<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, 2000
---------------
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 of organization (I.R.S. Employer Identification
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, 2000
$.01 Par Value 2,222,931 shares
<PAGE>
Page 2 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - Financial Information:
Consolidated Balance Sheets as of August 31, 2000 and
November 30, 1999........................................................................ 3
Consolidated Statements of Operations for the Three Months Ended and Nine Months
Ended August 31, 2000 and 1999........................................................... 4
Consolidated Statements of Cash Flows for the Nine Months
Ended August 31, 2000 and 1999........................................................... 5
Notes to Consolidated Financial Statements................................................... 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations............................................ 10
Part II - Other Information...................................................................... 13
Signature........................................................................................ 14
</TABLE>
<PAGE>
Page 3 of 14
PART I. FINANCIAL INFORMATION
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, November 30,
2000 1999
-------------- ---------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,642,000 $ 3,989,000
Marketable securities 112,000 109,000
Accounts receivable, net of reserves of
$273,000 in 2000 and $289,000 in 1999 2,161,000 2,035,000
Inventories 1,614,000 1,294,000
Prepaid expenses 695,000 357,000
-------------- ---------------
Total current assets 7,224,000 7,784,000
Equipment and Leasehold Improvements, net 1,004,000 1,243,000
Other Assets, net 70,000 22,000
-------------- ---------------
Total Assets $ 8,298,000 $ 9,049,000
============== ===============
Current Liabilities:
Accounts payable $ 1,060,000 $ 646,000
Accrued expenses 1,830,000 2,150,000
-------------- ---------------
Total current liabilities 2,890,000 2,796,000
Deferred Income Taxes 2,000 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, 2,279,104 and
2,161,095 shares issued in 2000 and 1999, respectively;
2,233,059 and 2,146,095 shares outstanding in 2000 and
1999, respectively 23,000 22,000
Treasury Stock, common, at cost,
46,045 and 15,000 shares in 2000 and 1999, respectively (196,000) (43,000)
Capital in excess of par value 13,144,000 12,891,000
Accumulated deficit (7,497,000) (6,569,000)
Cumulative translation adjustment (68,000) (51,000)
-------------- ---------------
Total stockholders' investment 5,406,000 6,250,000
-------------- ---------------
Total Liabilities and Stockholders' Investment $ 8,298,000 $ 9,049,000
============== ===============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Page 4 of 14
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,
2000 1999 2000 1999
---------------- --------------- ---------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 3,968,000 $ 4,061,000 $ 11,829,000 $ 11,997,00
Cost of sales 1,923,000 1,754,000 5,500,000 5,157,00
---------------- --------------- ---------------- -------------
Gross profit 2,045,000 2,307,000 6,329,000 6,840,000
Research and development expenses 813,000 683,000 2,201,000 1,915,000
Selling and marketing expenses 1,350,000 1,041,000 3,647,000 3,058,000
General and administrative expenses 477,000 430,000 1,495,000 1,508,000
---------------- --------------- ---------------- -------------
Income (loss) from operations (595,000) 153,000 (1,014,000) 359,000
Interest income 28,000 24,000 86,000 76,000
---------------- --------------- ---------------- -------------
Net income (loss) $ (567,000) $ 177,000 $ (928,000) $ 435,000
================ =============== ================ =============
Basic and diluted income (loss) per share $ (0.26) $ 0.08 $ (0.42) $ 0.20
================ =============== ================ =============
Basic weighted average number
of common shares outstanding 2,219,000 2,127,000 2,199,000 2,112,000
================ =============== ================ =============
Diluted weighted average number
of common shares outstanding 2,219,000 2,287,000 2,199,000 2,199,000
================ =============== ================ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Page 5 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
August 31, August 31,
2000 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (928,000) $ 435,000
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities-
Depreciation and amortization 548,000 518,000
Change in assets and liabilities-
Accounts receivable (126,000) (323,000)
Inventories (320,000) 76,000
Prepaid expenses (338,000) (111,000)
Accounts payable 412,000 442,000
Accrued expenses (324,000) 599,000
------------- -------------
Net cash provided by (used in) operating activities $ (1,076,000) $ 1,636,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements (309,000) (124,000)
Increase in other assets (50,000) (16,000)
------------- -------------
Net cash used in investing activities $ (359,000) $ (140,000)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury stock purchase (153,000) (42,000)
Proceeds from stock plans 258,000 84,000
------------- -------------
Net cash provided by financing activities $ 105,000 $ 42,000
------------- -------------
EXCHANGE RATE EFFECTS (17,000) (37,000)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (1,347,000) $ 1,501,000
CASH AND CASH EQUIVALENTS, beginning of period 3,989,000 2,780,000
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 2,642,000 $ 4,281,000
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
Page 6 of 14
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 1999 Annual Report on Form 10-K, filed with the
Securities and Exchange Commission on February 28, 2000.
