SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 29, 2000
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Commission File Number 0-3319
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DEL GLOBAL TECHNOLOGIES CORP.
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(Exact name of registrant as specified in its charter)
New York 13-1784308
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Commerce Park, Valhalla, NY 10595
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(Address of principal executive offices)
(Zip Code)
(914) 686-3600
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(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 such filing
requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the business on June 15, 2000.
Common Stock - 7,861,379
PART I
Item 1. Financial Statements
Consolidated Balance Sheets - April 29, 2000 and July 31, 1999
Consolidated Statements of Income for the Three Months and Nine
Months Ended April 29, 2000 and May 1, 1999
Consolidated Statements of Cash Flows for the Nine Months Ended
April 29, 2000 and May 1, 1999
Notes to Consolidated Financial Statements
-1-
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
April 29, July 31,
2000 1999
------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 1,167,532 $ 320,742
Investments available-for-sale 1,302,641 1,292,852
Trade receivables - net 23,722,438 15,624,433
Cost and estimated earnings
in excess of billings on
uncompleted contracts 9,674,098 6,402,532
Inventory 42,747,539 36,599,587
Prepaid expenses and other
current assets 2,574,811 1,216,145
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Total current assets 81,189,059 61,456,291
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FIXED ASSETS - Net 15,684,603 14,668,060
INTANGIBLES - Net 742,775 879,898
GOODWILL - Net 7,562,886 5,236,965
OTHER ASSETS 2,030,006 1,862,743
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TOTAL $107,209,329 $ 84,103,957
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable - banks $ 3,313,444 $ --
Current portion of long-term debt 1,571,153 516,654
Accounts payable - trade 11,174,802 6,295,586
Accrued liabilities 5,744,752 4,468,521
Deferred compensation liability 1,916,331 1,201,065
Income taxes 1,375,180 1,224,451
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Total current liabilities 25,095,662 13,706,277
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LONG-TERM LIABILITIES
Long-term debt (less current portion) 6,136,615 1,832,287
Other 2,181,040 594,272
Deferred income taxes 2,057,186 1,620,417
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Total liabilities 35,470,503 17,753,253
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MINORITY INTEREST IN SUBSIDIARY 28,350 --
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SHAREHOLDERS' EQUITY
Common stock, $.10 par value;
Authorized 20,000,000 shares;
Issued and outstanding - $8,402,245
shares at April 29, 2000 and
8,278,646 shares at July 31, 1999 840,226 827,866
Additional paid-in capital 51,594,965 50,798,502
Comprehensive income (8,091) --
Retained earnings 24,250,499 19,032,506
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76,677,599 70,658,874
Less common stock in treasury -
572,346 shares at April 29, 2000
and 490,393 shares at July 31, 1999 4,967,123 4,308,170
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Total shareholders' equity 71,710,476 66,350,704
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TOTAL $ 107,209,329 $ 84,103,957
============= =============
See notes to consolidated financial statements
-2-
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
------------------------ ------------------------
April 29, May 1, April 29, May 1,
2000 1999 2000 1999
----------- ----------- ----------- -----------
NET SALES $20,526,198 $18,684,525 $53,688,571 $49,416,143
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 12,527,706 11,216,870 32,257,905 29,204,291
Research and development 2,052,124 1,753,406 5,301,967 4,707,649
Selling, general and
administrative 2,990,150 3,064,658 8,294,113 8,435,479
Interest expense - net 128,941 78,577 274,073 101,289
----------- ----------- ----------- -----------
17,698,921 16,113,511 46,128,058 42,448,708
----------- ----------- ----------- -----------
INCOME BEFORE PROVISION
FOR INCOME TAXES AND
MINORITY INTEREST 2,827,277 2,571,014 7,560,513 6,967,435
PROVISION FOR INCOME TAXES 886,827 797,015 2,325,922 2,159,905
----------- ----------- ----------- -----------
NET INCOME BEFORE MINORITY
INTEREST 1,940,450 1,773,999 5,234,591 4,807,530
MINORITY INTEREST 16,598 -- 16,598 --
----------- ----------- ----------- -----------
NET INCOME $ 1,923,852 $ 1,773,999 $ 5,217,993 $ 4,807,530
=========== =========== =========== ===========
NET INCOME PER COMMON
SHARE AND COMMON
BASIC $ .25 $ .23 $ .67 $ .63
=========== =========== =========== ===========
