-----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, UaAad/o3hjkSQH7TgDt7cdlpbKSkF2+iZyBlUg2Vxw9mhkiWVspRXG3rO+vWBZFX JETGGxfWoS8tcpZFDq3nZw== 0000028365-96-000005.txt : 19960216 0000028365-96-000005.hdr.sgml : 19960216 ACCESSION NUMBER: 0000028365-96-000005 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951230 FILED AS OF DATE: 19960213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DETECTION SYSTEMS INC CENTRAL INDEX KEY: 0000028365 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATIONS EQUIPMENT, NEC [3669] IRS NUMBER: 160958589 STATE OF INCORPORATION: NY FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-08125 FILM NUMBER: 96517630 BUSINESS ADDRESS: STREET 1: 130 PERINTON PKWY CITY: FAIRPORT STATE: NY ZIP: 14450 BUSINESS PHONE: 7162234060 MAIL ADDRESS: STREET 1: 130 PERINTON PARKWAY CITY: FAIRPORT STATE: NY ZIP: 14450 10-Q/A 1 UNITED STATES 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 December 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: 0-8125 ---------------------------- DETECTION SYSTEMS, INC. (Exact name of registrant as specified in its charter) State of New York 16-0958589 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 130 Perinton Parkway, Fairport, New York 14450 (Address of principal executive offices) (Zip Code) (716) 223-4060 (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 the filing requirements for the past 90 days. Yes __x__ No ___ As of February 9, 1996, there were outstanding 2,808,444 shares of the registrant's common stock, par value $.05 per share. PART I FINANCIAL INFORMATION DETECTION SYSTEMS, INC. AND SUBSIDIARIES Consolidated Balance Sheet (Unaudited) ASSETS Dec 31, 1995 March 31, 1995 Current Assets: ------------ -------------- Cash & cash equivalents $ 1,151,810 $ 4,580,751 Short-term investments, at cost, which approximates market value 0 2,437,842 Accounts receivable, less allowance for doubtful accounts of $100,000 5,934,983 4,916,052 Inventories 8,364,057 5,255,724 Income tax receivable 843,561 94,121 Deferred income tax charges 428,400 354,500 Prepaid expenses and other assets 510,829 314,285 ----------- ----------- Total Current Assets 17,233,640 17,953,275 Fixed assets at cost 15,547,982 12,655,276 Less accumulated depreciation 9,749,743 8,734,705 ---------- ---------- 5,798,239 3,920,571 Property under capital lease 4,740,110 4,760,810 Less accumulated depreciation 2,210,825 2,035,297 ---------- ---------- 2,529,285 2,725,513 Other assets 137,548 145,934 ----------- ----------- Total Assets $25,698,712 $24,745,293 ========== ========== LIABILITIES Current Liabilities Current portion of long-term debt $ 369,728 $ 434,934 Accounts payable 2,101,620 1,213,958 Short term borrowings 850,000 0 Accrued payroll & benefits 696,382 1,074,103 Other accrued liabilities 289,914 266,526 ---------- ----------- Total Current Liabilities 4,307,644 2,989,521 Obligations under capital leases 469,014 745,733 Deferred compensation 1,722,271 1,527,638 Deferred income tax 288,200 288,200 Shareholders' Equity Common stock, par value $.05 per share Authorized 12,000,000 shares, Issued 2,810,411 shares at 12/31/95 and 2,792,489 at 3/31/95 140,483 139,624 Capital in excess of par value 6,960,891 6,853,246 Retained earnings 12,225,961 12,724,265 ---------- ----------- 19,327,335 19,717,135 Less: Treasury stock, 1,967 shares at 12/31/95 at cost and 7,468 shares at 3/31/95 at cost (10,689) (36,326) Notes receivable for stock purchases (405,063) (486,608) ---------- ----------- 18,911,583 19,194,201 ---------- ----------- Total Liabilities & Shareholders' Equity $25,698,712 $24,745,293 =========== ===========
