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 the quarterly period ended December 31, 1994
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 0-11691
DICEON ELECTRONICS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-3534864
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(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
18522 Von Karman Avenue, Irvine, California 92715
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(Address of principal executive offices) (Zip Code)
(714) 833-0870
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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__
At February 6, 1995, there were 8,340,320 outstanding shares of common stock.
This report consists of 11 pages.
DICEON ELECTRONICS, INC.
FORM 10-Q
INDEX
Page
PART I. Financial Information:
Item 1.
Consolidated Balance Sheets as of December 31, 1994 and
January 1, 1994................................................... 2
Consolidated Statements of Operations for the Three Months
Ended December 31, 1994 and January 1, 1994....................... 3
Consolidated Statements of Cash Flows for the Three Months
Ended December 31, 1994 and January 1, 1994........................ 4
Notes to the Consolidated Financial Statements.................... 5
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations ............................................ 6
PART II. Other Information ................................................ 10
DICEON ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars, except share data)
December 31, September 30,
------------ -------------
1994 1994
------------ -------------
ASSETS (Unaudited)
Current assets
Cash and cash equivalents $ 1,300 $ 1,562
Accounts receivable - net 10,018 9,063
Inventories 6,042 7,277
Prepaid expenses and other current assets 559 381
-------- --------
Total current assets 17,919 18,283
-------- --------
Property, plant and equipment 65,610 65,481
Less accumulated depreciation and amortization (48,770) (47,703)
-------- --------
Property, plant and equipment, net 16,840 17,778
-------- --------
Other assets 953 922
-------- --------
Total assets $ 35,712 $ 36,983
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,417 $ 6,170
Accrued payroll and related costs 1,824 1,950
Restructuring reserve 710 861
Other current liabilities 2,154 2,005
Short-term borrowings 2,827 3,456
Current portion of long-term debt 45 50
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Total current liabilities 12,977 14,492
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Long term debt 400 406
Convertible subordinated debentures 16,000 16,000
Stockholders' equity
Common stock, $1.00 par value, 20,000,000 shares
shares authorized, 8,334,960 shares issued and
outstanding 8,335 8,335
Additional paid-in capital 3,373 3,373
Accumulated deficit (5,373) (5,623)
-------- --------
Net stockholders' equity 6,335 6,085
-------- --------
Total liabilities and stockholders' equity $ 35,712 $ 36,983
======== ========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
DICEON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended
December 31, January 1,
----------- ----------
1994 1994
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Net sales $ 22,753 $ 24,311
Cost of sales 19,883 23,691
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Gross profit 2,870 620
Operating expenses:
Selling, general and administrative 2,066 2,661
Research and development 123 266
Provision for restructuring of operations 0 600
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Total operating expenses 2,189 3,527
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Income (loss) from operations 681 (2,907)
Other (income) expense:
Interest expense 432 469
Interest income (1) (23)
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Net income (loss) $ 250 $ (3,353)
======== ========
Earnings (loss) per common share $ 0.03 $ (0.65)
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Weighted average common shares outstanding 8,335 5,135
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
DICEON ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
(Unaudited)
Three Months Ended
December 31, January 1,
------------ ----------
1994 1994
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 250 $(3,353)
Adjustments to reconcile net income (loss) to
net cash from operating activities:
Depreciation and amortization 1,525 1,704
Provision for restructuring of operations 0 600
(Increase) decrease in accounts receivable (955) 976
Decrease in inventories 1,235 684
Increase in prepaid expenses and other
current assets (178) (393)
Decrease in accounts payable (753) (2,048)
Decrease in accrued payroll and related taxes (126) (563)
Decrease in restructuring reserve (151) (548)
Increase in other current liabilities 149 323
Increase in other assets (24) (128)
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Net cash provided (used) by operating activities 972 (2,746)
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of short-term investments 0 4,000
Purchase of property, plant and equipment (594) (788)
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Net cash (used) provided by investing activities (594) 3,212
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CASH FLOWS USED BY FINANCING ACTIVITIES
Net borrowings (payments) on short-term borrowings (629) 0
Principal payments on long term debt (11) (11)
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Net cash used by financing activities (640) (11)
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Net (decrease) increase in cash and cash equivalents (262) 455
Cash and cash equivalents, beginning of period 1,562 2,415
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Cash and cash equivalents, end of period $ 1,300 $ 2,870
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SUPPLEMENTAL CASH FLOW INFORMATION:
Interest expense payments $ 16 $ 16
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Income tax payments $ 20 $ 4
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
DICEON ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Diceon
Electronics, Inc. and its subsidiaries (the "Company") contain all
adjustments, consisting of only normal recurring adjustments, which, in
the opinion of management, are necessary to present fairly the
financial position of the Company as of December 31, 1994 and September
30, 1994, the results of its operations for the three months ended
December 31, 1994 and January 1, 1994 and its cash flows for the three
months ended December 31, 1994 and January 1, 1994. Certain information
and footnote disclosures normally included in the financial statements
have been condensed or omitted pursuant to rules and regulations of the
Securities and Exchange Commission, although the Company believes that
the disclosures in the consolidated financial statements are adequate
to make the information presented not misleading.
