-----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, AQOc0EWelz+zug3PgZT8CW6XU9R2++KDejB80jQY9Nf0Yv7cUoMoxkPkVyszqefv DVgvcUKD90cSRlHSnqAYow== 0000912057-96-027150.txt : 19961121 0000912057-96-027150.hdr.sgml : 19961121 ACCESSION NUMBER: 0000912057-96-027150 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961120 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: 96669871 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 SEPTEMBER 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 incorporation of (I.R.S. Employer Identification Memorex Telex N.V.) Number of Memorex Telex N.V.) 545 EAST JOHN CARPENTER FREEWAY IRVING, TEXAS 75062-3931 TELEPHONE NO.: (972) 444-3500 (Address, including Zip Code, and telephone number, including area code, of authorized representative in 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 October 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)
SEPT. 30, 1996 MAR. 31, 1996 -------------- ------------- (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents including restricted deposits and guarantees of $7,253 at September 30, 1996 and $7,592 at March 31, 1996. $ 18,261 $ 26,838 Accounts receivable, net 72,302 108,021 Inventories, primarily finished goods 39,470 34,891 Service parts 26,997 31,697 Other current assets 5,692 4,104 ---------- ---------- Total current assets 162,722 205,551 Property, plant and equipment, net 23,984 28,622 Other assets 13,804 33,995 ---------- ---------- $ 200,510 $ 268,168 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' DEFICIT Current Liabilities: Current debt obligations $ 103,554 $ 114,578 Accounts payable 117,404 119,197 Accrued liabilities 149,227 169,098 ---------- ---------- Total current liabilities 370,185 402,873 Debt obligations 4,286 4,903 Other long-term liabilities 123,609 137,743 Stockholders' Deficit: Common stock 1,338 1,338 Additional paid-in capital 73,726 73,726 Accumulated deficit (373,370) (354,749) Foreign currency translation adjustment 736 2,334 ---------- ---------- Total stockholders' deficit (297,570) (277,351) ---------- ---------- $ 200,510 $ 268,168 ---------- ---------- ---------- ----------
See accompanying note. MEMOREX TELEX N.V. ( A Netherlands Corporation) CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share amounts)
FOR SIX MONTHS FOR SIX MONTHS ENDED SEPT. 30, 1996 ENDED SEPT. 30, 1995 -------------------- -------------------- (UNAUDITED) Revenues $ 360,777 $ 428,421 Cost of revenues 285,029 317,360 ---------- ---------- Gross margin 75,748 111,061 Selling, general, and administrative expenses 82,823 99,720 Other (income) expenses, net 1,391 (4,137) Amortization of intangibles 0 62,561 ---------- ---------- Operating loss (8,466) (47,083) Interest income 373 702 Interest expense (10,529) (9,616) Accretion of debt forgiveness discount 0 (3,254) ---------- ---------- Loss before income taxes (18,622) (59,251) Provision for income taxes 0 0 ---------- ---------- Net loss $ (18,622) $ (59,251) ---------- ---------- ---------- ---------- Net loss per common share of 0.10 DFL $ (0.74) $ (2.36) ---------- ---------- ---------- ---------- Weighted average number of common shares used in the computation of net loss per common share 25,076,665 25,061,225
See 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 SEPT. 30, 1996 ENDED SEPT. 30, 1995 -------------------- -------------------- (UNAUDITED) Revenues $ 158,985 $ 207,870 Cost of revenues 128,672 156,132 ---------- ---------- Gross margin 30,313 51,738 Selling, general, and administrative expenses 39,535 47,898 Other (income) expenses, net 291 (3,434) Amortization of intangibles 0 31,280 ---------- ---------- Operating loss (9,513) (24,006) Interest income 184 418 Interest expense (5,653) (4,680) Accretion of debt forgiveness discount 0 (3,254) ---------- ---------- Loss before income taxes (14,982) (31,522) Provision for income taxes 0 0 ---------- ---------- Net loss $ (14,982) $ (31,522) ---------- ---------- ---------- ---------- Net loss per common share of 0.10 DFL $ (0.60) $ (1.26) ---------- ---------- ---------- ---------- Weighted average number of common shares used in the computation of net loss per common share 25,076,665 25,066,922
