<PAGE>
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 Quarterly Period Ended: August 31, 1999
---------------
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: 0-21367
-------
DATA TRANSLATION, INC.
---------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-3332230
- -------------------------- -------------------------------
(State or other jurisdiction (I.R.S. Employer Identification
of organization or incorporation) Number)
100 Locke Drive
Marlboro, Massachusetts
------------------------------------------------------
(Address of principal executive offices)
01752
------------------------------------------------------
(Zip code)
(508) 481-3700
------------------------------------------------------
(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 latest practicable date.
Common Stock, Outstanding at September 30, 1999
$.01 Par Value 2,150,735 shares
<PAGE>
Page 2 of 13
DATA TRANSLATION, INC. AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information:
Consolidated Balance Sheets as of August 31, 1999 and
November 30, 1998................................................................................................... 3
Consolidated Statements of Operations for the Three Month Periods and Nine Month Periods
Ended August 31, 1999 and 1998...................................................................................... 4
Consolidated Statements of Cash Flows for the Nine Month Periods
Ended August 31, 1999 and 1998...................................................................................... 5
Notes to Consolidated Financial Statements............................................................................ 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations....................................................................... 8
Part II - Other Information............................................................................................. 12
Signatures.............................................................................................................. 13
</TABLE>
<PAGE>
Page 3 of 13
PART I. FINANCIAL INFORMATION
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, November 30,
1999 1998
---------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 4,281,000 $ 2,780,000
Accounts receivable, net of reserves of
$372,000 in 1999 and $397,000 in 1998 2,086,000 1,763,000
Inventories 1,126,000 1,202,000
Prepaid expenses 489,000 378,000
---------------- -----------------
Total current assets 7,982,000 6,123,000
Equipment and Leasehold Improvements, net 1,039,000 1,328,000
Other Assets - net 36,000 125,000
---------------- -----------------
Total Assets $ 9,057,000 $ 7,576,000
================ =================
Current Liabilities:
Accounts payable $ 698,000 $ 256,000
Accrued expenses 2,364,000 1,765,000
---------------- -----------------
Total current liabilities 3,062,000 2,021,000
Deferred Income Taxes 3,000 3,000
Stockholders' Investment:
Preferred Stock, $.01 par value,
Authorized - 5,000,000 shares, none issued -- --
Common Stock, $.01 par value,
Authorized - 30,000,000 shares, issued -
2,146,095 and 2,096,920 in 1999 and 1998, respectively 21,000 21,000
Treasury Stock, common, at cost,
15,000 and 0 shares in 1999 and 1998, respectively (42,000) --
Capital in excess of par value 12,848,000 12,764,000
Accumulated deficit (6,796,000) (7,231,000)
Cumulative translation adjustment (39,000) (2,000)
---------------- -----------------
Total stockholders' investment 5,992,000 5,552,000
---------------- -----------------
Total Liabilities and Stockholders' Investment $ 9,057,000 $ 7,576,000
================ =================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Page 4 of 13
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 4,061,000 $ 3,919,000 $ 11,997,000 $ 12,910,000
Cost of sales 1,754,000 1,990,000 5,157,000 6,233,000
------------ ------------ ------------ ------------
Gross profit 2,307,000 1,929,000 6,840,000 6,677,000
Research and development expenses 683,000 705,000 1,915,000 1,876,000
Selling and marketing expenses 1,041,000 1,517,000 3,058,000 4,606,000
General and administrative expenses 430,000 504,000 1,508,000 1,523,000
------------ ------------ ------------ ------------
Income (loss) from operations 153,000 (797,000) 359,000 (1,328,000)
Interest income 24,000 35,000 76,000 116,000
Other expense, net -- (1,000) -- (49,000)
------------ ------------ ------------ ------------
Net income (loss) $ 177,000 $ (763,000) $ 435,000 $ (1,261,000)
============ ============ ============ ============
Basic and diluted income (loss) per share $ 0.08 $ (0.36) $ 0.20 $ (0.61)
============ ============ ============ ============
Basic weighted average number
of shares outstanding 2,127,000 2,092,000 2,112,000 2,079,000
============ ============ ============ ============
Diluted weighted average number
of shares outstanding 2,287,000 2,092,000 2,199,000 2,079,000
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Page 5 of 13
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
August 31, August 31,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 435,000 $ (1,261,000)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities-
Depreciation and amortization 518,000 839,000
Change in assets and liabilities-
Accounts receivable (323,000) 702,000
Inventories 76,000 (57,000)
Prepaid expenses (111,000) (95,000)
Accounts payable 442,000 189,000
Due to related party -- (273,000)
Accrued expenses 599,000 678,000
Net liabilities of discontinued operations -- (1,113,000)
------------ ------------
Net cash provided by (used in) operating activities $ 1,636,000 $ (391,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements (124,000) (201,000)
Increase in other assets (16,000) (50,000)
------------ ------------
Net cash used in investing activities $ (140,000) $ (251,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury stock purchase (42,000) --
Proceeds from stock plans 84,000 74,000
------------ ------------
Net cash provided by financing activities $ 42,000 $ 74,000
------------ ------------
EXCHANGE RATE EFFECTS (37,000) 16,000
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 1,501,000 $ (552,000)
CASH AND CASH EQUIVALENTS, beginning of period 2,780,000 3,922,000
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 4,281,000 $ 3,370,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Page 6 of 13
DATA TRANSLATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
In the opinion of management, these unaudited consolidated financial
statements and disclosures reflect all adjustments necessary for fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. These consolidated financial
statements should be read in conjunction with the consolidated financial
statements and the notes thereto included in the latest audited financial
statements of Data Translation, Inc. and its subsidiaries (the "Company"), which
are contained in the Company's 1998 Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on March 1, 1999.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. CASH EQUIVALENTS
Cash equivalents are carried at cost which approximates market value and
have maturities of less than three months. Cash equivalents include money market
accounts, overnight time deposits, and U.S. Treasury bills.
