<PAGE>
PROSPECTUS
2,000,000 Shares
DEL
[LOGO]
Common Stock
------------------------
All of the 2,000,000 shares of Common Stock offered hereby are being sold
by Del Global Technologies Corp. (the 'Company'). The Company's Common Stock is
quoted on the American Stock Exchange under the symbol 'DEL.' On June 6, 1996,
the last reported sale price for the Company's Common Stock on the American
Stock Exchange was $12.25 per share. The Common Stock has been approved for
quotation on the Nasdaq National Market under the symbol 'DGTC'. After the
completion of this offering, the Common Stock will be traded on the Nasdaq
National Market under the symbol 'DGTC' rather than on the American Stock
Exchange. See 'Price Range of Common Stock.'
------------------------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE 'RISK FACTORS'
BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
<S> <C> <C> <C>
Per Share....................... $10.50 $0.68 $9.82
Total (3)....................... $21,000,000 $1,360,000 $19,640,000
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
'Underwriting.'
(2) Before deducting expenses payable by the Company, estimated at $450,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an additional 300,000 shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $24,150,000, $1,564,000 and $22,586,000,
respectively. See 'Underwriting.'
------------------------
The shares of Common Stock offered by this Prospectus are offered by the
several Underwriters, subject to prior sale, when, as and if delivered to and
accepted by them, and subject to the right of the Underwriters to reject orders
in whole or in part. It is expected that delivery of the shares of Common Stock
will be made in New York, New York, on or about June 12, 1996.
------------------------
Needham & Company, Inc. Tucker Anthony
Incorporated
The date of this Prospectus is June 6, 1996
<PAGE>
Selected Medical Imaging Systems
DynaRad HF-110A Portable System [PHOTO]
DynaRad NOVA-SC Mammography System [PHOTO]
Gendex Mamex Mammography System [PHOTO]
Gendex High Frequency Generator [PHOTO]
Gendex Elevating Table System [PHOTO]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH MAY STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE AMERICAN STOCK EXCHANGE, THE NASDAQ
NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and the Consolidated Financial Statements and Notes thereto
included or incorporated by reference in this Prospectus. Except as otherwise
indicated, all information contained in this Prospectus assumes that the
Underwriters' over-allotment option is not exercised.
THE COMPANY
Del Global Technologies Corp. is primarily engaged in the design,
manufacture and marketing of medical imaging systems and critical electronic
subsystems for medical imaging and diagnostic products. The Company's products
are designed to provide cost-effective, high-quality solutions to the needs of
its customers. The Company's medical imaging systems include mammography
systems, high frequency x-ray generators and x-ray systems (both stationary and
portable) sold under both its tradenames and private labels. The Company's
critical electronic subsystems are custom engineered to complex customer
performance specifications and include high voltage power components, such as
power supplies, capacitors, transformers and pulse forming networks. These
products are utilized by original equipment manufacturers ('OEMs') for medical
imaging and diagnostic products having a broad range of applications such as
computerized tomography (CT), magnetic resonance imaging (MRI), bone
densitometry, radiography, blood analysis, medical laser surgery and nuclear
medicine. As a result of its record for quality and reliability, the Company has
developed close working relationships with its OEM customers. These
relationships often result in the Company's selection as the sole source
provider of these critical electronic subsystems to OEMs. The Company also
designs, manufactures and markets precision power conversion products for
non-medical applications and electronic noise suppression systems for
telecommunications equipment.
The Company believes that recent cost containment trends in the healthcare
industry have created opportunities for its cost-effective medical imaging
products in domestic and international markets. Such trends include:
o INCREASED DEMAND FOR LOWER COST MEDICAL EQUIPMENT. The Company's medical
systems and critical electronic subsystems are designed to meet the needs
of the healthcare industry to reduce medical imaging and diagnostic
costs. The Company focuses its sales, marketing and development efforts
primarily on medical imaging systems and critical electronic subsystems
priced at under $100,000 per unit. The Company's medical imaging systems
have a list price of approximately $9,000 to $70,000 per unit; however,
the Company believes that its products offer comparable performance to
competing products typically priced higher.
o OUTSOURCING OF CRITICAL ELECTRONIC SUBSYSTEMS. OEMs are responding to an
increasingly competitive environment by concentrating on their core
strengths such as marketing and distribution. As a result, OEMs are
attempting to lower their cost structures by outsourcing their
requirements for certain critical electronic subsystems to lower cost
manufacturers such as the Company. The Company has successfully utilized
its engineering and manufacturing skills to provide such subsystems on a
cost-effective basis. In addition, the Company's longstanding customer
relationships have provided the Company with substantial opportunities to
demonstrate its expertise and expand its sales to OEMs.
o INCREASED DEMAND FOR CERTAIN DIAGNOSTIC PROCEDURES. The proliferation of
managed care and the recent introduction of new therapies for diseases
such as osteoporosis have resulted in increased demand for certain
diagnostic procedures. Diagnostic imaging is an integral component of the
early detection, diagnosis, treatment and monitoring of certain diseases.
In addition, many managed care providers have encouraged the use of such
early diagnostic imaging procedures as a method of reducing overall
healthcare costs.
o LOWER COST MEDICAL SERVICES IN CERTAIN INTERNATIONAL
MARKETS. International demand for cost-effective medical devices is
increasing as many countries with limited healthcare budgets are
attempting to improve the quality of care offered to their citizens.
During the past four years the Company has grown internally and through
acquisitions into a company whose predominant business is serving the medical
imaging and diagnostic markets. Most significantly, in March 1996 the Company
completed the acquisition of certain assets of the Gendex Medical Division
('Gendex') of
3
<PAGE>
Dentsply International Inc. Gendex, which designs, manufactures and markets
medical imaging systems and related products, had recorded net sales of
approximately $18.9 million during the calendar year ended December 31, 1995.
The Company's sales of medical imaging products increased from approximately
$3.4 million or 17.7% of total net sales in fiscal 1992 to approximately $35.4
million or 66.1% of total net sales in fiscal 1995 on a pro forma basis.
Reflecting worldwide demand for its products and increased international sales
efforts, the Company has increased export sales from approximately $5.3 million
in fiscal 1992 to approximately $11.7 million in fiscal 1995. Export sales
consist of direct sales of the Company's products and sales of subsystems that
are incorporated into OEMs' products for export.
The Company's goal is to become a leading provider of cost-effective,
high-quality medical imaging systems and critical electronic subsystems at a per
unit price of less than $100,000. The Company's strategy to achieve this goal is
to continue to expand its business by focusing on selling cost-effective
products; by developing additional innovative medical imaging products; by
leveraging its marketing expertise to expand domestic and international sales;
by expanding existing OEM customer relationships; and by continuing its
strategic acquisition program.
The Company was incorporated under the laws of the State of New York in
1954. The Company's principal offices are located at One Commerce Park,
Valhalla, New York 10595. The Company's telephone number is (914) 686-3600. As
used in this Prospectus, the term 'Company' includes the Company's subsidiaries.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by
the Company.......................... 2,000,000 shares
Common Stock to be outstanding after
this offering........................ 6,664,556 shares(1)
Use of proceeds........................ For repayment of certain outstanding
indebtedness and for general corporate
purposes, including working capital and
potential acquisitions. See 'Use of
Proceeds.'
American Stock Exchange Symbol(2)...... DEL
Approved Nasdaq National Market
Symbol(2)............................ DGTC
</TABLE>
- ------------
(1) Based on the number of shares outstanding as of May 31, 1996. Does not
include an aggregate of (i) 1,619,861 shares of Common Stock issuable upon
exercise of options outstanding under the Company's employee stock option
plan, of which 1,345,826 shares are currently exercisable at a weighted
average exercise price of $3.65 per share; (ii) 300,000 shares of Common
Stock issuable upon exercise of the Underwriters' over-allotment option; and
(iii) 79,781 shares of Common Stock reserved for issuance upon exercise of
outstanding warrants exercisable at a weighted average exercise price of
$6.09. See 'Underwriting.'
(2) After the completion of this offering, the Common Stock will be traded on
the Nasdaq National Market rather than on the American Stock Exchange.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND SUPPLEMENTAL DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------
AUGUST 3, AUGUST 1, JULY 31, JULY 30, JULY 29,
1991 1992 1993(2) 1994(2) 1995(2)
--------- --------- -------- -------- --------
CONSOLIDATED STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C> <C>
Net sales................................ $17,323 $18,949 $ 22,287 $ 24,327 $ 32,596
Gross profit............................. 6,651 7,195 8,832 9,148 13,418
Income before provision for income
taxes.................................. 1,478 2,150 2,369 1,455 2,742
Net income............................... 1,082 1,492 1,661 1,190(3) 1,905
Net income per common share and common
share equivalent, primary and fully
diluted(1)............................. $ 0.35 $ 0.34 $ 0.36 $ 0.25(3) $ 0.39
Number of shares used in computation of
primary earnings per share(1).......... 3,137 4,426 4,573 4,897 5,044
Number of shares used in computation of
fully diluted earnings per share(1).... 3,137 4,439 4,575 4,897 5,066
SUPPLEMENTAL OPERATING DATA:
Percentage of sales:
Medical Imaging Products............... 14.8% 17.7% 35.9% 38.7% 44.2%
Non-Medical Products................... 85.2% 82.3% 64.1% 61.3% 55.8%
<CAPTION>
Six Months Ended(2)
--------------------------------------------------
February 3, 1996
------------------------------------
JANUARY 28, PRO PRO FORMA AS
1995(2) ACTUAL FORMA(4) ADJUSTED(4)(5)
----------- ------- --------- -------------
CONSOLIDATED STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C>
Net sales................................ $13,715 $16,801 $25,438 $25,438
Gross profit............................. 6,215 7,056 8,214 8,214
Income before provision for income
taxes.................................. 1,375 1,673 1,213 1,806
Net income............................... 956 1,163 843 1,255
Net income per common share and common
share equivalent, primary and fully
diluted(1)............................. $ 0.19 $ 0.23 $ 0.16 $ 0.18
Number of shares used in computation of
primary earnings per share(1).......... 5,012 5,247 5,247 7,247
Number of shares used in computation of
fully diluted earnings per share(1).... 5,012 5,252 5,252 7,252
SUPPLEMENTAL OPERATING DATA:
Percentage of sales:
Medical Imaging Products............... 47.0% 46.4% 64.6% 64.6%
Non-Medical Products................... 53.0% 53.6% 35.4% 35.4%
</TABLE>
<TABLE>
<CAPTION>
FEBRUARY 3, 1996
--------------------------------------
PRO PRO FORMA AS
ACTUAL FORMA(4) ADJUSTED(4)(5)
------- --------- --------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital....................... $21,917 $27,797 $32,787
Total assets.......................... 40,670 48,420 53,410
Long-term debt........................ 11,755 17,455 5,055
Shareholders' equity.................. 21,152 21,152 40,342
</TABLE>
- ------------
(1) Net income per common share and common share equivalent has been restated to
give effect to stock dividends in fiscal years 1992, 1993, 1994, 1995 and
1996. See Note 1 of Notes to the Company's Consolidated Financial Statements
for computation of earnings per share.
(2) The fiscal years ended July 31, 1993, July 30, 1994, July 29, 1995 and the
six month periods ended January 28, 1995 and February 3, 1996 include the
operations of Dynarad Corp. ('Dynarad'); the fiscal years ended July 30,
1994, July 29, 1995 and the six month periods ended January 28, 1995 and
February 3, 1996 include the operations of Bertan High Voltage Corp.
('Bertan') from their respective dates of acquisition.
(3) Includes cumulative effect of adoption of SFAS-109 'Accounting for Income
Taxes' in fiscal 1994 of $76,363 or $0.02 per common share.
(4) Gives effect to the Gendex acquisition, which was funded through bank
borrowings of $5.7 million and the issuance of a subordinated note for $1.8
million, as if the transactions occurred at the beginning of the six month
period for statement of income data and at February 3, 1996 for balance
sheet data. The pro forma financial information is not necessarily
indicative of the operating results which would have been achieved had the
Company acquired Gendex at the beginning of the period presented or the
results to be achieved in the future.
(5) As adjusted to give effect to estimated net proceeds of approximately $19.2
million from the offering, at the offering price of $10.50 per share of
Common Stock, and issuance of 2,000,000 additional shares of Common Stock,
as if the offering had occurred at the beginning of the six month period for
statement of income data and at February 3, 1996 for balance sheet data.
5
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following risk factors,
in addition to the other information in this Prospectus or incorporated herein
by reference, in evaluating the Company and its business before purchasing the
shares of Common Stock offered hereby.
ACQUISITION PROGRAM
As part of its growth strategy, the Company has been engaged in a strategic
acquisition program to expand its product lines, particularly its medical
imaging systems. Since December 1989, the Company has completed five
acquisitions. The success of the Company's acquisition program and of its
underlying growth strategy will depend, among other things, on the continued
availability of suitable acquisition candidates. Many of the Company's
competitors have greater financial, marketing and other resources than the
Company and may be willing to pay higher prices for acquisitions. There can be
no assurance as to the Company's ability to compete for or finance acquisitions,
or that the Company will be able to complete any acquisitions on satisfactory
terms, or at all, in the future. In order to finance acquisitions, it may be
necessary for the Company to raise additional funds through public or private
financing. Any equity or debt financing, if available at all, may be on terms
which are not favorable to the Company and, in the case of equity financing, may
result in dilution to the Company's stockholders. The Company's ability to
integrate the operations of acquired companies is essential to any successful
acquisition. There can be no assurance that the Company will be successful at
integrating or managing new businesses. See 'Business--The Company's Strategy.'
GENDEX ACQUISITION
In March 1996 the Company completed the acquisition of certain assets of
Gendex for approximately $7.5 million. The acquired business generated
approximately $18.9 million in net sales for the calendar year ended December
31, 1995. As a consequence of the Gendex acquisition, the Company has grown
significantly in size and has broadened its medical imaging product line. The
Gendex business has not yet been fully integrated with the Company's other
operations, and there can be no assurance that the Company will be able to
accomplish such integration successfully. In view of the size of the Gendex
business, any failure to integrate it successfully into the Company's other
operations would have a material adverse effect on the Company's business,
results of operations and financial condition. See 'Business.'
GOVERNMENT REGULATION
The Company's medical imaging systems are subject to regulation under both
the Federal Food, Drug, and Cosmetics Act and the Radiation Control for Health
and Safety Act. These statutes, in combination and individually, impose strict
requirements dealing with the safety, effectiveness and other properties of the
products to which they apply and address elements relating to the testing,
manufacturing standards and procedures, distribution, record keeping, report
making, labeling, promotion and radiation emitting qualities of these products.
Failure to comply can result in, among other things, the imposition of fines,
criminal prosecution, recall and seizure of products, injunctions restricting or
precluding production or distribution, the denial of new product approvals and
the withdrawal of existing product approvals.
Prior to commercial distribution in the United States, most medical
products, including the Company's, must be listed with the Food and Drug
Administration ('FDA') and the facilities in which they are manufactured must be
registered with the FDA. Additionally, prior to distribution, the products are
required to be subjected to a review process by the FDA to assess whether they
qualify for marketing under a '510(k)' Premarket Notification Process as
substantially equivalent to a product marketed before May 28, 1976 or whether an
application for Premarket Approval must be favorably acted upon before they may
be distributed. All of the Company's products to date have met the appropriate
FDA requirement for marketing but no assurance can be given that the Company
will receive marketing authority with respect to additional products or
applications of the Company's technology.
The Company must also comply with current Good Manufacturing Practice
('GMP') regulations promulgated by the FDA. These regulations require, among
other things, that (i) the manufacturing process be regulated and controlled by
the use of written procedures and (ii) the production of medical products, which
meet
6
<PAGE>
the manufacturer's specifications, be validated by extensive and detailed
testing of every aspect of the process. They also require investigation of any
deficiencies in the manufacturing process or in the products produced and
detailed record keeping. Manufacturing facilities are subject to FDA inspection
on an unscheduled basis to monitor compliance with GMP requirements. If
violations of the applicable regulations are noted during FDA inspections of the
Company's manufacturing facilities, there may be a material adverse effect on
the continued marketing of the Company's products through the imposition of
penalties, withdrawal of approvals or damage to reputation or goodwill. The
Company is in compliance with current GMP requirements in all material respects.
The Company's marketing of its products in several foreign markets is
subject to foreign country qualification and regulation. In certain foreign
markets it may be necessary or advantageous to obtain ISO 9000 certification,
which is analogous to compliance with the FDA's GMP requirements. The Company is
in the process of obtaining ISO 9000 certification for certain of its operating
facilities; however, there can be no assurance that such facilities will receive
ISO 9000 certification or that the Company will be able to continue to meet the
requirements for ISO 9000 certification.
There can be no assurance that the Company's products will continue to
comply with all applicable FDA regulations or that the Company will receive the
requisite approvals to market any of its future products. Any failure to receive
approvals, withdrawal of existing approvals or non-compliance with performance
standards could have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, any change in
existing Federal, state or foreign laws or regulations, or in the interpretation
or enforcement thereof, or the promulgation of any additional laws or
regulations could have a material adverse effect on the Company's business,
results of operations and financial condition. See 'Business--Government
Regulation.'
COMPETITION
The markets for the Company's products are highly competitive and subject
to technological change and evolving industry requirements and standards. The
Company believes that these trends will continue into the foreseeable future.
Many of the Company's current and potential competitors have substantially
greater financial, marketing and other resources than the Company. As a result,
they may be able to adapt more quickly to new or emerging technologies and
changes in customer requirements, or to devote greater resources to the
promotion and sale of their products than the Company. Competition could
increase if new companies enter the market or if existing competitors expand
their product lines or intensify efforts within existing product lines. Although
the Company believes that its products are more cost-effective than those of its
primary competitors, certain competing products may have other advantages which
may limit the Company's market. There can be no assurance that continuing
improvements in current or new products by competitors will not make their
products technically equivalent or superior to the Company's products in
addition to providing cost or other advantages. There can be no assurance that
the Company's current products, products under development or ability to
introduce new products will enable it to compete effectively. See
'Business--Competition.'
UNCERTAINTY OF HEALTHCARE REFORM
In recent years, healthcare reform and medical cost containment have
received significant attention in the United States and many foreign countries,
including proposals to reduce Medicare and Medicaid payments and to move toward
managed care. Although the Company believes that its products are
cost-effective, certain reform proposals and cost containment measures being
considered by Congress, as well as certain states, could limit price increases
on, and future sales of, the Company's medical imaging systems and its critical
electronic subsystems for medical applications due, among other things, to
decisions by hospitals and other healthcare providers to defer or reduce
acquisitions of capital equipment. As a result, such reforms or cost containment
measures could materially and adversely affect revenues derived by the Company
from sales of these products. Uncertainty in the medical community regarding the
nature and effect of proposed healthcare reforms and cost containment measures
may also have a material adverse effect on sales of these products. See
'Business-- Government Regulation.'
7
<PAGE>
DEPENDENCE ON THE COMPANY'S KEY PERSONNEL
The Company is highly dependent on the key members of its management, the
loss of whose services could significantly impede the achievement of the
Company's business objectives. Although the Company has been able to attract and
retain highly qualified and well-trained managerial and technical personnel,
there can be no assurance that the Company will be able to continue to attract
individuals with the requisite credentials, or will be able to attract and
retain personnel on acceptable terms. See 'Management.'
PRODUCT LIABILITY
The Company's business involves the risk of product liability claims
inherent to its business. The Company currently maintains product liability
insurance with an aggregate coverage limit of $25 million per year, subject to
certain deductibles and exclusions. There can be no assurance that the product
liability insurance maintained by the Company will be sufficient to protect the
Company from product liability claims, or that product liability insurance will
be available to the Company at a reasonable cost, if at all, in the future. A
product liability claim which is not covered by the Company's insurance could
have a material adverse effect on the Company's business, results of operations
and financial condition.