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.
The Company accounts for marketable securities in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 115, Accounting for
Certain Investments in Debt and Equity Securities. Under this standard, the
Company is required to classify all investments in debt and equity securities
into one or more of the following three categories: held-to-maturity, available-
for-sale or trading. The Company's marketable securities mature in October 2000
and are classified as held-to-maturity as the Company has the positive intent
and ability to hold to maturity. Marketable securities are reported at amortized
cost. The Company's cash equivalents and marketable securities are invested in
highly rated government securities.
3. Segment Reporting and Geographic Information
(a) Segment Reporting
The Company adopted SFAS No. 131. Disclosures About Segments of an Enterprise
and Related Information in the fiscal year ended November 30, 1999. SFAS No. 131
establishes standards for reporting information regarding operating segments in
annual financial statements and requires selected information for those segments
to be presented in interim financial reports issued to stockholders. SFAS No.
131 also establishes standards for related disclosures about products and
services and geographic areas. Operating segments are identified as components
of an enterprise about which separate financial information is available for
evaluation by the chief decision maker, or decision making group, in making
decisions how to allocate resources and assess performance. The Company's chief
operating decision-maker, as defined under SFAS No. 131, is the Chief Executive
Officer.
The Company's reportable segments are Core and Broadway(TM). The Core segment
is composed of the data acquisition, imaging and machine vision business which
consists of plug-in cards and Windows-based software that provide an integrated,
high performance system solution to the general scientific and industrial, test
and measurement marketplace. The Broadway segment is composed of a plug-in video
capture card, Broadway, which is a high-performance video capture and encoding
system for Windows 98 and Windows NT PCs. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies contained in the Company's 1999 Annual Report on Form 10-K,
filed with the Securities and Exchange Commission on February 28, 2000. The
Company evaluates performance based on revenues and operating margin. Revenues
are attributed to geographic areas based on where the customer is located.
Segment information for the three and nine months ended August 31, 2000 and
August 31, 1999 is as follows:
<PAGE>
Page 7 of 14
<TABLE>
<CAPTION>
Core Broadway Total
----------- ------------- ------------
<S> <C> <C> <C>
For the three months ended August 31, 2000
Revenues from unaffiliated customers................. $ 3,437,000 $ 531,000 $ 3,968,000
Cost of revenue...................................... 1,663,000 260,000 1,923,000
Research and development............................. 778,000 35,000 813,000
----------- ----------- ------------
Operating margin (1)................................. $ 996,000 $ 236,000 $ 1,232,000
=========== =========== ============
For the three months ended August 31, 1999
Revenues from unaffiliated customers................. $ 3,584,000 $ 477,000 $ 4,061,000
Cost of revenue...................................... 1,487,000 267,000 1,754,000
Research and development............................. 629,000 54,000 683,000
----------- ----------- ------------
Operating margin (1)................................. $ 1,468,000 $ 156,000 $ 1,624,000
=========== =========== ============
For the nine months ended August 31, 2000
Revenues from unaffiliated customers................. $10,370,000 $ 1,459,000 $ 11,829,000
Cost of revenue...................................... 4,782,000 718,000 5,500,000
Research and development............................. 2,034,000 167,000 2,201,000
----------- ----------- ------------
Operating margin (1)................................. $ 3,554,000 $ 574,000 $ 4,128,000
=========== =========== ============
For the nine months ended August 31, 1999
Revenues from unaffiliated customers................. $10,457,000 $ 1,540,000 $ 11,997,000
Cost of revenue...................................... 4,367,000 790,000 5,157,000
Research and development............................. 1,712,000 203,000 1,915,000
----------- ----------- ------------
Operating margin (1)................................. $ 4,378,000 $ 547,000 $ 4,925,000
=========== =========== ============
</TABLE>
(1) The Operating Margins reported reflect only the expenses of the line of
business and do not represent the actual margins for each operating
segment since they do not contain an allocation for selling and marketing,
general and administrative and other corporate expenses incurred in
support of the line of business.
