-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PFE3l5QAEoMubRqwsSGkROwgnHDLCbumbhnkJNHRZ9YkSR7i5LUHWRJhsuOzv49W /olw47q5vGHLQ4VmVEIIMQ== 0000027748-97-000010.txt : 19971216 0000027748-97-000010.hdr.sgml : 19971216 ACCESSION NUMBER: 0000027748-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971101 FILED AS OF DATE: 19971215 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEL GLOBAL TECHNOLOGIES CORP CENTRAL INDEX KEY: 0000027748 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 131784308 STATE OF INCORPORATION: NY FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-03319 FILM NUMBER: 97738080 BUSINESS ADDRESS: STREET 1: 1 COMMERCE PARK CITY: VALHALLA STATE: NY ZIP: 10595 BUSINESS PHONE: 9146863600 MAIL ADDRESS: STREET 1: 1 COMMERCE PARK CITY: VALHALLA STATE: NY ZIP: 10595 FORMER COMPANY: FORMER CONFORMED NAME: DEL ELECTRONICS CORP DATE OF NAME CHANGE: 19920703 10-Q 1 DEL GLOBAL TECHNOLOGIES CORP. 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 Quarter Ended November 1, 1997 Commission File Number 0-3319 DEL GLOBAL TECHNOLOGIES CORP. ----------------------------- (Exact name of registrant as specified in its charter) New York 13-1784308 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Commerce Park, Valhalla, NY 10595 ------------------------------------- (Address of principal executive offices) (Zip Code) (914)686-3600 ------------- (Registrant's telephone number including area code) 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 close of the business on December 11, 1997. Common Stock - 7,471,463 PART I Item 1. Financial Statements Consolidated Balance Sheets - November 1, 1997 and August 2, 1997 Consolidated Statements of Income for the Three Months ended November 1, 1997 and November 2, 1996 Consolidated Statements of Cash Flows for the Three Months ended November 1, 1997 and November 2, 1996 Notes to Consolidated Financial Statements -1- DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) ASSETS November 1, August 2, 1997 1997 ----------- ----------- CURRENT ASSETS Cash and cash equivalents $ 6,444,734 $ 6,070,608 Investments available-for-sale 959,457 722,566 Trade receivables - net 12,113,684 11,211,357 Cost and estimated earnings in excess of 2,283,259 1,868,002 billings on uncompleted contracts Inventory 25,209,188 24,681,348 Prepaid expenses and other current assets 1,868,212 1,808,762 ----------- ----------- Total current assets 48,878,534 46,362,643 ----------- ----------- FIXED ASSETS - Net 11,452,745 11,159,010 INTANGIBLES - Net 1,070,104 1,112,991 GOODWILL - Net 4,087,565 4,135,409 DEFERRED CHARGES 476,978 507,933 OTHER ASSETS 849,656 851,824 ----------- ----------- TOTAL $66,815,582 $64,129,810 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt $ 126,067 $ 127,999 Accounts payable - trade 4,568,043 3,936,529 Accrued liabilities 3,717,297 3,699,188 Deferred compensation liability 784,427 722,566 Income taxes 1,008,438 868,949 ----------- ----------- Total current liabilities 10,204,272 9,355,231 ----------- ----------- LONG-TERM LIABILITIES LONG-TERM DEBT (less current portion included above) 377,840 411,127 OTHER 717,691 725,258 DEFERRED INCOME TAXES 1,165,323 1,107,964 ----------- ----------- Total liabilities 12,465,126 11,599,580 ----------- ----------- SHAREHOLDERS' EQUITY Common stock, $.10 par value; Authorized 20,000,000 shares; Issued and outstanding - 7,611,718 shares at November 1, 1997 and 7,516,234 shares at August 2, 1997 761,171 751,622 Additional paid-in capital 46,535,304 45,909,517 Retained earnings 7,829,305 6,572,318 ----------- ----------- 55,125,780 53,233,457 Less common stock in treasury - 111,255 shares at November 1, 1997 and 104,255 at August 2, 1997 775,324 703,227 ----------- ----------- Total shareholders' equity 54,350,456 52,530,230 ----------- ----------- TOTAL $66,815,582 $64,129,810 =========== =========== See notes to consolidated financial statements -2- DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended ----------------------------- November 1, November 2, 1997 1996 ------------ ------------ NET SALES $ 13,480,069 $ 12,311,384 ------------ ------------ COSTS AND EXPENSES: Cost of sales 8,047,545 7,506,238 Research and development 1,235,889 1,076,827 Selling, general and administrative 2,402,399 2,325,539 Interest income - net (54,275) (19,456) ------------ ------------ 11,631,558 10,889,148 INCOME BEFORE PROVISION FOR INCOME TAXES 1,848,511 1,422,236 PROVISION FOR INCOME TAXES 591,524 433,782 ------------ ------------ NET INCOME $ 1,256,987 $ 988,454 ============ ============ Per share amounts: Net income per common share and common share equivalents $ .15 $ .12 ============ ============ Weighted average number of common shares outstanding and common share equivalents 8,609,984 8,463,327 ============ ============ See notes to consolidated financial statements -3- DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended -------------------------- November 1, November 2, 1997 1996 ----------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,256,987 $ 988,454 Adjustments to reconcile net income to net cash provided by operating activities: Imputed interest 16,570 16,954 Depreciation 320,596 231,625 Amortization 132,931 132,391 Changes in assets and liabilities: (Increase) decrease in trade receivables (902,327) 236,482 Increase in cost and estimated earnings in excess of billings on uncompleted