INTERNATIONAL OPERATIONS
Export sales accounted for approximately 36% of the Company's net sales in
fiscal 1995 and the Company intends to continue to expand its presence in
international markets. However, export sales are subject to a number of risks,
including the following: agreements may be difficult to enforce and receivables
difficult to collect through a foreign country's legal system; foreign customers
may have longer payment cycles; foreign countries may impose additional
withholding taxes or otherwise tax the Company's foreign income, impose tariffs
or adopt other restrictions on foreign trade; U.S. export licenses may be
difficult to obtain; and the protection of intellectual property in foreign
countries may be more difficult to enforce. There can be no assurance that any
of these factors will not have a material adverse effect on the Company's
business, results of operations and financial condition.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Common Stock may be highly volatile. Such factors
as quarterly fluctuations in the Company's results of operations, the
announcement of technological innovations or new products by the Company or its
competitors, investor perception of the Company, and general market conditions
in the industry in which the Company competes may have a significant impact on
the market price of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
The sale, or availability for sale, of substantial amounts of Common Stock
in the public market subsequent to this offering pursuant to Rule 144 or
otherwise could adversely affect the market price of the Common Stock and could
impair the Company's ability to raise additional capital at a time and on terms
favorable to the Company. The Company's executive officers and directors, who in
the aggregate currently hold approximately 279,480 shares of Common Stock and
options to purchase 1,156,424 shares of Common Stock, have agreed pursuant to
lock-up agreements that they will not, without the prior written consent of
Needham & Company, Inc., sell or otherwise dispose of any shares of Common Stock
beneficially owned by them for a period of 12 months from the date of this
Prospectus (the 'Lock-Up Period'); provided that such persons may sell up to an
aggregate of 75,000 shares of Common Stock during the last six months of the
Lock-Up Period. Upon the expiration of the Lock-Up Period certain of these
shares will be eligible for sale in the public market or will become eligible
for sale in the public market from time to time, subject to Rule 144 under the
Securities Act of 1933, as amended. The availability of Rule 144 to the holders
of restricted securities of the Company would be conditioned on, among other
things, the availability of current public information concerning the Company.
398,683 shares of Common Stock currently outstanding are 'restricted securities'
as that term is defined in Rule 144 promulgated under the Securities Act and
may, under certain circumstances, be sold without registration pursuant to Rule
144.
8
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,000,000 shares of
Common Stock offered hereby will be approximately $19.2 million ($22.1 million
if the Underwriters' over-allotment option is exercised in full), after
deduction of the underwriting discounts and commissions and estimated expenses
of the offering payable by the Company.
The Company intends to use the net proceeds of this offering (i) to repay
approximately $7.4 million of its revolving credit facility; (ii) to repay
approximately $5.0 million of the outstanding principal balance of the term loan
under its loan agreement; (iii) to repay the $1.8 million principal balance of
the subordinated note which it issued in connection with the acquisition of
Gendex; and (iv) to add the balance to working capital to be used for general
corporate purposes, including new product development; expansion of the
Company's sales and marketing program; and for strategic acquisitions of
businesses, products or technologies complementary to the Company's business.
Approximately $5.7 million of such bank borrowings were used to fund the cash
portion of the purchase price for Gendex. The Company expects to fund additional
working capital needs, including Gendex working capital, through cash generated
from operations and by utilizing its fully available revolving credit facility.
Pending such uses, the Company plans to invest the net proceeds of this offering
in short term, interest-bearing investment grade securities. No portion of the
proceeds of this offering has been allocated to any specific acquisition nor has
the Company entered into any agreements or letters of intent with respect to any
future acquisitions. See 'Business.'
The Company's term loan and revolving credit facility bear interest
initially at the bank's prime rate with incentive pricing if the Company
achieves certain financial ratios which are measured on a quarterly basis. In
addition, the Company, at its option, may elect a LIBOR (London Interbank
Borrowing Rate) based rate. The Company's term loan and revolving credit
facility mature on April 30, 2001 and March 31, 2000, respectively, and
currently bear interest at the rate of 8.19% per annum. The Company's
subordinated note in the amount of $1.8 million (the 'Gendex Note') was issued
in payment of a portion of the purchase price of certain assets of Gendex. The
Gendex Note bears interest at the rate of 7.75% per annum and matures on March
6, 2003.
9
<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the American Stock Exchange
('AMEX') under the symbol DEL. The following table sets forth, for the periods
indicated, the high and low sales prices per share of Common Stock, on the AMEX,
as reported on the AMEX Composite Tape through May 31, 1996, and as adjusted to
reflect 3% semi-annual stock dividends paid in each of fiscal 1994, 1995 and
1996.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL YEAR ENDED JULY 30, 1994
First Quarter................................ $5 3/4 $4 3/4
Second Quarter............................... 7 1/8 5 1/4
Third Quarter................................ 8 1/4 6
Fourth Quarter............................... 7 5/8 5 3/8
FISCAL YEAR ENDED JULY 29, 1995
First Quarter................................ 6 1/2 5 3/8
Second Quarter............................... 6 4 5/8
Third Quarter................................ 5 3/4 5
Fourth Quarter............................... 6 3/4 5 3/8
FISCAL YEAR ENDING AUGUST 3, 1996
First Quarter................................ 6 3/4 5 5/8
Second Quarter............................... 8 1/8 6
Third Quarter................................ 8 3/4 7 5/8
Fourth Quarter (through June 6, 1996)........ 20 7 3/4
</TABLE>
The last reported sale price of the Common Stock on the AMEX on June 6,
1996 was $12.25 per share. As of May 31, 1996, there were approximately 1,129
holders of record of the Company's Common Stock.
The Common Stock has been approved for quotation on the Nasdaq National
Market under the symbol 'DGTC'. After the completion of this offering, the
Common Stock will be traded on the Nasdaq National Market rather than on the
AMEX.
DIVIDEND POLICY
The Company has paid dividends in the form of shares of Common Stock of 5%
in each of fiscal 1986, 1987 and 1988, 6% in each of fiscal 1990 and 1992, 6%
and 3% in fiscal 1993, and 3% semi-annually in each of fiscal 1994, 1995 and
1996. The Company intends to continue the payment of 3% semi-annual dividends in
the form of shares of Common Stock. The Company has not paid any cash dividends
since 1983 and does not anticipate paying any cash dividends on the Common Stock
in the foreseeable future. The Company intends to retain any earnings to provide
funds for utilization in its business. The Company's loan agreement currently
contains provisions which effectively prohibit the payment of cash dividends by
the Company. See 'Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources' and Note 6 of Notes
to the Company's Consolidated Financial Statements.
10
<PAGE>
CAPITALIZATION
The following table sets forth at February 3, 1996: (i) the historical
capitalization of the Company, (ii) the pro forma capitalization after giving
effect to the Gendex acquisition, and (iii) the pro forma as adjusted
capitalization to reflect the issuance and sale by the Company of the 2,000,000
shares of Common Stock offered hereby, at the offering price of $10.50 per share
of Common Stock, and the application of the estimated net proceeds therefrom,
after deducting the underwriting discounts and commissions and estimated
offering expenses payable by the Company. This table should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
FEBRUARY 3, 1996(1)
---------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
----------- ------------ --------------
<S> <C> <C> <C>
Current portion of long-term debt....... $ 943,383 $ 943,383 $ 943,383
=========== ============ ==============
Long-term debt.......................... $11,755,397 $ 17,455,397 $ 5,055,397
----------- ------------ --------------
Subordinated debt....................... 1,800,000
----------- ------------ --------------
Shareholders' equity:
Common Stock, $.10 par value,
10,000,000 shares authorized;
4,346,983 shares issued and
outstanding; 6,346,983 shares
issued and outstanding, as
adjusted........................... 434,698 434,698 634,698
Additional paid-in capital.............. 17,490,139 17,490,139 36,480,139
Retained earnings....................... 3,563,896 3,563,896 3,563,896
----------- ------------ --------------
21,488,733 21,488,733 40,678,733
Less Common Stock in treasury........... 336,685 336,685 336,685
----------- ------------ --------------
Total shareholders' equity............ 21,152,048 21,152,048 40,342,048
----------- ------------ --------------
Total capitalization.................... $32,907,445 $ 40,407,445 $ 45,397,445
=========== ============ ==============
</TABLE>
- ------------
(1) Shares outstanding are as of February 3, 1996. Subsequent to this
date, the Company issued 375,798 shares of Common Stock as the result
of the exercise of stock options and warrants. Does not include, as of
May 31, 1996, an aggregate of (i) 1,619,861 shares of Common Stock
issuable upon exercise of options outstanding under the Company's
employee stock option plan, of which 1,345,826 shares are currently
exercisable at a weighted average exercise price of $3.65 per share of
Common Stock; (ii) 300,000 shares of Common Stock issuable upon
exercise of the Underwriters' over-allotment option; and (iii) 79,781
shares of Common Stock reserved for issuance upon exercise of
outstanding warrants at a weighted average exercise price of $6.09.
See 'Underwriting.'
(2) Gives effect to the Gendex acquisition, which was funded through bank
borrowings of $5.7 million and the issuance of a subordinated note for
$1.8 million, as if the transaction occurred at February 3, 1996.
(3) Assumes repayment of approximately $7.4 million of the Company's
revolving credit facility, approximately $5.0 million of the
outstanding principal balance of the term loan under its loan
agreement; and the $1.8 million principal balance of the subordinated
note which it issued in connection with the Gendex acquisition, all of
which were incurred subsequent to February 3, 1996. See 'Use of
Proceeds.'
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected statement of income data presented for the fiscal years ended
July 31, 1993, July 30, 1994 and July 29, 1995 and balance sheet data as of July
30, 1994 and July 29, 1995 have been derived from the financial statements
included elsewhere in this Prospectus, which have been audited by Deloitte &
Touche LLP. The selected statement of income data for the fiscal years ended
August 3, 1991 and August 1, 1992 and balance sheet data as of August 3, 1991,
August 1, 1992 and July 31, 1993 have been derived from audited financial
statements not included herein. The information as of and for the six month
periods ended January 28, 1995 and February 3, 1996 has been derived from
unaudited financial statements and, in the opinion of management, includes all
adjustments (consisting of normal recurring adjustments) necessary for a fair
presentation of the information shown herein. The operating results for the six
months ended February 3, 1996 are not necessarily indicative of the results to
be expected for the entire fiscal year. The pro forma results and balance sheet
data reflect the completion of the bank borrowing and Gendex acquisition in
March 1996. The pro forma as adjusted balance sheet data as of February 3, 1996
reflect the completion of the offering made hereby as well as the transactions
in the pro forma column. This selected consolidated financial data should be
read in conjunction with the Company's Consolidated Financial Statements and
Notes thereto and 'Management's Discussion and Analysis of Financial Condition
and Results of Operations' appearing elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------
AUGUST 3, AUGUST 1, JULY 31, JULY 30, JULY 29,
1991 1992 1993(2) 1994(2) 1995(2)
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Net sales........................................ $ 17,323 $ 18,949 $ 22,287 $ 24,327 $ 32,596
--------- --------- -------- -------- --------
Costs and expenses:
Cost of sales.................................. 10,672 11,754 13,455 15,179 19,178
Research and development....................... 846 1,262 1,713 2,253 2,862
Selling, general and administrative............ 3,453 3,474 4,390 4,863 6,623
Interest expense--net.......................... 874 309 360 577 1,191
--------- --------- -------- -------- --------
15,845 16,799 19,918 22,872 29,854
--------- --------- -------- -------- --------
Income before provision for income taxes......... 1,478 2,150 2,369 1,455 2,742
Provision for income taxes....................... 396 658 708 341 837
--------- --------- -------- -------- --------
Income before cumulative effect of change in
accounting principle........................... 1,082 1,492 1,661 1,114 1,905
Cumulative effect of adoption of SFAS-109........ 76
--------- --------- -------- -------- --------
Net income....................................... $ 1,082 $ 1,492 $ 1,661 $ 1,190 $ 1,905
--------- --------- -------- -------- --------
--------- --------- -------- -------- --------
Net income per common share and common share
equivalent, primary and fully diluted before
cumulative effect of adoption of SFAS-109(1)... $ 0.35 $ 0.34 $ 0.36 $ 0.23 $ 0.39
Cumulative effect of adoption of SFAS-109........ 0.02
--------- --------- -------- -------- --------
Net income per common share and common share
equivalent primary and fully diluted(1)........ $ 0.35 $ 0.34 $ 0.36 $ 0.25 $ 0.39
--------- --------- -------- -------- --------
--------- --------- -------- -------- --------
Number of shares used in computation of primary
earnings per share(1).......................... 3,137 4,426 4,573 4,897 5,044
Number of shares used in computation of fully
diluted earnings per share(1).................. 3,137 4,439 4,575 4,897 5,066
<CAPTION>
SIX MONTHS ENDED(2)
--------------------------------------------------
FEBRUARY 3, 1996
-------------------------------------
JANUARY 28, PRO PRO FORMA AS
1995 ACTUAL FORMA(3) ADJUSTED(3)(4)
----------- ------- --------- -------------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Net sales........................................ $13,715 $16,801 $25,438 $25,438
----------- ------- --------- -------------
Costs and expenses:
Cost of sales.................................. 7,500 9,745 17,224 17,224
Research and development....................... 1,209 1,432 1,434 1,434
Selling, general and administrative............ 3,055 3,356 4,662 4,662
Interest expense--net.......................... 576 595 905 312
----------- ------- --------- -------------
12,340 15,128 24,225 23,632
----------- ------- --------- -------------
Income before provision for income taxes......... 1,375 1,673 1,213 1,806
Provision for income taxes....................... 419 510 370 551
----------- ------- --------- -------------
Income before cumulative effect of change in
accounting principle........................... 956 1,163 843 1,255
Cumulative effect of adoption of SFAS-109........
----------- ------- --------- -------------
Net income....................................... $ 956 $ 1,163 $ 843 $ 1,255
----------- ------- --------- -------------
----------- ------- --------- -------------
Net income per common share and common share
equivalent, primary and fully diluted before
cumulative effect of adoption of SFAS-109(1)... $ 0.19 $ 0.23 $ 0.16 $ 0.18
Cumulative effect of adoption of SFAS-109........
----------- ------- --------- -------------
Net income per common share and common share
equivalent primary and fully diluted(1)........ $ 0.19 $ 0.23 $ 0.16 $ 0.18
----------- ------- --------- -------------
----------- ------- --------- -------------
Number of shares used in computation of primary
earnings per share(1).......................... 5,012 5,247 5,247 7,247
Number of shares used in computation of fully
diluted earnings per share(1).................. 5,012 5,252 5,252 7,252
</TABLE>
<TABLE>
<CAPTION>
AUGUST 3, AUGUST 1, JULY 31, JULY 30, JULY 29,
1991 1992 1993 1994 1995
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................. $ 10,210 $ 11,308 $ 13,857 $ 18,530 $ 20,648
Total assets..................................... 18,299 19,413 24,969 36,198 39,055
Long-term debt................................... 3,965 3,902 5,639 11,486 11,903
Shareholders' equity............................. 10,815 12,773 15,634 17,699 19,525
<CAPTION>
February 3, 1996
------------------------------------
PRO PRO FORMA AS
ACTUAL FORMA(3) ADJUSTED(3)(4)
------ --------- -------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................. $21,917 $27,797 $32,787
Total assets..................................... 40,670 48,420 53,410
Long-term debt................................... 11,755 17,455 5,055
Shareholders' equity............................. 21,152 21,152 40,342
</TABLE>
- ------------
(1) Net income per common share and common share equivalent has been restated to
give effect to stock dividends in fiscal years 1992, 1993, 1994, 1995 and
1996. See Note 1 of Notes to the Company's Consolidated Financial Statements
for computation of earnings per share.
(2) The fiscal years ended July 31, 1993, July 30, 1994, July 29, 1995 and the
six month periods ended January 28, 1995 and February 3, 1996 include the
operations of Dynarad; the fiscal years ended July 30, 1994, July 29, 1995
and the six month periods ended January 28, 1995 and February 3, 1996
include the operations of Bertan from their respective dates of acquisition.
(3) Gives effect to the Gendex acquisition, which was funded through bank
borrowings of $5.7 million and the issuance of a subordinated note for $1.8
million, as if the transactions occurred at the beginning of the six month
period for statement of income data and at February 3, 1996 for balance
sheet data. The pro forma financial information is not necessarily
indicative of the operating results which would have been achieved had the
Company acquired Gendex at the beginning of the period presented or the
results to be achieved in the future.
(4) As adjusted to give effect to estimated net proceeds of approximately $19.2
million from the offering, at the offering price of $10.50 per share of
Common Stock, and issuance of 2,000,000 additional shares of Common Stock,
as if the offering had occurred at the beginning of the six month period for
statement of income data and at February 3, 1996 for balance sheet data.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's net sales have increased as a result of both internal growth
and acquisitions. The Company has completed three acquisitions in the past four
years: Dynarad (a designer and manufacturer of medical imaging systems and, to a
lesser extent, critical electronic subsystems) in fiscal 1993; Bertan (a
designer and manufacturer of precision high voltage power supplies and
instrumentation for medical and industrial applications) in fiscal 1994; and
Gendex in fiscal 1996. The Company's net sales have increased from $18.9 million
in fiscal 1992 to $32.6 million in fiscal 1995, at a compounded annual growth
rate of approximately 20.0%. With the acquisition of Gendex, the Company's net
sales would have been approximately $53.6 million for fiscal 1995 on a pro forma
basis. The Company has recently experienced significant internal growth. Net
sales have increased, solely from existing operations, approximately 22.5% to
$16.8 million for the first six months of fiscal 1996 versus the comparable
period of the previous year.
During the past four years the Company has grown internally and through
acquisitions into a company whose predominant business is serving the medical
imaging and diagnostic markets. The Company's net sales attributable to medical
imaging products have increased from approximately $3.4 million or 17.7% of
total net sales in fiscal 1992 to $14.4 million or 44.2% of total net sales in
fiscal 1995. On a pro forma basis, the Company's net sales attributable to
medical imaging products were approximately $35.4 million or 66.1% of total
sales in fiscal 1995.
The Company believes that recent cost containment trends in the healthcare
industry have created opportunities for its cost-effective medical imaging
products in domestic and international markets. Such trends include increased
demand for lower cost medical equipment, outsourcing of critical electronic
subsystems by OEMs, increased demand for certain diagnostic procedures and lower
cost medical services in certain international markets.
GENERAL
The following discussion and analysis examines the major factors
contributing to the Company's financial condition and results of operations for
the six months ended February 3, 1996 and January 28, 1995, and for the three
years ended July 29, 1995, July 30, 1994 and July 31, 1993. The following
discussion and analysis should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.
As described more fully under 'Business,' the Company's products are
comprised of two major product groups: Medical Imaging Products, which include
medical imaging systems and critical electronic subsystems for medical
applications, and Non-Medical Products, which include critical electronic
subsystems for precision high voltage products and noise suppression products.
Estimated percentages of net sales for these product groups for the past two
fiscal years and pro forma for the six months ended February 3, 1996 are set
forth in the table on page 21.
For segment reporting purposes, the Company has organized its operations
based upon its manufacturing capabilities into two segments: Medical
Manufacturing and Specialty Electronics Manufacturing. The Specialty Electronics
Manufacturing segment includes sales of critical electronic subsystems for
medical applications which are classified as Medical Imaging Products but which
are manufactured within this segment, of approximately $4.5 million and $4.2
million, respectively, for the six months ended February 3, 1996 and January 28,
1995, and approximately $8.8 million, $4.6 million and $3.8 million,
respectively, for the fiscal years ended July 29, 1995, July 30, 1994 and July
31, 1993. These sales have been included in the Medical Imaging Products product
group in the table on page 21.
13
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of net sales represented by items as shown in the Company's consolidated
statements of income.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS ENDED
-------------------------------- -----------------------------
JULY 31, JULY 30, JULY 29, JANUARY 28, FEBRUARY 3,
1993 1994 1995 1995 1996
-------- -------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net sales............................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales......................................... 60.4 62.4 58.8 54.7 58.0
Research and development.............................. 7.7 9.3 8.8 8.8 8.5
Selling, general and administrative................... 19.7 19.9 20.3 22.3 20.0
Interest expense--net................................. 1.6 2.4 3.7 4.2 3.5
-------- -------- -------- ------ ------
89.4 94.0 91.6 90.0 90.0
-------- -------- -------- ------ ------
Income before provision for income taxes................ 10.6 6.0 8.4 10.0 10.0
Provision for income taxes.............................. 3.2 1.4 2.6 3.1 3.1
-------- -------- -------- ------ ------
Income before cumulative effect of change in method for
accounting for income taxes........................... 7.4 4.6 5.8 6.9 6.9
Cumulative effect of change in method for accounting for
income taxes.......................................... 0.3
-------- -------- -------- ------ ------
Net income.............................................. 7.4% 4.9% 5.8% 6.9% 6.9%
-------- -------- -------- ------ ------
-------- -------- -------- ------ ------
</TABLE>
FOR THE SIX MONTHS ENDED FEBRUARY 3, 1996 COMPARED TO THE SIX MONTHS ENDED
JANUARY 28, 1995
Net sales for the Specialty Electronics Manufacturing segment for the 1996
six month period were approximately $13.5 million compared to approximately
$11.5 million for the 1995 six month period, an increase of approximately $2.0
million or 17.4%. The increase was primarily due to higher sales levels of
products supplied by the Company to its OEM customers. Net sales for the Medical
Manufacturing segment for the 1996 six month period were approximately $3.3
million compared to approximately $2.2 million for the 1995 six month period, an
increase of approximately $1.1 million or 50.0%. The increase was primarily due
to increased sales of portable x-ray systems.
