-----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, NOUrYlwsO2WEpAVeOtD4bDLm1dhoucCsxyf+mQz7T7DNKqpkX90VA9oARsFzgn0/ rlX7MZ0rDoQc4w/lCLZs5w== 0000950135-97-004570.txt : 19971117 0000950135-97-004570.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950135-97-004570 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NYSE 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: SEC FILE NUMBER: 001-12657 FILM NUMBER: 97718182 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 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, 1997 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, 1997 there were 16,871,573 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 1997 1996 1997 1996 -------- ------- -------- -------- Sales $115,856 $85,725 $220,176 $166,847 Cost of sales 50,812 31,262 93,449 61,510 -------- ------- -------- -------- Gross profit 65,044 54,463 126,727 105,337 Selling, general and administrative expense 33,278 27,888 65,037 53,947 Product development expense 13,384 10,256 27,079 19,902 Amortization of intangibles 1,439 1,559 2,882 3,125 -------- ------- -------- -------- Operating income 16,943 14,760 31,729 28,363 Interest expense (429) (173) (781) (279) Interest income 872 581 1,364 1,224 Other income 282 305 452 422 -------- ------- -------- -------- Income before income taxes 17,668 15,473 32,764 29,730 Provision for income taxes 7,156 6,196 13,270 12,041 -------- ------- -------- -------- Net Income $ 10,512 $ 9,277 $ 19,494 $ 17,689 ======== ======= ======== ======== Income per common share $ 0.60 $ 0.52 $ 1.12 $ 0.98 ======== ======= ======== ======== Weighted average number of common shares 17,426 17,914 17,394 18,106 ======== ======= ======== ========
See notes to condensed consolidated financial statements. 3 3 DYNATECH CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
Sept. 30 March 31 1997 1997 -------- -------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 43,544 $ 39,782 Accounts receivable, net 69,751 70,930 Inventories: Raw materials 21,185 19,423 Work in process 12,899 11,376 Finished goods 13,825 9,326 -------- -------- 47,909 40,125 Other current assets 8,833 11,074 -------- -------- Total current assets 170,037 161,911 Property and equipment, net 25,312 23,833 Intangible assets, net 40,938 43,813 Other assets 20,786 20,478 -------- -------- $257,073 $250,035 ======== ======== LIABILITIES & EQUITY Current liabilities: Notes payable & current portion of long-term debt $ 164 $ 201 Accounts payable 14,774 16,900 Accrued expenses: Compensation and benefits 15,743 23,912 Deferred revenue 9,132 8,876 Other accrued expenses 12,585 22,455 Net liabilities of discontinued operations 4,172 9,173 -------- -------- Total current liabilities 56,570 81,517 Long-term debt 21,163 5,226 Deferred income taxes 989 1,025 Deferred compensation 2,087 1,581 SHAREHOLDERS' EQUITY Common stock 3,721 3,721 Additional paid-in capital 8,321 9,887 Retained earnings 215,000 195,506 Cumulative translation adjustments (2,107) (1,247) Treasury stock (48,671) (47,181) -------- -------- Total shareholders' equity 176,264 160,686 -------- -------- $257,073 $250,035 ======== ========
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 1997 1996 -------- -------- Operating activities: Net income $ 19,494 $ 17,689 Adjustments for noncash items included in net income: Depreciation 5,730 4,441 Amortization of intangibles 2,882 3,125 Other 32 698 Change in operating assets and liabilities (18,978) (7,054) -------- -------- Net cash flows provided by continuing operations 9,160 18,899 Net cash flows used in discontinued operations (10,197) (5,744) -------- -------- Net cash flows provided by (used in) operating activities (1,037) 13,155 Investing activities: Purchases of property and equipment (7,796) (4,318) Proceeds from sale of businesses -- 10,267 Other (58) 169 -------- -------- Net cash flows provided by (used in) continuing operations (7,854) 6,118 Net cash flows provided by (used in) discontinued operations 507 (884) -------- -------- Net cash flows provided by (used in) investing activities (7,347) 5,234 Financing activities: Debt borrowings 16,000 6,700 Repayment of notes payable -- (571) Proceeds from exercise of stock options 2,177 1,195 Purchases of treasury stock (5,330) (22,334) -------- -------- Net cash flows provided by (used in) financing activities 12,847 (15,010) Effect of exchange rate on cash (701) (89) -------- -------- Increase in cash and cash equivalents 3,762 3,290 Cash and cash equivalents at beginning of year 39,782 46,094 -------- -------- Cash and cash equivalents at end of period $ 43,544 $ 49,384 ======== ========
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, 1997, and the unaudited consolidated statements of income and unaudited consolidated condensed statements of cash flows for the interim periods ended September 30, 1997 and 1996 include all adjustments (consisting only of 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 Form 10-K and Annual Report as of March 31, 1997. 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 most recent Form 10-K and Annual Report as of March 31, 1997. 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, and tax valuation reserves. Actual results could differ from those estimates. B. PRO FORMA FINANCIAL INFORMATION On December 31, 1996 the Company acquired substantially all of the assets and assumed certain liabilities of Itronix Corporation ("Itronix") located in Spokane, Washington, for $65.4 million in cash. The following unaudited pro forma information presents a summary of consolidated results of operations of the Company as if the acquisition had occurred at the beginning of fiscal 1997, with pro forma adjustments to give effect to amortization of goodwill and intangibles, interest expense on acquisition debt, and certain other adjustments, together with related income tax effects. 6 6
