 1997 present
the results of operations as if Novadyne Computer Systems had been acquired as
of January 1, 1996 taking into consideration only those transactions known to
be occurring, and having continuing impact to operations as a result of the
acquisition.
The price for the assets purchased and liabilities assumed from Novadyne
Computer Systems was allocated as follows (in thousands):
<TABLE>
<S> <C>
Accounts receivable, net $ 4,248
Equipment 4,584
Prepaid expense 26
Accrued expenses (1,506)
Deferred income (2,934)
Goodwill 7,831
-------------
$ 12,249
=============
</TABLE>
<PAGE> 19
GENICOM CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 28, 1997
(UNAUDITED)
(In thousands, except share data)
<TABLE>
<CAPTION>
NOVADYNE PRO FORMA
GENICOM COMPUTER SYSTEMS ADJUSTMENTS PRO FORMA
-------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,414 $ 927 $ (927) 1 $ 1,414
Accounts receivable, net 80,532 4,248 84,780
Inventories 62,755 54 (54) 1 62,755
Prepaid expenses and other assets 8,861 133 (107) 2 8,887
-------------- --------------- ------------- --------------
TOTAL CURRENT ASSETS 153,562 5,362 (1,088) 157,836
Restricted cash 1,530 (1,530) 1 0
Property, plant and equipment, net 29,564 4,584 34,148
Intangibles and other assets 35,142 209 7,622 3 42,973
-------------- --------------- ------------- --------------
$ 218,268 $ 11,685 $ 5,004 $ 234,957
============== =============== ============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Debt maturing within one year $ 5,062 $ 29,509 $ (29,509) 4 $ 5,062
Accounts payable and accrued expenses 75,087 6,515 (5,009) 5 76,593
Deferred income 12,360 2,934 15,294
-------------- --------------- ------------- --------------
TOTAL CURRENT LIABILITIES 92,509 38,958 (34,518) 96,949
Long-term debt, less current portion 70,400 12,249 6 82,649
Other non-current liabilities 10,373 10,373
-------------- --------------- ------------- --------------
TOTAL LIABILITIES 173,282 38,958 (22,269) 189,971
PREFERRED STOCK 13,000 (13,000) 7
-------------- --------------- ------------- --------------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock 111 111
Additional paid-in capital 26,585 15,581 (15,581) 7 26,585
Retained earnings (accumulated deficit) 19,811 (55,854) 55,854 7 19,811
Foreign currency translation adjustment (1,521) (1,521)
-------------- --------------- ------------- --------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 44,986 (40,273) 40,273 44,986
-------------- --------------- ------------- --------------
$ 218,268 $ 11,685 $ 18,004 $ 234,957
============== =============== ============= ==============
</TABLE>
See notes to pro forma consolidated financial statements.
<PAGE> 20
GENICOM CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
1. To adjust for assets not acquired by the Registrant.
the Registrant.
2. To adjust for prepaid expenses purchased on November 14, 1997 by the
Registrant.
3. Adjustment to reflect goodwill recognized upon the acquisition of
certain assets and liabilities of Novadyne Computer Systems.
4. To adjust for liabilities not assumed by the Registrant as part of the
Novadyne Computer Systems asset acquisition.
5. To adjust for accrued expenses assumed on November 14, 1997 by the
Registrant.
6. This pro forma adjustment reflects the assumed borrowings under the
Registrant's credit facilities.
7. Elimination of the redeemable preferred stock and stockholders' deficit of
Novadyne Computer Systems, Inc.
<PAGE> 21
GENICOM CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 29, 1996
(unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
NOVADYNE PRO FORMA
GENICOM COMPUTER SYSTEMS ADJUSTMENTS PRO FORMA
-------------- ----------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES, NET: $ 303,258 $ 38,274 $ $ 341,532
OPERATING COSTS AND EXPENSES:
Cost of revenues 232,289 28,143 (2,386) 1 258,046
Operating expenses 67,643 11,001 (4,388) 2 74,256
--------------- ------------- ------------- --------------
299,932 39,144 (6,774) 332,302
--------------- ------------- ------------- --------------
OPERATING INCOME 3,326 (870) 6,774 9,230
Interest expense, net 4,903 2,881 (1,840) 3 5,944
Other income (27) 27 4 0
--------------- ------------- ------------- --------------
(LOSS) INCOME BEFORE INCOME TAXES (1,577) (3,724) 8,587 3,286
Income tax (benefit)expense (3,658) 3,435 5 (223)
--------------- ------------- ------------- --------------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 2,081 (3,724) 5,152 3,509
EXTRAORDINARY ITEM (422) (422)
--------------- ------------- ------------- --------------
NET INCOME $ 1,659 $ (3,724) $ 5,152 $ 3,087
=============== ============= ============= ==============
EARNINGS PER COMMON SHARE
Income before extraordinary item $ 0.19 6 $ 0.32
Extraordinary item (0.04) (0.04)
--------------- --------------
Net income $ 0.15 $ 0.28
=============== ==============
EARNINGS PER COMMON SHARE
Income before extraordinary item $ 0.17 $ 0.29
Extraordinary item (0.03) (0.03)
--------------- --------------
Net income $ 0.14 $ 0.25
=============== ==============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES AND
COMMON SHARE EQUIVALENTS OUTSTANDING
Basic 10,933 10,933
=============== ==============
Diluted 12,168 12,168
=============== ==============
</TABLE>
See notes to pro forma consolidated financial statements.
