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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JULY 2, 1994
COMMISSION FILE NO. 1-8045
______________________
GENRAD, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-1360950
- ------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. employer identification number)
incorporation or organization)
300 BAKER AVENUE, CONCORD, MASSACHUSETTS 01742
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 369-4400
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 X No
------- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
19,065,133 shares of Common Stock, $1 par value, outstanding July 29,
1994
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<TABLE>
GENRAD, INC. AND SUBSIDIARIES
-----------------------------
TABLE OF CONTENTS
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<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheet Assets 1
Consolidated Balance Sheet Liabilities 2
Consolidated Statement of Operations 3
Condensed Consolidated Statement of Cash Flows 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Operating Results 6
PART II. OTHER INFORMATION:
Item 4. - Submission of Matters to a Vote of Security Holders 9
Item 6. - Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
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1.
<TABLE>
PART I. FINANCIAL INFORMATION
GENRAD, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
Assets
(In thousands)
<CAPTION>
July 2, January 1,
1994 1994
---------- ----------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and equivalents $12,989 $ 8,418
Accounts receivable, net 34,416 30,994
Inventories:
Raw materials 7,592 6,480
Work in process 2,590 3,068
Finished goods 4,755 3,757
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14,937 13,305
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Other current assets 2,916 2,846
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Total current assets 65,258 55,563
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Property, plant and equipment:
Land 519 512
Buildings 25,023 25,591
Machinery and equipment 69,932 67,896
Service parts 17,625 16,640
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113,099 110,639
Less: Accumulated depreciation 97,704 94,566
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15,395 16,073
Other assets 1,358 1,380
Assets held for sale 3,801 4,100
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$85,812 $77,116
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</TABLE>
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
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2.
<TABLE>
GENRAD, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
Liabilities and Stockholders' Equity
(In thousands)
<CAPTION>
July 2, January 1,
1994 1994
--------- ---------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Notes payable to banks $ 2,106 $ 3,475
Trade accounts payable 6,589 5,437
Accrued liabilities 33,535 27,330
Accrued compensation and
employee benefits 9,749 10,134
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Total current liabilities 51,979 46,376
--------- ---------
Long-term Liabilities:
Long-term debt 48,884 48,851
Accrued pensions and benefits 13,817 12,985
Future lease costs of unused facilities 10,814 12,682
Other long-term liabilities 1,510 1,509
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Total long-term liabilities 75,025 76,027
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Stockholders' Equity (deficit):
Common stock, $1 par value
Authorized 60,000 shares; issued and
outstanding 19,060,000 and 18,530,000 19,060 18,530
Additional paid-in capital 105,838 105,177
Accumulated deficit (163,475) (166,492)
Equity adjustment from foreign
currency translation (2,615) (2,502)
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Total stockholders' equity (deficit) (41,192) (45,287)
--------- ---------
$ 85,812 $ 77,116
========= =========
</TABLE>
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
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3.
<TABLE>
GENRAD, INC. AND SUBSIDIARIES
Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
------------------ ----------------
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Sales of products $ 30,287 $ 34,170 $ 57,891 $ 69,005
Sales of services 6,540 8,019 12,921 15,933
----------- ----------- ----------- -----------
36,827 42,189 70,812 84,938
----------- ----------- ----------- -----------
Cost and expenses:
Cost of products sold 16,590 20,236 31,551 40,577
Cost of services sold 2,829 4,297 6,085 8,557
----------- ----------- ----------- -----------
19,419 24,533 37,636 49,134
----------- ----------- ----------- -----------
Gross margin 17,408 17,656 33,176 35,804
Operating expenses:
Selling, general and administrative 10,604 13,442 20,945 24,848
Research and development 3,694 4,157 6,983 7,753
----------- ----------- ----------- -----------
14,298 17,599 27,928 32,601
----------- ----------- ----------- -----------
Operating income 3,110 57 5,248 3,203
Other income (expense):
Interest income 78 73 114 134
Interest expense (976) (1,113) (2,018) (2,212)
Other-net 274 190 403 (28)
----------- ----------- ----------- -----------
(624) (850) (1,501) (2,106)
----------- ----------- ----------- -----------
Income (loss) before taxes 2,486 (793) 3,747 1,097
Income taxes 480 - 730 560
----------- ----------- ----------- -----------
Net income (loss) $ 2,006 $ (793) $ 3,017 $ 537
=========== =========== =========== ===========
Net income (loss) per share $ 0.10 $ (0.04) $ 0.15 $ 0.03
Average common shares outstanding 19,815,000 18,021,000 19,787,000 18,829,000
</TABLE>
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
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4.
