<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934.
FOR QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934.
For the transition period from to .
Commission file number 0-5260
GENERAL AUTOMATION, INC.
(Exact name of registrant as specified in its charter).
DELAWARE 95-2488811
(State or other jurisdiction of (I.R.S. employer I.D. No.)
incorporation or organization)
17731 MITCHELL NORTH, IRVINE, CALIFORNIA 92714
(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code: (714) 250-4800
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 registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|
As of April 30, 1996 there were 7,392,876 shares of common stock of the
Registrant outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30
1996 1995
--------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 92 $ 101
Accounts receivable, less allowances of
$936 and $444 respectively 6,679 5,679
Inventories 1,862 1,726
Prepaid expenses 991 185
------- -------
Total current assets 9,624 7,691
Long-term receivables 570 570
Property, plant and equipment, net of
accumulated depreciation and
amortization 1,370 1,354
Other assets 691 869
------- -------
TOTAL ASSETS $12,255 $10,484
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 3
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30
1996 1995
--------- ------------
(UNAUDITED)
<S> <C> <C>
LIABILITIES
Current liabilities:
Accounts payable $ 3,210 $ 2,959
Deferred revenue 4,694 3,401
Other accrued liabilities 771 850
Notes payable and current
portion of long-term debt 907 1,119
-------- --------
Total current liabilities 9,582 8,329
-------- --------
Long-term debt, excluding current portion 1,111 1,305
Deferred credits 79 79
-------- --------
Total Liabilities 10,772 9,713
-------- --------
SHAREHOLDERS' EQUITY
Common stock par value $.10 per share
Authorized 30,000,000 shares;
issued and outstanding 7,392,876
at March 31, 1996 and 7,391,776
at September 30, 1995 739 739
Additional paid-in capital 42,534 42,533
Deficit (41,790) (42,501)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 1,483 771
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,255 $ 10,484
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
-------------------- --------------------
1996 1995 1996 1995
-------------------- --------------------
<S> <C> <C> <C> <C>
SALES - PRODUCT $ 2,329 $ 1,128 $ 4,601 2,647
SALES - SERVICE REVENUE 3,958 1,647 7,237 3,281
-------------------- --------------------
Total 6,287 2,775 11,838 5,928
-------------------- --------------------
COSTS AND EXPENSES:
Cost of sales - Product 2,143 1,101 4,167 2,359
Cost of sales - Service 2,172 1,201 4,336 2,394
Research and development 271 118 494 239
Selling and administrative 1,101 956 1,973 1,845
Other, net 28 17 16 81
-------------------- --------------------
5,715 3,393 10,986 6,918
-------------------- --------------------
OPERATING INCOME 572 (618) 852 (990)
Interest income 7 12 8 29
Interest expense (72) (104) (149) (210)
-------------------- --------------------
INCOME/(LOSS) BEFORE INCOME TAXES 507 (710) 711 (1,171)
Provision for income taxes 0 0 0 0
-------------------- --------------------
NET INCOME/(LOSS) $ 507 $ (710) $ 711 $ (1,171)
==================== ====================
PER SHARE-PRIMARY:
NET INCOME/(LOSS) $ 0.07 $ (0.10) $ 0.10 $ (0.12)
==================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
------------------------
MARCH 31, MARCH 31,
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME/(LOSS) 711 (1,171)
Adjustments to reconcile net income to net cash
provided by or (used) for operations:
Gain from disposal of assets (55)
Depreciation and amortization 29 171
Changes in assets, (increase)/decrease
and liabilities, increase/(decrease):
Accounts receivable (1,000) (111)
Inventories (136) 496
Prepaid expenses (806) (111)
Other assets 178
Accounts payable 251 375
Deferred revenue 1,293 149
Accrued expense (79) 59
------- -------
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES 441 (143)
------- -------
CASH FLOWS (USED FOR) PROVIDED BY INVESTING ACTIVITIES:
Purchases of property, plant and equipment (45) (1,267)
Sale of SGA Pacific, Ltd. 1,045
------- -------
NET CASH USED FOR INVESTING ACTIVITIES (45) (222)
------- -------
CASH FLOWS (USED FOR) PROVIDED BY FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1
Proceeds from issuance of notes payable 276 1,306
Principal payments on notes (682) (1,024)
------- -------
NET CASH (USED FOR) PROVIDED BY FINANCING ACTIVITIES (405) 282
------- -------
Decrease in cash (9) (83)
Cash at beginning of period 101 230
------- -------
Cash at end of period $ 92 $ 147
======= =======
Cash paid during the period for:
Interest $ 149 $ 221
======= =======
Income taxes $ 0 $ 0
======= =======
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE> 6
GENERAL AUTOMATION, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. FINANCIAL STATEMENTS:
The financial statements for the current year included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission and reflect all adjustments, consisting
of normal recurring adjustments, which, in the opinion of management, are
necessary for a fair statement of the results of the interim periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that disclosures are adequate to make the information
presented not misleading. It is suggested that these condensed financial
statements be read in conjunction with the Company's latest annual report.
