UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to __________
Commission File Number: 0-8125
----------------------------
DETECTION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
State of New York 16-0958589
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
130 Perinton Parkway, Fairport, New York 14450
(Address of principal executive offices) (Zip Code)
(716) 223-4060
(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 the filing
requirements for the past 90 days. Yes X No _____
As of February 10, 2000 there were outstanding 6,343,024 shares of the
registrant's common stock, par value $.05 per share.
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
DETECTION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(in thousands, except per share data)
Dec. 31, 1999 March 31, 1999
(Unaudited)
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 9,397 $ 4,414
Accounts receivable, less allowance for
doubtful accounts ($1,063 and $1,006,
respectively) 24,520 20,916
Inventories, net 32,480 37,762
Other current assets 4,017 3,249
-------- --------
70,414 66,341
Fixed assets, net 12,654 12,420
Goodwill and other intangibles 9,231 9,381
Other assets 5,763 4,670
-------- --------
$ 98,062 $ 92,812
======== ========
Liabilities
Current liabilities:
Short term borrowings $ 1,665 $ 1,416
Current portion of long term debt 2,554 647
Accounts payable 9,823 7,076
Accrued payroll and benefits 1,749 1,863
Income taxes payable 2,474 2,108
Other current liabilities 2,865 4,134
-------- --------
21,130 17,244
Other liabilities 2,701 2,645
Long term debt 15,002 17,179
Shareholders' equity:
Common stock, par value $.05 per share;
Authorized - 12,000 shares
Issued - 6,578 shares and 6,562 shares,
respectively 329 328
Capital in excess of par value 44,955 45,073
Other accumulated comprehensive loss (430) (310)
Retained earnings 18,524 14,447
-------- --------
63,378 59,538
Less - Treasury stock, at cost (4,104) (3,780)
Notes receivable for stock purchases (45) (14)
-------- --------
59,229 55,744
-------- --------
$ 98,062 $ 92,812
======== ========
</TABLE>
(See accompanying notes to financial statements)
<TABLE>
<CAPTION>
DETECTION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations and Retained Earnings (Unaudited)
(in thousands, except per share data)
For the Three Months Ended: Dec. 31, 1999 Dec. 31, 1998
(Current Year) (Preceding Year)
-------------- ---------------
<S> <C> <C>
Net sales $ 36,333 $ 34,201
Costs and expenses:
Production 21,722 21,054
Research and development 2,710 2,106
Marketing, administrative and general 9,606 8,807
-------- --------
Total costs and expenses 34,038 31,967
Operating income 2,295 2,234
Other income (expense):
Net interest expense (298) (403)
Other (expense) income (151) 182
-------- --------
Income before income taxes 1,846 2,013
Provision for income taxes 691 782
-------- --------
Net income $ 1,155 $ 1,231
Other comprehensive income (loss):
Foreign currency translation adjustment (125) (234)
-------- --------
Total comprehensive income 1,030 997
Retained earnings at beginning of period 17,369 12,038
Less: other comprehensive income 125 234
-------- --------
Retained earnings at end of period $ 18,524 $ 13,269
======== ========
Earnings per share
Basic $ 0.18 $ 0.19
======== ========
Diluted $ 0.17 $ 0.18
======== ========
</TABLE>
(See accompanying notes to financial statements)
<TABLE>
<CAPTION>
DETECTION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statement of Operations and Retained Earnings (Unaudited)
(in thousands, except per share data)
For the Nine Months Ended: Dec. 31, 1999 Dec. 31, 1998
(Current Year) (Preceding Year)
--------- ---------
<S> <C> <C>
Net sales $ 107,798 $ 103,464
Costs and expenses:
Production 64,777 63,988
Research and development 7,620 6,196
Marketing, administrative and general 27,962 26,892
--------- ---------
Total costs and expenses 100,359 97,076
Operating income 7,439 6,388
Other income (expense)
Net interest expense (785) (1,121)
Other (expense) income (142) 120
--------- ---------
Income before income taxes 6,512 5,387
Provision for income taxes 2,435 2,094
--------- ---------
Net income $ 4,077 $ 3,293
Other comprehensive income (loss):
Foreign currency translation adjustment (120) (211)
--------- ---------
Total comprehensive income 3,957 3,082