Cost of sales for the Specialty Electronics Manufacturing segment for the
1996 six month period was approximately $7.5 million or 55.6% of net sales
compared to approximately $6.3 million or 54.9% of net sales for the 1995 six
month period. The increase in cost of sales as a percentage of net sales was
primarily due to a change in product mix. Cost of sales for the Medical
Manufacturing segment for the 1996 six month period was approximately $2.3
million or 67.6% of net sales compared to approximately $1.2 million or 53.8% of
net sales for the 1995 six month period. The increase in cost of sales as a
percentage of net sales was primarily due to a change in product mix and special
introductory pricing.
Research and development costs for the Specialty Electronics Manufacturing
segment for both the 1996 six month period and the 1995 six month period were
approximately $1.1 million. Research and development costs for the Medical
Manufacturing segment for the 1996 six month period were approximately $300,000
compared to approximately $100,000 for the 1995 six month period. The increase
in research and development costs was primarily due to costs incurred in
connection with new product development.
Selling, general and administrative expenses for the Specialty Electronics
Manufacturing segment were approximately $2.8 million or 20.7% of net sales for
the 1996 six month period compared to approximately $2.6 million or 22.6% of net
sales for the 1995 six month period. The increase in selling, general and
administrative expenses was due to increased selling expenses, advertising costs
and commissions reflecting increased sales levels. Selling, general and
administrative expenses for the Medical Manufacturing segment were approximately
$600,000 or 18.2% of net sales for the 1996 six month period compared to
approximately
14
<PAGE>
$500,000 or 21.6% of net sales for the 1995 six month period. For both segments,
the decreases as a percentage of net sales were due to higher sales volumes
without a proportionate increase in expenses.
Net interest expense was approximately $600,000 for both the 1996 six month
period and the 1995 six month period.
Income tax expense was 30.5% of pre-tax income for both the 1996 six month
period and the 1995 six month period. The effective rate was less than the
Federal statutory rate primarily due to sales made through the Company's Foreign
Sales Corporation and research and development and other tax credits.
As a result of the foregoing, net income increased to approximately $1.2
million for the 1996 six month period, an increase of 21.6% from approximately
$950,000 for the 1995 six month period. For the 1996 six month period primary
and fully diluted earnings per share were $0.23 compared to $0.19 for the 1995
six month period, an increase of 21.1%. The number of outstanding shares and
common share equivalents as of February 3, 1996 increased by 4.8% from January
28, 1995.
PRO FORMA. On a pro forma basis to include Gendex, net sales increased
51.4% to approximately $25.4 million for the 1996 six month period from
approximately $16.8 million for the 1995 six month period. Pro forma net income
declined to approximately $900,000 ($0.16 per share) from approximately $1.2
million ($0.23 per share) as a result of the losses incurred at Gendex prior to
its acquisition by the Company, and the effect of interest expense on debt
incurred to effect the acquisition, net of applicable income taxes. On a pro
forma as adjusted basis, net income increased to $1.3 million ($0.18 per share)
resulting from the aforementioned factors and the assumed use of a portion of
the net proceeds of this offering to reduce Gendex acquisition debt and certain
other debt of the Company. See 'Use of Proceeds.'
FISCAL YEARS 1995, 1994 AND 1993
Net sales for the Specialty Electronics Manufacturing segment for fiscal
1995 were approximately $27.0 million compared to approximately $19.4 million
for fiscal 1994, an increase of 39.1%. The increase in net sales was due to
internal growth (approximately $1.3 million) and the inclusion of Bertan for all
of fiscal 1995 (approximately $6.3 million). Net sales for the Specialty
Electronics Manufacturing segment for fiscal 1994 increased by 7.2% from
approximately $18.1 million for fiscal 1993. The increase in net sales was
primarily due to the acquisition of Bertan, which occurred in April 1994. Net
sales for the Medical Manufacturing segment were approximately $5.6 millon in
fiscal 1995 compared to approximately $4.9 million in fiscal 1994, an increase
of 13.9%. Net sales for the Medical Manufacturing segment in fiscal 1994
increased by 17.8% from approximately $4.2 million in fiscal 1993. In all three
years, the increases in net sales for the Medical Manufacturing segment were
principally due to the internal growth of Dynarad as a result of new product
introductions.
Cost of sales for the Specialty Electronics Manufacturing segment increased
to approximately $15.0 million or 55.5% of net sales in fiscal 1995 from
approximately $12.1 million or 62.3% of net sales in fiscal 1994. The decrease
in cost of sales as a percentage of net sales in fiscal 1995 was primarily due
to the improved operating efficiencies of Bertan and the inclusion of this
subsidiary's operations for all of fiscal 1995. Cost of sales was approximately
$10.8 million or 59.3% of net sales in fiscal 1993. Cost of sales, as a
percentage of net sales, for the Specialty Electronics Manufacturing segment,
increased from fiscal 1993 primarily due to the mix of goods sold and increased
competitive pricing pressure in certain markets which this segment serves. The
cost of sales for the Medical Manufacturing segment was approximately $4.2
million or 75.0% of net sales in fiscal 1995 compared to approximately $3.1
million or 62.9% of net sales in fiscal 1994. The increase in cost of sales as a
percentage of net sales was due to a change in the mix of products sold in this
segment in fiscal 1995 as compared to fiscal 1994. The cost of sales for the
Medical Electronics Manufacturing segment was approximately $2.7 million or
65.0% of net sales in fiscal 1993.
Research and development costs for the Specialty Electronics Manufacturing
segment increased by 47.6% to approximately $2.7 million in fiscal 1995 from
approximately $1.8 million in fiscal 1994. The inclusion of Bertan for all of
fiscal 1995 was the primary reason for this increase. Research and development
costs for the Specialty Electronics Manufacturing segment increased by 19.2% in
fiscal 1994 from approximately $1.5 million in fiscal 1993. Research and
development costs for the Medical Manufacturing segment decreased by 63.3% to
approximately $153,000 in fiscal 1995 as compared to approximately $418,000 in
fiscal 1994. Research and development costs for the Medical Manufacturing
segment increased by 140.2% in fiscal 1994 from
15
<PAGE>
approximately $174,000 in fiscal 1993. This increase in research and development
costs was primarily attributable to the development of new medical imaging
systems.
Selling, general and administrative expenses, for the Specialty Electronics
Manufacturing segment, were approximately $5.4 million or 19.9% of net sales in
fiscal 1995, approximately $3.7 million or 19.1% of net sales in fiscal 1994 and
approximately $3.5 million or 19.3% of net sales in fiscal 1993. Selling,
general and administrative expenses, for the Medical Manufacturing segment, were
approximately $1.2 million or 22.2% of net sales in fiscal 1995 compared to
approximately $1.1 million or 23.5% of net sales in fiscal 1994 and
approximately $889,000 or 21.4% of net sales in fiscal 1993. These increases in
selling, general and administrative expenses were principally attributable to
increased commissions at RFI Corporation ('RFI') and the addition of a chief
financial officer in fiscal 1993.
Interest expense, net of interest income, for fiscal 1995, 1994 and 1993
was approximately $1.2 million, $577,000 and $360,000, respectively. Interest
expense increased in fiscal 1995 compared to fiscal 1994 and fiscal 1993 due to
higher levels of borrowing resulting from the Bertan acquisition, working
capital requirements and higher interest rates. In addition, interest expense
increased in fiscal 1994 due to higher levels of borrowing to fund increased
research and development expenses at Dynarad.
Income tax expense increased to 30.5% of pre-tax income in fiscal 1995 from
23.2% in fiscal 1994 due to an increase in pre-tax earnings in fiscal 1995 over
fiscal 1994. Income tax expense for fiscal 1994 would have been 28.8% if not for
a reduction of approximately $108,000 due to tax benefits in fiscal 1994
resulting from the RFI acquisition which were realized on the Company's tax
return in fiscal 1994. A corresponding charge of approximately $108,000 was
included in selling, general and administrative expenses. Income tax expense for
fiscal 1993 would have been 33.2% if not for a reduction of approximately
$117,000 due to the benefits resulting from the RFI acquisition. Income tax
expense was 29.7% in fiscal 1993 due to increased tax credits available in 1993.
There was a cumulative effect of change in method for accounting for income
taxes of approximately $76,000 in fiscal 1994 due to the adoption of SFAS 109.
Net income for fiscal 1995 was approximately $1.9 million, an increase of
60.1% from approximately $1.2 million in fiscal 1994. Net income in fiscal 1994
decreased by 28.4% from approximately $1.7 million in fiscal 1993. The primary
and fully diluted earnings per share were $0.39, an increase of $0.14 per share
which represents a 56.0% increase from primary and fully diluted earnings per
share of $0.25 in fiscal 1994 while the number of outstanding shares and common
share equivalents increased by 9.3%. Fiscal 1994 primary and fully diluted
earnings per share decreased by 30.5% from $0.36 primary and fully diluted
earnings in fiscal 1993, while the number of outstanding shares and common share
equivalents increased by 7.0%. The primary and fully diluted earnings per share
before cumulative effect of change in method for accounting for income taxes for
fiscal 1994 was $0.23 per share, a decrease of 36.1% from fiscal 1993.
PRO FORMA. On a pro forma basis to include Gendex, net sales increased to
approximately $53.6 million from approximately $32.6 million in fiscal 1995. Pro
forma net income declined to approximately $1.5 million ($0.31 per share) from
approximately $1.9 million ($0.39 per share) on an historical basis as a result
of interest on the acquisition related debt, net of applicable income taxes,
offset in part by the small historical net income of Gendex prior to its
acquisition by the Company. On a pro forma as adjusted basis, net income
increased to approximately $2.4 million ($0.34 per share) resulting from the
aforementioned factors and the assumed use of a portion of the net proceeds of
this offering to reduce Gendex acquisition debt and certain other debt of the
Company. See 'Use of Proceeds.'
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and acquisitions through a
combination of cash flow from operations, bank borrowing and the issuance of
Common Stock.
WORKING CAPITAL. At February 3, 1996 and July 29, 1995, the Company's
working capital was approximately $21.9 million and $20.6 million, respectively.
At such dates the Company had approximately $162,000 and $506,000, respectively,
in cash and cash equivalents.
Trade receivables at February 3, 1996 decreased approximately $732,000 as
compared to July 29, 1995 as the result of collections and lower sales levels in
the quarter ended February 3, 1996 as compared to the quarter ended July 29,
1995. These lower sales levels were primarily attributable to more workdays in
the last quarter of the Company's fiscal year as compared to the second quarter
of its fiscal year due to plant shutdowns for the calendar year end holidays.
16
<PAGE>
Inventory at February 3, 1996 increased approximately $1.9 million as
compared to July 29, 1995. Major new orders received in the six months ended
February 3, 1996 resulted in the increased inventory levels.
Prepaid expenses and other current assets increased approximately $449,000
at February 3, 1996 as compared to July 29, 1995. This increase in prepaid
expenses and other current assets was primarily attributable to advanced
payments for inventory for Del Medical Systems under its exclusive distribution
agreement for diagnostic medical image enhancers, worker's compensation
insurance policy premiums and costs incurred relating to the Gendex acquisition.
CREDIT FACILITY AND BORROWING. On March 5, 1996, in conjunction with the
acquisition of Gendex, the Company and its lending bank entered into an Amended
and Restated Credit Agreement wherein the bank increased the Company's line of
credit to $24.0 million, consisting of a five year $10.0 million term loan and a
four year revolving line of credit of $14.0 million. In connection with the
Gendex acquisition, on March 6, 1996 the Company delivered a seven year $1.8
million subordinated note to Dentsply International Inc. The Company had unused
and available revolving credit of $3.2 million and $1.6 million, after deducting
outstanding letters of credit of $562,000 and $504,000, at March 5, 1996 and
July 29, 1995, respectively. See Note 6 of Notes to the Company's Consolidated
Financial Statements. Borrowings under such facilities are secured by all of the
assets of the Company.
CAPITAL EXPENDITURES. The Company continues to invest in capital
equipment, principally for its manufacturing operations, in order to improve its
manufacturing capability and capacity. The Company has expended approximately
$761,000, $1.3 million, $1.7 million and $1.3 million for capital equipment for
the 1996 six month period and in fiscal years 1995, 1994 and 1993, respectively.
At February 3, 1996, the Company had commitments totaling $150,000 to improve
the manufacturing control systems and computer systems at certain of its
manufacturing operations.
The Company may expand its technical and marketing capabilities and product
lines through the acquisition of other companies, businesses or technologies
that are complementary to the Company's current business. The Company is not
currently engaged in active discussions with respect to any acquisitions.
The Company currently anticipates that cash generated from operations and
amounts available under its bank lending facilities will be sufficient to
satisfy its operating cash needs for at least the next two years.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
LONG-LIVED ASSETS. In March 1995, the Financial Accounting Standards Board
('FASB') issued Statement of Financial Accounting Standards ('SFAS') No. 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.
STOCK-BASED COMPENSATION. In October 1995, the FASB issued SFAS No. 123,
'Accounting for Stock-Based Compensation,' which requires adoption of the
disclosure provisions no later than fiscal years beginning after December 15,
1995 and adoption of the measurement and recognition provisions for non-employee
transactions no later than after December 15, 1995. The new standard defines a
fair value method of accounting for the issuance of stock options and other
equity instruments. Under the fair value method, compensation cost is measured
at the grant date based on the fair value of the award and is recognized over
the service period, which is usually the vesting period. Pursuant to SFAS No.
123, companies are encouraged, but not required, to adopt the fair value method
of accounting for employee stock-based transactions. Companies are also
permitted to continue to account for such transactions under Accounting
Principles Board Opinion ('APB') No. 25, 'Accounting for Stock Issued to
Employees,' but would be required to disclose in a note to the financial
statements pro forma net income and per share amounts as if the company had
applied the new method of accounting. SFAS No. 123 also requires increased
disclosures for stock-based compensation arrangements regardless of the method
chosen to measure and recognize compensation for employee stock-based
arrangements. The Company has elected to continue to account for such
transactions under APB No. 25 and will disclose the required pro forma effect on
net income and earnings per share.
17
<PAGE>
BUSINESS
Del Global Technologies Corp. is primarily engaged in the design,
manufacture and marketing of medical imaging systems and critical electronic
subsystems for medical imaging and diagnostic products. The Company's products
are designed to provide cost-effective, high-quality solutions to the needs of
its customers. The Company's medical imaging systems include mammography
systems, high frequency x-ray generators and x-ray systems (both stationary and
portable) sold under both its tradenames and private labels. The Company's
critical electronic subsystems are custom engineered to complex customer
performance specifications and include high voltage power components, such as
power supplies, capacitors, transformers and pulse forming networks. These
products are utilized by OEMs for medical imaging and diagnostic products having
a broad range of applications such as computerized tomography (CT), magnetic
resonance imaging (MRI), bone densitometry, radiography, blood analysis, medical
laser surgery and nuclear medicine. As a result of its record for quality and
reliability, the Company has developed close working relationships with its OEM
customers. These relationships often result in the Company's selection as the
sole source provider of these critical electronic subsystems to OEMS. The
Company also designs, manufactures and markets precision power conversion
products for non-medical applications and electronic noise suppression systems
for telecommunications equipment.
The Company's medical systems and critical electronic subsystems are
designed to meet the needs of the healthcare industry to reduce medical imaging
and diagnostic costs. The Company focuses its sales, marketing and development
efforts primarily on medical imaging systems and critical electronic subsystems
priced at under $100,000 per unit. The Company's medical imaging systems have a
list price of approximately $9,000 to $70,000 per unit; however, the Company
believes that its products offer comparable performance to competing products
typically priced higher. The Company's cost-effective medical imaging systems
and subsystems also meet the increasing international demand for such products.
OEMs are also attempting to lower their cost structures by outsourcing
their requirements for certain critical electronic subsystems to lower cost
manufacturers such as the Company. The Company has successfully utilized its
engineering and manufacturing skills to provide such subsystems on a
cost-effective basis. In addition, the Company's longstanding customer
relationships have provided the Company with substantial opportunities to
demonstrate its expertise and expand its sales to OEMs.
During the past four years the Company has grown internally and through
acquisitions into a company whose predominant business is serving the medical
imaging and diagnostic markets. Most significantly, in March 1996 the Company
completed the acquisition of certain assets of Gendex. Gendex, which designs,
manufactures and markets medical imaging systems and related products, had
revenues of approximately $18.9 million during the calendar year ended December
31, 1995. The Company's sales of medical imaging products increased from
approximately $3.4 million or 17.7% of total net sales in fiscal 1992 to
approximately $35.4 million or 66.1% of total net sales in fiscal 1995 on a pro
forma basis. Reflecting worldwide demand for its products and increased
international sales efforts, the Company has increased export sales from
approximately $5.3 million in fiscal 1992 to approximately $11.7 million in
fiscal 1995. Export sales consist of direct sales of the Company's products and
sales of subsystems that are incorporated into OEMs' products for export.
MARKET TRENDS
Cost containment trends within the healthcare industry have forced both
healthcare providers and equipment suppliers to become increasingly focused on
reducing costs. The Company believes that such trends have increased the demand
for its cost-effective medical imaging products in domestic and international
markets. Healthcare providers have traditionally provided healthcare services on
a fee-for-service basis. As this model has given way to methods of compensation
which place financial risk upon the provider, providers have been forced to seek
innovative methods of reducing the cost of delivering effective health care,
including efforts to lower the amounts spent upon capital equipment; to increase
the percentage of medical procedures performed by capital constrained
alternative site providers; and to increase the use of diagnostic systems as
part of an effort to reduce total health expenditures. As a result, equipment
suppliers are faced with a market that is particularly cost sensitive. In
addition, the international demand for cost-effective medical systems is
increasing as many countries with limited healthcare budgets are attempting to
improve the quality of care offered to their citizens. These trends have forced
OEMs to attempt to lower their cost structures in order to maintain
profitability in the face of
18
<PAGE>
cost sensitive customers. One method utilized by OEMs to accomplish this is to
outsource various components for their equipment, including critical electronic
subsystems.
In addition, managed care providers have encouraged the use of early
detection diagnostic imaging procedures as a method of reducing overall costs.
Examples include the increased utilization of mammography, bone densitometry and
portable CT scanning products to identify potential health risks. Mammography
has made significant contributions to the diagnosis of breast disease and the
detection of breast cancer. Bone densitometry assists physicians in the
diagnosis and monitoring of metabolic bone diseases such as osteoporosis.
Portable CT scanners permit practitioners to obtain high quality images in
non-traditional environments.
INDUSTRY BACKGROUND
MEDICAL IMAGING SYSTEMS. Medical imaging systems of the types manufactured
by the Company use x-ray technology to produce images of matter beneath an
opaque surface. An imaging system principally consists of a high-voltage power
supply, an x-ray tube and an image recording system, which is usually film.
X-rays are generated as a result of high voltage being applied to the x-ray
tube. The performance of the x-ray system, including image resolution, is
directly linked to the precision performance of the high voltage power supply.
The object to be imaged is placed between the x-ray tube and the film. X-rays,
which are not reflected by opaque surfaces, pass through the object and expose
the film. However, if the object is comprised of areas of varying densities or
chemical compositions, x-rays will be absorbed by the denser areas or areas of
certain chemical compositions in proportion to the density or chemical
composition of the matter. As a result, the film will be exposed to a varying
degree, thereby producing an image of the density or chemical variation within
the object. For example, since bone has a greater density than the surrounding
tissue in the body, x-rays can be used to produce an image of a skeleton.
X-ray systems are differentiated by a number of key characteristics such as
image resolution, accuracy, portability, size and cost. The design of an x-ray
system requires complex engineering which determines the performance factors
required of the various components of the system.
CRITICAL ELECTRONIC SUBSYSTEMS. Critical electronic subsystems for medical
imaging and non-medical applications of the types manufactured by the Company
consist of high voltage power conversion components such as power supplies,
capacitors and transformers. High voltage power supplies are used to transform
commercially generated electric power from low voltage to high voltage. High
voltage power supplies raise the input voltage from the available level to the
significantly higher level required to operate the customer's electronic
equipment. They must be designed to meet specific requirements and involve
complex engineering including specialty high voltage magnetics, specialty
engineering materials and unique manufacturing processes, as well as special
testing and evaluation techniques.
