SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended February 1, 1997
Commission File Number 1-10512
DEL GLOBAL TECHNOLOGIES CORP.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-1784308
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Commerce Park, Valhalla, NY 10595
- ------------------------------- -----
(Address of principal executive offices) (Zip Code)
(914) 686-3600
--------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Common Stock - 7,400,414
<PAGE>
PART I
Item 1. Financial Statements
Consolidated Balance Sheets - February 1, 1997 and August 3, 1996
Consolidated Statements of Income for the Three Months and Six
Months ended February 1, 1997 and February 3, 1996
Consolidated Statements of Cash Flows for the Six Months ended
February 1, 1997 and February 3, 1996
Notes to Consolidated Financial Statements
-1-
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
February 1, August 3,
1997 1996
----------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 5,528,176 $ 5,817,800
Investments available-for-sale 640,283 545,651
Trade receivables 9,533,259 9,221,328
Inventory 25,496,375 23,819,882
Prepaid expenses and other current assets 1,999,939 1,675,039
----------- -----------
Total current assets 43,198,032 41,079,700
----------- -----------
FIXED ASSETS - Net 10,204,605 9,538,489
INTANGIBLES - Net 1,283,271 1,322,552
GOODWILL - Net 4,231,099 4,311,472
DEFERRED CHARGES 712,569 784,751
OTHER ASSETS 638,534 692,788
----------- -----------
TOTAL $60,268,110 $57,729,752
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 117,420 $ 120,078
Accounts payable - trade 4,193,165 3,693,580
Accrued liabilities 3,698,788 4,070,202
Income taxes 674,846 643,545
----------- -----------
Total current liabilities 8,684,219 8,527,405
----------- -----------
LONG-TERM LIABILITIES
Long-term debt (less current
portion included above) 531,620 499,852
Other 795,709 789,589
Deferred income taxes 843,378 843,378
----------- -----------
Total liabilities 10,854,926 10,660,224
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, $.10 par value;
Authorized - 10,000,000 shares;
Issued and outstanding -
7,467,669 shares at February 1, 1997
and 7,440,108 shares at August 3, 1996 746,767 722,340
Additional paid-in capital 45,307,346 43,272,713
Retained earnings 3,769,066 3,411,160
----------- -----------
49,823,179 47,406,213
----------- -----------
Less common stock in treasury -
67,255 shares at February 1, 1997
and 58,255 shares at August 3, 1996 409,995 336,685
----------- -----------
Total shareholders' equity 49,413,184 47,069,528
----------- -----------
TOTAL $60,268,110 $57,729,752
=========== ===========
See notes to consolidated financial statements
-2-
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ----------------------------
Feb. 1, Feb. 3, Feb. 1, Feb. 3,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 12,691,871 $ 9,329,438 $ 25,003,255 $ 16,800,619
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales 7,558,599 5,553,918 15,064,837 9,744,552
Research and development 1,115,612 789,063 2,192,439 1,431,894
Selling, general & administrative 2,434,208 1,784,151 4,759,747 3,356,117
Interest (income) or expense - net (27,840) 285,984 (47,296) 595,211
------------ ------------ ------------ ------------
11,080,579 8,413,116 21,969,727 15,127,774
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 1,611,292 916,322 3,033,528 1,672,845
PROVISION FOR INCOME TAXES 491,444 283,261 925,226 510,218
------------ ------------ ------------ ------------
NET INCOME $ 1,119,848 $ 633,061 $ 2,108,302 $ 1,162,627
============ ============ ============ ============
Per share amounts:
Net income per common share
and common share equivalents
- primary $ .13 $ .12 $ .25 $ .22
============ ============ ============ ============
- fully diluted $ .13 $ .11 $ .25 $ .21
============ ============ ============ ============
Weighted average number of
common shares outstanding
and common share equivalents
- primary 8,583,517 5,587,027 8,523,422 5,566,839
============ ============ ============ ============
- fully diluted 8,620,692 5,597,408 8,561,147 5,572,030
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
---------------------------
Feb. 3, Feb. 3,
1997 1996
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,108,302 $ 1,162,627
Adjustments to reconcile net
income to net cash provided
by operating activities:
Imputed Interest 33,968 33,133
Depreciation 471,697 338,919
Amortization 263,782 194,617
Changes in assets and liabilities:
(Increase) decrease in trade receivables (311,931) 731,732
Increase in cost and estimated
earnings in excess of billings
billings on uncompleted contracts -- (8,183)
Increase in inventory (1,676,493) (1,870,199)
Increase in prepaid and other current assets (350,951) (503,223)
Decrease in other assets 27,402 37,861
Increase in accounts payable - trade 499,585 208,502
Decrease in accrued liabilities (371,412) (346,549)
Increase in income taxes payable 178,918 266,768
----------- -----------
Net cash provided by operating activities 872,867 246,005
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for fixed assets (1,137,813) (761,231)
Net cash paid on acquisition of
subsidiaries (15,000) --
Investment in marketable securities - net (94,632) (119,256)
Payments to former shareholders of
subsidiary acquired (27,850) (26,250)
----------- -----------
Net cash used in investing activities (1,275,295) (906,737)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayment of) bank borrowing 29,110 (147,554)
Payment for repurchase of shares (73,310) (19,770)
Proceeds from exercise of stock options
and warrants 175,338 491,867
Other (18,334) (7,748)
----------- -----------
Net cash provided by financing activities 112,804 316,795
----------- -----------
(Continued)
See notes to consolidated financial statements
-4-
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
-------------------------
Feb. 1, Feb 3,
1997 1996
------- ------
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (289,624) $(343,937)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 5,817,800 505,989
----------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,528,176 $ 162,052
=========== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 27,950 $ 569,505
=========== =========
Income taxes paid $ 747,057 $ 269,405
=========== =========
(Concluded)
See notes to consolidated financial statements
-5-
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 In the opinion of the Company's management, the accompanying
unaudited consolidated financial statements contain all
adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the results of the Company's
financial position as of February 1, 1997 and the results of its
operations and its cash flows for the six months ended February
1, 1997 and February 3, 1996.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements as of August 3,
1996.
The consolidated financial statements should be read in
conjunction with the notes to the financial statements as of
August 3, 1996.
NOTE 2 The results of operations for the six month period ended February
1, 1997 are not necessarily indicative of the results to be
expected for the full year.
NOTE 3 Inventory is stated at a lower of cost (first-in, first-out) or
market.
Inventories and their effect on cost of sales are determined by
physical count for annual reporting purposes and are estimated by
management for interim reporting purposes.
Inventory consists of the following:
Feb. 1, Aug. 3,
1997 1996
----------- -----------
Finished goods $ 5,848,404 $ 5,463,847
Work-in-process 10,209,391 9,538,081
Raw material and purchased parts 9,438,580 8,817,954
----------- -----------
Total $25,496,375 $23,819,882
=========== ===========
NOTE 4 FIXED ASSETS
Fixed assets consist of the following:
Feb. 1, Aug. 3,
1997 1996
----------- -----------
Land $ 694,046 $ 694,046
Building 2,146,025 2,146,025
Machinery and equipment 9,268,032 8,426,324
Furniture and fixtures 1,235,764 833,880
Leasehold improvements 1,085,642 1,043,996
Construction in progress 263,999 435,102
Transportation equipment 30,103 11,425
---------- -----------
14,723,611 13,590,798
Less accumulated depreciation and
amortization 4,519,006 4,052,309
----------- -----------
Net fixed assets $10,204,605 $ 9,538,489
=========== ===========
-6-
<PAGE>
NOTE 5 Net income per common share was computed using the treasury stock
method. The weighted average number of common shares and common
share equivalents for the period and for all periods presented
includes the effect of the 3 percent stock dividend (see Note 6)
declared on November 19, 1996.
NOTE 6 On November 19, 1996, the Company declared a 3 percent stock
dividend to holders of record on December 4, 1996, payable
December 23, 1996.
