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 May 1, 1999
Commission File Number 0-3319
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 business on June 9, 1999.
Common Stock - 7,772,884
<PAGE>
PART I
Item 1. Financial Statements
Consolidated Balance Sheets - May 1,1999 and August 1, 1998
Consolidated Statements of Income for the Three Months and Nine
Months Ended May 1, 1999 and May 2, 1998
Consolidated Statements of Cash Flows for the Nine Months Ended
May 1, 1999 and May 2, 1998
Notes to Consolidated Financial Statements
-1-
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
May 1, August 1,
1999 1998
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 952,144 $ 3,401,697
Investments available-for-sale 1,068,384 913,125
Trade receivables - net 15,927,676 14,341,744
Cost and estimated earnings in
excess of billings on
uncompleted contracts 5,441,540 3,306,673
Inventory 34,936,021 29,195,262
Prepaid expenses and other
current assets 2,306,413 1,358,847
----------- -----------
Total current assets 60,632,178 52,517,348
----------- -----------
FIXED ASSETS - Net 13,864,911 12,739,509
INTANGIBLES - Net 812,782 941,443
GOODWILL - Net 5,648,726 4,809,255
DEFERRED CHARGES 294,889 387,044
OTHER ASSETS 984,183 962,028
----------- -----------
TOTAL $82,237,669 $72,356,627
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 550,309 $ 120,410
Accounts payable - trade 7,016,236 5,403,403
Accrued liabilities 4,496,002 3,938,623
Deferred compensation liability 1,173,749 913,046
Income taxes 1,436,813 394,540
----------- -----------
Total current liabilities 14,673,109 10,770,022
----------- -----------
LONG-TERM LIABILITIES
LONG-TERM DEBT (less current
portion included above) 1,263,773 240,273
OTHER 591,206 484,366
DEFERRED INCOME TAXES 1,598,709 1,406,162
----------- -----------
Total liabilities 18,126,797 12,900,823
----------- -----------
SHAREHOLDERS' EQUITY
Common stock, $.10 par value;
Authorized 20,000,000 shares;
Issued and outstanding -
8,157,979 shares at May 1, 1999
and 7,988,993 shares at
August 1, 1998 815,799 798,898
Additional paid-in capital 50,085,345 49,124,456
Retained earnings 17,168,435 12,360,906
----------- -----------
68,069,579 62,284,260
Less common stock in treasury -
445,237 shares at May 1, 1999
and 299,746 at August 1, 1998 3,958,707 2,828,456
----------- -----------
Total shareholders' equity 64,110,872 59,455,804
----------- -----------
TOTAL $82,237,669 $72,356,627
=========== ===========
See notes to consolidated financial statements
-2-
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
--------------------------- ---------------------------
May 1, May 2, May 1, May 2,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 18,684,525 $ 16,682,726 $ 49,416,143 $ 44,565,977
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Cost of sales 11,216,870 9,995,579 29,204,291 26,546,139
Research and development 1,753,406 1,548,915 4,707,649 4,249,161
Selling, general and
administrative 3,064,658 3,019,143 8,435,479 7,897,980
Interest expense (income)
- net 78,577 (5,530) 101,289 (104,080)
------------ ------------ ------------ ------------
16,113,511 14,558,107 42,448,708 38,589,200
------------ ------------ ------------ ------------
INCOME BEFORE PROVISION
FOR INCOME TAXES 2,571,014 2,124,619 6,967,435 5,976,777
PROVISION FOR INCOME TAXES 797,015 679,878 2,159,905 1,912,569
------------ ------------ ------------ ------------
NET INCOME $ 1,773,999 $ 1,444,741 $ 4,807,530 $ 4,064,208
============ ============ ============ ============
NET INCOME PER COMMON
SHARE AND COMMON SHARE
EQUIVALENTS:
BASIC $ .23 $ .19 $ .63 $ .54
============ ============ ============ ============
DILUTED $ .22 $ .18 $ .59 $ .50
============ ============ ============ ============
Weighted average number of
common shares outstanding 7,700,294 7,541,988 7,658,666 7,484,513
============ ============ ============ ============
Weighted average number of
common shares outstanding and
common share equivalents 8,163,269 8,228,828 8,163,470 8,191,038
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements
-3-
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
--------------------------
May 1, May 2,
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,807,530 $ 4,064,208
Adjustments to reconcile net income
to net cash provided by operating
activities net of effects of acquisitions:
Depreciation 1,287,436 1,026,803