DILUTED $ .24 $ .22 $ .64 $ .59
=========== =========== =========== ===========
Weighted average number
of common shares
outstanding 7,824,196 7,700,294 7,807,739 7,658,666
=========== =========== =========== ===========
Weighted average number
of common shares
outstanding and common
share equivalents 8,175,899 8,163,269 8,170,552 8,163,470
=========== =========== =========== ===========
See notes to consolidated financial statements
-3-
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
-------------------------
April 29, May 1,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 5,217,993 $ 4,807,530
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 1,779,856 1,287,436
Amortization 567,385 508,615
Imputed interest 49,471 62,986
Deferred income tax provision 410,204 192,547
Tax benefit from exercise of stock
options and warrants 252,770 450,530
Amortization of stock-based compensation 39,218 16,822
Minority interest in net income of
consolidated subsidiary 16,598 --
Changes in assets and liabilities
(net of acquisition of subsidiary):
Increase in trade receivables (1,136,875) (1,585,932)
Increase in cost and estimated earnings
in excess of billings on uncompleted
contracts (3,271,566) (2,134,867)
Increase in inventory (1,768,587) (5,290,759)
Increase in prepaid and other current
assets (1,018,292) (1,014,802)
Increase in other assets (206,031) (22,875)
Increase in accounts payable - trade 434,113 1,612,833
(Decrease) increase in accrued liabilities (142,937) 584,712
Increase in deferred compensation liability 215,128 260,703
Increase in income taxes payable 460,592 1,042,273
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Net cash provided by operating activities 1,899,040 777,752
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid to acquire subsidiary (1,099,027) (550,018)
Expenditures for fixed assets (2,362,128) (2,412,838)
Investment in marketable securities (9,789) (114,459)
Payments to former shareholders of subsidiary
acquired (65,096) (119,569)
----------- -----------
Net cash used in investing activities (3,536,040) (3,196,884)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from bank borrowing 2,912,777 653,399
Payment for repurchase of shares (549,471) (1,130,251)
Proceeds from exercise of stock options
and warrants 138,651 448,498
Other (18,167) (2,067)
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Net cash provided by (used in) financing
activities 2,483,790 (30,421)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 846,790 (2,449,553)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 320,742 3,401,697
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,167,532 $ 952,144
=========== ===========
See notes to consolidated financial statements
-4-
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
-------------------------
April 29, May 1,
2000 1999
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 227,748 $ 142,395
============ ============
Income taxes paid $ 1,191,320 $ 473,940
============ ============
SUPPLEMENTAL SCHEDULE OF INVESTING AND
FINANCING ACTIVITIES:
Investment in subsidiary $ 2,543,867
Less cash acquired (1,214,539)
Compensation cost of warrant issued (218,702)
Investment costs in accrued expenses (11,599)
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Net cash paid to acquire subsidiary $ 1,099,027
============
Acquisition of selected assets $ 1,508,702
Payment due under acquisition term note (958,684)
------------
Net cash paid to acquire selected assets $ 550,018
============
See notes to consolidated financial statements
-5-
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to
present fairly the results of the Company's financial position as
of April 29, 2000 and the results of its operations and its cash
flows for the nine months ended April 29, 2000 and May 1, 1999.
The Company's consolidated financial statements, in conformity
with generally accepted accounting principles, include the
assets, liabilities and the results of operations of a majority
owned subsidiary. The ownership of the other interest holders is
reflected as minority interest.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements as of July 31, 1999.
The financial statements of the consolidated foreign subsidiary
Villa Sistemi Medicali S.p.A. ("Villa") are denominated in
Italian lira and are converted into U.S. dollars for reporting
purposes. As a result, they are subject to the effects of
currency fluctuations which may affect reported earnings and
future cash flows. These foreign currency conversions are
calculated in accordance with SFAS No. 52, "Foreign Currency
Translation."
The consolidated financial statements should be read in
conjunction with the notes to the financial statements as of July
31, 1999.
NOTE 2 The results of operations for the three and nine-month periods
ended April 29, 2000 are not necessarily indicative of the
results to be expected for the full year.
