<PAGE> 1
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 quarterly period ended April 30, 1995 or
Transition report pursuant to Section 13 or 15 (d)
- ----- of the Securities Exchange Act of 1934
For the transition period from ___________ to ___________
Commission File Number 0-14836
GENERAL PARAMETRICS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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<S> <C>
Delaware 94-2835068
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(State of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
1250 Ninth Street, Berkeley, California 94710
- ---------------------------------------------
(Address of principal executive office including zip code)
(510)-524-3950
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(Telephone including area code)
Not Applicable
- ---------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
----- ----
At June 5, 1995, there were 5,113,635 shares of Common Stock of the Registrant
outstanding.
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GENERAL PARAMETRICS CORPORATION
INDEX
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Page No.
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PART I FINANCIAL INFORMATION
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ITEM 1: Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets
April 30, 1995 and October 31, 1994 3
Consolidated Condensed Statements of Operations
Quarter ended April 30, 1995 and 1994 4
Consolidated Condensed Statements of Cash Flows
Quarter ended April 30, 1995 and 1994 5
Notes to Consolidated Condensed Financial Statements 6
ITEM 2: Management s Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II OTHER INFORMATION
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Item 6: Exhibits and Reports on Form 8-K 11
SIGNATURES
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GENERAL PARAMETRICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
Part I- Financial Information
Item 1
Assets
<TABLE>
<CAPTION>
April 30, October 31,
1995 1994
(unaudited)
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 963,000 $ 639,000
Marketable securities 2,523,000 1,981,000
Accounts receivable, net 2,120,000 2,864,000
Inventories (Note 2) 3,621,000 3,398,000
Prepaid expenses 89,000 58,000
Refundable income taxes 28,000 281,000
----------- -----------
Total current assets 9,344,000 9,221,000
Marketable securities 2,040,000 2,871,000
Property and equipment, net 333,000 400,000
Capitalized software development costs, net (Note 3) 959,000 994,000
----------- -----------
Total assets $12,676,000 $13,486,000
=========== ===========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Accounts payable $ 396,000 $ 540,000
Accrued compensation and benefits 205,000 243,000
Other accrued liabilities 100,000 210,000
Income taxes payable - ---
Deferred income tax 171,000 98,000
----------- -----------
Total current liabilities 872,000 1,091,000
----------- -----------
Stockholders equity (Note 5):
Common stock 51,000 51,000
Additional paid-in capital 2,782,000 2,763,000
Retained earnings 8,971,000 9,581,000
----------- -----------
11,804,000 12,395,000
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$12,676,000 $13,486,000
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
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GENERAL PARAMETRICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
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<CAPTION>
Quarters Ended Six Months Ended
April 30, April 30,
------------------------- -------------------------
1995 1994 1995 1994
---- ---- ----- ----
<S> <C> <C> <C> <C>
Net sales $2,402,000 $ 3,009,000 $5,294,000 $ 6,137,000
Cost of sales 1,528,000 1,899,000 3,324,000 3,825,000
---------- ----------- ---------- -----------
Gross margin 874,000 1,110,000 1,970,000 2,312,000
---------- ----------- ---------- -----------
Operating expenses:
Marketing and sales 612,000 829,000 1,168,000 1,551,000
Research and development (Note 3) 279,000 335,000 536,000 658,000
General and administrative 204,000 234,000 449,000 451,000
---------- ----------- ---------- -----------
1,095,000 1,398,000 2,153,000 2,660,000
---------- ----------- ---------- -----------
Income (loss) from operations (221,000) (288,000) (183,000) (348,000)
Interest income 59,000 67,000 150,000 135,000
---------- ----------- ---------- -----------
Income (loss) before income taxes (162,000) (221,000) ( 33,000) (213,000)
Provision (benefit) for (from) income taxes ( 75,000) (109,000) ( 36,000) (150,000)
---------- ----------- ---------- -----------
Net income (loss) $ ( 87,000) $ (112,000) $ 3,000 $ ( 63,000)
========== =========== ========== ===========
Net income (loss) per share $ (0.02) $ (0.02) $ 0.00 $ (0.01)
========== =========== ========== ===========
Average number of common shares
and common share equivalents 5,114,000 5,086,000 5,114,000 5,086,000
========== =========== ========== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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GENERAL PARAMETRICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
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<CAPTION>
Six Months Ended
April 30,
--------------------------
1995 1994
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<S> <C> <C>
Cash flows provided (used) by operating
activities:
Net income (loss) $ 3,000 $ (63,000)
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation, amortization and
deferred taxes 471,000 331,000
(Increase) decrease in current assets other than
cash, cash equivalents and
marketable securities 743,000 1,299,000
Increase (decrease) in current liabilities (292,000) (363,000)
----------- ----------
Net cash provided by operating activities 925,000 1,204,000
----------- ----------
