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, 1995
Commission File Number 1-10512
DEL ELECTRONICS CORP.
(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
(Address of principal executive offices)
(Zip Code)
(914) 686-3600
(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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock - 4,079,334 shares
PART I
Item 1. Financial Statements
Consolidated Balance Sheets - April 29, 1995 and
July 30, 1994
Consolidated Statements of Income for the Three Months and Nine Months
ended April 29, 1995 and April 30, 1994
Consolidated Statements of Cash Flows for the Nine Months ended April
29, 1995 and April 30, 1994
Notes to Consolidated Financial Statements
-1-
DEL ELECTRONICS CORP. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
April 29, 1995 July 30, 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents .................... $ 234,017 $ 445,597
Investments available-for-sale ............... 338,956 346,270
Trade receivables ............................ 5,520,524 6,120,457
Cost and estimated earnings in excess
of billings on uncompleted contracts ....... 425,819 551,301
Inventory .................................... 18,535,233 16,072,933
Prepaid expenses and other current assets .... 994,265 856,969
------------ ------------
Total Current Assets .................... 26,048,814 24,393,527
------------ ------------
FIXED ASSETS - NET ............................... 7,308,875 7,164,858
GOODWILL - NET ................................... 2,897,104 2,992,191
DEFERRED CHARGES ................................. 910,643 1,036,785
OTHER ASSETS ..................................... 598,934 611,012
------------ ------------
TOTAL ........................................ $ 37,764,370 $ 36,198,373
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt ............ $ 943,383 $ 928,568
Accounts payable - trade ..................... 2,256,005 2,477,101
Accrued liabilities .......................... 2,511,328 2,457,682
Income taxes payable ......................... 261,527 --
------------ ------------
Total Current Liabilities .................. 5,972,243 5,863,351
------------ ------------
LONG-TERM LIABILITIES
LONG-TERM DEBT (less current portion
included above) ............................ 11,513,516 11,485,722
OTHER ........................................ 738,900 757,410
DEFERRED TAXES PAYABLE ....................... 393,383 393,383
------------ ------------
Total Liabilities .......................... 18,618,042 18,499,866
------------ ------------
SHAREHOLDERS' EQUITY
Common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
April 29, 1995 - 4,120,788
July 30, 1994 - 4,091,002 ............... 412,079 385,616
Additional paid-in capital ................... 16,270,713 14,828,924
Retained earnings ............................ 2,696,620 2,583,817
------------ ------------
19,379,412 17,798,357
Less common shares in treasury -
April 29, 1995 - 41,454
July 30, 1994 - 17,670 ..................... 233,084 99,850
------------ -----------
Total Shareholders' Equity ................... 19,146,328 17,698,507
------------ -----------
TOTAL ........................................ $ 37,764,370 $ 36,198,373
============ ============
<FN>
See notes to consolidated financial statements.
</FN>
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DEL ELECTRONICS CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
Apr. 29, Apr. 30, Apr. 29, Apr. 30,
1995 1994 1995 1994
----------- ----------- ----------- -----------
Net sales ...................... $ 8,945,910 $ 5,592,496 $22,661,332 $16,309,022
----------- ----------- ----------- -----------
Costs and expenses
Cost of sales .................. 5,356,021 3,052,376 12,855,964 9,396,224
Research and development ....... 725,535 444,092 1,934,585 1,135,805
Selling, general & admin ....... 1,822,568 1,250,127 4,877,374 3,478,174
Interest expense - net ......... 289,891 127,050 866,184 345,932
----------- ----------- ----------- -----------
8,194,015 4,873,645 20,534,107 14,356,135
----------- ----------- ----------- -----------
Income before provision
for income taxes ........... 751,895 718,851 2,127,225 1,952,887
Provision for income taxes ..... 229,979 215,308 649,479 595,808
----------- ----------- ----------- -----------
Income before cumulative
effect of change in method for
accounting for income taxes .... 521,916 503,543 1,477,746 1,357,079
Cumulative effect of change
in method for accounting for
income taxes ................... -- -- -- 76,363
----------- ----------- ----------- -----------
Net income ..................... $ 521,916 $ 503,543 $ 1,477,746 $ 1,433,442
=========== =========== =========== ===========
Per share amounts:
Income before cumulative
effect of change in method
for accounting for income
taxes .......................... $ .11 $ .10 $ .31 $ .29
Cumulative effect of change
in method for accounting
for income taxes ............... -- -- -- .02
----------- ----------- ----------- -----------
Net income per common share
and common share equivalents
primary and fully diluted ...... $ .11 $ .10 $ .31 $ .31
=========== =========== =========== ===========
Weighted average number of
common shares outstanding
and common share equivalents
4,832,384 4,856,068 4,853,630 4,713,676
=========== =========== =========== ===========
<FN>
See notes to consolidated financial statements.
