Struggling Firm Feels It May Have Passed Low Point
Computer Automation, the troubled Irvine maker of electronics equipment, resumed its interrupted annual meeting Thursday and revealed that it expects to report yet more operating losses for the third fiscal quarter ended March 31, marking its 14th consecutive quarterly loss.
However, company officials tempered the latest round of disappointing news with indications that the struggling company, which has lost more than $20 million in the last three years, may have passed its lowest point.
According to chairman and chief executive George Pratt, operations, which were severely trimmed over the last year, are close to the break-even point. Other officials confirmed that the company is expecting its sales to increase in the current quarter, largely because of a new product the company will formally unveil within the next two weeks.
In addition, Pratt revealed that the company has renegotiated the lease for its headquarters, giving the company a minimum immediate cash payment of $1.5 million and the possibility of another $500,000 within the next six months. Furthermore, he said that the company’s $400,000 credit line, originally set to expire two weeks ago, has been extended through the end of May and that the company will soon begin receiving its monthly payments from the sale of one of its divisions.
“The cash-flow problems have (been) alleviated somewhat,” Pratt told the shareholders. Just four months ago, company officials said cash reserves were so low that Computer Automation faced the possibility of a bankruptcy filing.
Last month the firm abruptly announced to gathered shareholders that its annual meeting would be postponed because officials had received notice that liability insurance for directors and officers had been suddenly canceled. Company officials said they were offered no explanation for the cancellation and blamed the move on the widespread retrenchment of insurance companies from liability coverage.
Although the company has yet to find replacement insurance for its top officials, Pratt said the newly reelected directors have all agreed to serve on the board without liability coverage. However, Pratt said the board members had reserved the right not to serve a full term.
Remarks to Shareholders
In prepared remarks to about two dozen shareholders and employees assembled in the company’s austere headquarters, Pratt said Computer Automation has largely accomplished its goals set one year ago.
He cited the sale of the company’s computer services division, the closing of its German subsidiary and the consolidation of its domestic operations into a single facility in Irvine. As a result of the moves, Pratt said, the company’s work force, which numbered 910 just two years ago, had dropped to 176.
But, despite the cuts, Pratt said the company has been unable to turn a profit because of “the sharp reversal in demand for automatic test equipment,” the electronic diagnostic devices that have become Computer Automation’s primary line of business.
Pratt said company efforts had also been “sidetracked” by unwanted publicity surrounding a recently withdrawn acquisition bid from Everett/Charles Test Equipment Inc. in Pomona. In an unsolicited bid, Everett/Charles proposed to buy Computer Automation for about $3 per share and merge the two operations into a single facility.
Everett/Charles president and controlling shareholder Jerry Hudspeth withdrew the offer last week after Computer Automation officials repeatedly failed to accept it.