Profit Reconciliation:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
2000 1999 2000 1999
--------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Total operating margin for reportable segments.... $ 1,232,000 $ 1,624,000 $ 4,128,000 $ 4,925,000
Selling and marketing expenses.................... (1,350,000) (1,041,000) (3,647,000) (3,058,000)
General and administrative expenses............... (477,000) (430,000) (1,495,000) (1,508,000)
Interest income................................... 28,000 24,000 86,000 76,000
--------------- ---------------- ---------------- --------------
Net income (loss) before provision for
income taxes.................... $ (567,000) $ 177,000 $ (928,000) $ 435,000
=============== ================ ================ ==============
</TABLE>
<PAGE>
Page 8 of 14
(b) Geographic Information
<TABLE>
<CAPTION>
United
-------
United States Kingdom Germany Eliminations Consolidated
------------- ------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
For the three months ended August 31, 2000
Sales to unaffiliated customers (1)................. $ 3,068,000 $ 287,000 $ 613,000 $ -- $ 3,968,000
Sales or transfers between geographic areas......... 474,000 -- -- (474,000) --
------------- ----------- ----------- ------------ -------------
Total net sales..................................... $ 3,542,000 $ 287,000 $ 613,000 $ (474,000) $ 3,968,000
============= =========== =========== ============ =============
Net income (loss) before
provision for income taxes...................... $ (536,000) $ (52,000) $ 32,000 $ (11,000) $ (567,000)
============= =========== =========== ============ =============
Long-lived assets................................... $ 930,000 $ 65,000 $ 22,000 $ (13,000) $ 1,004,000
============= =========== =========== ============ =============
For the three months ended August 31, 1999
Sales to unaffiliated customers (1)................. $ 3,047,000 $ 396,000 $ 618,000 $ -- $ 4,061,000
Sales or transfers between geographic areas......... 460,000 -- -- (460,000) --
------------- ----------- ----------- ------------ -------------
Total net sales..................................... $ 3,507,000 $ 396,000 $ 618,000 $ (460,000) $ 4,061,000
============= =========== =========== ============ =============
Net income (loss) before
provision for income taxes...................... $ 180,000 $ 19,000 $ 10,000 $ (32,000) $ 177,000
------------- ----------- ----------- ------------ -------------
Long-lived assets................................... $ 987,000 $ 52,000 $ 13,000 $ (13,000) $ 1,039,000
============= =========== =========== ============ =============
For the nine months ended August 31, 2000
Sales to unaffiliated customers (2)................. $ 9,008,000 $ 1,024,000 $ 1,797,000 $ -- $ 11,829,000
Sales or transfers between geographic areas......... 1,410,000 -- -- (1,410,000) --
------------- ----------- ----------- ------------ -------------
Total net sales..................................... $ 10,418,000 $ 1,024,000 $ 1,797,000 $ (1,410,000) $ 11,829,000
------------- ----------- ----------- ------------ -------------
Net income (loss) before
provision for income taxes...................... $ (850,000) $ (74,000) $ 6,000 $ (10,000) $ (928,000)
============= =========== =========== ============ =============
Long-lived assets................................... $ 930,000 $ 65,000 $ 22,000 $ (13,000) $ 1,004,000
============= =========== =========== ============ =============
For the nine months ended August 31, 1999
Sales to unaffiliated customers (2)................. $ 8,805,000 $ 1,230,000 $ 1,962,000 $ -- $ 11,997,000
Sales or transfers between geographic areas......... 1,374,000 -- -- (1,374,000) --
------------- ----------- ----------- ------------ -------------
Total net sales..................................... $ 10,179,000 $ 1,230,000 $ 1,962,000 $ (1,374,000) $ 11,997,000
============= =========== =========== ============ =============
Net income (loss) before
provision for income taxes...................... $ 401,000 $ 73,000 $ 49,000 $ (88,000) $ 435,000
------------- ----------- ----------- ------------ -------------
Long-lived assets................................... $ 987,000 $ 52,000 $ 13,000 $ (13,000) $ 1,039,000
============= =========== =========== ============ =============
</TABLE>
(1) Foreign sales from the United States to unaffiliated customers for the
three months ended August 31, 2000 and August 31, 1999 were approximately
$903,000, and $781,000, respectively.
