-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S8yOlhfN0w/bunG8yTYytFyc6i7xHz3L4YRGMpmy4Wr6R1aw/2vYejXhA9h41Cyf 3ZFw+v449aJqmCiMLe1VCg== 0000728376-98-000003.txt : 19980603 0000728376-98-000003.hdr.sgml : 19980603 ACCESSION NUMBER: 0000728376-98-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980404 FILED AS OF DATE: 19980519 DATE AS OF CHANGE: 19980602 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AXIOHM TRANSACTION SOLUTIONS INC CENTRAL INDEX KEY: 0000728376 STANDARD INDUSTRIAL CLASSIFICATION: 3679 IRS NUMBER: 942917470 STATE OF INCORPORATION: CA FISCAL YEAR END: 0102 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13459 FILM NUMBER: 98628322 BUSINESS ADDRESS: STREET 1: 15070 AVENUE OF SCIENCE CITY: SAN DIEGO STATE: CA ZIP: 92128 BUSINESS PHONE: 6194513485 MAIL ADDRESS: STREET 1: 15070 AVENUE OF SCIENCE CITY: SAN DIEGO STATE: CA ZIP: 92128 FORMER COMPANY: FORMER CONFORMED NAME: DH TECHNOLOGY INC DATE OF NAME CHANGE: 19920703 10-Q 1 AXIOHM TRANSACTION SOLUTIONS 10Q Q1 1998 UNITED STATES 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 April 4, 1998, 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: 0-13459 Axiohm Transaction Solutions, Inc. (Exact name of registrant as specified in its charter) California 94-2917470 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 15070 Avenue of Science, San Diego, California 92128 (Address of principal executive office) Registrant's telephone number, including area code: (619) 451-3485 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 XXX No____ As of April 4, 1998, there were 6,517,426 shares of the registrant's Common Stock outstanding. AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION PAGE NO. ITEM 1 - Financial Statements Condensed Consolidated Balance Sheets 1 April 4, 1998 and December 31, 1997 Condensed Consolidated Statements of Operations Quarters Ended April 4, 1998 and March 31, 1997 2 Condensed Consolidated Statements of Cash Flows Quarters Ended April 4, 1998 and March 31, 1997 3 Notes to Condensed Consolidated Financial Statements 4 ITEM 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 13 PART II. OTHER INFORMATION Item 5 - Other Information 20 Item 6 - Exhibits and Reports on Form 8-K 20 SIGNATURES 21 EXHIBITS INDEX 22
PART 1 - FINANCIAL INFORMATION ITEM 1 - Financial Statements AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets (In thousands) April 4, December 31, ----------------- ------------------- 1998 1997 ----------------- ------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 3,158 $ 3,877 Restricted cash - 8,594 Accounts receivable, net 34,825 30,515 Inventories 33,904 30,103 Prepaid expenses and other current assets 10,429 11,015 ----------------- ------------------- Total current assets 82,316 84,104 Fixed assets, net of accumulated depreciation 21,161 21,535 Intangible assets 86,848 92,371 Other assets 5,826 6,034 ================= =================== Total assets $ 196,151 $ 204,044 ================= =================== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable $ 19,181 $ 17,351 Current portion of long-term debt 5,487 5,948 Current portion of government grant obligations 700 649 Accrued payroll, payroll taxes and benefits 5,314 6,194 Accrued expenses 3,527 4,645 Income taxes payable - 1,937 Deferred revenue 1,952 2,056 Rabbi Trust - 8,594 Other current liabilities 1,448 4,481 ----------------- ------------------- Total current liabilities 37,609 51,855 Non-current liabilities: Long-term debt 178,486 165,564 Government grant obligations 1,462 1,569 Other long-term liabilities 3,120 3,137 ----------------- ------------------- Total liabilities $ 220,677 $ 222,125 ----------------- ------------------- Shareholders' equity (deficit): Preferred shares, no par value Authorized: 1,000,000 shares, none issued $ - $ - Common shares: Common stock, authorized: 28,500,000 shares; issued and outstanding: 6,517,426 in 1998 and 6,512,926 shares in 1997 23,898 23,852 Foreign currency translation adjustment (413) (658) Retained earnings (accumluated deficit) (48,011) (41,275) ----------------- ------------------- Total shareholders' equity (deficit) (24,526) (18,081) ----------------- ------------------- Total liabilities and shareholders' equity $ 196,151 $ 204,044 ================= =================== The accompanying notes are an integral part of these condensed consolidated financial statements.
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (In thousands, except per share data) Period Ended April 4, March 31, ----------------- ----------------- 1998 1997 ----------------- ----------------- (Unaudited) (Unaudited) Net sales $ 57,069 $ 24,891 Cost of net sales 36,995 17,324 ----------------- ----------------- Gross margin 20,074 7,567 Operating expenses: Selling, general and administrative 8,804 2,926 Research and development 4,090 1,740 Acquisition related amortization 8,462 51 ----------------- ----------------- Total operating expenses 21,356 4,717 ----------------- ----------------- Income (loss) from operations (1,282) 2,850 Interest and other income 88 49 Interest and other expense 4,367 175 ----------------- ----------------- Income (loss) before income taxes (5,561) 2,724 Income taxes 1,175 1,099 ----------------- ----------------- Net income (loss) $ (6,736) $ 1,625 ================= ================= Basic: Net income (loss) per share $ (1.03) $ 0.25 Shares used in per share calculation 6,517 6,513 Diluted: Net income (loss) per share $ (1.03) $ 0.25 Shares used in per share calculation 6,517 6,513 The accompanying notes are an integral part of these condensed consolidated financial statements.
