-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, cPl1+l57V+auqLSBv7VWRara9yH49gZYgnmEKvOEvJg51S/tOOLCR62WAYJIhquH /b/lr78UjQBLudJ5+IBVyQ== 0000710983-95-000003.txt : 19950517 0000710983-95-000003.hdr.sgml : 19950517 ACCESSION NUMBER: 0000710983-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941230 FILED AS OF DATE: 19950213 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: QMS INC CENTRAL INDEX KEY: 0000710983 STANDARD INDUSTRIAL CLASSIFICATION: 3577 IRS NUMBER: 630737870 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09348 FILM NUMBER: 95509605 BUSINESS ADDRESS: STREET 1: ONE MAGNUM PASS CITY: MOBILE STATE: AL ZIP: 36618 BUSINESS PHONE: 2056334300 FORMER COMPANY: FORMER CONFORMED NAME: QUALITY MICRO SYSTEMS INC DATE OF NAME CHANGE: 19840816 10-Q 1 QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended DECEMBER 30, 1994 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ------- to ------- Commission file number 1-9348 QMS, INC. (Exact name of registrant as specified in its charter) DELAWARE 63-0737870 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) ONE MAGNUM PASS, MOBILE, AL 36618 (Address of principal executive offices) (Zip Code) (334) 633-4300 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (x) No ( ) APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of the issuer's common stock, as of the latest practicable date 10,676,815 at January 27, 1995. QMS, INC. AND SUBSIDIARIES INDEX PART I - FINANCIAL INFORMATION PAGE NUMBER Item 1. Financial Statements Condensed Consolidated Balance Sheets (unaudited) as of December 30, 1994 and September 30, 1994 3-4 Condensed Consolidated Statements of Operations (unaudited) for the three months ended December 30, 1994 and December 31, 1993 5 Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended December 30, 1994 and December 31, 1993 6 Notes to Condensed Consolidated Financial Statements (unaudited) for the three months ended December 30, 1994 and December 31, 1993 7 Computation of Earnings Per Common Share 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-10 PART II - OTHER INFORMATION 11 Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults upon Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. (a) Exhibits (b) Reports on Form 8 - K SIGNATURES 12 QMS, INC. AND SUBSIDIARIES PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS as of December 30, 1994 and September 30, 1994 (Unaudited) DECEMBER 30, September 30, IN THOUSANDS 1994 1994 ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 3,815 $ 4,956 Trade Receivables (less allowance for doubtful accounts of $498 at December 1994 and $504 at September 1994) 46,530 51,462 Inventories, Net (Note 3) 73,696 69,770 Other Current Assets 9,759 8,335 ------- ------- Total Current Assets 133,800 134,523 ------- ------- PROPERTY, PLANT AND EQUIPMENT 74,857 72,880 Less Accumulated Depreciation 43,803 42,054 ------- ------- Property, Plant and Equipment, Net 31,054 30,826 ------- ------- OTHER ASSETS 16,430 16,674 ------- ------- TOTAL ASSETS $181,284 $182,023 ======== ======== SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS QMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS as of December 30, 1994 and September 30, 1994 (Unaudited) DECEMBER 30, September 30, in thousands 1994 1994 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts and Notes Payable $ 23,482 $ 20,791 Other 30,850 34,342 ------- ------- Total Current Liabilities 54,332 55,133 ------- ------- LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS 35,780 35,687 ------- ------- DEFERRED INCOME TAXES 2,189 2,201 ------- ------- STOCKHOLDERS' EQUITY 88,983 89,002 ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $181,284 $182,023 ======== ======== SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS QMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 30, 1994 AND DECEMBER 31, 1993 (Unaudited) Three Months Ended DECEMBER 30, December 31, in thousands, except per share amounts 1994 1993 NET SALES $70,520 $70,654 COST OF GOODS SOLD 47,846 46,822 ------- ------- GROSS PROFIT 22,674 23,832 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 21,643 22,673 ------- ------- OPERATING INCOME 1,031 1,159 ------- ------- OTHER INCOME (EXPENSE) Interest Income 13 17 Interest Expense (924) (872) Miscellaneous Expense (20) (834) ------- ------- Total Other Expense (931) (1,689) ------- ------- INCOME (LOSS) BEFORE INCOME TAXES 100 (530) INCOME TAX PROVISION (BENEFIT) 28 (164) ------- ------- NET INCOME (LOSS) $ 72 $ (366) ======= ======= EARNINGS (LOSS) PER COMMON SHARE (Note 2) Primary $ 0.01 $ (0.03) Fully Diluted $ 0.01 $ (0.03) SHARES USED IN PER SHARE COMPUTATION (Note 2) Primary 10,726 10,706 Fully Diluted 10,726 10,706 SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS QMS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 30, 1994 AND DECEMBER 31, 1993 (Unaudited) DECEMBER 30, December 31, in thousands 1994 1993 Cash Flows from Operating Activities: Net Income (Loss) $ 72 $ (366) Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: Depreciation of Property, Plant and Equipment 2,184 2,363 Amortization of Capitalized and Deferred Software 2,783 2,017 Provision for Losses on Inventory 900 (663) Other 4 (60) Changes in Assets and Liabilities that provided (used) cash: Trade Receivables 4,892 (2,237) Inventories (4,826) 3,574 Accounts Payable 2,69 5,844 Income Tax Payable (1,164) 0 Other (3,705) (1,989) ------- ------- Net Cash Provided by Operating