(2) Foreign sales from the United States to unaffiliated customers for the nine
months ended August 31, 2000 and August 31, 1999 were approximately
$2,696,000, and $2,458,000, respectively.
3. Inventories
Inventories are stated at the lower of first-in, first-out (FIFO)
cost or market and consist of the following:
August 31, November 30,
2000 1999
---- ----
Raw material $ 1,034,000 $ 899,000
Work-in-process 242,000 89,000
Finished goods 338,000 306,000
----------- -----------
$ 1,614,000 $ 1,294,000
=========== ===========
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.
<PAGE>
Page 9 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Stock Buyback Plan
On June 22, 2000, the company announced that its Board of Directors
had approved the purchase of up to $250,000 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, 2000, the company has
purchased 31,045 shares of its common stock for an aggregate purchase price of
$153,000.
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 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, 2000 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:
Three months Nine months
ended August 31, ended August 31,
1999 1999
---- ----
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
================ ================
6. Stock Compensation
In March 2000, the FASB issued Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation-An Interpretation of APB
Opinion No. 25. The interpretation clarifies the application of Opinion 25 in
certain situations, as defined. The interpretation became effective on July 1,
2000, and covers certain events that occur after December 15, 1998. The effects
of applying this interpretation should be recognized on a prospective basis from
the effective date. The Adoption of the interpretation may affect 50,001 options
that were repriced after December 15,1998. There was no effect during the third
quarter of the fiscal 2000.
7. Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
balance sheet and measure those instruments at fair value. Pursuant to SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities-Deferral of
the Effective Date of FASB No. 133, SFAS No. 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. SFAS No. 133 is not
expected to have a material impact on the Company's financial statements.
<PAGE>
Page 10 of 14
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
impact on the Company's business results of operations, and financial condition
of contingencies over which the Company has no control, and (vi) 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 judgment 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 described
under the heading "Certain Factors That May Affect Future Results" in the
Company's 1999 Annual Report on Form 10-K, filed with the Securities and
Exchange Commission on February 28, 2000.
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,
------------ ----------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales................................... 100.0 100.0 100.0 100.0
Gross profit................................ 51.5 56.8 53.5 57.0
Research and development expenses........... 20.5 16.8 18.6 16.0
Selling and marketing expenses.............. 34.0 25.6 30.8 25.5
General and administrative expenses......... 12.0 10.6 12.7 12.5
----- ------ ------ ------
Income (loss) from operations............... (15.0) 3.8 (8.6) 3.0
Interest (expense) income and other, net.... 0.7 0.6 0.7 0.6
----- ------ ------ ------
Net income (loss)........................... (14.3)% 4.4% (7.9)% 3.6%
===== ====== ====== ======
</TABLE>
Comparison of Third Fiscal Quarter of 2000 to Third Fiscal Quarter of 1999:
Net sales for the fiscal quarter ended August 31, 2000 were $3,968,000, a
decrease of $93,000, or 2.3%, from the same period a year ago. The decrease was
attributable primarily to lower than expected sales of the Company's core
products. Additionally, the Company believes that it is currently in the midst
of an acceptance period as newly released products are being introduced to the
marketplace to replace the Company's legacy products. The Company will have to
manage successfully the transition from the legacy products in order to maintain
the appropriate level of revenue to support the Company's expense base.
Gross profit for the fiscal quarter ended August 31, 2000 was 51.5%,
compared to 56.8% in the comparable quarter of the prior year. The reduction in
gross profit from the comparable prior year period was the result of a less
favorable product mix.
<PAGE>
Page 11 of 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
The loss from operations for the third fiscal quarter of 2000 was $595,000,
compared to income from operations of $153,000 in the comparable quarter of the
prior year. The decrease in income is primarily a result of the Company's
investment within the product development and sales and marketing departments
during the third quarter of fiscal 2000. The investment is part of an overall
strategy to revitalize the Company's product lines with new technology to
supplant eroding legacy product sales. Operating expenses for the third quarter
of fiscal 2000 were $2,640,000, representing 66.5% of sales, compared to
$2,154,000, representing 53.0% of sales, in the prior year period. Research and
development expenses for the third quarter of fiscal 2000 were $813,000,
representing 20.5% of sales, compared to $683,000, representing 16.8% 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, imaging and machine vision product lines. Sales and marketing
expenses for the third quarter of fiscal 2000 were $1,350,000, representing
34.0% of sales, compared to $1,041,000, representing 25.6% of sales, in the
prior year period. The increase in sales and marketing expenses is primarily a
result of an increase in the size of the Company's core sales force and an
aggressive marketing campaign introduced in the second quarter to promote the
Company's new products. General and administrative expenses were $477,000 for
the third quarter of fiscal 2000, representing 12.0% of sales, compared to
$430,000, representing 10.6% of sales, for the same period last year.