NOTE 7 ACQUISITION
As of March 6, 1996, the Company acquired certain selected assets
of the Gendex Medical Division of Dentsply International Inc.
("Dentsply"), which have been consolidated as of that date. The
new entity formed is the Gendex-Del Medical Imaging Corp.
("Gendex-Del").
Unaudited pro-forma financial information for the 3 and 6 month
periods ended February 3, 1996, as if the Gendex Medical
acquisition occurred at the beginning of the respective periods,
is as follows:
Three Months Six Months
Ended Ended
Feb. 3, 1996 Feb. 3, 1996
------------ ------------
Net Sales
$ 13,325,247 $25,663,032
=============== ===========
Income before provision
for income taxes $ 710,425 $ 1,257,247
=============== ===========
Net Income $ 493,745 $ 873,782
=============== ===========
Net income per common share
and common share equivalents
primary and fully diluted $ .09 $ .16
=============== ===========
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 the results to be
achieved in the future.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the three months ended February 1, 1997 were
approximately $12.7 million compared to approximately $9.3 million, an increase
of approximately 36.0 percent over the corresponding period in the prior year.
Net sales for the six months ended February 1, 1997 were approximately $25.0
million as compared to approximately $16.8 million for the six months ended
February 3, 1996, an increase of approximately 48.8 percent. These increases are
due to the inclusion of net sales from the Gendex-Del subsidiary.
Cost of sales, as a percentage of net sales for the three months ended
February 1, 1997, was 59.6 percent compared to 59.5 percent for the prior
corresponding period. Cost of sales, as a percentage of net sales, for the six
months ended February 1, 1997 was 60.3 percent as compared to 58.0 percent for
the six months ended February 3, 1996. This change was due to the change in
product mix in the periods. The current year period includes the gross margins
of medical imaging systems manufactured by Gendex-Del.
Research and development expenses increased to approximately $1.1
million for the three months ended February 1, 1997 from approximately $789,000
for the three months ended February 3, 1996. Research and development expenses
increased to approximately $2.2 million for the six months ended February 1,
1997 from approximately $1.4 million for the six months ended February 3, 1996.
The increase was attributable to Gendex-Del and the increase in other research
and development activities. The Company continues to invest in research and
development in order to introduce new state-of-the-art products for its medical
and industrial markets.
Selling, general and administrative expenses were approximately $2.4
million for the three months ended February 1, 1997 as compared to approximately
$1.8 million for the same period in the prior year. Selling, general and
administrative expenses increased to approximately $4.8 million for the six
months ended February 1, 1997 from approximately $3.4 million for the same
period in the prior year. These increases are primarily attributable to the
inclusion of the selling, general and administrative expenses of Gendex-Del.
Net interest income was approximately $28,000 for the three months
ended February 1, 1997 as compared to net interest expense of approximately
$286,000 for the corresponding period in the prior year. Net interest income was
approximately $47,000 for the six months ended February 1, 1997 compared to
approximately $595,000 of interest expense for the corresponding prior period.
Interest expense was significantly reduced as the Company paid off substantially
all of its debt. Interest income resulted from the investment of some of the
proceeds from the public offering of the Company's common stock, which were in
money market instruments and high grade commercial paper.
Income tax expense was 30.5 percent of pre-tax income for the six
months ended February 1, 1997 and for the six months ended February 3, 1996. The
decrease from statutory rates is primarily due to sales being made through the
Company's Foreign Sales Corporation, research and development and other tax
credits.
