<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: May 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
or incorporation) Identification 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 June 30, 2000
$.01 Par Value 2,210,736 shares
<PAGE>
Page 2 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
INDEX
-----
<TABLE>
<CAPTION>
Page No.
--------
Part I - Financial Information:
<S> <C>
Consolidated Balance Sheets as of May 31, 2000 and
November 30, 1999............................................................................. 3
Consolidated Statements of Operations for the Three Months Ended and Six Months
Ended May 31, 2000 and 1999................................................................... 4
Consolidated Statements of Cash Flows for the Six Months
Ended May 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
<TABLE>
<CAPTION>
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 31, November 30,
2000 1999
---------------- -----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 3,336,000 $ 3,989,000
Marketable securities -- 109,000
Accounts receivable, net of reserves of
$273,000 in 2000 and $289,000 in 1999 1,811,000 2,035,000
Inventories 1,479,000 1,294,000
Prepaid expenses 838,000 357,000
---------------- -----------------
Total current assets 7,464,000 7,784,000
Equipment and Leasehold Improvements, net 1,112,000 1,243,000
Other Assets, net 71,000 22,000
---------------- -----------------
Total Assets $ 8,647,000 $ 9,049,000
================ =================
Current Liabilities:
Accounts payable $ 979,000 $ 646,000
Accrued expenses 1,693,000 2,150,000
---------------- -----------------
Total current liabilities 2,672,000 2,796,000
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, 2,210,653 and
2,175,780 shares issued in 2000 and 1999,
respectively; 2,195,653 and 2,160,780 shares
outstanding in 2000 and 1999, respectively 23,000 22,000
Treasury Stock, common, at cost,
15,000 shares in 2000 and 1999, respectively (43,000) (43,000)
Capital in excess of par value 12,995,000 12,891,000
Accumulated deficit (6,930,000) (6,569,000)
Cumulative translation adjustment (73,000) (51,000)
---------------- -----------------
Total stockholders' investment 5,972,000 6,250,000
---------------- -----------------
Total Liabilities and Stockholders' Investment $ 8,647,000 $ 9,049,000
================ =================
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
Page 4 of 14
<TABLE>
<CAPTION>
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
2000 1999 2000 1999
------------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $ 3,959,000 $ 4,079,000 $ 7,862,000 $ 7,936,000
Cost of sales 1,878,000 1,732,000 3,577,000 3,403,000
------------- ----------- ------------ -----------
Gross profit 2,081,000 2,347,000 4,285,000 4,533,000
Research and development expenses 751,000 621,000 1,388,000 1,232,000
Selling and marketing expenses 1,208,000 1,015,000 2,298,000 2,017,000
General and administrative expenses 539,000 579,000 1,018,000 1,078,000
------------- ----------- ------------ -----------
Income (loss) from operations (417,000) 132,000 (419,000) 206,000
Interest income 33,000 24,000 58,000 52,000
------------- ----------- ------------ -----------
Net income (loss) $ (384,000) $ 156,000 $ (361,000) $ 258,000
============= =========== ============ ===========
Basic and diluted income (loss) per share $ (0.17) $ 0.07 $ (0.16) $ 0.12
============= =========== ============ ===========
Basic weighted average number
of common shares outstanding 2,195,000 2,106,000 2,189,000 2,105,000
============= =========== ============ ===========
Diluted weighted average number
of common shares outstanding 2,195,000 2,208,000 2,189,000 2,156,000
============= =========== ============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
Page 5 of 14
<TABLE>
<CAPTION>
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
May 31, May 31,
2000 1999
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (361,000) $ 258,000
(loss)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities-
Depreciation and amortization 384,000 317,000
Change in assets and liabilities-
Accounts receivable 224,000 (336,000)
Inventories (185,000) 34,000
Prepaid expenses (481,000) 94,000
Accounts payable 330,000 176,000
Accrued expenses (457,000) 410,000
------------ -----------
Net cash provided by (used in) operating activities $ (546,000) $ 953,000
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements (252,000) (24,000)
Maturity of marketable securities 109,000 --
Increase in other assets (49,000) (16,000)
------------ -----------
Net cash used in investing activities $ (192,000) $ (40,000)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Treasury stock purchase -- (42,000)
Proceeds from stock plans 107,000 16,000
------------ -----------
Net cash provided by (used in) financing activities $ 107,000 $ (26,000)
------------ -----------
EXCHANGE RATE EFFECTS (22,000) (32,000)
------------ -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (653,000) $ 855,000
CASH AND CASH EQUIVALENTS, beginning of period 3,989,000 2,780,000
------------ -----------
CASH AND CASH EQUIVALENTS, end of period $ 3,336,000 $ 3,635,000
============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<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.