NOTE 3 INVESTMENTS
April 29, July 31,
2000 1999
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Deferred compensation investments $ 1,342,602 $ 1,201,066
Less amounts recorded as cash (81,083) (55,057)
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Net 1,261,519 1,146,009
Other investments 41,122 146,843
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Total $ 1,302,641 $ 1,292,852
=========== ===========
Investments available-for-sale at April 29, 2000 and July 31,
1999 include $1,342,602 and $1,201,066, respectively, for certain
key executives' deferred compensation. At April 29, 2000 and July
31, 1999, $81,083 and $55,057, respectively, were classified as
cash and $1,261,519 and $1,146,009, respectively, were recorded
as investments. The liabilities of $1,342,602 and $1,201,066,
respectively, are recorded as deferred compensation liability.
Gains and losses on the investments held to fund the deferred
compensation, either recognized or unrealized, inure to the
benefit or detriment of the individual key executives' deferred
compensation. At April 29, 2000 and July 31, 1999, the balance of
investments available-for-sale of $41,122 and $146,843,
respectively, are equity securities held by the Company for its
own account. Realized and unrealized gains and losses on these
securities for the periods ended April 29, 2000 and May 1, 1999
were not material and are recorded in the financial statements.
-6-
NOTE 4 PERCENTAGE OF COMPLETION ACCOUNTING
April 29, July 31,
2000 1999
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Costs incurred on
uncompleted contracts $18,610,774 $15,012,158
Estimated earnings 12,080,621 9,329,220
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30,691,395 24,341,378
Less billings to date 21,017,297 17,938,846
----------- -----------
Costs and estimated
earnings in excess of
billings on uncompleted contracts $ 9,674,098 $ 6,402,532
=========== ===========
The backlog of unshipped contracts being accounted for under the
percentage of completion method of accounting was approximately
$4.9 million at April 29, 2000.
NOTE 5 INVENTORY
Inventory is stated at the lower of cost (first-in, first-out) or
market.
Inventories and their effect on cost of sales are determined by
physical count for annual reporting purposes and are estimated by
management for interim reporting purposes.
Inventory consists of the following:
April 29, July 31,
2000 1999
----------- -----------
Finished goods $ 8,234,385 $ 5,414,095
Work-in-process 20,472,875 14,814,766
Raw material and purchased parts 14,040,279 16,370,726
----------- -----------
Total $42,747,539 $36,599,587
=========== ===========
NOTE 6 FIXED ASSETS
Fixed assets consist of the following:
April 29, July 31,
2000 1999
----------- -----------
Land $ 694,046 $ 694,046
Building 2,200,742 2,161,025
Machinery and equipment 18,724,920 16,446,086
Furniture and fixtures 1,632,665 1,435,929
Leasehold improvements 2,453,593 2,180,873
Transportation equipment 38,495 30,103
----------- -----------
25,744,461 22,948,062
Less accumulated depreciation
and amortization 10,059,858 8,280,002
----------- -----------
Net fixed assets $15,684,603 $14,668,060
=========== ===========
NOTE 7 ACQUISITION OF SUBSIDIARY
On December 28, 1999, the Company obtained a 19% interest in
Villa located in Milan, Italy. On April 3, 2000, the Company
acquired an additional 61% interest to bring its total ownership
to 80%. The consideration paid by the Company for the acquisition
of Villa shares consisted of: $1,100 in cash and a six-year
warrant to purchase 50,000 shares of Del Global Technologies
Corp. common stock at the fair market price on the date of
issuance, valued at approximately $219,000 (using the
Black-Scholes method as prescribed by SFAS No. 123, "Accounting
for Stock-Based Compensation"). To date, the associated
transaction costs of this acquisition were approximately
$432,000. The source of funds for the acquisition of Villa was
from the Company's working capital and credit facility.
-7-
Further, the Company contributed $1,892,000 to the charter
capital of Villa. Villa management also collectively contributed
$108,000 to the charter capital of Villa.
This acquisition is being accounted for as a purchase and
accordingly, the original purchase price was allocated to assets
and liabilities acquired based on a preliminary estimate of their
fair value at the date of acquisition and is subject to
modification as more information becomes available.