Three months ended Six months ended September 30, 1996 September 30, 1996 (in thousands except (in thousands except per share data) per share data) Revenue $106,380 $208,392 Net income $ 9,526 $ 17,382 Earnings per share $ 0.53 $ 0.96 Weighted average shares 17,914 18,106
C. NEW PRONOUNCEMENTS The Financial Accounting Standards Board issued Statement No. 128 , "Earnings per Share," which modifies the way in which earnings per share ("EPS") is calculated and disclosed. Currently, the Company discloses primary and fully diluted EPS. Upon adoption of this standard for the interim period ending December 31, 1997, the Company will disclose basic and diluted EPS for fiscal 1998 and will restate all prior period EPS data presented. The Company does not anticipate this change will have a material impact on EPS. The Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income" which establishes standards for the reporting and display of comprehensive income in general-purpose financial statements. The Company has not assessed the impact of this Standard on its financial statements. The Financial Accounting Standards Board issued Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information," which establishes standards for the reporting of operating segments in the financial statements. The Company has not assessed the impact of this Standard on its financial statements. 7 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Continuing Operations RESULTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1997 VERSUS THREE MONTHS ENDED SEPTEMBER 30, 1996 Consolidated sales for the three months ended September 30, 1997 were $115.9 million as compared to $85.7 million for the prior year's second quarter, and $106.4 million including the pro forma effects related to the acquisition of Itronix, a company purchased on December 31, 1996. Sales of communications test products increased $5.4 million to $57.6 million or 10.3% over the same period a year ago, reflecting continued stable growth in the U.S. market for communications test solutions. Sales for industrial computing and communication products increased $22.7 million to $38.8 million or 140.7% over the same period last year due primarily to the Itronix acquisition. Sales of Itronix's portable communications products included sales of its new Pentium product released during the first week of the second quarter. Sales of catalog-related products within the industrial communications products increased 21% due to increased demand. Sales of visual communications products increased $2.1 million to $19.5 million or 11.9% due to continued demand for aircraft cabin video information services. Consolidated gross profit was $65.0 million or 56.1% of consolidated sales in the three months ended September 30, 1997, compared to $54.5 million or 63.5% for the comparable period a year ago. The percentage decrease was primarily attributed to a higher proportion of lower margin industrial communications sales within the overall sales mix. Selling, general and administrative expense for the three months ended September 30, 1997 was $33.3 million or 28.7% of consolidated sales as compared to $27.9 million or 32.5% for the same period last year. The dollar increase and the percent decrease were primarily the result of the acquisition of Itronix, in which the percentage of selling, general and administrative expense to sales for Itronix is less than the consolidated average. Product development expense was $13.4 million or 11.6% of consolidated sales as compared to $10.3 million or 12% of consolidated sales for the same period last year. The increase was primarily driven by increased spending on industrial communications products including the effects related to the acquisition of Itronix. Amortization of intangibles during the second quarter was $1.4 million as compared to $1.6 million for the second quarter last year. Amortization expense decreased due to the write-off of goodwill and certain intangibles related to product and distribution transitions at the end of fiscal 1997 and was offset by an increase in goodwill amortization related to the acquisition of Itronix. Interest income, net of interest expense, was $443 thousand during the second quarter of fiscal 1997, as compared to $408 thousand for the same period a year ago. Interest expense during the second quarter was higher than the same quarter last year due to higher average borrowings, offset by interest income received on a prior year tax abatement. Net income for the second quarter of fiscal 1997 was $10.5 million, an increase of 13.3% over the same period a year ago. Earnings per share increased 15.4% compared to the same period last year, partially due to the effect of the Company's stock buyback program in which the stock was repurchased during fiscal 1997 and the first quarter of fiscal 1998. 