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 six months ended May 31, 2000 and May 31,
1999 is as follows:
<PAGE>
Page 7 of 14
<TABLE>
<CAPTION>
Core Broadway Total
---------- ---------- ----------
<S> <C> <C> <C>
For the three months ended May 31, 2000
Revenues from unaffiliated customers ........ $3,490,000 $ 469,000 $3,959,000
Cost of revenue ............................. 1,648,000 230,000 1,878,000
Research and development .................... 704,000 47,000 751,000
---------- ---------- ----------
Operating margin (1) ........................ $1,138,000 $ 192,000 $1,330,000
========== ========== ==========
For the three months ended May 31, 1999
Revenues from unaffiliated customers ........ $3,610,000 $ 469,000 $4,079,000
Cost of revenue ............................. 1,465,000 267,000 1,732,000
Research and development .................... 567,000 54,000 621,000
---------- ---------- ----------
Operating margin (1) ........................ $1,578,000 $ 148,000 $1,726,000
========== ========== ==========
For the six months ended May 31, 2000
Revenues from unaffiliated customers ........ $6,934,000 $ 928,000 $7,862,000
Cost of revenue ............................. 3,118,000 459,000 3,577,000
Research and development .................... 1,256,000 132,000 1,388,000
---------- ---------- ----------
Operating margin (1) ........................ $2,560,000 $ 337,000 $2,897,000
========== ========== ==========
For the six months ended May 31, 1999
Revenues from unaffiliated customers ........ $6,873,000 $1,063,000 $7,936,000
Cost of revenue ............................. 2,879,000 524,000 3,403,000
Research and development .................... 1,084,000 148,000 1,232,000
---------- ---------- ----------
Operating margin (1) ........................ $2,910,000 $ 391,000 $3,301,000
========== ========== ==========
</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 Six Months Ended
May 31, May 31, May 31, May 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total operating margin for reportable segments ..... $ 1,330,000 $ 1,726,000 $ 2,897,000 $ 3,301,000
----------- ----------- ----------- -----------
Selling and marketing expenses ..................... (1,208,000) (1,015,000) (2,298,000) (2,017,000)
General and administrative expenses ................ (539,000) (579,000) (1,018,000) (1,078,000)
Interest income .................................... 33,000 24,000 58,000 52,000
----------- ----------- ----------- -----------
Net income (loss) before provision for
income taxes ................................ $ (384,000) $ 156,000 $ (361,000) $ 258,000
=========== =========== =========== ===========
</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 May 31, 2000
Sales to unaffiliated customers (1) ........... $ 2,988,000 $ 344,000 $ 627,000 $ -- $ 3,959,000
Sales or transfers between geographic areas.... 468,000 -- -- (468,000) --
----------- ----------- ----------- ----------- -----------
Total net sales ............................... $ 3,456,000 $ 344,000 $ 627,000 $ (468,000) $ 3,959,000
=========== =========== =========== =========== ===========
Net income (loss) before
provision for income taxes ................ $ (339,000) $ (32,000) $ (18,000) $ 5,000 $ (384,000)
=========== =========== =========== =========== ===========
Long-lived assets ............................. $ 1,033,000 $ 77,000 $ 15,000 $ (13,000) $ 1,112,000
=========== =========== =========== =========== ===========
For the three months ended May 31, 1999
Sales to unaffiliated customers (1) ........... $ 2,958,000 $ 482,000 $ 639,000 $ -- $ 4,079,000
Sales or transfers between geographic areas.... 457,000 -- -- (457,000) --
----------- ----------- ----------- ----------- -----------
Total net sales ............................... $ 3,415,000 $ 482,000 $ 639,000 $ (457,000) $ 4,079,000
=========== =========== =========== =========== ===========
Net income (loss) before
provision for income taxes ................ $ 155,000 $ 53,000 $ (23,000) $ (29,000) $ 156,000
=========== =========== =========== =========== ===========
Long-lived assets ............................. $ 1,033,000 $ 64,000 $ 16,000 $ (13,000) $ 1,100,000
=========== =========== =========== =========== ===========
For the six months ended May 31, 2000
Sales to unaffiliated customers (2) ........... $ 5,941,000 $ 737,000 $ 1,184,000 $ -- $ 7,862,000
Sales or transfers between geographic areas.... 935,000 -- -- (935,000) --
----------- ----------- ----------- ----------- -----------
Total net sales ............................... $ 6,876,000 $ 737,000 $ 1,184,000 $ (935,000) $ 7,862,000
=========== =========== =========== =========== ===========
Net income (loss) before
provision for income taxes ................ $ (314,000) $ (22,000) $ (26,000) $ 1,000 $ (361,000)
=========== =========== =========== =========== ===========
Long-lived assets ............................. $ 1,033,000 $ 77,000 $ 15,000 $ (13,000) $ 1,112,000
=========== =========== =========== =========== ===========
