<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 January 31, 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)
Delaware 94 -2835068
(State of incorporation) (I.R.S. Employer Identification No.)
1250 Ninth Street, Berkeley, California 94710
(Address of principal executive office including zip code)
(510)-524-3950
(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 March 6, 1995, there were 5,111,920 shares of Common Stock of the Registrant
outstanding.
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GENERAL PARAMETRICS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART I FINANCIAL INFORMATION
ITEM 1: Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets
January 31, 1995 and October 31, 1994 3
Consolidated Condensed Statements of Operations
Quarter ended January 31, 1995 and 1994 4
Consolidated Condensed Statements of Cash Flows
Quarter ended January 31, 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
Item 6: Exhibits and Reports on Form 8-K 11
SIGNATURES
</TABLE>
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GENERAL PARAMETRICS CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
Part I- Financial Information
Item 1
<TABLE>
<CAPTION>
Assets
January 31, October 31,
1995 1994
(unaudited)
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,035,000 $ 639,000
Marketable securities 201,000 1,981,000
Accounts receivable, net 2,681,000 2,864,000
Inventories (Note 2) 3,265,000 3,398,000
Prepaid expenses 111,000 58,000
Refundable income taxes - 281,000
----------- -----------
Total current assets 7,293,000 9,221,000
Marketable securities 4,363,000 2,871,000
Property and equipment, net 358,000 400,000
Capitalized software development costs, net (Note 3) 979,000 994,000
----------- -----------
Total assets $12,993,000 $13,486,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 309,000 $ 540,000
Accrued compensation and benefits 212,000 243,000
Other accrued liabilities 89,000 210,000
Income taxes payable 142,000 -
Deferred income tax 44,000 98,000
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Total current liabilities 796,000 1,091,000
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Stockholders' equity (Note 5):
Common stock 51,000 51,000
Additional paid-in capital 2,781,000 2,763,000
Retained earnings 9,365,000 9,581,000
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12,197,000 12,395,000
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$12,993,000 $13,486,000
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements
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GENERAL PARAMETRICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Quarters Ended
January 31,
---------------------------------------
1995 1994
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<S> <C> <C>
Net sales $2,892,000 $3,128,000
Cost of sales 1,796,000 1,926,000
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Gross profit 1,096,000 1,202,000
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Operating expenses:
Marketing and sales 556,000 722,000
Research and development (Note 3) 257,000 323,000
General and administrative 245,000 217,000
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1,058,000 1,262,000
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Income (loss) from operations 38,000 (60,000)
Interest income 91,000 68,000
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Income before income taxes 129,000 8,000
Provision (benefit) for (from) income taxes 39,000 (41,000)
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Net income $ 90,000 $ 49,000
========== ==========
Net income per share $ 0.02 $ 0.01
========== ==========
Average number of common shares and
common share equivalents 5,112,000 5,096,000
========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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GENERAL PARAMETRICS CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
January 31,
--------------------------------
1995 1994
--------------------------------
<S> <C> <C>
Cash flows provided (used) by operating
activities:
Net income $ 90,000 $ 49,000
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation, amortization and
deferred taxes 143,000 186,000
(Increase) decrease in current assets other than
cash, cash equivalents and
marketable securities 544,000 1,203,000
Increase (decrease) in current liabilities (241,000) (256,000)
---------- ----------
Net cash provided by operating activities 536,000 1,182,000
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Cash flows provided (used) by investing activities:
Marketable securities 288,000 (241,000)
Purchases of property and equipment ( 2,000) ( 34,000)
Capitalized software development costs (138,000) (159,000)
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Net cash provided (used) by investing
activities 148,000 (434,000)
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Cash flows provided (used) by financing activities:
Common Stock issued under Employee Stock
Purchase, Employee Stock Option and
Executive Bonus Plans 18,000 36,000
Payment of cash dividends (306,000) (304,000)
----------- ----------
Net cash provided (used) by financing
activities (288,000) (268,000)
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Net increase (decrease) in cash and cash equivalents 396,000 480,000
Cash and cash equivalents at beginning of period 639,000 893,000
---------- ----------
Cash and cash equivalents at beginning of period $1,035,000 $1,373,000
========== ==========
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements.
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GENERAL PARAMETRICS CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1- Financial Statements
The accompanying Consolidated Condensed Balance Sheet of General Parametrics
Corporation at January 31, 1995 and the Consolidated Condensed Statements of
Operations for the quarters ended January 31, 1995 and 1994, respectively, and
the Consolidated Condensed Statements of Cash Flows for the three months ended
January 31, 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 January 31, 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:
<TABLE>
<CAPTION>
January 31, October 31,
1995 1994
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<S> <C> <C>
Raw materials $1,781,000 $1,630,000
Work-in-progress 365,000 175,000
Finished goods 1,119,000 1,593,000
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$3,265,000 $3,398,000
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</TABLE>
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 January 31, 1995, there have been no writedowns of net realizable
value.
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<TABLE>
<CAPTION>
Quarter ended January 31,
1995 1994
-----------------------------------
<S> <C> <C>
Gross research and development
expenditures $ 242,000 $ 315,000
Less: Software development costs
capitalized during the period (138,000) (159,000)
Add: Amortization of software
development costs capitalized
in prior periods 153,000 167,000
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$ 257,000 $ 323,000
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</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 timeof 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
unreralized 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 January 31, 1995:
<TABLE>
<S> <C>
Held-to-maturity securities $3,558,000
Available-for-sale 1,006,000
----------
$4,564,000
</TABLE>
Gross unrealized losses were not material to the financial statements taken as a
whole as of January 31, 1995.