Net income increased to approximately $1.1 million for the three months
ended February 1, 1997, an increase of approximately 76.9 percent from
approximately $633,000 for the prior corresponding period. Net income per common
share for the three months ended February 1, 1997 increased to $.13 from $.12,
on a primary basis, even though the weighted number of common shares outstanding
and common share equivalents increased approximately 53.6 percent to 8,583,517
from 5,587,027 shares in the prior corresponding period. Net income per common
share for the three months ended February 1, 1997 increased to $.13 from $.11,
on a fully diluted basis, even though the weighted number of common shares
outstanding and common share equivalents increased approximately 54.0 percent to
8,620,692 from 5,597,408 shares in the prior corresponding period. Net income
-8-
<PAGE>
increased to approximately $2.1 million for the six months ended February 1,
1997, an increase of approximately 81.3 percent from approximately $1.2 million
for the prior corresponding period. Net income per common share for the six
months ended February 1, 1997 increased to $.25 from $.22, on a primary basis,
even though the weighted number of common shares outstanding and common share
equivalents increased approximately 53.1 percent to 8,523,422 from 5,566,839
shares in the prior corresponding period. Net income per common share for the
six months ended February 1, 1997 increased to $.25 from $.21, on a fully
diluted basis, even though the weighted number of common shares outstanding and
common share equivalents increased approximately 53.6 percent to 8,561,147 from
5,572,030 shares in the prior corresponding period. The increases in net income
for the three and six month periods ended February 1, 1997 are primarily due to
higher sales to the Company's medical imaging and diagnostic product customers.
The Company's growth strategy continues to be to grow internally by
expanded product development and marketing and by acquisition and/or joint
ventures with specific focus on cost-effective medical imaging and diagnostic
products.
The backlog of unshipped orders at February 1, 1997 was approximately
$22.2 million.
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 the
Company's common stock.
Working Capital. At February 1, 1997 and August 3, 1996, the Company's
working capital was approximately $34.5 million and $32.6 million, respectively.
On February 1, 1997 and August 3, 1996 the Company had approximately $5.5
million and $5.8 million, respectively, in cash and cash equivalents.
Inventory at February 1, 1997 increased approximately $1.7 as compared
to August 3, 1996. Major new orders received in the quarter ended February 1,
1997 resulted in the increase of inventory levels.
Credit Facility and Borrowing. At February 1, 1997, the Company had a
$14.0 million revolving credit line and a $10.0 million acquisition credit line.
The available portion of the revolving credit line was approximately $13.6
million, after deducting outstanding letters of credit of approximately
$262,500, and $9.6 million was available under its acquisition credit line.
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
$608,000 and $1.1 million for capital equipment for the three month and six
month periods ended February 1, 1997, respectively.
The Company anticipates that cash generated from operations and amounts
available under its bank lending facilities will be sufficient to satisfy its
current operating cash needs.
-9-
<PAGE>
PART II
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Submission to a Vote of Security Holders
At the annual meeting of stockholders of the Company held on
February 13, 1997, the stockholders:
(a) Elected the following directors: Natan V. Bertman,
David Michael, Seymour Rubin James Tiernan and
Leonard A. Trugman.
Election of Directors For Withheld
--------------------- --------- --------
L.A. Trugman 6,681,327 75,940
N.V. Bertman 6,409,791 347,476
D. Michael 6,682,226 75,041
S. Rubin 6,678,742 78,525
J. Tiernan 6,675,030 82,237
(b) Approved the proposal to amend the Company's Certificate
of Incorporation to increase the number of authorized
shares of the Company's common stock from 10,000,000 to
20,000,000 shares.
For Against Abstain Broker No Vote
--------- ------- ------- --------------
6,386,948 313,972 54,575 1,772
Item 5. Other Information
(i) On November 19, 1996, the Registrant declared a 3
percent stock dividend payable on December 23, 1996 to
holders of record on December 4, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 3.1 - Certificate of Amendment of the
Certificate of Incorporation
dated February 13, 1997
Exhibit 11 - Computation of Earnings per
Common Share
Exhibit 27 - Financial Data Schedule
(b) Report on Form 8-K: None
-10-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
DEL GLOBAL TECHNOLOGIES CORP.
/S/LEONARD A. TRUGMAN
---------------------
Leonard A. Trugman
Chairman of the Board,
Chief Executive Officer
and President
/S/MICHAEL H. TABER
---------------------
Michael H. Taber
Vice President - Finance,
Secretary and Chief
Accounting Officer
Dated: March 11, 1997
-11-
CERTIFICATE OF AMENDMENT OF THE
CERTIFICATE OF INCORPORATION
OF
DEL GLOBAL TECHNOLOGIES CORP.