</FN>
-3-
DEL ELECTRONICS CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Nine Months Ended
April 29, April 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ....................................... $ 1,477,746 $ 1,433,442
Adjustments to reconcile net income to
net cash provided by operating activities:
Imputed interest ............................... 18,991 --
Depreciation ................................... 592,379 498,572
Amortization ................................... 301,047 242,792
Changes in assets and liabilities:
Decrease (increase) in trade receivables ......... 599,933 (161,457)
Decrease in cost and estimated
earnings in excess of billings on
uncompleted contracts .......................... 125,482 597,647
Increase in inventory ............................ (2,462,300) (3,492,934)
Increase in prepaid and
other current assets ........................... (97,870) (472,971)
(Increase) decrease in deferred charges .......... (7,084) 16,384
Increase in other assets ......................... (18,182) (81,998)
Decrease in accounts payable - trade ............. (221,096) (264,010)
Increase in accrued liabilities .................. 224,021 271,713
Increase in income taxes payable ................. 261,527 282,201
Increase in deferred taxes payable ............... -- 213,210
------------ ------------
Net cash provided by (used in)
operating activities ........................... 794,594 (917,409)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for fixed assets .................... (736,396) (386,838)
Net cash acquired on acquisition
of subsidiary .................................. -- 4,049
Payments to former shareholders of
subsidiary acquired ............................ (207,876) --
Investment in marketable securities .............. (97,946) --
Sale of marketable securities .................... 105,260 --
Other ............................................ -- (78,254)
------------ ------------
Net cash used in investing activities ............ (936,958) (461,043)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings .................... 42,609 1,377,656
Interest rate protection purchased ............... (71,500) --
Payment for repurchase of shares ................. (133,234) --
Proceeds from exercise of
stock options and warrants ..................... 111,864 --
Other ............................................ (18,955) (18,887)
------------ ------------
Net cash (used in) provided by
financing activities ......................... (69,216) 1,358,769
------------ ------------
<FN>
See notes to consolidated financial statements.
</FN>
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DEL ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Continued)
(Unaudited)
Nine Months Ended
April 29, April 30,
1995 1994
----------- ----------
NET DECREASE CASH AND CASH EQUIVALENTS ............... $ (211,580) $ (19,683)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....... 445,597 384,958
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............. $ 234,017 $ 365,275
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid .................................... $ 645,341 $ 267,209
=========== ===========
Income taxes paid ................................ $ 167,852 $ 405,378
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Acquisition of subsidiaries ........................ $ 4,367,249
-----------
Cash acquired in acquisition ....................... 6,130
Common stock issued ................................ 871,429
Payment due to Bertan shareholders ................. 2,600,000
Payments due under non-compete agreements .......... 753,739
Acquisition costs in accrued liabilities ........... 140,000
-----------
4,371,298
-----------
Cash acquired on acquisition of subsidiary ......... $ (4,049)
===========
Issuance of stock to reduce accrued liabilities .... $ 2,500
===========
<FN>
See notes to consolidated financial statements
</FN>
-5-
DEL ELECTRONICS CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. In the opinion of the Company, 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, 1995 and
the results of its operations and its cash flows for the three months
ended April 29, 1995 and April 30, 1994.
The accounting policies followed by the Company are set forth in Note 1
to the Company's consolidated financial statements as of July 30, 1994.
The consolidated financial statements should be read in conjunction
with the notes to the consolidated financial statements as of July 30,
1994.
NOTE 2. The results of operations for the three and nine month periods ended
April 29, 1995 are not necessarily indicative of the results to be
expected for the full year.