The consolidated financial statements included herein should be read in
conjunction with the consolidated financial statements of the Company
for the year ended September 30, 1994, included in the Company's Annual
Report on Form 10-K for that fiscal year.
NOTE 2 - INVENTORIES
Inventories consist of the following (thousands of dollars):
December 31, September 30,
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1994 1994
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(Unaudited)
Raw materials $ 3,071 $ 4,233
Work in progress 2,971 3,044
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Totals $ 6,042 $ 7,277
========== ==========
NOTE 3 - EARNINGS (LOSS) PER COMMON SHARE
Earnings or loss per common share for the three months ended December
31, 1994 and January 1, 1994 has been computed based on weighted
average common shares outstanding as of the above dates and does not
include the effect of common stock equivalents as such effect would
have been anti-dilutive.
NOTE 4 - INCOME TAXES
As of September 30, 1994, the Company had net operating losses
carryforwards for federal and state income tax purposes of $29,636,000
and $25,296,000, respectively. Income before income taxes was applied
against the net operating loss carryforwards resulting in no income tax
provision for the quarter ended December 31, 1994. These carryforwards,
for which future benefit is not assured, expire through 2008.
DICEON ELECTRONICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and Notes thereto contained elsewhere within this Report on
Form 10-Q.
RESULTS OF OPERATIONS
Net sales
Net sales for the three months ended December 31, 1994 decreased 6.4
percent compared to the first quarter of fiscal 1994. The decrease
resulted primarily from lower unit sales volume combined with a
reduction in average sales price. The decrease in sales volume was
attributable to a decrease in demand from the Company's recurring
customer base for all of the Company's products. The reduction in
average sales price was attributable to the continued highly
competitive nature of the circuit board industry. Management does not
expect improvement in the average sales price in the near-future.
Cost of sales
Cost of sales as a percentage of net sales decreased from 97.4 percent
in the first quarter of fiscal 1994 to 87.4 percent for the first
quarter of fiscal 1995. The decrease was attributable to lower labor
and benefit cost per units shipped and, to a lesser extent, lower
material cost per units shipped. The improvement in labor and benefit
costs was due to better utilization of labor after the January 6, 1994
and October 3, 1994 reductions in employees and improved operating
efficiencies. The improvement in material cost per units shipped was
due to a better product mix and cost reductions.
Selling, General and Administrative
Selling, general and administrative (SG&A) expense for the three months
ended December 31, 1994 decreased 22.4 percent compared to the first
quarter of fiscal 1994. As a percentage of net sales, SG&A decreased
from 10.9 percent for the first quarter of fiscal 1994 to 9.1 percent
for the first quarter of fiscal 1995. The decrease in SG&A for the
first quarter of fiscal 1995 from that incurred in the first quarter of
fiscal 1994, was primarily due to the inclusion in the first quarter of
fiscal 1994 of consulting fees associated with the Company's initial,
discontinued efforts to restructure its 5 1/2 percent Convertible
Subordinated Debentures and consulting fees associated with obtaining a
line of credit with an asset based lender. Also contributing to the
decrease in SG&A were lower labor costs for administrative and
executive functions due to the January 6 1994, and October 3, 1994
restructurings and associated reductions in the number of employees.
