<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1995.
-----------------
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 no. 2-43561
DATUM INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-2512237
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1363 SOUTH STATE COLLEGE BLVD., ANAHEIM, CA 92806-5790
(Address of principal executive offices) (Zip code)
(714) 533-6333
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by a 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 the
filing requirements for the past 90 days. YES X . NO .
----- -----
The registrant had 3,958,764 shares of common stock outstanding as of
March 31, 1995.
Total number of sequentially numbered pages contained herein are: 11
1
<PAGE> 2
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations . . 8
PART II. OTHER INFORMATION
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
MARCH 31, December 31,
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
Current assets
Cash and short-term investments $ 255,000 $ 221,000
Accounts receivable 14,931,000 5,978,000
Accounts receivable, unbilled 236,000 326,000
Inventories
Purchased parts 6,579,000 2,081,000
Work-in-process 6,852,000 4,465,000
Finished products 2,559,000 446,000
----------- -----------
15,990,000 6,992,000
Prepaid expenses 279,000 432,000
Deferred income taxes 869,000 869,000
Income tax refund receivable 210,000 216,000
----------- -----------
Total current assets 32,770,000 15,034,000
Plant and equipment
Land 2,040,000 2,040,000
Buildings 4,450,000 4,450,000
Equipment 14,091,000 6,017,000
Leasehold improvements 1,132,000 878,000
----------- -----------
21,713,000 13,385,000
Less accumulated depreciation and amortization 6,479,000 6,310,000
----------- -----------
15,234,000 7,075,000
----------- -----------
Excess of purchase price over net assets acquired 10,521,000 2,413,000
Other assets 48,000 56,000
----------- -----------
$58,573,000 $24,578,000
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</TABLE>
See Notes to Condensed Consolidated Financial Statements
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DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable $ 3,668,000 $ 1,598,000
Accrued salaries and wages 1,136,000 1,256,000
Other accrued expenses 1,538,000 476,000
Income taxes payable 164,000 ----
Notes payable to bank 8,650,000 3,000,000
Current portion of long-term debt 1,530,000 20,000
----------- -----------
Total current liabilities 16,686,000 6,350,000
----------- -----------
Long-term debt 9,627,000 50,000
----------- -----------
Postretirement benefits 171,000 152,000
----------- -----------
Deferred income taxes 1,143,000 1,143,000
----------- -----------
Stockholders' equity
Common stock, par value $.25 per share
Authorized - 8,000,000 shares
Issued - 3,963,014 shares in 1995
2,668,224 shares in 1994 991,000 667,000
Additional paid-in capital 23,793,000 10,294,000
Retained earnings -
Beginning of period 5,922,000 4,986,000
Net income 240,000 936,000
----------- -----------
End of period 6,162,000 5,922,000
----------- -----------
Total stockholders' equity 30,946,000 16,883,000
----------- -----------
$58,573,000 $24,578,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 5
DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Net product sales and contract revenues $9,832,000 $7,463,000
---------- ----------
Costs and expenses
Cost of products sold and contract revenues 5,550,000 4,370,000
Selling 1,596,000 1,208,000
Product development 942,000 545,000
Administrative and general 1,212,000 911,000
Interest expense 129,000 57,000
Interest income (3,000) (3,000)
---------- ----------
9,426,000 7,088,000
---------- ----------
Income before income taxes 406,000 375,000
Income tax provision 166,000 150,000
---------- ----------
Net income $ 240,000 $ 225,000
========== ==========
Earnings per common and common
equivalent share $ 0.08 $ 0.09
========== ==========
Weighted average number of common and
common equivalent shares outstanding 3,089,000 2,603,000
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements
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<PAGE> 6
DATUM INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------
MARCH 31, March 31,
1995 1994
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 240,000 $ 225,000
------------ ----------
Adjustments to reconcile income to net cash provided by
operating activities:
Depreciation and amortization 300,000 182,000
Contribution of the Company's shares of common stock 45,000 43,000
Changes in assets and liabilities, net of acquisitions:
Increase in accounts receivable (3,116,000) (414,000)
(Increase) decrease in accounts receivable,
unbilled - current portion 90,000 (164,000)
Decrease in income tax refund receivable 6,000 --
Increase in inventories (391,000) (342,000)
(Increase) decrease in prepaid expenses (107,000) 52,000
Increase in deferred income taxes - current portion -- (7,000)