Retained earnings at beginning of period 14,447 9,976
Less: other comprehensive income 120 211
--------- ---------
Retained earnings at end of period $ 18,524 $ 13,269
========= =========
Earnings per share
Basic $ 0.64 $ 0.52
========= =========
Diluted $ 0.60 $ 0.48
========= =========
</TABLE>
(See accompanying notes to financial statements)
<TABLE>
<CAPTION>
DETECTION SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows (Unaudited)
(in thousands of dollars)
For the Nine Months Ended December 31, 1999 1998
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $ 4,077 $ 3,293
------- -------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,418 2,807
Changes in assets and liabilities:
Accounts receivable (3,518) 1,535
Inventories 5,388 (2,917)
Accounts payable 2,546 (2,420)
Accrued payroll and benefits (126) 49
Other assets & liabilities (2,462) 116
------- -------
Total adjustments 4,246 (830)
------- -------
Net cash provided by operating activities 8,323 2,463
Cash flows from investing activities:
Capital expenditures (2,206) (2,250)
Acquisition of businesses (521) (505)
------- -------
Net cash used in investing activities (2,727) (2,755)
Cash flows from financing activities:
Proceeds from borrowings 249 1,443
Principal payments on debt and
capital lease obligations (270) (1,666)
Common stock transactions, net 77 46
Repurchases of common stock (549) --
------- -------
Net cash used in financing activities (493) (177)
Effect of exchange rates (120) (211)
------- -------
Net increase (decrease) in cash and cash equivalents 4,983 (680)
Cash and cash equivalents, beginning of period 4,414 3,160
------- -------
Cash and cash equivalents, end of period $ 9,397 $ 2,480
======= =======
Cash paid during the period for:
Interest $ 1,159 $ 1,311
======= =======
Income taxes $ 2,626 $ 614
======= =======
</TABLE>
(See accompanying notes to financial statements)
DETECTION SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
THREE AND NINE MONTH PERIODS ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
NOTE 1. GENERAL
The accompanying unaudited interim consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission (SEC). The interim consolidated financial statements include
the consolidated accounts of Detection Systems, Inc. and its majority-owned
subsidiaries (collectively, "the Company") with all significant intercompany
transactions eliminated. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair statement
of the financial position, results of operations and cash flows for the interim
periods presented have been made. Certain prior period balances have been
reclassified to conform with the current period presentation. Certain footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles (GAAP) have been condensed or
omitted pursuant to such SEC rules and regulations. These financial statements
should be read in conjunction with the Company's Annual Report on Form 10-K for
the year ended March 31, 1999.
Cash flow statement - Non-cash transactions during the first quarter of fiscal
1999 consisted of the acquisition of certain businesses with shares of the
Company's common stock. See Note 3.
NOTE 2. INVENTORIES
Major classifications of inventory follow (in thousands):
Dec. 31, 1999 March 31, 1999
-------------- --------------
Component Parts $11,507 $14,838
Work In Process 2,468 2,464
Finished Products 18,505 20,460
------ ------
$32,480 $37,762
====== ======
NOTE 3. ACQUISITIONS
Fiscal 2000 Acquisitions - During the second quarter ended September 30, 1999,
the Company acquired all of the outstanding shares of Caetec S.r.l. ("Caetec")
for approximately $700,000 in cash. Caetec is an Italian technology company with
a line of fire control products.
Fiscal 1999 Acquisitions - In June 1998, the Company acquired all of the
outstanding shares of Efsec AB ("Efsec") for approximately $1,250,000, comprised
of cash and 28,161 shares of its common stock. Efsec is a Swedish distributor of
electronic security equipment with annual net sales of approximately $3,000,000
prior to its acquisition.
In June 1998, the Company acquired all of the outstanding stock of Alarm Center
Kft ("Alarm Center") for $135,000 in cash. Alarm Center is a Hungarian
distributor of electronic security equipment with annual net sales of
approximately $500,000 prior to its acquisition.