Amortization 508,615 405,290
Deferred income tax provision 192,547 115,602
Tax benefit from exercise of stock options
and warrants 450,530 780,959
Imputed interest 62,986 62,751
Amortization of stock-based compensation 16,822 101,123
Changes in assets and liabilities:
Increase in trade receivables (1,585,932) (1,836,497)
Increase in cost and estimated earnings
in excess of billings on uncompleted
contracts (2,134,867) (1,018,231)
Increase in inventory (5,290,759) (2,530,225)
Increase in prepaid and other current assets (1,014,802) (530,755)
(Increase) decrease in other assets (22,875) 1,285
Increase in accounts payable - trade 1,612,833 1,577,410
Increase in accrued liabilities 584,712 789,818
Increase in deferred compensation liability 260,703 136,510
Increase (decrease) in income taxes payable 1,042,273 (163,904)
----------- -----------
Net cash provided by operating activities 777,752 2,982,147
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash paid on acquisition of subsidiaries (550,018) (899,926)
Expenditures for fixed assets (2,412,838) (1,731,275)
Investment in marketable securities (114,459) (160,537)
Payments to former shareholders of
subsidiaries acquired (119,569) (56,772)
----------- -----------
Net cash used in investing activities (3,196,884) (2,848,510)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayment of) bank
borrowing 653,399 (147,272)
Payment for repurchase of shares (1,130,251) (1,430,852)
Proceeds from exercise of stock options
and warrants 448,498 1,275,801
Other (2,067) 40,497
----------- -----------
Net cash used in financing activities (30,421) (261,826)
----------- -----------
(Continued)
See notes to consolidated financial statements
-4-
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
--------------------------
May 1, May 2,
1999 1998
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS $(2,449,553) $ (128,189)
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 3,401,697 6,070,608
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 952,144 $ 5,942,419
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 142,395 $ 36,109
=========== ===========
Income taxes paid $ 473,940 $ 1,091,188
=========== ===========
SUPPLEMENTAL SCHEDULE OF INVESTING AND
FINANCING ACTIVITIES:
Acquisition of selected assets $ 1,508,702 $ 994,455
Acquisition costs in accrued expenses -- (94,529)
Payment due under acquisition term notes (958,684) --
----------- -----------
Net cash paid to acquire selected assets $ 550,018 $ 899,926
=========== ===========
See notes to consolidated financial statements
-5-
<PAGE>
DEL GLOBAL TECHNOLOGIES CORP. AND 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 May 1, 1999 and the results of its
operations and its cash flows for the nine months ended May 1,
1999 and May 2, 1998.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements as of August 1,
1998.
The consolidated financial statements should be read in
conjunction with the notes to the financial statements as of
August 1, 1998.
Certain reclassifications have been made in the prior period's
financial statements to correspond to the current period's
presentation.
NOTE 2 The results of operations for the three month and nine month
periods ended May 1, 1999 are not necessarily indicative of the
results to be expected for the full year.
NOTE 3 INVESTMENTS AND DEFERRED COMPENSATION
At May 1, 1999, the Company had set aside $1,173,749 of deferred
compensation for its President and certain key executives. Of
this amount $153,926 was in cash and $1,068,384 was in
investments available-for-sale. Included in investments
available-for-sale are $48,561 of U. S. Treasury bonds and equity
securities held by the Company for its own account and are
recorded at fair market. At August 1, 1998, the Company had
$913,046 of deferred compensation for its President which was in
investments available-for sale. The deferred compensation
liability at May 1, 1999 and August 1, 1998 was $1,173,749 and
$913,046, respectively. Gains and losses on the investments held
to fund the deferred compensation, either recognized or realized,
inure to the benefit or detriment of the President's or key
executives' individual deferred compensation. Realized and
unrealized gains and losses on investments held for the Company's
account in the nine-month period ended May 1, 1999 were not
material and are recorded in the financial statements.