NOISE SUPPRESSION PRODUCTS. Noise suppression products are used to reduce
or eliminate interfering signals generated by internal or external electronic
components and equipment which otherwise could interfere with the normal
operation of electronic equipment and systems. A noise suppression product may
range in size from the miniature type, which utilizes discoidal ceramic
monolithic capacitors (miniature capacitors made of ceramic material), to
multi-circuit subsystems handling high power requirements and weighing thousands
of pounds. Poor transmission reception in electronic devices can result from the
proximate operation of other electronic devices which generate unwanted
electrical signals. This problem is severely compounded in many communications
environments where there are a large number of electronic devices in a confined
area, such as in voice or data communications systems in an airplane or ship.
Noise suppression products are required by various types of equipment
manufacturers in order to comply with government regulations and specifications
and commercial standards. These products may be integrated within the electronic
equipment for which they have been designed or, in the case of large noise
suppression products, connected externally to such equipment, or to an external
power source which may power an entire facility.
19
<PAGE>
THE COMPANY'S STRATEGY
The Company's goal is to become a leading provider of cost-effective,
high-quality medical imaging systems and subsystems at a per unit price of less
than $100,000. The Company's strategy is to continue the expansion of its
business through internal growth and through acquisitions. Key elements of this
strategy include:
o FOCUS ON COST-EFFECTIVE PRODUCTS. The Company believes that cost and
quality are the two major determining factors in its success in the
markets within which it competes. The Company focuses its sales,
marketing and development efforts primarily on the market for medical
imaging systems and critical electronic subsystems priced at under
$100,000 per unit. The Company's medical imaging systems have a list
price of approximately $9,000 to $70,000 per unit yet the Company
believes that its products offer comparable performance to those of its
competitors whose prices per unit are typically greater.
o DEVELOP ADDITIONAL INNOVATIVE MEDICAL IMAGING PRODUCTS. The Company
believes that a significant opportunity exists to develop other
cost-effective medical systems and products. Examples of these products
currently under development include fluoroscopy, tomography and neonatal
imaging systems.
o LEVERAGE MARKETING EXPERTISE TO EXPAND DOMESTIC AND EXPORT SALES OF
MEDICAL SYSTEMS. The Company is seeking to leverage its marketing
expertise by expanding the sale of its products into complementary
domestic and international markets, by selling newly developed and
acquired products to existing customers and by expanding its customer
base for existing products. The Company intends to continue to focus on
international opportunities. The Company's export sales increased from
approximately $6.8 million in fiscal 1994 to approximately $11.7 million
in fiscal 1995.
o EXPAND EXISTING OEM CUSTOMER RELATIONSHIPS. The Company's research and
development program is often conducted in conjunction with its customers
in order to obtain solutions for end use requirements. The Company
believes that the relationship established during this process often
allows it to be the sole source provider to its OEM customers and gives
it the ability to market its products to its existing OEM customers for
use in additional applications.
o CONSUMMATE STRATEGIC ACQUISITIONS. Strategic acquisitions have been a
major contributor to the Company's historical growth. The Company has
completed five acquisitions over the past seven years and intends to
continue to pursue acquisition opportunities to expand its product lines
into complementary markets. The Company's acquisitions include the
following entities and products:
<TABLE>
<S> <C> <C>
ACQUISITION DATE PRODUCT LINE
Gendex Medical Division of Dentsply March 1996 Radiographic x-ray systems, high frequency
International Inc. x-ray generators, x-ray tables and mammography
systems under the GENDEX(Trademark) and
UNIVERSAL tradenames, serving the medical,
chiropractic and veterinary markets.
Bertan High Voltage Corp. April 1994 Precision high voltage power supplies and
instrumentation for medical and industrial
applications.
Dynarad Corp. September 1992 Mammography and portable x-ray systems and
precision high voltage power supplies for
medical applications.
Filtron Co., Inc. October 1991 Electronic noise suppression products.
RFI Corporation December 1989 Electronic noise suppression products,
critical electronic subsystems and advanced
magnetic products.
</TABLE>
20
<PAGE>
PRODUCTS
The following table sets forth the Company's estimate of the percentages of
the Company's net sales accounted for by its Medical Imaging and Non-Medical
Products for the past two fiscal years and pro forma for the six months ended
February 3, 1996.
MEDICAL IMAGING PRODUCTS
<TABLE>
<CAPTION>
PRO FORMA FOR
FISCAL YEAR ENDED THE SIX MONTH
------------------------------ PERIOD ENDED
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Medical Imaging Systems....... 19.7% 17.1% 47.0%
Critical Electronic Subsystems
for Medical Applications.... 19.0 27.1 17.6
----- ----- -----
Total....................... 38.7% 44.2% 64.6%
----- ----- -----
----- ----- -----
</TABLE>
NON-MEDICAL PRODUCTS
<TABLE>
<CAPTION>
PRO FORMA FOR
FISCAL YEAR ENDED THE SIX MONTH
------------------------------ PERIOD ENDED
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Critical Electronic Subsystems
for Precision High Voltage
Products.................... 22.1% 32.8% 19.4%
Noise Suppression Products.... 39.2 23.0 16.0
----- ----- -----
Total....................... 61.3% 55.8% 35.4%
----- ----- -----
----- ----- -----
</TABLE>
21
<PAGE>
Medical Imaging Products
MEDICAL IMAGING SYSTEMS. The Company's medical imaging systems are sold
under the GENDEX(Trademark), UNIVERSAL and Dynarad brand names. The following
table sets forth certain information regarding the range of the Company's
medical imaging systems, including certain products under development. The list
prices of the Company's medical x-ray systems range from approximately $9,000 to
$70,000 per unit.
<TABLE>
<S> <C>
PRODUCT FEATURES
MAMMOGRAPHY SYSTEMS
MAMEX(TRADEMARK) HIGH FREQUENCY MAMMOGRAPHY SYSTEM o Digital displays of compression force, compressed
thickness and degree of angulation
o Cassette sensor switch with exposure inhibitor
o Automatic selection of collimating aperture, focal
spot and filtration
o Motorized vertical travel
o High frequency x-ray generator
o Optional Cytoguide Stereotactic needle biopsy system
NOVA SC MAMMOGRAPHY SYSTEM o Patient controlled breast compression to reduce
procedural discomfort, increase x-ray penetration and
produce superior image resolution
o Micro-computer driven data management system
assisting practitioner in compliance with governmental
and regulatory requirements
o Molybdenum and rhodium filters for improved contrast
resolution and features
o High frequency x-ray generator
o Optional Cytoguide Stereotactic needle biopsy system
STATIONARY MEDICAL X-RAY SYSTEMS
ATC-725/525 ANATOMICALLY PROGRAMMED HIGH FREQUENCY o Individual control of kilovolt ('kV'), milliamp
GENERATORS seconds ('mAs') and time
o Vacuum fluorescent display
o Anatomically programmed radiology
o Preprogrammed for 2,400 combinations of exposure
PULSAR 625/325 GENERATOR o Control console provides large, easy to read meters
for simplified usage
o Major and minor kV selection for precise technique
set-up
o Digital display of 138 mAs stations for precision
technique selection
o Precise digital timer counts electrical pulses for
accurate exposure time
o Full wave solid state (silicon) rectification
increases reliability by making the most efficient use
of electrical power
EV SERIES OF ELEVATING X-RAY EXAMINATION TABLES o Extensive vertical table travel from 21' to 34' for
easy patient access
o Easy to use foot treadles for quick patient
positioning
o Smooth, stain resistant top designed to support up to
500 lbs.
o Low absorption table top material assures high
contrast, scatter free radiographs and reduced patient
exposure
GX-30 HIGH FREQUENCY GENERATOR o 500 mAs output; 300 mAs at 125 kV
o 40-125 kV in 32 steps; 1.0-300 mAs in 29 steps
o Digital kv and mAs displays
o Two bucky capability
o Closed loop kV and mAs stabilization
o Automatic line voltage compensation
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
PRODUCT FEATURES
PORTABLE X-RAY SYSTEMS
HF-110A PORTABLE X-RAY SYSTEM AND PHANTOM PORTABLE o Superior image quality
X-RAY SYSTEM o High frequency power supply
o Microprocessor control and digital display
o Electronic regulation of kV and mAs
o Extremely lightweight
o Ideal for use in the home or in the field
MODEL 1200 PORTABLE X-RAY SYSTEM o Lightweight, self contained travel container
o 1.0mm focal spot provides superior resolution
o Full-wave rectified
o Frequency selection switch to match line frequency
ALPHA-MPDX PORTABLE INTRA-ORAL DENTAL o Durable, lightweight
X-RAY SYSTEM o Short exposure time
o Capable of operating from fluctuating motor generator
power or from domestic power source
o Shipping container for shipping and storage of system
9000 SERIES PORTABLE X-RAY SYSTEMS o Lightweight, portable full wave rectified generators
o LCD kV digital displays of pre-indicated kV
o Available on three mobile stands
MISCELLANEOUS
NEO NATAL X-RAY SYSTEM* o Reduced exposure time for premature infants
o Higher contrast
o Superior resolution
MSV-2000 MINIATURE ENDOCAMERA o High performance camera
o Vivid, crystal clear color images
o Adaptable to existing equipment and outputs including
B/W, R/G/B, Super VHS and Composite Video
o High resolution image sensor
o SAS(Trademark) automatic electronic shutter
o Rigid and flexible scope interfaces
MULTI-FUNCTIONAL ADAPTIVE IMAGE PROCESSOR (MAIP) o Sharpens and enhances video image presented allowing
diagnostician or surgeon to obtain clarity and a
virtual 'depth' of field
o Permits more precise manipulation of endoscopic tools
o Direct applications to most imaging modalities,
including Laparoscopy, Endoscopy, CT Scan, MRI,
Mammography, X-ray, Ultrasound and Fluoroscopy
</TABLE>
- ------------
* under development
23
<PAGE>
Mammography Systems. The Company's mammography systems permit imaging of
the breast for both screening and diagnostic procedures. The MAMEX(Trademark)
high frequency mammography system uses a microprocessor controlled, constant
potential, high frequency generator for greater energy efficiency at lower kV
outputs, resulting in images with higher contrast. The system's sophisticated
Autocomp automatic kV program ensures proper selection of kV within the first 50
milliseconds of exposure, regardless of breast tissue type. The NOVA SC
Mammography system features 'PNEUFLO' pneumatic, patient controlled breast
compression to reduce procedural discomfort, increase x-ray penetration and
produce superior image resolution. The NOVA SC Mammography System also features
a fully integrated micro-processor driven data management system.
Stationary Medical X-Ray Systems. Under the GENDEX(Trademark) brand name,
the Company produces a full product line of high frequency medical x-ray
generators, such as the GENDEX(Trademark) GX-30, which economically provide
superior quality x-ray generation associated with high frequency technology,
resulting in lower patient dosage, extended tube life and less blurring due to
patient motion when compared to single phase generators. The GX-30 generator was
developed for both the replacement and new installation markets.
The Company also produces a broad line of single phase radiographic
generators, floor and wall tube mounts, tables and film holders. The EV-200
elevating x-ray table has a four-way float top and adjustable height features to
ease the positioning of non-ambulatory and casted patients. The Company also
markets a floor rotating tubestand.
The Company's premium x-ray products, the ATC 725/525 line of products, are
anatomically programmed high frequency generators. The technician needs only to
input the body region to be imaged, the desired view of that region and patient
thickness. The generators, through microprocessor controllers, will then
automatically select the proper exposure parameters from the database of 2,400
possible combinations. A total of 120 different examinations covering eight body
regions and up to 15 views per region can be preprogrammed into the unit's
Anatomically Programmed Radiology ('APR') memory. These controls assure the
production of consistent films for a given examination regardless of the
technician performing the examination.
Portable Medical X-Ray Systems. The Company is also a leader in the
portable x-ray market with its HF-110A and PHANTOM systems. Both of these
portable systems utilize high frequency, microprocessor controlled technology to
produce consistent quality x-rays with the added advantages of being smaller,
lighter in weight and more cost-effective than stationary x-ray systems. Both
systems are FDA certified, UL recognized and meet international safety and
quality standards. The Dynarad 9000 Series of portable x-ray systems consist of
lightweight portable full-wave rectified generators, equipped with LCD kV
digital displays of pre-indicated kV. The 9000 Series is available on three
mobile stands. The Dynarad 1200 Series is a compact, reliable portable system,
designed for international use. It can be operated within a wide range of
environmental and electrical conditions. The 1200 Series is ideal for hospital
clinics, mobile medical and military field operations because it is extremely
lightweight and versatile.
The portable Alpha-MPDX intra-oral dental system is built into a shippable
container which houses all the parts for shipment as well as becoming the system
base in the operational mode. The system's design provides a durable,
lightweight field dental x-ray system capable of operating from fluctuating
motor generator power or from domestic power sources around the world by
utilizing modern, high frequency power conversion techniques.
CRITICAL ELECTRONIC SUBSYSTEMS FOR MEDICAL APPLICATIONS. The Company's
research and development program is often conducted in conjunction with its
customers in order to obtain custom solutions for end use requirements. As a
result, the Company is often the sole source provider to its OEM customers. The
Company's high voltage power supplies deliver precisely regulated output power
while operating over a very wide range of temperatures, altitudes, humidity,
shock and vibration conditions. The Company has designed power supplies that
deliver power over a range from several watts up to 60 kilowatts with output
voltage ranging from hundreds of volts up to several hundred thousand volts.
Operating frequencies range from 60 hertz up to 100 kilohertz.
24
<PAGE>
The table below sets forth selected OEM customers which utilize the
Company's critical electronic subsystems for medical imaging and diagnostic
applications in systems which they manufacture. The Company is the sole source
provider for several of these customers.
SYSTEMS SELECTED CUSTOMERS
CT Scanners Elscint Ltd.; Analogic Corp.
MRI GE Medical Systems
Bone Densitometry Lunar Corporation
Medical Laser Surgery Hereaus Laser
Nuclear Medicine ADAC Laboratories; Elscint Ltd.
Blood Analysis Becton Dickinson & Co.; Coulter
Electronics Inc.
Cancer Therapy Varian Associates, Inc.
Non-Medical Products
CRITICAL ELECTRONIC SUBSYSTEMS FOR HIGH VOLTAGE POWER CONVERSION
APPLICATIONS. The Company's critical electronic subsystems for high voltage
power conversion applications consist of high voltage DC power supplies, high
and low voltage power supplies and high voltage transformers. Such products are
used in many leading-edge high technology scientific and industrial applications
by OEM manufacturers, universities and private research laboratories. The
Company has also been a supplier of miniature HV power supplies used in
detection systems for hazardous materials, serving this market for approximately
20 years.
NOISE SUPPRESSION PRODUCTS. Certain of the Company's noise suppression
products are designed to assure that equipment manufactured for government
applications meets rigid standards for interference generation and
susceptibility. In addition, these products are designed to prevent classified
cryptographic and data signals used in government and industrial applications
from accidentally emanating and compromising government or industrial
intelligence. The Company's noise suppression product designs are listed on the
United States Government's Qualified Products Lists. Such products are used on
satellites, space applications and other critical applications that require
approved high reliability products.
The Company offers custom designed and standard noise suppression products
to meet customer specifications. The Company's catalog contains approximately
1,200 standard noise suppression products. During fiscal 1995 approximately 65%
of the Company's noise suppression product sales were attributable to custom
designed products and approximately 35% were attributable to catalog products.
APPLICATIONS. The Company has developed state-of-the-art, multi-channel
critical electronic subsystems for industrial laser machining, ion implantation,
energy exploration, electrostatic deposition, photomultiplier tube, x-ray tube,
travelling wave tube, cathode ray tube and ion pump applications, food
processing and steel rolling. In addition, critical subsystems of the Company's
high voltage DC power supplies are included in analytical and material research
equipment, nuclear instrumentation, process control equipment, automatic test
equipment, scanning electron microscopes and semi-conductor manufacturing
equipment. The Company is a key supplier of critical electronic subsystems for
high voltage power conversion applications to such customers as Schlumberger
Ltd., Micrion Corp., Litton Industries, Inc., Varian Associates, Inc., Eaton
Corporation and various United States and foreign governmental agencies.
The Company's noise suppression products are used in voice and data
communications equipment, computer equipment and government communications
systems, cellular telephone relay sites (cells) and other state-of-the-art voice
and data transmission modalities. The Company's filtering equipment allows the
major suppliers of telephone and cellular services to isolate subscribers' calls
and markedly improve overall system performance. The Company is a key supplier
of noise suppression products for use in telephone switching equipment for AT&T
Corp., Northern Telecom Limited, ITT Gilfillan and Westinghouse Electric Corp.
25
<PAGE>
MARKETING, SALES AND DISTRIBUTION
The Company's medical imaging systems are distributed in the United States
and certain foreign countries by a network of approximately 400 dealers. Medical
imaging systems dealers are supported by the Company's regional managers,
product line managers and technical support groups, who train dealer sales
personnel and participate in customer calls. Technical support in the selection,
use and maintenance of the Company's products is provided to dealers and
professionals by customer service representatives. The Company also maintains
telephone hotlines to provide technical assistance to dealers and professionals.
Additional product and dealer support is provided through participation in
medical equipment exhibitions and trade advertising. The Company exhibits its
products at the American College of Surgeons Annual Meetings, at the
Radiological Society of North America Conferences in Chicago and at the MEDICA
Medical Conference in Dusseldorf, Germany.
The Company markets its critical electronic subsystems for both medical and
non-medical products through 17 in-house sales personnel, approximately 48
exclusive independent sales representatives in the United States and
approximately 90 exclusive international agents principally in the Middle East,
Canada, Europe, Asia, Australia and India. Sales representatives are compensated
primarily on a commission basis; the international agents are compensated either
on a commission basis or act as independent distributors. The Company's
marketing efforts emphasize its ability to custom engineer products to optimal
performance specifications and the Company's record for quality and reliability.
The Company emphasizes team selling where a sales representative, a Company
engineer and management personnel work together to market the Company's
products. The Company also markets its products through its catalogs and through
trade journals and participation in industry shows.
PRODUCT DEVELOPMENT AND MANUFACTURING
The Company has an extensive ongoing research and development program. As
of February 3, 1996, the Company employed 44 persons in research and
development, who are engaged both in the design of customized products and in
the Company's ongoing research and development activities. The Company's
expenditures for research and development were approximately $2.9 million in
fiscal 1995, $2.3 million in fiscal 1994 and $1.7 million in fiscal 1993.
Approximately 80% of all new critical electronic subsystems produced by the
Company are designed and developed to customer specifications for use as
components of the customer's equipment. For example, the Company has developed
cost-effective anode modules for CT scanners and a 'ruggedized' miniature HV oil
exploration probe for a Fortune 50 multi-national corporation. The Company
generally retains all custom technology developed to meet customer
specifications in connection with new electronic subsystems.
Certain new products are developed by the Company as standard products for
industry at large after the Company has evaluated their potential. Such products
include standardized HV, high frequency rack mounted power supplies and
associated modules for use as precision test equipment by industrial
laboratories, universities and research facilities. In addition, many new custom
designed noise suppression products are eventually made available as standard
products in the Company's catalog.
The Company has computer-assisted design (CAD) systems to facilitate the
design of printed circuit boards for its power conversion products and assist in
the mechanical design of its products, thereby enhancing product development and
customized design services. The Company utilizes the CAD systems in the
mechanical design of its noise suppression products in order to optimize the
miniaturization and packaging of such products.
As part of its ongoing quality assurance program, the Company has installed
an expanded computerized quality control center for the testing of its noise
suppression products under a wide range of environmental conditions. The Company
maintains complete engineering laboratories for quality control and
environmental testing. In particular, the Company has extensive environmental
testing departments for the testing of its products against temperature
fluctuations, vibration, shock, humidity, electro-magnetic pulse and other
adverse environmental conditions.
The Company's long term customer relationships have facilitated and
enhanced product development. Many customers have consulted with the Company
concerning their product development programs, enabling the Company to custom
design critical electronic subsystems and noise suppression products for new
generations of customer products.
26
<PAGE>
EXPORT SALES
During the three fiscal years ended July 31, 1995, July 30, 1994 and July
29, 1993, export sales accounted for approximately 36%, 28% and 21%,
respectively, of the Company's net sales. Export sales are made principally in
Europe, the Far East, the Middle East and Canada.