For the six months ended May 31, 1999
Sales to unaffiliated customers (2) ........... $ 5,759,000 $ 834,000 $ 1,343,000 $ -- $ 7,936,000
Sales or transfers between geographic areas.... 914,000 -- -- (914,000) --
----------- ----------- ----------- ----------- -----------
Total net sales ............................... $ 6,673,000 $ 834,000 $ 1,343,000 $ (914,000) $ 7,936,000
=========== =========== =========== =========== ===========
Net income (loss) before
provision for income taxes ................ $ 221,000 $ 54,000 $ 40,000 $ (57,000) $ 258,000
=========== =========== =========== =========== ===========
Long-lived assets ............................. $ 1,033,000 $ 64,000 $ 16,000 $ (13,000) $ 1,100,000
=========== =========== =========== =========== ===========
</TABLE>
--------------
(1) Foreign sales from the United States to unaffiliated customers for the
three months ended May 31, 2000 and May 31, 1999 were approximately
$885,000, and $736,000, respectively.
(2) Foreign sales from the United States to unaffiliated customers for the six
months ended May 31, 2000 and May 31, 1999 were approximately $1,773,000,
and $1,676,000, respectively.
3. INVENTORIES
Inventories are stated at the lower of first-in, first-out (FIFO) cost
or market and consist of the following:
May 31, November 30,
2000 1999
---------- ----------
Raw material $1,045,000 $ 899,000
Work-in-process 160,000 89,000
Finished goods 274,000 306,000
---------- ----------
$1,479,000 $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. 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 six months
ended May 31, 1999 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 six months ended May 31, 1999 is as follows:
Three months Six months
ended May 31, ended May 31,
1999 1999
---- ----
Basic weighted average shares 2,106,000 2,105,000
Weighted average common
equivalent shares 102,000 51,000
----------- -----------
Diluted weighted average
shares outstanding 2,208,000 2,156,000
=========== ===========
5. 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.
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 is effective on July 1,
2000, but 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 Company expects the adoption of the Interpretation
during the third quarter will affect the accounting for stock options repriced
during fiscal year 1999.
<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 SIX MONTHS ENDED
------------------- ----------------
MAY 31, MAY 31,
------- -------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net sales ................................... 100.0 100.0 100.0 100.0
Gross profit ................................ 52.6 57.5 54.5 57.1
Research and development expenses ........... 19.0 15.2 17.7 15.5
Selling and marketing expenses .............. 30.5 24.9 29.2 25.4
General and administrative expenses ......... 13.6 14.2 12.9 13.6
----- ----- ----- -----
Income (loss) from operations ............... (10.5) 3.2 (5.3) 2.6
Interest (expense) income and other, net..... 0.8 0.6 0.7 0.7
----- ----- ----- -----
Net income (loss) ........................... (9.7)% 3.8% (4.6)% 3.3%
===== ===== ===== =====
</TABLE>
COMPARISON OF SECOND FISCAL QUARTER OF 2000 TO SECOND FISCAL QUARTER OF 1999:
Net sales for the fiscal quarter ended May 31, 2000 were $3,959,000, a
decrease of $120,000, or 2.9%, from the same period a year ago. The decrease
was attributable primarily to lower than expected sales of the Company's core
products from its United Kingdom subsidiary. Core sales from the Company's
United Kingdom subsidiary decreased approximately 28.6% from the same period a
year ago. 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 May 31, 2000 was 52.6%, compared to
57.5% 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 second fiscal quarter of 2000 was $417,000,
compared to income from operations of $132,000 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 second 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 second
quarter of fiscal 2000 were $2,498,000, representing 63.1% of sales, compared to
$2,215,000, representing 54.3% of sales, in the prior year period. Research and
development expenses for the second quarter of fiscal 2000 were $751,000,
representing 19.0% of sales, compared to $621,000, representing 15.2% 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 second quarter of fiscal 2000 were $1,208,000, representing
30.5% of sales, compared to $1,015,000, representing 24.9% 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 introduced in the second quarter to promote the Company's new
products. General and administrative expenses were $539,000 for the first
quarter of fiscal 2000, representing 13.6% of sales, compared to $579,000,
representing 14.2% of sales, for the same period last year. The slight decrease
in general and administrative expenses is primarily the result of a reduction in
staff and professional fees within the general and administrative departments.