NOTE 4 PERCENTAGE OF COMPLETION ACCOUNTING
Nine Months
Ended
May 1, August 1, May 1,
1999 1998 1999
----------- ----------- -----------
Costs incurred on
uncompleted contracts $12,151,273 $ 6,804,554 $ 5,346,719
Estimated earnings 7,611,727 4,178,103 3,433,624
----------- ----------- -----------
19,763,000 10,982,657 8,780,343
Less billings to date 14,321,460 7,675,984 6,645,476
----------- ----------- -----------
Costs and estimated
earnings in excess of
billings on uncompleted
contracts $ 5,441,540 $ 3,306,673 $ 2,134,867
=========== =========== ===========
The backlog of unshipped contracts being accounted for under the
percentage of completion method of accounting was approximately
$4.2 million at May 1, 1999.
-6-
<PAGE>
NOTE 5 INVENTORY
Inventory is stated at the 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: May 1, August 1,
1999 1998
----------- -----------
Finished goods $ 5,801,962 $ 4,848,572
Work-in-process 15,963,420 11,333,936
Raw material and purchased parts 13,170,639 13,012,754
----------- -----------
Total $34,936,021 $29,195,262
=========== ===========
NOTE 6 FIXED ASSETS
Fixed assets consist of the following:
May 1, August 1,
1999 1998
----------- -----------
Land $ 694,046 $ 694,046
Building 2,146,025 2,146,025
Machinery and equipment 13,538,604 11,370,262
Furniture and fixtures 1,582,778 1,484,310
Leasehold improvements 1,643,192 1,613,883
EDP equipment 2,007,991 1,891,272
Transportation equipment 30,103 30,103
----------- -----------
21,642,739 19,229,901
Less accumulated depreciation
and amortization 7,777,828 6,490,392
----------- -----------
Net fixed assets $13,864,911 $12,739,509
=========== ===========
NOTE 7 NET INCOME PER COMMON SHARE AND COMMON SHARE EQUIVALENTS
During the year ended August 1, 1998, the Company adopted
Statement of Financial Accounting Standard ("SFAS") No. 128,
"Earnings Per Share." This statement is effective for financial
statements issued for periods ending after December 15, 1997.
Basic and diluted earnings per share have been restated for all
prior periods to reflect the adoption of SFAS No. 128.
NOTE 8 ACQUISITION
In December 1998, the Company acquired certain selected assets of
Acoma Medical Imaging Inc. for approximately $1.4 million in
cash, including expenses, payable over a three-year period. The
acquired assets consisted of inventory and technology.
NOTE 9 EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
Reporting Comprehensive Income. In June 1997, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 130,
"Reporting Comprehensive Income." This statement is effective for
years beginning after December 15, 1997. Management has evaluated
the effect of this statement on its financial reporting from the
adoption of this statement and has found that no further
disclosures are needed.
Disclosures About Segments of an Enterprise and Related
Information. In June 1997, the FASB issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related
Information." SFAS No. 131 requires the reporting of profit and
loss, specific revenue and expense items and assets for
-7-
<PAGE>
reportable segments. It also requires the reconciliation of total
segment revenues, total segment profit and loss, total segment
assets and other amounts disclosed for segments, to the
corresponding amounts in the general purpose financial
statements. This statement is effective for fiscal years
beginning after December 15, 1997. The Company has not yet
determined what additional disclosures may be required in
connection with adopting SFAS No. 131.
Disclosures about Pensions and Other Postretirement Benefits. In
February 1998, the FASB issued SFAS No. 132, "Employers
Disclosures about Pensions and Other Postretirement Benefits."
This statement revises employers' disclosures about pensions and
other postretirement benefit plans. It does not change the
measurement or recognition of those plans. SFAS No. 132 is
effective for fiscal years beginning after December 15, 1997.
Management does not anticipate that this statement will have a
significant effect on the Company's consolidated financial
statements.
Disclosures about Derivative Instruments and Hedging Activities.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS No. 133 is effective for
all quarters of all fiscal years beginning after December 15,
1999. Management does not anticipate that this statement will
have any effect on the Company's consolidated financial
statements.
-8-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This Management Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements. Such statements involve various
risks that may cause actual results to differ materially. These risks include,
but are not limited to, the ability of the Company to grow internally or by
acquisition and to integrate acquired businesses, changing industry or
competitive conditions, and other risks referred to in the Company's
registration statements and periodic reports filed with the Securities and
Exchange Commission.
OVERVIEW
The Company's net sales have increased as a result of both
internal growth and acquisitions. The Company has completed five acquisitions in
the past five years: Dynarad (a designer and manufacturer of medical imaging
systems and 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; Gendex-Del (a
manufacturer of medical imaging systems) in fiscal 1996, X-Ray Technologies,
Inc. (a manufacturer of medical imaging systems) in fiscal 1998 and Acoma
Medical Imaging Inc. (a manufacturer of medical imaging systems) in fiscal 1999.
