SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1995
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: 0-7304
DYNAMICS CORPORATION OF AMERICA
(Exact name of registrant as specified in its charter)
NEW YORK 13-0579260
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
475 Steamboat Road, Greenwich, Connecticut 06830-7197
(Address of principal executive offices) (Zip Code)
(203) 869-3211
(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 October 30, 1995:
Voting 3,825,760
Non-Voting 4,066
<PAGE>
DYNAMICS CORPORATION OF AMERICA
AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
As of September 30, 1995 and December 31, 1994 2
Condensed Consolidated Statements of
Income - For the Three and Nine Months
Ended September 30, 1995 and 1994 3
Condensed Consolidated Statement of
Stockholders' Equity - For the Nine
Months Ended September 30, 1995 4
Condensed Consolidated Statements of
Cash Flows - For the Nine Months
Ended September 30, 1995 and 1994 5
Notes to Condensed Consolidated Financial
Statements 6 - 8
Item 2. Management's Discussion and
Analysis of Results of Operations
and Financial Condition 9 - 12
Part II - Other Information:
Item 6. Exhibits and Reports on Form 8-K 13
Signature Page 14
<PAGE>
Part 1 - Financial Information
Item 1 - Financial Statements
DYNAMICS CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1995 (Unaudited) AND DECEMBER 31, 1994
(DOLLAR AMOUNTS IN THOUSANDS)
September 30, December 31,
ASSETS 1995 1994
Current Assets:
Cash and cash equivalents $ 1,206 $ 6,837
Accounts receivable, less allowances of $552
and $604 19,015 15,214
Inventories - Note 1 22,508 17,893
Other current assets 2,643 3,065
Current assets of division held for sale -
Note 2 656 1,185
Deferred income taxes 5,493 5,418
TOTAL CURRENT ASSETS 51,521 49,612
Property, Plant and Equipment - at cost, less
accumulated depreciation and amortization of
$33,247 and $32,454 3,561 3,472
Equity Investment in CTS Corporation - Note 3 73,466 69,291
Other Assets 2,432 1,719
Deferred Income Taxes 83
TOTAL ASSETS $130,980 $124,177
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt $ 85 $ 126
Accounts payable 6,739 4,454
Accrued expenses and sundry liabilities 15,248 15,648
Federal income taxes payable 1,736 2,006
TOTAL CURRENT LIABILITIES 23,808 22,234
Long-term Debt 441 401
Other Liabilities 1,551 1,817
Deferred Income Taxes 1,330
TOTAL LIABILITIES 27,130 24,452
Contingencies - Note 6
Stockholders' Equity:
Preferred stock, par value $1 per share --
authorized 894,000 shares - none issued
Series A Participating Preferred Stock, par
value $1 per share - authorized 106,000
shares - none issued
Stockholders' equity - see accompanying
statement 103,850 99,725
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $130,980 $124,177
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
DYNAMICS CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Unaudited
For the three months For the nine months
ended September 30, ended September 30,
1995 1994 1995 1994
Net sales $30,077 $24,732 $82,697 $71,446
Cost of sales 22,551 17,929 61,408 51,927
Gross profit 7,526 6,803 21,289 19,519
Selling, general and administrative
expenses 6,780 6,121 19,486 17,755
746 682 1,803 1,764
Other income (expense), net - Note 4 (110) 127 233 378
Provision for division held for sale -
Note 2 (360)
Income from continuing operations before
items shown below 636 809 1,676 2,142
Income tax charge (benefit) - Note 5 (729) 295 (355) 783
Income from continuing operations before
equity in CTS Corporation 1,365 514 2,031 1,359
Income from equity investment in CTS
Corporation 1,079 648 3,081 2,469
Income from continuing operations 2,444 1,162 5,112 3,828
Income from discontinued operation, net
of income tax charge of $2,022 - 3,334
Note 2
Net income $ 2,444 $ 1,162 $ 5,112 $ 7,162
Weighted average number of common and
common equivalent shares
outstanding 3,837,119 3,878,527 3,841,071 3,881,468
Income per common share:
Continuing operations $ .64 $ .30 $ 1.33 $ .99
Discontinued operation .86
Net income $ .64 $ .30 $ 1.33 $ 1.85
Dividends per common share $ .10 $ .10 $ .20 $ .20
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
<TABLE>
DYNAMICS CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(DOLLAR AMOUNTS IN THOUSANDS)
Unaudited
<CAPTION>
Common Stock
(Authorized 10,000,000
voting shares and 600,000
non-voting shares) Paid-in Total
Shares Additional Retained Deferred Stockholders'
Outstanding* Par Value Capital Earnings Compensation Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 3,846,677 $385 $11,698 $88,133 $(491) $99,725
Shares issued and issuable
from treasury pursuant to
benefit plans 461 18 18
Shares acquired for
treasury and pursuant to
benefit plans (16,420) (2) (125) (259) (386)
Amortization of deferred
compensation and related
tax benefit 35 114 149
Net income 5,112 5,112
Cash dividends (768) (768)
Balance at September 30, 1995 3,830,718 $383 $11,626 $92,218 $(377) $103,850
<FN>
* Net of shares held in treasury at $.10 par value per share (3,344,443 voting shares at September 30, 1995 and 3,328,484
voting shares at December 31, 1994). The cumulative cost of treasury shares held at September 30, 1995 amounted to
approximately $35,200. Includes non-voting shares outstanding of 4,539 at September 30, 1995.
