-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, tfOkLLStoCWsZaG+/RlWVhbcxYjiJyV8/5oOCCYLBT8pUVm22U7wieUuuv7fGd3I khdTvcowRuKSZ8c+LX8yuw== 0000030841-95-000005.txt : 19950516 0000030841-95-000005.hdr.sgml : 19950516 ACCESSION NUMBER: 0000030841-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950203 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYNATECH CORP CENTRAL INDEX KEY: 0000030841 STANDARD INDUSTRIAL CLASSIFICATION: 3577 IRS NUMBER: 042258582 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07438 FILM NUMBER: 95505060 BUSINESS ADDRESS: STREET 1: 3 NEW ENGLAND EXECUTIVE PARK CITY: BURLINGTON STATE: MA ZIP: 01803-5087 BUSINESS PHONE: 6172726100 MAIL ADDRESS: STREET 1: 3 NEW ENGLAND EXECUTIVE PARK CITY: BURLINGTON STATE: MA ZIP: 01803-5087 10-Q 1 12/31/94 10Q U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1994 Commission file number 0-7438 DYNATECH CORPORATION (Exact name of registrant as specified in its charter) MASSACHUSETTS 04-2258582 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 3 New England Executive Park Burlington, Massachusetts 01803-5087 (Address of principal executive offices)(Zip code) Registrant's telephone number, including area code:(617) 272-6100 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 January 16, 1995 there were 8,747,538 shares of common stock of the registrant outstanding. PART I. FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS DYNATECH CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (Unaudited)
Three Months Ended Nine Months Ended December 31 December 31 1994 1993 1994 1993 Sales $127,242 $113,381 $366,391 $342,490 Cost of sales 60,003 53,752 174,301 160,786 Gross profit 67,239 59,629 192,090 181,704 Selling, general and administrative expense 42,179 41,020 120,607 118,944 Product development expense 12,888 12,647 38,331 39,211 Amortization of intangibles 2,041 2,468 6,405 7,785 Operating income 10,131 3,494 26,747 15,764 Interest expense (922) (854) (3,328) (2,252) Interest income 301 116 895 546 Other income (expense) 253 (165) 774 (45) Income from continuing operations before income taxes 9,763 2,591 25,088 14,013 Provision for income taxes 4,155 1,166 10,736 5,846 Income from continuing operations 5,608 1,425 14,352 8,167 Loss from discontinued operations, net of income taxes --- 151 --- 73 Net income $5,608 $ 1,274 $14,352 $8,094 Income per common share Continuing operations $0.64 $0.15 $1.60 $0.88 Discontinued operations --- (0.01) --- (0.01) $0.64 $0.14 $1.60 $0.87 Weighted average number of common shares 8,734 9,293 8,972 9,284 See notes to condensed consolidated financial statements.
DYNATECH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
December 31 March 31 1994 1994 (Unaudited) ASSETS Current assets: Cash and cash equivalents $45,063 $23,101 Accounts receivable, net 75,426 73,090 Inventories: Raw materials 26,039 26,923 Work in process 13,596 14,091 Finished goods 19,342 20,671 58,977 61,685 Other current assets 23,470 26,683 Net current assets of discontinued operations --- 10,805 Total current assets 202,936 195,364 Property and equipment, net 34,704 39,253 Intangible assets, net 33,534 37,238 Other assets 8,306 8,698 $279,480 $280,553 LIABILITIES Current liabilities: Notes payable and current portion of long-term debt $3,561 $2,911 Accounts payable 18,621 20,234 Streamlining and restructuring accrual 28,483 35,276 Other accrued expenses 48,777 45,283 Accrued income taxes 3,256 650 Total current liabilities 102,698 104,354 Long-term debt 30,002 33,006 Deferred income taxes 246 550 SHAREHOLDERS' EQUITY Common stock 2,477 2,477 Additional paid-in capital 9,432 9,414 Retained earnings 200,309 185,957 Cumulative foreign currency adjustments 509 (757) Treasury stock (66,193) (54,448) Total shareholders' equity 146,534 142,643 $279,480 $280,553 See notes to condensed consolidated financial statements.
