-----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, RkWP3NP05txfP43Jthgvqb3mvr0L+KaCe1u6EieyCQDb+3A03fHG0pQbp4Nc+rR5 28u0624TiqEanRtxapyfyg== 0000912057-96-017697.txt : 19960816 0000912057-96-017697.hdr.sgml : 19960816 ACCESSION NUMBER: 0000912057-96-017697 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEMOREX TELEX N V CENTRAL INDEX KEY: 0000818035 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19862 FILM NUMBER: 96612244 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FREEWAY STREET 2: 1101 BA CITY: IRVING STATE: TX ZIP: 75062-3931 BUSINESS PHONE: 2144443500 MAIL ADDRESS: STREET 1: 545 E. JOHN CARPENTER FREEWAY CITY: IRVING STATE: TX ZIP: 75062 10-Q 1 FORM 10-Q - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- 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 FISCAL QUARTER ENDED JUNE 30, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-19862 ------------------------ MEMOREX TELEX N.V. (Exact name of registrant as specified in their respective charter) THE NETHERLANDS NOT APPLICABLE (Jurisdiction of (I.R.S. Employer incorporation of Identification Memorex Telex N.V.) Number of Memorex Telex N.V.) 545 EAST JOHN CARPENTER FREEWAY IRVING, TEXAS 75062-3931 TELEPHONE NO.: (214) 444-3500 (Address, including Zip Code, and telephone number, including area code, of authorized representative in the United States) ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: AMERICAN DEPOSITORY RECEIPTS EVIDENCING AMERICAN DEPOSITORY SHARES WHICH REPRESENT COMMON STOCK, 0.10 DFL. NOMINAL VALUE Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. Yes X No --- --- Indicate by checkmark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a Court. Yes X No --- --- The number of shares of the registrant's Common Stock, 0.10 DFl. Nominal Value, outstanding as of July 31, 1996, was 25,076,665. - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS MEMOREX TELEX N.V. (A Netherlands Corporation) CONSOLIDATED BALANCE SHEETS (In thousands) JUNE 30, 1996 MAR. 31, 1996 ------------- ------------- (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents including restricted deposits and guarantees of $8,248 at June 30, 1996 and $14,669 at March 31, 1996. $ 20,427 $ 26,838 Accounts receivable, net 96,235 108,021 Inventories, primarily finished goods 36,947 34,891 Service parts 32,676 31,697 Other current assets 4,979 4,104 --------- --------- Total current assets 191,264 205,551 Property, plant and equipment, net 27,613 28,622 Other assets 32,002 33,995 --------- --------- $ 250,879 $ 268,168 --------- --------- --------- --------- LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Current debt obligations $ 113,084 $ 114,578 Accounts payable 124,388 119,197 Accrued liabilities 160,644 169,098 --------- --------- Total current liabilities 398,116 402,873 Debt obligations 4,511 4,903 Other long-term liabilities 129,797 137,743 Stockholders' Deficit: Common stock 1,338 1,338 Additional paid-in capital 73,726 73,726 Accumulated deficit (358,388) (354,749) Foreign currency translation adjustment 1,779 2,334 --------- --------- Total stockholders' deficit (281,545) (277,351) --------- --------- $ 250,879 $ 268,168 --------- --------- --------- --------- See the accompanying note. MEMOREX TELEX N.V. (A Netherlands Corporation) CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share amounts) FOR THREE MONTHS FOR THREE MONTHS ENDED JUNE 30, 1996 ENDED JUNE 30, 1995 ------------------- ------------------- (UNAUDITED) Revenues $ 201,792 $ 220,551 Cost of revenues 156,357 161,228 ----------- ----------- Gross margin 45,435 59,323 Selling, general, and administrative expenses 43,288 51,822 Other (income) expenses, net 1,100 (703) Amortization of intangibles 0 31,281 ----------- ----------- Operating income (loss) 1,047 (23,077) Interest income 189 284 Interest expense (4,876) (4,936) ----------- ----------- Loss before income taxes (3,640) (27,729) Provision for income taxes 0 0 ----------- ----------- Net loss $ (3,640) $ (27,729) ----------- ----------- ----------- ----------- Net loss per common share of 0.10 DFL $ (0.15) $ (1.11) ----------- ----------- ----------- ----------- Weighted average number of common shares used in the computation of net loss per common share 25,076,665 25,059,517 ----------- ----------- ----------- ----------- See the accompanying note. MEMOREX TELEX N.V. (A Netherlands Corporation) CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands) FOR THREE MONTHS FOR THREE MONTHS ENDED JUNE 30, 1996 ENDED JUNE 30, 1995 ------------------- ------------------- (UNAUDITED) Cash flows from operating activities: Net loss $(3,640) $(27,729) Adjustments to reconcile loss to net cash provided (used) by operating activities: Depreciation and amortization 2,435 33,766 Changes in components of working capital excluding short-term debt 3,425 (26,415) Other long-term liabilities (6,757) 410 Other assets 1,993 1,680 Other (1,290) (3,248) ------- -------- Net cash used by operating activities (3,834) (21,536) ------- -------- Cash flows from investing activities: Proceeds from asset sales 0 3,462 Capital expenditures (783) (1,234) ------- -------- Net cash provided (used) by investment activities (783) 2,228 ------- -------- Cash flows from financing activities: Issuance of common stock 0 11 Issuance of debt 763 4,486 Redemption of debt (2,557) (3,678) ------- -------- Net cash provided by financing activities (1,794) 819 ------- -------- Net decrease in cash and cash equivalents (6,411) (18,489) Cash and cash equivalents at beginning of period 26,838 36,886 ------- -------- Cash and cash equivalents at end of period $20,427 $ 18,397 ------- -------- ------- -------- See the accompanying note. