Washington Post article..
Not that anybody cares but here is an article shedding some light on the parent company's demise. As I heard before it was the company's printer business that bankrupt the parent company:
Firm's Demise Shows Mistakes Can Be Fatal
By Kenneth Bredemeier
Washington Post Staff Writer
Tuesday , May 30, 2000 ; E01
It was only a couple of years ago that Chantilly-based Genicom Corp. seemed to be near the top of an essential niche market suited nicely to the booming
high-tech age: manufacturing computer printers for the likes of Wal-Mart, Chrysler, General Motors and Prudential.
But those times are just a memory. Genicom is spending its last days mired in the federal bankruptcy court in Wilmington, Del., its assets being auctioned off piece by piece. At best, the sales may yield $34.8 million for the creditors of a company that in 1998 generated $452 million in revenue.
Genicom's bitter ending--the result of a changing computer printer market, some bad management decisions and a business acquisition that quickly turned
sour--shows how even in the best of economic times, corporations can and do fail. More than 44,000 U.S. corporations filed for federal bankruptcy protection in each of the past two years.
Even in booming Fairfax County, 67 firms filed for bankruptcy in the past year. A total of 81 District of Columbia firms filed bankruptcy petitions in 1999, 795 in Maryland and 841 in Virginia, according to the American Bankruptcy Institute, a research group.
The range of Fairfax businesses filing for bankruptcy was wide, including firms in the technology, banking, cosmetics, coffee, floral and wrecking industries. And just as there is no single formula for business success, there seems to be no standard reason for failing.
Genicom had no choice but to file for protection under Chapter 11 of the U.S. Bankruptcy Code, which allows debtors to continue to operate as they seek to
restructure or liquidate a company. It was forced to in March by a group of nine lenders headed by Bank of America that negotiated with the firm for months late
last year and early this year as Genicom fell behind on its financial obligations. The banks say they are owed nearly $116 million.
Genicom was originally part of General Electric Corp., but was bought by venture capitalists in 1983. It was in financial difficulty by the late 1980s and was taken over a decade ago by a new management team headed by Paul Winn, now 55, who had spent 22 years at International Business Machines Corp., the last 15 in its printer business.
In the 1990s, Genicom's executives attempted to increase the size of the firm's printer business through acquisition of smaller firms that had a particular niche they wanted to pursue.
As the decade progressed, Genicom gained "a significant share in the impact printer market," said Shaun Donnellan, a principal in the turnaround management firm of Glass & Associates in Canton, Ohio, who was hired as chief executive to oversee the firm's path through bankruptcy court. Impact printers use technology
somewhat akin to that of old-fashioned typewriters, though at much higher speed: keys strike an inked ribbon, making an imprint on a piece of paper.
"We had a number one or number two position in the world in the last three years" in impact printers, Winn said. Unfortunately, he added, that part of the printer business has been declining by 5 percent a year as more corporations switch to laser printers.
Laser was the future that Genicom had to chase. And while it had laser printers to offer customers, Winn said "our brand name wasn't recognized."
By 1997, Genicom's executives decided they needed a brand-name printer to market, so in August 1997 the company paid $27 million to buy the printer division of a leading manufacturer, Digital Equipment Corp. Winn said the Digital name gave the firm the immediate market recognition it had sought, not to mention another $115 million in annual revenue. In 1998, the company hit its peak in revenue, taking in $452 million, making it the 41st biggest company in the Washington area.
But Genicom's euphoria over the Digital purchase lasted just a matter of months.
In February 1998, Compaq Computer bought the rest of Digital and within weeks announced that it would abandon the use of the Digital brand, according to Winn
and Donnellan. That immediately undercut the whole point of Genicom's acquisition. Winn said that under the terms of Genicom's purchase, Digital was to continue marketing its named printers, a task that Compaq was supposed to assume with its acquisition of the rest of Digital.
"When the brand name was done away with, the revenue [from the Digital printers] dried up. It petered away," said one former Genicom official who declined to
be identified. "I don't want to indicate they did this with the intent of hurting Genicom," he said. "They just didn't focus on it. But they did breach a contract and did
do harm to us."
Compaq did not respond to a request for comment on its actions regarding the Digital purchase.
