SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended October 28, 1995
Commission File Number 1-10512
DEL ELECTRONICS CORP.
(Exact name of registrant as specified in its charter)
New York 13-1784308
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Commerce Park, Valhalla, NY 10595
(Address of principal executive offices)
(Zip Code)
(914) 686-3600
(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 close of the period covered by this report.
Common Stock - 4,197,649
<PAGE>
PART I
Item 1. Financial Statements
Consolidated Balance Sheets - October 28, 1995 and July 29, 1995
Consolidated Statements of Income for the Three Months ended
October 28, 1995 and October 29, 1994
Consolidated Statements of Cash Flows for the Three Months ended
October 28, 1995 and October 29, 1994
Notes to Consolidated Financial Statements
-1-
<PAGE>
DEL ELECTRONICS CORP. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
October 28, July 29,
1995 1995
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents .......................... $ 295,381 $ 505,989
Investments available-for-sale ..................... 413,881 378,534
Trade receivables .................................. 5,230,424 6,456,853
Cost and estimated earnings in excess
of billings on uncompleted contracts ........... 404,030 395,847
Inventory ........................................... 19,125,131 18,038,358
Prepaid expenses and other current assets ........... 1,466,571 1,117.963
----------- -----------
Total Current Assets ........................ 26,935,418 26,893,544
----------- -----------
FIXED ASSETS - NET .................................. 7,963,243 7,752,781
GOODWILL - NET ...................................... 2,833,713 2,865,408
DEFERRED CHARGES .................................... 839,153 876,638
OTHER ASSETS ........................................ 620,877 666,263
----------- -----------
TOTAL ....................................... $39,192,404 $39,054,634
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt .................... $ 943,383 $ 943,383
Accounts payable - trade ............................. 2,537,524 2,539,615
Accrued liabilities .................................. 2,454,247 2,484,435
Income taxes payable ................................. 425,809 277,830
----------- -----------
Total Current Liabilities .................... 6,360,963 6,245,263
----------- -----------
LONG-TERM LIABILITIES
LONG-TERM DEBT (less current portion included above) 11,391,132 11,902,951
OTHER .............................................. 778,948 775,541
DEFERRED TAXES PAYABLE ............................. 605,806 605,806
----------- -----------
Total Liabilities .......................... 19,136,849 19,529,561
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, $.10 par value
Authorized - 10,000,000 shares
Issued and outstanding -
October 28, 1995 - 4,253,814
July 29, 1995 - 4,253,486 .................. 425,417 412,960
Additional paid-in capital ......................... 17,013,878 16,239,784
Retained earnings .................................. 2,939,390 3,189,244
----------- -----------
20,378,685 19,841,988
----------- -----------
Less common shares in treasury -
October 28, 1995 - 56,165
July 29, 1995 - 55,165 ..................... 323,130 316,915
--- ---- ------ ----------- -----------
Total Shareholders' Equity ................. 20,055,555 19,525,073
----------- -----------
TOTAL .............................................. $39,192,404 $39,054,634
=========== ===========
</TABLE>
See notes to consolidated financial statements
` -2-
<PAGE>
DEL ELECTRONICS CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 28, October 29,
1995 1994
<S> <C> <C>
Net Sales................................... $7,471,181 $6,136,056
Costs and expenses
Cost of sales.......................... 4,190,634 3,219,205
Research and development............... 642,831 520,756
Selling, general & administrative...... 1,571,966 1,476,774
Interest expense - net................. 309,227 271,006
---------- ----------
6,714,658 5,487,741
---------- ----------
Income before provision for income taxes..... 756,523 648,315
Provision for income taxes................... 226,957 197,700
---------- ----------
Net Income................................... $ 529,566 $ 450,615
========== ==========
Per share amounts:on share and common share
equivalents primary and fully diluted $ .11 $ .09
========== ==========
Weighted average number of common shares
outstanding and common share equivalents 5,228,250 5,080,137
========== ==========
</TABLE>
See notes to consolidated financial statements
` -3-
<PAGE>
DEL ELECTRONICS CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 28, October 29,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................ $ 529,566 $ 450,615
Adjustments to reconcile net income to
net cash provided by operating activities:
Imputed interest .................. 16,532 6,492
Depreciation ...................... 160,610 192,221
