UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File Number 0-15011
Data Measurement Corporation
(Exact name of registrant as specified in its charter)
Delaware 06-0774266
(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization.)
15884 Gaither Drive, Gaithersburg, Maryland 20877
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 948-2450
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
The number of shares outstanding of the registrant's common stock par
value $.01 per share, as of September 30, 1994 was 1,327,818.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DATA MEASUREMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
1994 1993 1994 1993
Sales...................................... $6,121,236 $4,530,379 $17,548,521 $15,000,672
Costs and expenses:
Cost of sales............................ 4,759,111 3,843,396 13,521,563 11,523,088
Selling, general & admin................. 1,128,122 927,156 3,193,998 3,180,401
Interest expense......................... 99,788 95,088 301,383 303,051
Loss (gain) on foreign exch.............. (14,644) 9,011 (5,931) 54,823
Costs and expenses......................... 5,972,377 4,874,651 17,011,013 15,061,363
Income before provision
for income taxes......................... 148,859 (344,272) 537,508 (60,691)
Provision for income taxes:
Current.................................. 0 5,351 11,426 45,334
Deferred................................. (10,121) (28,325) 63,425 (50,634)
Net income before
extraordinary item....................... 158,980 (321,298) 462,657 (55,391)
Extraordinary item......................... 4,012,180 0 4,012,180 0
Net income after
extraordinary item....................... $4,171,160 ($321,298) $4,474,837 ($55,391)
Net Income per Share.......................
-Primary
-Before Extraordinary Item $0.12 ($0.25) $0.35 ($0.04)
-Extraordinary Item $2.95 - $2.99 -
-After Extraordinary Item $3.07 ($0.25) $3.34 ($0.04)
-Fully Diluted
-Before Extraordinary Item $0.11 ($0.25) $0.33 ($0.04)
-Extraordinary Item $2.60 - $2.60 -
-After Extraordinary Item $2.71 ($0.25) $2.93 ($0.04)
See accompanying notes to consolidated financial statements.
DATA MEASUREMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1994 1993
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents................ $1,264,474 $738,695
Accounts Receivable:
Trade, less allowance for
doubtful accounts of $158,509
in 1994 & $187,934 in 1993........... 3,753,462 3,847,764
Unbilled accounts receivable........... 3,174,716 1,007,674
Retainages............................. 1,035,073 1,587,546
Total Accounts Receivable............. 7,963,251 6,442,984
Inventories:
Work-in-process........................ 1,788,718 2,774,924
Material and parts..................... 6,622,577 5,354,370
Total inventories.................... 8,411,295 8,129,294
Deferred income taxes.................... 172,240 172,240
Prepaid income taxes..................... 82,760 82,760
Other.................................... 362,576 321,892
Total current assets................. 18,256,596 15,887,865
Property & equipment, at cost:
Land..................................... 39,400 36,925
Building................................. 496,947 465,731
Machinery and equipment.................. 1,721,780 1,637,562
Demonstration equipment.................. 1,052,131 1,038,382
Office furniture......................... 803,819 724,671
Leasehold improvements................... 165,106 161,400
Total property and equipment......... 4,279,183 4,064,671
Less accumulated depreciation
and amortization....................... 3,319,742 2,875,546
Net property & equipment............. 959,441 1,189,125
Patents and licenses at cost, less
amortization of $110,101 in 1994
and $95,049 in 1993...................... 54,819 35,828
Goodwill................................... 393,374 398,555
TOTAL ASSETS $19,664,230 $17,511,373
See accompanying notes to consolidated financial statements.