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 MEMOREX TELEX N.V. (A Netherlands Corporation) NOTE TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands) 1. BASIS OF PRESENTATION Interim information is unaudited; however, in the opinion of the Company's management, all adjustments necessary for a fair presentation of interim results have been included. All such adjustments are of a normal recurring nature. The results for the three months ended June 30, 1996 are not necessarily indicative of results to be expected for the entire year. These financial statements and notes should be read in conjunction with the Company's consolidated financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 RESULTS OF OPERATIONS: The Company is a worldwide distributor of data network and storage solutions and a provider of a full range of information technology services. The following table sets forth the Company's revenues and gross margins excluding the Asia/Pacific operations for its product groups for the three months ended June 30, 1996 and the three months ended June 30, 1995 ("the comparable period"). The revenues and gross margins associated with the Asia/Pacific operations have been included in the table for presentation purposes. ($ in millions) Revenues Gross Margin Gross Margin % ---------------- --------------- --------------- 1996 1995 1996 1995 1996 1995 ------ ------ ----- ----- ----- ----- Networks $ 82.0 $ 96.3 $15.7 $26.5 19.1% 27.5% Storage 22.3 19.7 7.5 5.8 33.6% 29.4% Service 73.5 79.2 15.6 20.0 21.2% 25.3% Other 5.3 6.3 2.4 2.3 45.3% 36.5% ------ ------ ----- ----- Subtotal $183.1 $201.5 $41.2 $54.6 22.5% 27.1% Asia/Pacific 18.6 19.1 4.2 4.7 22.6% 24.6% ------ ------ ----- ----- Total $201.7 $220.6 $45.4 $59.3 22.5% 26.9% ------ ------ ----- ----- ----- ----- ------ ------ ----- ----- ----- ----- Networks revenue and gross margin continued to decline against the comparable period as sales of network connectivity products increased 25.3%, although not enough to offset the 36.7% decline in sales of traditional fixed function display and mainframe network products. Networks gross margin as a percentage of sales declined from the prior year due to the continued shift in sales mix away from the higher margin fixed function display and mainframe network products and to a higher volume of sales of lower margin business partner products in the current year. Storage revenue in the current year, increased 13.2% from the level in the comparable period. The rise is mainly attributed to increased sales of tape products offsetting the lower than expected revenues from the Company's other midrange storage products. Storage margins as a percentage of revenues increased in the current year primarily due to the stronger margins achieved on the sale of tape products. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 Service revenue has declined in comparison to the prior year. In the current year, growth in revenues from advanced services was offset by the decline in revenues from traditional maintenance. Service gross margin as a percentage of revenues declined against the levels achieved in the prior year as a result of the decline in revenues from higher margin traditional maintenance contracts which have largely been replaced with lower margin subcontracted services for cabling and third party maintenance contracts. Additionally, price competition and product mix changes have adversely impacted service margins. Other revenues declined against the prior year primarily as a result of declines in lease and brokerage revenues. The Company estimates that the strengthening of the U.S. dollar when compared with the comparable period unfavorably affected revenues by approximately $4.7 million, with slight effect to the margins, for the three months ended June 30, 1996. Selling, general and administrative expenses for the three months ended June 30, 1996, decreased $ 8.5 million over the comparable period. The reductions reflect the continued effect of the Company's cost reductions programs. The strengthening of the U.S. dollar, when compared against the comparable period, favorably affected selling, general and administrative expenses for the three months ended June 30, 1996 by approximately $.7 million. Other income (expense) in the current year decreased approximately $1.8 million against the prior year. The decrease was primarily the result of gains on sale of assets included