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (In thousands) Period Ended April 4, March 31, ------------------ ------------------ 1998 1997 ------------------ ------------------ (Unaudited) (Unaudited) Cashflows from operating activities: Net income (loss) $ (6,736) $ 1,625 Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation and amortization 10,209 779 Other (1,961) 1,055 Changes in assets and liabilities, net of effects of acquisition of business: Accounts receivable (4,310) (2,762) Inventories (3,801) (1,668) Accounts payable and accrued expenses (272) 569 Other current assets 586 (338) Other current liabilities (3,033) (1,205) ------------------ ------------------ Net cash used in operating activities $ (9,318) $ (1,945) Cashflows from investing activities: Payment for acquisition of business and other intangibles $ (3,207) $ - Capital expenditures and other (890) (1,680) ------------------ ------------------ Net cash used in investing activities $ (4,097) $ (1,680) Cashflows from financing activities: Net borrowings under line of credit $ 13,205 $ 1,543 Principal repayments under long term debt (800) (33) Payments of dividends - (98) Exercise of stock options 46 - Net loans to related parties - 1,608 ------------------ ------------------ Net cash provided by financing activities $ 12,451 $ 3,020 Effect of exchange rate changes on cash 245 (393) ------------------ ------------------ Net increase in cash and cash equivalents $ (719) $ (998) Cash and cash equivalents at beginning of period 3,877 1,839 ------------------ ------------------ Cash and cash equivalents at end of period $ 3,158 $ 841 ================== ================== Supplemental Cashflow Disclosures: Cash paid during the year for: Interest $ 7,252 $ 203 Income taxes 3,112 64 Other transactions: Capital lease obligation $ - $ 20 Payment of restricted cash to former officers (8,594) - Reduction of liability to former officers $ 8,594 $ - ================== ================== The accompanying notes are an integral part of these condensed consolidated financial statements
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (April 4, 1998 - Unaudited) Note 1: Unaudited Interim Financial Statements The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of only normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the quarter ended April 4, 1998 are not necessarily indicative of the results which may be expected for the year ended December 31, 1998 or any other period. Reference is made to the Consolidated Financial Statements and Notes thereto included in the Company's Annual Report on Form 10-K filed on March 31, 1998 as amended on April 15, 1998. In May, 1998, Axiohm Transaction Solutions, Inc. (the "Company") changed its fiscal year from the twelve month period ended December 31 to the 52 or 53-week period that ends on the Saturday nearest December 31, effective for fiscal year 1998. As a result, the Company's first quarter of 1998 represents the thirteen-week period ended on April 4, 1998, and the Company's 1998 fiscal year will end on January 2, 1999. Fiscal year 1998 will have fifty-three weeks. The quarter ended March 31, 1997, contained 12 weeks and six days and the difference between the two comparable periods is immaterial in terms of sales and net income. Note 2: Basis of Presentation The financial statements of Axiohm include the accounts of its wholly owned subsidiaries in the United States, France, Mexico, the United Kingdom, Australia, Hong Kong and Japan. All intercompany accounts and transactions have been eliminated. On August 21, 1997, pursuant to an Agreement and Plan of Merger dated as of July 14, 1997 (the "Agreement of Merger"), AX Acquisition Corporation ("AX" or the "Purchaser"), an indirect wholly-owned subsidiary of Axiohm S.A., acquired approximately 88%, or 7,000,000 shares, of the outstanding Common Stock of DH Technology, Inc. ("DH") through a public tender offer to the shareholders of DH at a price of $25 per share (the "Tender Offer"). On October 2, 1997, pursuant to the Agreement of Merger, AX acquired, directly or indirectly, 100% of the outstanding Common Stock of Axiohm S.A. in exchange for 5,518,524 shares of DH Common Stock and $12.2 million in cash (the "Share Exchange Offer"). Simultaneously with the Share Exchange Offer, DH purchased all of the outstanding shares of AX in exchange for the assumption of approximately $190 million of debt (the "Acquisition Financing") incurred by AX to finance the Tender Offer. As part of the Acquisition Financing the Company completed a private placement (the "Senior Notes Offering") of $120 million of its 9.75% Senior Subordinated Notes due 2007 (the "Notes"). The Notes were exchanged in March 1998 for new, substantially identical Notes which have been registered under the Securities Act of 1933, as amended. The Company's payment obligation under the Senior Notes is jointly and severally fully and unconditionally guaranteed on a senior subordinated basis by certain of the Company's subsidiaries (the "Guarantor Subsidiaries"), all of which are directly or indirectly wholly owned by the Company. Immediately after the Share Exchange Offer, AX was merged with and into DH (the "Merger"), the surviving legal entity, and the company changed its name from "DH Technology, Inc." to "Axiohm Transaction Solutions, Inc." (the "Company"). In connection with the Merger, Axiohm S.A. changed its tax filing status and was renamed Axiohm S.A.R.L. Immediately after the Merger, approximately 85% of DH's outstanding Common Stock was held by the former shareholders of Axiohm S.A.R.L. and 15% was held by the former public shareholders of DH. The Tender Offer, the Share Exchange Offer and the Merger (collectively the "Acquisition") have been accounted for in a manner similar to a reverse acquisition, in which Axiohm S.A.R.L. was treated as the acquiror for accounting purposes. Accordingly, the historical financial information for periods prior to August 31, 1997 is that of Axiohm S.A.R.L. The effective date of the Acquisition and Merger of DH for accounting purposes was August 31, 1997, and, accordingly, the capital structure of the Company has been retroactively restated to reflect the number of shares and options outstanding as a result of the Acquisition. Note 3: Inventories The composition of inventories at April 4, 1998 and December 31, 1997 was as follows: April 4, 1998 December 31, 1997 Raw materials $24,929,000 $20,014,000 Work in process $2,733,000 2,328,000 Finished goods $6,242,000 7,761,000 ----------- ----------- Totals $33,904,000 $30,103,000 =========== =========== Note 4: Guarantors and Financial Information The following consolidating financial information is presented for purposes of complying with the reporting requirements of the Guarantor Subsidiaries. Separate financial statements and other disclosures with respect to the Guarantor Subsidiaries are not presented because the Company believes that such financial statements and other information would not provide additional information that is material to investors. There are no contractual restrictions, under the Notes or otherwise, upon the ability of the Guarantor Subsidiaries to make distributions or pay dividends to their respective equityholders. Directly or indirectly, the Company is the sole equityholder of all of the Guarantor Subsidiaries. The condensed consolidating financial information presents condensed financial statements as of April 4, 1998 and December 31, 1997 and for the quarter ended April 4, 1998 of: a) the Company on a parent company only basis ("Parent") (carrying its investments in the subsidiaries under the equity method), b) the Guarantor Subsidiaries separated as to French Guarantors (Axiohm S.A.R.L., Dardel Technologies E.U.R.L., Axiohm Investissements S.A.R.L.), and U.S. Guarantors (Axiohm IPB, Inc., Cognitive L.L.C., Cognitive Solutions, Inc., and Stadia Colorado Corp.), c) the Non-Guarantor Subsidiaries (DH Technology Plc, DH Technology Pty, DH Technologia, Axiohm Ltd. (Hong Kong), and Axiohm Japan Inc.), d) elimination entries necessary to consolidate the Parent Company and its subsidiaries, and e) the Company on a consolidated basis. The condensed consolidating financial information also presents condensed financial statements for the quarter ended March 31, 1997 of: a) the Guarantor Subsidiaries which were in existence and were within the Company's consolidated structure during the quarter ended March 31, 1997 separated as to French Guarantors (Axiohm S.A.R.L., but excluding Dardel Technologies E.U.R.L.), and U.S. Guarantors (Axiohm IPB, Inc.), b) The Non-Guarantor Subsidiaries which were in existence and were within the Company's consolidated structure during the quarter ended March 31, 1997 (Axiohm Ltd. (Hong Kong) and Axiohm Japan Inc.), c) elimination entries necessary to consolidate such Guarantor and Non-Guarantor Subsidiaries, and d) such Guarantor and Non-Guarantor Subsidiaries on a consolidated basis.