Amortization ...................... 97,308 103,375
Changes in assets and liabilities:
Decrease in trade receivables ............. 1,226,429 986,535
(Increase) decrease in cost and estimated
earnings in excess of billings on
uncompleted contracts ................. (8,183) 143,550
Increase in inventory ..................... (1,086,773) (1,544,505)
Increase in prepaid and
other current assets .................. (362,808) (20,061)
Decrease (increase) in other assets ....... 31,458 (3,981)
Decrease in accounts payable - trade ...... (2,091) (380,005)
Decrease in accrued liabilities ........... (30,189) (74,140)
Increase in income taxes payable .......... 147,979 --
----------- ----------
Net cash provided by (used in)
operating activities ................. 719,838 (139,904)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for fixed assets ............. (371,072) (175,584)
Investment in marketable securities ....... (35,347) (52,345)
Payments to former shareholder of
subsidiary acquired .................... (13,125) (12,500)
---------- ----------
Net cash used in investing activities .. (419,544) (240,429)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayment of) proceeds from
bank borrowing ......................... (511,819) 117,858
Interest rate protection purchased ........ -- (71,500)
Payment for repurchase of shares .......... (6,215) (41,667)
Proceeds from exercise of stock options ... 7,132 57,000
---------- ----------
Net cash (used in) provided by
financing activities ............... (510,902) 61,691
---------- ----------
</TABLE>
See notes to consolidated financial statements
` -4-
<PAGE>
DEL ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
October 28, October 29,
1995 1994
<S> <C> <C>
NET DECREASE IN CASH AND CASH EQUIVALENTS ......$ (210,608) $(318,642)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD ................................. 505,989 445,597
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ....... $ 295,381 $ 126,955
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid .......................... $ 119,543 $ 80,964
========= =========
Income taxes paid ...................... $ 78,978 $ 87,369
========= =========
</TABLE>
See notes to consolidated financial statements
` -5-
<PAGE>
DEL ELECTRONICS CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 In the opinion of the Company's management, the accompanying
unaudited consolidated financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present
fairly the results of the Company's financial position as of October
28, 1995 and the results of its operations and its cash flows for the
three months ended October 28, 1995 and October 29, 1994.
The accounting policies followed by the Company are set forth in Note
1 to the Company's financial statements as of July 29, 1995.
The consolidated financial statements should be read in conjunction
with the notes to the financial statements as of July 29, 1995.
NOTE 2 The results of operations for the three month period ended October
28, 1995 are not necessarily indicative of the results to be expected
for the full year.
NOTE 3 PERCENTAGE OF COMPLETION ACCOUNTING
<TABLE>
<CAPTION>
Balance at
October 28,1995
<S> <C>
Costs incurred on uncompleted contracts $ 344,309
Estimated earnings 94,921
---------
439,230
Less: Billings to-date 35,200
---------
Costs and estimated earnings in excess of
billing on uncompleted contracts $ 404,030
=========
</TABLE>
` -6-
<PAGE>
NOTE 4 Inventory is stated at a lower of cost (first-in, first-out)or market.
Inventories and their effect on cost of sales are determined by
physical count for annual reporting purposes and are estimated by
management for interim reporting purposes.
Inventory consists of the following:
<TABLE>
<CAPTION>
October 28, July 29,
1995 1995
<S> <C> <C>
Finished goods $ 4,663,072 $ 4,398,096
Work in process 8,103,038 7,642,588
Raw material and purchased parts 6,359,021 5,997,674
----------- -----------
Total $19,125,131 $18,038,358
=========== ===========
</TABLE>
NOTE 5 FIXED ASSETS
<TABLE>
<CAPTION>
Fixed assets consist of the following:
October 28, July 29,
1995 1995
<S> <C> <C>
Land $ 694,046 $ 694,046
Building 2,146,025 2,146,025
Machinery and equipment 6,870,062 6,624,296
Furniture and fixtures 782,035 773,694
Leasehold improvements 791,994 790,226
Construction in Progress 139,796 76,023
Transportation equipment 11,425 10,987
----------- -----------
11,435,383 11,115,297
Less accumulated depreciation
and amortization 3,472,140 3,362,516
----------- -----------
$ 7,963,243 $ 7,752,781
=========== ===========
</TABLE>
NOTE 6 Net income per common share was computed using the modified
treasury stock method. This method was utilized since the number of
shares of common stock obtainable upon the assumed exercise of
outstanding options and warrants in the aggregate exceeded 20 percent
of the number of common shares outstanding at the end of the period.