Cash flows provided (used) by investing activities:
Marketable securities 289,000 52,000
Purchases of property and equipment ( 19,000) ( 46,000)
Capitalized software development costs (277,000) (340,000)
----------- ----------
Net cash provided (used) by investing
activities (7,000) (334,000)
----------- ----------
Cash flows provided (used) by financing activities:
Common Stock issued under Employee Stock
Purchase, Employee Stock Option and
Executive Bonus Plans 19,000 39,000
Payment of cash dividends (613,000) (609,000)
----------- ----------
Net cash provided (used) by financing
activities (594,000) (570,000)
----------- ----------
Net increase (decrease) in cash and cash equivalents 324,000 300,000
Cash and cash equivalents at beginning of period 639,000 893,000
----------- ----------
Cash and cash equivalents at beginning of period $ 963,000 $1,193,000
=========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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<PAGE> 6
GENERAL PARAMETRICS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1- Financial Statements
The accompanying Consolidated Condensed Balance Sheet of General Parametrics
Corporation at April 30, 1995 and the Consolidated Condensed Statements of
Operations for the quarters ended April 30, 1995 and 1994, respectively, and
the Consolidated Condensed Statements of Cash Flows for the three months ended
April 30, 1995 and 1994, respectively, have not been audited by independent
accountants. However, in the opinion of management, all adjustments, consisting
only of normal, recurring adjustments necessary for a fair statement of the
results of operations for the interim periods, have been made.
The results of operations for the quarter ended April 30, 1995 are not
necessarily indicative of results expected for the fiscal year ended October
31, 1995. The Consolidated Condensed Financial Statements included in this Form
10-Q should be read in conjunction with the audited Consolidated Financial
Statements and Notes thereto included in the Company s Annual Report on Form
10-K for the fiscal year ended October 31, 1994. The Consolidated Condensed
Financial Statements included in this Form 10-Q should be read in conjunction
with the audited Consolidated Financial Statements and Notes thereto included
in the Company s Annual Report on Form 10-K for the fiscal year ended October
31, 1994.
Note 2- Inventories
Inventories consisted of:
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April 30, October 31,
1995 1994
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<S> <C> <C>
Raw materials $1,962,000 $1,630,000
Work-in-progress 290,000 175,000
Finished goods 1,369,000 1,593,000
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$3,621,000 $3,398,000
========== ==========
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Note 3- Research and development expenses
The Company capitalizes software development costs in accordance with Statement
of Financial Accounting Standards No. 86 "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed". Software development costs
are capitalized when technological feasibility has been achieved. Amortization
of these costs begins when the products are available for general release to
customers and is computed on a product-by-product basis using amortization
periods not exceeding three years. Amortization represents the greater of the
amount computed using: (a) the ratio that current gross revenues for a product
bears to the total of current and anticipated future gross revenues for that
product; or (b) the straight-line method over the remaining estimated economic
life of the product.
On a quarterly basis, management reviews each capitalized software development
cost to assure the expected revenues less anticipated costs to produce and
support the product is greater than the net capitalized cost. For the three
months ended April 30, 1995, there have been no writedowns of net capitalized
cost.
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Quarter ended April 30,
---------------------------------
1995 1994
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Gross research and development
expenditures $ 259,000 $ 335,000
Less: Software development costs
capitalized during the period (139,000) (181,000)
Add: Amortization of software
development costs capitalized
in prior periods 159,000 181,000
----------- ------------
$ 279,000 $ 335,000
=========== ============
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<CAPTION>
Six months ended April 30,
-----------------------------------------
1995 1994
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<S> <C> <C>
Gross research and development
expenditures $ 501,000 $ 650,000
Less: Software development costs
capitalized during the period (277,000) (340,000)
Add: Amortization of software
development costs capitalized
in prior periods 312,000 348,000
----------- ------------
$ 536,000 $ 658,000
=========== ============
</TABLE>
Note 4- Marketable securities
Effective November 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS No. 115"). SFAS No. 115 has been adopted on a
prospective basis and the financial statements of prior years have not been
restated. The cumulative effect as of November 1, 1994 of adopting SFAS No. 115
is immaterial.
Under SFAS No. 115, management is required to determine the appropriate
classification of its securities at the time of purchase and reevaluate such
designation as of each balance sheet. Held-to-maturity securities are reported
at amortized cost. Available-for-sale securities are carried at fair value,
with unrealized gains and losses, net reported in a separate component of
shareholders equity until disposition. Realized gains and losses and declines
in value judged to be other than temporary are included in interest income.