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Balance Sheets (In thousands) April 4, 1998 (Unaudited) ---------------------------------------------------------------------------- Guarantor Subsidiaries Non-Guarantor ------------------------- Parent French US Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ 15,506 $ 333 $ (13,627) $ 946 $ - $ 3,158 Restricted cash - - - - - - Accounts receivable, net 10,433 3,264 18,231 2,897 - 34,825 Inventories 5,498 7,875 17,390 4,575 (1,434) 33,904 Prepaid expenses and other current assets 7,256 1,817 644 181 531 10,429 Intercompany (16,578) 827 11,790 (3,240) 7,201 - ---------------------------------------------------------------------------- Total current assets 22,115 14,116 34,428 5,359 6,298 82,316 Fixed assets, net of accumulated depreciation 3,775 3,838 11,863 1,685 - 21,161 Intangible assets 83,307 93 3,440 8 - 86,848 Other assets 5,491 8,948 76 51 (8,740) 5,826 Investment in Subsidiaries 45,030 (45,030) - ============================================================================ Total assets $ 159,718 $ 26,995 $ 49,807 $ 7,103 $ (47,472) $ 196,151 ============================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities : - Accounts payable $ 4,990 $ 5,887 $ 6,809 $ 1,495 $ - $ 19,181 Current portion of long-term debt 4,824 575 32 56 - 5,487 Current portion of government grant obligations - 700 - - - 700 Accrued payroll, payroll taxes and benefits 2,041 1,856 1,362 55 - 5,314 Accrued expenses 2,381 256 824 66 - 3,527 Income taxes payable (4,608) 3,053 476 73 1,006 - Deferred revenue 324 1,061 567 - - 1,952 Rabbi Trust - - - - - - Other current liabilities (832) 2,713 790 69 (1,292) 1,448 ---------------------------------------------------------------------------- Total current liabilities 9,120 16,101 10,860 1,814 (286) 37,609 Non-current liabilities: Long-term debt 176,860 1,548 40 38 - 178,486 Government grant obligations - 912 550 - - 1,462 Other long-term liabilities (2,168) 3,391 1,897 - - 3,120 ---------------------------------------------------------------------------- Total liabilities 183,812 21,952 13,347 1,852 (286) 220,677 ---------------------------------------------------------------------------- Shareholders equity Preferred shares, no par value Authorized: 1,000,000 shares, none issued Common shares: Common stock, authorized: 25,500,000 shares; issued and outstanding: 6,517,426 in 1998 and 6,512,926 in 1997 23,852 4,167 - 360 (4,481) 23,898 Capital in excess of par value - - - - - - Foreign currency translation adjustment 65 (494) - 129 (113) (413) Retained earnings (accumluated deficit) (48,011) 1,370 36,460 4,762 (42,592) (48,011) ---------------------------------------------------------------------------- Total shareholders' equity (deficit) (24,094) 5,043 36,460 5,251 (47,186) (24,526) ---------------------------------------------------------------------------- ============================================================================ Total liabilities and shareholders' equity $ 159,718 $ 26,995 $ 49,807 $ 7,103 $ (47,472) $ 196,151 ============================================================================
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Statements of Cash Flows (In thousands) Period Ending April 4, 1998 (Unaudited) ----------------------------------------------------------------------------- Guarantor Subsidiaries Non-Guarantor ------------------------- Parent French US Subsidiaries Eliminations Consolidated Cashflows from operating activities: Net cash provided by (used in) operating activities $ (7,715) $ 9,479 $ (1,551) $ (1,021) $ (8,510) $ (9,318) ----------------------------------------------------------------------------- Cashflows from investing activities: Payment for acquisition of business and other $ (3,207) $ - $ - $ - $ - $ (3,207) intangibles Capital expenditures and other (549) (8,623) (398) 248 8,432 (890) ----------------------------------------------------------------------------- Net cash provided by (used in) investing activities $ (3,756) $ (8,623) $ (398) $ 248 $ 8,432 $ (4,097) ----------------------------------------------------------------------------- Cashflows from financing activities: Net borrowings under line of credit $ 13,892 $ (724) $ (10) $ 47 $ - $ 13,205 Principal repayments under long term debt (800) - - - - (800) Payments of dividends - - - - - - Exercise of stock options - - - - 46 46 Net loans to related parties - - - - - - ----------------------------------------------------------------------------- Net cash provided by (used in) financing activities $ 13,092 $ (724) $ (10) $ 47 $ 46 $ 12,451 Effect of exchange rate changes on cash 25 63 - 127 30 245 ----------------------------------------------------------------------------- Net increase in cash and cash equivalents $ 1,646 $ 195 $ (1,959) $ (599) $ (2) $ (719) ----------------------------------------------------------------------------- Cash and cash equivalents at beginning of period 13,860 138 (11,666) 1,545 - 3,877 ----------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 15,506 $ 333 $ (13,625) $ 946 $ (2) $ 3,158 =============================================================================
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Balance Sheets (In thousands) December 31, 1997 ---------------------------------------------------------------------------- Guarantor Subsidiaries Non-Guarantor ------------------------- Parent French US Subsidiaries Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ 13,860 $ 138 $ (11,666) $ 1,545 $ - $ 3,877 Restricted cash 8,594 - - - - 8,594 Accounts receivable, net 10,388 3,760 15,209 3,099 (1,941) 30,515 Inventories 3,611 4,995 17,140 4,600 (243) 30,103 Prepaid expenses and other current assets 4,235 9,759 437 (3,316) (100) 11,015 Intercompany (14,259) 2,612 11,514 (1,761) 1,894 - ---------------------------------------------------------------------------- Total current assets 26,429 21,264 32,634 4,167 (390) 84,104 Fixed assets, net of accumulated depreciation 3,847 4,052 11,679 1,957 - 21,535 Intangible assets 88,555 93 3,521 202 - 92,371 Other assets 5,428 413 418 83 (308) 6,034 Investment in Subsidiaries 45,030 - - - (45,030) - ============================================================================ Total assets $ 169,289 $ 25,822 $ 48,252 $ 6,409 $ (45,728) $ 204,044 ============================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Current liabilities : Accounts payable $ 2,510 $ 6,570 $ 6,767 $ 1,504 $ - $ 17,351 Current portion of long-term debt 5,689 227 32 - - 5,948 Current portion of government grant obligations - 649 - - - 649 Accrued payroll, payroll taxes and benefits 690 3,557 1,947 - - 6,194 Accrued expenses 1,620 1,196 2,113 (284) - 4,645 Income taxes payable 1,937 174 (174) - - 1,937 Deferred revenue 416 1,121 519 - - 2,056 Rabbi Trust 8,594 - - - - 8,594 Other current liabilities 4,481 - - - - 4,481 ---------------------------------------------------------------------------- Total current liabilities 25,937 13,494 11,204 1,220 - 51,855 Non-current liabilities: Long-term debt 162,903 2,014 600 47 - 165,564 Government grant obligations - 1,569 - - - 1,569 Other long-term liabilities (2,168) 3,455 1,850 - - 3,137 ---------------------------------------------------------------------------- Total liabilities 186,672 20,532 13,654 1,267 - 222,125 ---------------------------------------------------------------------------- Shareholders equity Common stock, authorized: 25,500,000 shares; issued and outstanding: 6,512,926 shares in 1998 and 1997 23,852 4,167 - 360 (4,527) 23,852 Capital in excess of par value - - - - - - Foreign currency translation adjustment 40 (557) - 2 (143) (658) Retained earnings (accumluated deficit) (41,275) 1,680 34,598 4,780 (41,058) (41,275) ---------------------------------------------------------------------------- Total shareholders' equity (deficit) (17,383) 5,290 34,598 5,142 (45,728) (18,081) ---------------------------------------------------------------------------- ============================================================================ Total liabilities and shareholders' equity $ 169,289 $ 25,822 $ 48,252 $ 6,409 $ (45,728) $ 204,044 ============================================================================