These transactions have been accounted for as purchases and, accordingly, the
results of these businesses are included in the consolidated financial
statements as of the date of acquisition.
NOTE 4 - EARNINGS PER SHARE
There are no significant reconciling items between net income as presented in
the consolidated statement of operations and net income available to common
shareholders used in the calculation of earnings per share. Reconciling items
between the number of shares used in the calculation of basic and diluted
earnings per share relate to deferred compensation plans, options and warrants,
as follows (in thousands):
Three months Nine months
ended Dec. 31, ended Dec. 31,
1999 1998 1999 1998
---- ---- ---- ----
Weighted average number of shares
outstanding 6,269 6,328 6,346 6313
Shares associated with deferred
compensation, option and warrant plans 489 504 473 513
NOTE 5 - RESTRUCTURING
The Company recorded a restructuring charge of approximately $400,000 during the
first quarter of fiscal 1999 for severance costs related to the termination of
employees at the Fairport, New York and Southall, England facilities. The charge
has been included in the results from continuing operations and had a material
impact on operating results in the first quarter of 1999. This restructuring
program was substantially completed during the third quarter of fiscal 2000.
NOTE 6 - GEOGRAPHIC INFORMATION
The Company's operating structure includes operating segments in the United
States, Asia Pacific and Europe. Management evaluates the performance of its
operating segments separately to monitor the different factors affecting
financial performance in the different regions. Segment profit or loss includes
substantially all of the segment's costs of production, distribution and
administration. The Company manages income taxes on a global basis, thus, the
Company evaluates segment performance based on profit or loss before income
taxes.
The following table presents net sales and income (loss) before income taxes of
the Company's domestic and foreign operations. Net sales and income (loss)
before income taxes of the Company's domestic operations include the impact of
export sales. Inter-area sales are presented on a basis intended to reflect the
market value of the products as nearly as possible.
<TABLE>
<CAPTION>
For the Three Months Ended December 31, 1999 1998
---- ----
(in thousands)
Sales to unaffiliated customers
<S> <C> <C>
United States operations $ 20,808 $ 20,762
Asia Pacific operations 6,744 5,393
European operations 8,781 8,046
------- -------
$ 36,333 $ 34,201
======= =======
Sales between affiliates
United States operations $ 1,810 $ 1,928
Asia Pacific operations 8,218 9,875
European operations 111 58
------ ------
$ 10,139 $ 11,861
====== ======
Income (loss) before income taxes
United States operations $ 1,946 $ 1,395
Asia Pacific operations 449 1,468
European Operations (550) (866)
Eliminations 1 16
----- -----
$ 1,846 $ 2,013
===== =====
For the Nine Months Ended December 31, 1999 1998
---- ----
(in thousands)
Sales to unaffiliated customers
United States operations $ 64,465 $ 65,191
Asia Pacific operations 19,083 15,189
European operations 24,250 23,084
------- -------
$107,798 $103,464
======= =======
Sales between affiliates
United States operations $ 6,281 $ 6,102
Asia Pacific operations 24,111 29,149
European operations 359 184
------ ------
$ 30,751 $ 35,435
====== ======
Income (loss) before income taxes
United States operations $ 4,125 $ 4,466
Asia Pacific operations 3,150 2,992
European Operations (1,148) (1,242)
Eliminations 385 (829)
----- -----
$ 6,512 $ 5,387
===== =====
</TABLE>
NOTE 7 - OTHER MATTERS
The Company's Board of Directors has authorized the repurchase of up to
$10,000,000 of the Company's common stock. As of December 31, 1999 the Company
had purchased 59,500 shares of common stock for approximately $549,000.
DETECTION SYSTEMS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company is a supplier of equipment to the electronic protection
industry. The Company designs, manufactures and markets electronic detection,
control and communication equipment for security, fire protection, access
control and closed circuit television ("CCTV") applications, offering products
primarily for the commercial and mid- to high-end residential portions of the
market. From its founding in 1968 until 1995, the Company was primarily a
provider of security sensor devices for the domestic market. In 1995, the
Company adopted a strategy designed to expand its product offerings, establish
an international sales presence, increase its manufacturing capacity and improve
its overall cost structure. The Company has since made ten acquisitions, opened
six sales offices and established a manufacturing facility in Asia.