3. INVENTORIES
Inventories are stated at the lower of first-in, first-out (FIFO) cost
or market and consist of the following:
<TABLE>
<CAPTION>
August 31, November 30,
1999 1998
----------- ------------
<S> <C> <C>
Raw material $ 831,000 $ 817,000
Work-in-process 143,000 54,000
Finished goods 152,000 331,000
----------- ------------
$ 1,126,000 $1,202,000
=========== ============
</TABLE>
Work-in-process and finished goods inventories include material, labor and
manufacturing overhead. Management performs periodic reviews of inventory and
disposes of items not required by their manufacturing and marketing plan.
4. STOCK BUYBACK PLAN
On March 26, 1999, the Company announced that its Board of Directors had
approved the purchase of up to $1,000,000 of its shares of common stock over the
remainder of the year. Purchases will be made at prevailing prices as market
conditions and cash availability permit. As of August 31, 1999, the Company has
purchased 15,000 shares of its Common Stock for an aggregate purchase price of
$42,000.
<PAGE>
Page 7 of 13
DATA TRANSLATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per share is computed by dividing net income
(loss) by the weighted average number of common shares outstanding during the
period. The dilutive effect of potential common shares in 1999 consisting of
outstanding stock options is determined using the treasury method in accordance
with SFAS 128. Diluted net income (loss) per share for the three and nine
months ended August 31, 1998 is the same as basic net income (loss) per share
since the inclusion of the potential common stock equivalents would be
antidilutive.
A reconciliation of basic and diluted weighted average shares outstanding for
the three and nine months ended August 31, 1999 is as follows:
<TABLE>
<CAPTION>
Three months Nine months
ended August 31, ended August 31,
1999 1999
---------------- ----------------
<S> <C> <C>
Basic weighted average shares 2,127,000 2,112,000
Weighted average common
equivalent shares 160,000 87,000
---------------- ----------------
Diluted weighted average
shares outstanding 2,287,000 2,199,000
================ ================
</TABLE>
6. CAPITALIZED SOFTWARE DEVELOPMENT COSTS
The Company capitalizes certain computer software development costs.
Such costs, net of accumulated amortization, were approximately $16,000 and
$121,000 as of August 31, 1999 and November 30, 1998, respectively, and are
included in other assets. These costs are amortized on a straight-line basis
over two years, which approximates the life of the product. Amortization
expense, included in cost of sales, was approximately $105,000 and $120,000 for
the nine months ended August 31, 1999 and 1998, respectively.
7. RECENT ACCOUNTING PRONOUNCEMENTS
The Company adopted SFAS 130, "Reporting Comprehensive Income",
effective December 1, 1998. SFAS 130 establishes standards for reporting and
display of comprehensive income and its components in financial statements. The
comprehensive income (loss) for the nine months ended August 31, 1999 and August
31, 1998 is $398,000 and ($1,246,000), respectively.
Additionally, the Company will adopt SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information" for the fiscal year ended
November 30, 1999. SFAS No. 131 requires certain financial and supplementary
information to be disclosed on an annual and interim basis for each reportable
segment of an enterprise. SFAS No. 131 is effective for fiscal years beginning
after December 15, 1997.