BACKLOG
The Company's backlog of unshipped orders as of March 31, 1996 was
approximately $25.0 million, of which approximately $2.5 million was
attributable to Gendex, as compared to $18.9 million at July 29, 1995.
Substantially all of the backlog will result in shipments within the next 12
months.
GOVERNMENT REGULATION
The Company's medical imaging systems are subject to regulation under both
the Federal Food, Drug, and Cosmetics Act and the Radiation Control for Health
and Safety Act. These statutes, in combination and individually, impose strict
requirements dealing with the safety, effectiveness and other properties of the
products to which they apply and address elements relating to the testing,
manufacturing standards and procedures, distribution, record keeping, report
making, labeling, promotion and radiation emitting qualities of these products.
Failure to comply can result in, among other things, the imposition of fines,
criminal prosecution, recall and seizure of products, injunctions restricting or
precluding production or distribution, the denial of new product approvals and
the withdrawal of existing product approvals.
Prior to commercial distribution in the United States, most medical
products, including the Company's, must be listed with the FDA and the
facilities in which they are manufactured must be registered with the FDA.
Additionally, prior to distribution, the products are required to be subjected
to a review process by the FDA to assess whether they qualify for marketing
under a '510(k)' Premarket Notification Process as substantially equivalent to a
product marketed before May 28, 1976 or whether an application for Premarket
Approval must be favorably acted upon before they may be distributed. All of the
Company's products to date have met the appropriate FDA requirement for
marketing but no assurance can be given that the Company will receive marketing
authority with respect to additional products or applications of the Company's
technology.
As a manufacturer of medical imaging systems, the Company is subject to
certain other FDA regulations and the Company's manufacturing processes and
facilities are subject to continuing review by the FDA. The Company must also
comply with current GMP regulations promulgated by the FDA. These regulations
require, among other things, that (i) the manufacturing process be regulated and
controlled by the use of written procedures and (ii) the production of medical
products, which meet the manufacturer's specifications, be validated by
extensive and detailed testing of every aspect of the process. They also require
investigation of any deficiencies in the manufacturing process or in the
products produced and detailed record keeping. Manufacturing facilities are
therefore subject to FDA inspection on an unscheduled basis to monitor
compliance with GMP requirements. If violations of the applicable regulations
are noted during FDA inspections of the Company's manufacturing facilities,
there may be a material adverse effect on the continued marketing of the
Company's products through the imposition of penalties or withdrawal of
approvals. The Company is required to expend time, resources and effort in
product manufacturing and quality control to ensure compliance. The Company is
in substantial compliance with current GMP requirements, as well as other
applicable FDA regulations.
The Company's marketing of its products in several foreign markets is
subject to qualification and regulation by applicable foreign governments. In
certain foreign markets, it may be necessary or advantageous to obtain ISO 9000
certification, which is analogous to compliance with the FDA's GMP requirements.
The Company is in the process of obtaining ISO 9000 certification for certain of
its operating facilities; however, there can be no assurance that such
facilities will receive ISO 9000 certification or that the Company will be able
to continue to meet the requirements for ISO 9000 certification. The Federal
government, most states and certain foreign countries monitor and require
licensing of x-ray devices and the handling of radioactive material. Failure to
comply with such laws could subject the Company to fines and penalties. The
Company has obtained the requisite regulatory approval for its systems where it
markets its products. Federal, state and foreign regulations
27
<PAGE>
regarding the manufacture and sale of medical devices are subject to future
change. The Company cannot predict what impact, if any, such changes might have
on its business.
No assurance can be given that the FDA or foreign regulatory agencies will
give the requisite approvals or clearances for any of the Company's medical
imaging systems and other products under development on a timely basis, if at
all. Moreover, after clearance is given, both in the case of the Company's
existing products and any future products, these agencies can later withdraw the
clearance or require the Company to change the system or its manufacturing
process or labeling, to supply additional proof of its safety and effectiveness,
or to withdraw, recall, repair, replace or refund the cost of the medical
system, if it is shown to be hazardous or defective. The process of obtaining
clearance to market products is costly and time-consuming and can delay the
marketing and sale of the Company's products.
The Company is also subject to various United States government guidelines
and regulations relating to the qualification of its non-medical products for
inclusion in Government Qualified Product Lists in order to be eligible to
receive purchase orders from a government agency or for inclusion of a product
in a system which will ultimately be used by a governmental agency. The Company
has had many years of experience in designing, testing and qualifying its
non-medical products for sale to governmental agencies. Certain government
contracts are subject to cancellation rights. The Company has experienced no
material termination of a government contract and is not aware of any pending
terminations of government contracts.
The Social Security Act imposes criminal penalties and exclusion from the
Medicare and Medicaid programs upon persons who make or receive kickbacks,
bribes or rebates in connection with such programs. The anti-kickback rules
prohibit providers and others from soliciting, offering, receiving or paying,
directly or indirectly, any remuneration in return for either making a referral
for a covered service or item or ordering any such covered service or item. In
order to provide guidance with respect to the anti-kickback rules, the Office of
the Inspector General issued final regulations outlining certain 'safe harbor'
practices, which although potentially capable of inducing prohibited referrals,
would not be prohibited if all applicable requirements are met. A relationship
which fails to satisfy a safe harbor is not necessarily illegal, but could be
scrutinized on a case-by-case basis. The Company believes that it currently
complies with the anti-kickback rules in planning its activities, and believes
that its activities, even if not within a safe harbor, do not violate the
anti-kickback statute. In the event the Company was excluded from marketing and
selling its products to Medicare and Medicaid providers, such exclusion could
have a significant adverse effect on the Company.
Pursuant to the Occupational Safety and Health Act, facility operators have
a general duty to provide a workplace to their employees that is safe from
hazard. Over the past few years, the Occupational Safety and Health
Administration ('OSHA') has issued rules relevant to certain hazards that are
found in facilities such as the Company's. Failure to comply with these
regulations, other applicable OSHA rules or with the general duty to provide a
safe workplace could subject an employer, including a facility employer such as
the Company, to substantial fines and penalties.
The Company has not experienced, and does not anticipate, any material
expenditures in connection with its compliance with Federal, state or local
environmental laws or regulations.
There can be no assurance that the Company's products will continue to
comply with all applicable FDA regulations or that the Company will receive the
requisite approvals to market any of its future products. Any failure to receive
approvals, withdrawal of existing approvals or non-compliance with performance
standards could have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, any change in
existing Federal, state or foreign laws or regulations, or in the interpretation
or enforcement thereof, or the promulgation of any additional laws or
regulations could have a material adverse effect on the Company's business,
results of operations and financial condition.
COMPETITION
The markets for the Company's products are highly competitive and subject
to technological change and evolving industry requirements and standards. The
Company believes that these trends will continue into the foreseeable future.
Many of the Company's current and potential competitors have substantially
greater financial, marketing and other resources than the Company. As a result,
they may be able to adapt more quickly to new or
28
<PAGE>
emerging technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products than the Company.
Competition could increase if new companies enter the market or if existing
competitors expand their product lines or intensify efforts within existing
product lines. Although the Company believes that its products are more
cost-effective than those of its primary competitors, certain competing products
may have other advantages which may limit the Company's market. There can be no
assurance that continuing improvements in current or new products will not make
them technically equivalent or superior to the Company's products in addition to
providing cost or other advantages. There can be no assurance that the Company's
current products, products under development or ability to introduce new
products will enable it to compete effectively.
SOURCES AND SUPPLY OF RAW MATERIALS
All of the raw materials used by the Company in the manufacture of its
products are purchased from various suppliers and are available from numerous
sources. No single supplier accounts for a significant percentage of the
Company's raw material requirements. The Company has not encountered any
difficulty in obtaining such supplies and believes that if any current source of
supply for a particular material or component became unavailable, alternate
sources of supply would be available at comparable prices and delivery
schedules.
TRADEMARKS AND PATENTS
The Company's trademark properties are important and contribute to the
Company's marketing position. To safeguard these properties, the Company
maintains trademark registrations in the United States and in significant
international markets for its products. As part of its acquisition of certain
assets of Gendex, the Company acquired the UNIVERSAL tradename and has been
granted a license to use, in conjunction with the word 'medical', the
GENDEX(Trademark) trademark for medical imaging systems for five years from
March 1996. The Company owns the FILTRON(Registered) trademark for noise
suppression products. The Company does not consider that its business is
materially dependent on patent protection.
EMPLOYEES
As of March 31, 1996, the Company had approximately 425 employees,
including eight executive officers, 27 persons in general administration, 26
persons in sales and marketing, 314 persons in manufacturing and 50 persons in
research and development. Management believes that its employee relations are
good. None of the Company's employees are represented by a labor union.
LEGAL PROCEEDINGS
From time to time, the Company is a party to various legal proceedings
incidental to its business. Management does not believe that any of these legal
proceedings will have a material adverse effect on the Company's business,
results of operations or financial condition.
29
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
NAME AGE POSITION
- ---------------------------------- --- ----------------------------------
Leonard A. Trugman(1)............. 58 Chairman of the Board, President
and Chief Executive Officer
David Engel....................... 47 Executive Vice President and
Chief Financial Officer
Louis J. Farin, Sr................ 52 Vice President and General Manager
of Del Power Conversion Division
Paul J. Liesman................... 35 Vice President and Vice President
and General Manager of Bertan High
Voltage Corp.
John D. MacLennan................. 44 Vice President and Vice President
and General Manager of Gendex-Del
Medical Imaging Corp.
Seymour Rubin..................... 65 Vice President and President of
RFI Corporation, Director
George Solomon.................... 50 Vice President--International
Sales and Marketing and President
of Del Medical Systems Corp.
Michael H. Taber.................. 51 Vice President--Finance, Secretary
and Chief Accounting Officer
Natan V. Bertman(1)(2)............ 67 Director
David Michael(1)(2)(3)............ 58 Director
James Tiernan(3).................. 72 Director
- ------------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Stock Option Committee
The officers of the Company, with the exception of Mr. Trugman, are elected
or appointed by the Board of Directors to hold office until the meeting of the
Board of Directors following the next annual meeting of shareholders. Subject to
the right of the Company to remove officers pursuant to its By-Laws, officers
serve until their successors are chosen and have qualified. Mr. Trugman holds
his position pursuant to an employment agreement which expires on July 31, 2000.
30
<PAGE>
Leonard A. Trugman has been Chairman of the Board, Chief Executive Officer
and President from September 1985 to the present. Mr. Trugman was Vice President
of Operations at General Microwave Corporation, an AMEX traded microwave
components company from 1981 to 1985. Mr. Trugman holds a Masters of Science
Degree in Mechanical Engineering and a Masters Degree in Business
Administration.
David Engel has been Executive Vice President and Chief Financial Officer
since January 1996. Mr. Engel was Executive Vice President of Bertan High
Voltage Corp. from November 1994 to January 1996. Mr. Engel was Vice
President--Finance and Administration at Bertan High Voltage Corp. from March
1981 to November 1994.
Louis J. Farin, Sr. has been Vice President and General Manager of Del
Power Conversion Division from August 1994 to the present. Mr. Farin had been
Senior Vice President--Operations of the Company since December 1986.
Paul J. Liesman has been Vice President and Vice President and General
Manager of Bertan High Voltage Corp. since May 1996. From March 1996 to May
1996, Mr. Liesman was Vice President--Operations of Bertan High Voltage Corp.
From January 1995 to March 1996, he was Operations Manager at Del Power
Conversion. Mr. Liesman was Chief Mechanical Engineer at Del Power Conversion
from March 1990 to January 1995. Mr. Liesman holds a Masters Degree in Business
Administration.
John D. MacLennan has been Vice President since April 1996 and the Vice
President and General Manager of Gendex-Del Medical Imaging Corp. since April
1996. Mr. MacLennan was Vice President and General Manager of the Gendex Medical
Division of Dentsply International Inc. from January 1995 to March 1996. From
March 1990 to December 1994, he was Vice President--Medical Marketing of the
Gendex Medical Division of Dentsply International Inc. Mr. MacLennan holds a
Masters Degree in Business Administration.
Seymour Rubin has been Vice President of the Company since December 1989
and was elected a director of the Company in February 1990. Mr. Rubin was a
co-founder of RFI Corporation. Mr. Rubin was the Executive Vice President of RFI
Corporation from 1968 to February 1990 and has been the President of RFI
Corporation since February 1990. Mr. Rubin holds a Masters of Science Degree in
Engineering.
George Solomon has been Vice President--International Sales and Marketing
since April 1, 1996. From October 1993 to March 31, 1996, Mr. Solomon was Vice
President and General Manager of Dynarad Corp. Mr. Solomon has been President of
Del Medical Systems Corp. since June 1994. From March 1993 to October 1993, Mr.
Solomon was a consultant to the Company. From February 1989 to February 1993,
Mr. Solomon was General Manager of Fujinon.
Michael H. Taber has been the Vice President--Finance and Chief Accounting
Officer of the Company since January 1996. Mr. Taber was appointed Secretary in
October 1994. Mr. Taber was Chief Financial Officer of the Company from January
1993 to December 31, 1995. Mr. Taber was the Assistant General Manager of RFI
Corporation from October 1991 to April 1992. Mr. Taber was President of Filtron
Co. Inc. from August 1990 to October 1992. Mr. Taber holds a Masters Degree in
Accounting and is a Certified Public Accountant.
Natan V. Bertman has served as a director of the Company since 1985. He is
a partner in the law firm of Bertman & Levine.
David Michael has served as a director of the Company since 1985. He is
President of David Michael & Co., P.C. and is a Certified Public Accountant.
James Tiernan has served as a director of the Company since 1985. He is a
former senior vice president of Chase Manhattan Bank, New York, NY.
Dr. Raymond Kaufman, the former Chairman and Co-Founder of the Company,
resigned from the Company's Board in April 1996. At such time Dr. Kaufman was
named Director Emeritus of the Company. He holds a Doctorate in Physics.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table identifies each person known to the Company to be the
beneficial owner of more than five percent of the Common Stock, each director of
the Company, and all directors and officers of the Company as a group, and sets
forth the number of shares of Common Stock beneficially owned as of May 31, 1996
by each such person and such group and the percentage of the outstanding Common
Stock owned by each such person and such group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1)
----------------------- -----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE NUMBER PERCENTAGE
- ------------------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Leonard A. Trugman ........... 852,594(2) 16.0% 852,594(2) 11.6%
Natan V. Bertman ............. 101,668(3) 2.2% 101,668(3) 1.5%
David Michael ................ 151,241(4) 3.2% 151,241(4) 2.2%
Seymour Rubin ................ 114,647(5) 2.4% 114,647(5) 1.7%
James Tiernan ................ 8,231(6) * 8,231(6) *
George Solomon ............... 6,222(7) * 6,222(7) *
Paul J. Liesman .............. 1,150(8) * 1,150(8) *
David Engel .................. 2,836(9) * 2,836(9) *
Michael H. Taber ............. 9,442(10) * 9,442(10) *
Louis J. Farin, Sr. .......... 31,589(11) * 31,589(11) *
John D. MacLennan ............ 5,000 * 5,000 *
All officers and directors
(11) as a group ............ 1,284,620(12) 22.7% 1,284,620(12) 16.8%
</TABLE>
- ------------
* Represents less than 1% of the outstanding shares of Common Stock including
shares issuable to such beneficial owner under options which are presently
exercisable or will become exercisable within 60 days of May 31, 1996.
(1) Unless otherwise indicated, each person has sole voting and investment
power with respect to the shares shown as beneficially owned by such
person.
(2) Mr. Trugman's address is c/o Del Global Technologies Corp., One Commerce
Park, Valhalla, NY 10595. Includes 667,444 shares, options for which are
presently exercisable or will become exercisable within 60 days of May 31,
1996.
(3) Includes 70,171 shares, options for which are presently exercisable or will
become exercisable within 60 days of May 31, 1996. Does not include 943
shares owned by Mr. Bertman's spouse.
(4) Includes 115,214 shares, options for which are presently exercisable or
will become exercisable within 60 days of May 31, 1996.
(5) Includes 102,831 shares, options for which are presently exercisable or
will become exercisable within 60 days of May 31, 1996.
(6) Includes 8,231 shares, options for which are presently exercisable or will
become exercisable within 60 days of May 31, 1996.
(7) Includes 5,797 shares, options for which are presently exercisable or will
become exercisable within 60 days of May 31, 1996.
(8) Includes 1,073 shares, options for which are presently exercisable or will
become exercisable within 60 days of May 31, 1996.
(9) Includes 2,692 shares, options for which are presently exercisable or will
become exercisable within 60 days of May 31, 1996.
(10) Includes 8,702 shares, options for which are presently exercisable or will
become exercisable within 60 days of May 31, 1996.
(11) Includes 22,985 shares, options for which are presently exercisable or will
become exercisable within 60 days of May 31, 1996.
(12) Includes 1,005,140 shares, options for which are presently exercisable or
will become exercisable within 60 days of May 31, 1996.
32
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of May 31, 1996 the Company's authorized capital stock consists of
10,000,000 shares of Common Stock, par value $.10 per share, of which 4,663,466
shares are issued and outstanding. The holders of Common Stock are entitled to
one vote per share on all matters submitted to a vote of shareholders. All
shares of Common Stock have equal rights and are entitled to such dividends as
may be declared by the Board of Directors out of funds legally available
therefor and to share ratably upon liquidation in the assets available for
distribution to shareholders. The Common Stock is not subject to call or
assessment, has no preemptive, conversion or cumulative voting rights and is not
subject to redemption. All outstanding shares of Common Stock are, and the
shares of Common Stock offered hereby will, upon issuance and sale, be, fully
paid and non-assessable with no personal liability attached to the ownership
thereof.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is Chemical Mellon
Shareholder Services, 450 West 33rd Street, New York, New York 10001.
33
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting
Agreement, the Underwriters named below, for whom Needham & Company, Inc. and
Tucker Anthony Incorporated are acting as representatives (the
'Representatives'), have severally agreed to purchase from the Company, and the
Company has agreed to sell to each Underwriter, the aggregate number of shares
of Common Stock set forth opposite their respective names in the table below.
The Underwriting Agreement provides that the obligations of the Underwriters to
pay for and accept delivery of the shares of Common Stock are subject to certain
conditions precedent, and that the Underwriters are committed to purchase and
pay for all shares if any are purchased.
NUMBER
UNDERWRITER OF SHARES
- ------------------------------------------------------------ ---------
Needham & Company, Inc...................................... 522,500
Tucker Anthony Incorporated................................. 522,500
Bear, Stearns & Co. Inc..................................... 60,000
Alex. Brown & Sons Incorporated............................. 60,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 60,000
Hambrecht & Quist LLC....................................... 60,000
Lehman Brothers............................................. 60,000
J.P. Morgan Securities Inc.................................. 60,000
Morgan Stanley & Co. Incorporated........................... 60,000
Smith Barney Inc............................................ 60,000
William Blair & Company, L.L.C.............................. 35,000
Equitable Securities Corporation............................ 35,000
Fahnestock & Co. Inc........................................ 35,000
First Albany Corporation.................................... 35,000
Furman Selz LLC............................................. 35,000
Piper Jaffray Inc........................................... 35,000
Ragen McKenzie Incorporated................................. 35,000
Raymond James & Associates, Inc............................. 35,000
The Robinson-Humphrey Company, Inc.......................... 35,000
Rodman & Renshaw, Inc....................................... 35,000
Sutro & Co. Incorporated.................................... 35,000
Auerbach, Pollak & Richardson, Inc.......................... 15,000
Black & Company, Inc........................................ 15,000
Hampshire Securities Corporation............................ 15,000
Pauli & Company, Incorporated............................... 15,000
Prime Charter Ltd........................................... 15,000
Starr Securities, Inc....................................... 15,000
---------
Total................................................ 2,000,000
---------
---------
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the public offering
price set forth on the cover page of this Prospectus and to certain dealers (who
may include the Underwriters) at such price less a concession not in excess of
$0.36 per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $0.10 per share to certain other dealers (who may
include the Underwriters). After the offering to the public, the public offering
price and other selling terms may be changed by the Representatives.
The Company has granted the Underwriters an option, exercisable during the
30-day period after the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock at the public offering price, less the
underwriting discounts and commissions, set forth on the cover page of this
Prospectus. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the Common Stock offered
hereby. To the extent the Underwriters exercise such option, each of the
Underwriters will have a firm commitment, subject to certain exceptions, to
purchase approximately the same percentage of such additional shares that the
number of shares of Common Stock to be purchased by it shown in the above table
bears to the total shown.
