UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 June 30, 1995
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OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to _____________________
Commission file number 1-8533
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DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-2632319
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 Sylvan Way, Parsippany, New Jersey 07054
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(Address of principal executive offices) (Zip Code)
201-898-1500
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(Registrant's telephone number, including area code)
None
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(Former name, former address and former fiscal year,
if changed since last report.)
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 latest practicable date. The number of shares of
Class A Common Stock, $.01 par value, and Class B Common Stock, $.01 par value,
outstanding as of August 7, 1995 was 3,307,324 and 2,168,134, respectively
(exclusive of 432,639 shares of Class A Common Stock and 21,619 shares of
Class B Common Stock held in the treasury).
<PAGE>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets--June 30, 1995 and
March 31, 1995............................................ 3
Condensed Consolidated Statements of Earnings--Three Months
Ended June 30, 1995 and 1994.............................. 4
Condensed Consolidated Statements of Cash Flows--Three
Months Ended June 30, 1995 and 1994....................... 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 7-9
PART 2. OTHER INFORMATION
Item 1. Not Applicable
Item 2. Not Applicable
Item 3. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders......... 10
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K............................ 10
SIGNATURES ................................................................ 11
2
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<TABLE>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
<CAPTION>
Assets June 30, 1995 March 31, 1995
------ ------------- --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents ....................................... $ 9,105,000 $ 11,197,000
Accounts receivable ............................................. 18,299,000 17,432,000
Inventories, net of progress payments ........................... 9,040,000 11,724,000
Other current assets ............................................ 2,142,000 2,445,000
-------------- -------------
Total current assets ....................................... 38,586,000 42,798,000
Property, plant and equipment, less accumulated
depreciation and amortization of
$24,256,000 and $23,812,000 at June 30, 1995 and
March 31, 1995, respectively .................................... 10,457,000 9,849,000
Intangible assets, less accumulated amortization of
$3,598,000 and $3,457,000 at June 30, 1995
and March 31, 1995, respectively ................................ 8,779,000 8,920,000
Other assets ...................................................... 3,468,000 3,023,000
-------------- -------------
$ 61,290,000 $ 64,590,000
============== =============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and other ...................................... $ 18,193,000 $ 22,481,000
-------------- -------------
Total current liabilities .................................. 18,193,000 22,481,000
-------------- -------------
Long-term debt, excluding current installments .................... 11,861,000 11,732,000
Deferred income taxes ............................................. 4,605,000 4,605,000
Other liabilities ................................................. 3,287,000 3,263,000
-------------- -------------
Total liabilities .......................................... 37,946,000 42,081,000
Stockholders' equity:
Class A Common Stock, $.01 par value per share
Authorized 10,000,000 shares; issued 3,739,963 and
3,699,963 shares at June 30, 1995 and March 31, 1995,
respectively ............. .................................... 37,000 37,000
Class B Common Stock, $.01 par value per share
Authorized 20,000,000 shares; issued 2,187,753 and
2,163,253 shares at June 30, 1995 and March 31, 1995,
respectively ............. .................................... 22,000 22,000
Additional paid-in capital ........................................ 13,594,000 13,435,000
Retained earnings ................................................. 11,575,000 10,919,000
-------------- -------------
25,228,000 24,413,000
Treasury Stock, at cost;
432,639 shares of Class A Common Stock and
21,619 shares of Class B Common Stock ........................... (1,617,000) (1,617,000)
Unamortized restricted stock compensation ......................... (267,000) (287,000)
-------------- -------------
Net stockholders' equity ........................................ 23,344,000 22,509,000
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$ 61,290,000 $ 64,590,000
============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
Three Months Ended June 30,
-----------------------------
1995 1994
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Revenues ....................................... $17,279,000 $16,012,000
Costs and expenses ............................. 15,965,000 14,936,000
----------- ------------
Operating income .......................... 1,314,000 1,076,000
Interest and related expenses .................. (325,000) (342,000)
Other income, net .............................. 87,000 156,000
----------- ------------
Earnings before income taxes .............. 1,076,000 890,000
Income taxes ................................... 420,000 382,000
----------- ------------
Net earnings .............................. $ 656,000 $ 508,000
=========== ============