<TABLE>
GENRAD, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended
----------------
July 2, July 3,
1994 1993
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<S> <C> <C>
Operating activities:
Net income $ 3,017 $ 537
Adjustments to reconcile net income
to net cash provided (used) by operating activities:
Depreciation and amortization 3,034 4,461
Reserve for future lease costs of unused facilities, net (2,610) (1,197)
Increase (decrease) resulting from changes
in operating assets and liabilities
Accounts receivable (2,361) (5,429)
Inventories (1,365) (2,934)
Trade accounts payable 1,021 (1,171)
Income taxes - 359
Accrued liabilities 6,196 2,703
Accrued compensation and employee benefits 121 (881)
Prepaid expense 23 2,262
Other, net 430 134
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Net cash provided (used) by operating activities 7,506 (1,156)
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Investing activities:
Purchases of property, plant and equipment (2,127) (2,966)
Proceeds from sale of property, plant and equipment 103 61
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Net cash provided (used) by investing activities (2,024) (2,905)
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Financing activities:
Net change in notes payable (1,820) (777)
Proceeds from employee stock plan 1,191 750
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Net cash provided (used) by financing activities (629) (27)
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Effects of exchange rates on cash (282) 154
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Increase (decrease) in cash equivalents 4,571 (3,934)
Cash and equivalents at beginning of period 8,418 8,621
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Cash and equivalents at end of period $12,989 $ 4,687
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</TABLE>
The accompanying Notes are an integral part of these Consolidated
Financial Statements.
<PAGE> 7
5.
GENRAD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING COMMENTS
Reference is made to the registrant's 1993 annual report to stockholders, which
contains, at pages 15 through 37, financial statements and the notes
thereto, including a summary of significant accounting policies.
With respect to the financial information for the interim periods included in
this report, which is unaudited, the management of the company believes that
all adjustments necessary for a fair presentation of the results for
such interim periods have been included. All adjustments are of a normal and
recurring nature.
The results of any interim period are not necessarily indicative of the results
for the entire year.
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6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS
OPERATING RESULTS
- -----------------
Incoming orders for the Company's products and services declined slightly to
$33 million for the three months and $78 million for the six months ended July
2, 1994 from $37 million and $84 million, respectively, for the comparable
periods in 1993. Included in orders received during the three months and six
months ending July 3, 1993 were $4 million and $12 million, respectively, of
orders related to product lines discontinued in the 1993 third quarter.
Excluding orders for these discontinued product lines, year- to-date product
and service orders increased reflecting increased demand for the Company's
products.
Net product and service revenues were $37 million for the three months and $71
million for the six months ended July 2, 1994 as compared to $42 million and
$85 million, respectively, for the same periods in 1993. The reduction between
comparable periods stems in part from the Company's discontinuance of certain
product lines during the 1993 third quarter. Discontinued product lines
contributed $4 million for the three months and $8 million for the six months
ended July 3, 1993. In addition, the three months and six months ended July 3,
1993 included $10 million and $20 million, respectively, in increased revenues
derived from contracts with Ford of Europe and the U.S. Marine Corps. Although
these contracts continue, revenues from these contracts reached peak levels
during 1993. Revenues derived from the international market accounted for 58%
and 61% of revenues for the three and six months ended July 2, 1994, as
compared to 51% and 54% for the similar periods in 1993. Product and service
revenues derived from the international market are subject to the risks of
currency fluctuations.
