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 December 31, 1996
period ended
OR
TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
For the transition to
period from
Commission file 1-8533
number
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-2632319
(State or other (I.R.S.
jurisdiction of Employer
incorporation or Identificati
organization) on No.)
5 Sylvan Way, Parsippany, 07054
New Jersey
(Address of principal (Zip Code)
executive offices)
201-898-1500
(Registrant's telephone number, including
area code)
None
(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 ___
As of February 4, 1997, 5,584,093 shares of the registrant's Common Stock,
$.01 par value, were outstanding (exclusive of 420,893 shares held in treasury).
<PAGE>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
INDEX
PART 1. FINANCIAL
INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1996 and 3
March 31, 1996
Condensed Consolidated Statements of Earnings
- Three and Nine Months Ended December 31, 4
1996 and 1995
Condensed Consolidated Statements of Cash
Flows - Nine Months Ended December 31, 1996 5
and 1995
Notes to Condensed Consolidated Financial 6-7
Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
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 12
Holders
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<PAGE>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, 1996 March 31, 1996
Assets
Current Assets:
Cash and cash equivalents $ 8,616,000 $ 22,785,000
Accounts receivable 22,224,000 22,942,000
Inventories, net of progress
payments 23,297,000 19,449,000
Other current assets 1,918,000 1,464,000
Total current assets 56,055,000 66,640,000
Property, plant and equipment, less accumulated
depreciation and amortization of $27,480,000
and $25,744,000 at December 31, 1996 and
March 31, 1996, respectively 19,667,000 16,191,000
Intangible assets, less accumulated amortization of
$4,555,000 and $4,027,000 at December 31, 1996
and March 31, 1996, respectively 10,173,000 8,498,000
Other assets 6,180,000 5,922,000
$ 92,075,000 $ 97,251,000
Liabilities and Stockholders' Equity
Current liabilities $ 23,095,000 $ 32,650,000
Long-term debt, excluding current
installments 32,309,000 32,608,000
Deferred income taxes 2,607,000 2,607,000
Other liabilities 2,909,000 2,820,000
Total liabilities 60,920,000 70,685,000
Stockholders' equity:
Common Stock, $.01 par value per share
Authorized 20,000,000 shares; issued 5,987,986
shares at December 31, 1996 60,000 -
Class A Common Stock, $.01 par value per share
Authorized 10,000,000 shares; issued 3,739,963
shares at March 31, 1996 - 37,000
Class B Common Stock, $.01 par value per share
Authorized 20,000,000 shares; issued 2,223,603
shares at March 31, 1996 - 22,000
Additional paid-in capital 14,159,000 13,639,000
Retained earnings 18,944,000 15,022,000
33,163,000 28,720,000
Treasury Stock, at cost;
420,893 shares of Common Stock at December 31, 1996;
432,639 shares of Class A Common Stock and 65,795
shares of Class B Common Stock at March 31, 1996
(1,619,000) (1,918,000)
Unamortized restricted stock
compensation (389,000) (236,000)
Net stockholders' equity 31,155,000 26,566,000
$ 92,075,000 $ 97,251,000
See accompanying notes to condensed consolidated financial statements.