Decrease in other assets 8,000 11,000
Increase (decrease) in accounts payable 874,000 (1,000)
Decrease in accrued expenses (25,000) (269,000)
Increase in income taxes payable 164,000 155,000
Increase in postretirement benefits 19,000 19,000
------------ ----------
Total reconciling items (2,133,000) (735,000)
------------ ----------
Net cash used in operating activities (1,893,000) (510,000)
------------ ----------
Cash flows from investing activities:
Book value of equipment disposals 1,000 60,000
Capital expenditures (359,000) (134,000)
Payment for acquisition, net of cash (14,494,000) --
------------ ----------
Net cash used in investing activities (14,852,000) (74,000)
------------ ----------
Cash flows from financing activities:
Proceeds from line of credit 5,650,000 110,000
Proceeds from (reductions to) long-term debt and notes payable 11,087,000 (65,000)
Exercise of stock options 42,000 3,000
------------ ----------
Net cash provided by financing activities 16,779,000 48,000
------------ ----------
Net increase (decrease) in cash and cash equivalents 34,000 (536,000)
Cash and cash equivalents at beginning of period 221,000 651,000
------------ ----------
Cash and cash equivalents at end of period $ 255,000 $ 115,000
============ ==========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
In connection with the acquisition of Efratom, the Company issued
1,277,778 shares of common stock valued at $13,736,000.
See Notes to Condensed Consolidated Financial Statements
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DATUM INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995 AND 1994
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the requirements of Form 10-Q and, therefore,
do not include all information and footnotes which would be presented were such
financial statements prepared in accordance with generally accepted accounting
principles, and should be read in conjunction with the audited financial
statements presented in the Company's 1994 Annual Report to Stockholders. In
the opinion of management, the accompanying financial statements reflect all
adjustments which are necessary for a fair presentation of the results for the
interim period presented. The results of operations for such interim period are
not necessarily indicative of results to be expected for the full year.
NOTE B - EARNINGS PER SHARE
Earnings per share is calculated by dividing net earnings by the weighted
average number of common and common equivalent shares outstanding during each
period taking into consideration primary and fully diluted shares.
NOTE C - SUBSEQUENT EVENTS
On March 16, 1995 the stockholders of the Company approved the purchase of all
the outstanding capital stock of Efratom Time and Frequency Products, Inc., a
Colorado corporation, and Ball Efratom Elektronik GmbH, a corporation organized
under the laws of the Republic of Germany (collectively, Efratom). The purchase
price consisted of $15,000,000 cash and 1,277,778 shares of Datum common stock.
The cash portion of the purchase price is subject to a post-closing adjustment
based on a comparison of the working capital and fixed assets of Efratom as of
August 7, 1994 and as of March 17, 1995. The acquisition closed on March 17,
1995.
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<PAGE> 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" presented in the
Company's 1994 Annual Report to Stockholders.
Results of Operations
Consolidated product sales increased 31.7% for the quarter ended March 31,
1995, when compared to the corresponding quarter of 1994. The increase was
primarily due to the growth of our Local Area Network product line and to the
acquisition of Efratom on March 17, 1995, which added two weeks of new sales
to Datum.
Cost of products sold for the quarter ended March 31, 1995, was 56.4%, compared
with 58.6% for the corresponding quarter of 1994. The increased margin
percentage was due to a more favorable product mix in most of the operating
divisions.
Selling expense as a percent of sales was 16.2% for the quarter ended March 31,
1995, the same as the corresponding quarter of 1994. The increase in absolute
dollars was partially due to the addition of Efratom (two weeks).
Product development expense as a percentage of sales increased to 9.6% of the
quarter ended March 31, 1995, compared with 7.3% for the corresponding quarter
of 1994. This was largely attributable to the higher level of investment in
telecommunication products, but also reflects a maintained level of development
activity in GPS receivers, LAN synchronization products and cesium standards.
Also, Efratom product development expense, as a percentage of sales, is higher
than that of the other divisions of Datum.
General and Administrative expense as a percent of sales was 12.3% for the
quarter ended March 31, 1995, compared to 12.2% for the corresponding quarter
in 1994.
