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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
Amendment No. 1
FORM 10-K405/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended October 30, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR
SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition Period From ________ to ________
Commission File Number 0-8567
DATAMETRICS CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 95-3545701
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
21135 Erwin Street
Woodland Hills, California 91367
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(ADDRESS OF PRINCIPAL (ZIP CODE)
EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (818)
598-6200
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ----------------------------------- --------------------------------
Common Stock, .01 par value American Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant (based on the closing price of such stock as reported by the American
Stock Exchange on January 20, 1995 was approximately $39,760,000.
The number of shares outstanding of the Registrant's Common Stock, as of the
latest practicable date:
9,325,078 Shares of Common Stock as of January 20, 1995.
_________________________
Documents Incorporated by Reference
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Portions of the Datametrics Corporation 1994 Annual Report to
Stockholders for the year ended October 30, 1994 are incorporated by reference
into Parts I and II. With the exception of those portions which are expressly
incorporated by reference in the Annual Report on Form 10-K, the Datametrics
Corporation 1994 Annual Report to Stockholders is not deemed filed as part of
this Report.
Portions of the Datametrics Corporation definitive Proxy Statement to
be filed with the Securities and Exchange Commission within 120 days after the
close of the fiscal year ended October 30, 1994 are incorporated by reference
into Part III.
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PART II
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ITEM 7.
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MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
RESULTS OF OPERATIONS
FISCAL YEAR 1994 COMPARED WITH FISCAL YEAR 1993
Sales for the year ended October 30, 1994 were $25,211,000, an increase of
$1,227,000 or 5%, compared with sales of $23,984,000 in the prior year. In
fiscal 1994, decreases in non-military-related sales of $1,163,000 and
international military printer sales of $1,363,000 were offset by increases in
printer and keyboard sales related to the U.S. Department of Defense of $341,000
and ruggedized computer and computer workstation sales of $6,618,000, reflecting
twelve months' results of such sales compared to only three months in 1993. In
addition, in fiscal 1994, the Company only recognized $233,000 in sales (0.9% of
total Company sales) compared to $2,780,000 (11.6% of Company sales) in fiscal
1993 from contracts for printers and keyboards for NASA's Space Station Freedom.
In November 1993, the Company's contract was terminated for convenience by
McDonnell Douglas Corporation for reasons unrelated to the Company's product.
The Company's backlog of funded orders not recognized as sales increased from
$7,793,000 at October 31, 1993 to $10,459,000 at October 30, 1994. This
increase resulted primarily from contracts with the Canadian Defense Department,
partially offset by the U.S. Department of Defense delays in contract awards and
reduced funding of military programs.
Gross profit for fiscal 1994 was $8,306,000 (32.9% of sales), a decrease of
$55,000, or 0.7%, compared with $8,361,000 (34.9% of sales) for the prior year.
Gross profit as a percent of sales decreased 0.8% in fiscal 1994 due to a change
in product mix. The remaining 1.2% gross profit decrease was due to a cost
overrun on a contract for a new black-and-white military printer.
Research and development expenses were $2,297,000 for fiscal year 1994 compared
with $1,951,000 for the prior year. This increase was due to an accelerated
development schedule for the Company's high-speed color printer technology in
order to shorten time to market. The Company expects that this development
effort will cause research and development expenses to continue to increase in
fiscal 1995. The research and development expenses incurred in 1994 related to
development of a high-speed commercial color printer technology and product
enhancements, lower-cost black-and-white printers and ruggedization of newer-
model workstations. The research and development expenses incurred in fiscal
1993
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related to development of a high-speed commercial color printer technology,
product enhancements and lower-cost black-and-white printers.
Selling, general and administrative expenses for fiscal 1994 were $6,254,000
(24.8% of sales) compared with $5,547,000 (23.1% of sales) for the prior year.
The increase was due to increased expenses associated with marketing the
Company's color printer technology.