The Company recognizes net sales upon shipment of products to customers.
Production expenses include materials, direct labor and manufacturing overhead
as well as an allocated portion of indirect overhead. Outgoing freight, customs
and other costs associated with delivery of products to customers are classified
under marketing, administrative and general expenses. Research and development
expenses include costs associated with salaries and benefits for certain
engineering employees, supplies, agency approvals, depreciation and occupancy,
as well as charges for independent testing and independent contractors engaged
for specific projects. Marketing, administrative and general expenses include
costs related to the Company's sales efforts and corporate and general
administrative functions, including costs of executive, administrative and sales
personnel, marketing/selling supplies, advertising, depreciation and
professional fees.
Results of Operations
The following table sets forth, for the periods indicated, the percentages which
certain items of income and expense bear to net sales:
<TABLE>
<CAPTION>
Fiscal Year Three Months Nine Months
Ended March 31, Ended Dec. 31, Ended Dec. 31
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Production 61.7 65.6 59.8 61.6 60.1 61.8
Research and development 6.1 6.8 7.5 6.2 7.1 6.0
Marketing, administrative
and general 25.9 23.8 26.4 25.7 25.9 26.0
---- ---- ---- ---- ---- ----
Operating income 6.3 3.8 6.3 6.5 6.9 6.2
Net interest expense (1.1) (1.6) (0.8) (1.1) (0.7) (1.1)
Other income (expense) 0.1 (0.4) (0.4) 0.5 (0.1) 0.1
---- ---- ---- ---- ---- ----
Income before income taxes 5.3 1.8 5.1 5.9 6.1 5.2
Provision for income taxes 2.1 0.7 1.9 2.3 2.3 2.0
---- ---- ---- ---- ---- ----
Net income 3.2% 1.1% 3.2% 3.6% 3.8% 3.2%
=== === === === === ===
</TABLE>
Three Months Ended December 31, 1999 Compared to Three Months Ended December
31, 1998
The Company's net sales increased 6.2% to $36,333,000 in the third quarter
of fiscal 2000 from $34,201,000 in the comparable period in fiscal 1999. Net
sales during the current year period have been favorably impacted compared to
the year ago period by strong sales in the Asia-Pacific region, which increased
25.1% and by sales in the European region, which increased 9.1%. Sales by
operations in the United States were consistent with the year ago period.
Domestic sales continue to be affected by lower sales to certain major customers
and by the acquisition of some of the Company's domestic customers by other
businesses which are not standardized on the Company's products.
Production expenses increased 3.2% to $21,722,000 in the fiscal 2000 period
from $21,054,000 in the comparable period in fiscal 1999. As a percentage of net
sales, production expenses decreased to 59.8% in the fiscal 2000 period compared
to 61.6% in the comparable period in fiscal 1999. The decrease in production
expenses as a percentage of net sales was primarily due to changes in product
mix and to improvements in the Company's manufacturing cost structure.
Research and development expenses increased 28.7% to $2,710,000 in the
fiscal 2000 period from $2,106,000 in the comparable period in fiscal 1999. As a
percentage of net sales, research and development expenses increased to 7.5% in
the fiscal 2000 period from 6.2% in the comparable period in 1999. The increase
in research and development expenses in aggregate and as a percentage of net
sales is primarily attributable to headcount increases to support the Company's
research and development efforts.
Marketing, administrative and general expenses increased 9.1% to $9,606,000
in the fiscal 2000 period from $8,807,000 in the comparable period in fiscal
1999. As a percentage of net sales, marketing, administrative and general
expenses increased to 26.4% in the fiscal 2000 period from 25.7% in the
comparable period in fiscal 1999. The increase in marketing, administrative and
general expenses is attributable to headcount increases as well as expenditures
associated with the opening of offices in Spain and Argentina during the second
quarter of fiscal 2000.
