-----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, NOLr6TcSn0lK3YuvHVZxeDY5x9blp0B2clIT/p6pvrrYsIzumQRYOvLFimVH81Ij 6BlS6QkzB46gabIJ1PQ3mQ== 0000950135-96-004646.txt : 19961106 0000950135-96-004646.hdr.sgml : 19961106 ACCESSION NUMBER: 0000950135-96-004646 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961105 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYNATECH CORP CENTRAL INDEX KEY: 0000030841 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] 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: 96654127 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 DYNATECH CORPORATION FORM 10-Q 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 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 October 15, 1996 there were 17,047,813 shares of common stock of the registrant outstanding. 2 2 PART I. FINANCIAL INFORMATION ----------------------------- Item 1. Financial Statements DYNATECH CORPORATION CONSOLIDATED STATEMENTS OF INCOME (In thousands except per share data) (Unaudited)
Three Months Ended Six Months Ended September 30 September 30 1996 1995 1996 1995 ------- ------- -------- -------- Sales $85,725 $68,513 $166,847 $135,271 Cost of sales 31,262 26,262 61,510 51,511 ------- ------- -------- -------- Gross profit 54,463 42,251 105,337 83,760 Selling, general and administrative expense 27,888 23,848 53,947 46,709 Product development expense 10,256 9,001 19,902 18,196 Purchased incomplete technology -- 16,852 -- 16,852 Amortization of intangibles 1,559 1,165 3,125 2,254 ------- ------- -------- -------- Operating income (Loss) 14,760 (8,615) 28,363 (251) Interest expense (173) (482) (279) (1,031) Interest income 581 557 1,224 1,118 Other income 305 320 422 426 ------- ------- -------- -------- Income (Loss) from continuing operations before income taxes 15,473 (8,220) 29,730 262 Provision (Benefit) for income taxes 6,196 (3,337) 12,041 98 ------- ------- -------- -------- Income (Loss) from continuing operations 9,277 (4,883) 17,689 164 Loss from discontinued operations, net of taxes -- 110 -- 532 ------- ------- -------- -------- Net income (Loss) $ 9,277 $(4,993) $ 17,689 $ (368) ======= ======= ======== ======== Income (Loss) per common share: Continuing Operations $ 0.52 $ (.27) $ 0.98 $ 0.01 Discontinued Operations -- (.01) -- (.03) ------- ------- -------- -------- $ 0.52 $ (.28) $ 0.98 $ (.02) ======= ======= ======== ======== Weighted average number of common shares 17,914 17,858 18,106 17,727 ======= ======= ======== ========
See notes to condensed consolidated financial statements. 3 3 DYNATECH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
Sept. 30 March 31 1996 1996 -------- -------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 49,384 $ 46,094 Accounts receivable, net 51,599 45,367 Inventories: Raw materials 9,583 10,210 Work in process 9,351 9,381 Finished goods 6,484 7,325 -------- -------- 25,418 26,916 Other current assets 8,041 5,981 Net assets of discontinued operations held for sale 19,435 22,824 -------- -------- Total current assets 153,877 147,182 Property and equipment, net 18,240 18,551 Intangible assets, net 25,038 28,406 Other assets 11,205 11,050 -------- -------- $208,360 $205,189 ======== ======== LIABILITIES Current liabilities: Notes payable & current portion of long-term debt $ 105 $ 655 Accounts payable 10,206 9,849 Other accrued expenses 30,561 30,817 -------- -------- Total current liabilities 40,872 41,321 Long-term debt 8,500 1,800 Deferred income taxes 286 531 Deferred compensation 1,193 818 SHAREHOLDERS' EQUITY Common stock 3,721 3,721 Additional paid-in capital 9,053 12,102 Retained earnings 183,346 165,657 Cumulative translation adjustments 361 342 Treasury stock (38,972) (21,103) -------- -------- Total shareholders' equity 157,509 160,719 -------- -------- $208,360 $205,189 ======== ========
See notes to condensed consolidated financial statements 4 4 DYNATECH CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
Six Months Ended September 30 1996 1995 -------- -------- Operating activities: Income from continuing operations $ 17,689 $ 164 Adjustments for noncash items included in net income: Depreciation 4,441 4,051 Amortization of intangibles 3,125 2,254 Purchased incomplete technology -- 16,852 Increase (Decrease) in deferred taxes 445 (3,102) Other 253 (158) Change in operating assets and liabilities, net of effects of business acquisitions and divestitures (7,054) (7,616) -------- -------- Net cash flows provided by continuing operations 18,899 12,445 Net cash flows (used in) discontinued operations (5,744) (13,755) -------- -------- Net cash flows provided by (used in) operating activities 13,155 (1,310) -------- -------- Investing activities: Purchases of property and equipment (4,318) (4,581) Disposals of property and equipment 162 26 Proceeds from sales of businesses 10,267 3,819 Business acquired in purchase transaction -- (9,868) Other 7 142 -------- -------- Net cash flows provided by (used in) continuing operations 6,118 (10,462) Net cash flows (used in) discontinuing operations (884) (1,398) -------- -------- Net cash flows provided by (used in) investing activities 5,234 (11,860) -------- -------- Financing activities: Debt borrowings 6,700 14,901 Repayment of debt (571) (488) Proceeds from exercise of stock options 1,195 586 Purchases of treasury stock (22,334) -- -------- -------- Net cash flows provided by (used in) financing activities (15,010) 14,999 -------- -------- Effect of exchange rate on cash (89) 664 -------- -------- Increase in cash and cash equivalents 3,290 2,493 -------- -------- Cash and cash equivalents at beginning of year 46,094 27,795 -------- -------- Cash and cash equivalents at end of period $ 49,384 $ 30,288 ======== ======== Supplemental data: Cash paid during the period for interest $ 279 $ 960 Cash paid during the period for income taxes $ 13,498 $ 3,155 Tax benefit of disqualifying dispositions of stock options $ -- $ 126 Stock issued for acquisition of Tele-Path Industries $ -- $ 13,700
See notes to condensed consolidated financial statements. 5 5 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS A. Condensed Consolidated Financial Statements In the opinion of management, the unaudited condensed consolidated balance sheet at September 30, 1996, and the unaudited consolidated statements of income and unaudited consolidated condensed statements of cash flows for the interim periods ended September 30, 1996 and 1995 include all adjustments (including normal recurring adjustments) necessary to present fairly these financial statements. 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 Annual Report on Form 10K for the fiscal year ended March 31, 1996. This Form 10-Q contains forward-looking statements which involve risks and uncertainties. The Company's actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, product demand and market acceptance risks, the effect of economic conditions, the impact of competitive products and pricing, product development, commercialization and technological difficulties, capacity and supply constraints or difficulties, availability of capital resources, general business and economic conditions, the effect of the company's accounting policies, and other risks detailed in the Company's Annual Report and 10K for the fiscal year ended March 31, 1996 . The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Significant estimates in these financial statements include allowances for accounts receivable, net realizable value of inventories, tax valuation reserves, and the net realizable value of assets from discounted operations held for sale. Actual results could differ from those estimates. B. Divestments During the first six months of fiscal 1997, the Company sold two businesses for approximately $10.3 million in cash. The effects of these transactions were reflected in the net assets held for sale and did not effect fiscal 1997 earnings. In October 1996 the Corporation sold three businesses which have been classified as discontinued operations for approximately $33 million. The Company expects to dispose of the remaining units held for sale during fiscal 1997. Management believes that the net proceeds from these dispositions will exceed the carrying amounts and anticipated ongoing costs to operate the business in 1997. Anticipated gains will not be reflected in the statements of operations until they are realized at the completion of the divestiture program. 6 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Continuing Operations Results of Continuing Operations - -------------------------------- Consolidated sales for the six months ended September 30, 1996 increased 23% to $166,847,000 from $135,271,000 for the comparable period in the prior year. Communications Test sales rose 29.0% for the six months ended in fiscal 1997. The increase was due in part to acquired businesses in the second half of fiscal 1996. Sales for the Industrial and Scientific Communications and Non-Broadcast Video Technology business were up 18.5% and 12.4%, respectively, over the corresponding six months ended September 30, 1996. Backlog from ongoing operations was $64.7 million at September 30, 1996 as compared with $57.3 million at March 31, 1996. The increase is due to strong demand for frame relay and ISDN test equipment in the