DATA MEASUREMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1994 1993
(Unaudited)
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to bank.................... $1,213,950 $487,397
Accounts payable......................... 1,741,367 1,399,832
Advance payments on contracts............ 1,559,831 819,111
Accrued compensation..................... 718,154 724,655
Accrued warranty expense................. 342,370 386,895
Accrued commission expense............... 494,121 451,812
Accrued interest expense................. 27,134 27,635
Other accrued liabilities................ 381,129 540,595
Current income taxes..................... 63,933 50,513
Current portion of long term debt 517,552 382,654
Total current liabilities.............. 7,059,541 5,271,099
Deferred income taxes...................... 201,946 136,000
Long term debt............................. 3,674,878 3,377,763
Non interest bearing long
term obligation.......................... 0 4,747,569
Stockholders' equity:
Common stock, $.01 par value............. 13,308 12,988
Additional paid in capital............... 5,415,253 5,335,573
Retained earnings........................ 3,700,724 (774,016)
Currency translation adjustments......... (384,620) (578,803)
Treasury stock, 3,000 shares,
at cost................................ (16,800) (16,800)
Total stockholders' equity............. 8,727,865 3,978,942
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY... $19,664,230 $17,511,373
See accompanying notes to consolidated financial statements.
DATA MEASUREMENT CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income............................... $4,474,837 ($55,391)
Adjustments to reconcile net earnings
to net cash used in operations:
Depreciation......................... 397,100 262,023
Amortization......................... 22,609 20,206
Changes in assets and liabilities:
Accounts receivable.................. (1,394,190) (388,220)
Inventories.......................... (164,538) (1,135,723)
Other current assets................. (26,584) (56,402)
Patents and licenses................. (28,591) (8,995)
Accounts payable..................... 321,392 825,056
Advance payments on contracts........ 708,201 (226,132)
Accrued compensation................. (12,892) (19,644)
Other accrued liabilities............ (200,472) 99,244
Current income taxes................. 10,028 (224,487)
Deferred income taxes................ 63,436 (50,634)
Net cash provided by (or used in)
operating activities: 4,170,336 (959,099)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment.... (127,703) (37,630)
Disposal of property and equipment....... 0 61,265
Net cash provided by (or used in)
investing activities: (127,703) 23,635
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (repayment) of long term debt... (4,262,401) (246,876)
Increase (decrease) in notes payable..... 707,873 640,887
Proceeds from sale of common stock....... 0 29,331
Net cash provided by (or used in)
financing activities: (3,554,528) 423,342
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS: 37,673 (64,425)
NET INCREASE/(DECREASE) IN CASH: 525,778 (576,547)
CASH, Beginning of period 738,696 1,049,675
CASH, End of period $1,264,474 $473,128
Supplemental cash flow information:
Interest paid............................ $291,936 $316,864
Income taxes paid........................ $1,540 $268,246
Capitalized equipment leases............. $73,030 -
Conversion of Subordinated Debenture..... $80,000 $90,000
Termination of Contingent Obligation..... $4,012,180 -
See accompanying notes to consolidated financial statements.
DATA MEASUREMENT CORPORATION
NOTES TO CONSOLIDATED UNAUDITED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The consolidated, unaudited financial statements contained herein have
been prepared from the books and records of the Company. In the opinion of
management, all adjustments, consisting of normal recurring accruals,
necessary for a fair presentation of the results of operations for the interim
periods presented, have been reflected herein. The results of operations for
interim periods are not necessarily indicative of the results to be expected
for the entire year.
The Company has 4,000,000 authorized shares of $.01 par value common stock
of which there were 1,330,818 shares issued and 1,327,818 shares outstanding and
1,270,818 shares issued and 1,267,818 shares outstanding as of September 30,
1994 and 1993, respectively.
(2) NET INCOME PER SHARE CALCULATION
Primary income per share is based on the weighted average number of common
shares outstanding including common stock equivalents from dilutive stock
options and warrants. Common equivalent shares were computed using the treasury
stock method. The Company's convertible subordinated debentures are not common
stock equivalents. However, stock options having an exercise price below the
average market price of common stock during the period are common stock
equivalents and are assumed to have been exercised. Additionally, the method
assumes that the exercise proceeds are used by the Company to repurchase common
shares at the average market price. Under this method, the average shares used
in calculating primary earnings per share are 1,351,316 and 1,338,949 for the
three and nine month periods, respectively, ending September 30, 1994.
Fully diluted earnings per share have also been calculated using the
treasury stock method; in addition, however, the conversion of the convertible
subordinated debentures issued by the Company is also assumed. Average shares
used in calculating fully diluted earnings per share, therefore, are
1,542,135 and 1,540,801 for the three and nine month periods, respectively,
ending September 30, 1994.