<PAGE>
Page 8 of 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
This Form 10-Q may contain "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including, without limitation, with
respect to (i) the Company's anticipated liquidity position, (ii) market
conditions and trends in the markets in which the Company participates, (iii)
the Company's ability to meet its current operating requirements, (iv) the
Company's expectations as to completion of installation and testing of its
internal systems for Year 2000 compliance, (v) the Company's estimated costs of
achieving Year 2000 readiness, (vi) the Company's belief that its internal
systems will be Year 2000 compliant in a timely manner, (vii) the impact on the
Company's business results of operations, and financial condition of
contingencies over which the Company has no control, and (viii) certain other
statements identified or qualified by words such as "likely", "will",
"suggests", "may", "would", "could", "should", "expects", "anticipates",
"estimates", "plans", "projects", "believes", "is optimistic about", or similar
expressions (and variants of such words of expressions). Investors are
cautioned that forward-looking statements are inherently uncertain. These
forward-looking statements represent the best judgement of the Company as on the
date of this Form 10-Q and the Company cautions readers not to place undue
reliance on such statements. Actual performance and results of operations may
differ materially from those projected or suggested in the forward-looking
statements due to certain risks and uncertainties including, without limitation,
risks associated with fluctuations in the Company's operating results, volume
and timing of orders received, changes in the mix of products sold, competitive
pricing pressure, the Company's ability to meet or renegotiate customer demands,
the Company's ability to anticipate changes in the market, the Company's ability
to finance its operations on terms that are acceptable, the Company's ability to
attract and retain qualified personnel including the Company's management,
changes in the global economy, the dependence on certain key customers, the
Company's ability to realize sufficient margins on sales of its products, the
availability and timing of funding for the Company's current products and the
Company's development of and ability to successfully market future products.
RESULTS OF OPERATIONS
The following table sets forth certain consolidated statement of operations
data as a percentage of net sales.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
August 31, August 31,
------------------ -----------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales.................................................. 100.0 100.0 100.0 100.0
Gross profit............................................... 56.8 49.2 57.0 51.7
Research and development expenses.......................... 16.8 18.0 16.0 14.5
Selling and marketing expenses............................. 25.6 38.7 25.5 35.7
General and administrative expenses........................ 10.6 12.9 12.6 11.8
------ ------ ------ ------
Income (loss) from operations.............................. 3.8 (20.4) 3.0 (10.3)
Interest (expense) income and other, net................... 0.6 0.9 0.6 0.5
------ ------ ------ ------
Net income (loss).......................................... 4.4% (19.5)% 3.6% (9.8)%
====== ====== ====== ======
</TABLE>
COMPARISON OF THIRD FISCAL QUARTER OF 1999 TO THIRD FISCAL QUARTER OF 1998:
Net sales for the fiscal quarter ended August 31, 1999 were $4,061,000, an
increase of $142,000, or 3.6%, from the same period a year ago. The increase
was attributable primarily to increased sales of the Company's core products,
which increased approximately 2.6% from the same period a year ago.
Gross profit for the fiscal quarter ended August 31, 1999 was 56.8%, compared
to 49.2% in the comparable quarter of the prior year. The increase in gross
profit from the comparable prior year period was the result of lower
manufacturing overhead expenses as well as a more favorable product mix.
<PAGE>
Page 9 of 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Income from operations for the third fiscal quarter of 1999 was $177,000,
compared to a loss from operations of $763,000 in the comparable quarter of the
prior year. Operating expenses for the third quarter of fiscal 1999 were
$2,154,000, representing 53.0% of sales, compared to $2,726,000, representing
69.6% of sales, in the prior year period. Research and development expenses for
the third quarter of fiscal 1999 were $683,000, representing 16.8% of sales,
compared to $705,000, representing 18.0% of sales, for the comparable period of
the prior year. Sales and marketing expenses for the third quarter of fiscal
1999 were $1,041,000, representing 25.6% of sales, compared to $1,517,000,
representing 38.7% of sales, in the prior year period. The decrease in sales and
marketing expenses is primarily a result of a decrease in the size of the
Company's sales force and a consolidation of the Company's marketing programs.
General and administrative expenses were $430,000 for the third quarter of
fiscal 1999, representing 10.6% of sales, compared to $504,000, representing
12.9% of sales, for the same period last year. The decrease in general and
administrative expenses is primarily the result of a reduction in staff within
the general and administrative departments.
Net income for the fiscal quarter ended August 31, 1999 was $177,000, or $0.08
per diluted share, for the quarter ended August 31, 1999, compared to a net loss
of $763,000, or $0.36 per diluted share, for the same period in 1998.