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Statements of Operations (In thousands) March 31, 1997 (Unaudited) ------------------------------------------------------------------------------- Guarantor Subsidiaries Non-Guarantor ----------------------------- French US Subsidiaries Eliminations Consolidated ------------- ------------- ------------- -------------- --------------- Net Sales $ 30,133 $ 455 $ (5,697) $ (5,697) $ 24,891 Cost of net sales 22,311 401 (5,701) (5,388) 17,324 ------------------------------------------------------------------------------- Gross margin 7,822 54 4 (309) 7,567 Operating expenses Selling, general, and administrative 2,787 191 (1) (1) 2,977 Research & development 1,735 - 5 5 1,740 Acquisition related amortization - - - - ------------------------------------------------------------------------------- Total operating expenses 4,522 191 4 4 4,717 ------------------------------------------------------------------------------- Income (loss) from operations 3,300 (137) - (313) 2,850 Interest and other income 49 - - 49 Interest and other expense 174 1 - 175 ------------------------------------------------------------------------------- Income (loss) before income taxes 3,175 (138) - (313) 2,724 ------------------------------------------------------------------------------- Income taxes 1,214 - (115) 1,099 ------------------------------------------------------------------------------- Net income (loss) $ 1,961 $ (138) $ - $ (198) $ 1,625 ===============================================================================
AXIOHM TRANSACTION SOLUTIONS, INC. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Condensed Consolidating Statements of Cash Flows (In thousands) -------------------------------------------------------------------- Guarantor Subsidiaries Non-Guarantor --------------------------- French US Subsidiaries Eliminations Consolidated -------------------------------------------------------------------- Cashflows from operating activities: Net income (loss) $ 1,961 $ (138) $ - $ (198) $ 1,625 Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation and amortization 306 473 - - 779 Other non-cash charges 357 783 17 (102) 1,055 Changes in assets and liabilities, net of effects of acquisition of business: Accounts receivable (958) (3,103) 19 1,280 (2,762) Inventories 251 (2,232) - 313 (1,668) Accounts payable and accrued expenses (823) 2,735 (50) (1,293) 569 Other current assets (184) (173) 19 - (338) Other current liabilities (528) (671) (6) - (1,205) -------------------------------------------------------------------- Net cash provided by (used in) operating activities $ 382 $ (2,326) $ (1) $ - $ (1,945) -------------------------------------------------------------------- Cashflows from investing activities: Payment for acquisition of business and other intangibles $ - $ - $ - $ - $ - Capital expenditures and other (471) (1,193) (16) - (1,680) -------------------------------------------------------------------- Net cash used in investing activities $ (471) $ (1,193) $ (16) $ - $ (1,680) -------------------------------------------------------------------- Cashflows from financing activities: Net borrowings under line of credit $ - $ 1,552 $ (9) $ - $ 1,543 Principal repayments under long term debt (25) (8) - - (33) Payments of dividends (52) (46) - - (98) Exercise of stock options - - - - - Net loans to related parties 1,180 300 128 - 1,608 -------------------------------------------------------------------- Net cash provided by (used in) financing activities $ 1,103 $ 1,798 $ 119 $ - $ 3,020 Effect of exchange rate changes on cash (419) 26 - - (393) -------------------------------------------------------------------- Net increase in cash and cash equivalents $ 595 $ (1,695) $ 102 $ - $ (998) -------------------------------------------------------------------- Cash and cash equivalents at beginning of period 1,494 230 115 1,839 -------------------------------------------------------------------- Cash and cash equivalents at end of period $ 2,089 $ (1,465) $ 217 $ - $ 841 ===================================================================
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the Company's Consolidated Financial Statements and Notes thereto included herein. Background The Company was formed from the combination of Axiohm S.A.R.L. a French corporation ("Axiohm") and DH Technology, Inc. ("DH"). On August 21, 1997, AX Acquisition Corporation, an indirect wholly-owned subsidiary of Axiohm ("Purchaser"), acquired 7,000,000 shares of the Common Stock of DH (approximately 88%) through a tender offer to the shareholders of DH ("the Tender Offer"), resulting in a change in control of DH. On October 2, 1997, the Purchaser exchanged 5,518,524 shares of the Common Stock it had acquired in the Tender Offer and approximately $12.2 million in cash for certain of the outstanding shares of capital stock of Axiohm and all of the outstanding shares of capital stock of Dardel Technologies S.A. ("Dardel"), which held the remaining shares of capital stock of Axiohm. Immediately after this exchange, DH purchased from Axiohm IPB all of Purchaser's outstanding capital stock in exchange for the assumption by DH of the obligations incurred in financing the Tender Offer. Purchaser was then merged with and into DH (the "Merger"), and the remaining 1,481,476 shares of DH's Common Stock acquired in the Tender Offer and held by Purchaser at the time of the Merger were canceled in the Merger. Simultaneously, DH changed its name to Axiohm Transaction Solutions, Inc. The aggregate initial purchase price of $209.1 million consisted of cash for DH shares and stock options, transaction costs and the fair value of DH shares not tendered. The above transactions were financed with (i) borrowings of approximately $57.0 million, under a new $85 million credit facility that provides term loans in the aggregate principal amount of $50.0 million (the "Term Loan Facility), and revolving loans and letters of credit of up to $35.0 million (the "Revolving Credit Facility", and together with the Term Loan Facility, the "New Credit Facility") (ii) the proceeds of the Offering of $120,000,000 of its 9 3/4% Senior Subordinated Notes due in 2007, which were exchanged in March 1998 for equivalent notes which have been registered under the Securities Act (the "Notes"). Although DH was the surviving legal entity, the transaction was accounted for as a purchase of DH by Axiohm. For the first quarter of 1997, the following discussion