Marketable securities include the following held-to-maturity and available-for
sale securities as of April 30, 1995:
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Held-to-maturity securities $ 3,557,000
Available-for-sale 1,006,000
-----------
$ 4,563,000
===========
</TABLE>
Gross unrealized losses were not material to the financial statements taken as
a whole as of April 30, 1995.
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Note 5- Dividends
On May 22, 1995, the Company s Board of Directors declared a cash dividend of
$0.06 per share of Common Stock payable June 12, 1995 to stockholders of record
June 2, 1995.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales were $2,402,000 and $5,294,000 during the second quarter and first
half of fiscal 1995, compared to $3,009,000 and $6,137,000 for the same
periods one year ago. The decrease in net sales was attributed to lower unit
shipments of the Company s color printer and electronic presentation products
due to competitive product pressures. Increased market pressures have
significantly impacted the Company s sales and could continue to do so in the
future. The Company continues its efforts to expand its distribution channels
for color printers and consumables, however, there can be no assurance that
these efforts will be successful. The Company is currently not aware of any
items which would materially impact revenues either positively or negatively as
compared to the second quarter of 1995 level of sales.
Gross profit was 36.4% and 37.2% of net sales for the second quarter and first
six months of fiscal 1995, compared to 36.9% and 37.7% for the same periods
one year ago. The slight decrease in gross profit was due to a shift in the
Company s product mix to lower margin products and higher product costs
resulting from sourcing certain material components denominated in foreign
currencies that strengthened as compared to the U.S. dollar. In addition, the
Company recorded reserves totaling approximately $60,000 for slow-moving and/or
obsolete inventory. The decrease in the margin was partially offset by higher
than expected foreign sales that carried higher than average margins. Increased
competitive pressures will result in further price reductions for the Company s
products, which could have an adverse impact on gross margins and operating
results.
Marketing and sales expenses were $612,000 and $1,168,000 (25.5% and 22.1% of
the net sales, respectively) for the second quarter and first six months of
fiscal 1995, compared to $829,000 and $1,551,000 (27.6% and 25.3% of the net
sales, respectively) for the same periods one year ago. The decreases in
expenditures was the result of planned reductions in payroll and related
expenditures, travel and entertainment costs and other related expenditures.
Other than its ongoing efforts at cost containment, the Company is currently
not aware of any items which would materially impact marketing and sales
expenses either positively or negatively.
Research and development costs (before taking into effect the net
capitalization of software development costs) were $259,000 and $501,000 (10.8%
and 9.5% of the net sales, respectively) for the second quarter and first six
months of fiscal 1995, compared to $335,000 and $650,000 (11.1% and 10.6% of
the net sales, respectively) for the same periods one year ago. The dcreased
expenditures were the result of planned reductions in payroll and related costs
as a result of project completions and cost containment efforts. The Company
plans to continue its efforts at cost containment wherever possible while at
the same time, the Company plans to continue its commitment to its research and
development activities aimed at creating new products and technologies. The
Company is currently not aware of any items which would materially impact
research and development costs either positively or negatively.
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General and administrative expenditures were $204,000 and $449,000 (8.5% and
8.5% of the net sales, respectively) for the second quarter and first six
months of fiscal 1995, compared to $234,000 and $451,000 (7.8% and 7.3% of the
net sales, respectively) for the same periods one year ago. The decreased
expenditures were primarily due to cost containment efforts. The Company is
currently not aware of any items which would materially impact general and
administrative expenses either positively or negatively.
As a result of the above-mentioned factors, the losses from operations were
$221,000 and $183,000 for the second quarter and first six months of fiscal
1995, compared to the losses from operations of $288,000 and $348,000 for the
same periods one year ago.
Interest income was $59,000 and $150,000 for the second quarter and first six
months of fiscal 1995, compared to $67,000 and $135,000 for the same periods
one year ago.
As a result of the above mentioned factors, the losses before income taxes were
$162,000 and $33,000 for the second quarter and first six months of fiscal
1995, compared to the losses before income taxes of $221,000 and $213,000 for
the same periods one year ago.
The benefits from income taxes were $75,000 and $36,000 for the second quarter
and first six months of fiscal 1995, compared to the benefits from income taxes
of $109,000 and $150,000 for the same periods one year ago. The effective
benefit rates for the second quarter and first six months of fiscal 1995 were
higher than the normal statutory rates due to both tax-free interest income and
the availability of research and development credits.
The net loss for the second quarter of fiscal 1995 was $87,000 ($.02 per share)
and the net income for the first six months of fiscal 1995 was $3,000 ($.00 per
share), compared to the net losses of $112,000 ($.02 per share) and $63,000
(.01 per share) for the same periods one year ago.
LIQUIDITY AND CAPITAL RESOURCES
The Company s principal source of cash is the collection of accounts receivable
arising from the sale of its products. At April 30, 1995, the Company had cash,
cash equivalents and marketable securities of $5,526,000 compared to
$5,491,000 at October 31, 1994.