NOTE 3. PERCENTAGE OF COMPLETION ACCOUNTING
Balance at
April 29, 1995
Costs incurred on uncompleted
contracts ............................................... $ 334,984
Estimated earnings ......................................... 148,035
---------
483,019
Less: Billings to-date .................................... 57,200
---------
Costs and estimated earnings
in excess of billings on
uncompleted contracts .................................... $ 425,819
=========
The backlog of unshipped contracts being accounted for under the
percentage of completion method of accounting was $616,981 at April 29,
l995.
-6-
NOTE 4. Inventory is stated at a lower of cost (first-in, first-out) or
market.
Inventories are determined by physical count for annual reporting
purposes and are estimated by management for interim reporting
purposes based on estimated gross margins.
Inventory consists of the following:
April 29, 1995 July 30, 1994
Finished goods ................................. $ 3,259,148 $ 2,825,816
Work in process ................................ 8,305,908 7,201,564
Raw material and purchased parts ............... 7,084,974 6,142,965
----------- -----------
Total ...................................... 18,650,030 16,170,345
Less: Progress payments/deposits .............. 114,797 97,412
----------- -----------
$18,535,233 $16,072,933
=========== ===========
NOTE 5. FIXED ASSETS
Fixed assets consist of the following:
April 28, 1995 July 30, 1994
Land ....................................... $ 694,046 $ 694,046
Building ................................... 2,146,025 2,146,025
Machinery and equipment .................... 6,109,587 5,475,642
Furniture and fixtures ..................... 767,160 707,846
Leasehold improvements ..................... 792,365 749,219
Transportation equipment ................... 5,000 5,000
----------- -----------
10,514,184 9,777,788
Less accumulated depreciation
and amortization ......................... 3,205,309 2,612,930
----------- -----------
$ 7,308,875 $ 7,164,858
=========== ===========
NOTE 6. Net income per common share was computed using the modified treasury
stock method. This method was utilized since the number of shares of
common stock obtainable upon the assumed exercise of outstanding
options and warrants in the aggregate exceeded 20% of the number
of common shares outstanding at the end of the period. The weighted
average number of common shares and common share equivalents for the
periods presented includes the effect of the 3 percent stock dividends
declared on May 16, 1995 and November 23, 1994 (see Note 7).
NOTE 7. On May 16, 1995, the Company declared a 3 percent stock dividend to
holders of record on June 7, 1995, which is payable on June 23, 1995.
On November 23, 1994, the Company declared a 3 percent stock dividend
to holders of record on December 8, 1994, which was paid on December
27, 1994.
-7-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company has a revolving line of credit of $10,000,000 and two term
loans, the oustanding balances of which were $2,142,864 and $3,000,000 at April
29, 1995. Borrowings under the line of credit are based on 85 percent of
eligible accounts receivable and 50 percent of inventory, and has a $1,000,000
maximum sub-limit for letters of credit. As of April 29, 1995 the amount
outstanding under the line of credit was $7,275,000 and the unused and available
portion of the line of credit was approximately $2,271,500. Letters of credit
outstanding were $453,500.
The Company believes that its current financial resources, future
operating revenue and existing credit lines will be sufficient to meet its
foreseeable working capital requirements.
Working capital was $20,076,571 at April 29, 1995, compared to $18,530,176
at July 30, 1994, an increase of 8.3 percent. The current ratio increased to
4.36 to 1 at April 29, 1995 from 4.16 to 1 at July 30, 1994.
Investments available-for-sale of $338,956 at April 29, 1995 consist
primarily of corporate debt securities and equities. These investments are used
to fund a deferred compensation plan for a key Company employee.
Trade receivables at April 29, 1995 decreased $599,993 as compared to July
30, 1994 primarily as the result of improved collections.
Unbilled contract revenues were $425,819 at April 29, 1995 as compared to
$551,301 at July 30, 1994 due to shipments made on contracts which utilize the
percentage of completion method of accounting.
Inventory at January 28, 1995 increased approximately $2,462,300 as
compared to July 30, 1994. The increase in inventory is primarily due to major
new orders received in fiscal 1995.
Capital expenditures for the nine months ended April 29, 1995 were
approximately $736,000. These expenditures were primarily for printed circuit
board tooling and for assembly and test equipment in order to improve
manufacturing efficiency. There were no material open commitments for capital
equipment expenditures at April 29, 1995. The funds for capital expenditure
improvements were derived from operations and short-term borrowing.
