FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FOR FISCAL YEAR ENDED JULY 29, 1995
COMMISSION FILE NUMBER 1-10512
DEL ELECTRONICS CORP.
(Exact name of registrant as specified in its charter)
13-1784308
(IRS Employer Identification No.)
1 Commerce Park, Valhalla, New York 10595
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 914-686-3600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Stock, The American Stock Exchange, Inc.
$.10 Par Value
- --------------------------------------------------------------------------------
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 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 amounted to $24,428,993 at the close of business on October 24, 1995.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the close of business on October 24, 1995.
Common Stock - 4,074,434
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
DEL ELECTRONICS CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------
July 29 July 30, July 31, August 1, August 3,
1995(b) 1994(b) 1993(b) 1992 1991
------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales $32,596,312 $24,327,015 $22,287,315 $18,948,930 $17,323,205
----------- ----------- ----------- ----------- -----------
Cost and expenses:
Cost of sales 19,177,999 15,179,081 13,455,261 11,754,344 10,672,288
Research and development 2,861,844 2,253,412 1,712,881 1,262,263 845,945
Selling, general and
administrative 6,622,690 4,862,519 4,390,267 3,473,622 3,453,222
Interest expenses -- net 1,191,142 576,832 360,149 308,525 874,058
----------- ----------- ----------- ----------- -----------
29,853,675 22,871,844 19,918,558 16,798,754 15,845,513
----------- ----------- ----------- ----------- -----------
Income before provision
for income taxes 2,742,637 1,455,171 2,368,757 2,150,176 1,477,692
Provision for income taxes 837,428 341,525 708,000 657,792 395,734
Cumulative effect of adoption of
SFAS-109 -- 76,363 -- -- --
----------- ----------- ----------- ----------- -----------
Net income $ 1,905,209 $ 1,190,009 $ 1,660,757 $ 1,492,384 $ 1,081,958
=========== =========== =========== =========== ===========
Income before cumulative effect of
of change in accounting principle $.40 $.23 $.38 $.35 $.36
Cumulative effect of adoption
of SFAS-109 -- .02 -- -- --
----------- ----------- ----------- ----------- -----------
Net income per common share and
common share equivalents (a)
primary and fully diluted $.40 $.25 $.38 $.35 $.36
=========== =========== =========== =========== ===========
Number of shares used in
computation of primary
earnings per share (a) 4,897,374 4,754,260 4,439,513 4,296,864 3,045,438
=========== =========== =========== =========== ===========
Number of shares used in
computation of fully diluted
earnings per share (a) 4,918,032 4,754,260 4,442,198 4,310,090 3,045,438
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
As of
----------------------------------------------------------------------
July 29, July 30, July 31, August 1, August 3,
1995(c) 1994(c) 1993(c) 1992 1991
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $20,648,281 $18,530,176 $13,856,981 $11,307,592 $ 10,209,886
=========== =========== =========== =========== ============
Total assets $39,054,634 $36,198,373 $24,969,136 $19,412,572 $ 18,299,270
=========== =========== =========== =========== ============
Long-term debt $11,902,951 $11,485,722 $ 5,639,290 $ 3,901,622 $ 3,964,800
=========== =========== =========== =========== ============
Shareholders' equity $19,525,073 $17,698,507 $15,634,240 $12,773,226 $ 10,815,414
=========== =========== =========== =========== ============
Common shares outstanding 4,074,434 4,073,332 3,789,534 3,464,948 3,091,786
=========== =========== =========== =========== ============
</TABLE>
(a) Net income per common share and common stock equivalents have been
restated to give effect to stock dividends in 1995, 1994, 1993 and
1992. See footnote 1 of notes to the consolidated financial
statements for computation of earnings per share.
(b) The fiscal years ended July 29, 1995, July 30, 1994 and July 31,
1993 include the operations of Dynarad; fiscal years ended July
29, 1995 and July 30, 1994 includes the operations of Bertan.
(c) Common shares outstanding for 1995, 1994 and 1993 are reduced by
55,165, 16,656 shares and 4,000 shares of treasury stock,
respectively.
8
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements Page Number
-----------
CONSOLIDATED FINANCIAL STATEMENTS OF
DEL ELECTRONICS CORP. AND SUBSIDIARIES:
Independent Auditors' Report F-1
Consolidated Balance Sheets as of July 29, 1995 and
July 30, 1994 F-2
Consolidated Statements of Income for the Fiscal
Years Ended July 29, 1995, July 30, 1994 and July 31,
1993 F-3
Consolidated Statements of Shareholders' Equity for
the Fiscal Years Ended July 29, 1995, July 30, 1994,
and July 31, 1993 F-4
Consolidated Statements of Cash Flows for the Fiscal
Years Ended July 29, 1995, July 30, 1994, and July
31, 1993 F-5- F-6
Notes to Consolidated Financial Statements for the
Fiscal Years Ended July 29, 1995, July 30, 1994, and
July 31, 1993 F-7 - F17
Unaudited Selected Quarterly Financial Data F-18
2. (a) Exhibit
Number Description of Document Footnotes
------- ----------------------- ---------
3.1 Certificate of Incorporation dated October
25, 1954 (1)
3.2 Certificate of Amendment of Certificate of
Incorporation dated January 28, 1957 (1)
3.3 Certificate of Amendment of Certificate of
Incorporation dated July 12, 1960 (1)
3.4 Certificate of Amendment of Certificate of
Incorporation dated March 15, 1989 (2)
3.5 Certificate of Amendment of Certificate of
Incorporation dated January 19, 1989 (3)
3.6 By-Laws of Del Electronics Corp. (1)
4.1 Warrant Certificate of ARX, Inc. (4)
4.2 Warrant Certificate of LB Capital, Inc. (4)
21
<PAGE>
4.3 Stock Purchase Warrants of Laidlaw
Equities, Inc. and Colman Abbe (5)
4.4 Registration Rights Agreement by and among
Del Electronics Corp., Bertan Associates,
Inc. Lester Bertan, Howard Bertan and Karl
Reuchlein dated April 1, 1994 (6)
4.5 Warrant Agreement between Del Electronics
Corp., and Chase Manhattan Investment
Holdings, Inc., dated January 27, 1995 (7)
4.6 Amendment to Warrant Agreement between Del
Electronics Corp. and Chase Manhattan
Investment Holdings, Inc., dated January
27, 1995 (8)
4.7 Warrant Certificate of Stanley Wunderlich. (9)
4.8 Warrant Certificate of Chatfield Dean &
Co., Inc. (10)
4.9 Warrant Certificate of Russell J.
Breenberg. (11)
