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 -
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
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.
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
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:
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.
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
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
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
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
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.
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:
(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.
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
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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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:
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.
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.
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:
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.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The information is set forth below:
GENICOM CORPORATION AND SUBSIDIARIES FIVE YEAR FINANCIAL HISTORY (UNAUDITED)
(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.
ITEM 7.
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
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
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
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.
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
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.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
GENICOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
The accompanying notes are an integral part of these financial statements.
GENICOM CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
The accompanying notes are an integral part of these financial statements.
GENICOM CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
The accompanying notes are an integral part of these financial statements.
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
The accompanying notes are an integral part of these financial statements.
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
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
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.
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:
Property, plant and equipment consists of:
Accounts payable and accrued expenses consist of:
NOTE 3: DEBT OBLIGATIONS
Long term debt consists of:
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
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:
The following table sets forth the combined funded status for the Company's postretirement benefit obligations as of the indicated actuarial valuation dates:
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
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:
The following table sets forth the Pension Plan's funded status as of the indicated actuarial valuation dates:
The Company's assumptions used in determining the pension cost and pension liability shown above were as follows:
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.
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:
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.
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:
Income tax (benefit) expense consists of the following:
A reconciliation of the U.S. statutory Federal tax rate of 34.0% to the Company's effective tax rate is as follows:
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:
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
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.
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
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
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.
*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.
Financial information by geographic area:
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.
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.
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.
NOTE 12: SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
(in thousands, except per share data)
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10.
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.
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.
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.
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.
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 immediately following the signatures to this report.
Exhibits Included in Response to Item 601 of Regulation S-K
Yen Confidential treatment granted with respect to certain provisions pursuant to 17 C.F.R. 200.80 (b) (4).
# Management contracts or compensatory plans.
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.
GENICOM CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
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
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 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
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GENICOM CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In thousands)
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
GENICOM CORPORATION AND SUBSIDIARIES
INDEX TO EXHIBITS TO FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996
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