Activities 3,831 8,483 Cash Flows from Investing Activities: Purchase of Property, Plant and Equipment (2,499) (1,220) Additions to Capitalized and Deferred Software Costs (2,425) (1,842) Other 46 0 ------- ------- Net Cash Used in Investing Activities (4,878) (3,062) Cash Flows from Financing Activities: Proceeds from Long-Term Debt and Capital Leases 700 0 Payments of Long-Term Debt and Capital Leases, including Current Maturities (709) (2,347) Proceeds from Stock Options Exercised 30 9 Other 0 (244) ------- ------- Net Cash Provided by (used in) Financing Activities 21 (2,582) Effect of Exchange Rate Changes on Cash (115) (538) ------- ------- Net Change in Cash and Cash Equivalents (1,141) 2,301 Cash and Cash Equivalents at Beginning of Period 4,956 3,582 ------- ------- Cash and Cash Equivalents at End of Period $ 3,815 $ 5,883 ------- ------- SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS QMS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED DECEMBER 30, 1994 AND DECEMBER 31, 1993 (Unaudited) 1. MANAGEMENT OPINION In the opinion of management, the condensed consolidated financial statements reflect all adjustments necessary to present fairly the financial position of the Company as of December 30, 1994 and September 30, 1994 and the results of operations and changes in cash flows for the three months ended December 30, 1994 and December 31, 1993. The results of operations for the three months ended December 30, 1994 are not necessarily indicative of the results to be expected for the fiscal year ending September 29, 1995. 2. PER COMMON SHARE COMPUTATIONS Per share computations are based on the weighted average number of common shares outstanding during the period and the dilutive effect of the assumed exercise of stock options. 3. INVENTORIES Inventories at December 30, 1994 and September 30, 1994 are summarized as follows (in thousands): DECEMBER 30, September 30, 1994 1994 Raw materials $ 23,577 $ 24,003 Work in process 4,757 5,842 Finished goods 51,808 46,733 Inventory reserve (6,446) (6,808) --------- --------- TOTAL $ 73,696 $ 69,770 ========= ========= 4. COMMITMENTS AND CONTINGENCIES At September 30, 1994, the Company had a commitment of approximately $13.7 million under contracts to purchase print engines. As of December 30, 1994, the Company had a commitment of approximately $20.9 million to purchase print engines under purchase contracts. The Company was contingently liable for approximately $3.8 million as of December 30, 1994. This was principally the result of letters of credit issued in the normal course of business for the purchase of inventory. 5. RECLASSIFICATIONS Certain reclassifications have been made to fiscal 1994 amounts to conform to the fiscal 1995 presentation. QMS, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE (Unaudited) Three Months Ended DECEMBER 30, December 31, in thousands, except per share amounts 1994 1993 Net income (loss) $ 72 $ (366) ======= ======= Shares used in this computation: Weighted average common shares outstanding 10,675 10,706 Shares applicable to stock options, net of shares assumed to be purchased from proceeds at average market 51 0 ------- ------- Total shares for earnings per common share computation (primary) 10,726 10,706 ------- ------- Total fully diluted shares 10,726 10,706 ------- ------- Earnings per common share - primary $ 0.01 $ (0.03) ======== ======== Earnings per common share - fully diluted $ 0.01 $ (0.03) ======== ======== QMS, INC. AND SUBSIDIARIES PART I. FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Table 1: Net Sales Comparisons for Key Channels of Distribution Quarter ended December 30, 1994 (000's) Q1, 1995 Q1, 1994 Difference U.S. Direct $ 10,677 $ 10,572 $ 105 U.S. Reseller 4,780 12,144 (7,364) QMS Europe 23,384 19,156 4,228 QMS Japan 6,851 5,744 1,107 All Other 24,828 23,038 1,790 -------- -------- -------- Total $ 70,520 $ 70,654 $ (134) ======== ======== ======== Net sales for the first fiscal quarter of 1995 were essentially the same as net sales for the first fiscal quarter of 1994. The sales by key distribution channels in the first quarter of fiscal 1995 (the three months ended December 30, 1994) compared to the first quarter of fiscal 1994 (the three months ended December 31, 1993) are shown in Table 1 above. The United States direct channel is the Company's primary method of distribution for the higher end of the Company's product offerings to major corporate accounts and governmental agencies. The net sales improvements in the direct channel for the first quarter of fiscal 1995 compared to the first quarter of fiscal 1994 can be attributed to sales of new products introduced into the channel during fiscal 1994, which include the QMS 3825 monochrome laser printer and the magicolor(TM) color laser printer, in addition to increased sales of the QMS 3225 and QMS 1725. Fiscal 1995 net sales through the United States reseller channel for the first quarter are significantly below the fiscal 1994 first quarter net sales achievement. The United States reseller channel is the Company's primary method of distribution for up to sixteen page-per-minute monochrome laser printers and color laser printers. As was experienced throughout fiscal 1994, new competition in these product classes is the primary cause of the lower net sales. In QMS Europe, net sales for the first quarter of fiscal 1995 increased 22.1% over the first quarter sales of fiscal 1994. The increase in net