Backlog at the end of the 1994 second quarter was $26 million as compared to
$19 million at year-end 1993 and $34 million at the end of the 1993 second
quarter. The 1993 second quarter backlog included $7 million related to the
discontinued product lines and $6 million in increased backlog related to
the Ford of Europe and U.S. Marine Corps contracts. A substantial portion of
the second quarter 1994 ending backlog is scheduled for shipment prior to the
end of 1994.
Gross margin as a percent of revenues increased to 47% for the three and six
months ended July 2, 1994 from 42% in the comparable periods in 1993. Gross
margin percentages increased due to changes in product mix as a result of a
relative decrease in revenue levels of automotive electronics diagnostic
systems and revenues under the U.S. Marine Corps contract which have lower
margins than the Company's electronic manufacturing test products. In addition,
margins have improved as a percentage of revenues due to cost reductions
achieved as a result of the 1993 restructuring. However, and partially
offsetting some of the margin improvements noted above, the Company continues
to be impacted by competitive pricing pressures.
Operating Expenses decreased for the three and six month periods of 1994 to
$14.3 million and $27.9 million, respectively, from $17.6 million and $32.6
million in the comparable periods in 1993, which 1993 amounts include a charge
of $1.6 million taken for senior management severance. The decline in expenses
is directly related to the Company's 1993 restructuring which was initiated at
the end of the third quarter of 1993 and resulted in a reduction in workforce,
discontinued product lines, reduced facility costs and reduced depreciation.
Exclusive of the benefits of the restructuring, the Company's operating
expenses increased as a result of the Company's establishment of two additional
sales offices to service its automotive customers and from increased costs
associated with sales and operating performance incentive programs.
<PAGE> 9
7.
The provision for taxes in 1994 and 1993 represents foreign and state income
taxes. The Company utilized existing operating loss carryforwards to offset
current requirements for United States Federal Income Taxes.
As a result of the above, the Company reported net income of $2,006,000 for the
three months and $3,017,000 for the six months ended July 2, 1994 as
compared to a net loss of ($793,000) and net income of $537,000, respectively,
for the similar periods last year.
During the third quarter 1993, the Company developed and began the
implementation of a worldwide restructuring program. The results for the three
and six month periods ended July 2, 1994 reflect the benefits of a company-wide
reduction in force and reflect cash outflows for severance pay of approximately
$1.0 million and $2.4 million, respectively, related to the third quarter 1993
restructuring. Asset write-offs resulted in $0.7 million of depreciation
savings in the three months and $1.3 million in the six months ended July 2,
1994, related to the third quarter 1993 restructuring. Excess facilities
reserves relate primarily to lease losses for vacated or excess domestic and
European facilities. Net cash outflows related to excess facilities were $0.5
million and $1.2 million for the three months and six months ended July 2,
1994, respectively, related to the third quarter 1993 restructuring and $0.8
and $1.6 million, respectively, related to earlier restructurings. Operating
expense reductions for discontinued product lines related to the third quarter
1993 restructuring totaled $3.0 million for the three months and $5.9 million
for the six months ended July 2, 1994 in relation to the 1993 periods.
The Company is a named defendant in a patent infringement litigation matter
with a competitor. During the 1993 fourth quarter, the Company established a
reserve to cover its best estimate of the outcome of settlement negotiations.
During the 1994 first quarter, the Company increased its estimate of
legal costs and recorded such increase in General & Administrative Expenses.
In management's opinion, current reserves are adequate to cover the potential
outcome of the dispute.
LIQUIDITY AND SOURCES OF CAPITAL
- --------------------------------
Cash and equivalents increased by $4.6 million for the six months ended July 2,
1994. The increase reflects improved operating results which generated $7.5
million in cash and proceeds from employee stock purchases which
generated $1.2 million in cash, partially offset by the Company's investment in
research and development and productive equipment of $2.1 million and the
repayment of short-term borrowings of $1.8 million.