Net interest income amounted to $2,000 for the year ended October 30, 1994
compared with net interest expense of $65,000 for fiscal 1993. This change in
interest expense is due to decreased borrowings and investment income on the
proceeds of the Company's common stock offering.
Net income for the year ended October 30, 1994 amounted to $31,000 compared with
$1,483,000 for the prior year. This decrease of $1,452,000 was attributable to
a decrease in gross profit of $55,000, an increase in research and development
costs of $346,000, an increase in selling, general and administrative costs of
$707,000 and a change in accounting principle in fiscal 1993 resulting in a
$938,000 gain. These amounts were partially offset by a decrease in interest
expense of $67,000, an increase in amortization of excess of acquired net assets
over cost of $205,000 and a decrease in income tax expense of $322,000.
The Company had net deferred tax assets of $559,000 at October 30, 1994.
Management has determined that, based on the Company's carryback opportunities
and historical and expected future earnings from recurring operations, the
Company will more likely than not recognize these net deferred tax assets.
Ultimate recognition of these tax assets is dependent, to some extent, on future
revenue levels and margins. It is the intention of management to assess the
appropriate level for the valuation allowance each quarter.
The contract process in which products are offered for sale is generally set
before costs are incurred, and prices are based on estimates of the costs, which
include the anticipated impact of inflation.
RESULTS OF OPERATIONS
Fiscal Year 1993 compared with Fiscal Year 1992
Sales for the year ended October 31, 1993 were $23,984,000, an increase of
$1,626,000 or 7.3%, compared with sales of $22,358,000 in the prior year. In
fiscal 1993, non-military-related printer sales increased by $1,800,000,
international military printer sales decreased by $600,000, printer and keyboard
sales related to the U.S. Department of Defense decreased by $3,900,000, and
Rugged Digital sales added $4,300,000 during the year. The decrease in U.S.
Department of
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Defense printer and keyboard sales in fiscal 1993 was the result of an uncertain
defense budget situation that resulted in contract award delays and reduced
military program funding. In addition, in fiscal 1993, the Company recognized
$2,780,000 in sales (11.6% of total Company sales) from contracts for printers
and keyboards for NASA's Space Station Freedom. The Company's backlog of funded
orders not recognized as sales increased from $6,795,000 at October 25, 1992 to
$7,793,000 at October 31, 1993. This increase resulted primarily from the U.S.
Department of Defense contracts relative to Rugged Digital business partially
offset by award delays and reduced military program funding discussed above.
Gross profit for the year ended October 31, 1993 was $8,361,000 (34.9% of
sales), a decrease of $46,000 or .5% compared with $8,407,000 (37.6% of sales)
for the prior year. Gross profit as a percent of sales decreased 1.1 percentage
points in fiscal 1993 due to a change in product mix. The remaining 1.6
percentage points gross profit decrease was due to a cost overrun on a military
color printer interface which may be recovered on future orders.
Research and development expenses were $1,951,000 for fiscal year 1993 compared
with $1,390,000 for the prior year. This increase was due to an accelerated
development schedule for the Company's high-speed color printer technology in
order to shorten time to market. The research and development expenses incurred
in fiscal 1993 related to development of a high-speed commercial color printer
technology, product enhancements and lower-cost black-and-white printers. The
research and development expenses incurred in fiscal 1992 related to product
development for high-speed commercial color printer technology and a low-cost,
rugged, black-and-white printer and keyboard as well as enhancements to existing
products.
Selling, general and administrative expenses for the year ended October 31, 1993
were $5,547,000 (23.1% of sales) compared with $5,069,000 (22.7% of sales) for
the prior year. The increase was due to increased expense for marketing
relating to the Company's color printer technology.
Interest expense amounted to $65,000 for the year ended October 31, 1993
compared with $129,000 for the prior year. This reduction was due to decreased
borrowings and a lower overall interest rate.
The cumulative effect of change in accounting principle was the result of the
Company's adoption, effective as of the beginning of fiscal 1993, of a new
standard related to accounting for income taxes, Statement of Financial
Accounting Standards No. 109 (SFAS No. 109). The effect of adopting SFAS No.