See accompanying note. MEMOREX TELEX N.V. (A Netherlands Corporation) CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In thousands)
FOR SIX MONTHS FOR SIX MONTHS ENDED SEPT. 30, 1996 ENDED SEPT. 30, 1995 -------------------- -------------------- (UNAUDITED) Cash flows from operating activities: Net loss $ (18,622) $ (59,251) Adjustments to reconcile loss to net cash provided (used) by operating activities: Depreciation and amortization 4,452 67,774 Accretion of debt forgiveness discount 0 3,254 Changes in components of working capital excluding short-term debt 3,361 (19,537) Other long-term liabilities (13,267) (6,795) Other assets 4,374 5,444 Other (717) (4,295) ---------- ---------- Net cash used by operating activities (20,419) (13,406) ---------- ---------- Cash flows from investing activities: Proceeds from asset sales 25,000 4,813 Capital expenditures (1,517) (2,454) ---------- ---------- Net cash provided (used) by investment activities 23,483 2,359 ---------- ---------- Cash flows from financing activities: Issuance of common stock 0 20 Issuance of debt 2,351 8,661 Redemption of debt (13,992) (8,855) ---------- ---------- Net cash provided (used) by financing activities (11,641) (174) ---------- ---------- Net decrease in cash and cash equivalents (8,577) (11,221) Cash and cash equivalents at beginning of period 26,838 36,886 ---------- ---------- Cash and cash equivalents at end of period $ 18,261 $ 25,665 ---------- ---------- ---------- ----------
See accompanying note. MEMOREX TELEX N.V. (A Netherlands Corporation) NOTE TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands) NOTE 1: 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 six months ended September 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. During the quarter the Company concluded the sale of its Asia/Pacific operations. See Management's Discussion and Analysis of Financial Condition and Results of Operations in the Liquidity section for a discussion of the use of proceeds from the sale. The financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. On October 15, the Company announced that the U.S. operations filed for protection under Chapter 11 of the U.S. Bankruptcy code with the intent to sell the U.S. operations. As of November 1, the Bankruptcy court had approved sales agreements for substantially all of its U.S. operations. The bankruptcy filing by the U.S. operation is an event of default under the Company's $100 million Restructured Credit Facility ("Restructured Credit Facility") and the $12 million Term Loan Credit and Guaranty Agreement ("Term Loan") (the Restructured Credit Facility and the Term Loan are collectively referred to as "the Credit Facilities"). In addition, the Company is in default of certain other convenants and debt repayment obligations under the Credit Facilities. The proceeds from the sale of the U.S. operations will not be sufficient to cure the events of default. The obligations under the Credit Facilities are secured on a first priority basis to substantially all assets of the Company including the securities of the remaining subsidiaries. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED SEPTEMBER 30, 1996 RESULTS OF OPERATIONS: The Company is a provider of information technology solutions including the distribution and integration of data network and storage products and the provision of related services. The following table sets forth the Company's revenues and gross margins for its product groups for the six and three months ended September 30, 1996 and the six and three months ended September 30, 1995 ("the comparable periods"). The table includes results from the U.S. operations which declared bankruptcy subsequent to September 30, 1996. See Note 1. The revenues and gross margins associated with the Asia/Pacific operations for the three months ended June 30, 1996 and six months ended September 30, 1995 have been included as a separate line for presentation purposes.