The Company's net sales have increased from approximately $24.3 million in
fiscal 1994 to approximately $62.3 million in fiscal 1998, a compounded annual
growth rate of 26.5%.
During the past five 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 $9.4 million or 38.7%
of total net sales in fiscal 1994 to approximately $35.6 million or 65% of total
net sales and approximately $43.9 million or 71% of total net sales in fiscal
years 1997 and 1998, respectively.
Management believes that recent cost containment trends in the
healthcare industry have created opportunities for its cost-effective medical
imaging systems and subsystems in domestic and international markets. Some of
these trends are increased demand for lower cost medical equipment, outsourcing
of systems and critical electronic subsystems by leading original equipment
manufacturers ("OEMs"), increased demand for certain diagnostic procedures and
lower cost medical services in the global marketplace.
RESULTS OF OPERATIONS
Net sales for the three months ended May 1, 1999 were
approximately $18.7 million as compared to approximately $16.7 million for the
three months ended May 2, 1998, an increase of 12.0%. Net sales for the nine
months ended May 1, 1999 were approximately $49.4 million as compared to
approximately $44.6 million for the nine months ended May 2, 1998, an increase
of 10.9%. These increases were due to internal growth from existing operations.
Cost of sales, as a percentage of net sales, for the three and
nine months ended May 1, 1999 were 60.0% and 59.1%, respectively, as compared to
59.9% and 59.6%, respectively, for the prior corresponding periods.
Research and development expenses were approximately $1.8
million and $1.5 million for the three month periods ended May 1, 1999 and May
2, 1998, respectively. Research and development expenses increased to
approximately $4.7 million for the nine months ended May 1, 1999 from
approximately $4.2 million for the nine months ended May 2, 1998, an increase of
10.8%. The increase was primarily due to new product development. 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
$3.1 million, or 16.4% of net sales, for the three months ended May 1, 1999, as
compared to approximately $3.0 million, or 18.1% of net sales, for the same
period in the prior year, a decrease of 1.7%. Selling, general and
administrative expenses were approximately $8.4 million, or 17.1% of net sales,
for the nine months ended May 1, 1999 as compared to approximately $7.9 million,
or 17.7% of net sales, for the same period in the prior year, a decrease of .6%.
Net interest expense was approximately $79,000 for the three
months ended May 1, 1999 as compared to interest income of approximately $6,000
for the corresponding period in the prior year. Net interest expense was
approximately $101,000 for the nine months ended May 1, 1999, as compared to net
interest income of approximately $104,000 for the corresponding period in the
prior year. Net interest expense was the result of higher levels of long-term
debt for the three and nine month periods ended May 1, 1999.
-9-
<PAGE>
Income tax expense was 31% of pretax income for the three and
nine months ended May 1, 1999 and 32% for the three and nine months ended May 2,
1998. 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 $1.8 million for the
three months ended May 1, 1999, an increase of 22.8%, from approximately $1.4
million for the prior corresponding period. Basic earnings per share for the
three months ended May 1, 1999 increased to $.23 from $.19 for the three months
ended May 2, 1998, an increase of 21.1%. Diluted earnings per share rose to $.22
from $.18 for the three months ended May 1, 1999 and May 2, 1998, respectively,
an increase of 22.2%. The weighted average number of common shares outstanding
at May 1, 1999 were 7,700,294, as compared to 7,541,988 at May 2, 1998. The
weighted average number of common shares and common share equivalents at May 1,
1999 decreased to 8,163,269 from 8,228,828 at May 2, 1998. Net income increased
to approximately $4.8 million for the nine months ended May 1, 1999, an increase
of 18.3%, from approximately $4.1 million for the prior corresponding period.
Basic earnings per share for the nine months ended May 1, 1999 increased to $.63
from $.54 for the nine months ended May 2, 1998, an increase of 16.7%. Diluted
earnings per share rose to $.59 from $.50 for the nine months ended May 1, 1999
and May 2, 1998, respectively, an increase of 18%. The weighted average number
of common shares outstanding at May 1, 1999 were 7,658,666 as compared to
7,484,513 at May 2, 1998. The weighted average number of common shares and
common share equivalents at May 1, 1999 decreased to 8,163,470 from 8,191,038 at
May 2, 1998. The increase in net income for the three and nine month periods
ended May 1, 1999 was due to internal growth and improved gross margins.