2. INVENTORIES ARE AS FOLLOWS: (IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
--------- -------------
<S> <C> <C>
Materials, subassemblies and service spares $1,640 $1,498
Work in process 123 157
Finished goods 99 71
------ ------
Total Inventories $1,862 $1,726
====== ======
</TABLE>
3. EARNINGS PER COMMON SHARE:
Primary earnings or loss per common share for the three month periods
ended March 31, 1996 and 1995 is based on the weighted average of shares
outstanding, without inclusion of common stock equivalents, as such inclusion
would be anti-dilutive or dilution would be less than 3%.
Weighted average shares outstanding are 7,391,990 and 7,391,913 for the
three and six month periods ended March 31, 1996, and 7,355,665 and 10,074,144
for the three and six month periods ended March 31, 1995.
6
<PAGE> 7
GENERAL AUTOMATION, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL DATA
SUMMARY
The Company's marked improvement during the second quarter of FY 1996
over the same period in FY 1995 is the result of several management decisions to
re-focus the Company into the areas where the Company has the resources and good
reputation, and which offer the greatest opportunity for sustained
profitability. In addition to the actions set out in the two following
paragraphs, the Company strengthened its management team to implement the new
strategies which has resulted in nine consecutive months of profit improvement
and significant revenue gains; further, the Company introduced new systems and
Power95 software products which have had acceptance in the marketplace.
Effective May 22, 1995, the Company and SunRiver Data Systems ("SRDS")
entered into a strategic partnership under which the Company acquired the former
ADDS Pick based business. The acquisition broadened the Company's hardware and
software product offerings as well as adding over 2,000 service customers to its
customer base and effectively doubled the Company's worldwide business and
revenue base. (See "ACQUISITIONS AND DIVESTITURES" in the Company's 1995 Annual
Report on Form 10-K).
Effective August 28, 1995 the Company entered into an agreement with
Sanderson Computers, Inc. ("SCI") under which SCI will be responsible for the
world-wide sales and support of both the Maxial applications software package
and the Zebra 2000 Advanced Library Management and Information System. Under the
terms of the agreement, SCI will pay a royalty to the Company for each Maxial
system sold (the Zebra 2000 system was licensed to the Company by Sanderson
Computers PTY LTD and will provide no future revenues.) The amount of revenues
expected from this agreement are uncertain at this time and are not expected to
materially affect the position of the Company other than to eliminate the losses
previously experienced in support of these products.
SALES
Product sales increased $1,201,000 (106%) and $1,954,000 (74%) for the
three and six month periods ended March 31, 1996, as compared to the same three
and six month periods last year, primarily due to increased Dealer and
International revenues from the strategic partnership with SunRiver Data
Systems.
Service revenues increased $2,311,000 (140%) and $3,956,000 (121%) for
the three and six month periods ended March 31, 1996 compared to last year
primarily due to the strategic partnership with SunRiver Data Systems. Service
revenues on Company manufactured systems continue to decrease as older contracts
are being canceled at a faster rate than they can be replaced with contracts on
new equipment, which generally carry one year warranties and do not
7
<PAGE> 8
generate service revenues. Service revenues of $100,000 for the quarter and
$195,000 year to date were generated by GA's newly formed professional services
group, which utilizes existing personnel to offer hardware and software
consulting services.
Management believes that in the future, the Company will see declining
revenues from its own manufactured hardware. The decline is planned to be offset
with increased sales generated from new hardware produced by other manufacturers
under OEM agreements with Bull Groupe and NCR. The new hardware was introduced
in September, 1995 and for the three and six month periods ended March 31, 1996,
sales of non-GA manufactured hardware increased $484,000 and $855,000,
respectively, over the same periods last year.
GROSS MARGIN
The overall gross margin percentage for products and service increased
14 percentage points and 8 percentage points for the three and six month periods
ended March 31, 1996 as compared with the corresponding periods of the previous
year. Product gross margins increased 6 percentage points for the three month
period and decreased 1 percentage point for the six month period. The increase
for the three month period is due to the increased sales volume in relation to
fixed costs. The decrease for the six month period is due to a large percentage
of OEM computer systems sales, during the first quarter of the year, which carry
lower margins. Service revenue gross margins increased 18 percentage points and
13 percentage points for the three and six month periods respectively, due to
increased revenues in excess of increased overhead costs resulting from the
strategic partnership agreement.
EXPENSES
Research and development expenses, including engineering, increased
$153,000 and $255,000 during the three and six month periods ended March 31,
1996, respectively, compared to the same period last year. These increased
expenditures are the result of the consolidation of engineering functions
attendant to the strategic partnership.
Selling and Administrative expenses increased $145,000 and $128,000
during the three and six month periods ended March 31, 1996, respectively,
compared to the same period last year. As a percent of sales, the expense levels
have decreased from 34.4% to 17.5% for the quarter and from 31.1% to 16.7% year
to date due to the significant increase in revenue.