(3) EXTRAORDINARY ITEM
The Company replaced its long term financing, which had been provided by
the FDIC in a debt restructuring consummated in September, 1992, with a new 5
year term loan in the amount of $2,800,000. The Company also issued to the FDIC
a Convertible Subordinated Debenture, due in 1999, in the principal amount of
$240,000. As a part of and concurrent with this transaction, the FDIC
terminated the Company's contingent long term obligation which resulted in a
$4,012,180 extraordinary gain. The Company estimates the fair market value of
the debenture to be $663,000 and has included that amount in Long Term Debt.
Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Material Changes in Financial Condition:
The Company has continued to finance its operations by increases in advance
payments on future orders, by utilization of the Company's revolving line of
credit and by internally generated cash. The Company expects that the funds
provided by its operations and by its current working capital facilities will
enable it to finance its future operations.
At the end of the third quarter of 1994, the Company replaced its long term
financing, which had been provided by the FDIC in a debt restructuring which was
consummated in September, 1992, with a new 5 year term loan provided by Chase
Manhattan Bank of Maryland in the amount of $2,800,000. The Chase loan bears
interest at the rate of prime plus 1.5% and is repayable in quarterly
installments over the life of the loan. As a part of and concurrent with this
transaction, the FDIC terminated the Company's contingent long term obligation
which resulted in a $4,012,180 extraordinary gain which was reported in the
third quarter of 1994.
Material Changes in Results of Operations:
Sales for the three and nine month periods of 1994 were $6,121,236 and
$17,548,521 as compared to $4,530,379 and $15,000,672 in 1993, respectively.
These increases of 35.1% and 17.0%, respectively, result from the general
increase in order volume from all geographic markets with the exception of
Western Europe. Order backlog was $10,600,000 at September, 1994 as compared
to $9,000,000 at September 30, 1993.
Gross Margins were $1,362,125 and $4,026,958 or 22.3% and 22.9% of sales,
respectively, for the three and nine month periods of 1994 compared with
$686,983 and $3,477,584 or 15.2% and 23.2% of sales, respectively, for the same
periods in 1993. Gross margins in 1993 were negatively impacted by a slow
down in spare parts sales and by poor pricing on some system sales.
Selling, General and Administrative expenses were $1,128,122 and $3,193,998
or 18.4% and 18.2% of sales, respectively, for the three and nine month periods
of 1994, as compared to $927,156 and $3,180,401 or 20.5% and 21.2% of sales,
respectively, in the same periods in 1993. The percentage decreases were the
result of reduced overhead costs in the Company's foreign subsidiaries. The
actual dollar increase in the third quarter was attributable to higher
commission expense.
Interest Expenses were $99,788 and $301,383 or 1.6% and 1.7% of sales,
respectively, for the three and nine month periods of 1994 as compared to
$95,088 and $303,051 or 2.1% and 2.0% of sales, respectively, for the same
periods in 1993. Third quarter interest expenses increased as a result of
higher interest rates on, and utilization of, the Company's domestic working
capital facility.
The Company recorded a gain on foreign exchange of $14,644 or 0.2% of sales
for the third quarter of 1994 as compared to a loss of $9,011 or 0.2% of sales
for the same period in 1993. The gain is the result of the weakening dollar
during this period.
The Company's effective tax rate was (6.8)% and 13.9% for the three and
nine month periods of 1994 as compared to 6.7% and 8.7%, respectively, for the
same periods in 1993. In 1994 the Company utilized tax credits from domestic
operations to reduce its effective tax rate.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Not applicable.
(b) Reports on Form 8-K
A report discussing the debt restructuring was filed on Form 8-K as
of September 29, 1994.
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.
DATA MEASUREMENT CORPORATION
(Registrant)
Dated:
November 8, 1994 /s/ F. S. Rolandi
By: ------------------------
Frederick S. Rolandi
Vice President and Chief
Financial Officer
/s/ D. Gignoux
By: -------------------------
D. Gignoux
President and
Chief Executive Officer