See accompanying notes to financial information. DETECTION SYSTEMS, INC. AND SUBSIDIARIES Consolidated Income Statement (Unaudited) For the Three Months Ended: Dec 31, 1995 Dec 31, 1994 (Current Year) (Preceding Year) -------------- --------------- Gross sales less discounts, returns and allowances $ 8,563,799 $ 9,414,524 Other income 38,228 66,173 ---------- ---------- Total income 8,602,027 9,480,697 Costs and expenses: Production 5,991,708 5,656,195 Development 1,094,505 1,090,149 Marketing, administrative & general 2,164,194 1,789,376 Interest expenses 42,435 32,993 ---------- ---------- Total costs and expenses 9,292,842 8,568,713 (Loss) Income before taxes (690,815) 911,984 Provision for taxes 95,000 (343,000) ---------- ---------- Net (loss) income (595,815) 568,984 Retained earnings at beginning of period 12,821,776 12,127,661 Dividends none none Retained earnings at end of period $12,225,961 $12,696,645 Net (Loss) Income Per Share ($0.21) $0.20 ===== =====
(See accompanying notes to financial information) DETECTION SYSTEMS, INC. AND SUBSIDIARIES Consolidated Income Statement (Unaudited) For the Nine Months Ended: Dec 31, 1995 Dec 31, 1994 (Current Year) (Preceding Year) -------------- ---------------- Gross sales less discounts, returns and allowances $26,654,524 $26,259,273 Other income 204,735 243,468 ---------- ---------- Total income 26,859,259 26,502,741 Costs and expenses: Production 17,134,401 15,946,253 Development 3,091,647 3,041,938 Marketing, administrative & general 6,660,589 5,029,527 Interest expenses 139,926 123,154 ---------- ---------- Total costs and expenses 27,026,563 24,140,872 (Loss) Income before taxes (167,304) 2,361,869 Provision for taxes (331,000) (875,000) ---------- ---------- Net (Loss) Income (498,304) 1,486,869 Retained earnings at beginning of period 12,724,265 11,209,776 Dividends none none Retained earnings at end of period $12,225,961 $12,696,645 ========== ========== Net (Loss) Income Per Share ($0.16) $0.52 ===== ====
(See accompanying notes to financial information) DETECTION SYSTEMS, INC. AND SUBSIDIARIES Consolidated Statement of Cash Flows (Unaudited) For the Nine Months Ended December 31, 1995 1994 ---- ---- Cash Flows from Operating Activities: Net (Loss) Income ($498,304) $ 917,885 -------- ------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,196,270 708,108 Fixed asset retirements 2,682 2,625 Change in obsolescence reserve 0 50,000 Deferred compensation 194,633 48,744 Change in assets and liabilities: Accounts receivable (1,018,931) (575,615) Inventories (3,108,333) 671,576 Income tax receivable (749,440) 139,468 Prepaid expenses and other assets (196,544) (194,735) Accounts payable 887,662 304,358 Accrued payroll and benefits (377,721) 11,967 Other accrued liabilities 23,388 70,024 Income taxes payable 0 232,308 Deferred income taxes (73,900) 0 ---------- ---------- Total adjustments (3,220,234) 1,468,828 ---------- ---------- Net cash (used)provided in operating activities (3,718,538) 2,386,713 Cash flows from investing activities: Capital expenditures (2,872,006) (593,193) Short-term investments 2,437,842 (2,000,000) ---------- ---------- Net cash (used) in investing activities (434,164) (2,593,193) Cash flows from financing activities: Proceeds from short term borrowings 850,000 0 Principal payments on long-term debt and capital lease obligations (341,925) (283,295) Common stock transactions, net 215,686 68,924 ---------- ---------- Net cash provided (used) by financing activities 723,761 (214,371) Net (decrease) in cash and cash equivalents (3,428,941) (420,851) Cash and cash equivalents at beginning of period 4,580,751 3,907,111 ---------- ---------- Cash and cash equivalents at end of period $1,151,810 $3,486,260 ========= ========== Cash paid during the period for: Interest 36,216 67,183 Income taxes 1,090,327 864,749 Noncash transactions: The Company considers all highly liquid investments with a maturity of three months or less to be cash equivalents. See accompanying notes to financial information.