<PAGE>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Earnings
(Unaudited)
<TABLE>
<S>
<S>
Three Months Ended December 31, Nine Months Ended December 31,
1996 1995 1996 1995
<C> <C> <C> <C>
Revenues $ 38,379,000 $ 25,563,000 $ 99,242,000 $65,628,000
Costs and expenses 35,125,000 23,382,000 90,488,000 60,289,000
Operating income 3,254,000 2,181,000 8,754,000 5,339,000
Interest and related expenses (914,000) (978,000) (2,649,000) 1,675,000)
Other, net (36,000) 311,000 324,000 425,000
Earnings before income taxes 2,304,000 1,514,000 6,429,000 4,089,000
Income taxes 898,000 590,000 2,507,000 1,594,000
Net earnings $ 1,406,000 $ 924,000 $ 3,922,000 $ 2,495,000
Earnings per share:
Primary $ 0.24 $ 0.16 $ 0.68 $ 0.44
Fully Diluted $ 0.21 $ 0.16 $ 0.59 $ 0.44
Weighted average number of shares outstanding:
Primary 5,774,000 5,677,000 5,733,000 5,647,000
Fully Diluted 8,970,000 8,303,000 8,918,000 6,552,000
See accompanying notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended December 31,
1996 1995
Cash flows from operating activities
Net earnings $ 3,922,000 $ 2,495,000
Adjustments to reconcile net earnings to cash
flows from operating activities:
Depreciation and amortization 3,560,000 2,226,000
Other, net (24,000) 305,000
Changes in assets and liabilities, net of effects from
business combinations:
(Increase) decrease in accounts receivable 1,919,000 (2,859,000)
(Increase) in inventories (3,748,000) (4,141,000)
Decrease in other current assets 283,000 667,000
(Decrease) in accounts payable and other (9,664,000) (2,381,000)
Other, net (353,000) 194,000
Net cash used in operating activities (4,105,000) (3,494,000)
Cash flows from investing activities
Capital expenditures (2,461,000) (3,712,000)
Sales of fixed assets 122,000 2,380,000
Payments pursuant to business combinations,
net of cash acquired (6,226,000) (4,140,000)
Net cash used in investing activities (8,565,000) (5,472,000)
Cash flows from financing activities
Net proceeds from (repayments of)
short-term debt (899,000) 55,000
Payments on long-term debt (651,000) (374,000)
Repurchases of convertible subordinated debenture - (2,242,000)
Net proceeds from issuance of senior subordinated
convertible debentures - 23,360,000
Other, net 51,000 39,000
Net cash provided by (used in) financing
activities (1,499,000) 20,838,000
Net increase (decrease) in cash and cash
equivalents (14,169,000) 11,872,000
Cash and cash equivalents, beginning of period 22,785,000 11,197,000
Cash and cash equivalents, end of period $ 8,616,000 $23,069,000
See accompanying notes to condensed consolidated financial statements.
<PAGE>
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 December 31, 1996, the
results of operations for the three and nine months ended December 31, 1996
and 1995 and cash flows for the nine months ended December 31, 1996 and 1995.
The results of operations for the nine months ended December 31, 1996 are not
necessarily indicative of the results to be expected for the full year.
2)The Company's industrial revenue bonds, due 1998, are supported by an
irrevocable, direct-pay letter of credit in an amount equal to the principal
balance plus interest thereon for 45 days. At December 31, 1996, the
contingent liability of the Company as guarantor under the letter of credit
was approximately $1,726,000. The Company has collateralized the letter of
credit with accounts receivable and has also agreed to certain financial
covenants, including the maintenance of: (i) a certain minimum ratio of
consolidated tangible net worth to total debt (the "Debt Ratio"), (ii) a
certain minimum quarterly ratio of earnings before interest and taxes to
interest, and (iii) a certain minimum balance of billed and unbilled accounts
receivable. As a result of the issuance of the Company's 9% Senior
Subordinated Convertible Debentures, the Debt Ratio at December 31, 1996 was
below the required minimum ratio. The Company has obtained a waiver from the
issuing bank, expiring as of January 2, 1998 (the final redemption date), of
the required debt ratio and, accordingly, is in compliance with all covenants
under the letter of credit.
3)Until March 31, 1996, the Company had three authorized classes of stock: a
class consisting of 10,000,000 shares of Class A Common Stock, a class
consisting of 20,000,000 shares of Class B Common Stock, and a class
consisting of 2,000,000 shares of Preferred Stock (none of which has been
issued). The holders of the Class A and Class B Common Stock were entitled
to one vote per share and one-tenth vote per share, respectively.