Earnings per share of Class A and Class B
Common Stock ................................. $ .12 $ .10
=========== ============
Weighted average number of shares of Class A and
Class B Common Stock outstanding ............. 5,605,867 5,337,688
=========== ============
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
<TABLE>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Three Months Ended June 30,
---------------------------
1995 1994
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<S> <C> <C>
Cash flows from operating activities
Net earnings ........................................ $ 656,000 $ 508,000
Adjustments to reconcile net earnings to
cash flows from operating activities:
Depreciation and amortization ......................... 626,000 638,000
Other, net ............................................ 164,000 (3,000)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ............. (867,000) 1,107,000
(Increase) decrease in inventories ..................... 2,684,000 (1,685,000)
Decrease in other current assets ...................... 303,000 381,000
(Decrease) in accounts payable and other ............... (4,282,000) (2,158,000)
Other, net ............................................ 186,000 2,000
----------- -----------
Net cash used in operating activities .............. (530,000) (1,210,000)
. ------------ ------------
Cash flows from investing activities
Capital expenditures .................................. (1,057,000) (392,000)
Other, net ............................................ (630,000) (9,000)
----------- ------------
Net cash used in investing activities ............... (1,687,000) (401,000)
----------- ------------
Cash flows from financing activities
Payments on long-term debt ............................ (20,000) (18,000)
Repurchases of convertible subordinated debentures .... (61,000) (2,406,000)
Other borrowings ...................................... 206,000 --
----------- -----------
Net cash provided by (used in) financing activities.. 125,000 (2,424,000)
----------- -----------
Net decrease in cash ...................................... (2,092,000) (4,035,000)
Cash and cash equivalents, beginning of period ............ 11,197,000 15,465,000
----------- -----------
Cash and cash equivalents, end of period .................. $ 9,105,000 $11,430,000
=========== ===========
See accompanying notes to condensed consolidated financial statements.
5
</TABLE>
<PAGE>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1) In the opinion of Management, the accompanying unaudited condensed
consolidated financial statements of Diagnostic/Retrieval Systems, Inc. and
subsidiaries (the Company) contain all adjustments (consisting of only
normal and recurring adjustments) necessary for the fair presentation of
the Company's consolidated financial position as of June 30, 1995, the
statements of earnings for the three months ended June 30, 1995 and 1994
and cash flows for the three months ended June 30, 1995 and 1994.
2) The results of operations for the three months ended June 30, 1995 are not
necessarily indicative of the results to be expected for the full year.
3) Earnings per share of common stock is computed by dividing net earnings by
the weighted average number of shares of Class A and Class B Common Stock
outstanding during each period. For the three months ended June 30, 1995,
the computation of earnings per share included approximately 172,000 shares
from the assumed exercise of dilutive stock options computed using the
treasury stock method. Options outstanding to purchase shares of common
stock were not included in the computation of earnings per share for the
three months ended June 30, 1994, because their effect was not material.
Furthermore, additional shares assumed to be outstanding applicable to the
Company's convertible subordinated debentures also were not included for
any of the periods presented, because their effect on earnings per share
was antidilutive.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
-----------------------------------------------------------
and Results of Operations
-------------------------
Results of Operations
The following table sets forth items in the Condensed Consolidated
Statements of Earnings as a percent of revenues and the percentage increase or
decrease of those items as compared to the prior period.
Percent of Percent
Revenues Changes
------------------- -------------
Three months ended June 30, 1995 1994 1995 vs. 1994
--------------------------- ------ ------ -------------
Revenues ......................... 100.0% 100.0% 7.9%
Costs and expenses ............... 92.4 93.3 6.9
----- -----
Operating income ................. 7.6 6.7 22.1
Interest and related expenses .... (1.9) (2.1) (5.0)
Other income, net ................ .5 1.0 (44.2)
----- -----
Earnings before income taxes ..... 6.2 5.6 20.9
Income taxes ..................... 2.4 2.4 9.9
----- -----
Net earnings ..................... 3.8% 3.2% 29.1%
===== =====
Revenues for the three months ended June 30, 1995 were $17.3 million, an
increase of 7.9% over revenues for the same period a year ago. The revenue
growth was attributable to shipments relating to the Company's data storage
system and display workstation product lines, as well as to increases in
manufacturing services and commercial product sales, the latter reflecting the
impact of an acquisition last year.
Operating income for the three-month period ended June 30, 1995 was $1.3
million or 22% higher than operating income of $1.1 million during the first
quarter of the prior year. The improvement during the current year was mainly
attributable to the increase in revenues for the quarter and higher operating
margins generated by the Company's display, data storage and electro-optical
systems product lines.