4.10 Warrant Certificate of Shail B. Sheth. (12)
4.11 Warrant Certificate of Kenneth L.
Greenberg. (13)
4.12 Warrant Certificate of J. Shain Gross. (14)
4.13 Warrant Certificate of Rebecca Miller. (15)
4.14 Copy of Del Electronics Corp. Amended and
Restated Stock Option Plan (the "Plan"). (16)
4.15 Stock Purchase Plan (17)
4.16 Option Agreement, substantially in the form
used in connection with options granted
under the Plan (18)
10.1 Amended and Restated Executive Employment
Agreement of Leonard A. Trugman (19)
10.2 Amendment No. 1 to Amended and Restated
Employment Agreement of Leonard A. Trugman (20)
10.3 Amendment No. 2 to Amended and Restated
Employment Agreement of Leonard A. Trugman (21)
10.4 Employment Agreement of Leonard A. Michaels (22)
10.5 Employment Agreement of Howard Bertan (23)
22
<PAGE>
10.6 Modified and Restated Credit Agreement
dated as of May 10, 1994 among Del
Electronics Corp., RFI Corp., Dynarad
Corp., Bertan High Voltage Corp. and the
Chase Manhattan Bank, N.A. (24)
10.7 First Amendment to Modified and Restated
Credit Agreement dated November 4, 1994
among Del Electronics Corp., RFI Corp.,
Dynarad Corp., Del Medical Systems Corp.
and the Chase Manhattan Bank, N.A. (25)
10.8 Second Amendment to Modified and Restated
Credit Agreement dated November 11, 1994
among Del Electronics Corp., RFI
Corporation, Dynarad Corp., Bertan High
Voltage Corp., Del Medical Systems Corp.,
and The Chase Manhattan Bank, N.A. (26)
10.9 Third Amendment to Modified and Restated
Credit Agreement dated January 27, 1995
among Del Electronics Corp., RFI
Corporation, Dynarad Corp., Bertan High
Voltage Corp., Del Medical Systems Corp.,
and The Chase Manhattan Bank, N.A. (27)
10.10 Lease Agreement dated April 7, 1992 between
Messenger Realty and the Company (28)
10.11 Lease made as of September 1, 1992 between
Arleigh Construction and Del Acquisition
Corp. (29)
10.12 Lease and Guaranty of Lease dated May 25,
1994 between Leshow Enterprises and Bertan
High Voltage Corp. (30)
10.13 Consulting Agreement between Del
Acquisition Corp. and Harvey Schechter (31)
10.14 Consulting Agreement between Del
Acquisition Corp. and Mark Weiss (32)
*11 Computation of earnings per Common Share
and Common Share Equivalents for year ended
July 29, 1995
*21 Subsidiaries of Del Electronics Corp.
*23 Consent of Deloitte & Touche LLP
*27 Financial Data Schedule
* Filed herewith
23
<PAGE>
(1) Filed as Exhibit to Del Electronics Corp., Registration Statement on Form
S-1 (No. 2-16839) and incorporated herein by reference.
(2) Filed as Exhibit 3.5 to Del Electronics Corp., Annual Report on Form 10-K
for the year ended August 2, 1986 and incorporated herein by reference.
(3) Filed as Exhibit 4.5 to Del Electronics Corp., Form S-3 (No. 33-30446)
filed August 10, 1989 and incorporated herein by reference.
(4) Filed as Exhibits 4.2, 4.5 and 4.6 to Del Electronics Corp., Annual Report
on Form 10-K filed November 6, 1991 and incorporated herein by reference.
(5) Filed as Exhibit 4.2 to Del Electronics Corp., Pre-Effective Amendment No.
1 to Registration Statement on Form S-2 (No. 33- 40314) and incorporated
herein by reference.
(6) Filed as Exhibit 4.1 to Del Electronics Corp., Report on Form 8-K dated
June 10, 1994 and incorporated herein by reference.
(7) Filed as Exhibit 4.5 to Del Electronics Corp., Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(8) Filed as Exhibit 4.6 to Del Electronics Corp., Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(9) Filed as Exhibit 4.7 to Del Electronics Corp., Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(10) Filed as Exhibit 4.8 to Del Electronics Corp., Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(11) Filed as Exhibit 4.9 to Del Electronics Corp., Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(12) Filed as Exhibit 4.10 to Del Electronics Corp., Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(13) Filed as Exhibit 4.11 to Del Electronics Corp., Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(14) Filed as Exhibit 4.12 to Del Electronics Corp., Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(15) Filed as Exhibit 4.13 to Del Electronics Corp., Registration Statement on
Form S-3 (No. 33-61025) and incorporated herein by reference.
(16) Filed as Exhibit A to Del Electronics Corp., Proxy Statement dated January
26, 1994 and incorporated herein by reference.
(17) Filed as Exhibit 4.9 to Del Electronics Corp., Annual Report on Form 10-K
for the year ended July 29, 1989 and incorporated herein by reference.
(18) Filed as Exhibit 4.8 to Del Electronics Corp., Annual Report on Form 10-K
for the year ended July 30, 1994 and incorporated herein by reference.
(19) Filed as Exhibit 10.1 to Del Electronics Corp., Annual Report on Form 10-K
for the year ended July 31, 1993 and incorporated herein by reference.
(20) Filed as Exhibit 10.2 to Del Electronics Corp., Annual Report on Form 10-K
for the year ended July 30, 1994 and incorporated herein by reference.
(21) Filed as Exhibit 10.3 to Del Electronics Corp., Annual Report on Form 10-K
for the year ended July 30, 1994 and incorporated herein by reference.
(22) Filed as Exhibit 28.1 to Del Electronics Corp., Current Report on Form 8-K
dated November 9, 1992 and incorporated herein by reference.
(23) Filed as Exhibit 2.2 to Del Electronics Corp., Current Report on Form 8-K
dated June 10, 1994 and incorporated herein by reference.
24
<PAGE>
(24) Filed as Exhibit 10.6 to Del Electronics Corp., Annual Report on Form 10-K
for the year ended July 30, 1994 and incorporated herein by reference.
(25) Filed as Exhibit 10.7 to Del Electronics Corp., Annual Report on Form 10-K
for the year ended July 30, 1994 and incorporated herein by reference.
(26) Filed as Exhibit 10.1 to Del Electronics Corp., Quarterly Report on Form
10-Q for the quarter ended January 28, 1995 and incorporated herein by
reference.
(27) Filed as Exhibit 10.2 to Del Electronics Corp., Quarterly Report on Form
10-Q for the quarter ended January 28, 1995 and incorporated herein by
reference.
(28) Filed as Exhibit 6(a) to Del Electronics Corp., Quarterly Report on Form
10-Q for the quarter ended May 2, 1992 and incorporated herein by reference
(29) Filed as Exhibit 28.6 to Del Electronics Corp., Current Report on Form 8-K
dated November 9, 1992 and incorporated herein by reference.
(30) Filed as Exhibit 2.5 to Del Electronics Corp., Current Report on Form 8-K
dated June 10, 1994 and incorporated herein by reference.