Partially offsetting these reduced costs were higher commissions paid
to outside sales representatives.
Research and development
Research and development expenditures decreased 53.8 percent during the
three months ended December 31, 1994 from the first quarter of fiscal
1994. The decrease in expenditures is directly attributable due to
lower labor and benefit costs of engineers related to the reduction of
employees on January 6, 1994. Currently, the Company is marketing the
products developed in prior years at its Advanced Development Center in
Chatsworth, California (the center was closed in fiscal 1993).
Restructure
On January 6, 1994, the Company announced the down-sizing of all of its
operations. In connection with the down-sizing, the Company reduced its
work force by approximately 150 employees and accrued a one-time charge
of $600,000, recognized during the quarter ended January 1, 1994. All
costs associated with this restructuring were paid during fiscal 1994.
DICEON ELECTRONICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
Interest income and interest expense
Interest income decreased 95.6 percent for the three months ended
December 31, 1994, from the first quarter of fiscal 1994. The decrease
was primarily due to a reduction in interest bearing investments held
by the Company. The Company had no interest bearing investments during
the first quarter of fiscal 1995.
Interest expense decreased 7.9 percent for the three months ended
December 31, 1994, from the first quarter of fiscal 1994. The decrease
is attributable to lower interest expense due to the exchange of
$16,000,000 in principal amount of Debentures held by Mr. Milan
Mandaric for 3,200,000 newly issued shares of the Company's common
stock in a two part transaction which closed on June 30, 1994 and July
13, 1994. Partially offsetting the lower interest expense was interest
due to short-term borrowings from the Company's asset-based lender.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1994, the Company had cash, cash equivalents and
short-term investments of $1,300,000, which reflects a $262,000
decrease in the balance from September 30, 1994. Cash of $972,000 was
generated from operating activities. The decrease in inventories is
attributable to better purchasing practices of raw materials utilized
in the Company's backpanel product line. The Company's restructure
reserve decrease of $151,000 was attributable to the payment of wages
to executives who have severance agreements. The remaining $710,000 of
restructure reserve is expected to be paid over the next nine months,
mainly to those executives with severance agreements. All other
operating activities experienced normal fluctuations.
The cash generated from operating activities was offset by investing
activities of $594,000 for the purchase of capital equipment and by
financing activities for the repayment of a portion of the short term
borrowings. The purchase of capital equipment was for normal
replacements.
As of December 31, 1994, the Company had borrowed $4,668,000 under the
line of credit that was established December 17, 1993 with the
aforementioned lender. In the first quarter of fiscal 1995, the Company
repaid borrowings of $520,000, leaving net borrowings of $4,148,000.
Also, under the terms of the agreement, the Company's cash collections
are applied to any outstanding borrowings upon the receipts clearing
the bank. At December 31, 1994, the asset based lender was in
possession of $1,321,000 of the Company's cash collections and,
accordingly, such funds have been applied to the $4,148,000 borrowing.
As of December 31, 1994, the Company's ratio of current assets to
current liabilities was 1.4 to 1. In addition, the Company had
$1,300,000 in cash and cash equivalents which are available for current
operations, capital expenditures or other purposes. The Company has no
material cash obligations other than normal replacements. Management
believes that the Company's existing working capital, the remaining
borrowing capacity, and funds generated from operations will be
sufficient to meet presently anticipated working capital requirements.