109 was a one-time benefit to income of $938,000.
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Net income for the year ended October 31, 1993 amounted to $1,483,000 compared
with $1,337,000 for the prior year.
LIQUIDITY AND CAPITAL RESOURCES
During March and April 1994, the Company sold 2,300,000 shares of common stock
in a public offering. The net proceeds were approximately $5,138,000. The
Company used the net proceeds for the continued development, manufacture and
marketing of products based upon its high-speed color printer technology.
The Company has a revolving line of credit agreement (the "Credit Agreement")
with a bank, collateralized by substantially all of the Company's assets, which
allows the Company to borrow $3,000,000 at the bank's reference rate plus .25%
(7.75% reference rate at October 30, 1994).
The Credit Agreement requires the Company to maintain certain financial ratios
and restricts or limits the Company's ability to (i) create certain liens, (ii)
convey, transfer or sell assets, (iii) make capital expenditures, (iv) incur
additional indebtedness, (v) redeem or repurchase any class of stock, and (vi)
pay dividends on its preferred or common stock. In addition, the Credit
Agreement requires the Company to achieve net income on an annual basis and not
incur losses in two consecutive quarters. The Company was in compliance with
all the provisions at October 30, 1994.
The facility was renewed on November 23, 1994 with the same terms and conditions
and expires on January 31, 1995 with the same terms and conditions. The balance
outstanding at October 30, 1994 was $600,000. The Company is currently in
negotiations with several banks and expects to enter into a new line of credit.
There can be no assurance, however, that the Company will be able to obtain a
new line of credit and, if so, on what terms. Borrowings under this facility,
along with cash flows from operations, capital leases and capital loans, are the
Company's principal sources of short-term liquidity. As of December 9, 1994
there were no outstanding balances against the Credit Agreement.
The Company's working capital and current ratios at the end of fiscal years
1994, 1993 and 1992 were $12,361,000, $8,708,000 and $4,856,000 and 3.7, 2.6 and
2.4, respectively. The improvement in financial position over these periods is
the result of the Company's focus on managing asset levels, cutting operating
costs and the proceeds of the Company's public offering in March and April 1994.
Management believes that the Company must purchase approximately $1,000,000 of
capital equipment (including capitalized leases) during fiscal 1995. The
Company's other principal commitments for fiscal 1995 are federal and state
income taxes, lease
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obligations for the Company's facility, redemption of the Series B Preferred
Stock and interest due on bank borrowings.
Management expects to finance the capital expenditure requirements and other
commitments from a new bank line of credit, capital leases, capital loans and
from working capital. Subsequent to October 30, 1994, the Company entered into
borrowing arrangements in the amount of $925,000 which are collateralized by
furniture and fixtures with a net book value of $895,000.
BUSINESS ENVIRONMENT
As part of its diversification strategy, the Company has continued to invest
substantial resources in developing its commercial business. Results for the
first half of 1995 are expected to be impacted by continued heavy investment in
the Company's CYMAX commercial color printer program, during which time the
Company expects to introduce products to the market for field evaluation.
During the second half of 1995, the Company expects to make initial customer
deliveries and to ramp-up production, which the Company anticipates will begin
generating incremental commercial revenues.
Companies engaged in supplying equipment and services to U.S. government defense
programs are subject to special risks including dependence on government
appropriations, contract termination without cause, contract renegotiation, and
the intense competition for the available defense business.
Because of the foregoing, as well as other factors affecting the Company's
operating results, past financial performance should not be considered to be a
reliable indicator of future performance.
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Pursuant to the requirements of Regulation 12b-15 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 in the City of Woodland
Hills, State of California, on the 13th day of June, 1995.
DATAMETRICS CORPORATION
(Registrant)
/s/ John J. Van Buren
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John J. Van Buren,
Senior Vice President,
Chief Financial Officer
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