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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<PAGE>
DYNAMICS CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
Unaudited
September 30, September 30,
1995 1994
Operating activities:
Net income $ 5,112 $7,162
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 885 867
Deferred income taxes 1,338 594
Income from equity investment in
CTS before income taxes (4,581) (2,987)
Dividends from CTS 1,009 596
Gain on sale of property (198)
Increase in other assets (504) (82)
Decrease in other liabilities (266) (328)
Issuance of Company common stock 18 19
Other--net 149 87
Changes in operating assets and liabilities:
Accounts receivable (3,801) 315
Inventory (4,615) (1,443)
Other current assets (54) (134)
Accounts payable, accrued expenses
and sundry liabilities 1,885 2,085
Federal income taxes payable (270) 3
Decrease (increase) in current assets of
division held for sale 529 (762)
Net cash provided by (used in) operating
activities (3,364) 5,992
Investing activities:
Purchases of CTS common stock (603) (5,007)
Purchases of property, plant and equipment (850) (433)
Purchases of property, plant and equipment
for division held for sale (211)
Proceeds from sale of property 200
Proceeds from note receivable 476 24
Net cash used in investing activities (988) (5,416)
Financing activities:
Principal payments under capital
lease obligations and mortgages (125) (400)
Purchases of treasury stock (386) (754)
Dividends paid (768) (777)
Net cash used in financing activities (1,279) (1,931)
Decrease in cash and cash equivalents (5,631) (1,355)
Cash and cash equivalents at beginning of period 6,837 8,969
Cash and cash equivalents at end of period $ 1,206 $ 7,614
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of Management,
all adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the nine
months ended September 30, 1995 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1995. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-K for the year ended
December 31, 1994.
Note 1 - Inventories:
Quarterly inventories are estimated based on perpetual inventory records of the
Company and the gross profit method under the first-in, first-out and the last-
in, first-out methods.
Inventories are summarized as follows:
September 30, December 31,
1995 1994
(in thousands)
Raw materials and supplies $ 9,258 $ 7,579
Work in process 7,624 6,791
Finished goods 5,626 3,391
22,508 17,761
Inventories subject to progress billings 666
Progress billings (534)
- 132
$22,508 $17,893
Note 2 - Division Held for Sale - Fermont Division:
Income from discontinued operation for the nine month period ended September
30, 1994 reflects settlement of the preproduction portion of the equitable
proposal of the Company's Fermont Division on a contract with the Government
for the supply of 3KW generator sets.
On March 23, 1995, the Department of the Army notified Fermont that its 3KW
contract with Fermont had been terminated completely, for the convenience of
the Government. In October 1995, the Company filed its proposal for
compensation due Fermont from the Government as a result of this termination.
In August 1995, Libby Corporation withdrew its protest to the U.S. General
Accounting Office with respect to the July 17, 1995 confirmation by the U.S.
Army Aviation and Troop Command ("ATCOM") of ATCOM's January 13, 1995 award to
Fermont of a $57.8 million contract to manufacture tactical quiet generator
sets ("TQ Contract"). On September 30, 1995, ATCOM issued another order for
generator sets under the TQ Contract, raising the sales value of the TQ
Contract to approximately $68 million. Fermont is preparing its claim for an
equitable adjustment based on the delay occasioned by the stop work order
issued by the Government in connection with the protest of the original award
of the TQ Contract.
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<PAGE>
Note 2 - Division Held for Sale - Fermont Division (continued):
The Company has continued its efforts to sell Fermont. In the quarter ended
September 30, 1995, the Company determined to cease further bidding by Fermont
pending sale of the operation or winding down of the division in the course of
performing the TQ Contract; accordingly, a provision for additional projected
operating losses at Fermont was not required.
Note 3 - Equity Investment in CTS Corporation:
At September 30, 1995, the Company's holdings aggregated 2,242,100 shares of
CTS common stock, increased from 2,222,100 shares at December 31, 1994, and
the Company's percentage of equity ownership in CTS increased to 43.1% from
42.9%. Subsequent to September 30, 1995, and through November 10, 1995, the
Company purchased 61,000 additional CTS shares at a cost of $2,070,000,
bringing the Company's aggregate holdings to 2,303,100 shares of CTS common
stock, or 44.2%.