NOTE 8 SEGMENTS
The Company adopted SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", during the fourth quarter
of the year ended July 31, 1999. SFAS No. 131 establishes
standards for reporting information about operating segments in
annual financial statements and requires selected information
about operating segments in interim financial statements. It also
establishes standards for related disclosures about products and
services, major customers and geographic areas. Operating
segments are defined as components of an enterprise about which
separate financial information is available that is evaluated
regularly by the chief decision maker, or decision making group,
in deciding how to allocate resources and in assessing
performance. The Company's chief operating decision making group
is comprised of the Chief Executive Officer and the senior
executives of the Company's operating segments.
The Company has two reportable segments which are Medical Imaging
Systems and Critical Electronic Subsystems. The Medical Imaging
Systems Segment designs, manufactures and markets
state-of-the-art, cost-effective medical imaging and diagnostic
systems consisting of stationary and portable imaging systems,
radiographic/fluoroscopic systems, mammography systems, a
neo-natal imaging system and dental imaging systems. The Critical
Electronic Subsystems Segment designs, manufactures and markets
proprietary precision power conversion and electronic noise
suppression subsystems for medical as well as critical industrial
applications.
Selected financial data of these segments is as follows:
Medical Critical
Imaging Electronic
Systems Subsystems Total
----------- ----------- ------------
For the Nine Months
Ended April 29, 2000:
Net sales to external
customers $30,444,207 $23,244,364 $ 53,688,571
=========== =========== ============
Income before provision
for income taxes $ 3,048,928 $ 4,511,585 $ 7,560,513
=========== =========== ============
Segment assets $54,123,525 $53,085,804 $107,209,329
=========== =========== ============
Medical Critical
Imaging Electronic
Systems Subsystems Total
----------- ----------- ------------
For the Nine Months
Ended May 1, 1999:
Net sales to external
customers $27,071,278 $22,344,865 $49,416,143
=========== =========== ===========
Income before provision
for income taxes $ 2,947,878 $ 4,019,557 $ 6,967,435
=========== =========== ===========
Segment assets $37,490,805 $44,746,864 $82,237,669
=========== =========== ===========
-8-
NOTE 9 COMPREHENSIVE INCOME
The Company's total comprehensive income was as follows:
Three Months Nine Months
Ended Ended
April 29, April 29,
2000 2000
----------- -----------
Net Income $ 1,923,852 $ 5,217,993
Change in equity due to foreign
currency translation adjustments (8,091) (8,091)
----------- -----------
Comprehensive income $ 1,915,731 $ 5,209,902
=========== ===========
-9-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
This Management Discussion and Analysis of Financial Condition and Results of
Operations contains forward looking statements. Such statements involve various
risks that may cause actual results to differ materially. These risks include,
but are not limited to, the ability of the Company to grow internally or by
acquisition and to integrate acquired businesses, changing industry or
competitive conditions, and other risks referred to in the Company's
registration statements and periodic reports filed with the Securities and
Exchange Commission.
OVERVIEW
The Company's net sales have increased as a result of both
internal growth and acquisitions. The Company has completed six acquisitions in
the past eight years: Dynarad (a designer and manufacturer of medical imaging
systems and critical electronic subsystems) in fiscal 1993; Bertan (a designer
and manufacturer of precision high voltage power supplies and instrumentation
for medical and industrial applications) in fiscal 1994; Gendex-Del (a
manufacturer of medical imaging systems) in fiscal 1996; X-Ray Technologies,
Inc. (a manufacturer of medical imaging systems) in fiscal 1998, Acoma Medical
Imaging Inc. (a designer and manufacturer of medical imaging systems) in fiscal
1999 and Villa Sistemi Medicali S.p.A. (a designer and manufacturer of medical
and dental imaging systems) in fiscal 2000.
During the past five years the Company has grown internally and
through acquisitions into a company whose predominant business is serving the
medical imaging and diagnostic markets. The Company's net sales attributable to
medical imaging products have increased from approximately $14.4 million or 44%
of total net sales in fiscal 1995 to approximately $49.2 million or 72% of total
net sales in fiscal 1999.
Management believes that recent cost containment trends in the
healthcare industry have created opportunities for its cost-effective medical
imaging products in domestic and international markets. Some of these trends are
increased demand for lower cost medical equipment, the outsourcing of systems
and critical electronic subsystems by leading original equipment manufacturers
("OEMs"), increased demand for certain diagnostic procedures and lower cost
medical services in the global marketplace.
