-----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, DslSsBobBRFEY75/taQS2oimmbd1YM+9udXGEfKqLido1I7eEEdxwXqzWzOPbQ3/ N0ucQBTmIOb4AMsy/vvgwQ== 0000814579-95-000007.txt : 19951130 0000814579-95-000007.hdr.sgml : 19951130 ACCESSION NUMBER: 0000814579-95-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951014 FILED AS OF DATE: 19951128 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIANA CORP CENTRAL INDEX KEY: 0000057201 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 362448698 STATE OF INCORPORATION: DE FISCAL YEAR END: 0403 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-05486 FILM NUMBER: 95596930 BUSINESS ADDRESS: STREET 1: 8200 W BROWN DEER ROAD CITY: MILWAUKEE STATE: WI ZIP: 53223-1706 BUSINESS PHONE: 4143550037 FORMER COMPANY: FORMER CONFORMED NAME: FH INDUSTRIES CORP DATE OF NAME CHANGE: 19850814 FORMER COMPANY: FORMER CONFORMED NAME: SCOT LAD FOODS INC DATE OF NAME CHANGE: 19841202 10-Q 1 UNITED STATES 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 period ended October 14, 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 1-5486 THE DIANA CORPORATION (Exact name of registrant as specified in its charter) Delaware 36-2448698 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 8200 W. Brown Deer Road, Suite 200, Milwaukee, Wisconsin 53223 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (414) 355-0037 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. X Yes ___ No At October 31, 1995, the registrant had issued and outstanding an aggregate of 3,921,566 shares of its common stock. Part I - Financial Information Item 1. Financial Statements The Diana Corporation and Subsidiaries Condensed Consolidated Balance Sheets (Dollars in Thousands)
October 14, April 1, 1995 1995 ----------- ---------- (Unaudited) Assets Current assets Cash and cash equivalents $ 5,792 $ 2,440 Restricted short-term investment 81 300 Marketable securities 2,582 6,211 Receivables 13,242 14,785 Inventories 9,157 12,237 Other current assets 612 390 ------ ------- Total current assets 31,466 36,363 Property and equipment, net 3,631 3,803 Intangible assets 3,882 4,137 Other assets 1,166 1,024 ------ ------ $ 40,145 $ 45,327 ====== ======
Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 10,426 $ 12,355 Accrued liabilities 1,334 1,390 Current portion of long-term debt 753 3,129 ------ ------ Total current liabilities 12,513 16,874 Long-term debt 6,860 6,981 Other liabilities 1,184 1,743 Commitments and contingencies Shareholders' equity Preferred stock - $.01 par value --- --- Common stock - $1 par value 4,810 4,810 Additional paid-in capital 48,560 48,548 Accumulated deficit (28,433) (28,178) Unrealized loss on marketable securities (646) (713) Treasury stock (4,703) (4,738) ------ ------ Total shareholders' equity 19,588 19,729 ------ ------ $ 40,145 $ 45,327 ====== ======
See notes to condensed consolidated financial statements. 1 The Diana Corporation and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited) (In Thousands, Except Per Share Amounts)
12 Weeks Ended 28 Weeks Ended ------------------------ ------------------------ October 14, October 15, October 14, October 15, 1995 1994 1995 1994 ----------- ----------- ----------- ---------- Net sales $ 60,828 $ 56,255 $ 142,382 $ 131,004 Other income (loss) 198 (302) 333 (720) ------ ------ ------- ------- 61,026 55,953 142,715 130,284 Cost of sales 58,497 53,059 137,429 124,706 Selling and administra- tive expenses 2,181 2,485 4,932 5,411 ------ ------ ------- ------- Operating earnings 348 409 354 167 Interest expense (207) (224) (542) (584) Non-operating income --- 233 --- 68 Minority interest --- --- --- (44) Equity in earnings (loss) of unconsolidated subsidiaries 5 6 (67) 30 ------ ------ ------- ------- Net earnings (loss) $ 146 $ 424 $ (255) $ (363) ====== ====== ======= ======= Earnings (loss) per common share: Primary $ .04 $ .10 $ (.07) $ (.10) ====== ====== ======= ======= Fully diluted $ .03 $ .10 $ (.07) $ (.10) ====== ====== ======= ======= Weighted average number of common shares outstanding: Primary 4,134 4,075 3,917 3,761 ====== ====== ======= ======= Fully diluted 4,249 4,075 3,917 3,761 ====== ====== ======= =======
See notes to condensed consolidated financial statements. 2 The Diana Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) (In Thousands)