includes the results of operations of Axiohm only. While the effective date of the Merger was October 2, 1997 for legal purposes, the effective date of the acquisition of DH for accounting purposes was August 31, 1997. In connection with the foregoing transactions, the Company recorded approximately $105 million of goodwill and other intangibles which is being amortized over three years using the straight line method, which is the period estimated to be benefited. Results Of Operations First Quarter Ended April 4, 1998 Compared To First Quarter Ended March 31, 1997 Net Sales. Net sales of $57.1 million for the first quarter of 1998 increased 129.3%, or $32.2 million, compared to net sales of $24.9 million for the same period last year. Approximately 80% of the increase was the result of the inclusion of sales of DH; the balance was due to growth in the existing business which reflects increased unit volume of transaction printers and printer mechanisms partially offset by a decline in average selling prices. Cost of Net Sales. Cost of net sales of $37.0 million decreased to 64.8% of net sales for the first quarter of 1998 from 69.6% of net sales for the same period of 1997, due primarily to the following four factors: a favorable impact of the exchange rate between the U.S. dollar and the French franc for products manufactured in France and sold in the U.S.; lower purchase prices of components and parts; continuing technology improvements; and higher absorption of relatively fixed overhead costs partially offset by a decrease in average selling prices. Selling, General and Administrative Expenses. Selling, general, and administrative expenses of $8.8 million increased to 15.4% of net sales in the first quarter of 1998 from 12.0% in the same period in 1997. Approximately 90% of the increase was due to the inclusion of expenses of DH, the balance was primarily the result higher staffing levels and expenses needed to support higher sales, offset, in part, by the favorable impact of the fluctuations in the U.S. dollar compared to the French franc. Research and Development Expenses. Research and development expenses as a percentage of net sales decreased to 7.2% in the first quarter of 1998 compared to 7.0% in the first quarter of 1997. Total dollars expended for research and development increased $2.4 million to $4.1 million in the first quarter of 1998 compared to $1.7 million in the first quarter of 1997 partially due to the inclusion of expenses of DH. In addition, the Company believes that continued timely development of new products and enhancements to existing products are essential to maintaining the Company's competitive position. Accordingly, the Company anticipates that such expenses will increase in absolute dollar terms for the foreseeable future. Acquisition Related Amortization. The Company anticipates that, on a quarterly basis through the third quarter of 2000, operating expenses will include approximately $8.5 million in non-cash acquisition related charges which principally includes non-cash goodwill amortization. Income (Loss) from Operations. Loss from operations for the first quarter of 1998 was $1.3 million, compared to income from operations of $2.9 million in the same period for 1997. The loss from operations in the first quarter of 1998 was due to the acquisition related amortization charges discussed above. Interest and Other Income. Interest income as a percentage of net sales remained relatively unchanged at 0.2% for the first quarter of both 1998 and 1997. Interest and Other Expense. Interest expense increased to $4.4 million in the first quarter of 1998 from $0.2 million for the same period in 1997 due to interest payments on the New Credit Facility and Notes. Income Taxes. Provision for income taxes of $1.2 million in the first quarter of 1998 increased $0.1 million from $1.1 million in 1996. A provision for income taxes tax was recorded due to the non-deductibility of goodwill amortization for federal income tax purposes. Income taxes as a percentage of income before taxes, excluding the effect of acquisition related charges, was approximately 40.5% compared to 40.3%. Certain Factors That May Affect Future Results The risk factors set forth below are important factors that may affect future results and that could cause actual results to differ materially from those projected in forward-looking statements that may be made by the Company from time to time, including the forward-looking statements included in this report. Substantial Leverage and Debt Service. On April 4, 1998, the Company's total debt was $186.1 million and the Company had a shareholders' deficit of $24.5 million. Required principal payments under the New Credit Facility and Notes are as follows: $2.4 million remaining in 1998; $7.8 million in 1999; $7.8 million in 2000; $9.1 million in 2001; $5.6 million in 2002; $12.25 million in 2003; and $120.0 million in 2007. In 1998, it is anticipated that capital expenditures will not exceed the limit of $10.5 million permitted under the New Credit Facility. The Company's ability to make scheduled payments of principal of, or to pay the premium, if any, interest or liquidated damages, if any, thereon, or to refinance its indebtedness, or to fund planned capital expenditures, will depend upon its future performance, which, in turn, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. There can be no assurance that the Company's business will generate cash flow at or above anticipated levels or that the Company will be able to borrow funds under the New Credit Facility in an amount sufficient to enable the Company to service its indebtedness, including the Notes, or make anticipated capital expenditures. If the Company is unable to generate sufficient cash flow from operations or to borrow sufficient funds in the future to service its debt, it may be required to sell assets, reduce capital expenditures, refinance all or a portion of its existing indebtedness (including the Notes) or obtain additional financing. There can be no assurance that any such refinancing would be available on commercially reasonable terms, or at all, or that any additional financing could be obtained, particularly in view of the Company's high level of indebtedness, the restrictions on the Company's ability to incur additional indebtedness under the New Credit Facility and the indenture under which the Notes were issued (the "Indenture"), and the fact that substantially all of the Company's and its subsidiaries' assets have been pledged to secure obligations under the New Credit Facility. In addition, the Indenture and the New Credit Facility contain financial and other restrictive covenants that limit, among other things, the ability of the Company to borrow additional funds. Failure by the Company to comply with such covenants could result in events of default under the Indenture and the New Credit Facility which, if not cured or waived, could permit the indebtedness thereunder to be accelerated which would have a material adverse effect on the Company's business, financial condition and results of operations. Future Operating Results Subject to Fluctuation. The Company's operating results may fluctuate in the future as a result of a number of factors, including the timing of customer orders, timing of completion of existing customer contracts, variations in the Company's sales