in the comparable period. No tax provision was recorded in the current quarter due to tax credits and current year losses which are expected to result in no taxable income. The Company does not believe that inflation has had a material impact on its results of operations. LIQUIDITY: During the three months ended June 30, 1996, the Company's net loss, excluding the non-cash charges for depreciation, used cash of $1.2 million. Cash was provided from a decrease in accounts receivable ($11.8 million), and an increase in accounts payable ($5.2 million). The existing cash and cash sources were primarily used for workforce reductions, closure costs and unfavorable contractual obligations ($3.5 million), reductions in royalty obligations ($2.8 million), reduced deferred revenues on contract maintenance and warranty obligations ($12.9 million), and an increase in inventory ($3.0 million). As a result of the above, cash and cash equivalents, including restricted cash deposits, decreased $6.4 million. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 1996 The Company continues its transformation from a developer and manufacturer of computer hardware to a provider of networking and storage solutions. As part of this transformation, the Company continues to reengineer its selling, service, product development, fulfillment, and finance and administrative processes. This effort has resulted in workforce reductions, the consolidation of functions, disposition of certain facilities, and closure or sale of unprofitable operations. The cost of these initiatives, together with the cumulative decline in revenues and gross margins has continued to reduce the operating cash flow available to fulfill customer orders on a timely basis. During the quarter, the Company signed an agreement to sell its Asia/Pacific operations for $25 million. The Company also reached an agreement with the lenders to its $100 million Restructured Credit Facility (the "Credit Facility") for $9 million of the proceeds to be used to reduce debt and the remaining $16 million to be used to meet working capital requirements including accrued interest payments. Subsequent to the quarter end, the Company completed the sale of the Asia/Pacific operations and met all the conditions for effectiveness of the agreement with the lenders to the Credit Facility. The agreement with the lenders to the Credit Facility cures events of default that existed under this agreement at March 31, 1996, and includes a deferral through October 31, 1996, of interest payments otherwise due prior to such date. In connection with the amendments and waiver of the Credit Facility, the Company agreed to a modification of the Credit Facility to include a change in maturity date from December 31, 1998 to March 31, 1997, a change in the amortization schedule and certain other conditions. The Company also obtained waivers of existing events of default under the $12,000 Term Loan Credit and Guaranty Agreement. The proceeds from the sale of the Asia/Pacific operations and the deferral of interest payments will improve short-term liquidity, assisting the Company in its efforts to expedite new solution introductions, fulfill customer orders and enhance worldwide customer satisfaction. The Company continues discussions with financial and strategic investors and financial institutions concerning a new credit facility or other financing to repay the amounts owing under the Credit Facility and for working capital. In addition, the Company will continue to emphasize working capital management, particularly accounts receivable and inventory as potential sources of cash. The Company expects to also pursue other non-operating sources of funds such as increased factoring of accounts receivable, increased subsidiary lines of credit or, if necessary, undertake an asset disposition program. The Company believes that operating cash flow, non-operating sources of funds, and other new financing will enable the Company to continue to meet its obligations, however, there is no assurance that management's plans will be successful or what other actions might be necessary. PART II: OTHER INFORMATION ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS None ITEM 6: EXHIBITS AND REPORTS Exhibit 27 Financial Data Schedule SIGNATURES PURSUANT TO THE REQUIREMENTS 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. MEMOREX TELEX N.V. By: /s/Peter H. Dailey -------------------------------- (Peter H. Dailey) August 13, 1996 Chief Executive Officer By: /s/David J. Faulkner -------------------------------- (David J. Faulkner) Managing Director August 13, 1996 and Chief Financial Officer By: /s/ Greg Wood -------------------------------- (Greg Wood) Senior Vice President August 13, 1996 and Chief Accounting Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS MAR-31-1997 JUN-30-1996 20427 0 96235 (10352) 69623 4979 27613 (23574) 250879 398116 4511 0 0 1338 (280207) 250879 115566 201792 84930 156357 44388 1266 4876 (3640) 0 (3640) 0 0 0 (3640) (.15) (.15)
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