34
<PAGE>
The Underwriting Agreement contains covenants of indemnity and contribution
between the Underwriters and the Company against certain civil liabilities,
including liabilities under the Securities Act of 1933, as amended (the
'Securities Act').
The Company and its directors and officers have agreed not to offer, sell
or otherwise dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exchangeable for shares of Common Stock for a
period of six months, in the case of the Company, and 12 months, in the case of
its directors and officers, after the date of this Prospectus without the prior
written consent of Needham & Company, Inc., except for, in the case of the
Company, the shares of Common Stock offered hereby and issuable pursuant to
currently outstanding warrants and securities issued pursuant to the Company's
stock option plan and, in the case of its officers and directors, an aggregate
of 75,000 shares of Common Stock which may be sold during the last six months of
such 12-month period.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject any order for the purchase of shares in whole or in part.
LEGAL MATTERS
Certain legal matters with respect to the legality of the securities
offered hereby will be passed upon for the Company by Tashlik, Kreutzer &
Goldwyn P.C., Great Neck, New York. Certain members of Tashlik, Kreutzer &
Goldwyn P.C. beneficially own approximately 10,287 shares of the Company's
Common Stock and stock options to purchase an aggregate of approximately 29,095
additional shares of Common Stock. Certain legal matters will be passed upon for
the Underwriters by Haythe & Curley, New York, New York.
EXPERTS
The consolidated financial statements of the Company included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm upon their authority as experts in accounting and auditing.
The financial statements of the Gendex Medical Division of Dentsply
International Inc., as of December 31, 1995 and for the years ended December 31,
1994 and 1995 have been included herein and elsewhere in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, appearing herein, and upon the authority of said
firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
'Commission') in Washington, D.C., a Registration Statement on Form S-2 under
the Securities Act, relating to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
items of which are contained in exhibits and schedules to the Registration
Statement as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract,
agreement or any other document referred to herein are not necessarily complete.
Where such contract, agreement or other document is an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matter involved, each such statement being qualified in all
respects by such reference. For further information regarding the Company and
the securities offered hereby, reference is made to the Registration Statement
and to the exhibits filed as a part thereof, which may be inspected at the
office of the Commission without charge or copies of which may be obtained
therefrom upon request to the Commission and payment of the prescribed fee.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and in accordance therewith, files reports,
proxy statements and other information with the Commission. Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at prescribed rates at the public reference facilities maintained by the
Commission's Headquarters at 450 Fifth Street, Room 1024, N.W., Judiciary Plaza,
Washington, D.C. 20549, and at the Commission's Regional Offices at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661, and 7
World Trade Center, 13th Floor, New York, New York 10048. The Common Stock is
listed on the AMEX. Reports, proxy statements and other information concerning
the Company may be inspected at the American Stock Exchange, 86 Trinity Place,
New York, New York 10006.
35
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus its Annual
Report on Form 10-K, as amended, for the fiscal year ended July 29, 1995, its
Quarterly Reports on Form 10-Q for the quarterly periods ended October 28, 1995
and February 3, 1996, and its Current Report on Form 8-K, dated March 21, 1996,
which have been filed with the Commission. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document that is
also (or is deemed to be) incorporated by reference herein, modifies or replaces
such statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of the Registration
Statement or this Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all documents referred to above
(excluding exhibits thereto, unless such exhibits are specifically incorporated
by reference into such documents). Requests should be directed to: Michael H.
Taber, Secretary, Del Global Technologies Corp., One Commerce Park, Valhalla,
New York 10595 (telephone number: (914) 686-3600).
36
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
NUMBER
-------
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of July 30, 1994, July 29,
1995 and unaudited as of February 3, 1996................. F-3
Consolidated Statements of Income for the Fiscal Years Ended
July 31, 1993, July 30, 1994, July 29, 1995 and for the
unaudited Six Month Periods Ended January 28, 1995 and
February 3, 1996.......................................... F-4
Consolidated Statements of Shareholders' Equity for the
Fiscal Years Ended July 31, 1993, July 30, 1994, July 29,
1995 and for the unaudited Six Month Period Ended
February 3, 1996.......................................... F-5
Consolidated Statements of Cash Flows for the Fiscal Years
Ended July 31, 1993, July 30, 1994, July 29, 1995 and for
the unaudited Six Month Periods Ended January 28, 1995 and
February 3, 1996.......................................... F-6
Notes to Consolidated Financial Statements.................. F-8
Unaudited Selected Quarterly Financial Data................. F-21
GENDEX MEDICAL DIVISION OF DENTSPLY INTERNATIONAL INC.
Independent Auditors' Report................................ F-22
Statement of Net Assets to be Acquired As Of December 31,
1995...................................................... F-23
Statements of Revenues and Expenses for the Years Ended
December 31, 1994 and 1995................................ F-24
Notes to Financial Statements for the Years Ended December
31, 1994 and 1995......................................... F-25
CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
Condensed Consolidated Pro Forma Balance Sheet at February
3, 1996................................................... F-29
Condensed Consolidated Pro Forma Statement of Operations for
the Fiscal Year Ended July 29, 1995....................... F-30
Condensed Consolidated Pro Forma Statement of Operations for
the Six Months Ended February 3, 1996..................... F-31
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Del Global Technologies Corp.
Valhalla, New York
We have audited the accompanying consolidated balance sheets of Del Global
Technologies Corp. and subsidiaries (formerly Del Electronics Corp.) as of July
30, 1994 and July 29, 1995 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 Global Technologies Corp. and
subsidiaries at July 30, 1994 and July 29, 1995, and the results of their
operations and their cash flows for each of the 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.
DELOITTE & TOUCHE LLP
New York, New York
October 23, 1995
F-2
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 30, JULY 29, FEBRUARY 3,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (NOTE 6)
CURRENT ASSETS:
Cash and cash equivalents (Note 1)........................ $ 445,597 $ 505,989 $ 162,052
Investments available-for-sale (Notes 1, 2 and 10)........ 346,270 378,534 497,790
Trade receivables (net of allowance for doubtful accounts
of $164,675 at July 30, 1994, $144,431 at July 29, 1995
and $159,431 at February 3, 1996)...................... 6,120,457 6,456,853 5,725,121
Cost and estimated earnings in excess of billings on
uncompleted contracts (Note 3)......................... 551,301 395,847 404,030
Inventory (Notes 1 and 4)................................. 16,072,933 18,038,358 19,908,557
Prepaid expenses and other current assets (Note 11)....... 856,969 1,117,963 1,567,122
----------- ----------- -----------
Total current assets................................... 24,393,527 26,893,544 28,264,672
----------- ----------- -----------
Fixed assets--at cost (Notes 1 and 5)....................... 9,777,788 11,115,297 11,825,543
Less accumulated depreciation and amortization............ 2,612,930 3,362,516 3,650,451
----------- ----------- -----------
7,164,858 7,752,781 8,175,092
----------- ----------- -----------
Goodwill (net of accumulated amortization of $90,169 at July
30, 1994, $216,951 at July 29, 1995 and $280,342 at
February 3, 1996)(Notes 1 and 11)......................... 2,992,191 2,865,408 2,802,018
Deferred charges (Note 11).................................. 1,036,785 876,638 801,665
Other assets (Notes 7, 9 and 11)............................ 611,012 666,263 626,212
----------- ----------- -----------
Total....................................................... $36,198,373 $39,054,634 $40,669,659
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 6)................ $ 928,568 $ 943,383 $ 943,383
Accounts payable--trade................................... 2,477,101 2,539,615 2,748,117
Accrued liabilities (Note 11)............................. 2,457,682 2,484,435 2,137,886
Income taxes (Notes 1 and 9).............................. 277,830 518,277
----------- ----------- -----------
Total current liabilities.............................. 5,863,351 6,245,263 6,347,663
LONG-TERM LIABILITIES:
Long-term debt (less current portion included above) (Note
6)..................................................... 11,485,722 11,902,951 11,755,397
Other (Note 11)........................................... 757,410 775,541 782,424
Deferred income taxes (Notes 1 and 9)..................... 393,383 605,806 632,127
----------- ----------- -----------
Total liabilities...................................... 18,499,866 19,529,561 19,517,611
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 6, 7, 8, 10 and 11)
SHAREHOLDERS' EQUITY (Notes 1, 6 and 8):
Common stock--$.10 par value; Authorized--10,000,000
shares; Issued and outstanding--4,213,731 at July 30,
1994, 4,253,486 at July 29, 1995 and 4,346,983 at
February 3, 1996....................................... 385,616 412,960 434,698
Additional paid-in capital................................ 14,828,924 16,239,784 17,490,139
Retained earnings......................................... 2,583,817 3,189,244 3,563,896
----------- ----------- -----------
17,798,357 19,841,988 21,488,733
Less common stock in treasury--16,656 at July 30, 1994,
55,165 at July 29, 1995 and 58,225 at February 3,
1996................................................... 99,850 316,915 336,685
----------- ----------- -----------
Total shareholders' equity............................. 17,698,507 19,525,073 21,152,048
----------- ----------- -----------
Total....................................................... $36,198,373 $39,054,634 $40,669,659
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
----------------------------------------- ---------------------------
JULY 31, JULY 30, JULY 29, JANUARY 28, FEBRUARY 3,
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales (Notes 1, 3 and 12)........ $22,287,315 $24,327,015 $32,596,312 $13,715,422 $ 16,800,619
----------- ----------- ----------- ----------- ------------
Costs and expenses:
Cost of sales........................ 13,455,261 15,179,081 19,177,999 7,499,943 9,744,552
Research and development (Note 1).... 1,712,881 2,253,412 2,861,844 1,209,050 1,431,894
Selling, general and administrative.. 4,390,267 4,862,519 6,622,690 3,054,806 3,356,117
Interest expense--net of interest
income of $17,350 in 1993, $1,813
in 1994, $3,419 in 1995, $1,753 for
the six months ended Jan. 28, 1995
and $3,380 for the six months ended
Feb. 3, 1996....................... 360,149 576,832 1,191,142 576,293 595,211
----------- ----------- ----------- ----------- ------------
19,918,558 22,871,844 29,853,675 12,340,092 15,127,774
----------- ----------- ----------- ----------- ------------
Income before provision for income
taxes.............................. 2,368,757 1,455,171 2,742,637 1,375,330 1,672,845
Provision for income taxes (Notes 1
and 9)............................. 708,000 341,525 837,428 419,500 510,218
----------- ----------- ----------- ----------- ------------
Income before cumulative effect of
change in method for accounting for
income taxes....................... 1,660,757 1,113,646 1,905,209 955,830 1,162,627
Cumulative effect of change in method
for accounting for income taxes
(Note 1)........................... 76,363
----------- ----------- ----------- ----------- ------------
Net income........................... $ 1,660,757 $ 1,190,009 $ 1,905,209 $ 955,830 $ 1,162,627
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
Per share amounts (Note 1):
Income before cumulative effect of
change in method for accounting for
income taxes....................... $ 0.36 $ 0.23 $ 0.39 $ 0.19 $ 0.23
Cumulative effect of change in method
for accounting for income taxes.... 0.02
----------- ----------- ----------- ----------- ------------
Net income per common share and
common share equivalents primary
and fully diluted.................. $ 0.36 $ 0.25 $ 0.39 $ 0.19 $ 0.23
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S 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... 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 dividend--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
Stock dividend--3% December 1995 (Note
8) (unaudited)....................... 123,604 12,360 771,524 (787,975) (4,091)
Exercise of stock options and warrants
(Note 8) (unaudited)................. 93,780 9,378 482,489 491,867
Shares repurchased (Note 8)
(unaudited).......................... 3,060 (19,770) (19,770)
Costs of registering stock and options
(Note 8) (unaudited)................. (3,658) (3,658)
Net income (unaudited)................. 1,162,627 1,162,627
--------- -------- ------ --------- ----------- ---------- -----------
BALANCE--FEBRUARY 3, 1996 (UNAUDITED).. 4,346,983 $434,698 58,225 $(336,685) $17,490,139 $3,563,896 $21,152,048
--------- -------- ------ --------- ----------- ---------- -----------
--------- -------- ------ --------- ----------- ---------- -----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
--------------------------------------- -------------------------
JULY 31, JULY 30, JULY 29, JANUARY 28, FEBRUARY 3,
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income........................................... $ 1,660,757 $ 1,190,009 $ 1,905,209 $ 955,830 $ 1,162,627
Adjustments to reconcile net income to net cash
provided by (used in) operating activities net of
effects from purchase of Bertan and Dynarad........
Imputed interest................................... 68,963 18,991 33,133
Depreciation....................................... 606,389 684,786 749,586 388,492 338,919
Amortization....................................... 298,999 331,746 493,257 202,500 194,617
Deferred income tax provision (benefit)............ 138,600 (135,265) 36,452 65,491 26,321
Changes in assets and liabilities:
(Increase) decrease in trade receivables........... (56,784) (73,085) (336,396) 946,817 731,732
(Increase) decrease in cost and estimated earnings
in excess of billings on uncompleted
contracts....................................... (597,647) 46,346 155,454 168,445 (8,183)
Increase in inventory.............................. (2,430,090) (1,782,521) (1,965,425) (2,047,079) (1,870,199)
Increase in prepaid and other current assets....... (123,474) (153,368) (219,232) (196,453) (503,223)
Increase in deferred charges....................... (1,181,944)
Decrease (increase) in other assets................ 54,546 (200,862) (37,097) (16,692) 37,861
Increase (decrease) in accounts payable--trade..... 466,943 (70,113) 62,514 (686,763) 208,502
(Decrease) increase in accrued liabilities......... (520,348) (66,833) 197,128 12,804 (346,549)
Increase in income taxes payable................... 163,517 30,746 245,792 30,671 240,447
----------- ----------- ----------- ----------- -----------
Net cash (used in) provided by operating
activities.................................... (1,520,536) (198,414) 1,356,205 (156,946) 246,005
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Net cash paid on acquisition of subsidiaries....... (196,929) (2,784,282)
Payments to former shareholders of subsidiary
acquired........................................ (221,208) (195,375) (26,250)
Expenditures for fixed assets...................... (1,252,006) (1,694,344) (1,337,509) (429,508) (761,231)
(Investment in) sale of marketable securities--
net............................................. (370,181) (32,264) 52,731 (119,256)
Other current assets............................... (16,024)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities........... (1,448,935) (4,864,831) (1,590,981) (572,152) (906,737)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Net proceeds from (repayment of) bank borrowing.... 1,049,117 5,175,928 432,044 578,105 (147,554)
Payment for repurchase of shares................... (23,567) (76,283) (217,065) (122,554) (19,770)
Proceeds from exercise of stock options and
warrants........................................ 56,154 50,066 112,709 62,446 491,867
Other.............................................. (20,330) (25,827) (32,520) (18,935) (7,748)
----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities....... 1,061,374 5,123,884 295,168 499,062 316,795
----------- ----------- ----------- ----------- -----------
(continued)
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
--------------------------------------- -------------------------
JULY 31, JULY 30, JULY 29, JANUARY 28, FEBRUARY 3,
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net (decrease) increase in cash and cash
equivalents........................................ $(1,908,097) $ 60,639 $ 60,392 $ (230,036) $ (343,937)
Cash and cash equivalents, beginning of year......... 2,293,055 384,958 445,597 445,597 505,989
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents, end of year............... $ 384,958 $ 445,597 $ 505,989 $ 215,561 $ 162,052
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Supplemental disclosures of cash flow information:
Interest paid...................................... $ 374,727 $ 474,010 $ 1,084,332 $ 432,586 $ 569,505
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Income taxes paid.................................. $ 404,838 $ 595,570 $ 355,006 $ 98,930 $ 269,405
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Supplemental schedule of noncash investing and
financing activities:
Acquisition of subsidiaries.......................... $ 1,235,329 $ 4,816,153
----------- -----------
Deferred tax liability acquired in acquisition..... 146,902
Cash acquired in acquisition....................... 5,400 6,130
Common stock issued................................ 1,000,000 871,429
Payment due under non-compete agreement............ 807,410
Acquisition costs in accrued liabilities........... 33,000 200,000
----------- -----------
1,038,400 2,031,871
----------- -----------
Cash paid to acquire subsidiaries.................... $ 196,929 $ 2,784,282
----------- -----------
----------- -----------
Tax benefit related to exercise of stock options..... $ 188,000 $ 39,857 $ 32,038
----------- ----------- -----------
----------- ----------- -----------
(concluded)
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Description of Business Activities--Del Global Technologies Corp.
(formerly 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-effective 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 was formed on June 1, 1994 (Note 11).
c. Interim Financial Statements--The financial statements for the six
months ended January 28, 1995 and February 3, 1996 are unaudited, but in the
opinion of the Company's management reflect all adjustments (consisting of only
normal recurring adjustments) necessary for a fair presentation of the financial
position, results of operations and cash flows for such interim periods. The
results of operations for the six month periods ended January 28, 1995 and
February 3, 1996 do not necessarily represent the results to be expected for the
full year.
d. Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
e. Accounting Period--The Company's fiscal year-end is based on a
52/53-week cycle ending on the Saturday nearest to July 31.
f. 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.
g. Inventory Valuation--Inventory is stated at the lower of cost (first-in,
first-out) or market.
h. 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.
i. Research and Development Costs--Research and development costs are
charged to expense in the year incurred.
j. Net Income per Common Share and Common Share Equivalent--The Company
utilizes 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 percent of the then outstanding actual common shares. Any assumed funds still
available after the repurchase of 20 percent 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 the related tax effect. For
purposes of the calculation, this method increases net income by $0, $17,256 and
$53,997, in fiscal years ended 1993, 1994, and 1995, respectively, and $19,091
and $39,466 for
F-8
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
the six month periods ended January 28, 1995 and February 3, 1996, respectively,
for primary earnings per share. Net income was increased by $0, $10,336, and
$47,954 in fiscal years ended 1993, 1994, and 1995, respectively, and $17,525
and $22,626 for the six month periods ended January 28, 1995 and February 3,
1996, 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 4,572,698, 4,896,888, and 5,044,295 in fiscal years ended 1993,
1994, and 1995, respectively, and 5,012,086 and 5,247,280 for the six month
periods ended January 28, 1995 and February 3, 1996, respectively (Note 8).
k. Income Taxes--Income taxes provided include deferred taxes due to timing
differences between financial and tax reporting (Note 9).
In February 1993 the Company formed a Foreign Sales Corporation to act as
an agent for its export sales.
The Company adopted Statement of Financial Accounting Standards ('SFAS')
No. 109 'Accounting for Income Taxes' ('SFAS No. 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.
l. 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.
m. Investments--During the year ended July 30, 1994, the Company adopted
SFAS 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.
n. 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 are recognized when the expected future cash flows derived from such
intangible assets is less than their carrying value.
o. Long-Lived Assets--In March 1995, the Financial Accounting Standards
Board ('FASB') issued SFAS No. 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.
p. Stock-Based Compensation--In October 1995, the FASB issued SFAS No. 123,
'Accounting for Stock-Based Compensation,' which requires adoption of the
disclosure provisions no later than fiscal years beginning after December 15,
1995 and adoption of the measurement and recognition provisions for non-employee
transactions no later than after December 15, 1995. The new standard defines a
fair value method of accounting for the issuance of stock options and other
equity instruments. Under the fair value method, compensation cost is measured
at the grant date based on the fair value of the award and is recognized over
the service period, which is usually the vesting period. Pursuant to SFAS No.
123, companies are encouraged, but not required, to adopt the fair value method
of accounting for employee stock-based transactions. Companies are also
permitted to continue
F-9
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
to account for such transactions under Accounting Principles Board Opinion
('APB') No. 25, 'Accounting for Stock Issued to Employees,' but would be
required to disclose in a note to the financial statements pro forma net income,
and per share amounts as if the company had applied the new method of
accounting. SFAS No. 123 also requires increased disclosures for stock-based
arrangements regardless of the method chosen to measure and recognize
compensation for employee stock-based arrangements. The Company has elected to
continue to account for such transactions under APB No. 25 and will disclose the
required pro forma effect on net income and earnings per share.
2. INVESTMENTS
At July 29, 1995 and February 3, 1996 investments consist principally of
corporate debt securities and equities classified as available-for-sale.