(31) Filed as Exhibit 28.4 to Del Electronics Corp., Current Report on Form 8-K
dated November 9, 1992 and incorporated herein by reference.
(32) Filed as Exhibit 28.5 to Del Electronics Corp., Current Report on Form 8-K
dated November 9, 1992 and incorporated herein by reference.
25
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Del Electronics Corp. and Subsidiary
Valhalla, New York
We have audited the accompanying consolidated balance sheets of Del Electronics
Corp. and subsidiaries as of July 29, 1995 and July 30, 1994 and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three fiscal years in the period ended July 29, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Del Electronics Corp. and
subsidiaries at July 29, 1995 and July 30, 1994, and the results of their
operations and their cash flows for each of three fiscal years in the period
ended July 29, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes effective August 1, 1993 to
conform with Statement of Financial Accounting Standards No. 109.
S/DELOITTE & TOUCHE LLP
- -----------------------
DELOITTE & TOUCHE LLP
New York, New York
October 23, 1995
F-1
<PAGE>
DEL ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 29, July 30,
1995 1994
-------- ---------
ASSETS (Note 6)
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 505,989 $ 445,597
Investments available-for-sale
(Notes 1, 2 and 10) 378,534 346,270
Trade receivables (net of allowance
for doubtful accounts of $144,431
at July 29,1995 and $164,675 at
July 30, 1994) 6,456,853 6,120,457
Cost and estimated earnings in
excess of billings on uncompleted
contracts (Note 3) 395,847 551,301
Inventory (Notes 1 and 4) 18,038,358 16,072,933
Prepaid expenses and other current
assets (Note 11) 1,117,963 856,969
----------- -----------
Total current assets 26,893,544 24,393,527
----------- -----------
FIXED ASSETS - At cost (Notes 1
and 5) 11,115,297 9,777,788
Less accumulated depreciation and
amortization 3,362,516 2,612,930
----------- -----------
7,752,781 7,164,858
----------- -----------
GOODWILL (net of accumulated
amortization of $216,951 at
July 29, 1995 and $90,169 at
July 30, 1994) (Notes 1 and 11) 2,865,408 2,992,191
DEFERRED CHARGES (Note 11) 876,638 1,036,785
OTHER ASSETS (Notes 7, 9
and 11) 666,263 611,012
----------- -----------
TOTAL $39,054,634 $36,198,373
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term
debt (Note 6) $ 943,383 $ 928,568
Accounts payable - trade 2,539,615 2,477,101
Accrued liabilities (Note 11) 2,484,435 2,457,682
Income taxes (Notes 1 and 9) 277,830
----------- -----------
Total current liabilities 6,245,263 5,863,351
LONG-TERM LIABILITIES:
LONG-TERM DEBT (Less current
portion included above) (Note 6) 11,902,951 11,485,722
OTHER (Note 11) 775,541 757,410
DEFERRED INCOME TAXES
(Notes 1 and 9) 605,806 393,383
----------- -----------
Total liabilities 19,529,561 18,499,866
----------- -----------
COMMITMENTS AND
CONTINGENCIES (Notes 6,
7,8,10 and 11)
SHAREHOLDERS' EQUITY
(Notes 1, 7 and 8):
Common stock - $.10 par
value; Authorized - 10,000,000
shares; Issued and outstanding --
4,129,599 at July 29, 1995 and
3,856,162 shares at July 30, 1994 412,960 385,616
Additional paid-in capital 16,239,784 14,828,924
Retained earnings 3,189,244 2,583,817
----------- -----------
19,841,988 17,798,357
Less common stock in treasury --
55,165 at July 29, 1995 and
16,656 at July 30, 1994 shares
at cost 316,915 99,850
----------- -----------
Total shareholders' equity 19,525,073 17,698,507
----------- -----------
TOTAL $39,054,634 $36,198,373
=========== ===========
See notes to consolidated financial statements.
F-2
<PAGE>
DEL ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------
July 29, July 30, July 31,
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES (Notes 1, 3 and 12) $32,596,312 $24,327,015 $22,287,315
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 19,177,999 15,179,081 13,455,261
Research and development (Note 1) 2,861,844 2,253,412 1,712,881
Selling, general and administrative 6,622,690 4,862,519 4,390,267
Interest expense -- net of interest
income of $3,419 in 1995, $1,813 in
1994, and $17,350 in 1993 1,191,142 576,832 360,149
----------- ----------- -----------
29,853,675 22,871,844 19,918,558
----------- ----------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 2,742,637 1,455,171 2,368,757
PROVISION FOR INCOME TAXES
(Notes 1 and 9) 837,428 341,525 708,000
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN METHOD FOR ACCOUNTING
FOR INCOME TAXES 1,905,209 1,113,646 1,660,757
CUMULATIVE EFFECT OF CHANGE IN METHOD
FOR ACCOUNTING FOR INCOME TAXES
(Notes 1 and 9) 76,363
----------- ----------- -----------
NET INCOME $ 1,905,209 $ 1,190,009 $ 1,660,757
=========== =========== ===========
PER SHARE AMOUNTS (Note 1):
INCOME BEFORE CUMULATIVE EFFECT
OF CHANGE IN METHOD FOR ACCOUNTING
FOR INCOME TAXES $ .40 $ .23 $ .38
----------- ----------- -----------
CUMULATIVE EFFECT OF CHANGE IN METHOD
FOR ACCOUNTING FOR INCOME TAXES (Note 9) $ -- $ .02 $ --
----------- ----------- -----------
NET INCOME PER COMMON SHARE AND
COMMON SHARE EQUIVALENTS PRIMARY
AND FULLY DILUTED $ .40 $ .25 $ .38
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
DEL ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Issued Treasury Stock Additional
------------------- ------------------ Paid-in Retained
Shares Amount Shares Amount Capital Earnings Total
------ ------ ------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE -- AUGUST 1, 1992 2,819,713 $281,971 $9,514,367 $2,976,888 $12,773,226
Shares issued related
to acquisition (Note 11) 168,422 16,842 983,158 1,000,000
Stock dividends --
6% December 1992 and 3%
May 1993 (Note 8) 276,367 27,637 1,708,282 (1,741,583) (5,664)
Exercise of stock options
and warrants (Note 8) 106,450 10,645 45,509 56,154
Shares repurchased (Note 8) 4,000 $(23,567) (23,567)
Costs of registering stock
and options (Note 8) (14,666) (14,666)
Tax benefit related to exercise
of stock options (Note 8) 188,000 188,000
Net Income 1,660,757 1,660,757
--------- --------- ------ ---------- ----------- ---------- -----------
BALANCE -- JULY 31, 1993 3,370,952 337,095 4,000 (23,567) 12,424,650 2,896,062 15,634,240
Shares issued related
to acquisition (Note 11) 200,000 20,000 851,429 871,429
Stock dividends -- 3%
December 1993 and
June 1994 (Note 8) 212,407 21,240 1,473,677 (1,502,254) (7,337)
Exercise of stock options
and warrants (Note 8) 70,658 7,066 43,000 50,066
Shares repurchased (Note 8) 12,656 (76,283) (76,283)
Tax benefit related to exercise
of stock options (Note 8) 39,857 39,857
Other 2,145 215 (3,689) (3,474)
Net Income 1,190,009 1,190,009
--------- --------- ------ ---------- ----------- ---------- -----------