With the acquisition of Efratom came an increase in borrowing of $15 million
for part of the purchase price and up to an additional $7 million to cover the
increased daily working capital needs of the combined operations. The increase
in interest expense reflects the additional interest paid for two weeks on the
increased loan commitment.
Net income as a percent of sales decreased to 2.4% in the current quarter from
3.0% in the same quarter of 1994. The added cost of product development and
interest expense due to the acquisition accounted for this differential.
The prorated portion of shares issued to Ball Corporation for the acquisition
of Efratom added the equivalent shares from March 17, 1995 and, to a lesser
extent, the exercise of stock options also added to shares outstanding.
Liquidity and Capital Resources
Accounts receivable, including accounts receivable unbilled, increased from
$6,304,000 at December 31, 1994 to $15,167,000 at March 31, 1995. The major
reason for the increase is the presence of Efratom receivables of $7,800,000
not applicable on December 31, 1994.
Inventories increased from $6,992,000 at December 31, 1994, to $15,990,000 at
March 31, 1995. The increase is driven by the addition of $8,400,000 of
Efratom inventories not present on December 31, 1994.
Accounts payable increased from $1,598,000 at December 31, 1994 to $3,668,000
at March 31, 1995. The Efratom acquisition accounts for this increase.
At March 31, 1995 the Company had working capital of $16,084,000 and a current
ratio of 2.0:1. This compares to working capital of $8,684,000 and a current
ratio of 2.4:1 at December 31, 1994. The moderate decline in the current ratio
is the result of the large current loan balance associated with financing the
Efratom acquisition.
The notes payable to the bank reflects the revolving line with the bank which
increased to a maximum of $11,000,000. The balance reflects usage to date and
includes $4,000,000 utilized as a portion of the $15,000,000 cash purchase
price of Efratom. The additional usage is partially to cover the higher levels
of accounts receivable and inventory.
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<PAGE> 9
Effective March 17, 1995, the Company entered into a credit arrangement with
its bank for a credit facility to contain (i) an $11,000,000 revolving line of
credit; (ii) a $2,500,000 term loan payable over six (6) years; (iii) a
$2,500,000 term loan amortized over 25 years, payable in five (5) years; (iv) a
$6,000,000 term loan payable over four (4) years. All the loans have interest
payable at the bank's prime rate plus .5% to .75%. The loans are secured by
accounts receivable, inventory, real estate and equipment of Datum and Efratom.
The credit arrangement is effective through June 6, 1996.
The current portion of long-term debt reflects the banking arrangements
described above which are due and payable in a twelve month period.
The Company believes that the available credit line and funds generated by
operations are adequate to continue the Company's business as presently
conducted.
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<PAGE> 10
PART II. OTHER INFORMATION
Items 1 through 5 have been omitted because the related information is either
inapplicable or has been previously reported.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibit No. Description
----------- -----------
<S> <C>
27.1 Financial Data Schedule
(b) The following reports on Form 8-K were filed during the quarter covered by this report:
(i) Form 8-K filed March 27, 1995, regarding the Registrant's acquisition of Efratom Time
and Frequency Products, Inc. and Efratom Elektronik GmbH.
(ii) Form 8-K/A filed March 28, 1995, regarding the Registrant's acquisition of Efratom Time
and Frequency Products, Inc. and Efratom Elektronik GmbH.
</TABLE>
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<PAGE> 11
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.
DATUM INC.
/s/ Louis B. Horwitz Date May 15, 1995
- --------------------------------------- --------------------
Louis B. Horwitz, President
/s/ David A. Young Date May 15, 1995
- --------------------------------------- --------------------
David A. Young, Chief Financial Officer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 255
<SECURITIES> 0
<RECEIVABLES> 15,167
<ALLOWANCES> 89
<INVENTORY> 15,990
<CURRENT-ASSETS> 32,770
<PP&E> 21,713
<DEPRECIATION> 6,479
<TOTAL-ASSETS> 58,573
<CURRENT-LIABILITIES> 16,686
<BONDS> 9,627
<COMMON> 991
0
0
<OTHER-SE> 29,955
<TOTAL-LIABILITY-AND-EQUITY> 58,573
<SALES> 9,832
<TOTAL-REVENUES> 9,832
<CGS> 5,550
<TOTAL-COSTS> 9,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 129
<INCOME-PRETAX> 406
<INCOME-TAX> 166
<INCOME-CONTINUING> 240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 240
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