<PAGE> 22
GENICOM CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997
(UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
NOVADYNE PRO FORMA
GENICOM COMPUTER SYSTEMS ADJUSTMENTS PRO FORMA
------------------ ------------------- --------------- ---------------
<S> <C> <C> <C> <C>
REVENUES, NET: $ 297,681 $ 26,056 $ $ 323,737
OPERATING COSTS AND EXPENSES:
Cost of revenues 226,083 21,023 (1,789) 1 245,317
Operating expenses 57,313 6,124 (3,291) 2 60,146
------------------ ------------------- --------------- ---------------
283,396 27,147 (5,080) 305,463
------------------ ------------------- --------------- ---------------
OPERATING INCOME 14,285 (1,091) 5,080 18,274
Interest expense, net 4,900 1,909 (1,129) 3 5,680
Other income 340 (340) 4 0
------------------ ------------------- --------------- ---------------
INCOME BEFORE INCOME TAXES 9,385 (3,340) 6,549 12,594
Income tax expense 1,739 2,620 5 4,359
------------------ ------------------- --------------- ---------------
NET INCOME $ 7,646 (3,340) 3,929 $ 8,235
------------------ ------------------- --------------- ---------------
EARNINGS PER COMMON SHARE AND COMMON
SHARE EQUIVALENT - BASIC $ 0.69 6 $ 0.75
------------------ ---------------
- DILUTED $ 0.61 6 $ 0.66
------------------ ---------------
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES AND COMMON SHARE
EQUIVALENTS OUTSTANDING
Basic 11,023 11,023
------------------ ---------------
Diluted 12,472 12,472
------------------ ---------------
</TABLE>
See notes to pro forma consolidated financial statements.
<PAGE> 23
GENICOM CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
1. Eliminates salaries and benefits of approximately 60 people
(approximately $2.2 million and $1.7 million for 1996 and 1997,
respectively), field support costs (approximately $0.7 million and
$0.5 million, for 1996 and 1997 respectively), operations support
(approximately $1.8 million and $1.4 million, for 1996 and 1997
respectively), and facilities costs for locations and personnel not
acquired or retained. Increases depreciation expense of field spares
as the Registrant's policy of depreciation for these items is three
years and Novadyne Computer Systems depreciated these items five
years. This adjustment increases depreciation expense approximately
$1.3 million and $1.0 million, for 1996 and 1997 respectively.
Includes $1.4 million and $1.1 million for 1996 and 1997,
respectively, for amortization of goodwill associated with the
acquisition.
2. Eliminates salaries and benefits of approximately 25 people not
retained for general and administrative services and other
operating expenses such as, but not limited to, data
communications, taxes, insurance eliminated as a result of the
acquisition.
3. Incremental interest adjustment for the reduction in Novadyne
Computer Systems debt and the increase in the Registrant's
debt as a result of the acquisition.
4. Eliminates Novadyne Computer Systems other income and expense.
5. To recognize a consolidated pro form income tax provision at a rate of
40%.
6. Recalculate basic and diluted earnings per share based on the pro
forma net income.
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENICOM Corporation
------------------------------
Registrant
Date: March 16, 1998
James C. Gale
------------------------------
Signature
James C. Gale
Senior Vice President, Finance and
Chief Financial Officer
(Mr. Gale is the Chief Financial
Officer and has been duly
authorized to sign on behalf of
the Registrant)
<PAGE> 25
GENICOM CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS TO FORM 8-K/A
NOVEMBER 14, 1997
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ---------------------------------------------------------------- -----------------
<S> <C> <C>
23 Consent of Independent Accountants E-2-3
</TABLE>
E - 1
<PAGE> 1
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. 33-49472, 33-53843,
333-01845, 333-30153) of our report dated March 6, 1998, on our audits of the
consolidated financial statements of Novadyne Computer Systems, Inc. and
Subsidiary as of December 31, 1995 and 1996 and for the years then ended, which
report is included in this Current Report on Form 8-K/A.
March 16, 1998 Coopers and Lybrand, L.L.P.
McLean, VA
<PAGE> 2
Independent Auditors' Consent
We consent to the incorporation by reference in Registration Statement
Nos. 33-49472, 33-53843, 333-01845, and 333-30153 of Genicom Corporation on
Form S-8 of our report on the consolidated statements of operations,
stockholders' deficit and cash flows of Novadyne Computers Inc. and Subsidiary
for the year ended December 31, 1994, dated March 3, 1995, appearing in this
Form 8-K/A of Genicom Corporation dated November 14, 1997.
/s/ DELOITTE & TOUCH, LLP
Costa Mesa, California
March 13, 1998