DYNATECH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Nine Months Ended December 31 1994 1993 Operating activities: Net income from continuing operations $14,352 $8,167 Adjustments for noncash items included in net income: Depreciation 10,800 9,960 Amortization of intangibles 6,405 7,786 Increase in deferred taxes 3,273 (192) Other 96 1,507 Change in operating assets and liabilities, net of effects of purchase acquisitions and divestitures (9,097) (13,028) Net cash flows provided by continuing operations 25,289 14,200 Net cash flows provided by (used in) discontinued operations (3,250) 4,056 22,579 18,256 Investing activities: Purchases of property and equipment (11,351) (13,149) Disposals of property and equipment 403 410 Proceeds from sale of businesses 24,654 2,681 Businesses acquired in purchase transactions, net of cash acquired (1,056) (2,300) Other (387) 2,458 Net cash flows from (used in) investing activities 12,263 (9,900) Financing activities: Debt borrowings 612 --- Repayment of debt (3,291) (9,985) Proceeds from exercise of stock options 720 759 Purchases of treasury stock (12,576) --- Net cash flows used in financing activities (14,535) (9,136) Effect of exchange rate on cash 1,655 (2,521) Increase (decrease) in cash and cash equivalents 21,962 (3,301) Cash and cash equivalents at beginning of year 23,101 24,350 Cash and cash equivalents at end of period $45,063 $21,049 Supplemental data: Cash paid during the period for interest $4,323 $ 5,099 Cash paid during the period for income taxes $5,118 $10,151 Tax benefit of disqualifying dispositions of stock options $ 84 $ 358 See notes to condensed consolidated financial statements.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A. Condensed Consolidated Financial Statements In the opinion of management, the unaudited condensed consolidated balance sheet at December 31, 1994, and the unaudited consolidated statements of income and unaudited consolidated condensed statements of cash flows for the interim periods ended December 31, 1994 and 1993 include all adjustments (including normal recurring adjustments) necessary to present fairly these financial statements. The aforementioned financial statements have been subject to a review by the Company's independent accountants, whose report is included as page 9 to this filing. The accountants did not propose any adjustments or additional disclosures as a result of their review. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The year-end balance sheet data was derived from audited financial statements, but does not include disclosures required by generally accepted accounting principles. It is suggested that these condensed statements be read in conjunction with the Company's most recent Form 10-K and Annual Report as of March 31, 1994. B. Acquisitions and Divestments In October 1994 the Corporation acquired selected assets of Time Logic Inc. (TLI) of Moorpark, California for approximately $1 million in cash. TLI manufactures telecine editing systems for the post-production and corporate video market. Acquired intangible assets of $450,000 are being amortized over five years. The investment in excess of fair market value of assets purchased of $606,000 is being amortized over 15 years. In addition, the Company purchased technology rights and licenses aggregating $1.85 million which are being amortized over five years. During the first nine months of fiscal 1995, the Corporation sold Whistler Corporation and Micro Processor Systems, Inc., which have been classified as discontinued operations, for approximately $14 million in cash and long-term promissory notes approximating $3.1 million. Seven other businesses were sold for approximately $10.7 million in cash and long-term promissory notes approximating $1.1 million. The effects of these transactions are not material to the consolidated financial statements. C. Treasury Stock In June 1994 the Board of Directors authorized a repurchase of up to $30 million of Dynatech common stock on the open market and in private transactions. At December 31, 1994 the Corporation had repurchased 596,522 shares at a cost of $12.6 million. Treasury shares purchased prior to fiscal 1995 are being retired on February 15, prior to the stock split discussed in Note D below. The remaining acquired shares are held as common stock in treasury. D. Subsequent Events Stock Split On January 26, 1995 he Board of Directors approved a two-for-one stock split of the Company's common stock to shareholders of record on February 15. Distribution of one additional share for each share held by stockholders will be made on March 15, 1995. Extraordinary Item - Extinguishment of Debt On February 3, 1995 the Corporation paid off its $30 million 10.15% term notes using a combination of cash and bank borrowings. This fourth quarter transaction will result in an extraordinary loss of approximately $1 million net of taxes, consisting of redemption premiums. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Consolidated sales for the nine months ended December 31, 1994 increased 7% to $366,391,000 from $342,490,000 for the comparable period in the prior year. Information Support Products segment sales rose 13.4% for the nine months ended in fiscal 1995 reflecting a 15.3% growth for Transmission products and a 15.5% increase for Presentation products. Sales in the Diversified Instrumentation segment increased 5.2% from ongoing businesses for the comparable period in the prior year which excludes nonstrategic businesses sold or to be divested. This increase was a result of a 24.3% increase for aircraft video information systems and a 13% increase of sales of medical and diagnostic products offset partially by a 58.6% decline for commercial and military avionics data bus applications. The sale of seven businesses in this segment during fiscal 1994 and 1995 coupled with sales declines in businesses held for sale resulted in an overall decrease of 5.8%. Sales for the nine months from foreign operations rose 9.7% while domestic sales increased 6.3%. Sales for the current quarter increased 12% from the comparable prior year quarter, reflecting increases among all product areas within the Information Support Products segment. Consolidated gross profit for the current quarter and nine months was 52.8% and 52.4% of sales, respectively, compared to 52.6% and 53.1% for each of the respective prior year periods. Information Support Products gross margin declined to 55.1% compared to 56.8% in the nine months of the prior year due primarily to higher production costs for new product introductions and price sensitivity in video graphics generation markets. Diversified Instrumentation gross margin improved to 45.9% compared to 45.5% in the first nine months of the prior year resulting from greater sales of software products. Selling, general and administrative expenses were lower as a percent of sales for the third quarter and first nine months periods from the comparative prior year periods resulting in part from the streamlining actions announced in the fourth quarter of fiscal 1994. Product development expense was 10.5% of sales for the current nine months compared to 11.4% in the first nine months of the prior year. The reduction was attributed primarily to the nonstrategic businesses in the Diversified Instrumentation segment. Amortization of intangibles, of which $3.3 million in the first nine months of fiscal 1995 and $4 million in the first nine months of the prior year related to product technology and was excluded from cost of sales, declined due to business divestments and discontinuance of product lines. Interest expense from continuing and discontinued operations declined for the current nine months to $3,661,000 as compared with $4,347,000 in the prior year as a result of repayment of loan debt from operating cash flow. Interest income increased due to higher investment rates, earnings on notes acquired in divestment activities, and favorable operating cash flow. The effective tax rate was 42.8% for the current nine months compared to 41.7% in the prior year. The lower tax rate in the prior year reflects the cumulative effect of $315,000 on the net deferred tax assets resulting from the Budget Reconciliation Act of August 1993. Income from continuing operations for the third quarter increased 294% to $5,608,000, or $.64 per share, from $1,425,000, or $.15 per share, for the third quarter of the prior year, reflecting a 23.1% increase in sales of Information Support Products, along with lower product development expenses and amortization costs. Backlog from ongoing operations was $75.3 million at December 31, 1994 compared with $80.2 million at March 31, 1994. Estimated savings from implementing the streamlining and restructuring actions were $7.6 million in the first nine months of fiscal 1995 which approximate targeted goals. Employee headcount from continuing operations has achieved its planned 10% reduction in work force upon implementation of the streamlining actions and sale of seven businesses. In addition, the consumer automotive business units which employed approximately 10% of the work force have been sold. Sales and operating income of