DETECTION SYSTEMS, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS NINE-MONTH PERIOD ENDED December 31, 1995 (Unaudited) BASIS OF PRESENTATION: The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and, therefore, do not include all information and footnotes which are normally included in Form 10-K and the annual report to shareholders. The financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of results for the interim periods. INVENTORIES Major classifications of inventory follow: Dec 31, 1995 March 31, 1995 ------------- -------------- Component Parts 3,100,919 2,100,894 Work In Process 878,019 475,927 Finished Products 4,385,119 2,678,903 --------- --------- 8,364,057 5,255,724 ========= ========= DETECTION SYSTEMS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Net sales for the three and nine month periods ended December 31, 1995 decreased $851,000 and increased $395,000, respectively as compared to the sales for the comparable periods ended December 31, 1994. The decrease was primarily attributable to decreased domestic national account sales partially offset by the increase in international sales. The increase for the nine month period is attributable to the growing international business. The Company sells a variety of electronic security and fire equipment that has a significant range in both sales price and gross product margin. Based on customer demand, sales of different product types have historically shown noticeable shifts on a quarter to quarter basis. Detection Systems has lowered prices on certain products based on anticipated savings generated from the manufacturing of these products in the Company's new Southeast Asia manufacturing facility. It is projected that average prices will continue to decline in fiscal 1997 as customer demands warrant and as more products are shifted to the Southeast Asia facility. The Company has also adding reduced featured versions of its standard product line to accommodate this trend. Gross profit margins on sales for the three and nine months ended December 31, 1995 fell by approximately ten and four percentage points as compared with the same periods a year ago. This decline was attributable to special startup pricing for the Company's international sales offices as well as by the Company's recently implemented lower pricing policy based on the anticipated savings from its international manufacturing capability. The quarter ending December 31, 1995 also includes production expenses associated with the establishment of the new Southeast Asia manufacturing facility. There were no related sales revenues or inventory builds to support or absorb these expenses. Internationally, the Company's Detection Systems International, Inc. subsidiary currently has direct sales offices in Australia, China, France, Hong Kong and the United Kingdom and distributors in Belgium, Brazil, Columbia, Czech, Estonia, Hungary, India, Indonesia, Ireland, Israel, Italy, Korea, Latvia, Lithuania, Malaysia, Netherlands, New Zealand, Norway, Russia, Singapore, Slovakia, South Africa, Sweden, Taiwan, Thailand and Ukraine. The Company has obtained numerous product approvals from the appropriate agencies within these and other targeted countries. This process is similar to that provided by UL and the FCC in the United States. The Company's Southeast Asia manufacturing facility equipment and management are in place. Production began during the quarter and first product shipments were made to customers. The Company has attempted to duplicate much of the same quality proven manufacturing procedures and processes as established in its Fairport facility. Other income decreased for the three and nine month periods ended December 31, 1995 as compared with the same periods ended December 31, 1994 due to decreases in funds available for investment. Production expenses for the three and nine months ended December 31, 1995 increased 5.9% and 7.5% as compared with the same three and nine month period a year ago. These increases were attributable to the start up of the Southeast Asia manufacturing facility. Development expenses for the three and nine months periods ended December 31, 1995 remained consistent with that of the same periods ended December 31, 1994. Marketing, administrative and general expenses increased $375,000 and $1,631,000 in the three and nine month periods ended December 31, 1995 as compared with the same periods a year ago. These increases were primarily due to the startup of the Company s international venture. Interest expense increased slightly for the three and nine month periods ended December 31, 1995 versus the same periods a year ago. These increases are due to the short-term working capital borrowings established during the second and third fiscal quarters. Pretax losses were $691,000 and $167,000 for the three and nine month periods ended December 31, 1995 as compared with pretax income of $912,000 and $2,362,000, respectively, for the same periods ended December 31, 1994. While U.S. operations were profitable, the expensing of international startup activities resulted in the pretax losses in the current fiscal year. International startup expenses included the acquisition of new software, product conversions and approval costs, Southeast Asia manufacturing startup costs and market introduction costs. The Company s effective tax rate for the quarter ended December 31, 1995 was a benefit of 13.8%. The effective rate for the nine months ended December 31, 1995 was a provision of 197.8%. This slight tax benefit as well as the higher than normal tax provision result from the Company s inability to fully recognize tax benefits associated with certain subsidiary losses at this time. However, the Company will recognize benefit from these losses when recognition of the benefit becomes more likely than not. FINANCIAL CONDITION At December 31, 1995, the Company had net working capital of $12.9 million, including approximately $1.2 million in cash and cash equivalents. This compares to net working capital of approximately $15.0 million and $7.0 million in cash, cash equivalents and short-term investments at March 31, 1995. Operations for the nine-month period ended December 31, 1995 used net cash of $3,719,000. The cash outflow was primarily due to costs associated with the Company s international initiative. The Company has a $6.5 million bank commitment for a revolving credit facility, that extends into fiscal 1998. This commitment includes an interest rate based on either the bank's stated prime rate or the London Interbank Offered Rates (LIBOR) and a five year term loan provision for repayment of balance due, if necessary. At December 31, 