COMPARISON OF THE FIRST NINE MONTHS OF FISCAL 1999 TO THE FIRST NINE MONTHS OF
FISCAL 1998:
Net sales for the nine months ended August 31, 1999 were $11,997,000, a
decrease of $913,000, or 7.1%, from the same period a year ago. Sales of the
Company's data acquisition and imaging products have decreased approximately
4.9% from the same period in fiscal 1998. The Company believes that sales
continue to be adversely impacted by various market conditions including a
perceived shift in the data acquisition and imaging markets toward new, lower
priced hardware and software products, competitive pricing pressures and a
decline in the financial markets of certain regions abroad. Sales of the
Company's commercial products have decreased approximately 19.7% from the
comparable period in fiscal 1998, which the Company believes is due primarily to
the market conditions described above.
Gross profit for the nine months ended August 31, 1999 was 57.0%, compared to
51.7% in the comparable period of the prior year. The increase in gross profit
from the comparable prior year period was the result of lower manufacturing
overhead expenses as well as a more favorable product mix.
The Company's income from operations for the first nine months of fiscal 1999
was $359,000, compared to a loss from operations of $1,328,000 in the comparable
period of the prior year. A decrease in operating expenses as well as higher
gross profits contributed to the increase in income from operations. Operating
expenses for the first nine months of fiscal 1999 were $6,481,000, representing
54.1% of sales, compared to $8,005,000, representing 62.0% of sales, in the
prior year period. Prior year operating expenses include a significant
investment in advertising, promotion and sales channel development for the
Company's Broadway products. Research and development expenses were $1,915,000,
representing 16.0% of sales, compared to $1,876,000, representing 14.5% of
sales, for the comparable period of the prior year. This increase is primarily
attributable to an increased development effort in the Company's data
acquisition and imaging product lines. Sales and marketing expenses were
$3,058,000, representing 25.5% of sales, compared to $4,606,000, representing
35.7% of sales, in the prior year period. The decrease in sales and marketing
expenses is primarily a result of a decrease in the size of the Company's sales
force and a consolidation of the Company's marketing programs. General and
administrative expenses were $1,508,000, representing 12.6% of sales, compared
to $1,523,000, representing 11.8% of sales, for the comparable period in fiscal
1998.
Net income for the nine months ended August 31, 1999 was $435,000, or $0.20
per diluted share, compared to a net loss of $1,261,000, or $0.61 per diluted
share for the same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
As of August 31, 1999, the Company had cash and cash equivalents totaling
$4,281,000. as compared to cash and cash equivalents of $2,780,000 as of
November 30, 1998.
In the first nine months of 1999, the Company generated $1,636,000 from
operating activities, resulting from net income, increases in accounts payable
and accrued expenses and a decrease in inventory, partially offset by increases
in accounts receivable and prepaid expenses.
The Company used $140,000 for investing activities in the first nine months of
1999, mainly as a result of acquisitions of property and equipment.
<PAGE>
Page 10 of 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The Company generated funds from financing activities of $42,000 in the first
nine months of 1999 related to the exercise of stock options and the issuance of
stock under the employee stock purchase plan, offset by the purchase of 15,000
shares of the Company's Common Stock.
Given current available funds, the Company believes that it will be able to
meet its current operating requirements for the remainder of the current fiscal
year. If the Company is unsuccessful in increasing revenues or if its liquidity
position deteriorates, the Company will need to secure external financing in
order to meet its ongoing expenses. Therefore, the Company is pursuing possible
financing alternatives, but there can be no assurance that the Company will be
successful in obtaining any required financing.
YEAR 2000 COMPLIANCE DISCLOSURE
YEAR 2000 DEFINITION
The Year 2000 problem refers to computer programs that were written using two
digits rather than four digits to define the applicable year, and the resulting
inability of software to process date information later than December 31, 1999.
Computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
Risks associated with the Year 2000 problem include, among other things, (i)
failure of systems and software used by the Company's customers which will
impact their financial ability to purchase products from the Company, (ii)
failure of systems and software used by vendors and third-party service
providers upon which the Company relies for outsourced services and products,
(iii) Year 2000 problems with the Company's suppliers which could negatively
impact the Company's ability to fulfill its own orders promptly, and (iv) errors
or failures of systems in which the Company's products are integrated which
could result in improper interfacing or operation of such systems.
COMPANY PRODUCTS
The firmware in the Company's hardware products does not execute any date
manipulation and thus is not susceptible to the Year 2000 problem. Similarly,
the Company believes that its current and soon-to-be-released software products
are Year 2000 compliant because they do not store, manipulate, or process date
or time information. This compliance, however, depends on whether the underlying
operating system and other products used with the Company's products are Year
2000 compliant. The Company has solicited the status of Year 2000 compliance
with respect to all of its third party product offerings.