Net interest expense decreased to $298,000 in the fiscal 2000 period from
$403,000 in the comparable period in 1999, as outstanding borrowings, net of
cash invested, were lower during the current period.
The Company's effective income tax rate for the fiscal 2000 period was 37.4%
compared to 38.8% for the comparable period in fiscal 1999.
Nine Months Ended December 31, 1999 Compared to Nine Months Ended December
31, 1998
The Company's net sales increased 4.2% to $107,798,000 in the fiscal 2000
period from $103,464,000 in the comparable period in fiscal 1999. Net sales
during this period have been favorably impacted compared to the year ago period
by strong sales in the Asia-Pacific region, which increased 25.6% and by sales
in the European region, which increased 5.1%. Sales in the United States were
consistent with the year ago period. Domestic sales continue to be affected by
lower sales to certain major customers and by the acquisition of some of the
Company's domestic customers by other businesses which are not standardized on
the Company's products.
Production expenses increased 1.2% to $64,777,000 in the fiscal 2000 period
from $63,988,000 in the comparable period in fiscal 1999. As a percentage of net
sales, production expenses decreased to 60.1% in the fiscal 2000 period compared
to 61.8% in the comparable period in 1999. The increase in production expenses
was primarily due to a corresponding increase in the Company's net sales. The
decrease in production expenses as a percentage of net sales was primarily due
to changes in product mix and improvements in the Company's manufacturing cost
structure.
Research and development expenses increased 23.0% to $7,620,000 in the
fiscal 2000 period from $6,196,000 in the comparable period in fiscal 1999. As a
percentage of net sales, research and development expenses increased to 7.1% in
the fiscal 2000 period from 6.0% in the comparable period in 1999. The increase
in research and development expenses in aggregate and as a percentage of net
sales is primarily attributable to headcount increases to support the Company's
research and development efforts.
Marketing, administrative and general expenses increased 4.0% to $27,962,000
in the fiscal 2000 period from $26,892,000 in the comparable period in fiscal
1999. The year ago period included a $400,000 restructuring charge. Excluding
the impact of this charge, marketing, administrative and general expenses
increased 5.5%. Approximately $771,000 of this increase relates to the
acquisition of Efsec, Alarm Center and Caetec (See Note 3 to the Financial
Statements) as well as the start up of businesses in Norway, Spain and Argentina
subsequent to the third quarter of fiscal 1999. The remaining increase is
attributable to the addition of personnel to the sales and marketing
departments. As a percentage of net sales, marketing, administrative and general
expenses decreased to 25.9% in the fiscal 2000 period from 26.0% in the
comparable period in fiscal 1999.
Net interest expense decreased to $785,000 in the fiscal 2000 period from
$1,121,000 in the comparable period in 1999, as outstanding borrowings, net of
cash invested, were lower during the current period.
The Company's effective income tax rate for the fiscal 2000 period was 37.4%
compared to 38.9% for the comparable period in fiscal 1999.
Liquidity and Capital Resources
The Company considers liquidity to be its ability to meet its long- and
short-term cash requirements. Prior to 1996, those requirements were primarily
met by cash generated by the Company's operating activities and cash reserves.
Since the implementation of the Company's strategy designed to enhance its
product offerings, manufacturing capacity and international operations,
particularly its acquisitions and the development of the Asia facility, the
Company has required external sources of financing to satisfy its liquidity
needs.
Nine Months Ended December 31, 1999. During the nine months ended December
31, 1999, the Company's operating activities provided $8,323,000 of operating
cash flow. Net income, depreciation and amortization provided $6,495,000. A
decrease in inventories provided $5,388,000. An increase in accounts receivable
used $3,518,000, while an increase in accounts payable provided $2,546,000.
Other account changes used $2,588,000 of operating cash flow.
During the nine months ended December 31, 1999, cash used for investing
activities was $2,727,000 and was utilized for the acquisition of Caetec and for
capital expenditures.
During the nine months ended December 31, 1999, cash used by financing
activities was $493,000, primarily representing repurchases of the Company's
common stock.