Six Six Three Three Months Months Months Months Ended Ended Ended Ended ($ in millions) September September September September 30, 1996 30, 1995 30, 1996 30, 1995 --------- --------- --------- --------- Revenues - ------------- Networks $ 150.8 $ 190.0 $ 68.8 $ 93.7 Storage 34.1 30.2 11.8 10.5 Service 147.2 159.6 73.7 80.4 Other 10.0 11.7 4.7 5.5 -------- -------- -------- -------- Subtotal 342.1 391.5 159.0 190.1 Asia/Pacific 18.7 36.9 0.0 17.7 -------- -------- -------- -------- Total $ 360.8 $ 428.4 $ 159.0 $ 207.8 -------- -------- -------- -------- -------- -------- -------- -------- Gross Gross Gross Gross Margin Margin Margin Margin % % % % - - - - Gross Margins - ------------- Networks $ 27.6 18.3% $ 48.9 25.7% $ 11.9 17.3% $ 22.1 23.6% Storage 11.3 33.1% 8.6 28.5% 3.8 32.2% 2.6 24.8% Service 28.2 19.2% 39.9 25.0% 12.6 17.1% 19.9 24.8% Other 4.4 44.0% 4.5 38.5% 2.1 44.7% 2.6 47.3% -------- -------- -------- -------- Subtotal 71.5 20.9% 101.9 26.0% 30.4 19.1% 47.2 24.8% Asia/Pacific 4.2 22.5% $ 9.2 25.0% $ 0.0 0.0% $ 4.5 25.4% -------- -------- -------- -------- Total $ 75.9 21.0% 106.4 25.9% 32.5 19.1% 49.8 24.9% -------- -------- -------- -------- -------- -------- -------- --------
Networks revenue and gross margin declined against the comparable periods. Sales of network connectivity products for the six months ended September 30, 1996 increased slightly when compared to the comparable period while the upward trend was reduced by the 13.6% decline in sales for the three months ended September 30, 1996 when compared against the comparable period. Networks gross margin as a percentage of sales continued to decline from the prior year due to the continued shift in sales mix away from higher margin fixed function display and mainframe network products and to a higher volume of sales of lower margin business partner products during the current year. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED SEPTEMBER 30, 1996 Storage revenue for the six and three months ended September 30, 1996 increased 12.9% and 12.4%, respectively, when compared to their comparable periods. The increases are 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 sales of tape products. Service revenue declined 7.8% and 8.3% for the six months and three months ended September 30, 1996, respectively. In the current year, growth in revenues from advanced services was offset by the continued decline in revenues from traditional maintenance. Service gross margin as a percentage of revenues declined against the level 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 revenue declined against the prior year due to a decline in lease and brokerage revenues. The Company estimates that the stronger U.S. dollar when compared with the comparable periods unfavorably affected revenues, $7.6 million and $2.9 million, and margins, $1.5 million and $.1 million for the six and three months ended September 30, 1996, respectively. Selling, general and administrative expenses for the six and three months ended September 30, 1996, decreased $16.9 million and $8.4 million, respectively, against the comparable periods. The reductions reflect the continued effect of the Company's cost reduction programs. The stronger U.S. dollar, when compared against the comparable period, favorably affected selling, general and administrative expenses for the six and three months ended September 30, 1996 by approximately $1.1 million and $.4 million, respectively. Other income for the six and three months ended September 30, 1996 decreased approximately $5.5 million and $3.7 million, respectively, against the prior comparable periods. In the prior year, gains realized from the sale of assets of $2.7 million and $.5 million and foreign currency gains of $3.1 million and $3.4 million primarily account for the decrease between the comparable periods. No tax provision was recorded in the current year due to tax credits and current year losses which are expected to result in no taxable income. The Company does not believe that inflation has had a material impact on its results of operations. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED SEPTEMBER 30, 1996 The following unaudited condensed financial information presents a summary of the consolidated results of non-U.S. operations for the six months ending September 30, 1996 and 1995. ($ in millions) Six Months Six Months Ended Ended Sept. 30, 1996 Sept. 30, 1995 -------------- -------------- Revenues $ 187.6 $ 186.2 Gross Margin 38.6 48.2 Operating Expense 36.8 42.6 EBITDA 6.9 11.7 LIQUIDITY: During the six months ended September 30, 1996, the Company's net loss excluding the noncash charges for depreciation used cash of $14.2 million. Cash was provided from the sale of the Asia Pacific operations ($25 million), from decreased receivables ($24.1 million) and an increase in accounts payable ($1.5 million). These cash sources and existing cash balances were used to purchase inventory ($5.9 million), pay for workforce reductions, closure costs and unfavorable contractual obligations ($8.7 million), pay accrued