At July 29, 1995 and February 3, 1996 the fair value of investments
classified as available-for-sale based on maturity dates, are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR JULY 29, 1995 FEBRUARY 3, 1996
- ---------------------------------------- ------------- -----------------
<S> <C> <C>
1996.................................... $ 43,892 $ 73,307
1997-2002............................... 310,512 388,172
2003-2006............................... 24,130 36,311
------------- -----------------
$ 378,534 $ 497,790
------------- -----------------
------------- -----------------
</TABLE>
3. PERCENTAGE OF COMPLETION ACCOUNTING
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED YEAR ENDED ENDED
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Costs incurred on uncompleted
contracts............................. $ 427,392 $ 337,863 $344,309
Estimated earnings...................... 163,109 93,184 94,921
------------- ------------- ----------------
590,501 431,047 439,230
Less: Billings to date.................. 39,200 35,200 35,200
------------- ------------- ----------------
Costs and estimated earnings in excess
of billings on uncompleted
contracts............................. $ 551,301 $ 395,847 $404,030
------------- ------------- ----------------
------------- ------------- ----------------
</TABLE>
The backlog of unshipped contracts being accounted for under the percentage
of completion method of accounting was $762,524 at July 30, 1994, $633,753 at
July 29, 1995, and $625,570 at February 3, 1996.
4. INVENTORY
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 based on estimated gross margins.
F-10
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
4. INVENTORY--(CONTINUED)
Inventory consists of the following:
<TABLE>
<CAPTION>
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Finished goods.......................... $ 2,825,816 $ 4,398,096 $ 4,853,706
Work-in-process......................... 7,201,564 7,642,588 8,434,964
Raw materials and purchased parts....... 6,142,965 5,997,674 6,619,887
------------- ------------- ----------------
16,170,345 18,038,358 19,908,557
Less progress payments.................. 97,412
------------- ------------- ----------------
$ 16,072,933 $ 18,038,358 $ 19,908,557
------------- ------------- ----------------
------------- ------------- ----------------
</TABLE>
5. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Land.......................... $ 694,046 $ 694,046 $ 694,046
Buildings..................... 2,146,025 2,146,025 2,146,025
Machinery and equipment....... 5,475,652 6,624,296 7,164,933
Furniture and fixtures........ 707,846 773,694 802,924
Leasehold improvements........ 749,219 790,226 795,755
Construction in progress...... 76,023 210,435
Transportation equipment...... 5,000 10,987 11,425
------------- ------------- ----------------
9,777,788 11,115,297 11,825,543
Less accumulated depreciation
and amortization............ 2,612,930 3,362,516 3,650,451
------------- ------------- ----------------
Net fixed assets.............. $ 7,164,858 $ 7,752,781 $ 8,175,092
------------- ------------- ----------------
------------- ------------- ----------------
</TABLE>
Construction in progress relates to computer equipment and the
computerization of certain of the Company's manufacturing and accounting
systems.
6. DEBT
Long-term debt is summarized below:
<TABLE>
<CAPTION>
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------------------- ------------------------- -------------------------
DUE WITHIN DUE AFTER DUE WITHIN DUE AFTER DUE WITHIN DUE AFTER
ONE YEAR ONE YEAR ONE YEAR ONE YEAR ONE YEAR ONE YEAR
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Term note payable--
bank....................... $428,568 $ 2,035,722 $428,568 $ 1,607,154 $428,568 $ 1,392,870
Additional term note
payable--bank.............. 500,000 2,875,000 500,000 2,375,000 500,000 2,125,000
Credit line loan payable--
bank....................... 6,575,000 7,900,000 8,225,000
Other loan................... 14,815 20,797 14,815 12,527
---------- ----------- ---------- ----------- ---------- -----------
$928,568 $11,485,722 $943,383 $11,902,951 $943,383 $11,755,397
---------- ----------- ---------- ----------- ---------- -----------
---------- ----------- ---------- ----------- ---------- -----------
</TABLE>
The Company's credit facility with its lending bank was composed of two
term notes and a revolving credit line as of July 30, 1994, July 29, 1995 and
February 3, 1996. The total facility aggregated $14,910,722 at July 29,
F-11
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
6. DEBT--(CONTINUED)
1995 and $14,446,438 at February 3, 1996. 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 quarters 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 Company paid off the outstanding
borrowings of the Bertan subsidiary on May 26, 1994. The Company paid off the
outstanding borrowings of the Dynarad subsidiary on June 3, 1993. 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 was again reduced 1/2 percent.
The weighted average interest rate on the Company's borrowings under its
credit facility was 6.21 percent, 8.84 percent, and 8.44 percent for the years
ended July 30, 1994 and July 29, 1995, and the six months ended February 3,
1996, 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 approximately $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.
On March 6, 1996, in connection with an acquisition, (see note 14), the
Company and its lending bank entered into an Amended and Restated Credit
Agreement wherein the bank increased the Company's line of credit to
$24,000,000, consisting of a $10,000,000 five-year term loan and a four-year
revolving credit line of $14,000,000. Initial borrowing made under this credit
line on March 6, 1996 was used to pay off existing term loans, the existing
revolving credit loan balance and to fund the acquisition of certain assets of
the Gendex Medical Division ('Gendex') of Dentsply International Inc. Borrowing
under the revolving credit loan is based upon a formula based on 80 percent of
eligible accounts receivable and 50 percent of inventory, with a $2,000,000
maximum sub-limit for letters of credit. Interest will be computed at prime, or
at the Company's option, at a rate tied to the London Interbank Borrowing Rate
('LIBOR'). The unused and available portion of the line of credit was
approximately $3,243,000 after deducting outstanding letters of credit in the
amount of $652,000.
F-12
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
6. DEBT--(CONTINUED)
Long-term debt matures as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
- -----------------------------------------------------------
<S> <C>
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
-------------
-------------
</TABLE>
7. EMPLOYEE BENEFITS
Employee Benefit Plans--The Company has an employee benefit plan for
eligible employees. Included in the plan 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 1993, 1994, and 1995 was $15,000, $0, and $32,500,
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.
8. SHAREHOLDERS' EQUITY
a. Stock Dividends--On December 17, 1991, the Company declared a six
percent stock dividend to holders of record on December 3, 1991. On November 17,
1992, the Company declared a six percent stock dividend to holders of record on
December 3, 1992. On April 19, 1993, the Company declared a three percent stock
dividend to holders of record on May 3, 1993. 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 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 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
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 20, 1995 the
Company declared a three percent stock dividend to holders of record on December
5, 1995 payable on December 21, 1995. 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. At the annual meeting of shareholders held on February 14, 1996,
the shareholders approved the proposal to amend the Company's nonqualified stock
option plan to increase the number of shares of common stock with respect to
which options can be granted by 250,000 to a total of 2,473,648 shares. The
President exercised options to purchase 119,405 shares, former officers
exercised options to purchase 23,239 shares, a current officer exercised options
to purchase 3,522 shares, and various employees exercised options to purchase
9,550 shares in the fiscal year ended July 31, 1993. Various employees exercised
options to purchase 18,671 shares in the fiscal year ended July 30, 1994. A
former officer exercised options to purchase 16,526 shares, and various
employees exercised options to purchase 2,575 shares, during the fiscal year
ended July 29, 1995. As of July 29, 1995, the Company has granted options to
purchase 826,639 shares to the current President, 276,490 shares to former
officers, 262,961 shares to current officers and 692,740 shares to various
employees and directors. As of December 29, 1995 the stock option committee of
the Board of Directors granted additional options of 130,000 shares, 62,500 to
officers and 67,500 to various employees. During the six months ended February
3, 1996 various employees and former employees exercised options to purchase
6,963 shares.
F-13
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
8. SHAREHOLDERS' EQUITY--(CONTINUED)
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 December 31, 2009.
The following stock option information is as of:
<TABLE>
<CAPTION>
OPTIONS JULY 31, 1993 JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
- ------------------------------ -------------- -------------- -------------- ----------------
<S> <C> <C> <C> <C>
Granted and outstanding at
beginning of year........... 1,331,766 1,260,026 1,559,322 1,546,648
Granted....................... 86,723 347,319 105,820 130,000
Expired....................... (2,531) (29,353) (88,817) (9,537)
Exercised..................... (155,932) (18,670) (29,677) (6,963)
-------------- -------------- -------------- ----------------
Outstanding at end of
period...................... 1,260,026 1,559,322 1,546,648 1,660,148
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
Exercisable at end of
period...................... 908,300 1,063,557 1,173,059 1,361,870
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
Exercise prices............... $ 0.99-$6.32 $ 0.99-$6.32 $ 0.99-$6.32 $ 0.99-$6.56
-------------- -------------- -------------- ----------------
-------------- -------------- -------------- ----------------
</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 outstanding aggregating 261,779 shares at February
3, 1996. They are as follows:
1. In connection with an underwriting in June 1991, the underwriter
was granted warrants to purchase 134,163 shares of common stock at an
exercise price of $5.36. At February 3, 1996 there were 67,081 warrants
still unexercised.
2. The Company has granted warrants to the seller of selected Filtron
assets to purchase 100,621 shares of common stock at an exercise price of
$5.88. At February 3, 1996 there were 100,621 warrants still unexercised.
3. In connection with an amendment to a bank financing completed in
May 1994, the Company issued warrants to purchase 30,900 shares of common
stock at an exercise price of $6.95. In connection with its incentive
pricing amendment with the same bank, the Company reduced the exercise
price to $5.34. At July 29, 1995, the bank held warrants for 32,782 shares
at an exercise price of $5.18. At February 3, 1996 there were 32,782
warrants still unexercised. On March 6, 1996, the Company issued an
additional warrant to purchase 17,000 shares of common stock at an exercise
price of $7.00 to its lending bank.
4. The Company has granted 26,522 warrants to its Corporate
Development Consultant. At July 29, 1995, the consultant held warrants for
26,522 shares at an exercise price of $5.18. In connection with an
extension of a consulting agreement the Company issued 30,000 additional
warrants to purchase shares of common stock at $6.56 to this Corporate
Development Consultant. At February 3, 1996 there were 56,522 warrants
still unexercised.
5. The Company has granted 37,132 warrants to an Investment Advisory
firm and its key personnel. At July 29, 1995, they held warrants for 37,132
shares at an exercise price of $5.18. At February 3, 1996 there were 4,773
warrants still unexercised.
F-14
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
9. INCOME TAXES
Provision for income taxes consists of the following:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
----------------------------------------------- ------------------------------------
JULY 31, 1993 JULY 30, 1994 JULY 29, 1995 JANUARY 28, 1995 FEBRUARY 3, 1996
------------- ------------- ------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Current:
Federal............................ $ 509,400 $ 316,812 $ 692,064 $313,692 $430,084
State.............................. 60,000 83,000 108,912 40,317 53,813
------------- ------------- ------------- ---------------- ----------------
569,400 399,812 800,976 354,009 483,897
Deferred:
Federal and state.................. 138,600 (58,287) 36,452 65,491 26,321
------------- ------------- ------------- ---------------- ----------------
$ 708,000 $ 341,525 $ 837,428 $419,500 $510,218
------------- ------------- ------------- ---------------- ----------------
------------- ------------- ------------- ---------------- ----------------
</TABLE>
Deferred tax liabilities (assets) are comprised of the following:
<TABLE>
<CAPTION>
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Depreciation.................. $ 213,664 $ 401,880 $464,242
Pension....................... 77,712 83,914 83,914
Federal effect of New York
State tax credit............ 55,145 77,570 82,836
Difference in basis of fixed
assets...................... 120,595 110,200 105,931
Revenue recognition........... 52,534 35,289
------------- ------------- ----------------
Gross deferred tax
liabilities................. 519,650 708,853 736,923
------------- ------------- ----------------
Amortization.................. (6,704) 72,382 72,382
Inventory..................... (122,073) (153,119) (153,119)
Bad debt reserve.............. (50,809) (45,434) (45,434)
Deferred compensation......... (124,621) (264,831) (251,092)
New York State tax credits.... (162,190) (228,146) (243,634)
------------- ------------- ----------------
Gross deferred tax assets..... (466,397) (619,148) (620,897)
------------- ------------- ----------------
$ 53,253 $ 89,705 $116,026
------------- ------------- ----------------
------------- ------------- ----------------
</TABLE>
Deferred tax liabilities and assets are recorded in the consolidated
balance sheets as follows:
<TABLE>
<CAPTION>
JULY 30, 1994 JULY 29, 1995 FEBRUARY 3, 1996
------------- ------------- ----------------
<S> <C> <C> <C>
Liabilities:
Deferred income taxes......... $ 393,383 $ 605,806 $632,127
Assets:
Prepaid expenses and other
current assets.............. (177,940) (287,956) (286,784)
Other assets.................. (162,190) (228,145) (229,317)
------------- ------------- ----------------
$ 53,253 $ 89,705 $116,026
------------- ------------- ----------------
------------- ------------- ----------------
</TABLE>
The New York State tax credits expire at various dates through 2002.
F-15
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
9. INCOME TAXES--(CONTINUED)
The following is a reconciliation of the statutory Federal and effective
income tax rates:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
----------------------------------------- --------------------------
JULY 31, JULY 30, JULY 29, JANUARY 28, FEBRUARY 3,
1993 1994 1995 1995 1996
----------- ----------- ----------- ----------- -----------
% OF PRETAX % OF PRETAX % OF PRETAX % OF PRETAX % OF PRETAX
INCOME INCOME INCOME INCOME INCOME
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Statutory Federal income tax expense rate..... 34.0% 34.0% 34.0% 34.0% 34.0%
State taxes, less Federal tax effect.......... 2.9 (0.4) 1.5 1.9 2.1
Tax benefit from write-off of inventory for
tax purposes................................ (3.4) (4.3)
Permanent differences......................... 2.4 3.9 2.8 2.2 0.8
Tax benefits on foreign sales corp............ (3.3) (3.3) (4.1) (3.2)
Federal tax credits and other................. (6.2) (6.7) (4.5) (3.5) (3.2)
----- ----- ----- ----- -----
29.7% 23.2% 30.5% 30.5% 30.5%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
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 an escalation 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 an 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:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED AMOUNT
- ------------------------------------------------------------ ----------
<S> <C>
1996........................................................ $1,026,953
1997........................................................ 982,341
1998........................................................ 942,923
1999........................................................ 935,779
2000........................................................ 935,779
Thereafter.................................................. 2,590,738
----------
$7,414,513
----------
----------
</TABLE>
Rent expense, including real estate taxes of $180,504 in 1993, $225,025 in
1994, and $296,142 in 1995, was $614,318 in 1993, $604,665 in 1994, and
$1,111,300 in 1995.
b. Employment Agreements--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. 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.
F-16
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
10. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
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. As of April 1, 1996, the Vice
President elected to enter the consulting phase of 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.
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 statements.
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 200,000 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 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 four months ended July 30, 1994 was
$37,455, and was $111,666 for the year ended July 29, 1995.
F-17
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
11. ACQUISITIONS--(CONTINUED)
Unaudited pro forma financial information for the 12 month periods ended
July 31, 1993 and July 30, 1994, as if the Bertan acquisition occurred at the
beginning of the respective periods, is as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
JULY 31, 1993 JULY 30, 1994
------------- -------------
<S> <C> <C>
Net sales............................... $ 30,919,753 $ 29,834,149
------------- -------------
------------- -------------
Income before provision for income
taxes................................. $ 1,587,022 $ 1,015,417
------------- -------------
------------- -------------
Net income.............................. $ 1,127,022 $ 779,525
------------- -------------
------------- -------------
Net income per common share and common
share equivalents, primary and fully
diluted............................... $ 0.23 $ 0.15
------------- -------------
------------- -------------
</TABLE>
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 results to
be achieved in the future.
12. MAJOR CUSTOMERS AND EXPORT SALES
No one customer accounts for more than ten percent of the Company's sales
in any of the periods presented.
Export sales were 21 percent, 28 percent, 36 percent, 35 percent and 37
percent of total net sales in 1993, 1994 and 1995, and for the six months ended
January 28, 1995 and February 3, 1996, respectively.
Export sales by geographic areas were:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------------------------------
JULY 31, 1993 JULY 30, 1994 JULY 29, 1995
--------------------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Europe....................... $ 831,466 18% $ 2,321,259 34% $ 3,892,719 33%
Far East..................... 220,490 5% 741,142 11% 3,336,147 28%
Middle East.................. 2,472,027 54% 2,356,638 35% 3,256,903 28%
North America................ 1,005,529 22% 1,143,215 17% 627,777 6%
Other........................ 47,765 1% 191,295 3% 614,149 5%
------------ --- ------------ --- ------------ ---
Total export sales........... $ 4,577,277 100% $ 6,753,549 100% $ 11,727,695 100%
------------ --- ------------ --- ------------ ---
------------ --- ------------ --- ------------ ---
<CAPTION>
SIX MONTHS ENDED
------------------------------------------
JANUARY 28, 1995 FEBRUARY 3, 1996
-------------------- --------------------
<S> <C> <C> <C> <C>
Europe....................... $ 1,640,222 34% $ 2,003,936 32%
Far East..................... 1,391,014 29% 1,983,265 32%
Middle East.................. 1,280,650 27% 1,329,819 21%
North America................ 255,600 5% 921,262 14%
Other........................ 250,705 5% 40,407 1%
------------- --- ------------- ---
Total export sales........... $ 4,818,191 100% $ 6,278,689 100%
------------- --- ------------- ---
------------- --- ------------- ---
</TABLE>
F-18
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
13. SEGMENT REPORTING
The following analysis provides segment information for the two industries
in which the Company operates (see Note 1):
<TABLE>
<CAPTION>
SPECIALTY
ELECTRONICS MEDICAL
1993 MANUFACTURING MANUFACTURING TOTAL
- ---------------------------------------- ------------- ------------- -----------
<S> <C> <C> <C>
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
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
SPECIALTY
ELECTRONICS MEDICAL
1994 MANUFACTURING MANUFACTURING TOTAL
- ---------------------------------------- ------------- ------------- -----------
<S> <C> <C> <C>
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
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
<TABLE>
<CAPTION>
SPECIALTY
ELECTRONICS MEDICAL
1995 MANUFACTURING MANUFACTURING TOTAL
- ---------------------------------------- ------------- ------------- -----------
<S> <C> <C> <C>
Net sales............................... $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..................... $33,062,066 $ 5,992,568 $39,054,634
------------- ------------- -----------
------------- ------------- -----------
Capital expenditures.................... $ 1,140,242 $ 197,267 $ 1,337,509
------------- ------------- -----------
------------- ------------- -----------
Depreciation and amortization........... $ 965,478 $ 277,365 $ 1,242,843
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
F-19
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
FISCAL YEARS ENDED JULY 31, 1993, JULY 30, 1994, JULY 29, 1995
AND THE UNAUDITED SIX MONTH PERIODS ENDED JANUARY 28, 1995 AND FEBRUARY 3, 1996
13. SEGMENT REPORTING--(CONTINUED)
(a) For the fiscal year ended July 31, 1993, July 30, 1994 and July 29,
1995, sales of the Specialty Electronics Manufacturing segment included net
sales of approximately $3,838,000, $4,621,000 and $8,834,000 to customers for
medical imaging and diagnostic systems applications. Aggregate medical sales for
1993, 1994, and 1995 were approximately $7,991,000, $9,412,000 and $14,403,000
or 36%, 39% and 44% of total net sales, respectively.
14. SUBSEQUENT EVENT--UNAUDITED
On March 6, 1996, the Company and its newly formed wholly owned subsidiary,
Gendex-Del Medical Imaging Corp., acquired certain assets, including
inventories, fixed assets, intangibles and the use of the Gendex trademark, of
the Gendex Medical Division of Dentsply International Inc. for $5,700,000 in
cash and a subordinated note of $1,800,000. The subordinated note bears interest
at 7.75 percent, which is payable quarterly, with principal payments beginning
three years after closing. The Company assumed the lease for the Gendex facility
in Franklin Park, Illinois and will operate the business under the Gendex-Del
name. The Company entered into a supply agreement with Dentsply International
Inc. for certain components and parts used in the manufacture of medical x-ray
equipment and systems of Gendex.
See Consolidated Pro Forma Financial Information.