Communications Test business as well as increased orders for aircraft passenger video information systems in the Non-Broadcast Video Technology business. Consolidated Gross Profit for the current quarter and six months was 63.5% and 63.1% of sales, respectively, compared to 61.7% and 61.9% for each of the respective prior year periods. The increase in Gross Profit is a result of increased sales of higher margin products in all areas of the business. Product Development expense was 12.0% of sales for the current quarter and 11.9% for the first six months of fiscal 1997 as compared to 13.1% and 13.4% for the comparable periods in the prior year. Selling, General and Administrative expenses were 32.5% and 32.3% for the second quarter and six months ended September 30, 1996 as compared to 34.8% and 34.5% for the corresponding periods a year ago. The decrease is due to greater efficiencies in selling communications products and leverage in sales costs in the industrial and scientific communications businesses. The increase in amortization of intangible assets, $1.6 million for the second quarter and $3.1 million for the half as compared to $1.2 million and $2.3 million, respectively, for the prior year, is due to Communication Test acquisitions made during the second half of fiscal 1996. Interest income increased due to earnings on cash received from proceeds of assets held for sale. The effective tax rate was 40% and 40.5% for the three and six month periods ended September 30, 1996. The decrease in the second quarter was due to profit mix in lower state tax jurisdictions. Capital Resources and Liquidity - ------------------------------- The Company's funded debt was 5.2% of total capital at September 30, 1996, an increase from 1.5% at March 31, 1996. The current ratio rate increased to 3.8 to 1 at September 30, 1996 from 3.6 to 1 at March 31, 1996. Cash inflows from proceeds of business assets held for sale approximated $10.3 million in the first half of fiscal 1997 with related cash outflows of approximately $5.7 million. Additionally, $33 million was received in October from the sale of three businesses. Net cash flows from operating activities were $13.2 million for the six-month period ended September 30, 1996. Cash outflows of approximately $22.3 million were used to purchase 697,500 shares of treasury stock. The total number of shares authorized for repurchase under the current plan has been increased to 3,000,000. Approximately 1,500,000 have been repurchased to date. Dynatech believes it has sufficient resources to finance its cash requirements over the next year. 7 7 PART I. OTHER INFORMATION ------------------------- Item 6. (a) Exhibits Exhibit 27 - Financial Data Schedule PART II. OTHER INFORMATION -------------------------- Item 4. Results of Votes of Security Holders The annual meeting of Stockholders was held on July 30, 1996 in Boston, Massachusetts. A class of two directors as nominated by the Board of Directors to serve for a three-year term were elected at the meeting. At such meeting, 17,663,839 shares were entitled to vote and a plurality of the votes cast were needed for election. The table below discloses the vote with respect to each nominee for office.
IN FAVOR WITHHELD -------- -------- William R. Cook 16,092,104 1,571,735 Robert G. Paul 16,092,304 1,571,535
The terms of L. Dennis Kozlowski, Peter van Cuylenburg, and John F. Reno will expire in 1997 and the terms of Ronald L. Bittner, O. Gene Gabbard, and Richard K. Lochridge expire at the annual meeting in 1998. The results of the voting of the additional items were as follows: (a) To approve the 1996 Employee Stock Purchase Plan (as set forth in the Board's Proxy Statement)
FOR AGAINST ABSTAIN BROKER NON-VOTE --- ------- ------- --------------- Employee Stock Purchase Plan 14,728,067 1,340,989 60,692 1,534,091
Item 6. Reports on Form 8-K (b) No current reports on Form 8-K were filed by the Registrant during the quarter ended September 30, 1996. 8 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 November 5, 1996 ALLAN M. KLINE -------------------------- --------------------------------------- Vice President, Chief Financial Officer and Treasurer Date November 5, 1996 ROBERT W. WOODBURY, JR. -------------------------- --------------------------------------- Corporate Controller, Principal Accounting Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 6-MOS MAR-31-1997 APR-01-1996 SEP-30-1996 1 49,384 0 52,762 1,163 25,418 8,041 52,414 34,174 208,360 40,872 0 3,721 0 0 153,788 208,360 166,847 166,847 61,510 76,974 (422) 0 (945) 29,730 12,041 17,689 0 0 0 17,689 .98 .98
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