nonstrategic businesses divested or held for sale included in continuing operations were $42,428,000 and $421,000, respectively, for the first nine months of fiscal 1995. While the Company believes that the outlook for the fourth quarter of fiscal 1995 is good, no assurance can be given that operating results for the quarter will meet those of the successful second quarter and record third quarter. Operating results for the fourth quarter of fiscal 1995 will depend upon, among other things, the incoming order rate during the quarter for the Company's various businesses, product mix, and the continued successful implementation of the Company's reorganization plan. Capital Resources and Liquidity The Company's funded debt was reduced to 18.6% of total capital at December 31, 1994, an improvement from the year-end level of 20.1% at March 31, 1994, the lowest level in eight years. Working capital improved $9.2 million from March 31, 1994 levels due to cash proceeds from divestitures and favorable operating cash flow. This favorable cash flow enabled Dynatech to subsequently repay its $30 million term notes in February 1995. Cash outlays for the streamlining and restructuring actions approximated $8 million in the first nine months of fiscal 1995 and is expected to be $11 million for the year. This amount is lower than original projections due principally to delays in terminating various lease obligations. Dynatech believes it has sufficient resources to finance its cash requirements over the next year including the necessary streamlining and restructuring actions and any treasury stock repurchases. PART I. OTHER INFORMATION Item 6. (a) Exhibits Exhibit 15(1) Report of Independent Accountants Exhibit 15(2) SEC Awareness Letter Exhibit 27 Financial Data Schedule PART II. OTHER INFORMATION Item 6. Reports on Form 8-K (b) A Form 8-K was filed by the Registrant on November 30, 1994 reporting the adoption of certain amendments by the Board of Directors to the Company's By-Laws. These amendments provide advance notice by stockholders of director nominations or proposals at the Annual Meeting. 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. DYNATECH CORPORATION Date February 3, 1995 /s/ Robert H. Hertz Robert H. Hertz Chief Financial Officer and Treasurer Date February 3, 1995 /s/ John C. Maag John C. Maag Corporate Controller EX-15 2 EXHIBIT 15 (1) EXHIBIT 15(1) REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Dynatech Corporation: We have reviewed the unaudited condensed consolidated balance sheet of Dynatech Corporation as of December 31, 1994, the related consolidated statements of income for the three-month and six-month periods ended December 31, 1994 and 1993 and the related condensed consolidated statements of cash flows for the nine-month periods ended December 31, 1994 and 1993. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial accounting matters. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of March 31, 1994, and the related consolidated statements of operations, shareholders' equity, and cash flows for the year then ended (not presented herein), and in our report, dated May 23, 1994, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 1994, is fairly presented, in all material respects, in relation to the consolidated balance sheet from which it has been derived. COOPERS & LYBRAND L.L.P. Boston, Massachusetts January 23, 1995 EX-15 3 EXHIBIT 15 (2) EXHIBIT 15(2) January 23, 1995 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 RE: Dynatech Corporation We are aware that our report dated January 23, 1995 on our review of interim financial information of Dynatech Corporation for the interim periods ended December 31, 1994 and 1993, and included in the Corporation's quarterly report on Form 10-Q for the quarter ended December 31, 1994 is incorporated by reference in various registration statements on Form S-3 (File No. 2-78465, 2-81026, 2-82260, 2-85387, 2-86467, 2-92391, 2-94757, 33-365, 33-2387, 33-5544, 33-17169, 33-24058 and 33-30610) and Form S-8 (File No. 2-87779, 33-10465, 33-17243 and 33-42427). Pursuant to Rule 436(c) under the Securities Act of 1933, this report should not be considered a part of the registration statements prepared or certified by us within the meaning of Sections 7 and 11 of that Act. Sincerely yours, Coopers & Lybrand L.L.P. EX-27 4
5 1000 9-MOS MAR-31-1995 DEC-31-1994 45063 0 75426 0 58977 202936 34703 0 279480 102698 30002 2477 0 0 144057 279840 366391 366391 174301 174301 165343 0 3328 25088 10736 14352 0 0 0 14352 1.60 1.60
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