sales is directly related to sales of the magicolor(TM) color laser printer and the QMS 1060 and QMS 1660 monochrome laser printers which were introduced into this market during the last quarter of fiscal 1994. Net sales in QMS Japan increased 19.3% for the first quarter of fiscal 1995 compared to the first quarter of fiscal 1994. The increased net sales came from sales of the QMS 1660 and QMS 1060, which are sixteen and ten page-per-minute monochrome laser printers, respectively, and the magicolor(TM) color laser printer. These products were introduced into this market during the fourth quarter of fiscal 1994. Overall, the Company's gross profit as a percentage of sales declined from 33.7% in the first quarter of fiscal 1994 to 32.2% in the first quarter of fiscal 1995. This decline is primarily due to pricing pressure resulting from the increased competition principally in the United States reseller channel and in Europe, which resulted in the need to reduce some sales prices at the lower end of the Company's product offerings. The introduction of higher margin color and monochrome printers into several of the Company's markets during the latter part of fiscal 1994 is anticipated to help shift net sales towards higher margin print systems. The Company purchases print engine mechanisms and memory components from Japanese suppliers. Fluctuations in foreign currency exchange rates will affect the prices of these products. Negative impacts can be mitigated through yen-sharing arrangements with suppliers, foreign exchange contracts, price negotiations and the natural hedge provided by sales denominated in the yen; however, severe price increases resulting from exchange rate fluctuations could develop which would adversely affect operating results. Selling, general and administrative expenses declined 4.5% in the first quarter of fiscal 1995 compared to the first quarter of fiscal 1994. This improvement is a direct result of the Company's continuing cost reduction efforts and expense management practices. Total other expense decreased by $.8 million in the first quarter of fiscal 1995 compared to the first quarter of fiscal 1994. This decrease resulted primarily from changes in the translation of balance sheet elements that were denominated in foreign currencies. The Company's effective tax rate was 28% for the first quarter of fiscal 1995 compared to 31% for the same period of fiscal 1994. This decrease is due principally to the effect of the Company being able to utilize tax credits and other carryovers not previously available. Liquidity and Capital Resources During the first quarter of fiscal 1995 the Company's financing came principally from operations and borrowings on the revolving credit loan. The Company's net working capital was $79.5 million at December 30, 1994 compared to $79.4 million at September 30, 1994. Bank borrowings under the Company's secured revolving credit agreement were $23.9 million at December 30, 1994. The Company was not in compliance with certain of its revolving credit agreement covenants at the end of the first quarter of fiscal 1995 and requested and received a waiver of the non- compliance. As discussed in the Company's annual report Form 10-K for the year ended September 30, 1994, management is negotiating to replace one of the three members of the revolving credit agreement and belives the replacement will be accomplished in a timely manner. Management believes that the Company's continuing working capital and capital expenditure needs will be met by cash flow from operations and by the secured revolving credit agreement. Although management believes that the Company's relationship with its lenders is good, future waivers from the lenders, if necessary, will depend on the Company's performance. QMS, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS The Company's annual report on Form 10-K for the year ended September 30, 1994 reported the status of Sharon L. McNider v. QMS, Inc., et. al. During the first quarter of 1995, a continuance was granted and the case is now scheduled for trial on March 27, 1995. No other material developments occurred in this case during the first quarter of fiscal 1995. The Company is a defendant in various litigation in the normal course of business. Management is of the opinion that the ultimate resolution of such claims will not materially affect the Company's financial position or results of operations. ITEM 2 - CHANGES IN SECURITIES - None. ITEM 3 - DEFAULTS UPON SENIOR SECURITIES - None. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company's Annual Meeting of Stockholders was held on January 25, 1995. The results of the voting on the election of directors were as follows: Nominee For Withheld Total Votes Cast James L. Busby 9,488,754 144,541 9,633,295 Lucius E. Burch, III 9,489,493 143,802 9,633,295 Accordingly, all nominees for the Board of Directors were elected. ITEM 5 - OTHER INFORMATION - None. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit Number Description 27 Financial Data Schedule b) Reports: None. QMS, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. QMS, INC. (Registrant) Date: February 13, 1995 /s/ Charles D. Daley CHARLES D. DALEY Executive Vice President - Finance and Administration, Chief Financial Officer (Mr. Daley is the Principal Financial Officer and has been duly authorized to sign on behalf of the registrant.) EX-27 2
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