The Company is a party to long-term leases related to office closings and
vacated domestic and European facilities provided for in the Company's 1993 and
prior restructurings. During the six months ended July 2, 1994, cash of
approximately $2.8 million was used to fund these arrangements. Additional
funding of approximately $2.8 million is projected for the remaining quarters
of 1994. Such amounts do not include any benefit or additional cash outlays
that may result from surrendering or sub-leasing any of the facilities since
it is uncertain as to whether any such arrangements can be consummated during
1994. During the six months ended July 2, 1994, cash of approximately $3.2
million was used to fund severance and other items provided in the 1993
restructuring.
The Company's primary source of liquidity is internally generated funds. The
Company also has existing available secured lines of credit of up to $15.7
million of which $2.1 million was outstanding at the end of the second quarter
of 1994. The total available borrowings consist of a $12 million U.S. credit
facility entered into in June 1992 which expires January 1, 1995, and $3.7
million in a U.K. credit facility.
<PAGE> 10
8.
Borrowings under the U.S. credit facility are secured by all of the Company's
domestic assets and are subject to compliance tests and restrictions. Under
these restrictions, at July 2, 1994 the Company had an available borrowing
capacity of $9.1 million under the U.S. credit facility. Additionally, the
borrowings under the U.K. credit facility are secured by all of the Company's
U.K. assets and are payable on demand. Certain of the Company's assets held
for sale, once disposed of, could reduce the Company's available lines of
credit.
The Company's ability to fund its working capital and capital expenditure
requirements, make interest payments on its convertible debentures and other
borrowings and meet its other cash obligations, including those arising from
its recent restructurings, will depend, among other things, on the continued
availability and compliance with its credit lines. Management believes that
internally generated funds and its available credit lines will provide the
Company with sufficient sources of funds to satisfy its anticipated
requirements in 1994. However, if revenues or margins decrease significantly,
thereby reducing internally generated funds, the Company may require
significant funds from outside financing sources. In such event, there can be
no assurance that the Company would be able to obtain such funding as and when
required or on acceptable terms.
<PAGE> 11
9.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Annual Meeting of Shareholders of GenRad, Inc. was held on
May 12, 1994
(b) Not required pursuant to Instruction #3
(c) By a vote of 15,857,199 shares in favor, and 335,306 shares
withheld, the shareholders voted to approve the election of
Directors as described in the Proxy Statement dated April 8,
1994. The schedule of votes cast 'for' and 'withheld from'
respectively, for each Director were as follows: James F. Lyons,
15,863,411 and 329,086; and Adriana Stadecker, 15,857,191 and
335,306. By a vote of 9,497,292 shares in favor, 1,558,526
opposed, 121,730 abstaining and 5,014,949 not voted, the
shareholders voted to approve the amendment to the Company's
1991 Equity Incentive Plan as described in the Proxy Statement
dated April 8, 1994. By a vote of 10,341,964 shares in favor,
741,651 opposed, 93,933 abstaining and 5,014,949 not voted, the
shareholders voted to approve the amendment to the Company's
Employee Stock Purchase Plan as described in the Proxy Statement
dated April 8, 1994. By a vote of 9,388,254 shares in favor,
1,624,120 opposed, 165,174 abstaining and 5,014,949 not voted,
the shareholders voted to approve the Company's 1994 Director
Restricted Stock Plan as described in the Proxy Statement dated
April 8, 1994. By a vote of 15,881,986 shares in favor, 237,081
opposed and 73,430 abstaining, the shareholders voted to approve
the election of auditors as described in the Proxy Statement
dated April 8, 1994.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) There are no exhibits filed with this report.
(b) There were no reports on Form 8-K filed during the
Quarter ended July 3, 1994.
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10.
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.
GENRAD, INC.
by: /s/ ROBERT C. ALDWORTH
---------------------
ROBERT C. ALDWORTH
CHIEF FINANCIAL OFFICER
Date: August 8, 1994