channels or the mix of products it sells, changes in pricing policies by the Company's suppliers, fluctuations in manufacturing yields, market acceptance of new and enhanced versions of the Company's products and the timing of acquisitions of other businesses, products and technologies and any associated charges to earnings. In addition, the Company periodically evaluates the possible impairment of goodwill to determine whether events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable. Further, the Company's expense levels are based in part on expectations of future revenues. If anticipated sales and shipments in any quarter do not occur when expected, operating expenses and inventory levels could be disproportionately high and the Company's operating results for that quarter, and potentially for future quarters, would be adversely affected. The Company's operating results could also be affected by general economic conditions. Fluctuations in operating results are likely to cause volatility in the price of the Company's Common Stock. Axiohm has historically experienced, and the Company expects to continue to experience, relatively lower levels of sales of existing transaction printers during the period from mid-November to the end of December primarily in the United States. The Company believes that this seasonality has been caused by the fact that some of its POS customers do not install new systems in their facilities between Thanksgiving and Christmas, so as not to disturb their sales flow during this heavy selling period. The Company's customers encounter uncertain and changing demand for their products. They typically order products from the Company based on their forecasts. If demand falls below customers' forecasts, or if customers do not control their inventories effectively, they may cancel or reschedule shipments previously ordered from the Company. The Company has in the past experienced, and may at any time and with minimal notice in the future experience, cancellations and postponements of orders. Dependence on Principal Customer. Sales to NCR Corporation ("NCR"), the Company's largest customer, represented 52% and 35%, respectively, of net sales for the years ended December 31, 1996 and December 31, 1997. No other customer accounted for more than 10% of net sales for the year ended December 31, 1996 or December 31, 1997. On September 2, 1997, Axiohm IPB entered into a three-year contract with NCR (the "NCR Contract"). The NCR Contract provides that NCR and Axiohm IPB intend and expect that NCR will purchase from Axiohm IPB substantially all of its requirements for transaction printers of the type manufactured by Axiohm IPB (the "Covered Products"). In case there is reason to believe that NCR is purchasing less than 75% of its requirements for Covered Products from Axiohm IPB at any time during the term of the agreement, there is an obligation for both parties to work together in good faith to eliminate such deficiency. The NCR Contract provides that NCR's purchase commitment is subject to Axiohm IPB's ability to meet NCR's specifications and requirements for price, performance, quality, service and delivery with respect to such Covered Products. Any failure by NCR to continue purchasing products from the Company at historical levels or the termination of the NCR Contract would have a material adverse effect on the Company's business, financial condition and operating results. Competition. The Company has a number of significant domestic and foreign competitors for its transaction printer, bar code printer and card reader products. Many of the Company's competitors have significantly greater financial, technical and marketing resources than does the Company. To remain competitive, the Company believes that it will be required to maintain a high level of technological expertise and deliver reliable cost-effective products on a timely basis. There can be no assurance that the Company will have sufficient resources to continue to make the investments necessary to maintain its competitive position or that other competitors with substantially greater financial resources, including other manufacturers of non-transaction printers, will not attempt to enter the market. A failure to remain competitive would have a material adverse effect on the Company's business, financial condition and results of operations. Integration of Operations. The integration of the administrative, finance and manufacturing operations of Axiohm and DH, the coordination of their respective sales and marketing staffs and the implementation of appropriate operational, financial and management systems and controls will require significant financial resources and substantial attention from management. As part of the plan to achieve purchasing, manufacturing and other synergies, the Company has identified certain potential cost savings related to the business combination effected by the business combination. The Company expects to incur significant integration costs through 1999 related to the Merger and the aforementioned potential cost savings. Any inability of the Company to integrate these operations successfully in a timely and efficient manner could have a material adverse effect on the Company's business, financial condition and results of operations and would adversely affect its ability to realize its planned cost savings or would require additional expenditures to realize such cost savings. In addition, even if the businesses of Axiohm and DH are successfully integrated, no assurance can be given that future expenses can be reduced by the expected cost savings. The Company's prospects should be considered in light of the numerous risks commonly encountered in business combinations. In addition, the historical financial statements presented in this Report may not necessarily be indicative of the results that would have been attained had the Company actually operated on a combined basis. Technological Change; Competition; Dependence on New Products. The markets for some of the Company's products are characterized by frequent new product introductions and declining average selling prices over product life cycles. The Company's future success is highly dependent upon the timely completion and introduction of new products at competitive price/performance levels. In addition, the Company must respond to current competitors, who may choose to increase their presence in the Company's markets, and to new competitors, who may choose to enter those markets. If the Company is unable to make timely introduction of new products or respond to competitive threats, its business and operating results could be materially adversely affected. International Sales and Operations. The Company expects that international sales will continue to represent a significant portion of its net sales. Although the Company's net sales are denominated in U.S. dollars, its international business may be affected by changes in demand resulting from fluctuations in exchange rates as well as by risks such as tariff regulations and difficulties in obtaining export licenses. In addition, historically the French operations of Axiohm S.A. have incurred a majority of Axiohm S.A.'s expenses in French francs, while a substantial majority of Axiohm S.A.'s revenues have been in U.S. dollars. Any material appreciation in the French franc relative to the