BALANCE - JULY 30, 1994 3,856,162 385,616 16,656 (99,850) 14,828,924 2,583,817 17,698,507
Stock dividends -- 3%
December 1994 and
June 1995 (Note 8) 233,446 23,345 1,270,112 (1,299,782) (6,325)
Exercise of stock options
and warrants (Note 8) 39,991 3,999 108,710 112,709
Shares repurchased (Note 8) 38,509 (217,065) (217,065)
Tax benefit related to exercise
of stock options (Note 8) 32,038 32,038
Net Income 1,905,209 1,905,209
--------- --------- ------ ---------- ----------- ---------- -----------
BALANCE -- JULY 29, 1995 4,129,599 $ 412,960 55,165 $ (316,915) $16,239,784 $3,189,244 $19,525,073
========= ========= ====== ========== =========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
DEL ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
July 29, July 30, July 31,
1995 1994 1993
-------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 1,905,209 $ 1,190,009 $ 1,660,757
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities net of effects from purchase of
Bertan & Dynarad
Imputed interest 68,963
Depreciation 749,586 684,786 606,389
Amortization 493,257 331,746 298,999
Deferred income tax provision (benefit) 36,452 (135,265) 138,600
Changes in assets and liabilities:
Increase in trade receivables (336,396) (73,085) (56,784)
Decrease (increase) in cost and
estimated earnings in excess of
billings on uncompleted contracts 155,454 46,346 (597,647)
Increase in inventory (1,965,425) (1,782,521) (2,430,090)
Increase in prepaid and
other current assets (219,232) (153,368) (123,474)
Increase in deferred charges (1,181,944)
(Increase) decrease in other assets (37,097) (200,862) 54,546
Increase (decrease) in
accounts payable - trade 62,514 (70,113) 466,943
Increase (decrease) in accrued liabilities 197,128 (66,833) (520,348)
Increase in income taxes payable 245,792 30,746 163,517
----------- ----------- -----------
Net cash provide by (used in)
operating activities 1,356,205 (198,414) (1,520,536)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid on acquisition of
subsidiaries (2,784,282) (196,929)
Payments to former shareholders of
subsidiary acquired (221,208)
Expenditures for fixed assets (1,337,509) (1,694,344) (1,252,006)
Investment in marketable securities (152,264) (395,404)
Sale of marketable securities 120,000 25,223
Other current assets (16,024)
----------- ----------- -----------
Net cash used in investing
activities (1,590,981) (4,864,831) (1,448,935)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from bank borrowing 432,044 5,175,928 1,049,117
Payment for repurchase of shares (217,065) (76,283) (23,567)
Proceeds from exercise of stock options 112,709 50,066 56,154
Other (32,520) (25,827) (20,330)
----------- ----------- -----------
Net cash provided by
financing activities 295,168 5,123,884 1,061,374
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements. (Continued)
F-5
<PAGE>
DEL ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
July 29, July 30, July 31,
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 60,392 $ 60,639 $(1,908,097)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 445,597 384,958 2,293,055
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 505,989 $ 445,597 $ 384,958
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 1,084,332 $ 474,010 $ 374,727
=========== =========== ===========
Income taxes paid $ 355,006 $ 595,570 $ 404,838
=========== =========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
ACQUISITION OF SUBSIDIARIES $ 4,816,153 $ 1,235,329
----------- -----------
Deferred tax liability acquired
in acquisition 146,902
Cash acquired in acquisition 6,130 5,400
Common stock issued 871,429 1,000,000
Payment due under non-compete agreement 807,410
Acquisition costs in accrued liabilities 200,000 33,000
----------- -----------
2,031,871 1,038,400
----------- -----------
Cash paid to acquire subsidiaries $ 2,784,282 $ 196,929
=========== ===========
TAX BENEFIT RELATED TO EXERCISE OF
STOCK OPTIONS $ 32,038 $ 39,857 $ 188,000
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
(Concluded)
F-6
<PAGE>
DEL ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED JULY 29, 1995, JULY 30, 1994, JULY 31, 1993
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Description of Business Activities - Del Electronics Corp. ("Del")
together with its wholly owned subsidiaries, RFI Corporation ("RFI"),
Dynarad Corp. ("Dynarad"), Bertan High Voltage Corp. ("Bertan") and
Del Medical Systems Corp. ("Del Medical") (collectively the
"Company"), are engaged in two major lines of business. Del, RFI,
Bertan and to a lesser extent Dynarad are engaged in the design and
manufacture of specialty electronic components for medical,
industrial and military applications. Dynarad is also engaged in the
design and manufacture of cost-efficient medical imaging systems
including high frequency portable X-ray systems and mammography units
which are used in the medical diagnostic industry. Del Medical is
also engaged in the distribution of cost-effective, medical
diagnostic products.
b. Principles of Consolidation - The consolidated financial statements
include the accounts of Del, RFI, Dynarad, Bertan and Del Medical.
All material intercompany accounts and transactions have been
eliminated. Del purchased all of the common stock of Dynarad on
September 1, 1992 and the assets of Bertan on April 1, 1994. Del
Medical Systems was formed on June 1, 1994. (Note 11).
c. Accounting Period - The Company's fiscal year-end is based on a
52/53-week cycle ending on the Saturday nearest to July 31.
d. Revenue Recognition - The Company recognizes revenues upon shipment
of its products except for certain products which have long-term
production cycles and high dollar value. Revenues for these products
are recognized using the percentage of completion method of
accounting in proportion to costs incurred.
e. Inventory Valuation - Inventory is stated at the lower of cost
(first-in, first-out) or market.
f. Depreciation and Amortization - Depreciation and amortization are
computed by the straight-line method at rates adequate to allocate
the cost of applicable assets over their expected useful lives, which
range from 3 to 40 years.
g. Research and Development Costs - Research and development costs are
charged to expense in the year incurred.
h. Net Income per Common Share and Common Share Equivalent - Net income
per common share and common share equivalent is based on the net
income for each year divided by the weighted average number of shares
outstanding during such year adjusted for stock dividends. Net income
per common share and common share equivalent utilizing the Modified
Teasury Stock method in accordance with APB 15, also includes the
dilutive effect of shares issuable upon exercise of stock options.