Capital Resources. On December 31, 1999, the Company had cash balances of
$9,397,000. On that date, the Company had a $17,000,000 revolving credit
facility that was not drawn. This credit facility bears interest based upon
either the federal funds rate, the prime rate or LIBOR, each adjusted by a
factor which varies based upon the rates of funded debt to earnings before
interest, tax, depreciation and amortization, and matures on July 31, 2000.
The Company expects to continue to pursue expansion and/or acquisition
opportunities and the development of new products and markets. Significant
expenditures will also include continued research and development investment in
detection, control and communication projects. The Company also plans to
continue its efforts to market its products internationally.
The Company's Board of Directors has authorized the repurchase of up to
$10,000,000 of the Company's common stock.
The Company believes that the combination of its current cash balances, cash
flows from operations and existing credit facilities will be sufficient to fund
its planned operations during fiscal 2000.
Year 2000 Issues. The Company has appointed a team to assess the impact of
the year 2000 on its information systems, products, and business. This team
includes two members of senior management and is lead by the Vice President of
Operations. To ensure year 2000 compliance, the Company established specific
categories to be reviewed. Since January 1, 2000 the Company's mission critical
internal computer systems have continued to operate without exception and the
Company is not aware of product difficulties at any of our customer sites;
however, the Company continues to monitor potential year 2000 issues.
For additional information regarding the risks associated with the Company's
compliance with year 2000, see "Risk Factors-Year 2000" in Item 1 of the
Company's Form 10-K for the year ended March 31, 1999 which is incorporated
herein by reference thereto.
Euro Conversion. The Company is assessing the potential impact that may
result from the completion of the euro conversion in a number of areas,
including the following: (1) accounting and tax; (2) management information
systems required to accommodate euro-denominated transactions; (3) the impact on
currency exchange costs and currency exchange rate risk; and (4) the impact on
existing contracts. There has been no significant impact to the Company
resulting from the initial transition to the euro.
Dividend Policy. The Company is dedicated to promoting shareholder value
through long-term profitability and growth and believes that continued
investments in future product development are essential to this goal. For this
reason, it has been the Company's policy to not pay cash dividends.
Forward-Looking Statements
This quarterly report contains certain "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which represent
the Company's expectations or beliefs, including, but not limited to, statements
concerning industry performance, the Company's operations, performance,
financial condition, growth and acquisition strategies, margins and growth in
sales of the Company's products. For this purpose, any statements contained in
this quarterly report that are not statements of historical fact may be deemed
to be forward-looking statements. Without limiting the generality of the
foregoing, words such as "may," "will," "expect," "believe," "plan,"
"anticipate," "intend," "could," "estimate," "continue," "goal" or "strategy" or
the negative or other variations thereof or comparable terminology are intended
to identify forward-looking statements. These statements by their nature involve
substantial risks and uncertainties, certain of which are beyond the Company's
control, and actual results may differ materially depending on a variety of
important factors, including those described previously in the "Risk Factors"
section of the Company's 1999 Form 10-K for the year ended March 31, 1999.
PART II OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports for Form 8-K.
A. Exhibits
See Exhibit Index
B. Reports on Form 8-K
No reports on Form 8-K were filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DETECTION SYSTEMS, INC.