U.S. dollar would, absent any effects associated with hedging or currency trading transactions, detrimentally affect the financial performance of the Company's French operations. The Company attempts to limit its exposure to French franc currency fluctuation compared to the U.S. dollar by entering into various financial instruments, including forward exchange contracts, to offset its French franc denominated expenses with associated U.S. dollar denominated revenue, if, in the opinion of the Company, to do so would mitigate foreign exchange losses. The forward exchange contracts the Company has entered into are marked to market, with any exchange gains or losses and associated costs recognized in the income statement. The Company cannot predict the effect of exchange rate fluctuations upon future operating results. Intellectual Property Rights. The Company holds various U.S. and foreign patents on impact printheads, transaction printers, magnetic card readers and bar code products and has applied for additional domestic and foreign patents. The basic technology for many of the Company's products is based upon these patents and on manufacturing expertise. There can be no assurance that any issued patents will provide the Company with competitive advantages or will not be challenged by third parties, or that the patents of others will not have a material adverse effect on the Company's ability to do business, or that others will not independently develop similar products, duplicate the Company's products, or design around the patents issued to the Company. The Company has in the past been, and may in the future be, notified that it may be infringing intellectual property rights possessed by third parties. In addition, the Company has in the past commenced, and may in the future, commence litigation against third parties for infringement of the Company's intellectual property rights. Any such litigation initiated by the Company or by others is, at a minimum, costly, and can divert the efforts and attention of the Company's management and technical personnel, which can have a material adverse effect on the Company's business, financial condition and results of operations. Furthermore, there can be no assurance that other infringement claims by third parties or other claims for indemnification by customers or end-users of the Company's products resulting from infringement claims will not be asserted in the future or that such assertions, if proven to be true, will not have a material adverse effect on the Company's business, financial condition and results of operations. If any such claims are asserted against the Company, the Company may seek to obtain a license under the third party's intellectual property rights. There can be no assurance, however, that a license will be available on commercially reasonable terms, if at all. The Company could decide, in the alternative, to resort to litigation to challenge such claims or to design around the patented technology. Such actions could be costly and would divert the efforts and attention of the Company's management and technical personnel, which could have a material adverse effect on the Company's business, financial condition and results of operations. Management of Future Acquisitions. Historically, the Company has achieved a portion of its growth through acquisitions of other businesses, and the Company intends to pursue additional acquisitions as part of its growth strategy. There are a number of risks associated with any acquisition, including the substantial time and attention required from management of the Company in connection with such transactions, the difficulty of predicting whether the operations will perform as expected and other problems inherent with any transition of one business organization into another. There can be no assurance that the Company will be able to consummate any beneficial acquisitions in the future or that the anticipated benefits of any acquisition will be realized. If any such acquisitions are consummated, a failure by the Company to manage any such acquisitions successfully could have a material adverse effect on the Company's business, financial condition and results of operations. Additionally, there may be future acquisitions that could result in potentially dilutive issuances of equity securities, the incurrence of debt and contingent liabilities and amortization expenses related to goodwill and other intangible assets associated with the acquisitions of other businesses, any of which could have a material adverse effect on the Company's business, financial condition and results of operations. Future Sale of Axiohm Exchange Shares. In May 1998, the Company registered an aggregate of 5,515,858 shares of Common Stock held by the former shareholders of Axiohm S.A.R.L. and Dardel. As a result, the shares are available for sale by such holders on the open market. Although the Company has no knowledge related to the sale of a substantial number of shares in the public market, such sales, or the potential for such sales, could have a material adverse effect on the market price for the Company's Common Stock. Year 2000 Compliance. Many currently installed computer systems and software products are coded to accept only two digit entries in the date code field. Beginning in the year 2000, these date code fields will need to accept four digit entries to distinguish 21st century dates from 20th century dates. As a result, in less than two years, computer systems and/or software used by many companies may need to be upgraded to comply with such "Year 2000" requirements. The Company has purchased the necessary hardware and software, and is currently in the process of implementing firmwide, Oracle enterprise resource planning system ("ERP") Version 10.6. To date, Version 10.6 has been implemented in several locations and is expected to be implemented in other locations. Although Version 10.6 does not fully address Year 2000 requirements, the Company believes that Oracle ERP Version 10.7 does. Such Version 10.7 has already been released by Oracle, and the Company anticipates implementing such Version 10.7 prior to the beginning of the year 2000. The total cost to the Company of converting to Oracle ERP firmwide, is estimated to be approximately $1.0 million. Failure to implement Oracle ERP Version 10.7 or some other form of enterprise software that addresses Year 2000 requirements prior to the year 2000 might result in significant difficulties in the Company's administration of invoicing and payables and other processes. Such difficulties could have a material adverse effect on the Company's business, financial condition and results of operations. Liquidity and Capital Resources The Company's primary anticipated sources of capital are cash flow from operations and borrowings under the New Credit Facility. For the first quarter of 1998, operating income plus depreciation and amortization was $8.9 million. Cash used by operating activities in the first quarter of 1998 was $9.3 million which included depreciation and amortization expense of $10.2 million offset by an increase in accounts receivable of $4.3 million, an increase in inventories of $3.8 million, and a decrease in other current liabilities of $3.0 million. The Company's primary capital requirements include debt service, capital expenditures and working