28 Weeks Ended -------------- October 14, October 15, 1995 1994 ----------- ---------- Operating Activities: Net loss $ (255) $ (363) Reconciliation of net loss to net cash provided by operating activities: Loss on sales of marketable securities --- 1,170 Depreciation and amortization 669 591 Minority interest --- 44 Equity in (earnings) loss of unconsolidated subsidiaries 67 (30) Payment of net liabilities of unconsolidated subsidiary (233) --- Changes in operating assets and liabilities 2,343 3,531 ------ ------ Net cash provided by operating activities 2,591 4,943 Investing activities: Additions to property and equipment (281) (166) Purchases of marketable securities (469) (1,499) Sales of marketable securities 4,200 8,829 Investments in unconsolidated subsidiary (350) --- Other 158 97 ------ ------ Net cash provided by investing activities 3,258 7,261 Financing activities: Changes in short-term borrowings --- (2,144) Payments on long-term debt (2,497) (3,800) Payment toward bond settlement --- (2,822) ------ ------ Net cash used by financing activities (2,497) (8,766) ------ ------ Increase in cash and cash equivalents 3,352 3,438 Cash and cash equivalents at the beginning of the period 2,440 1,661 ------ ------ Cash and cash equivalents at the end of the period $ 5,792 $ 5,099 ====== ====== Non-cash transactions: Purchase of minority interest with common stock $ --- $ 1,895 Payment of net liabilities of uncon- solidated subsidiary with restricted short-term investment 219 ---
See notes to condensed consolidated financial statements. 3 The Diana Corporation and Subsidiaries Notes to Condensed Consolidated Financial Statements October 14, 1995 (Unaudited) NOTE 1 - Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the twenty-eight weeks ended October 14, 1995 are not necessarily indicative of the results that may be expected for the fiscal year ended March 30, 1996. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended April 1, 1995. The computation of earnings (loss) per common share is based on the weighted average common shares outstanding and dilutive common stock equivalents (stock options). NOTE 2 - Commitments and Contingencies C&L Communications, Inc. ("C&L") participates in an equipment leasing arrangement. C&L is subject to a future subscription obligation relating to the equipment lease for approximately $442,000 at October 14, 1995, if income from the underlying lease is insufficient to fund future operations of the arrangement. The lease for equipment expires in January 1999. The sellers have indemnified the Company with respect to any future subscription obligations. 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The following is a summary of sales for the second quarter and year-to- date for fiscal 1996 and 1995, including sales by significant product line for APC (in thousands): Second Quarter Year-To-Date -------------- ------------ 1996 1995 1996 1995 ---- ---- ---- ---- C&L $ 7,160 $ 10,966 $ 13,427 $ 19,778 Beef 26,218 22,699 62,273 56,899 Pork 10,469 9,174 26,969 22,660 Other 16,981 13,416 39,713 31,667 ------ ------ ------- ------- APC Total 53,668 45,289 128,955 111,226 ------ ------ ------- ------- $ 60,828 $ 56,255 $ 142,382 $ 131,004 ====== ====== ======= ======= For the twelve weeks ended October 14, 1995, net sales increased $4,573,000 or 8.1% over fiscal 1995 second quarter net sales. C&L's net sales decreased $3,806,000 or 34.7% from fiscal 1995 second quarter net sales primarily due to lower call controller sales and lower sales of digital network communications products. The market for call controllers has been negatively impacted by a continuing consolidation of long distance carriers and continuing growth of equal access resulting in a reduction of demand for the product. In addition, the digital network communications marketplace in the United States is growing at a slower pace than in previous years due to the proliferation of voice T-1 circuits. Network providers are seeking faster access devices which can compress data more cost effectively. Consequently, there has been downward pricing pressure in this market which has impacted the digital products that are sold by C&L. C&L is addressing the changing dynamics in the telecommunications marketplace through the future distribution of new product lines including ISDN, ATM, frame relay and digital switches. APC's overall volume (based on tonnage) during this period increased by 7.5% and net sales increased $8,379,000 or 18.5% over fiscal 1995 second quarter net sales. The average sales price per pound increased from $1.15 per pound in fiscal 1995 to $1.28 per pound in fiscal 1996 due to a change in the product mix. The increase in net sales is attributable to increased business resulting from the addition of a customer in December 1994. Sales to this customer during the second quarter and year-to-date fiscal 1996 accounted for more than 25% of APC's net sales. APC anticipates that sales to this customer will decrease from current levels due to the discontinuance of certain higher cost