During the second quarter of fiscal 1995, the Company paid a quarterly cash
dividend totaling $307,000 ($ 0.06 per share). This payment represented the
Company s nineteenth consecutive quarterly cash dividend.
On May 22, 1995, the Company s Board of Directors declared a cash dividend of
$0.06 per share of Common Stock, payable June 12, 1995 to stockholders of
record on June 2, 1995.
The Company has a $2,000,000 unsecured documentary letter of credit line
("Letter of Credit") specifically intended to facilitate the purchase of
components through Letters of Credit. Under the terms of this arrangement, the
Company may utilize credit for up to three days for each purchase that utilizes
the Letter of Credit facility. This Letter of Credit is subject to issuance and
negotiation fees of 0.25% and expires March 31, 1996. As of April 30, 1995, the
Company had no outstanding amounts due under its Letter of Credit facility.
Also, the Company has approximately $462,000 of purchase commitments
outstanding through this facility.
The Company believes that its current resources, along with future funds
generated from operations, will be sufficient to support its operating and
capital requirements for the foreseeable future. During the first six months of
fiscal 1995, additions to property and equipment were $19,000 compared to $
46,000 for the same period one year earlier.
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OTHER
From its inception, the Company has maintained a continuous program of
enhancing existing products and introducing new products that have extended its
various product lines. The Company believes that its future success will depend
on its ability to continue to enhance its existing products and/or to develop
new products which meet specific market needs in a cost-effective manner. There
can be no assurance, however, that the Company s products will not be rendered
obsolete by changing technology. Additionally, the introduction of new or
enhanced products by its competitors could adversely affect the company s sales
of existing products. In addition, lack of commercial acceptance of enhanced or
new products introduced by the Company could adversely affect the Company s
results of operations.
The Company principally uses standard components from multiple vendors.
However, in many of its products, certain components which are purchased from
sole-source suppliers. The Company also purchases some printer consumables from
sole-sources. There is no guarantee that the supply of sole-source components
and consumables from these suppliers, along with any new, improved and lower
cost components will continue to be made available to the Company.
The Company attempts to reduce the risk of interruption in supply of components
by maintaining adequate inventory. Loss or interruption of the supply of
components from sole-source supplier would require additional management and
engineering efforts to develop and qualify alternate sources and any such loss
could result in delays in product shipments which could adversely affect the
Company s results of operations.
The Company designs, manufactures and markets a range of presentation hardware
and software products for the business and government marketplaces that
include: color printers and supplies, electronic video presentation products,
and software products used for preparing and giving presentations.
PART II OTHER INFORMATION
Item 4. Submission of Matters to Vote of Securities Holders.
The Registrant held its Annual Meeting of Shareholders March 27, 1995. Proxies
for the meeting were solicited pursuant to Regulation 14A.
(a) The following management nominees for director were elected: Herbert B.
Baskin, J. Thomas Bentley, Luther J. Nussbaum, Victor D. Poor and Eugene T.
Sanders.
(b) The Stockholders approved and ratified the Board of Directors adoption of
the Company s 1995 Stock Option Plan, and the reservation of 500,000 shares of
Common Stock for issuance thereof. The number of shares voting in favor were
2,394,844, against were 181,785 and abstain were 22,791.
(c) The Stockholders approved and ratified the Board of Directors selection of
Price Waterhouse LLP as independent public for the Company for the current
fiscal year ending October 31, 1995. The number of shares voting in favor were
2,593,220, against were 100 and abstain were 6,100.
Item 6. Exhibits and Reports of Form 8-K.
(a) Exhibits - none
(b) Reports on Form 8-K. There were no reports on Form 8-K filed for the three
month period ended April 30, 1995.
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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.
GENERAL PARAMETRICS CORPORATION
Dated: June 5, 1995 By /s/ William A. Spazante
--------------------------------
William A. Spazante
Vice President, Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
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Exhibit Index
Ex. 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> APR-30-1995
<CASH> 963
<SECURITIES> 4,563
<RECEIVABLES> 2,120
<ALLOWANCES> 232
<INVENTORY> 3,621
<CURRENT-ASSETS> 6,821
<PP&E> 333
<DEPRECIATION> 2,672
<TOTAL-ASSETS> 12,676
<CURRENT-LIABILITIES> 872
<BONDS> 0
<COMMON> 51
0
0
<OTHER-SE> 11,753
<TOTAL-LIABILITY-AND-EQUITY> 12,676
<SALES> 5,294
<TOTAL-REVENUES> 5,294
<CGS> 3,324
<TOTAL-COSTS> 2,153
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 46
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (33,000)
<INCOME-TAX> (36,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,000
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