THE COMPANY'S INTERNAL SYSTEMS; STATE OF READINESS AND COSTS TO REMEDY
The Company has conducted an assessment of its computer information systems
and has implemented a Year 2000 plan to modify, upgrade or replace some of its
internal financial and operational systems. The Company estimates the cost of
bringing all internal systems, equipment and operations into Year 2000
compliance to be approximately $250,000. Currently, the Company is approximately
95% complete with the implementation process and has incurred approximately 95%
of the total estimated cost. The Company has funded its Year 2000 plan from
operating cash flows. The Company believes, based upon currently available
information, that these costs will not have a material adverse effect on its
business, financial condition or results of operations.
THIRD PARTY RELATIONSHIPS
The Company is also seeking to determine the extent to which it may be
vulnerable to any failures by its major suppliers, distributors and service
providers, as well as any third parties related to the Company's two foreign
sales offices. At this time the Company is unable to estimate the nature or
extent of any potential adverse impact resulting from the failure of third party
suppliers, distributors and service providers to achieve Year 2000 compliance.
However, there can be no assurance that these third parties will not experience
Year 2000 problems or that any problems would not have a material adverse effect
on the Company's product supply and distribution channels.
In addition, the Company does not currently have meaningful information
concerning the Year 2000 compliance status of its customers. If significant
numbers of the Company's current and future customers fail to achieve Year 2000
compliance, or if they divert technology expenditures away from those that were
reserved for engineering products to address Year 2000 compliance issues, the
Company's business, results of operations, or financial condition could be
materially adversely affected.
<PAGE>
Page 11 of 13
YEAR 2000 RISKS; CONTINGENCY PLAN
While the Company anticipates that its Year 2000 risks will be addressed
before January 1, 2000, no assurance can be given that the Company's or its
material third parties' Year 2000 conversion will be completed by such time. If
these efforts are not completed on time, or if the cost of updating or replacing
the Company's information systems exceeds the Company's current estimates, the
Year 2000 problem could have a material adverse impact on the Company's
business, financial condition or results of operations. Management has assessed
the most reasonably likely worst case scenario. Given its efforts to minimize
the risk of Year 2000 failures, the Company believes the worst case scenario
would occur if the Company were unable to process and fulfill customer orders
because of the Year 2000 problem. The Company has initiated the development of a
comprehensive contingency plan in the event that its Year 2000 conversion is not
successfully completed. The Company anticipates that the contingency plan will
be finalized during the fourth quarter of fiscal 1999.
POTENTIAL LIABILITY TO THIRD PARTIES
Some commentators have predicted significant litigation regarding Year 2000
compliance issues and because of the unprecedented nature of such litigation, it
is uncertain whether, or to what extent, the Company may be affected.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not engage in trading market risk sensitive instruments or
purchasing hedging instruments or "other than trading" instruments that are
likely to expose the Company to market risk, whether interest rate, foreign
currency exchange, commodity price or equity price risk. The Company has not
purchased options or entered into swaps or forward or futures contracts.
Additionally, the Company is exposed to market risk related to changes in
foreign currency exchange rates. These exposures may change over time as
business practices evolve and could have a material adverse effect on the
Company's business, financial condition and results of operations.
Historically, the Company's primary foreign currency exchange rate exposure has
been related to the operations of its European subsidiaries.
<PAGE>
Page 12 of 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits
Exhibit
Number Description
------- -----------------------
27 Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by this
report.
<PAGE>
Page 13 of 13
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 TRANSLATION, INC.
Date: October 14, 1999 By: /s/ Michael A. DiPoto
----------------------
Michael A. DiPoto
Vice President Finance
and Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> AUG-31-1999
<CASH> 4,281,000
<SECURITIES> 0
<RECEIVABLES> 2,086,000
<ALLOWANCES> 372,000
<INVENTORY> 1,126,000
<CURRENT-ASSETS> 7,982,000
<PP&E> 19,790,000
<DEPRECIATION> 18,751,000
<TOTAL-ASSETS> 9,057,000
<CURRENT-LIABILITIES> 3,062,000
<BONDS> 0
0
0
<COMMON> 21,000
<OTHER-SE> 5,971,000
<TOTAL-LIABILITY-AND-EQUITY> 9,057,000
<SALES> 11,997,000
<TOTAL-REVENUES> 11,997,000
<CGS> 5,157,000
<TOTAL-COSTS> 5,157,000
<OTHER-EXPENSES> 6,481,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 435,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 435,000
<EPS-BASIC> 0.20
<EPS-DILUTED> 0.20
</TABLE>