contracts (415,257) -- Increase in inventory (527,840) (880,188) Increase in prepaid and other current assets (69,493) (78,208) Increase in other assets (4,038) (1,831) Increase (decrease) in accounts payable- trade 631,514 (25,085) Increase (decrease) in accrued liabilities 18,112 (511,896) Increase in deferred compensation liability 61,861 33,695 Increase in income taxes payable 201,852 51,614 ----------- ----------- Net cash provided by operating activities 721,468 194,007 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Expenditures for fixed assets (614,333) (607,796) Investment in marketable securities (236,891) (33,695) Payments to former shareholders of subsidiary acquired (24,137) (13,925) ----------- ----------- Net cash used in investing activities (875,361) (655,416) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Net (repayment of) proceeds from bank borrowing (35,219) 323,000 Payment for repurchase of shares (72,097) -- Proceeds from exercise of stock options and warrants 638,548 138,352 Other (3,213) (13,385) ----------- ----------- Net cash provided by financing activities 528,019 447,967 ----------- ----------- (Continued) See notes to consolidated financial statements -4- DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended ------------------------ November 1, November 2, 1997 1996 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 374,126 $ (13,442) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,070,608 5,817,800 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $6,444,734 $ 5,804,358 ========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ 18,005 $ 14,340 ========== =========== Income taxes paid $ 389,672 $ 407,739 ========== =========== Tax benefit related to exercise of stock options and warrants $ -- $ 139,397 ========== =========== See notes to consolidated financial statements -5- DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 In the opinion of the Company's management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the results of the Company's financial position as of November 1, 1997 and the results of its operations and its cash flows for the three months ended November 1, 1997 and November 2, 1996. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements as of August 2, 1997. The consolidated financial statements should be read in conjunction with the notes to the financial statements as of August 2, 1997. NOTE 2 The results of operations for the three month period ended November 1, 1997 are not necessarily indicative of the results to be expected for the full year. NOTE 3 INVESTMENTS Investments available-for-sale at November 1, 1997 and August 2, 1997 include $784,427 and $722,566, respectively, for the Company's President's deferred compensation, pursuant to the terms of his employment contract. The liabilities of $784,427 and $722,566, respectively, are recorded as deferred compensation liability. Gains and losses on the investments held to fund the deferred compensation, either recognized or unrealized, inure to the benefit or detriment of the President's deferred compensation, based upon a contractual arrangement between the President and the Company. At November 1, 1997, the balance of investments available-for-sale of $175,030 are equity securities held by the Company for its own account. Realized and unrealized gains and losses on these securities for the period ended November 1, 1997 were not material and are recorded in the financial statements. NOTE 4 PERCENTAGE OF COMPLETION ACCOUNTING Three Months Ended November 1, August 2, November 1, 1997 1997 1997 ----------- ---------- ----------- Costs incurred on uncompleted contracts $4,047,633 $3,086,020 $ 961,613 Estimated earnings 2,153,236 1,578,126 575,110 ---------- ---------- ---------- 6,200,869 4,664,146 1,536,723 Less: Billings to date 3,917,610 2,796,144 1,121,466 ---------- ---------- ---------- Costs and estimated earnings in excess of billings on uncompleted contracts $2,283,259 $1,868,002 $ 415,257 ========== ========== ========== There were no contracts accounted for under the percentage of completion method of accounting for the three months ended November 2, 1996. The backlog of unshipped contracts being accounted for under the percentage of completion method of accounting was approximately $3,639,000 at November 1, 1997. -6- NOTE 5 INVENTORY Inventory is stated at a lower of cost (first-in, first-out) or market. Inventories and their effect on cost of sales are determined by physical count for annual reporting purposes and are estimated by management for interim reporting purposes. Inventory consists of the following: November 1, August 2, 1997 1997 ----------- ----------- Finished goods $ 3,942,391 $ 3,859,842 Work-in-process 9,979,753 9,770,789 Raw material and purchased ts 11,287,044 11,050,717 ----------- ----------- Total $25,209,188 $24,681,348 =========== =========== NOTE 6 FIXED ASSETS Fixed assets consist of the following: November 1, August 2, 1997 1997 ----------- ----------- Land $ 694,046 $ 694,046 Building 2,146,025 2,146,025 Machinery and equipment 11,439,108 10,865,897 Furniture and fixtures 1,302,072 1,280,216 Leasehold improvements 1,248,258 1,228,992 Transportation equipment 30,103 30,103 ----------- ----------- 16,859,612 16,245,279 Less accumulated depreciation and amortization 5,406,867 5,086,269 ----------- ----------- Net fixed assets $11,452,745 $11,159,010 =========== =========== NOTE 7 Net income per common share was computed using the treasury stock method. NOTE 8 EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS Earnings Per Share. In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." This statement is effective for financial statements issued for periods ending after December 15, 1997. Management has evaluated the effect on its financial reporting from the adoption of this statement and believes it will be significant. If SFAS No. 128 were effective for the quarter ended November 1, 1997, the effect of implementation would have resulted in "Basic Earnings per Share" of $.17 and "Diluted Earnings per Share" of $.15. -7- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management Discussion and Analysis of Financial Condition and Results of Operations contains forward looking statements. Such statements involve various risks that may cause actual results to differ materially. These risks include, but are not limited to, the ability of the Company to grow internally or by acquisition and to integrate acquired businesses, changing industry or competitive conditions, and other risks referred to in the Company's registration statements and periodic reports filed with the Securities and Exchange Commission. OVERVIEW The Company's net sales have increased as a result of both internal growth and acquisitions. The Company has completed three acquisitions in the past five years: Dynarad (a designer and manufacturer of medical imaging systems and critical electronic subsystems) in fiscal 1993; Bertan (a designer and manufacturer of precision high voltage power supplies and instrumentation for medical and industrial applications) in fiscal 1994; and Gendex-Del (a manufacturer of medical imaging systems) in fiscal 1996. The Company's net sales have increased from approximately $18.9 million in fiscal 1992 to approximately $54.7 million in fiscal 1997, a compounded annual growth rate of 23.6%. During the past five years the Company has grown internally and through acquisitions into a company whose predominant business is serving the medical imaging and diagnostic markets. The Company's net sales attributable to medical imaging products have increased from approximately $3.4 million or 17.7% of total net sales in fiscal 1992 to approximately $25.7 million or 59% of total net sales and approximately $35.6 million or 65.1% of total net sales in fiscal years 1996 and 1997, respectively. Management believes that recent cost containment trends in the healthcare industry have created opportunities for its cost-effective medical imaging products in domestic and international markets. Some of these trends are increased demand for lower cost medical equipment, outsourcing of systems and critical electronic subsystems by leading Original Equipment Manufacturers ("OEMs"), increased demand for certain diagnostic procedures and lower cost medical services in the global marketplace. RESULTS OF OPERATIONS Net sales for the three months ended November 1, 1997 were approximately $13.5 million as compared to approximately $12.3 million for the three months ended November 2, 1996, an increase of 9.5%. The increase is due to internal growth from existing operations. Cost of sales, as a percentage of net sales for the three months ended November 1, 1997, was 59.7% compared to 61% for the prior corresponding period. This improvement in margins is due to reduced manufacturing costs from efficiencies implemented in all existing operations. Research and development expenses increased to approximately $1.2 million for the three months ended November 1, 1997 from approximately $1.1 million, an increase of 14.8%, for the three months ended November 2, 1996. The increase was primarily due to new product development. The Company continues to invest in research and development in order to introduce new state-of-the-art products for its medical and industrial markets. Selling, general and administrative expenses were approximately $2.4 million, or 17.8% of net sales, for the three months ended November 1, 1997 as compared to approximately $2.3 million, or 18.9% of net sales, for the same period in the prior year, an increase of 3.3%. This increase was due to higher levels of advertising, increased trade show attendance and the acceleration of amortization of certain intangible assets. Net interest income was approximately $54,000 for the three months ended November 1, 1997 as compared to approximately $19,000 for the corresponding period in the prior year. Interest income resulted from the investment of a portion of the proceeds from the public offering of the Company's common stock, which are invested in money market -8- instruments and high grade commercial paper. Income tax expense was 32% of pre-tax income for the three months ended November 1, 1997 and 30.5% for the three months ended November 2, 1996. The decrease from statutory rates is primarily due to sales being made through the Company's Foreign Sales Corporation, research and development and other tax credits. Net income increased to approximately $1,257,000 for the three months ended November 1, 1997, an increase of approximately 27% from approximately $988,000 for the prior corresponding period. Net income per common share at November 1, 1997 increased to $.15 from $.12 at November 2, 1996, an increase