interest ($2 million), reduce deferred tax assessments ($2.8 million), reduce debt obligations ($11.6 million) and pay for capital additions ($1.5 million). Additionally, the deferred revenues on contract maintenance which are generally billed at the beginning of the calendar year and warranty obligations declined $12.5 million during the period. As a result of the above, cash and cash equivalents, including restricted cash deposits, declined $8.6 million. During the quarter the Company completed the sale of its Asia/Pacific operations for $25 million with which the Company used $9 million of the proceeds to reduce debt and the remaining $16 million to meet working capital requirements including accrued interest payments as agreed with the lenders to its Credit Facilities. Subsequent to the quarter end, the Company announced that on October 15, 1996, the U.S. operations filed for protection under Chapter 11 of the U.S. Bankruptcy code with the intent to sell the U.S. operations. On November 1, 1996, the U.S. Bankruptcy Court approved the sale of substantially all of its U.S. operations. The Company believes that the proceeds from such sales of the U.S. operations will not be sufficient to pay all amounts due to the secured lenders. The U.S. operations has secured debtor in possession financing to assure continued operations during the completion of the sales and for the wind down of the U.S. activities. The bankruptcy filing by the U.S. operation is an event of default under the Company's $100 million Restructured Credit Facility ("Restructured Credit Facility") and the $12 million Term Loan Credit and Guaranty Agreement ("Term Loan") (the Restructured Credit Facility and the Term Loan are collectively referred to as "the Credit Facilities"). In addition, the Company is MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED SEPTEMBER 30, 1996 in default of certain other covenants and debt repayment obligations under the Credit Facilities. The proceeds from the sale of the U.S. operations will not cure the events of default under the Credit Facilities. Discussions are ongoing with the lenders to its Credit Facilities concerning the amounts owing under the Credit Facilities and alternatives for the curing of events of default. In addition, the Company continues to emphasize working capital management in its remaining operations, 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 further asset dispositions to attempt to satisfy the obligations of the lenders. The Company believes that any solution to curing the events of default would likely result in a substantial dilution of ownership of existing shareholders of the Company. The ability of the Company to cure the events of default is unknown at this time. Therefore, no assurances can be given that the Company will be able to do so or what other actions might be necessary. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS At the annual meeting of stockholders held in Amsterdam on Monday, September 30, 1996, the stockholders of Memorex Telex N.V. voted (i) 2,361,083 for, 100 against, and 116,790 abstaining to elect Peter H. Dailey to the Management Board of the Company, (ii) 2,362,183 for, 0 against, and 116,790 abstained to elect Gregory S. Wood to the Management Board of the Company, (iii)2,361,183 for, 0 against, and 116,790 abstaining to elect Brad Sowers to the Management Board of the Company, (iv) 2,362,183 for, 0 against, and 116,790 abstaining to elect Anthony J. Barbieri to the Management Board of the Company, (v)2,361.183 for, 0 against, and 116,790 abstaining to adopt the annual financial statements contained in the Statutory Annual Report of Memorex Telex N.V. for the fiscal year ended March 31, 1996, which also contains the Report of the Management Board; and (vi) 2,361,83 for, 0 against, and 116,790 abstaining to appoint Ernst & Young LLP as United States auditors for the Company and Moret Ernst & Young LLP as Netherlands auditors for Memorex Telex N.V. for the fiscal year ending March 31, 1997. ITEM 5: OTHER INFORMATION Effective October 1, 1996, Messrs. Joshua Harris and Michael Gross resigned as members of the Supervisory Board of Directors of the Company. ITEM 6: EXHIBITS AND REPORTS Exhibit 27.1 FDS 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) November 20, 1996 Chief Executive Officer By: /s/David J. Faulkner ------------------------------------ (David J. Faulkner) Managing Director November 20, 1996 and Chief Financial Officer By: /s/Greg Wood ------------------------------------ (Greg Wood) Senior Vice President November 20, 1996 and Chief Accounting Officer EX-27 2 EXHIBIT 27
5 1,000 3-MOS MAR-31-1997 SEP-30-1996 18,261 0 72,302 (10,524) 66,467 162,722 23,984 (22,107) 200,510 370,185 4,286 0 0 1,338 (298,908) 200,510 81,549 158,985 62,198 128,672 39,826 1,498 5,653 (14,982) 0 (14,982) 0 0 0 (14,982) (.60) (.60) ON OCTOBER 15, THE COMPANY ANNOUNCED THAT THE U.S. OPERATION FILE FOR PROTECTION UNDER CHAPTER 11 OF THE U.S. BANKRUPTCY CODE WITH THE INTENT TO SELL THE U.S. OPERATIONS.
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