On February 7, 1996, the Board of Directors of the Company approved and
recommended for submission to the stockholders of the Company by a majority
vote the consideration and approval of an Amended and Restated Certificate of
Incorporation (the "Restated Certificate"), which amended and restated the
Company's certificate to (i) effect a reclassification of each share of Class
A Common Stock and each share of Class B Common Stock into one share of
Common Stock of the Company, (ii) provide that action by the stockholders may
be taken only at a duly called annual or special meeting and not by written
consent and (iii) provide that the stockholders of the Company would have the
right to make, adopt, alter, amend or repeal the by-laws of the Company only
upon the affirmative vote of not less than 66 2/3% of the outstanding capital
stock entitled to vote thereon. On March 26, 1996, the stockholders approved
the Restated Certificate. The Restated Certificate was filed with the
Secretary of State of the State of Delaware and became effective April 1,
1996. Accordingly, the Condensed Consolidated Balance Sheet as of March 31,
1996 presents Class A and Class B Common Stock; the Condensed Consolidated
Balance Sheet as of December 31, 1996 presents the new, single class of
Common Stock.
4)On June 18, 1996, a second-tier subsidiary of Precision Echo, Inc., a
wholly-owned subsidiary of the Company, acquired substantially all the
assets of Vikron, Inc. ("Vikron") for approximately $3.7 million.
Vikron, located in St. Croix Falls, Wisconsin, manufactures data and
recording heads.
The acquisition has been accounted for using the purchase method of
accounting. Accordingly, Vikron's results of operations from April 1, 1996
(the effective date of the acquisition) have been included in the Company's
reported operating results. The excess of cost over the estimated fair value
of net assets acquired was approximately $1.6 million and is being amortized
on a straight-line basis over 15 years.
5)On October 24, 1996, a second-tier subsidiary of Precision Echo, Inc., a
wholly-owned subsidiary of the Company, acquired certain assets of Nortronics
Company, Inc. ("Nortronics"), a Minnesota corporation, for approx-
imately $2.4 million. Nortronics manufactures magnetic data recording head
products.
The acquisition has been accounted for using the purchase method of
accounting. Accordingly, Nortronics' results of operations from July 1,
1996 (the effective date of the acquisition) have been included in the
Company's reported operating results.
6)On October 30, 1996, Pacific Technologies, Inc. ("PTI"), a California
corporation, merged with and into a subsidiary of the Company, for stock
and cash valued at approximately $0.5 million. Based in San Diego,
California, PTI provides systems and software engineering support to the U.S.
Navy for the testing of shipboard combat systems.
The merger has been accounted for using the purchase method of accounting.
Accordingly, PTI's results of operations from July 1, 1996 (the effective date
of the merger) have been included in the Company's reported operating
results.
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 presents the percentage
increase or decrease of those items as compared to the prior period.
<TABLE>
<S> <S> <S> <S> <S>
Percent of Revenues Percent of Revenues
Three Months Ended Percent Nine Months Ended Percent
December 31 Changes December 31 Changes
<C> <C> <C> <C> <C> <C>
1996 1995 1996 vs. 1995 1996 1995 1996 vs. 1995
Revenues 100.0 100.0 50.1 100.0 100.0 51.2
Cost and expenses 91.5 91.5 50.2 91.2 91.1 50.1
Operating income 8.5 8.5 49.2 8.8 8.1 64.0
Interest and related expenses (2.4) (3.8) -6.5 (2.7) (2.5) 58.1
Other, net (0.1) 1.2 -111.6 0.3 0.6 -23.8
Earnings before income taxes 6.0 5.9 52.2 6.4 6.2 57.2
Income taxes 2.3 2.3 52.2 2.4 2.4 57.3
Net Earnings 3.7 3.6 52.2 4.0 3.8 57.2
</TABLE>
Revenues for the three-month period ended December 31, 1996 increased 50.1%
to $38.4 million from $25.6 million for the same three-month period in fiscal
1996. On a year-to-date basis, revenues increased 51.2% to $99.2 million from
$65.6 million for the same nine-month period in fiscal 1996. The revenue
growth was due primarily to increased shipments associated with the
Company's display workstation and electro-optical system product lines,
as well as to increases in commercial product sales, which include revenues
from businesses acquired within the last year.