capital. The Company's ability to make scheduled payments of principal and interest to refinance its indebtedness, or to fund planned capital expenditures, will depend upon its future performance, which, in turn, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond its control. At the time of the acquisition of DH, the Company implemented a plan to achieve purchasing, manufacturing and other synergies. Costs related to such activities of DH could result in additional cash costs that may be reflected as additional goodwill. Required principal payments under the New Credit Facility and Notes are as follows: $3.2 million in 1998; $7.8 million in 1999; $7.8 million in 2000; $9.1 million in 2001; $9.1 million in 2002; $8.8 million in 2003; and $120 million in 2007. It is anticipated that capital expenditures in 1998 will not exceed the maximum permitted under the New Credit Facility of $10.5 million. There can be no assurance, however, that the Company's business will generate cash flow at or above anticipated levels or that the Company will be able to borrow funds under the New Credit Facility in an amount sufficient to enable the Company to service its indebtedness, or make anticipated capital expenditures. In particular, there can be no assurance that anticipated revenue growth will be achieved at the levels currently anticipated or at all. If the Company is unable to generate sufficient cash flow from operations or to borrow sufficient funds in the future to service its debt, it may be required to sell assets, reduce capital expenditures, refinance all or a portion of its existing indebtedness, or obtain additional financing. There can be no assurance that any such refinancing would be available on commercially reasonable terms, or at all, or that any additional financing could be obtained, particularly in view of the Company's high level of debt. At April 4, 1998, the Company's total debt including government grant obligations was $186.1 million. At that date the Company also had borrowing availability under the New Credit Facility of an additional $23.0 million for capital expenditure requirements, subject to conditions contained therein. Debt levels increased since December 31, 1997 due to borrowings against the line of credit to fund payments made to former officers of $3.5 million and the payment of $5.9 million of subordinated interest expense in the first quarter. The New Credit Facility and the Notes impose, and other debt instruments of the Company may, impose various restrictions and covenants on the Company which could potentially limit the Company's ability to respond to market conditions, to provide for unanticipated capital investments, to raise additional debt or equity capital, or to take advantage of business opportunities. The New Credit Facility includes various financial covenants of the Company, including covenants with respect to the maximum capital expenditures, a maximum ratio of debt to EBITDA, a minimum interest coverage ratio and a minimum fixed charge coverage ratio. The New Credit Facility subjects the Company to certain negative covenants, including without limitation covenants that restrict, subject to specified exceptions: the incurrence of additional indebtedness and other obligations and the granting of additional liens; mergers and acquisitions, investments and acquisitions and dispositions of assets; the incurrence of capitalized lease obligations; investments, loans and advances; dividends, stock repurchases and redemptions; prepayment or repurchase of other indebtedness and other provisions. The Company has entered into a $20 million interest rate swap agreement with a major financial institution. This swap agreement has the effect of converting certain variable rate debt to defined rate obligations and expires in November, 1999. Net amounts paid or received are accrued on a settlement basis as adjustments to interest expense. The Company incurred indebtedness of $120 million in connection with the issuance of the Notes. The indebtedness evidenced by the Notes is subordinated to the Company's obligations under the New Credit Facility. Interest is payable semi-annually on the unpaid principal at 9.75% per annum. The first payment of $5.8 million was paid April 1, 1998. The Indenture contains covenants regarding: restricted payments, incurrence of indebtedness, liens, dividends, merger, consolidation or sale of assets, and transactions with affiliates. Restrictions on Distributions by Guarantors to the Company There are no contractual restrictions, under the New Credit Facility or otherwise, upon the ability of the Guarantor Subsidiaries to make distributions or pay dividends to their respective equityholders. Directly or indirectly, the Company is the sole equityholder of all of the Guarantor Subsidiaries. PART II. OTHER INFORMATION Item 5 - Other Information Effective May 1, 1998 Nicolas Dourassoff was appointed the Company's Chief Executive Officer, replacing Patrick Dupuy and Gilles Gibier who had been serving on an interim basis as Co-Chief Executive Officers. Messrs. Dupuy and Gibier continue to serve as Co-Chairmen of the Company's Board of Directors and Mr. Dourassoff remains a director of the Company. Item 6 - Exhibits and reports on Form 8-K (a) Exhibits: ----------------------------------- --------------------------------------- ----------------------------------- --------------------------------------- ----------------------------------- --------------------------------------- 27.1 Financial Data Schedule. ----------------------------------- --------------------------------------- (b) During the quarter ended April 4, 1998, the Company filed the following reports on Form 8-K: Amendment No. 2 to the Registrant's Current Report on Form 8-K dated October 2, 1997, originally filed with the Securities and Exchange Commission on October 17, 1997 and amended by Amendment No. 1 thereto dated December 15, 1997 (collectively, the "Form 8-K"), filed solely for the purpose of amending Item 7, Financial Statements and Exhibits, to the Form 8-K on February 13, 1998. 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. Axiohm Transaction Solutions, Inc. by: May 19, 1998 /s/Janet W. Shanks - - -------------------- ----------------------------------------- Date Janet W. Shanks, Chief Accounting Officer (Chief Accounting Officer) AXIOHM TRANSACTION SOLUTIONS, INC. EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED APRIL 4, 1998 - - -------------------------------------------------------------------------------- EXHIBIT DESCRIPTION - - -------------------------------------------------------------------------------- ---------------- ---------------------------------------------------- 27.1 Financial Data Schedule. ---------------- ---------------------------------------------------- ---------------- ---------------------------------------------------------- ---------------- ---------------------------------------------------------- EX-27 2 FDS AXIOHM TRANSACTION SOLUTIONS, INC.
5 Axiohm Transaction Solutions, Inc 10Q Q1 0000728376 Axiohm Transaction Solutions, Inc 10Q Q1 1,000 U.S.DOLLARS 3-MOS JAN-02-1999 JAN-01-1998 APR-04-1998 1.0 3,158 0 34,597 228 33,904 82,316 21,161 0 196,151 37,609 0 0 0 23,898 (48,424) 196,151 57,069 57,069 36,995 58,351 0 40 4,367 (5,561) 1,175 1,175 0 0 0 (6,736) (1.03) (1.03)
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