The Company repurchased 23,784 shares of its common stock for $133,234
during the nine months ended April 29, 1995.
-8-
RESULTS OF OPERATIONS
Net sales for the three months ended April 29, 1995 were $8,945,910
compared to $5,592,496, an increase of approximately 60 percent over the
corresponding period in the prior year. Net sales for the nine months ended
April 29, 1995 were $22,661,332 compared to $16,309,022, an increase of
approximately 38.9 percent over the corresponding period in the prior year.
These increases were attributable to internal growth and the inclusion of the
sales of Bertan this year.
Cost of sales, as a percentage of net sales for the three months ended
April 29, 1995 was 59.9 percent compared to 54.5 percent for the prior
corresponding period. This change reflects the change in product mix in the
respective periods. Cost of sales, as a percentage of net sales for the nine
months ended April 29, 1995 was 56.7 percent compared to 57.6 percent for the
prior corresponding period. This decrease was primarily due to the reduction of
payroll costs at the beginning of the current year and the change in product mix
as the result of the acquisition of Bertan in April 1994.
Research and development expenses increased to $725,535 for the three
months ended April 29, 1995 from $444,092 for the three months ended April 30,
1994. Research and development expenses increased to $1,934,585 for the nine
months ended April 29, 1995 from $1,135,805 for the nine months ended April 30,
1994. These increases in research and development are primarily due to new
projects and the inclusion of the Bertan subsidiary for the full nine and three
months ended April 30, 1995. The Company continues to invest in research and
development in order to introduce new state-of-the-art products for its medical,
industrial and defense electronics markets.
Selling, general and administrative expenses were $1,822,568 in the three
months ended April 29, 1995 as compared to $1,250,127 in the same period in the
prior year. Selling, general and administrative expenses increased to $4,877,374
for the nine months ended April 29, 1995 from $3,478,174 for the same period in
the prior year. These increases were primarily attributable to the increase in
selling, general and administrative expenses due to the acquisition of Bertan
and expanded international sales and marketing expenses.
Net interest expense was $289,891 for the three months ended April 29,
1995 compared to $127,050 for the corresponding prior period. Net interest
expense was $866,184 for the nine months ended April 29, 1995 compared to
$345,932 for the corresponding prior period. This increase was attributable to
higher debt levels as the result of the acquisition of Bertan during April 1994
and higher interest rates.
Income tax expense was 30.5% of pre-tax income in the nine month periods
ended April 29, 1995 and April 30, 1994. The effective tax rates reflect sales
being made through the Company's Foreign Sales Corporation, increased research
and development and other tax credits.
The Company adopted Statement of Financial Accounting Standards number 109
"Accounting for Income Taxes" effective August 1, 1993. The cumulative effect of
change in method for accounting for income taxes was to increase net income in
the nine months ended April 30, 1994 by $76,363.
-9-
Net income increased to $521,916 for the three months ended April 29,
1995, an increase of approximately 3.6 percent from $503,543 for the prior
corresponding period. Net income per common share increased to $ .11 from $.10.
Net income increased to $1,477,746 for the nine months ended April 29, 1995, an
increase of approximately 3 percent from $1,433,442 for the prior corresponding
period. For the nine months ended April 29, 1995 primary and fully diluted net
income per share was $.31 as compared to $.31 for the nine months ended April
30, 1994. The 1994 period includes $.02 per share as the result of the
cumulative effect of the adoption of SFAS number 109 "Accounting for Income
Taxes". The number of outstanding shares and common share equivalents increased
3 percent from the nine month period ended April 30, 1994. The increases in net
income for the three and nine month periods are primarily due to internal
growth, the performance of the Bertan subsidiary and improved operating
efficiencies throughout the Company.
The backlog of unshipped orders at April 29, 1995 was approximately $20.0
million.
-10-
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
Not Applicable
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: None
-11-
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 ELECTRONICS CORP.
(Registrant)
June 6, 1995 Leonard A. Trugman
Date (Signature)
Chairman of the Board,
Chief Executive Officer
and President
June 6, 1995 Michael H. Taber
Date (Signature)
Chief Financial Officer
and Secretary
-12-