8 8 SIX MONTHS ENDED SEPTEMBER 30, 1997 VERSUS SIX MONTHS ENDED SEPTEMBER 30, 1996 Sales for the six months ended September 30, 1997 were $220.2 million, an increase of 32% for the same six month period a year ago, and 5.7% including the pro forma effects related to the acquisition of Itronix. The increase was attributable to increased demand for communications test products, catalog sales of industrial communications products, and aircraft cabin video information services. Gross margin for the six months ended September 30, 1997 was 57.6% down from 63.1% a year ago due to the increase of lower margin volume within the industrial communications businesses, primarily associated with the Itronix acquisition. The effective tax rate for the six-month period ending September 30, 1997 and 1996, respectively, was 40.5%. Net income for the six month period was $19.5 million, an increase of 10.2% over the same period a year ago, primarily attributable to the increase in sales. Backlog at September 30, 1997 was $90.0 million, an increase of 25.5% over the backlog at March 31, 1997, primarily attributable to increased orders at Itronix. CAPITAL RESOURCES AND LIQUIDITY The Company's funded debt was 11% of total capital at September 30, 1997, as compared to 3.3% as of March 31, 1997. The increase in debt of $16 million was primarily to help fund cash requirements for discontinued operations of $10.2 million, to repurchase 163 thousand shares of the Company's common stock in May 1997, and the purchase of property and equipment. Dynatech believes that with its current cash, cash generated from operations, and its current and future borrowing capacity it will be able to finance at least 12 months of capital expenditures, working capital requirements and potential acquisitions. NEW PRONOUNCEMENTS The Financial Accounting Standards Board issued Statement No. 128 , "Earnings per Share," which modifies the way in which earnings per share ("EPS") is calculated and disclosed. Currently, the Company discloses primary and fully diluted EPS. Upon adoption of this standard for the interim period ending December 31, 1997, the Company will disclose basic and diluted EPS for fiscal 1998 and will restate all prior period EPS data presented. The Company does not anticipate this change will have a material impact on EPS. The Financial Accounting Standards Board issued Statement No. 130, "Reporting Comprehensive Income" which establishes standards for the reporting and display of comprehensive income in general-purpose financial statements. The Company has not assessed the impact of this Standard on its financial statements. The Financial Accounting Standards Board issued Statement No. 131, "Disclosures about Segments of an Enterprise and Related Information," which establishes standards for the reporting of operating segments in the financial statements. The Company has not assessed the impact of this Standard on its financial statements. 9 9 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE The Annual Meeting of Stockholders was held on July 30, 1997 in Boston, Massachusetts. A class of three directors as nominated by the Board of Directors to serve for a three-year term were elected at the meeting. At such meeting, 16,675,563 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 -------- -------- John F. Reno 14,186,426 57,519 L. Dennis Kozlowski 14,187,284 56,661 Peter van Cuylenburg 14,188,207 55,738
The terms of O. Gene Gabbard and Richard K. Lochridge will expire in 1998 and the terms of William R. Cook and Robert G. Paul will expire at the annual meeting in 1999. The results of the voting of the additional items were as follows: (a) To ratify the selection of Coopers & Lybrand L.L.P. as the Company's independent auditors for the current fiscal year.
FOR AGAINST ABSTAIN BROKER NON-VOTE --- ------- ------- --------------- Selection of Auditors 14,176,685 20,421 46,839 -0-
Item 6. Exhibits and Reports on Form 8-K (a) EXHIBITS The exhibit numbers in the following list correspond to the numbers assigned to such exhibits in the Exhibit Table of Item 601 of Regulation S-K: Exhibit Number Description -------------- ----------- 11 Computation of Earnings Per Share 27 Financial Data Schedule (b) No current reports on Form 8-K were filed by the Registrant during the quarter ended September 30, 1997. 10 10 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 13, 1997 /s/ ALLAN M. KLINE ---------------------------------------- Allan M. Kline Vice President, Chief Financial Officer and Treasurer Date November 13, 1997 /s/ ROBERT W. WOODBURY, JR. ---------------------------------------- Robert W. Woodbury, Jr. Vice President, Corporate Controller and Principal Accounting Officer EX-11 2 COMPUTAION OF EARNINGS PER SHARE 1 Exhibit 11 Computation of Earnings per Share (In thousands except per share amount)
Three Months Ended Six Months Ended September 30 September 30 1997 1996 1997 1996 ------- ------- ------- ------- Net income $10,512 $ 9,277 $19,494 $17,689 ======= ======= ======= ======= Common stock outstanding, net of treasury stock, beginning of period 16,697 17,401 16,803 17,594 Weighted average treasury stock issued during the period 24 25 65 96 Weighted average common stock equivalents 705 837 645 756 Weighted average treasury stock repurchased 0 (349) (119) (340) ------- ------- ------- ------- Weighted average common stock outstanding, net of treasury stock, end of period 17,426 17,914 17,394 18,106 ======= ======= ======= ======= Income per common share $ 0.60 $ 0.52 $ 1.12 $ 0.98 ======= ======= ======= =======
EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 U.S. DOLLARS 6-MOS MAR-31-1998 APR-01-1997 SEP-30-1997 1 43,544 0 71,372 1,621 47,909 170,037 67,249 41,937 257,073 56,570 0 0 0 3,721 172,543 257,073 220,176 220,176 71,699 93,449 94,998 0 781 32,764 13,270 19,494 0 0 0 19,494 1.12 1.12
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