The backlog of unshipped orders at May 1, 1999 was
approximately $42 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 May 1, 1999 and August 1, 1998, the
Company's working capital was approximately $46.0 million and $41.7 million,
respectively. At such dates the Company had approximately $952,000 and $3.4
million, respectively, in cash and cash equivalents.
Trade receivables at May 1, 1999 increased approximately $1.6
million as compared to August 1, 1998, primarily due to increased sales levels.
Cost and estimated earnings in excess of billings on
uncompleted contracts increased to approximately $5.4 million at May 1, 1999
from approximately $3.3 million at August 1, 1998 due to new contracts and
additional work performed during the period on long term contracts accounted for
under the percentage of completion method of accounting.
Inventory at May 1, 1999 increased approximately $5.7 million,
as compared to August 1, 1998, primarily because of higher levels of sales of
medical systems and subsystems and the acquisition of Acoma Medical Imaging Inc.
inventory during the period.
Prepaid expenses and other current assets at May 1, 1999
increased approximately $948,000, as compared to August 1, 1998, due to
increases in prepaid trade show expenses and prepaid expenses related to
increased acquisition activity.
Trade accounts payable increased approximately $1.6 million at
May 1, 1999 from August 1, 1998 primarily because of higher levels of sales of
medical systems and subsystems.
Credit Facility and Borrowing. At May 1, 1999, 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 $13.4
million, after deducting borrowings of $445,000 and outstanding letters of
credit of approximately $125,000.
There was $9.5 million available under the Company's acquisition credit line.
Capital Expenditures. The Company continues to invest in
capital equipment, principally for its manufacturing operations, in order to
improve its manufacturing efficiency and capacity. The Company has expended
approximately $2.4 million for capital equipment for the nine-month period ended
May 1, 1999.
-10-
<PAGE>
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.
Shareholders' Equity. Shareholders' equity increased to
approximately $64.1 million at May 1, 1999 from approximately $59.5 million at
August 1, 1998. This was primarily due to the results of operations and the
exercise of 147,143 stock options and 15,000 warrants with proceeds of $448,498,
reduced by the repurchase of 145,491 shares at a cost of $1,130,251.
Year 2000. The Company has initiated a company-wide program and
developed a formal plan to identify, evaluate and implement changes to products,
computer systems, applications and infrastructure necessary to achieve a year
2000 date conversion with no effect on customers or disruption to business
operations. These actions are necessary to ensure that all systems and business
applications will recognize and process the year 2000 and beyond.
The Company uses purchased software programs for a variety of
functions, including drafting and design, general accounting and manufacturing
applications. Currently, all of the Company's products, software for design and
drafting applications and accounting and manufacturing are fully compliant.
Other peripheral computer systems and software have been evaluated and steps to
achieve compliance are being implemented. At this time, the Company believes
that it does not have any internal mission critical year 2000 issues that it
cannot remedy.
As part of the year 2000 readiness process, significant
customers, service providers, vendors and suppliers who are believed to be
critical to business operations after January 1, 2000 have been identified and
steps are underway in an attempt to reasonably ascertain their stage of
readiness. The Company is surveying them primarily through written
correspondence. With respect to mission critical third parties, the Company
intends to create contingency plans to mitigate its exposure to such third
parties that are not year 2000 compliant. In the event any mission critical
third parties do not achieve full compliance, the Company believes it has
sufficient alternative resources upon which to rely. Despite its efforts to
ascertain the readiness of its customers, suppliers and service providers, the
Company cannot be certain as to the actual year 2000 readiness of these third
parties or the impact their noncompliance may have on the Company's future
financial position, the results of its operations or its cash flows.
With respect to the Company's internal year 2000 compliance,
the Company has and expects to incur capital equipment expenditures as well as
staff and consulting costs to achieve compliance. The Company believes that all
costs to be incurred for all year 2000 compliance related projects will not have
a material effect on the Company's future financial position, results of its
operations or its cash flows.
The Company expects to achieve full compliance no later than
September 30, 1999.
EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
Reporting Comprehensive Income. In June 1997, the FASB issued
SFAS No. 130, "Reporting Comprehensive Income." This statement is effective for
years beginning after December 15, 1997. Management has evaluated the effect of
this statement on its financial reporting from the adoption of this statement
and has found that no further disclosures are needed.
Disclosures About Segments of an Enterprise and Related
Information. In June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." SFAS No. 131 requires the
reporting of profit and loss, specific revenue and expense items and assets for
reportable segments. It also requires the reconciliation of total segment
revenues, total segment profit and loss, total segment assets and other amounts
disclosed for segments, to the corresponding amounts in the general purpose
financial statements. This statement is effective for fiscal years beginning
after December 15, 1997. The Company has not yet determined what additional
disclosures may be required in connection with adopting SFAS No. 131.
Disclosures about Pensions and Other Postretirement Benefits.
In February 1998, the FASB issued SFAS No. 132, "Employers Disclosures about
Pensions and Other Postretirement Benefits." This statement revises employers'
disclosures about pensions and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. SFAS No. 132 is effective
for fiscal years beginning after December 15, 1997. Management does not
anticipate that this statement will have a significant effect on the Company's
consolidated financial statements.
-11-
<PAGE>
Disclosures about Derivative Instruments and Hedging
Activities. In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and hedging
activities. SFAS No. 133 is effective for all quarters of all fiscal years
beginning after December 15, 1999. Management does not anticipate that this
statement will have any effect on the Company's consolidated financial
statements.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
-12-
<PAGE>
PART II
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults on Senior Securities
None
Item 4. Submission to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 11 - Computation of Earnings per
Common Share
Exhibit 27 - Financial Data Schedule
(b) Report on Form 8-K: None
-13-
<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
Chief Financial Officer,
Vice President of Finance
and Secretary
Dated: June 10, 1999
-14-
EXHIBIT 11
DEL GLOBAL TECHNOLOGIES CORP. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
THREE AND NINE MONTHS ENDED MAY 1, 1999
AND MAY 2, 1998
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 1, 1999 May 1, 1999
------------------------------ -------------------------------
Per Per
Share Share
Net Income Shares Amount Net Income Shares Amount
---------- ------ ------ ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share:
Income available to common
shareholders $1,773,999 7,700,294 $.23 $4,807,530 7,658,666 $.63
==== ====
Effect of Dilutive Securities:
Warrants 13,720 14,025
Options 449,255 490,779
---------- ---------- ---- ---------- ---------- ----
Diluted Earnings Per Share $1,773,999 8,163,269 $.22 $4,807,530 8,163,470 $.59
========== ========== ==== ========== ========== ====
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
May 2, 1998 May 2, 1998
------------------------------ -------------------------------
Per Per
Share Share
Net Income Shares Amount Net Income Shares Amount
---------- ------ ------ ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Basic Earnings Per Share:
Income available to common
shareholders $1,444,741 7,541,988 $.19 $4,064,208 7,484,513 $.54
==== ====
Effect of Dilutive Securities:
Warrants 18,946 19,461
Options 667,894 687,064
---------- ---------- ---- ---------- ---------- ----
Diluted Earnings Per Share $1,444,741 8,228,828 $.18 $4,064,208 8,191,038 $.50
========== ========== ==== ========== ========== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000027748
<NAME> DEL GLOBAL TECHNOLOGIES CORP.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-02-1998
<PERIOD-END> MAY-01-1999
<CASH> 952,144
<SECURITIES> 1,068,384
<RECEIVABLES> 16,191,782
<ALLOWANCES> 264,106
<INVENTORY> 34,936,021
<CURRENT-ASSETS> 60,632,178
<PP&E> 21,642,739
<DEPRECIATION> 7,777,828
<TOTAL-ASSETS> 82,237,669
<CURRENT-LIABILITIES> 14,673,109
<BONDS> 0
0
0
<COMMON> 815,799
<OTHER-SE> 63,295,073
<TOTAL-LIABILITY-AND-EQUITY> 82,237,669
<SALES> 49,416,143
<TOTAL-REVENUES> 49,416,143
<CGS> 29,204,291
<TOTAL-COSTS> 29,204,291
<OTHER-EXPENSES> 13,143,128
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,289
<INCOME-PRETAX> 6,967,435
<INCOME-TAX> 2,159,905
<INCOME-CONTINUING> 4,807,530
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,807,530
<EPS-BASIC> .63
<EPS-DILUTED> .59
</TABLE>