Operating income for the three-month period ended December 31, 1996
increased 49.2% to $3.3 million from $2.2 million for the same three-
month period in fiscal 1996. On a year-to-date basis, operating income
increased 64% to $8.8 million from $5.3 million for the same nine-month
period in fiscal 1996. Operating income as a percentage of revenue was 8.5%
and 8.8% for the three-month and nine-month periods ended December 31, 1996,
respectively, as compared with 8.5% and 8.1%, respectively, for the
comparable prior year periods. The increase in operating income was due
primarily to the overall increase in revenues, together with higher profits
generated by certain of the Company's commercial products.
Interest and related expenses were $0.9 million and $2.6 million for the
three-month and nine-month periods ended December 31, 1996, as compared to
$1.0 million and $1.7 million in the prior year. The decrease in the third
quarter of fiscal 1997 was due primarily to the redemption of approximately
$5.0 million aggregate principal amount of the Company's 8.5% Convertible
Subordinated Debentures (the "8.5% Debentures") in the fourth quarter of
fiscal 1996. These debentures were redeemed using a portion of the proceeds
from the private placement on September 29, 1995, and November 3, 1995, of
$25.0 million aggregate principal amount of 9% Senior Subordinated Convertible
Debentures due 2003 (the "9% Debentures"). The increase in interest expense
for the nine-month period ended December 31, 1996 is due primarily to the
overall increase in interest expense associated with the issuance of the 9%
Debentures, offset in part by reductions in interest resulting from
redemptions of approximately $2.3 million and $5.0 million aggregate
principal amount of the Company's 8.5% Debentures in the second and
fourth quarters of fiscal 1996, respectively.
Other, net was a charge of $36,000 and income of $0.3 million for the three-
month and nine-month periods ended December 31, 1996, respectively, as
compared to income of $0.3 million and $0.4 million in the comparable periods
of fiscal 1996. The decreases were primarily due to an increase in minority
interest resulting from higher earnings generated by Laurel Technologies,
a partnership in which the Company has an 80% controlling interest.
The Company's effective tax rate for the three-month and nine-month periods
ended December 31, 1996 and 1995 was 39%. The Company records income tax
expense based on an estimated effective income tax rate for the full fiscal
year. The effective income tax rate and the components of income tax expense
for the fiscal quarter ended December 31, 1996 have not significantly changed
from those of the fiscal year ended March 31, 1996. 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 December 31, 1996 and
March 31, 1996 represented approximately 9% and 23%, respectively, of total
assets. During the nine-month period ended December 31, 1996, cash decreased
by approximately $14.2 million. This decrease resulted from the use of
approximately $6.2 million in the Vikron and Nortronics acquisitions,
approximately $2.5 million for capital expenditures and approximately $1.6
million for debt repayments. Additionally, approximately $4.1 million was
used in support of operations, primarily in settlement of accounts payable
balances associated with material procurement in the fourth quarter of
fiscal 1996. This material was purchased in anticipation of production
activity, primarily for display workstations, scheduled for fiscal 1997.
Capital expenditures, excluding assets acquired as a result of business
combinations are expected to approximate $3 million for the fiscal year ending
March 31, 1997. The majority of these expenditures will be for computer and
production-related equipment.
Working capital as of December 31, 1996 was $33.0 million, as compared to
$34.0 million at March 31, 1996. The decrease was primarily due to the uses
of cash for acquisitions and capital expenditures, partially offset by the
net effect of lower accounts payable and higher inventory balances.
On May 31, 1996, the Company entered into a revolving line of credit loan
agreement with Mellon Bank, N.A. ("Mellon Bank") for a three-year $15
million unsecured revolving line of credit (the "line of credit"), available
for working capital and letters of credit. As of December 31, 1996,
approximately $4.1 million was outstanding against the line of credit. On
December 6, 1996, the Company entered into a $5 million secured equipment
line of credit/term loan agreement with Mellon Bank (the "equipment
facility"). The equipment facility is available for equipment purchases
made through June 30, 1999. At December 31, 1996, there were no outstanding
borrowings against the equipment facility.