For purposes of the calculation, this method increases net income by
$53,997, $17,256, and $0, in fiscal 1995, 1994, and 1993,
respectively, for primary earnings per share. Net income was
increased by $47,954, $10,336, and $0 in 1995, 1994, and 1993,
respectively, for purposes of computing fully diluted earnings per
share. The number of shares of common stock and common share
equivalents used in the calculation were 4,897,374, 4,754,260, and
4,439,513 in fiscal 1995, 1994, and 1993, respectively (Note 8).
F-7
<PAGE>
i. Income Taxes - Income taxes provided include deferred taxes due to
timing differences between financial and tax reporting (Note 9).
The Company adopted Statement of Financial Accounting Standard
No. 109 "Accounting for Income Taxes" ("SFAS-109") effective
August 1, 1993. The cumulative effect of adopting SFAS No. 109
was to increase net income by $76,363 in the year ended July 30,
1994. SFAS No. 109 provides for the recognition of deferred tax
assets and liabilities for temporary differences between the
carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes
and for tax credit carryovers.
j. Cash and Cash Equivalents - The Company generally considers
short-term instruments with original maturities of three months or
less measured from their acquisition date and highly liquid
instruments readily convertible to known amounts of cash to be cash
equivalents.
k. Investments - During the year ended July 30, 1994, the Company
adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities"
(SFAS No. 115"). SFAS No. 115 requires an enterprise to classify debt
and equity securities into one of three categories: held-to-maturity,
available-for-sale, or trading. Investments classified as available
for sale are measured at fair value. The investments classified as
available-for-sale are used to fund a deferred compensation plan
established for one of the Company's key employees. Gains and losses,
either recognized or unrealized, inure to the benefit or detriment of
this employee's deferred compensation, based upon a contractual
arrangement between the employee and the Company.
l. Goodwill - Cost in excess of the net assets of companies acquired is
being amortized on a straight-line basis over twenty-five years. The
carrying value of intangible assets is periodically reviewed by the
Company and impairments will be recognized when the undiscounted
expected future cash flows, computed after interest expense derived
from the related operations, is less than their carrying value.
m. Long-Lived Assets - In March 1995, the Financial Accounting Standards
Board issued Statement Number 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
statement is effective for fiscal years beginning after December 15,
1995. The Company does not expect the effect on its consolidated
financial condition from the adoption of this statement to be
material.
2. INVESTMENTS
At July 29, 1995 investments consist principally of corporate debt
securities and equity securities classified as available-for-sale.
At July 29, 1995 the fair value of investments classified as
available-for-sale based on maturity dates, are as follows:
Fiscal Year Fair Value
----------- ----------
1996 $ 43,892
1997-2001 310,512
2002-2006 24,130
--------
$378,534
========
F-8
<PAGE>
3. PERCENTAGE OF COMPLETION ACCOUNTING
Year Ended Year Ended
July 29, 1995 July 30, 1994
------------- -------------
Costs incurred on uncompleted contracts $337,863 $ 427,392
Estimated earnings 93,184 163,109
431,047 590,501
Less: Billings to date 35,200 39,200
-------- ---------
Costs and estimated earnings in excess
of billings on uncompleted contracts $395,847 $ 551,301
======== =========
The backlog of unshipped contracts being accounted for under the
percentage of completion method of accounting was $ 633,753 at July 29,
1995 and $762,524 at July 30, 1994.
4. INVENTORY
Inventory consists of the following:
July 29, 1995 July 30, 1994
------------- -------------
Finished goods $ 4,398,096 $ 2,825,816
Work-in-process 7,642,588 7,201,564
Raw materials and purchased parts 5,997,674 6,142,965
----------- -----------
18,038,358 16,170,345
Less progress payments 97,412
----------- -----------
$18,038,358 $16,072,933
=========== ===========
5. FIXED ASSETS
Fixed assets consist of the following:
July 29, 1995 July 30, 1994
------------- -------------
Land $ 694,046 $ 694,046
Buildings 2,146,025 2,146,025
Machinery and equipment 6,624,296 5,475,652
Furniture and fixtures 773,694 707,846
Leasehold improvements 790,226 749,219
Construction in Progress 76,023
Transportation equipment 10,987 5,000
------------ -----------
11,115,297 9,777,788
Less accumulated depreciation and
amortization 3,362,516 2,612,930
------------ -----------
Net Fixed Assets $ 7,752,781 $ 7,164,858
============ ===========
F-9
<PAGE>
6. DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
July 29, 1995 July 30, 1994
-------------------------- ---------------------------
Due Within Due After Due Within Due After
One Year One Year One Year One Year
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Term note payable --
Bank $428,568 $ 1,607,154 $ 428,568 $ 2,035,722
Additional term note payable --
Bank 500,000 2,375,000 500,000 2,875,000
Credit line loan
payable - Bank 7,900,000 6,575,000
Other Loan 14,815 20,797
-------- ----------- --------- -----------
$943,383 $11,902,951 $ 928,568 $11,485,722
======== =========== ========= ===========
</TABLE>
The Company's credit facility with its lending bank is composed of two
term notes and a revolving credit line. The total facility aggregates
$14,910,722 at July 29, 1995. The facilities include the balance of a
seven year term note of $2,035,722 with interest at prime plus 1/2
percent which was eight and three quarter percent at July 29 1995; an
additional five year term note of $3,500,000, with a balance outstanding
of $2,875,000 at July 29, 1995, with interest at a prime plus 3/4
percent, which was used to purchase Bertan; and a revolving credit line
of $10,000,000 with interest at prime, with a letter of credit sub-limit
of $1,000,000. The revolving credit facility is subject to commitment
fees of 1/4 percent on the average daily unused portion of the facility,
payable quarterly. Borrowings are collateralized by all of the assets of
the Company and a $1,000,000 life insurance policy on the life of the
Company's president, up to the limit of the indebtedness. The Credit
Agreement also requires the Company to maintain minimum annual net worth
and working capital ratios, limits additional indebtedness and the
payment of cash dividends and contains other restrictive covenants.
Under the most restrictive terms, as of July 29, 1995, $10,000 is
available for cash dividends.
The Company and its lending bank further amended its credit agreement in
January 1995, whereby the Company, if it meets certain ratios in six
month increments, is able to borrow at rates which are lower than the
stated rate in its loan agreement. Based on financial ratios achieved
during the six month period ended January 28, 1995, the interest rate on
all of the Company's loans was reduced by 1/2 percent. Based on the
Company's financial ratios at July 29, 1995 and for the six months then
ended, the interest rate for the next six months will again be reduced
1/2 percent.
The weighted average interest rate on the Company's borrowings under its
credit facility was 8.84% and 6.21% for the years ended July 29, 1995
and June 30, 1994, respectively.