The weighted average number of common shares and common share
equivalents for the period and for all periods presented includes the
effect of the 3 percent stock dividend (see Note 7) declared on
November 20, 1995.
NOTE 7 On November 20, 1995, the Company declared a 3 percent stock dividend
to holders of record on December 5, 1995, payable December 21, 1995.
` -7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company has a line of credit of $10,000,000 and outstanding
balances on two term loans of $1,928,580 and $2,750,000 at October 28, 1995.
Borrowing under the line of credit is based on 85 percent of eligible accounts
receivable and 50 percent of inventory, and has a $1,000,000 maximum sub-limit
for letters of credit. As of October 28, 1995 the amount outstanding under the
line of credit was $7,625,000 and the unused and available portion of the line
of credit was approximately $1,825,000. Letters of credit outstanding were
approximately $550,000.
The Company believes that its current financial resources, future
operating revenue and existing credit lines will be sufficient to meet its
foreseeable working capital requirements.
Working capital was $20,574,455 at October 28, 1995, compared to
$20,648,281 at July 29, 1995, a decrease of 3.6 percent. The current ratio
decreased to 4.23 to 1 at October 28, 1995 from 4.31 to 1 at July 29, 1995.
Investments available-for-sale of $413,881 at October 28, 1995 consist
primarily of corporate debt securities and equities. These investments are used
to fund a deferred compensation plan for a key Company employee.
Trade receivables at October 28, 1995 decreased $1,226,429 as compared
to July 29, 1995 as the result of collections and lower sales levels in the
quarter ended October 28, 1995 as compared to the quarter ended July 29, 1995.
This is primarily attributable to more workdays in the last quarter of the
Company's fiscal year as compared to the first quarter of its fiscal year due to
plant shutdowns for summer vacations.
Unbilled contract revenues were $404,030 at October 28, 1995 as
compared to $395,847 at July 29, 1995 due to work performed on contracts which
utilize the percentage of completion method of accounting.
Inventory at October 28, 1995 increased approximately $1,086,773 as
compared to July 29, 1995. Major new orders received in the quarter ended
October 28, 1995 resulted in the increase of inventory levels.
Prepaid expenses and other current assets increased approximately
$363,000 at October 28, 1995 as compared to July 29, 1995. This increase was
primarily attributable to advanced payments for inventory for Del Medical
Systems under its exclusive distribution agreement for diagnostic medical image
enhancers and worker's compensation insurance policy premiums.
Capital expenditures for the quarter ended October 28, 1995 were
approximately $371,000. These expenditures were primarily for assembly and test
equipment for improved manufacturing efficiencies. Depreciation expense was
$160,610 for the quarter ended October 28, 1995 as compared to $192,221 for the
quarter ended October 29, 1994 because certain classes of fixed assets have been
fully depreciated. There were no material open commitments for capital equipment
expenditures at October 28, 1995. The funds for capital expenditure improvements
were derived from operations and short-term borrowing.
The Company's debt at October 28, 1995 decreased approximately $512,000
as compared to July 29, 1995. The decrease is due primarily to collections of
trade receivables during the quarter.
` -8-
<PAGE>
The Company repurchased 1,000 shares of its common stock for $6,215
during the quarter ended October 28, 1995.
RESULTS OF OPERATIONS
Net sales for the quarter ended October 28, 1995 were $7,471,181 as
compared to $6,136,056 in the quarter ended October 29, 1994, an increase of
approximately 22 percent. The increase was due to internal growth in all
operating units.
Cost of sales as a percentage of sales increased from 52.5 percent in
the quarter ended October 29, 1994 to 56.1 percent in the quarter ended October
28, 1995. This increase was due to the change in the mix of the products sold
during the respective periods.
Research and development costs increased to approximately $643,000 in
the quarter ended October 28, 1995 from $521,000 in the quarter ended October
29, 1994. The Company continues to invest in research and new product
development of state-of-the-art products for its medical, industrial and defense
electronic markets.
Selling, general and administrative expenses as a percentage of sales
decreased from 24.1 percent in the quarter ended October 29, 1994 to 21.0
percent in the quarter ended October 28, 1995. While selling, general and
administrative expenses increased approximately 6.4 percent from last year's
quarter, the percentage decrease is primarily attributable to the increase in
revenue levels for the current year's quarter as compared to the comparable
quarter last year.