Note 5- Dividends
On February 21, 1995, the Company's Board of Directors declared a cash dividend
of $0.06 per share of Common Stock payable March 24, 1995 to stockholders of
record March 10, 1995.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales were $2,892,000 during the first quarter of fiscal 1995, a 7.5%
decrease compared to net sales of $3,128,000 during the first quarter of fiscal
1994. The decrease in net sales was attributed to lower unit shipments of the
Company's electronic presentation products due to competitive product pressures
and softness in governmental purchases. During the first quarter of fiscal 1995,
revenues in the Company's color printer business increased as the Company
continues its efforts to expand its distribution channels for color printers and
consumables. The Company is currently not aware of any items which would
materially impact revenues either positively or negatively.
Gross profit was 37.9% of net sales for the first quarter of fiscal 1995,
compared to 38.4% for the same period one year ago. The decrease in gross profit
was due to a shift in the Company's product mix to lower margin products and the
weaker U.S. dollar as compared to certain foreign currencies, which resulted in
higher costs for some components/products sourced outside the United States.
Increased competitive pressures could result in further price reductions for the
Company's products, which could have a material adverse impact on gross margins
and operating results.
Marketing and sales expenses were $556,000 (19.2% of the net sales) for the
first quarter of fiscal 1995, compared to $722,000 (23.1% of the net sales) for
the same period one year ago. The decrease in expenditures were the result of
planned reductions in payroll and related expenditures, travel and entertainment
costs and certain other 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 $242,000 (8.4% of the net sales) for the
first quarter of fiscal 1995, compared to $315,000 (10.1% of the net sales) for
the same period one year ago. The decreased expenditures were primarily in
payroll and related costs and overhead costs. The decrease expenditures were the
result of planned reductions and the Company plans to continue its efforts at
cost containment wherever possible. At the same time, the Company plans to
continue its strong 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.
General and administrative expenditures were $245,000 (8.5% of the net sales)
for the first quarter of fiscal 1995, compared to $217,000 (6.9% of the net
sales) for the same period one year ago. The increased expenditures were
primarily due to a $43,000 increase to reserves for doubtful accounts. Without
this expense, general and administrative expenditures would have decreased as
the Company continues its efforts at cost containment of general and
administrative expenditures. 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 income from operations was
$38,000 for the first quarter of fiscal 1995, compared to the loss from
operations of $60,000 for the same period one year ago.
Interest income was $91,000 for the first quarter of fiscal 1995, compared to
$68,000 for the same period one year ago. The increase in interest income was
attributed to the receipt during the first quarter of 1995 of interest
associated with a refund of taxes paid in prior years.
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As a result of the above mentioned factors, the income before income taxes was
$129,000 for the first quarter of fiscal 1995, compared to $8,000 for the same
period one year ago.
The provision for income taxes was $39,000 for the first quarter of fiscal 1995,
compared to the benefit from income taxes of $41,000 for the same period one
year ago. The effective rate of 30.2% for the first quarter of fiscal 1995 was
below the normal statutory rates due to both tax-free interest income and the
availability of research and development credits.
Net income was $90,000 ($.02 per share) for the first quarter of fiscal 1995
compared to $49,000 ($.01 per share) for the first quarter of fiscal 1994.
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 January 31, 1995, the Company had
cash, cash equivalents and marketable securities of $5,599,000 compared to
$5,491,000 at October 31, 1994.
During the first quarter of fiscal 1995, the Company paid a quarterly cash
dividend totaling $306,000 ($ 0.06 per share). This payment represented the
Company's eighteenth consecutive quarterly cash dividend.
On February 21, 1995, the Company's Board of Directors declared a cash dividend
of $0.06 per share of Common Stock, payable March 24, 1995 to stockholders of
record on March 10, 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, 1995. As of January 31, 1995,
the Company had no outstanding amounts due under its Letter of Credit facility.
Also, the Company has approximately $349,000 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 three months
of fiscal 1995, additions to property and equipment were $ 2,000 compared to $
34,000 for the same period one year earlier.
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 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
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<PAGE> 10
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 6. Exhibits and Reports of Form 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K. There were no reports on Form 8-K filed for the
three month period ended January 31, 1995.
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: March 15, 1995 By /s/ William A. Spazante
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William A. Spazante
Vice President, Finance and Chief Financial Officer
(Principal Financial and Accounting Officer)
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------------------------------------------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000795665
<NAME> GENERAL PARAMETRICS CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> JAN-31-1995
<CASH> 1,035
<SECURITIES> 4,564
<RECEIVABLES> 2,681
<ALLOWANCES> 275
<INVENTORY> 3,265
<CURRENT-ASSETS> 7,293
<PP&E> 358
<DEPRECIATION> 2,630
<TOTAL-ASSETS> 12,993
<CURRENT-LIABILITIES> 796
<BONDS> 0
<COMMON> 51
0
0
<OTHER-SE> 12,146
<TOTAL-LIABILITY-AND-EQUITY> 12,993
<SALES> 2,892
<TOTAL-REVENUES> 2,892
<CGS> 1,796
<TOTAL-COSTS> 1,058
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 43
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 129,000
<INCOME-TAX> 39,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,000
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