DICEON ELECTRONICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
In June 1994, the Company agreed with Mr. Milan Mandaric to exchange
$16,000,000 of 5 1/2 percent Convertible Subordinated Debentures due
2012 for 3,200,000 newly issued shares of common stock. The transaction
included a payment of $293,000 for accrued interest on the debentures
exchanged and reimbursement of $50,000 for Mr. Mandaric's professional
expenses. All legal and consulting costs related to those discussions
were accrued for in the third quarter of fiscal 1994 and were applied
against the extraordinary gain recorded in the third quarter of fiscal
1994. There was no cash infusion made by Mr. Mandaric as a result of
this transaction. The Company subsequently delivered those Debentures
to the Trustee for credit against future sinking fund payments under
the terms of the indenture relating to the Debentures.
Environmental
The Company's manufacturing processes utilize substantial quantities of
heavy metals, acids and other hazardous substances, as well as
substantial quantities of water. The Company is subject to federal,
state and local environmental laws and regulations regarding air, water
and land use, the generation, use, storage and disposal of hazardous
materials and wastes, and the operation and closure of manufacturing
facilities at which hazardous materials are used or hazardous wastes
are generated. The Company is aware of contamination of soil and
groundwater (principally by metals and solvents) at two of its former
facilities in Northern California. The Company incurred costs of
$109,000 to cleanup soil at one of the former facilities and the
property was returned to its owner during the second quarter of fiscal
1994. The likely future cost of groundwater cleanup at that facility is
not yet reasonably estimable, but investigative costs of $30,000 have
been estimated through March 1, 1995. At the other former facility in
Northern California the estimated cleanup cost for the soil
contamination is $137,000. In addition the facility is adjacent to an
existing State of California administered Superfund site and may become
part of a related State of California administered regional groundwater
investigation; the likely future cost to the Company in connection with
possible groundwater cleanup is not yet reasonably estimable. During
the second quarter of fiscal 1994, the Company also incurred costs of
$235,000 to clean up soil contamination at a former facility in
Southern California and the property was returned to its owner. At
another former facility in Southern California, the Company conducted
limited groundwater sampling in connection with a potential sale of the
property, and low concentrations of solvents were detected. At this
time, it is not possible to determine whether any response actions will
need to be taken; and accordingly, the likely future cost to the
Company is not yet reasonably estimable.
The Company is further aware of soil and groundwater contamination
(principally by metals and solvents) at two currently used facilities,
one in Northern California and one in Southern California. At its
Northern California facility, the Company is indemnified by the former
property owner who acknowledged his obligation. At its Southern
California facility, the Company's preliminary estimate of remedial
costs, expected to be incurred over five to seven years, ranges from
approximately, $880,000 to $1,480,000 (including between approximately
$300,000 and $400,000 estimated capital expenditures for waste
treatment equipment acquisition and installation costs). At its
Northern California facility, the Company also received notice that
regulatory authorities plan to reduce the discharge limits for
industrial waste water discharge containing heavy metals. New limits
are expected to become effective July 1, 1996. Depending on the
magnitude of the modifications needed to comply with the reduced
limits, the cost is preliminarily estimated by the Company at between
approximately $50,000 to $750,000.
DICEON ELECTRONICS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Continued)
As of December 31, 1994, the Company believes it has appropriately
recorded all known costs related to environmental matters, including
the minimum amounts where the estimated costs are within a range, and
are primarily accrued in other current liabilities. However, actual
future environmental related expenditures are subject to numerous
uncertainties, including the discovery of additional environmental
concerns, further development of cost estimates, new and changing
environmental laws and requirements, or new interpretations of existing
laws and requirements. Accordingly, there can be no assurance that
future environmental related expenditures will not exceed the Company's
current estimates, or that they will not have a materially adverse
effect on the Company.
Part II. OTHER INFORMATION
Item 6 a. EXHIBITS
10.1 Lease for 1188 Bordeaux Drive, Sunnyvale, California, dated October 24,
1994, by and among Symtron Corporation and Redtree Properties, L.P.
b. CURRENT REPORTS ON FORM 8-K
During the first quarter of the current fiscal year, the Company did
not file any current reports on Form 8-K.
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.
DICEON ELECTRONICS, INC.
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(Registrant)
Date: February 6, 1995 By: /s/ MICHAEL S. SHIMADA
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Michael S. Shimada
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)