Interest and related expenses was $.3 million for the first quarter of
fiscal 1996 and fiscal 1995.
7
<PAGE>
Other income, net was $.1 million for the three months ended June 30, 1995,
a decrease of approximately $.1 million from other income, net for the same
three-month period of the prior year. The decrease is due primarily to the
reduced cash balance.
The Company's effective tax rate during the three-month period ended June
30, 1995 and 1994 was 39% and 40%, respectively. The Company records income tax
expense based on an estimated full year effective income tax rate. The effective
income tax rate and the components of income tax expense for the first quarter
of fiscal 1996 did not significantly change from those for the year ended March
31, 1995. The provision for income taxes includes all estimated income taxes
payable to federal and state governments as applicable.
Financial Condition and Liquidity
Cash and Cash Flow: Cash and cash equivalents at June 30, 1995 and March
31, 1995 represented approximately 15% and 17%, respectively, of total assets.
During the three-month period ended June 30, 1995, cash decreased $2.1 million.
This decrease was primarily the result of capital expenditures during the
quarter of approximately $1.1 million and by cash utilized by operations of
approximately $.5 million. Capital expenditures are expected to approximate $2.4
million for the fiscal year. The majority of these expenditures will be for
computer and laboratory-related equipment. The Company has obtained a $5.0
million unsecured line of credit from NatWest Bank which will be used to
supplement working capital needs.
Accounts Receivable and Inventories: Accounts receivable increased
approximately $.9 million during the three months ended June 30, 1995 as a
result of shipments made during the quarter. Generally, there are no contract
provisions for retainage, and all accounts receivable are expected to be
collected within one year. The decrease in inventories of $2.7 million during
the first quarter of fiscal 1996 was primarily due to the net effect of the
build-up in costs to be billed upon delivery and final acceptance of products
and an increase in progress billings based on contractual provisions.
June 30, 1995 March 31, 1995
------------- --------------
Quick ratio ............................ 1.5 1.3
Current ratio .......................... 2.1 1.9
Liabilities-to-equity ratio ............ 1.6 1.9
Long-term debt, excluding current
installments, to capitalization ...... 33.7% 34.3%
8
<PAGE>
Backlog: At June 30, 1995, the Company's backlog of orders was $118 million
as compared to $126 million at March 31, 1995. The decrease in backlog for the
first quarter was due to the net effect of revenues for the period which were
partially offset by bookings. New contract awards during the three months ended
June 30, 1995 totalled $8.8 million.
Acquisition
On July 5, 1995, Photronics Corp., a wholly-owned subsidiary of the
Company, acquired, through its wholly-owned subsidiary (Photronics),
substantially all of the assets of Opto Mechanik, Inc. (OMI), pursuant to an
Agreement for Acquisition of Assets dated May 24, 1995, as amended July 5, 1995
(the Agreement). Under the terms of the Agreement, Photronics paid, on the date
of acquisition, approximately $5,450,000 for the net assets of OMI. OMI, located
in Melbourne, Florida, designs and manufactures electro-optical sighting and
targeting systems used primarily in military fire control devices and in various
weapons systems.
9
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None
10
<PAGE>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
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.
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
----------------------------------
Registrant
/s/ NANCY R. PITEK
Date: August 11, 1995 ----------------------------------
Nancy R. Pitek
Controller and Treasurer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM DIAGNOSTIC/RETRIEVAL
SYSTEMS, INC. FORM 10-Q FOR THE QUARTERLY PERIOD
ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 9,105,000
<SECURITIES> 0
<RECEIVABLES> 18,299,000
<ALLOWANCES> 0
<INVENTORY> 9,040,000
<CURRENT-ASSETS> 38,586,000
<PP&E> 34,713,000
<DEPRECIATION> 24,256,000
<TOTAL-ASSETS> 61,290,000
<CURRENT-LIABILITIES> 18,193,000
<BONDS> 11,861,000
<COMMON> 59,000
0
0
<OTHER-SE> 23,285,000
<TOTAL-LIABILITY-AND-EQUITY> 61,290,000
<SALES> 17,279,000
<TOTAL-REVENUES> 17,279,000
<CGS> 15,965,000
<TOTAL-COSTS> 15,965,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 325,000
<INCOME-PRETAX> 1,076,000
<INCOME-TAX> 420,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 656,000
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0
</TABLE>