1995, the Company had short-term loans of $850,000 from its line of credit. The Company believes that current levels of cash and cash equivalents together with its available line of credit, will be sufficient to meet its foreseeable working capital needs. On a long-term basis, most cash requirements of the international initiative are expected to be derived from operations of overseas subsidiaries. The Company continually reviews its capital assets and upgrades them as required to insure that its technical and manufacturing capabilities stay on the leading edge of the industries it serves. During the quarter ended December 31, 1995, the Company installed manufacturing equipment in its Southeast Asia plant and trained personnel on its operation. Although the Company has a broad customer base, it does have several customers who individually account for large amounts of business. A significant change in purchases by one of these customers could result in significant fluctuations in sales and profit. To minimize these fluctuations, the Company has increased its emphasis on partnership opportunities with its national and regional accounts. In addition, the Company has increased its support of domestic and international wholesale distribution companies. The Company s international initiative is also expected to minimize fluctuations in sales. The Company expects to continue expenditures on the development of new products and markets. These expenditures will include continued investment in security detection, fire detection, alarm control products and several wireless projects, as well as the expansion of the Company s international marketing efforts. The Company, in conjunction with its Emergency Communications subsidiary, has initiated a nationwide promotional campaign of its Security Escort(R) personal safety system to engineered systems dealers. This is the first time the system has been offered to markets other than colleges and universities. Potential opportunities for the system exist in areas such as health care facilities, shopping malls, high rise residential facilities and corporate campuses. Additional interest has also been expressed in certain government applications. Accounts receivable increased $1,019,000 from the March 31, 1995 level. This increase was partially attributable to the increased sales during the quarter ended December 31, 1995 to the Company s international customers. It was also impacted by special promotional startup terms offered to these same customers. The Company s standard credit terms are net 30 days. Inventories increased $3,108,000 from the March 31,1995 level due to the build-up of inventory to support the Company's international venture. The Company regularly reviews its reserve for obsolescence and adjusts it accordingly. Occasionally, a new product will render another obsolete. However, it has been the Company s policy to time the release of new products to minimize this impact. Prepaid expenses and other assets increased $197,000 from the March 31, 1995 due to the payment of several deposits associated with the Southeast Asia manufacturing facility. Accounts payable increased $888,000 from the March 31, 1995 level due to timing of payments on inventory purchases to finance our international venture. Accrued payroll and benefits decreased $378,000 from March 31, 1995, primarily due to the payment of fiscal 1995 year-end performance bonuses. PART II OTHER INFORMATION Item 1. Legal Proceedings Not applicable Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. Detection Systems, Inc. announced on February 13, 1996 that it has purchased all the outstanding stock of Radionics, Inc. from Expamet, International Plc for $17,727,500 cash. Radionics, a leading U.S. manufacturer of control equipment for the security, fire protection and access control markets, had sales of $45 million for its fiscal year ended December 31, 1995, giving the combined companies sales of $80 million for that period. Item 6. Exhibits and Reports for Form 8-K. A. Exhibits See Exhibit Index B. Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended December 31, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DETECTION SYSTEMS, INC. Registrant DATE: February 13, 1996 By: /s/ Karl H. Kostusiak Karl H. Kostusiak, President By: /s/ Frank J. Ryan Frank J. Ryan, Vice President, Secretary and Treasurer (Chief Financial & Accounting Officer) EXHIBIT INDEX (3i) Text of the Certification of Incorporation, as amended. Incorporated by reference to Exhibit 3a to the registrants Form 10-K dated June 25, 1993. (3i) Certificate of Amendment of Certificate of Incorporation as filed with New York Secretary of State. Incorporated by reference to Exhibit 3a to the registrants Form 10-K dated June 25, 1993. (3ii) The text of the registrant's By-laws, as amended, are incorporated by reference to Exhibit 3b to the Company's Report on Form 10-K dated June 25, 1993. (10) Executive Employment Agreements dated May 24, 1994 are incorporated by reference to Exhibit 10 starting on page 134 to the registrant's Report on Form 10-K dated June 27, 1994. (11) Statement regarding computation of per share earnings. See Exhibit 11. (27) Financial data schedule. Included as Exhibit 27 to electronic Edgar filing only. Exhibit 11 DETECTION SYSTEMS, INC. AND SUBSIDIARIES Consolidated Computation of Net Income Per Common And Common Equivalent Share Three Months Ended December 31, 1995 1994 Net Income ($ 595,815) $582,984 ADD - Interest on deferred compensation 15,550 14,729 -------- ------- Adjusted net income applicable to common stock ($ 580,265) $597,713 Number of Shares: Weighted average number of shares 2,805,387 2,754,977 Common Stock equivalent due to assumed exercise of stock options and warrants 0 226,178 --------- -------- 2,805,387 2,981,155 ========= ========= Net (Loss) Income per Common and Common Equivalent share ($0.21) $0.20 Nine Months Ended December 31, 1995 1994 ----- ----- Net (Loss) Income ($498,304) $1,500,869 ADD - Interest on deferred compensation 50,692 39,628 -------- --------- Adjusted net income applicable to common stock ($447,612) $1,540,497 Number of Shares: Weighted average number of shares 2,805,387 2,733,212 Common Stock equivalent due to assumed exercise of stock options and warrants 78,705 227,540 --------- --------- 2,884,092 2,960,752 Net Income per Common and Common Equivalent share ($.16) $.52
EX-27 2
5 3-MOS MAR-31-1996 SEP-30-1996 1151810 0 6034983 (100000) 8364057 17233640 20288092 11960568 25698712 4307644 0 7101374 0 0 12225961 25698712 8563799 8602027 5991708 9250407 3258699 0 42435 (690815) 95000 0 0 0 0 (595815) .21 .21
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