Under Section 805 of the Business Corporation Law
----------------------------------------------
It is hereby certified that:
FIRST: The name of the Corporation is DEL GLOBAL TECHNOLOGIES CORP. (the
"Corporation").
SECOND: The certificate of incorporation of the Corporation was filed by
the Department of State on October 26, 1954. The name under which the
Corporation was formed is Del Electronics Corp.
THIRD: The amendment of the certificate of incorporation of the Corporation
effected by this certificate of amendment is as follows:
to increase the number of authorized shares of common stock, $.10
par value, from ten million (10,000,000) shares to twenty million
(20,000,000) shares, $.10 par value.
FOURTH: To accomplish the foregoing amendment, paragraph "Third" of the
certificate of incorporation of the Corporation is hereby amended to read as
follows:
THIRD: the aggregate number of shares which the Corporation shall have
authority to issue is Twenty Million (20,000,000) shares of common stock, $.10
par value."
FIFTH: The foregoing amendment of the certificate of incorporation of the
Corporation was authorized by the Board of Directors and followed by the
majority vote of the holders of all of the outstanding shares of the Corporation
entitled to vote on such amendment of the certificate of incorporation.
IN WITNESS WHEREOF, we have hereunto signed this certificate this 13th day
of February, 1997, and affirmed that the statements made herein are true under
penalties of perjury.
/S/LEONARD TRUGMAN
- ------------------
Leonard A. Trugman, President
/S/MICHAEL TABER
- ----------------
Michael Taber, Secretary
EXHIBIT 11
DEL GLOBAL TECHNOLOGIES CORP. & SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE MONTHS AND SIX MONTHS ENDED FEBRUARY 1, 1997
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
February 1, 1997 February 1, 1997
----------------------- -----------------------
Fully Fully
Primary Diluted Primary Diluted
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $1,119,848 $1,119,848 $2,108,302 $2,108,302
========== ========== ========== ==========
Reconciliation of weighted
average number of shares
outstanding to amount used
in earnings per share computation:
Weighted average number of
shares outstanding 7,499,879 7,499,879 7,446,246 7,446,246
Add - shares issuable from assumed
exercise of options under the
Treasury Stock method 1,083,638 1,120,813 1,077,176 1,114,901
---------- ---------- ---------- ----------
Weighted average number of shares
outstanding as adjusted 8,583,517 8,620,692 8,523,422 8,561,147
========== ========== ========== ==========
Net income per common share $ 0.13 $ 0.13 $ 0.25 $ 0.25
========== ========== ========== ==========
</TABLE>
The Company utilized the Treasury Stock method for computing net income per
common share.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000027748
<NAME> DEL GLOBAL TECHNOLOGIES CORP.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-02-1997
<PERIOD-START> AUG-04-1996
<PERIOD-END> FEB-01-1997
<EXCHANGE-RATE> 1.000
<CASH> 5,528,176
<SECURITIES> 640,283
<RECEIVABLES> 9,752,322
<ALLOWANCES> 219,063
<INVENTORY> 25,496,375
<CURRENT-ASSETS> 43,198,032
<PP&E> 14,723,611
<DEPRECIATION> 4,519,006
<TOTAL-ASSETS> 60,268,110
<CURRENT-LIABILITIES> 8,684,219
<BONDS> 0
0
0
<COMMON> 746,767
<OTHER-SE> 48,666,417
<TOTAL-LIABILITY-AND-EQUITY> 49,413,184
<SALES> 25,003,255
<TOTAL-REVENUES> 25,003,255
<CGS> 15,064,837
<TOTAL-COSTS> 15,064,837
<OTHER-EXPENSES> 6,952,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (47,296)
<INCOME-PRETAX> 3,033,528
<INCOME-TAX> 925,226
<INCOME-CONTINUING> 2,108,302
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,108,302
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