The Company believes that its current working capital position and
available financing are sufficient to support its current operational needs.
Accounts Receivable and Inventories: Accounts receivable decreased by
approximately $1.9 million in the nine-month period ended December 31, 1996,
net of the effect of assets acquired pursuant to business combinations. The
net decrease was due primarily to the collection of an outstanding balance
associated with one of the Company's display workstation contracts, billed at
the end of the second quarter. Generally, there are no contract provisions for
retainage, and all accounts receivable are expected to be collected within one
year.
Inventories increased by approximately $3.7 million from March 31, 1996,
net of the effect of assets acquired pursuant to business combinations. The
increase was due primarily to increased material procurement and production
activity on certain data recording and commercial products.
<TABLE>
<S> <C> <C>
December 31, March 31, 1996
1996
Quick ratio 1.3 1.4
Current ratio 2.4 2.0
Liabilities-to-equity
ratio 2.0 2.7
Long-term debt,
excluding current
installments, to
capitalization 50.9% 55.1%
</TABLE>
Backlog: At December 31, 1996, the Company's backlog of orders was
approximately $118.6 million as compared to $145.6 million at March 31, 1996.
The decrease in backlog was due to the net effect of revenues, partially
offset by bookings. New contract awards of approximately $69 million were
booked during the nine-month period ended December 31, 1996.
Acquisitions and Related Activities
On June 18, 1996, a second-tier subsidiary of Precision Echo, Inc., a
wholly-owned subsidiary of the Company, acquired substantially all the assets
of Vikron, Inc. ("Vikron") for approximately $3.7 million. Vikron, located in
St. Croix Falls, Wisconsin, manufactures data and recording heads.
The acquisition has been accounted for using the purchase method of
accounting. Accordingly, Vikron's results of operations from April 1, 1996
(the effective date of the acquisition) have been included in the Company's
reported operating results. The excess of cost over the estimated fair value
of net assets acquired was approximately $1.6 million and is being amortized
on a straight-line basis over 15 years.
On October 24, 1996, a second-tier subsidiary of Precision Echo, Inc., a
wholly-owned subsidiary of the Company, acquired certain assets of Nortronics
Company, Inc. ("Nortronics"), a Minnesota corporation, for approximately $2.4
million. Nortronics manufactures magnetic data recording head products.
The acquisition has been accounted for using the purchase method of
accounting. Accordingly, Nortronics' results of operations from July 1, 1996
(the effective date of the acquisition) have been included in the Company's
reported operating results.
On October 30, 1996, Pacific Technologies, Inc. ("PTI"), a California
corporation, merged with and into a subsidiary of the Company, for stock and
cash valued at approximately $0.5 million. Based in San Diego, California,
PTI provides systems and software engineering support to the U.S. Navy for
the testing of shipboard combat systems.
The merger has been accounted for using the purchase method of accounting.
Accordingly, PTI's results of operations from July 1, 1996 (the effective
date of the merger) have been included in the Company's reported operating
results.
Letter of Credit
The Company's industrial revenue bonds, due 1998, are supported by an
irrevocable, direct-pay letter of credit in an amount equal to the principal
balance plus interest thereon for 45 days. At December 31, 1996, the contingent
liability of the Company as guarantor under the letter of credit was
approximately $1,726,000. The Company has collateralized the letter of credit
with accounts receivable and has also agreed to certain financial covenants,
including the maintenance of: (i) a certain minimum ratio of consolidated
tangible net worth to total debt (the "Debt Ratio"), (ii) a certain minimum
quarterly ratio of earnings before interest and taxes to interest, and (iii) a
certain minimum balance of billed and unbilled accounts receivable. As a result
of the issuance of the Company's 9% Senior Subordinated Convertible Debentures,
the Debt Ratio at December 31, 1996 was below the required minimum ratio. The
Company has obtained a waiver from the issuing bank, expiring as of January 2,
1998, (the final redemption date) of the required debt ratio and accordingly is
in compliance with all covenants under the letter of credit.