Registrant
DATE: February 14, 2000 By: /s/ Karl H. Kostusiak
Karl H. Kostusiak, President
By: /s/ Frank J. Ryan
Frank J. Ryan, Vice President,
Secretary and Treasurer
(Principal Financial Officer)
By: /s/ Christopher P. Gerace
Christopher P. Gerace
Vice President & Chief Accounting Officer
(Principal Accounting Officer)
EXHIBIT INDEX
Item
No. Exhibits Location
3(a) Detection Systems, Inc. Incorporated by reference to
Certificate of Exhibit 3(a) of the Company's
Incorporation as amended Quarterly Report on Form 10-Q for
the quarter ended 9/30/99
3(b) Detection Systems, Inc. Incorporated by reference to
By-Laws as amended Exhibit 3(b) of the Company's 1997
Annual Report on Form 10-K
10(a) Medical reimbursement plan Incorporated by reference to
Exhibit 10(b) of the Company's 1997
Annual Report on Form 10-K
10(b) Employee stock purchase plan
Incorporated by reference to Exhibit 10
of the Company's 1994 Annual Report on
Form 10-K
10(c) Fleet Amended & Restated Incorporated by reference to
Credit Facility Agreement Exhibit 10(c) of the Company's
dated September 30, 1998 Quarterly Report on Form 10-Q for
the quarter ended 9/30/98
10(d) Deferred Compensation Plan Incorporated by reference to
and Deferred Bonus Plan Exhibit 10(c) of the Company's
Quarterly Report on Form 10-Q, for
the quarter ended 12/31/97
10(e) 1992 Restated Stock Option Incorporated by reference to
Plan Exhibit 22 of the Company's 1995
Annual Report on Form 10-K
10(f) 1997 Stock Option Plan, as Incorporated by reference to the
amended Company's Proxy Statement on Form
DEF 14A filed on 7/8/99
10(g) Non-Employee Director Stock Incorporated by reference to
Option Plan Exhibit B of the Company's Proxy
Form DEF 14A filed 7/8/99
10(h) Executive Officer Cash Incorporated by reference to
Bonus Plan Exhibit 10(h) of the Company's 1999
Annual Report on Form 10-K
10(i) Executive employment Incorporated by reference to
contract with Karl H. Exhibit 10(i)of the Company's
Kostusiak Quarterly Report on Form 10-Q for
the quarter ended 6/30/99
10(j) Executive employment Incorporated by reference to
contract with David B. Exhibit 10(j)of the Company's
Lederer Quarterly Report on Form 10-Q for
the quarter ended 6/30/99
10(k) Stock Purchase Agreements Incorporated by reference to
with Karl H. Kostusiak and Exhibit 10(l) of the Company's 1997
David B. Lederer Annual Report on Form 10-K
11 Computation of Per Share Included as Exhibit 11 of this
Earnings Statement Quarterly Report on Form 10-Q
27 Financial Data Schedule Included as Exhibit 27 of this
Quarterly Report on Form 10-Q
<TABLE>
<CAPTION>
Exhibit 11
DETECTION SYSTEMS, INC.
COMPUTATION OF EARNINGS PER SHARE
(In thousands, except per share data)
Three Months Ended December 31, 1999 1998
---- ----
<S> <C> <C>
Net income $1,155 $1,231
====== ======
Weighted average number of shares 6,269 6,328
====== ======
Basic earnings per share $ 0.18 $ 0.19
====== ======
Shares attributable to deferred
compensation plans and stock
options and warrants 489 504
====== ======
Diluted earnings per share: $ 0.17 $ 0.18
====== ======
Nine Months Ended December 31, 1999 1998
------ ------
Net income $4,077 $3,293
====== ======
Weighted average number of shares 6,346 6,313
====== ======
Basic earnings per share 0.64 $ 0.52
====== ======
Shares attributable to deferred
compensation plans and stock
options and warrants 473 513
====== ======
Diluted earnings per share: $ 0.60 $ 0.48
====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 9,397
<SECURITIES> 0
<RECEIVABLES> 25,583
<ALLOWANCES> (1,063)
<INVENTORY> 32,480
<CURRENT-ASSETS> 70,414
<PP&E> 35,043
<DEPRECIATION> (22,389)
<TOTAL-ASSETS> 98,062
<CURRENT-LIABILITIES> 21,130
<BONDS> 0
0
0
<COMMON> 329
<OTHER-SE> 58,900
<TOTAL-LIABILITY-AND-EQUITY> 98,062
<SALES> 36,333
<TOTAL-REVENUES> 36,333
<CGS> 21,722
<TOTAL-COSTS> 34,038
<OTHER-EXPENSES> 151
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 298
<INCOME-PRETAX> 1,846
<INCOME-TAX> 691
<INCOME-CONTINUING> 1,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,155
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.17
</TABLE>