In order to protect against adverse interest rate fluctuations, the
Company entered into two three-year interest rate protection agreements
with its bank with a combined cost of approxmately $145,000. The
interest protection agreements protect the Company against any
fluctuation in interest expense above nine percent at $5,500,000 of
borrowings, and on any fluctuation in interest expense above ten percent
on the next $3,000,000 of borrowings. The second level of protection is
reduced on a pro-rata basis as the additional term note is repaid. Both
agreements terminate in July 1997.
As of July 29, 1995 the revolving credit line had an outstanding balance
of $7,900,000 and an unused portion of $1,596,000. Under the letter of
credit facility, letters of credit of $504,000 were outstanding at July
29, 1995.
F-10
<PAGE>
Long-term debt matures as follows:
Fiscal Year Ending
------------------
1996 (included in current portion) $ 943,383
1997 8,843,499
1998 934,434
1999 1,803,568
2000 and after 321,450
-----------
$12,846,334
===========
7. EMPLOYEE BENEFITS
The Company has employee benefit plans for eligible employees. Included
in the plans is a profit sharing plan which provides for contributions
as determined by the Board of Directors. The contributions can be paid
to the plan in cash or common stock of the Company. Expense for the
fiscal years ended in 1995, 1994, and 1993 was $32,500, $0, and $15,000,
respectively. The plan also incorporates a 401(k) Retirement Plan that
is available to substantially all employees, allowing them to defer a
portion of their salary. The Company also has a defined benefit plan
frozen effective February 1, 1986.
8. SHAREHOLDERS' EQUITY
a. Stock Dividends - On May 16, 1995, the Company declared a three
percent stock dividend to holders of record on June 7, 1995,
payable on June 23, 1995. On November 23 , 1994, the Company
declared a three percent stock dividend to holders of record on
December 8, 1994, payable on December 27, 1994. On May 4, 1994,
the Company declared a three percent stock dividend to holders of
record on May 18, 1994, payable June 20, 1994. On November 22,
1993, The Company declared a three percent stock dividend to
holders of record on December 9, 1993, payable December 23, 1993.
On April 19, 1993, the Company declared a three percent stock
dividend to holders of record on May 3, 1993. On November 17,
1992 the Company declared a six percent stock dividend to holders
of record on December 3, 1992. The effects of these stock
dividends have been reflected in the financial statements and
notes for all periods presented.
b. Nonqualified Stock Option Plan - The Company has a nonqualified
stock option plan under which a total of 2,158,882 options to
purchase common stock can be granted. As of July 29, 1995, the
Company has granted options to purchase 802,562 shares to the
current president, 268,437 shares to former officers, 255,302
shares to current officers and 672,563 shares to various
employees and directors. A former officer exercised 16,045
options, and various employees exercised 2,500 options during the
fiscal year ended July 29,1995. Various employees exercised
18,127 options in the fiscal year ended July 30, 1994. The
president exercised 115,927 options, former officers exercised
22,562 options, a current officer exercised 3,419 options, and
various employees exercised 9,274 options in the fiscal year
ending July 31, 1993.
The option price per share is determined by the Board of
Directors, but cannot be less than 85 percent of fair market
value of a share at the date of grant. All options to date have
been granted at the fair market value of the Company's stock at
the date of grant. No options can be granted under this plan
subsequent to September 25, 1995.
F-11
<PAGE>
The following stock option information is as of:
<TABLE>
<CAPTION>
July 29, July 30, July 31,
Options 1995 1994 1993
------- -------- -------- --------
<S> <C> <C> <C>
Granted and outstanding
at beginning of year 1,514,782 1,224,205 1,293,856
Granted 102,738 337,203 84,198
Expired (86,231) (28,499) (2,458)
Exercised (28,813) (18,127) (151,391)
----------- ----------- -----------
Outstanding at end of year 1,502,476 1,514,782 1,224,205
=========== =========== ===========
Exercisable at end of year 1,138,893 1,032,580 881,845
=========== =========== ===========
Exercise prices $1.02-$6.51 $1.02-$6.51 $1.02-$6.51
=========== =========== ===========
</TABLE>
Under the Company's stock option plan, options are exercisable 25
percent a year, commencing at the end of the first year they are
outstanding and expiring fifteen years from the date they are
granted.
c. There were warrants, all of which were granted at no less than
fair market value, outstanding aggregating 321,574 shares at July
29, 1995. They are as follows:
1. In connection with an underwriting in June 1991, the
underwriter was granted warrants to purchase 130,256 shares of
common stock at an exercise price of $5.52.
2. The Company has granted warrants to the seller of selected
Filtron assets to purchase 97,691 shares of common stock at an
exercise price of $6.06.
3. In connection with an amendment to a bank financing completed
in May 1994, the Company issued warrants to purchase 30,000
shares of common stock at an exercise price of $7.16. In
connection with its incentive pricing amendment with the same
bank, the Company reduced the exercise price to $5.50. At July
29, 1995, the bank held warrants for 31,827 shares at an
exercise price of $5.34.
4. The Company has granted 25,750 warrants to its Corporate
Development Consultant. At July 29, 1995, the consultant held
warrants for 25,750 shares at an exercise price of $5.34.
5. The Company has granted 36,050 warrants to an Investment
Advisory firm and its key personnel. At July 29, 1995, they
held warrants for 36,050 shares at an exercise price of $5.34.
9. INCOME TAXES
Provision for income taxes consists of the following:
Fiscal Year Ended
------------------------------------------
July 29, July 30, July 31,
1995 1994 1993
-------- -------- --------
Current:
Federal $692,064 $316,812 $509,400
State 108,912 83,000 60,000
-------- -------- --------
800,976 399,812 569,400
Deferred:
Federal and state 36,452 (58,287) 138,600
-------- -------- --------
$837,428 $341,525 $708,000
======== ======== ========
F-12
<PAGE>
Deferred tax liabilities (assets) are comprised of the following:
July 29, July 30,
1995 1994
-------- --------
Depreciation $401,880 $ 213,664
Pension 83,914 77,712
Federal effect of New York State tax credits 77,570 55,145
Difference in basis of fixed assets 110,200 120,595
Revenue recognition 35,289 52,534
-------- --------
Gross deferred tax liabilities 708,853 519,650
-------- --------
Amortization 72,382 (6,704)
Inventory (153,119) (122,073)
Bad debt reserve (45,434) (50,809)
Deferred compensation (264,831) (124,621)
NYS tax credits (228,146) (162,190)
-------- --------
Gross deferred tax assets (619,148) (466,397)
-------- --------
$ 89,705 $ 53,253
======== ========
Deferred tax liabilities and assets are recorded in the consolidated balance
sheets as follows:
July 29, July 30,
1995 1994
-------- --------
Liabilities:
Deferred income taxes $ 605,806 $ 393,383
Assets:
Prepaid expenses and other current assets (287,956) (177,940)
Other assets (228,145) (162,190)
---------- ---------
$ 89,705 $ 53,253
========= =========
The New York State tax credits expire at various dates through 2002.