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
11. Schedule of Computations of Per Share Earnings
27. Financial Data Schedule
(b) Reports on Form 8-K
None.
<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
Date: February 14, 1997 /s/ Nancy R. Pitek
Nancy R. Pitek
Vice President, Finance
Treasurer and Secretary
DIAGNOSTIC/RETRIEVAL SYSTEMS, INC.
EXHIBIT 11
SCHEDULE OF COMPUTATIONS OF PER SHARE EARNINGS
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended December 31, Nine Months Ended December 31,
1996 1995 1996 1995
PRIMARY
Net earnings for primary earnings
per share $1,406,000 $ 924,000 $3,922,000 $2,495,000
Weighted average number of shares
outstanding (1) 5,538,000 5,497,000 5,507,000 5,473,000
Add - common equivalent shares (determined
using the "treasury stock" method)
representing shares issuable upon exercise
of employee stock options 236,000 180,000 226,000 174,000
Weighted average number of shares used
in calculation of primary earnings
per share 5,774,000 5,677,000 5,733,000 5,647,000
Primary earnings per share $ 0.24 $ 0.16 $ 0.68 $ 0.44
FULLY DILUTED
Net earnings $1,406,000 $ 924,000 $3,922,000 $2,495,000
Add - interest on 8.5% Convertible
Subordinated Debentures, net of applicable
income taxes (2) 65,000 - 195,000 -
Add - interest on 9% Senior Subordinated
Convertible Debentures, net of applicable
income taxes 351,000 332,000 1,049,000 332,000
Add - amortization of deferred issuance costs
relating to 9% Senior Subordinated Convertible
Debentures, net of applicable
income taxes 36,000 31,000 107,000 31,000
Net earnings for fully diluted earnings
per share $1,858,000 $1,287,000 $5,273,000 $2,858,000
Weighted average number of shares used in
calculation of primary earnings
per share 5,774,000 5,677,000 5,733,000 5,647,000
Add (deduct) incremental shares representing:
Shares issuable upon exercise of stock options
included in primary earnings per share
calculation (236,000) (180,000) (226,000) (174,000)
Shares issuable upon exercise of stock options
based on period-end market
prices 274,000 184,000 253,000 185,000
Shares issuable upon conversion of 8.5%
Convertible Subordinated
Debentures (2) 333,000 - 333,000 -
Shares issuable upon conversion of 9%
Senior Subordinated Convertible
Debentures 2,825,000 2,622,000 2,825,000 894,000
Weighted average number of shares used
in calculation of fully diluted
earnings per share 8,970,000 8,303,000 8,918,000 6,552,000
Fully diluted earnings
per share $ 0.21 $ 0.16 $ 0.59 $ 0.44
(1) Effective April 1, 1996, Class A and Class B Common Stock were reclassified
into a new single class of Common Stock. See Note 3 to Condensed Consolidated
Financial Statements.
(2) No adjustment made for all prior year periods, as the effect on reported
per share earnings was antidilutive.
</TABLE>
<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
DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 8,616,000
<SECURITIES> 0
<RECEIVABLES> 22,224,000
<ALLOWANCES> 0
<INVENTORY> 23,297,000
<CURRENT-ASSETS> 56,055,000
<PP&E> 47,147,000
<DEPRECIATION> 27,480,000
<TOTAL-ASSETS> 92,075,000
<CURRENT-LIABILITIES> 23,095,000
<BONDS> 32,309,000
0
0
<COMMON> 60,000
<OTHER-SE> 31,095,000
<TOTAL-LIABILITY-AND-EQUITY> 92,075,000
<SALES> 38,379,000
<TOTAL-REVENUES> 38,379,000
<CGS> 35,125,000
<TOTAL-COSTS> 35,125,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 914,000
<INCOME-PRETAX> 2,304,000
<INCOME-TAX> 898,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,406,000
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.21
</TABLE>