routes. For the twenty-eight weeks ended October 14, 1995, net sales increased $11,378,000 or 8.7% over fiscal 1995 sales for the same period of time. C&L's fiscal 1996 year-to-date sales decreased $6,351,000 or 32.1% from fiscal 1995. C&L's year-to-date sales decrease is attributable to the same factors discussed above. APC's overall volume (based on tonnage) during this period increased by 6.8% and net sales increased by $17,729,000 or 15.9% from fiscal 1995 sales. The average sales price per pound during the twenty-eight weeks ended October 14, 1995 increased from $1.18 in fiscal 1995 to $1.29 in 5 fiscal 1996. APC's year-to-date sales increase is attributable to the same factors discussed above. For the twelve weeks ended October 14, 1995, other income (loss) improved from a loss of $302,000 to income of $198,000. For the twenty-eight weeks ended October 14, 1995, other income (loss) improved from a loss of $720,000 to income of $333,000. During the second quarter of fiscal 1996 and year-to-date fiscal 1996, the Company did not incur any gains or losses on sales of marketable securities as compared to losses of $430,000 and $1,170,000, respectively, incurred during the same periods of time in fiscal 1995. In addition, during fiscal 1996, the Company had smaller amounts of investments in corporate debt as compared to the same period of time in fiscal 1995 resulting in lower interest income. During the second quarter of fiscal 1995, the Company reduced its investments in corporate debt in amounts sufficient enough to eliminate all margin borrowings incurred to acquire these investments. Throughout fiscal 1995 the Company was decreasing its investments in corporate debt due to the decrease in interest rates. For the twelve weeks ended October 14, 1995, gross profit decreased $865,000 or 27.1% from the same period in fiscal 1995. The decrease in gross profit is primarily attributable to the reduction in C&L's sales. On a consolidated basis, gross profit as a percentage of net sales was 3.8% in the second quarter of fiscal 1996 as compared to 5.7% in the second quarter of fiscal 1995. C&L's gross profit as a percentage of net sales was 17.7% in the second quarter of fiscal 1996 as compared to 18.7% in fiscal 1995. The decrease in C&L's gross profit percentage in fiscal 1996 is attributable to lower margins on both call controllers and digital products due to the factors discussed in the sales analyses. APC's gross profit as a percentage of net sales was 2.0% in the second quarter of fiscal 1996 as compared to 2.5% in fiscal 1995. The decrease in APC's gross profit percentage in fiscal 1996 is primarily due to the customer added in December 1994. For the twenty-eight weeks ended October 14, 1995, gross profit decreased $1,345,000 or 21.4% from the same period in fiscal 1995. The decrease in gross profit is primarily attributable to the reduction in C&L's sales. On a consolidated basis, year-to-date gross profit as a percentage of net sales was 3.5% in fiscal 1996 as compared to 4.8% in fiscal 1995. C&L's gross profit as a percentage of net sales was 18.8% for the twenty-eight weeks ended October 14, 1995 as compared to 19.2% for the same period of time in fiscal 1995. The decrease in C&L's gross profit percentage is attributable to lower margins on call controllers due to the factors discussed in the sales analyses. APC's gross profit as a percentage of net sales for the twenty-eight weeks ended October 14, 1995 was 1.9% as compared to 2.2% for the same period of time in fiscal 1995. The decrease in APC's gross profit percentage for the twenty-eight weeks ended October 14, 1995 is primarily due to the customer added in December 1994. 6 For the twelve weeks ended October 14, 1995, selling and administrative expenses decreased $304,000 or 12.2% from the same period in fiscal 1995. Selling and administrative expenses as a percentage of net sales were 3.6% for the twelve weeks ended October 14, 1995 as compared to 4.4% for the same period in fiscal 1995. Selling and administrative expenses have decreased primarily because of lower selling and marketing expenses incurred by C&L resulting from its lower sales level. For the twenty-eight weeks ended October 14, 1995, selling and administrative expenses decreased $479,000 or 8.9% over the same period in fiscal 1995. Selling and administrative expenses as a percentage of net sales were 3.5% for the twenty-eight weeks ended October 14, 1995 as compared to 4.1% for the same period in fiscal 1995. The decrease in selling and administrative expenses is attributable to the same factors discussed above. For the twelve and twenty-eight weeks ended October 14, 1995, interest expense