The following is a reconciliation of the statutory Federal and effective income
tax rates:
Fiscal Year Ended
------------------------------------
July 29, July 31, July 31,
1995 1994 1993
-------- -------- --------
% of % of % of
Pretax Pretax Pretax
Income Income Income
------ ------ ------
Statutory Federal income tax expense rate 34.0% 34.0% 34.0%
State taxes, less Federal tax effect 1.5 (.4) 2.9
Tax benefit from write-off of inventory
for tax purposes (4.3) (3.4)
Permanent differences 2.8 3.9 2.4
Tax benefits on foreign sales corp (3.3) (3.3)
Federal tax credits and other (4.5) (6.7) (6.2)
---- ---- ----
30.5% 23.2% 29.7%
==== ==== ====
F-13
<PAGE>
10. COMMITMENTS AND CONTINGENCIES
a. The Company entered into an operating lease commencing August 1, 1992
and expiring July 31, 2002 for Del's offices and operating facility in
Valhalla, New York. This lease includes escalations for real estate
taxes and operating expenses. In September 1992 the Company entered
into an operating lease for Dynarad's facility in Deer Park, N.Y. This
lease provides escalation for real estate taxes. In May 1994 the
Company entered into an operating lease for Bertan's facility in
Hicksville, New York. This lease provides for escalation for real
estate taxes. In addition, the Company has various auto leases
accounted for as operating leases. The future minimum annual lease
commitments as of July 29, 1995 are as follows:
Fiscal Year Ended Amount
----------------- ------
1996 $1,026,953
1997 982,341
1998 942,923
1999 935,779
2000 935,779
Thereafter 2,590,738
----------
$7,414,513
==========
Rent expense, including real estate taxes of $296,142 in 1995,
$225,025 in 1994, and $180,504 in 1993 was $1,111,300 in 1995,
$604,665 in 1994, and $614,318 in 1993.
b. The Company has an employment agreement with its President through
July 2000. The agreement provides for minimum base salary, deferred
compensation and bonuses as defined. Under the terms of the agreement
with the President, the Company will accrue deferred compensation at a
rate of five percent of pretax income with a minimum of $100,000 and a
maximum of $125,000. Such liability is funded by the Company's
investments classified as available-for-sale. Gains and losses, either
recognized or unrealized, inure to the benefit or detriment of this
employee's deferred compensation, based upon a contractual arrangement
between the President and the Company. Bonus will accrue at five
percent of pretax income. Also included in the President's agreement
are certain benefits in the event of death or disability, as well as
certain benefits in the event of a change of control. Upon completion
of the term of the agreement, the President may opt for a five year
extension in the form of a consulting contract at a rate specified
within the agreement.
In connection with the acquisition of Dynarad, the Company has an
employment agreement with one Vice President through 1997. The
agreement provides for a minimum base salary of $157,500 per annum
(subject to upward adjustment on an annual basis) and certain bonuses
if certain income goals of Dynarad specified in the agreement are
achieved. Upon the completion of the five year term of the agreement,
the Vice President may opt for a five year extension in the form of a
consulting contract at a rate specified within the agreement.
In connection with the acquisition of Dynarad, the Company entered
into an employment agreement with a key employee which provides for
bonuses based on growth of revenues. As of July 30, 1994, the employee
has been engaged as a consultant at a rate specified within the
agreement.
The Company entered into ten year consulting agreements through 2002
with two of the former shareholders of Dynarad. The agreements call
for annual payments of $28,000 and $21,000, respectively.
In connection with the acquisition of Bertan, the Company entered into
a three year employment agreement with a key employee who is President
of Bertan which provides for a minimum base salary of $140,000 per
annum (subject to upward adjustment on an annual basis) and a bonus
equal to five percent of pretax income. Upon completion of the three
year term of the agreement, the Company may opt for a two year
extension of this agreement. Upon completion of the employment phase
of the agreement, the Company and the employee have agreed to a ten
year non-compete agreement at a minimum annual rate of $50,000 as
adjusted for the greater of five percent per annum or increases in the
cost of living. Additionally, the Company has entered into a ten year
non-compete agreement with the former Chairman of Bertan at a minimum
annual rate of $50,000 as adjusted for the greater of five percent per
annum or increases in the cost of living.
F-14
<PAGE>
c. The Company is a defendant in several legal actions arising from the
normal course of business. Management believes the Company has
meritorious defenses to such actions and that the outcomes will not be
material to the consolidated financial condition and results of
operations.
11. ACQUISITIONS
Bertan
As of April 1, 1994, the Company acquired the net assets and business of
Bertan Associates, Inc., which has been consolidated as of that date. The
Company paid the selling shareholders $2,600,000 in cash and 218,545 shares
of common stock valued at $871,429. The Company also entered into an
employment and non-compete agreements with one of the former shareholders
of Bertan Associates, Inc. and a non-compete agreement with another of the
former shareholders. The Company entered into a ten year lease agreement
for its operating facility in Hicksville, New York. One of Bertan's
officers is a partner in the real estate company that owns this building.
The Company believes that the lease between the Company and the partnership
was entered into on terms no less favorable than could be obtained from
unaffiliated third parties. The lease provides for minimum annual payments
of $383,380, inclusive of real estate taxes.
The acquisition has been accounted for as a purchase and, accordingly, the
original purchase price was allocated to assets and liabilities acquired
based upon the estimated fair value at the date of acquisition. The
transaction resulted in an excess of cost over fair value of net assets
acquired of $2,809,095 which is included in goodwill. Such excess is being
amortized over a 25 year period. The charge to income for the year ended
July 29, 1995 and for the four months ended July 30, 1994 was $111,666 and
$37,455, respectively.
Unaudited pro forma financial information for the 12 month periods ended
July 30, 1994 and July 31, 1993, as if the Bertan acquisition occurred at
the beginning of the respective periods, is as follows:
Year Ended Year Ended
July 30, July 31,
1994 1993
---------- ----------
Net Sales $29,834,149 $30,919,753
=========== ===========
Income before provision for
income taxes $ 1,015,417 $ 1,587,022
=========== ===========
Net Income $ 779,525 $ 1,127,022
=========== ===========
Net income per common share
and common share equivalents
primary and fully diluted $ .15 $ .24
=========== ===========
The pro forma financial information presented above is not necessarily
indicative of the operating results which would have been achieved had the
Company acquired Bertan at the beginning of the respective periods or of
results to be achieved in the future.