Interest expense for the quarter ended October 28, 1995 increased to
$309,227 from $271,006 in the quarter ended October 29, 1994.
Income tax expense decreased to 30.0 percent of pre-tax income in the
quarter ended October 28, 1995 from 30.5 percent in the quarter ended October
29, 1994. This decrease was primarily due to more sales being made through the
Company's Foreign Sales Corporation and increased research and development and
other tax credits.
Net income for the quarter ended October 28, 1995 was $529,566 as
compared to $450,615 for the quarter ended October 29, 1994. For the quarter
ended October 28, 1995 primary and fully diluted earnings per share were $.11 as
compared to $.09 in the quarter ended October 29, 1994. The number of
outstanding shares and common share equivalents increased approximately 2.9%
from October 29, 1994.
The backlog of unshipped orders at October 28, 1995 was approximately
$19.5 million.
` -9-
<PAGE>
PART II
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Submission to a Vote of Security Holders
None
Item 5. Other Information
(i) On November 20, 1995, the Registrant declared a 3
percent stock dividend payable on December 20, 1995 to
holders of record on December 5, 1995.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 11 - Computation of Earnings per
Common Share
(b) Report on Form 8-K: None
` -10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized,
DEL ELECTRONICS CORP.
/S/Leonard A. Trugman
----------------------
Leonard A. Trugman
Chairman of the Board,
Chief Executive Officer
and President
/S/Michael H. Taber
----------------------
Michael H. Taber
Chief Financial Officer &
Secretary
Dated: December 5, 1995
` -11-
<PAGE>
EXHIBIT 11
DEL ELECTRONICS CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS ENDED OCTOBER 28, 1995
<TABLE>
<CAPTION>
Fully
Primary Diluted
<S> <C> <C>
Reconciliation of net income per statement
of income to amount used in earnings per
share computation:
Net income $ 529,566 $ 529,566
Assumed reduction of - Interest on short-term debt,
debt tax effect on application of
assumed proceeds from exercise of options
subject to limitations under the Modified
Treasury Stock method 22,626 22,626
---------- ----------
Net income, as adjusted $ 552,192 $ 552,192
========== ==========
Reconciliation of weighted average number of
shares outstanding to amount used in earnings
per share computation:
Weighted average number of shares outstanding 4,196,864 4,196,864
Add - shares issuable from assumed exercise of
options subject to limitations under the Modified
Treasury Stock method 1,031,386 1,031,386
---------- ----------
Weighted average number of shares
outstanding as adjusted 5,228,250 5,228,250
========== ==========
Net income per common share $ .11 $ .11
========== ==========
</TABLE>
The Company utilized the Modified Treasury Stock method for computing net income
per common share. Under this method, the funds obtained by the assumed exercise
of all options and warrants were applied to repurchase common stock at the
average market price but limited to an amount of repurchased shares to no
greater than 20% of the then outstanding actual common shares. Any assumed funds
still available after the repurchase of 20% of outstanding actual common shares
were assumed to be utilized to reduce the existing short-term debt. The
adjustment to net income has been shown net of tax effect of 30%.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000027748
<NAME> DEL ELECTRONICS CORP.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-03-1996
<PERIOD-START> JUL-30-1995
<PERIOD-END> OCT-28-1995
<EXCHANGE-RATE> 1.000
<CASH> 295,381
<SECURITIES> 413,881
<RECEIVABLES> 5,382,355
<ALLOWANCES> 151,931
<INVENTORY> 19,125,131
<CURRENT-ASSETS> 1,466,571
<PP&E> 11,435,383
<DEPRECIATION> 3,472,140
<TOTAL-ASSETS> 39,192,404
<CURRENT-LIABILITIES> 6,360,963
<BONDS> 0
<COMMON> 425,417
0
0
<OTHER-SE> 19,630,138
<TOTAL-LIABILITY-AND-EQUITY> 39,192,404
<SALES> 7,471,181
<TOTAL-REVENUES> 7,471,181
<CGS> 4,190,634
<TOTAL-COSTS> 4,190,634
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 309,227
<INCOME-PRETAX> 756,523
<INCOME-TAX> 226,957
<INCOME-CONTINUING> 529,566
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 529,566
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