Other expenses increased $11,000 and decreased $65,000 during the three
and six month periods ended March 31, 1996, compared to the same period last
year. The increase for the three month period is due to costs associated with
the strategic partnership. During the six month period, these costs were offset
by $55,000 on the disposal of assets from the Company's previously occupied
Anaheim facility.
Interest expense decreased $32,000 and $61,000 for the three and
six month periods ended March 31, 1996 compared with the same period in 1995
due to decreased borrowings resulting from increased cash flows and the nine
consecutive profitable months.
8
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
The Company continues to operate on improved cash resources.
The Company's liquidity needs are met through receivable collections
and asset-based loans. Through these two vehicles, we have met our supplier's
requirements and have been able to continue the debt retirement effort begun in
1994. The Company is in the process of seeking a new line of credit, perhaps as
high as $1,000,000, which is based on a more normal lending basis and at a lower
cost. The continued profitability of the Company is the key element in obtaining
this new line of credit. This new line would then be available for the Company
to expand the business; management does not envision it being required for the
current operations.
Net cash provided by operating activities for the six months ended
March 31, 1996 was $441,000. Cash of $1,942,000 was consumed by increases in
receivables, inventory and prepaid expenses while increases in accounts payable
and deferred revenue generated $1,544,000.
Net cash of $45,000 was consumed by investing activities attributable
to the purchase of fixed assets.
Financing activities consumed net cash of $405,000, through new notes
issued of $276,000 to finance annual insurance premiums, offset by net payments
of debt totaling $682,000. Employees exercised stock options which generated
cash of $1,000.
Currently, the Company has an agreement with a U.S. lender for a
revolving line of credit, not to exceed $800,000 plus monthly fees, which is
collateralized by domestic accounts receivable. The agreement is renewable at
six month intervals. The interest rate is prime plus 6%, but not less than 14%,
payable monthly. In addition, there are other monthly costs for maintaining the
open line of credit. Because the amount of borrowing is dependent upon accounts
receivable levels, varying levels of domestic activity could preclude full
utilization of the facility. Management believes that these funds will be
adequate for the short term, however, it is actively seeking to secure funding
at a more competitive rate to provide additional capital for expansion. At March
31, 1996, the balance of the loan was $311,000. The Line of credit contains
various covenants and restrictions. At March 31, 1996, the Company was in full
compliance with all covenants and restrictions.
The accounts receivable balance at March 31, 1996 was $6,679,000, an
increase of $1,000,000 from September 30, 1995. This growth is primarily due to
the $1,317,000 increase in annual billings by the Company on the previously held
SunRiver contracts. These contracts are billed 45 days prior to the customer's
anniversary date. The Company records revenue on a monthly amortized basis; the
annualized portion of the unpaid receivables when compared to current period
revenues can result in a higher than normal "days outstanding" profile.
9
<PAGE> 10
ITEM 3. OTHER INFORMATION
The Company has been named as one of three defendants in a lawsuit
brought by the owner of real property once leased and used by a division of the
Company as part of its operations. The plaintiff is seeking relief from alleged
environmental damages which may have occurred on the property before, during, or
after the time the Company leased the property. The extent of the damage, if
any, has not been determined at this time nor has the extent of the Company's
liability, if any, been established in relation to the other defendants. All of
the parties to the action, including the plaintiff, are jointly funding testing
to determine the contamination, and scope of any required remedial effort. The
Company has two of its insurance carriers contributing to the Company's legal
expenses associated with this matter. However, such contribution is being made
under a reservation of rights. Until the testing results are available to
determine the environmental damages, if any, the Company has not recorded a
liability for any financial exposures attributed to the Company for remedial
effort
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GENERAL AUTOMATION, INC.
DATE: April 30, 1996 By: /s/ John R. Donnelly
-----------------------
John R. Donnelly
Vice President, Finance
Chief Financial Officer
10
<PAGE> 11
PART II OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
INTERNALLY PREPARED FOR SIX MONTHS ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-Q FOR PERIOD ENDED MARCH 31, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 92
<SECURITIES> 0
<RECEIVABLES> 7,615
<ALLOWANCES> 936
<INVENTORY> 1,862
<CURRENT-ASSETS> 9,624
<PP&E> 3,615
<DEPRECIATION> 2,245
<TOTAL-ASSETS> 12,255
<CURRENT-LIABILITIES> 9,582
<BONDS> 1,111
0
0
<COMMON> 739
<OTHER-SE> 1,483
<TOTAL-LIABILITY-AND-EQUITY> 12,255
<SALES> 4,601
<TOTAL-REVENUES> 11,838
<CGS> 4,167
<TOTAL-COSTS> 8,513
<OTHER-EXPENSES> 2,435
<LOSS-PROVISION> 48
<INTEREST-EXPENSE> 149
<INCOME-PRETAX> 711
<INCOME-TAX> 0
<INCOME-CONTINUING> 711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 711
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
