Plagued by Losses, Computer Maker Restructures Debt
After five years of almost uninterrupted financial problems, General Automation Inc. announced Thursday that it has renegotiated a $15-million bank debt and completed several other moves to restructure its computer manufacturing operations.
Nevertheless, the Anaheim company admitted that it expects to post unspecified losses in the last two quarters of its 1986 fiscal year which ends Aug. 2. Although the losses will include red ink from write-offs associated with the latest moves, company officials admitted that the computer operations will also lose money due to slow sales.
However, executives of the company, which has lost nearly $29 million since 1981, contended that the latest moves would end the problems and allow the company to focus its attention on its new family of business computers.
“We have cleared the decks, and we can now move forward,” said Chairman and Chief Executive Leonard Mackenzie. “We’ve been fighting an uphill battle for the last five years.”
Mackenzie acknowledged that the company’s persistent financial woes had scared off potential customers and siphoned off corporate resources. Now, he said, the company would have the flexibility and stature it needs to compete in the cut-throat fight for business computer sales.
Perhaps the most important move for the company was a debt conversion with its two banks that will reduce its debt from about $15 million to $1.3 million. In the agreement, formally signed on May 31, General Automation was forgiven the debt in exchange for a combination of stock, cash, notes and warrants.
The debts had been held by Bracton Corp. in San Francisco and the Federal Deposit Insurance Corp., which was assigned the note by Continental Illinois, the troubled Chicago bank. The agreement calls for Bracton to receive 500,000 shares of common stock, or about 15% of the outstanding shares, a $500,000 note and warrants to purchase another 139,400 common shares. The FDIC received $1.2 million in cash, a note for $250,000 and warrants for nearly 139,400 shares.
The company said the cash to repay the banks came from a $1.25-million investment made by a group of unidentified businessmen. The investors were given a note and warrants for future stock purchases.
In addition, John D. Murray, vice president of finance, said the company has reached a tentative agreement with the Internal Revenue Service to repay about $4.2 million in back taxes and interest over the next five years. The tentative agreement, which covers taxes owed from 1972 through 1982, is subject to final approval of the IRS.
1.5 Million Shares
Furthermore, the company said it has filed with the Securities and Exchange Commission to sell 1.5 million common shares. Proceeds from the sale, scheduled for next month, would be used to repay the IRS, retire debt, pay for ongoing operations and push development of its Zebra family of business computers.
The company said it has also applied to NASDAQ for relisting on its National Market System trading list.
Finally, the company said it intends to close a handful of European sales offices and sell the manufacturing and development operations of its mid-size computer line to an unidentified Orange County company. The company, however, will continue to sell the systems on behalf of the new manufacturer.
All told, Mackenzie said the steps would allow General Automation to concentrate its efforts on its only remaining products: the Zebra systems.
Since the systems were introduced in mid-1983, General Automation has increasingly moved to bank its entire future on them. Now that they are the company’s only product, Mackenzie said General Automation will push new development and sales on the mid-size businesses that are its target customers.