of 25%. The number of common shares outstanding and common share equivalents increased to 8,609,984 at November 1, 1997 from 8,463,327 at November 2, 1996. The increase in net income for the three month period ended November 1, 1997 is primarily due to internal growth and improved gross margins. The backlog of unshipped orders at November 1, 1997 was approximately $33 million. LIQUIDITY AND CAPITAL RESOURCES The Company has funded its operations and acquisitions through a combination of cash flow from operations, bank borrowing and the issuance of the Company's common stock. Working Capital. At November 1, 1997 and August 2, 1997, the Company's working capital was approximately $38.7 million and $37.0 million, respectively. At such dates the Company had approximately $6.4 million and $6.1 million, respectively, in cash and cash equivalents. Trade receivables at November 1, 1997 increased approximately $902,000 as compared to August 2, 1997 primarily due to increased sales levels. Cost and estimated earnings in excess of billings on uncompleted contracts increased to approximately $2.3 million at November 1, 1997 from approximately $1.9 million at August 2, 1997 due to additional work performed in the quarter on long term contracts accounted for under the percentage of completion method of accounting. Inventory at November 1, 1997 increased approximately $528,000 as compared to August 2, 1997, primarily because of additional production requirements of a major new OEM contract which commenced in the third quarter of fiscal 1997. Trade accounts payable increased approximately $632,000 at November 1, 1997 from August 2, 1997 primarily because of the increased inventory requirements of a major new OEM contract. Credit Facility and Borrowing. At November 1, 1997, the Company had a $14 million revolving credit line and a $10 million acquisition credit line. The available portion of the revolving credit line was approximately $13.7 million, after deducting outstanding letters of credit of approximately $180,000 and $9.7 million was available under its acquisition credit line. Capital Expenditures. The Company continues to invest in capital equipment, principally for its manufacturing operations, in order to improve its manufacturing capability and capacity. The Company has expended approximately $614,000 for capital equipment for the three month period ended November 1, 1997. The Company anticipates that cash generated from operations and amounts available under its bank lending facilities will be sufficient to satisfy its current operating cash needs. Shareholders' Equity. Shareholders' equity increased to approximately $54.4 million at November 1, 1997 from approximately $52.5 million at August 2, 1997, primarily due to the results of operations. Additionally, during the period approximately 95,000 stock options and warrants were exercised, with proceeds of approximately $639,000 and -9- 7,000 shares of common stock were repurchased at a cost of approximately $72,000. Effects of New Accounting Pronouncements Earnings Per Share. In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." This statement is effective for financial statements issued for periods ending after December 15, 1997. Management has evaluated the effect on its financial reporting from the adoption of this statement and believes it will be significant. If SFAS No. 128 were effective for the quarter ended November 1, 1997, the effect of implementation would have resulted in "Basic Earnings per Share" of $.17 and "Diluted Earnings per Share" of $.15. -10- PART II Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults on Senior Securities None Item 4. Submission to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 11 - Computation of Earnings per Common Share Exhibit 27 - Financial Data Schedule (b) Report on Form 8-K: None -11- SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DEL GLOBAL TECHNOLOGIES CORP. /S/LEONARD A. TRUGMAN --------------------- Leonard A. Trugman Chairman of the Board, Chief Executive Officer and President /S/MICHAEL H. TABER --------------------- Michael H. Taber Vice President - Finance, Secretary and Chief Accounting Officer Dated: December 12, 1997 -12- EX-11 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE THREE MONTHS ENDED NOVEMBER 1, 1997 Fully Primary Diluted ---------- ---------- Net income $1,256,987 $1,256,987 ========== ========== Reconciliation of weighted average number of shares outstanding to amount used in earnings per share computation: Weighted average number of shares outstanding 7,439,410 7,439,410 Add - shares issuable from assumed exercise of options under the Treasury Stock method 1,170,574 1,170,574 ---------- ---------- Weighted average number of shares outstanding as adjusted 8,609,984 8,609,984 ========== ========== Net income per common share $ .15 $ .15 ========== ========== The Company utilized the Treasury Stock method for computing net income per common share. EX-27 3 FDS -- ART. 5 FOR 10-Q
5 0000027748 DEL GLOBAL TECHNOLOGIES CORP. 3-MOS AUG-01-1998 AUG-03-1997 NOV-01-1997 6,444,734 959,457 12,194,366 80,682 25,209,188 48,878,534 16,859,612 5,406,867 66,815,582 10,204,272 0 0 0 761,171 53,589,285 66,815,582 13,480,069 13,480,069 8,047,545 8,047,545 3,638,288 0 (54,275) 1,848,511 591,524 1,256,987 0 0 0 1,256,987 .15 .15
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