Meanwhile, Genicom encountered other financial setbacks, such as the unexpected expense of installing a new company computer system, which cost $20 million
instead of the anticipated $6 million.
Winn added that a printer repair depot the company started in Louisville looked promising at first. Genicom liked the fact that United Parcel Service had a major
transportation hub there so that it could quickly ship the repaired printers back to their owners--until it realized that UPS also repaired printers and other high-tech
equipment in Louisville.
"It was not profitable, never was," Winn said of the repair center, which was closed in December.
As Genicom's financial setbacks mounted, it became harder and harder to pay its lenders. By the third quarter of last year it was violating its credit terms.
Winn said, "The interesting point was that we had a way to get out of all this, but the banks weren't interested." He said Genicom officials had persuaded a second group of banks to pay off the first group, albeit at a discounted rate that Winn declined to disclose.
"They were not going to get all they were owed," Winn said of the firm's lenders, "but we think that the discount was more than they're going to get in the bankruptcy case."
As the calendar turned to 2000, Genicom's financial health was growing more precarious by the day. The Nasdaq market delisted the firm's stock, which once had traded at $16 a share, because it failed to meet the $1 minimum price level and the $4 million net tangible asset requirement.
On March 3, the lenders "swept all my accounts" of collateral that Genicom had posted, Winn said.
"They basically said they wanted to take it into Chapter 11 and sell it at auction," Winn said. Simultaneously, both he and Gale were ousted and Donnellan brought in. "They wanted someone in there who would break it up and sell it," Winn said.
Pete Joost, a Bank of America official who handled some of the negotiations over the demise of Genicom, declined to discuss the banks' role.
So far, the Wilmington court has approved the $6.22 million sale of Genicom's Canadian operations and the $3.5 million sale of a division that made printers for airline tickets, boarding passes and baggage tags. Donnellan said Compaq has agreed to pay $12.6 million as settlement of Genicom's damage claims involving the Digital deal and that the rest of the assets are worth about $12.4 million.
"We're open to all and any offers at this point, whatever way realizes the highest value," said Donnellan, who added that the entire sale may be completed within 60 days.
Uncertain is the fate of Genicom's 570 employees, who work in Chantilly; Waynesboro, Va.; and Texas. Some may keep their jobs under new owners, while
others may lose them or leave.
So, with hindsight, what would Winn have done differently?
He "probably should have sued [Compaq] way earlier," he said. "I should have done it more aggressively."
Winn said he hopes to run another company some day.
"I feel much more valuable as the result of this experience," he said, "but it was very humbling. I'm very proud of my Genicom experience and the first 8 1/2 years
of them were outstanding. This is my first failure of my career."
Down, Soon to be Out
1983: Venture capitalists buy the printer division of General Electric Co. and incorporate it as Genicom.
1990-91: As the company falls into financial difficulty, new mangement is brought in, headed by Paul Winn, a longtime IBM executive who becomes Genicom's
1996: Genicom acquires Texas Instruments' worldwide printer business, which gives Genicom entree into travel-industry printing jobs, such as that for baggage tags
and airline tickets.
1997: Genicom pays $27 million to buy Digital Equipment Corp.'s printer division, which gives Genicom a brand-name printer.
1998: Compaq Computer Corp. buys the remainder of Digital and abandons the use of the Digital name, dealing a severe blow to Genicom's effort to market a
well-known brand and sharply curtailing the revenue it expected from its Digital deal. Still, the firm has $452 million in annual revenue.
1999: By the third quarter, Genicom is operating in violation of its credit agreements.
January 2000: Nasdaq delists Genicom's stock because it fails to meet the $1 minimum price level as well as the $4 million net tangible asset requirement.
March: Winn and Chief Financial Officer James Gale are ousted by lenders, who force the company into bankruptcy to sell off its assets. Shaun Donnellan is
brought in as chief executive to take the firm through the bankruptcy proceedings.
May: The firm moves out of its elegant Chantilly headquarters and instead operates out of cramped quarters nearby. A federal bankruptcy court in Wilmington,
Del., begins to approve sale of portions of Genicom that eventually will result in the demise of the firm. The fate of the company's 570 employees is uncertain;
some might follow their jobs to the companies that buy portions of Genicom.
© 2000 The Washington Post Company