The net loss for the fiscal quarter ended May 31, 2000 was $384,000, or $0.17
per diluted share, compared to net income of $156,000, or $0.07 per diluted
share, for the same period in 1999.
COMPARISON OF THE FIRST SIX MONTHS OF FISCAL 2000 TO THE FIRST SIX MONTHS OF
FISCAL 1999:
Net sales for the six months ended May 31, 1999 were $7,862,000, a decrease of
$74,000, or 0.9%, from the same period a year ago. Sales of the Company's
commercial product, Broadway, have decreased approximately 9.9% 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 sales force and a consolidation of the Company's
marketing programs. Sales of the Company's data acquisition, imaging and machine
vision products increased approximately 0.3% from the comparable period in
fiscal 1999, which the Company believes is due primarily to release of new
products into the marketplace. 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 six months ended May 31, 2000 was 54.5%, compared to
57.1% 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 six months of fiscal 2000 was
$419,000, compared to income from operations of $206,000 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 six months of fiscal 2000 were $4,704,000, representing 59.8% of
sales, compared to $4,327,000, representing 54.5% 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 $1,388,000, representing 17.7% of sales, compared
to $1,232,000, representing 15.5% 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, imaging and machine vision product
lines. Sales and marketing expenses were $2,298,000, representing 29.2% of
sales, compared to $2,017,000, representing 25.4% 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 $1,018,000, representing
12.9% of sales, compared to $1,078,000, representing 13.6% of sales, for the
comparable period in fiscal 1999. The slight decrease in general and
administrative expenses is primarily the result of a reduction in staff and
professional fees within the general and administrative departments.
The net loss for the six months ended May 31, 2000 was $361,000, or $0.16 per
diluted share, compared to net income of $258,000, or $0.12 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 May 31, 2000, the Company had cash and cash equivalents totaling
$3,336,000 as compared to cash and cash equivalents of $3,989,000 as of November
30, 1999.
In the first six months of 2000, the Company used $546,000 from operating
activities, resulting from a net loss, increases in inventory and prepaid
expenses and a decrease in accrued expenses, partially offset by a decrease in
accounts receivable and an increase in accounts payable.
The Company used $192,000 for investing activities in the first six months of
2000, principally as a result of acquisitions of property and equipment.
The Company generated funds from financing activities of $107,000 in the first
six months of 2000 related to the exercise of stock options and the issuance of
stock under the Company's employee stock purchase plan.
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 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
a) The Annual Meeting of Stockholders of the Company was held on
April 6, 2000.
b) The first matter voted upon at the meeting was the election of
Ellen W. Harpin for a three-year term as a Class I Director. The
voting results were as follows:
1,967,605 votes FOR
6,817 votes AGAINST
232,737 votes ABSTAINED
b) The second matter voted upon at the meeting was to ratify the
action of the Board of Directors in amending the Company's 1996
Stock Option Plan to increase the number of shares of common
stock authorized for issuance thereunder from 500,000 to
1,500,00. The voting results were as follows:
824,395 votes FOR
47,041 votes AGAINST
234,675 votes ABSTAINED
1,101,048 BROKER NON-VOTE
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.
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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: July 15, 2000 By: /s/ Michael A. DiPoto
----------------------------
Michael A. DiPoto
Vice President Finance
and Chief Financial Officer