decreased $17,000 or 7.6% and $42,000 or 7.2%, respectively, over the same periods in fiscal 1995. The decrease in interest expense for the twelve weeks ended October 14, 1995 is due to the elimination of borrowings by C&L under its line of credit for the majority of the second quarter of fiscal 1996. The decrease in interest expense for the twenty-eight weeks ended October 14, 1995 is due to the above factor and because short term borrowings by Diana's corporate office were eliminated during the second quarter of fiscal 1995 due to the termination of margin borrowings on marketable security investments. For the twelve weeks ended October 15, 1994, non-operating income of $233,000 was attributable to the receipt of a settlement payment pursuant to a court order. During the first quarter of fiscal 1995, a non-operating expense of $165,000 was incurred representing a charge related to the settlement of a discrimination suit brought by a former employee of one of the Company's subsidiaries. Equity in earnings (loss) of unconsolidated subsidiaries changed from earnings of $30,000 during the twenty-eight weeks ended October 15, 1994 to a loss of $67,000 for the same period of time in fiscal 1996. Diana's unconsolidated subsidiary, Sattel Communications Company ("Satcom") incurred a loss during fiscal 1996 primarily due to expenses incurred related to the development of its business. Satcom was formed in December 1994. In addition, APC's unconsolidated subsidiary incurred a loss during fiscal 1996 due to lower gross profit margins. In October 1995, C&L appointed a new chief executive officer who has excellent senior management experience in telecommunications switching and data communications. C&L's former chief executive officer will remain on C&L's Board of Directors and will provide consulting services to C&L. Subsequently, several employees resigned from C&L including, among others, the chief financial officer, the vice president of sales and marketing, the sales manager and six out of fourteen sales people. Several if not all of these former employees went to work for a newly formed competitor. C&L is in the process of replacing the departed personnel. At this time the magnitude of the impact of this on C&L's business cannot be determined. 7 LIQUIDITY AND CAPITAL RESOURCES The Company recorded cash flow from operating activities of $2,591,000 during the twenty-eight weeks ended October 14, 1995 as compared to $4,943,000 for the same period of time in fiscal 1995. The cash flow from operating activities during the twenty-eight weeks ended October 14, 1995 is primarily attributable to the following changes in operating assets and liabilities: a) inventories decreased by $3,080,000 or 25.2% from April 1, 1995; b) receivables decreased $1,543,000 or 10.4% from April 1, 1995; and c) accounts payable decreased $1,929,000 or 15.6% from April 1, 1995. For the twenty-eight weeks ended October 14, 1995, the Company had $281,000 of capital expenditures. C&L's and APC's Loan and Security Agreements include covenants that restrict capital expenditures. In fiscal 1996, C&L's and APC's capital expenditures will be limited to $900,000 because of covenants in their Loan and Security Agreements that restrict capital expenditures. C&L's credit facility provides for a revolving line of credit of up to $6,000,000 with interest at the prime rate plus .25% through December 1995. At October 14, 1995, C&L had no borrowings outstanding and available unused borrowing capacity of $4,785,000. APC's credit facility provides a revolving line of credit of up to $9,500,000 with interest at the prime rate plus 2.0% through November 1997. A $2 million letter of credit facility is included within the total credit facility. At October 14, 1995, APC borrowed $4,439,000 and had letters of credit of $2,000,000 issued on its behalf. At October 14, 1995, APC had available unused borrowing capacity of $2,311,000. APC management estimates that the minimum level of borrowings that will be outstanding for the remainder of the fiscal year will be approximately $4,000,000 and has classified $439,000 of the amount outstanding as a current liability. In August and November 1995, APC and its lender entered into waiver and amendment agreements relating to the Loan and Security Agreement in order to avoid violating certain financial covenants in fiscal 1996. The Company is exploring options with respect to its investment in APC. 8 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K a) Exhibits: 4.1 - Waiver and Sixth Amendment to Loan and Security Agreement between Atlanta Provision Company, Inc. and Shawmut Capital Corporation dated November 28, 1995. 