RESULTS OF OPERATIONS
Net sales for the three months ended April 29, 2000 were
approximately $20.5 million as compared to approximately $18.7 million for the
three months ended May 1, 1999, an increase of 10%. Net sales for the nine
months ended April 29, 2000 were approximately $53.7 million as compared to
approximately $49.4 million for the nine months ended May 1, 1999, an increase
of 9%. These increases are primarily due to internal growth from existing
operations.
Cost of sales, as a percentage of net sales for the three
months ended April 29, 2000, was 61% as compared to 60% for the prior
corresponding period. Cost of sales, as a percentage of net sales for the nine
months ended April 29, 2000, was 60% as compared to 59% for the prior
corresponding period. These increases are due to a change in product mix in both
periods.
Research and development expenses were approximately $2.1 and
$1.8 million for the three- month periods ended April 29, 2000 and May 1, 1999,
respectively, an increase of 17%. Research and development expenses increased to
approximately $5.3 million for the nine months ended April 29, 2000 from
approximately $4.7 million for the nine months ended May 1, 1999, an increase of
13%. This increase was primarily due to new product development. The Company
continues to invest in research and development in order to introduce new
state-of-the-art products for its medical and industrial markets.
Selling, general and administrative expenses were approximately
$3.0 million and $3.1 million for three-month periods ended April 29, 2000 and
May 1, 1999, respectively, or 14.6% and 16.4% of net sales, due to increased
sales volume. Selling, general and administrative expenses were approximately
$8.3 million,
-10-
or 15.5% of net sales, for the nine months ended April 29, 2000 as compared to
approximately $8.4 million, or 17.1% of net sales, due to increased sales
volume, for the same period in the prior year.
Net interest expense was approximately $129,000 for the three
months ended April 29, 2000 as compared to approximately $79,000 for the
corresponding period in the prior year. Net interest expense was approximately
$274,000 for the nine months ended April 29, 2000 as compared to approximately
$101,000 for the corresponding period in the prior year. These increases are due
to higher interest rates and higher levels of debt for both periods.
Income tax expense was 30.4% of pretax income for the three and
nine months ended April 29, 2000 and 31% for the three and nine months ended May
1, 1999. The decrease from statutory rates is primarily due to sales being made
through the Company's Foreign Sales Corporation, research and development and
other tax credits.
Net income increased to approximately $1.9 million for the
three months ended April 29, 2000, an increase of 8.5% from approximately $1.8
million for the prior corresponding period. Basic earnings per share at April
29, 2000 increased to $.25 from $.23 at May 1, 1999, an increase of 9%. Diluted
earnings per share increased to $.24 at April 29, 2000 from $.22 at May 1, 1999,
an increase of 9%. The weighted number of common shares outstanding increased to
7,824,196 at April 29, 2000 from 7,700,294 at May 1, 1999 and the number of
common shares and common share equivalents outstanding increased to 8,175,899 at
April 29, 2000 from 8,163,269 at May 1, 1999. Net income increased to
approximately $5.2 million for the nine months ended April 29, 2000, an increase
of 9% from approximately $4.8 million for the prior corresponding period. Basic
earnings per share at April 29, 2000 increased to $.67 from $.63 at May 1, 1999,
an increase of 6%. Diluted earnings per share increased to $.64 at April 29,
2000 from $.59 at May 1, 1999, an increase of 9%. The weighted number of common
shares outstanding increased to 7,807,739 at April 29, 2000 from 7,658,666 at
May 1, 1999 and the number of common shares and common share equivalents
outstanding increased to 8,170,552 at April 29, 2000 from 8,163,470 at May 1,
1999. These increases in net income for both the three and the nine-month
periods ended April 29, 2000 were due to higher sales.
The backlog of unshipped orders at April 29, 2000 was
approximately $47 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and acquisitions through
a combination of cash flow from operations, bank borrowings and the issuance of
the Company's common stock.
Working Capital. At April 29, 2000 and July 31, 1999, the
Company's working capital was approximately $56.1 million and $47.8 million,
respectively. At such dates the Company had approximately $1.2 million and
$321,000, respectively, in cash and cash equivalents.