12. MAJOR CUSTOMERS AND EXPORT SALES
In the Specialty Electronic Components segment, no one customer accounts
for more than ten percent of the Company's sales. In the Medical Imaging
and Diagnostic Products segment one customer, the U.S. Government,
accounted for 17 percent, 28 percent and 22 percent of sales in 1995, 1994
and 1993, respectively.
Export sales were 36 percent, 28 percent, and 21 percent of total sales in
1995, 1994 and 1993, respectively. For the years ended July 29, 1995, July
30, 1994, and July 31, 1993, export sales by geographic areas were:
F-15
<PAGE>
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Europe $ 3,892,719 33% $2,321,259 34% $ 831,466 18%
Far East 3,336,147 28% 741,142 11% 220,490 5%
Middle East 3,256,903 28% 2,356,638 35% 2,472,02 54%
North America 627,777 6% 1,143,215 17% 1,005,529 22%
Other 614,149 5% 191,295 3% 47,765 1%
----------- --- ---------- --- ---------- ---
Total export sales $11,727,695 100% $6,753,549 100% $4,577,277 100%
=========== === ========== === ========== ===
</TABLE>
13. SEGMENT REPORTING
The following analysis provides segment information for the two industries
in which the Company operates (see Note 1):
Specialty Medical Imaging
Electronic and Diagnostic
1995 Components Products Total
---- ---------- --------------- ----------
Net Sales (a) $27,026,761 $ 5,569,551 $32,596,312
Operating expenses 23,097,275 5,565,258 28,662,533
----------- ----------- -----------
Operating profit $ 3,929,486 $ 4,293 3,933,779
=========== =========== ===========
Interest expense 1,191,142
Provision for income taxes 837,428
-----------
Net income $ 1,905,209
===========
Identifiable assets $33,062,025 $ 5,992,609 $39,054,634
=========== =========== ===========
Capital expenditures $ 1,140,242 $ 197,267 $ 1,337,509
=========== =========== ===========
Depreciation and amortization $ 965,478 $ 277,365 $ 1,242,843
=========== =========== ===========
(a) For the fiscal year ended July 29, 1995, sales of the Specialty
Electronic Components segment included sales of approximately
$8,834,000 to customers for medical imaging and diagnostic
applications. Aggregate medical sales for fiscal 1995 were
approximately $14,403,000 or 44% of total sales.
F-16
<PAGE>
Specialty Medical Imaging
Electronic and Diagnostic
1994 Components Products Total
---- ---------- --------------- -----------
Net Sales $19,436,334 $ 4,890,681 $24,327,015
Operating expenses 17,654,075 4,640,937 22,295,012
----------- ----------- -----------
Operating profit $ 1,782,259 $ 249,744 2,032,003
=========== ===========
Interest expense 576,832
Provision for income taxes 341,525
FASB-109 tax adjustment 76,363
-----------
Net income $ 1,190,009
===========
Identifiable assets $28,833,760 $ 7,364,613 $36,198,373
=========== =========== ===========
Capital expenditures $ 1,626,358 $ 406,590 $ 2,032,948
=========== =========== ===========
Depreciation and amortization $ 813,226 $ 203,306 $ 1,016,532
=========== =========== ===========
Specialty Medical Imaging
Electronic and Diagnostic
1993 Components Products Total
---- ---------- --------------- ----------
Net Sales $18,134,429 $ 4,152,886 $22,287,315
Operating expenses 15,732,200 3,826,209 19,558,409
----------- ----------- -----------
Operating profit $ 2,402,229 $ 326,677 2,728,906
=========== ===========
Interest expense 360,149
Provision for income taxes 708,000
-----------
Net income $ 1,660,757
=========== =========== ===========
Identifiable assets $23,745,219 $ 1,223,917 $24,969,136
=========== =========== ===========
Capital expenditures $ 1,102,229 $ 142,167 $ 1,244,396
=========== =========== ===========
Depreciation and amortization $ 747,341 $ 158,047 $ 905,388
=========== =========== ===========
F-17
<PAGE>
DEL ELECTRONICS CORP. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTER
----------------------------------------------------------------------
First Second Third Fourth
----- ------ ----- ------
YEAR ENDED JULY 29, 1995:
<S> <C> <C> <C> <C>
Net sales $6,136,056 $7,579,366 $8,945,910 $9,934,980
========== ========== ========== ==========
Gross profit $2,916,851 $3,298,628 $3,589,889 $3,612,945
========== ========== ========== ==========
Net income $ 450,615 $ 505,215 $ 521,916 $ 427,463
========== ========== ========== ==========
Primary and fully diluted
earnings per share $ .09 $ .11 $ .11 $ .09
========== ========== ========== ==========
First(1) Second Third Fourth(2)
----- ------ ----- ------
YEAR ENDED JULY 30, 1994:
Net sales $5,336,091 $5,380,435 $5,592,496 $8,017,993
========== ========== ========== ==========
Gross profit $2,179,485 $2,193,193 $2,540,120 $2,235,136
========== ========== ========== ==========
Net income (loss) $ 484,287 $ 445,612 $ 503,543 $(243,433)
Primary and fully diluted ========== ========== ========== ==========
earnings (loss) per share $ .11 $ .09 $ .10 $ (.05)
========== ========== ========== ==========
</TABLE>
(1) Includes the cumulative effect of change in the method for accounting
for income taxes of $76,363.
(2) The Company estimates gross profit for interim reporting purposes. The
fourth quarter results for the period ended July 30, 1994 were
adversely impacted by a decline in gross profit determined as a result
of physical inventories taken at year end.
F-18
<PAGE>
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.
DEL ELECTRONICS CORP.
(Registrant)
By: /S/Michael Taber
---------------
Michael Taber
Chief Financial Officer,
Secretary and Principal
Accounting Officer
Dated: November 28, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000027748
<NAME> DEL ELECTRONICS CORP.
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> JUL-29-1995
<PERIOD-START> JUL-31-1994
<PERIOD-END> JUL-29-1995
<CASH> 505,989
<SECURITIES> 378,534
<RECEIVABLES> 6,601,284
<ALLOWANCES> (144,431)
<INVENTORY> 18,038,358
<CURRENT-ASSETS> 26,893,544
<PP&E> 11,115,297
<DEPRECIATION> 3,362,516
<TOTAL-ASSETS> 39,054,634
<CURRENT-LIABILITIES> 6,245,263
<BONDS> 0
<COMMON> 412,960
0
0
<OTHER-SE> 19,112,113
<TOTAL-LIABILITY-AND-EQUITY> 39,054,634
<SALES> 32,596,312
<TOTAL-REVENUES> 32,596,312
<CGS> 19,177,999
<TOTAL-COSTS> 19,177,999
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 256,544
<INTEREST-EXPENSE> 1,191,142
<INCOME-PRETAX> 2,742,637
<INCOME-TAX> 837,428
<INCOME-CONTINUING> 1,905,209
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,905,209
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
</TABLE>