27 - Financial Data Schedule b) A Form 8-K dated October 17, 1995 was filed by the Company which covered: Item 5. Other Events Press release dated October 17, 1995 announcing the termination of a previously announced agreement to acquire a majority interest in ATI Communications. 9 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. THE DIANA CORPORATION By:/s/ Richard Y. Fisher Richard Y. Fisher Chairman of the Board (Principal Executive Officer) By:/s/ R. Scott Miswald R. Scott Miswald Vice President, Treasurer and Controller (Principal Financial and Accounting Officer) DATE: November 28, 1995 10 EX-4.1 2 WAIVER AND SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT November 28, 1995 Atlanta Provision Company, Inc. 1400 West Marietta Street, N.W. Atlanta, GA 30318 Attention: G. Michael Coggins Ladies and Gentlemen: Reference is made to that certain Loan and Security Agreement dated as of November 24, 1992, between Atlanta Provision Company, Inc. ("Borrower") and Shawmut Capital Corporation (successor in interest to Barclays Business Credit, Inc. ("Lender")), as amended to date (the "Loan Agreement"). Unless otherwise defined herein, all capitalized terms used herein shall have the same meanings provided for such terms in the Loan Agreement. Borrower has informed Lender that an Event of Default has occurred under the Loan Agreement because of Borrower's failure to achieve Net Cash Flow in excess of negative One Hundred Ninety-Five Thousand Dollars (-$195,000) for the period ending October 14, 1995 as required under subsection 9.3(c) of the Loan Agreement (the "Existing Default"). Borrower has requested that Lender (i) waive the Existing Default and (ii) amend certain provisions of the Loan Agreement, and Lender has agreed to such requests on the terms and conditions set forth herein. 1. Waiver. Lender hereby waives the Existing Default. The foregoing waiver is limited to the Existing Default specified and shall not constitute a waiver of any other existing or future Default or Event of Default or of any rights that Lender may have under the Loan Agreement or applicable law with respect thereto, all of which rights Lender hereby expressly reserves. 2. Amendments. The Loan Agreement is hereby amended as follows: a. Section 9.3(a) of the Loan Agreement (Minimum Adjusted Tangible Net Worth) is amended and restated in its entirety, as follows: "(a) Minimum Adjusted Tangible Net Worth. Maintain at all times Consolidated Adjusted Tangible Net Worth of not less than the amount shown below for the period corresponding thereto:" 1 Atlanta Provision Company, Inc. November 28, 1995 Page 2 Period Amount April 1, 1995 through $3,900,000 March 29, 1996 March 30, 1996 through $3,900,000 March 28, 1997 March 29, 1997 and thereafter $4,400,000 b. Section 9.3(b) of the Loan Agreement (Profitability) is amended and restated in its entirety, as follows: "(b) Profitability. Achieve Consolidated Adjusted Net Earnings From Operations not to exceed a Four Hundred Thousand Dollar ($400,000) loss for fiscal year 1996 and not less than a Five Hundred Thousand Dollar ($500,000) profit for each fiscal year thereafter." c. Section 9.3(c) Net Cash Flow is amended as follows: Period Amount November 11, 1995 ($355,000) December 9, 1995 ($395,000) January 6, 1996 ($465,000) February 3, 1996 ($200,000) March 2, 1996 $130,000 March 30, 1996 $230,000 April 27, 1996 $340,000 May 25, 1996 $350,000 June 22, 1996 $425,000 July 20, 1996 $450,000 August 17, 1996 $475,000 September 14, 1996 and thereafter $500,000 2 Atlanta Provision Company, Inc. November 28, 1995 Page 3 3. Effectiveness. This Waiver and Sixth Amendment to Loan and Security Agreement shall be effective as of the date hereof when duly executed by both parties and delivered to Lender. Except as expressly amended hereby, the Loan Agreement shall remain in full force and effect as executed. 4. Counterparts. This Waiver and Sixth Amendment to Loan and Security Agreement may be executed in counterparts all of which, taken together, shall constitute but one instrument. Very truly yours, SHAWMUT CAPITAL CORPORATION By:/s/ Robert J. Lund Robert J. Lund Vice President Acknowledged and agreed to this 28th day of November, 1995 ATLANTA PROVISION COMPANY, INC. By:/s/ R. Scott Miswald Its: Secretary 3 EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF THE DIANA CORPORATION AS OF AND FOR THE 28 WEEKS ENDED OCTOBER 14, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1000 6-MOS MAR-30-1996 OCT-14-1995 5873 2582 13654 (412) 9157 31466 8201 (4570) 40145 12513 6860 4810 0 0 20127 40145 142382 142715 137429 137429 4932 0 542 (255) 0 (255) 0 0 0 (255) (.07) (.07)
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