Cost and estimated earnings in excess of billings on
uncompleted contracts increased to approximately $9.7 million at April 29, 2000
from approximately $6.4 million at July 31, 1999, due to additional long-term
contracts accounted for under the percentage of completion method of accounting
in the nine-month period.
Trade receivables increased approximately $8.1 million at April
29, 2000 as compared to July 31, 1999 primarily due to the acquisition of Villa
and higher sales in the period.
Inventory at April 29, 2000 increased approximately $6.1
million as compared to July 31, 1999 primarily because of the acquisition of
Villa and higher sales levels of major medical OEM contracts.
Prepaid expenses and other current assets at April 29, 2000
increased approximately $1.4 million as compared to July 31, 1999 primarily
because of the acquisition of Villa and increased prepaid trade show expense.
-11-
Goodwill increased approximately $2.3 million at April 29, 2000
as compared to July 31, 1999 because of the acquisition of Villa.
On December 28, 1999, the Company obtained a 19% interest in
Villa Sistemi Medicali S.p.A. ("Villa") located in Milan, Italy, On April 3,
2000, the Company acquired an additional 61% interest to bring its total
ownership to 80%. The consideration paid by the Company for the acquisition of
Villa shares consisted of: $1,100 in cash and a six-year warrant to purchase
50,000 shares of Del Global Technologies Corp. common stock at the fair market
price on the date of issuance valued at approximately $219,000 (using the
Black-Scholes method as prescribed by SFAS No. 123, "Accounting for Stock-Based
Compensation"). To date, the associated transaction costs of this acquisition
were approximately $432,000. The source of funds for the acquisition of Villa
was from the Company's working capital and credit facility.
Accounts payable increased approximately $4.9 million at April
29, 2000 from July 31, 1999 due to the acquisition of Villa.
Credit Facility and Borrowing. At April 29, 2000 the Company
had a $14.0 million revolving credit line and a $10.0 million acquisition credit
line with its bank. The available portion of the revolving credit line was
approximately $8.4 million, after deducting outstanding letters of credit of
approximately $1.6 million and $7.5 million was available under its acquisition
credit line. Additionally, Villa has a revolving line of credit of approximately
$9.2 million with a consortium of banks which is used primarily for accounts
receivable financing. At April 29, 2000, approximately $3.8 million was being
utilized.
Long-term debt increased approximately $4.3 million as compared
to July 31, 1999, primarily due to the acquisition of Villa, additional
investments in capital equipment and additional working capital requirements. In
addition, Villa has a term loan of approximately $412,000 with its bank and an
Italian government research and development loan of approximately $1.6 million.
The Company anticipates that cash generated from operations and
amounts available under its bank lending facilities will be sufficient to
satisfy its currently projected operating cash needs.
Capital Expenditures. The Company continues to invest in
capital equipment, principally for its manufacturing operations, in order to
improve its manufacturing capability and capacity. The Company has expended
approximately $2.4 million for capital equipment for the nine-month period ended
April 29, 2000.
Shareholders' Equity. Shareholders' equity increased to
approximately $71.7 million at April 29, 2000 from approximately $66.4 million
at July 31, 1999, primarily due to the results of operations. Additionally,
during the current nine-month period 117,738 stock options were exercised, with
proceeds of $248,133 and 81,953 shares of common stock were repurchased at a
cost of approximately $659,000.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
Disclosures about Derivative Instruments and Hedging
Activities. In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and hedging
activities. SFAS No. 133 is effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. Due to the acquisition of the consolidated
foreign subsidiary of Villa, management is currently evaluating the possible
affects of this statement on the future results of the Company's financial
position, future results of its operations and future cash flows. Since the
Company does not engage in derivative instrument activity, this pronouncement
has no current affect on its financial statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
None.
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PART II
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Submission to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 11 - Computation of Earnings per Common
Share
Exhibit 27 - Financial Data Schedule
(b) Report on Form 8-K - Filed May 5, 2000
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DEL GLOBAL TECHNOLOGIES CORP.
-----------------------------
/S/LEONARD A. TRUGMAN
---------------------
Leonard A. Trugman
Chairman of the Board,
Chief Executive Officer
and President
/S/MICHAEL H. TABER
---------------------
Michael H. Taber
Chief Financial Officer,
Vice President of Finance
and Secretary
Dated: June 16, 2000
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