The net loss for the fiscal quarter ended August 31, 2000 was $567,000, or
$0.26 per diluted share, compared to net income of $177,000, or $0.08 per
diluted share, for the same period in 1999.
Comparison of the First Nine Months of Fiscal 2000 to the First Nine Months of
Fiscal 1999:
Net sales for the nine months ended August 31, 2000 were $11,829,000, a
decrease of $168,000, or 1.4%, from the same period a year ago. Sales of the
Company's commercial product, Broadway, have decreased approximately 3.2% from
the same period in fiscal 1999. The decrease in sales is primarily a result of a
decrease in the size of the Company's Broadway sales force and a consolidation
of the Company's Broadway marketing programs. Sales of the Company's data
acquisition, imaging and machine vision products decreased approximately 1.2%
from the comparable period in fiscal 1999, which the Company believes is due
primarily to eroding sales within the Company's legacy product lines.
Additionally, the Company believes that it is currently in the midst of an
acceptance period as newly released products are being introduced to the
marketplace to replace the Company's legacy products. The Company will have to
manage successfully the transition from the legacy products in order to maintain
the appropriate level of revenue to support the Company's expense base.
Gross profit for the nine months ended August 31, 2000 was 53.5%, compared
to 57.0% in the comparable period of the prior year. The reduction in gross
profit from the comparable prior year period was the result of a less favorable
product mix.
The Company's loss from operations for the first nine months of fiscal 2000
was $1,014,000, compared to income from operations of $359,000 in the comparable
period of the prior year. An increase in operating expenses as well as lower
gross profits contributed to the loss from operations. Operating expenses for
the first nine months of fiscal 2000 were $7,343,000, representing 62.0% of
sales, compared to $6,481,000, representing 54.0% of sales, in the prior year
period. Current year operating expenses include a significant investment in
research and development, marketing, promotion and sales channel development for
the Company's data acquisition, imaging and machine vision products. Research
and development expenses were $2,201,000, representing 18.6% of sales, compared
to $1,915,000, representing 16.0% 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, imaging and machine vision product
lines. Sales and marketing expenses were $3,648,000, representing 30.8% of
sales, compared to $3,058,000, representing 25.5% of sales, in the prior year
period. The increase in sales and marketing expenses is primarily a result of an
increase in the size of the Company's sales force and an aggressive marketing
campaign that was introduced in the second quarter to promote the Company's new
products. General and administrative expenses were $1,495,000, representing
12.7% of sales, compared to $1,508,000, representing 12.5% of sales, for the
comparable period in fiscal 1999.
The net loss for the nine months ended August 31, 2000 was $928,000, or
$0.42 per diluted share, compared to net income of $435,000, or $0.20 per
diluted share for the same period in 1999.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Liquidity and Capital Resources
As of August 31, 2000, the Company had cash, cash equivalents and
marketable securities totaling $2,754,000 as compared to cash, cash equivalents
and marketable securities of $4,098,000 as of November 30, 1999.
In the first nine months of 2000, the Company used $1,076,000 from
operating activities, resulting from a net loss, increases in inventory,
accounts receivable and prepaid expenses and a decrease in accrued expenses,
partially offset by an increase in accounts payable.
The Company used $359,000 for investing activities in the first nine months
of 2000, principally as a result of acquisitions of property and equipment.
The Company generated funds from financing activities of $258,000 in the
first nine months of 2000 related to the exercise of stock options and the
issuance of stock under the Company's employee stock purchase plan, offset by
the purchase of 31,045 shares of the Company's common stock.
Given currently 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.
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.
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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
One report on Form 8-K was filed with The Securities and
Exchange Commission on June 22, 2000, in which, The Company
reported "Other Events" under Item 5 thereof.
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Page 14 of 14
SIGNATURE
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 16, 2000 By: /s/ Michael A. DiPoto
---------------------------------------
Michael A. DiPoto
Vice President Finance
and Chief Financial Officer