F-20
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
SUPPLEMENTAL FINANCIAL INFORMATION
UNAUDITED SELECTED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
QUARTER
----------------------------------------------------
FIRST(1) SECOND THIRD FOURTH(2)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended July 30, 1994:
Net sales............................. $5,336,091 $5,380,435 $5,592,496 $8,017,993
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Gross profit.......................... $2,179,485 $2,913,193 $2,540,120 $2,235,136
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income............................ $ 484,287 $ 445,612 $ 503,543 $ (243,433)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Primary earnings and fully diluted
earnings per share................. $ 0.11 $ 0.09 $ 0.10 $ (0.05)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<CAPTION>
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended July 29, 1995:
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 earnings and fully diluted
earnings per share................. $ 0.09 $ 0.11 $ 0.11 $ 0.09
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
<CAPTION>
FIRST SECOND
---------- ----------
<S> <C> <C>
Six months ended February 3, 1996:
Net sales............................. $7,471,181 $9,329,438
---------- ----------
---------- ----------
Gross profit.......................... $3,280,547 $3,775,520
---------- ----------
---------- ----------
Net income............................ $ 529,566 $ 633,061
---------- ----------
---------- ----------
Primary earnings and fully diluted
earnings per share................. $ 0.11 $ 0.12
---------- ----------
---------- ----------
</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-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
DENTSPLY International Inc.
We have audited the accompanying statement of net assets to be acquired as of
December 31, 1995 and the statements of revenues and expenses for the years
ended December 31, 1994 and 1995 of the Gendex Medical Division of DENTSPLY
International Inc. (DENTSPLY). These financial statements are the responsibility
of DENTSPLY'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.
As discussed in notes 1(a) and 7 to the financial statements, DENTSPLY
International Inc. has entered into an Agreement in Principle to sell all
inventory, fixed assets and certain intangible assets of the Gendex Medical
Division to a third party on or about February 28, 1996.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets to be acquired as of December 31, 1995 and
revenues and expenses for the years ended December 31, 1994 and 1995 of Gendex
Medical Division, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Chicago, Illinois
February 9, 1996
F-22
<PAGE>
GENDEX MEDICAL DIVISION
OF
DENTSPLY INTERNATIONAL INC.
STATEMENT OF NET ASSETS TO BE ACQUIRED
DECEMBER 31, 1995
<TABLE>
<S> <C>
Inventories (Note 2)........................................ $6,129,493
Fixed assets, net (Note 3).................................. 650,675
Intangible assets, less accumulated amortization............ 1,701,961
----------
$8,482,129
----------
----------
</TABLE>
See accompanying notes to financial statements.
F-23
<PAGE>
GENDEX MEDICAL DIVISION
OF
DENTSPLY INTERNATIONAL INC.
STATEMENTS OF REVENUES AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
----------- -----------
<S> <C> <C>
Net sales......................................... $20,664,178 $18,895,991
Cost of goods sold (Note 5)....................... 17,521,209 16,364,819
----------- -----------
Gross profit.................................... 3,142,969 2,531,172
Selling, general, and administrative expenses
(Notes 4 and 5)................................. 2,812,812 2,627,916
----------- -----------
Operating profit (loss)......................... 330,157 (96,744)
Other income (expense)............................ (51,835) 13,110
----------- -----------
Net excess (deficiency) of revenues over
expenses..................................... $ 278,322 $ (83,634)
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to financial statements.
F-24
<PAGE>
GENDEX MEDICAL DIVISION
OF
DENTSPLY INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization
The Gendex Medical Division (Gendex Medical) of DENTSPLY International Inc.
(DENTSPLY) designs, develops, manufactures and markets x-ray systems and related
components for the medical x-ray market.
Gendex Medical entered the medical x-ray market in August 1987 with the
introduction of a unique high-frequency generator and an integrated
table/tubestand. In April 1989, Universal/Allied Imaging, Inc., a manufacturer
of a full line of single phase conventional radiographic equipment and
components such as tables, film holders and tube mounts, was acquired. The
acquisition of Universal/Allied Imaging substantially expanded Gendex Medical's
medical product line and enabled it to offer its medical dealers a compliment of
tables, tubestands, film holders and generators, including its high frequency
generators. In January 1993, Gendex Medical acquired a mammography x-ray system
from the Soredex division of Orion Corporation, thereby gaining an entrant in
this attractive, growing portion of the medical x-ray market.
As more fully described in note 7, DENTSPLY International Inc. has entered
into an Agreement in Principle to sell all inventory, fixed assets and certain
intangible assets of Gendex Medical to a third party on or about February 28,
1996.
(b) Basis of Presentation
The Gendex Medical Division's financial results have historically been
reported in a combined manner with the results of the Gendex Dental Division's
Chicago, Grand Avenue location. For purposes of this presentation, the
accompanying financial statements present only those net assets of Gendex
Medical anticipated to be acquired by a third party as of December 31, 1995. The
statements of revenues and expenses of the division for the years ended December
31, 1994 and 1995 include only the operating results of the Gendex Medical
Division presented on a stand-alone basis, excluding the impact, if any, on
DENTSPLY International Inc.'s consolidated income tax provision.
(c) Inventories
Inventories are valued at the lower of cost or market using the first-in,
first-out (FIFO) method.
(d) Fixed Assets
Fixed assets are recorded at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets which range
from four to fifteen years. Leasehold improvements are amortized on the
straight-line method over the shorter of the lease term or estimated useful life
of the assets.
(e) Intangible Assets
Intangible assets, which consist primarily of trademarks, tradenames,
patents and product design rights, are being amortized over the estimated useful
lives of the respective assets (which range from 12 to 40 years) using the
straight-line method. The cumulative amount of amortization at December 31, 1995
is $553,807. Amortization expense for the years ended December 31, 1994 and 1995
is $168,087 and $153,321. Management of Gendex Medical periodically evaluates
the carrying value of intangible assets to determine that no decline in carrying
value has occurred. Upon determination of a decline in value, an appropriate
amount would be charged to operations.
(f) Revenue Recognition
Revenue is recognized when title passes upon shipment of the product.
F-25
<PAGE>
GENDEX MEDICAL DIVISION
OF
DENTSPLY INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
(2) INVENTORIES
Classification of inventories is as follows as of December 31, 1995:
<TABLE>
<S> <C>
Finished goods...................................... $2,187,988
Work-in-process..................................... 1,688,903
Raw materials....................................... 2,252,602
----------
$6,129,493
----------
----------
</TABLE>
(3) FIXED ASSETS
A summary of fixed assets follows as of December 31, 1995:
<TABLE>
<S> <C>
Leasehold improvements.............................. $ 512,347
Machinery and equipment............................. 532,740
Furniture and fixtures.............................. 25,013
Tools, dies and molds............................... 100,048
Data handling equipment............................. 107,255
Computer software................................... 6,928
----------
1,284,331
Less accumulated depreciation and amortization.... 633,656
----------
$ 650,675
----------
----------
</TABLE>
Depreciation and amortization expense for the years ended December 31, 1994
and 1995 is $165,073 and $226,226.
(4) SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling expenses include all costs associated with selling and marketing
activities including sales commission, advertising and travel. General and
administrative expenses are primarily an allocation of accounting, human
resource and data processing costs which are shared among various regional
DENTSPLY affiliated locations.
A breakdown of these costs for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Selling and marketing expenses............... $2,265,699 $2,188,095
General and administrative expenses.......... 525,897 436,047
Research and development expenses............ 21,216 3,774
---------- ----------
$2,812,812 $2,627,916
---------- ----------
---------- ----------
</TABLE>
(5) RELATED PARTY TRANSACTIONS
Other DENTSPLY affiliated divisions located in Chicago and Des Plaines,
Illinois produce fabricated components for Gendex Medical. Most of these
components could be readily sourced from local third party vendors. The cost
charged to the Gendex Medical Division for fabricated components approximates
the cost to manufacture. The total cost of components produced for Gendex
Medical by these affiliated divisions in 1994 and 1995 was $6,724,868 and
$4,801,268, respectively.
F-26
<PAGE>
GENDEX MEDICAL DIVISION
OF
DENTSPLY INTERNATIONAL INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
(5) RELATED PARTY TRANSACTIONS--(CONTINUED)
Additionally, administrative services such as accounting, computer and
human resources, are performed for Gendex Medical by the DENTSPLY affiliated
division in Des Plaines, Illinois, while legal, tax and other business
administrative services are provided by the DENTSPLY Corporate office in York,
Pennsylvania. The costs of such services are deemed to be not significant. The
cost for administrative services provided by the local DENTSPLY affiliates is a
direct allocation of actual cost with no charge for Corporate services.
(6) LEASES
Gendex Medical is obligated under operating leases, principally for its
office and manufacturing facility. Total rental expense for operating leases for
the years ended December 31, 1994 and 1995 was $203,413 and $214,157,
respectively.
(7) PENDING SALE OF GENDEX MEDICAL
On December 15, 1995, DENTSPLY International Inc. entered into an Agreement
in Principle to sell all inventories, fixed assets and certain intangible assets
of the Gendex Medical Division to a third party for approximately $7,500,000. In
accordance with the Agreement in Principle, such assets existing at the closing
date will be transferred to the third party. All receivables at closing will
remain with the Seller. Substantially all contracts and leases of Gendex Medical
will be assigned to the third party. Such terms of the agreement may be subject
to revision upon final negotiation of the transaction.
F-27
<PAGE>
CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The accompanying Condensed Consolidated Pro Forma Financial Statements
reflect the acquisition of certain assets of the Gendex Medical Division of
Dentsply International Inc. by Gendex-Del Medical Imaging Corp., a wholly-owned
subsidiary of Del Global Technologies Corp. Such acquisition was effective March
7, 1996. The Condensed Consolidated Pro Forma Balance Sheet combines the
unaudited Balance Sheet of Del Global Technologies Corp. at February 3, 1996
with the audited Statement of Net Assets to be Acquired of the Gendex Medical
Division of Dentsply International Inc. at December 31, 1995 as if such
transaction had occurred on February 3, 1996. The Condensed Consolidated Pro
Forma Statement of Operations for the fiscal year ended July 29, 1995 combines
the audited Statement of Income of Del Global Technologies Corp. and
Subsidiaries for the fiscal year ended July 29, 1995 with the unaudited
Statement of Operations of the Gendex Medical Division of Dentsply International
Inc. for the twelve month period ended July 31, 1995 as if such transaction had
occurred at the beginning of the twelve month period presented. The Condensed
Consolidated Pro Forma Statement of Operations for the six month period ended
February 3, 1996 combines the unaudited Statement of Income of Del Global
Technologies Corp. and Subsidiaries for the six months ended February 3, 1996
with the unaudited Statement of Operations of the Gendex Medical Division of
Dentsply International Inc. for the six month period ended January 31, 1996 as
if such transaction had occurred at the beginning of the six month period
presented. The Pro Forma, As Adjusted column also gives effect to the use of a
portion of the net proceeds from this offering to reduce Gendex acquisition debt
and certain other debt of the Company. The transaction has been accounted for as
a purchase and appropriate adjustments have been made to the Condensed
Consolidated Pro Forma Statements of Operations to reflect the transaction at
the beginning of the respective periods combined. The pro forma financial
information presented above is not necessarily indicative of the operating
results which would have been achieved had the Company acquired Gendex Medical
at the beginning of the periods presented or of results to be achieved in the
future.
F-28
<PAGE>
CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
<TABLE>
<CAPTION>
DEL GENDEX PRO FORMA PRO FORMA
CONSOLIDATED MEDICAL ADJUSTMENTS AT OTHER
FEBRUARY 3, DECEMBER 31, DEBIT FEBRUARY 3, ADJUSTMENTS PRO FORMA,
1996 1995 (CREDIT) 1996 DEBIT (CREDIT) AS ADJUSTED
------------ ------------ ----------- ------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and investments...... $ 659,842 $ 659,842 $ 4,990,000(3) $ 5,649,842
Trade receivables......... 5,725,121 5,725,121 5,725,121
Inventory................. 19,908,557 $6,129,493 26,038,050 26,038,050
Prepaid expenses and other
current assets.......... 1,971,152 1,971,152 1,971,152
------------ ------------ ------------ -----------
Total current assets...... 28,264,672 6,129,943 34,394,165 39,384,165
------------ ------------ ------------ -----------
Fixed assets net.......... 8,175,092 650,675 8,825,767 8,825,767
Goodwill.................. 2,802,018 2,802,018 2,802,018
Investment in assets of $ 7,750,000(1)
subsidiary.............. (7,750,000)(2)
Other assets.............. 1,427,877 1,701,961 (732,129)(2) 2,397,709 2,397,709
------------ ------------ ------------ -----------
Total..................... $ 40,669,659 $8,482,129 $ 48,419,659 $53,409,659
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-
term debt............... $ 943,383 $ 943,383 $ 943,383
Accounts payable.......... 2,748,117 2,748,117 2,748,117
Accrued liabilities and
income taxes............ 2,656,163 $ (250,000)(1) 2,906,163 2,906,163
------------ ------------ -----------
Total current
liabilities............. 6,347,663 6,597,663 6,597,663
Long-term debt............ 11,755,397 (5,700,000)(1) 17,455,397 $ 12,400,000(3) 5,055,397
Subordinated debt......... (1,800,000)(1) 1,800,000 1,800,000(3)
Other liabilities......... 1,414,551 1,414,551 1,414,551
------------ ------------ -----------
Total liabilities......... 19,517,611 27,267,611 13,067,611
------------ ------------ -----------
Common stock.............. 434,698 434,698 (200,000)(3) 634,698
Net assets acquired....... $8,482,129 8,482,129(2)
Additional paid-in
capital................. 17,490,139 17,490,139 (18,990,000)(3) 36,480,139
Retained earnings......... 3,563,896 3,563,896 3,563,896
------------ ------------ ------------ -----------
21,488,733 8,482,129 21,488,733 40,678,733
Less: Treasury stock...... 336,685 336,685 336,685
------------ ------------ ------------ -----------
Total shareholders'
equity.................. 21,152,048 8,482,129 21,152,048 40,342,048
------------ ------------ ------------ -----------
Total..................... $ 40,669,659 $8,482,129 $ 48,419,659 $53,409,659
------------ ------------ ------------ -----------
------------ ------------ ------------ -----------
</TABLE>
PRO FORMA ADJUSTMENTS TO BALANCE SHEET:
(1) To reflect cash consideration of $5,700,000, seller's subordinated note of
$1,800,000, professional fees and expenses of approximately $250,000 related
to acquisition and investment in subsidiary.
(2) To reflect assets acquired at fair value and eliminate net equity acquired.
(3) To reflect the issuance and sale of 2,000,000 shares of Common Stock at the
offering price of $10.50 per share and the application of the estimated net
proceeds after deducting underwriters' commissions and estimated expenses.
The proceeds have been assumed to be used to repay revolving credit debt of
$7,400,000, term loan debt of $5,000,000, subordinated debt of $1,800,000
and the balance of $4,990,000 used as working capital.
F-29
<PAGE>
CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FISCAL YEAR ENDED JULY 29, 1995
<TABLE>
<CAPTION>
GENDEX MEDICAL
DEL CONSOLIDATED TWELVE MONTHS ENDED PRO FORMA PRO FORMA
FISCAL YEAR ENDED JULY 31, 1995 ADJUSTMENTS AT
JULY 29, 1995 (UNAUDITED) DEBIT (CREDIT) JULY 29, 1995
----------------- ------------------- -------------- -------------
<S> <C> <C> <C> <C>
Net sales............................... $32,596,312 $20,995,954 $ 53,592,266
----------------- ------------------- -------------
Cost of sales........................... 19,177,999 18,011,318 37,189,317
Research and development................ 2,861,844 12,056 2,873,900
Selling, general and administrative..... 6,622,690 2,895,769 9,518,459
Interest expense........................ 1,191,142 $ 624,000(1) 1,815,142
----------------- ------------------- -------------
29,853,675 20,919,143 51,396,818
----------------- ------------------- -------------
Pre-tax income.......................... 2,742,637 76,811 2,195,448
Income taxes............................ 837,428 (167,000)(2) 670,428
----------------- ------------------- -------------
Net income.............................. $ 1,905,209 $ 76,811 $ 1,525,020
----------------- ------------------- -------------
----------------- ------------------- -------------
Net income per common share and common
share equivalent......................
Primary................................. $ 0.39 $ 0.31
----------------- -------------
----------------- -------------
Fully diluted........................... $ 0.39 $ 0.31
----------------- -------------
----------------- -------------
Weighted average shares outstanding..... 5,044,295(3) 5,044,295(3)
----------------- -------------
----------------- -------------
<CAPTION>
OTHER
ADJUSTMENTS PRO FORMA
DEBIT (CREDIT) AS ADJUSTED
-------------- ------------
<S> <C> <C>
Net sales............................... $ 53,592,266
------------
Cost of sales........................... 37,189,317
Research and development................ 2,873,900
Selling, general and administrative..... 9,518,459
Interest expense........................ $ (1,193,500)(4) 621,642
------------
50,203,318
------------
Pre-tax income.......................... 3,388,948
Income taxes............................ 364,018(4) 1,034,446
------------
Net income.............................. $ 2,354,502
------------
------------
Net income per common share and common
share equivalent......................
Primary................................. $ 0.34
------------
------------
Fully diluted........................... $ 0.34
------------
------------
Weighted average shares outstanding..... 2,000,000(5) 7,044,295
------------
------------
</TABLE>
F-30
<PAGE>
CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED FEBRUARY 3, 1996
<TABLE>
<CAPTION>
DEL
CONSOLIDATED GENDEX MEDICAL
SIX MONTHS SIX MONTHS
ENDED ENDED PRO FORMA PRO FORMA AT OTHER
FEBRUARY 3, JANUARY 31, ADJUSTMENTS FEBRUARY 3, ADJUSTMENTS PRO FORMA
1996 (UNAUDITED) 1996 (UNAUDITED) DEBIT (CREDIT) 1996 DEBIT (CREDIT) AS ADJUSTED
----------------- ---------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $16,800,619 $8,636,962 $ 25,437,581 $25,437,581
----------------- ---------------- -------------- -----------
Cost of sales........... 9,744,552 7,479,609 17,224,161 17,224,161
Research and
development........... 1,431,894 1,887 1,433,781 1,433,781
Selling, general and
administrative........ 3,356,117 1,305,516 4,661,633 4,661,633
Interest expense........ 595,211 $310,000(1) 905,211 $ (593,030)(4) 312,181
----------------- ---------------- -------------- -----------
15,127,774 8,787,012 24,224,786 23,631,756
----------------- ---------------- -------------- -----------
Pre-tax income (loss)... 1,672,845 (150,050) 1,212,795 1,805,825
Income taxes............ 510,218 (140,316)(2) 369,902 180,874(4) 550,776
----------------- ---------------- -------------- -----------
Net income (loss)....... $ 1,162,627 $ (150,050) $ 842,893 $1,255,049
----------------- ---------------- -------------- -----------
----------------- ---------------- -------------- -----------
Net income per common
share and common share
equivalent:
Primary................. $ 0.23 $ 0.16 $ 0.18
----------------- -------------- -----------
----------------- -------------- -----------
Fully diluted........... $ 0.23 $ 0.16 $ 0.18
----------------- -------------- -----------
----------------- -------------- -----------
Weighted average shares
outstanding........... 5,252,173(3) 5,252,173(3) 2,000,000(5) 7,252,173
----------------- -------------- -------------- -----------
----------------- -------------- -------------- -----------
</TABLE>
PRO FORMA ADJUSTMENTS TO STATEMENTS OF OPERATIONS:
(1) Interest expense on $5,700,000 of additional bank debt and $1,800,000 of
subordinated debt.
(2) Tax effect of Gendex Medical pretax income net of pro forma interest
adjustment.
(3) Weighted average shares outstanding adjusted for 3% semi-annual stock
dividend paid in December 1995.
(4) To reflect reduced interest expense and related tax effect as the result of
the assumed repayment of debt at the beginning of the respective periods
presented.
(5) To reflect the additional 2,000,000 shares of Common Stock to be issued upon
completion of this offering.
F-31
<PAGE>
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OTHER THAN THE SHARES OF COMMON STOCK TO WHICH THIS PROSPECTUS RELATES, OR AN
OFFER IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED,
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.............................. 3
Risk Factors.................................... 6
Use of Proceeds................................. 9
Price Range of Common Stock..................... 10
Dividend Policy................................. 10
Capitalization.................................. 11
Selected Consolidated Financial Data............ 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 13
Business........................................ 18
Management...................................... 30
Principal Stockholders.......................... 32
Description of Capital Stock.................... 33
Underwriting.................................... 34
Legal Matters................................... 35
Experts......................................... 35
Available Information........................... 35
Incorporation of Certain Documents by
Reference..................................... 36
Index to Financial Statements................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,000,000 Shares
[LOGO]
Common Stock
------------------------
PROSPECTUS
------------------------
Needham & Company, Inc.
Tucker Anthony
Incorporated
------------------------
June 6, 1996
- ------------------------------------------------------
- ------------------------------------------------------