The market value of the Company's investment in CTS amounted to $69,505,000 at
September 30, 1995 and $61,663,000 at December 31, 1994. The market value at
November 10, 1995 was $80,033,000. Under the Control Share Acquisitions
Chapter of the Indiana Business Corporation Law, 1,020,000 of the Company's
shares of CTS stock presently have no voting rights.
Summarized unaudited financial information derived from CTS' Quarterly Report
on Form 10-Q for the quarter ended October 1, 1995 follows:
Three Months Ended Nine Months Ended
October 1, October 2, October 1, October 2,
1995 1994 1995 1994
(in thousands)
Net sales $73,890 $65,950 $226,281 $200,925
Gross earnings $18,345 $15,100 $ 54,766 $47,849
Net earnings $ 4,218 $ 3,031 $12,116 $ 9,410
Certain reclassifications have been made for all years presented in CTS'
financial statements to conform to the classifications adopted by CTS in 1995.
Note 4 - Other Income (Expense), Net:
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
(in thousands)
Interest:
Income $49 $74 $184 $172
Expense (13) (14) (39) (59)
36 60 145 113
Gain on sale of property and
leasehold rights 198
Staff reduction costs (125) (125)
Other, net (21) 67 15 265
($110) $127 $233 $378
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<PAGE>
Note 5 - Income Tax Charge (Benefit):
Included in net income for the three and nine month periods ended September
30, 1995 is an income tax benefit of $998,000, or $.26 per share, reflecting a
favorable resolution of prior year tax matters. Exclusive of this tax
benefit, the effective tax rate for the three and nine month periods ended
September 30, 1995 and 1994 exceeds the Federal statutory rate primarily due
to the effect of state income and franchise taxes, offset in part in the
current nine month period by state tax credits.
Note 6 - Contingencies:
The Company is a supplier to the United States Government under contracts and
subcontracts on which there are cost allocation, cost allowability and
compliance issues under examination by various agencies or departments of the
Federal government. In the course of the resolution of these issues, the
Company may be required to adjust certain prices or refund certain payments on
its government contracts and subcontracts. The Company believes that any such
price adjustments or refunds will not have a material adverse effect on the
financial position of the Company.
In October 1994 the Company, after notifying the Consumer Products Safety
Commission, commenced a recall of approximately 2,700 electronic toasters
manufactured in the United Kingdom by a third party and distributed in the
U.S. by the Company's Waring Products Division, because of a defect in the
electronic timer on the units. The Company has advised the manufacturer that
it will seek full indemnity from the manufacturer, as provided in the
agreement between the parties, for all costs of the recall. The costs of the
recall are not expected to materially affect the financial condition of the
Company.
The Company has been notified by the U.S. Environmental Protection Agency
("EPA") that it is a Potentially Responsible Party ("PRP") regarding hazardous
waste cleanup at a non-Company site in Connecticut and at a Company site in
California. Certain of the PRPs at the Connecticut site have agreed with the
EPA to fund a feasibility study at the site and have sued the Company and
other PRPs who have not agreed to share the costs. A property owner
neighboring the Company site in California has sued the Company and others for
allegedly causing contamination at the neighbor's property. In late March,
1995, the Company was sued by a state environmental agency to recover response
costs related to the cleanup of a non-Company site in Pennsylvania as to which
the Company was earlier designated a PRP. The Company is also a defendant in
two lawsuits seeking contribution towards the Superfund cleanup costs relating
to two other non-Company sites in that state. Based upon its knowledge of the
extent of the Company's exposure and current statutes, rules and regulations,
management believes that the anticipated costs resulting from claims and
proceedings with respect to the above mentioned sites, including remediation,
the extent and cost of which are presently unknown, will not materially affect
the financial position of the Company.
With respect to other claims and actions against the Company, it is the
opinion of Management that they will not have a material effect on the
financial position of the Company.
-8-
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations - Three Months Ended September 30, 1995 Compared to
Three Months Ended September 30, 1994
Sales increased $5,345,000, or 21.6%. Sales in the Electrical Appliances and
Electronic Devices segment increased $2,319,000. Sales of heat dissipating
devices, especially those for computer microprocessors, and of frequency
control devices, largely to the telecommunications industry, registered gains
of $1,596,000 and $780,000, respectively. Sales of electrical appliances were
relatively unchanged, as sales declines for international and domestic
consumer products were offset by increased sales of commercial products.
Sales in the Fabricated Metal Products and Equipment segment declined
$170,000, as lower sales of commercial air products were partially offset by
improved sales of systems products. Sales in the Power and Controlled
Environmental Systems segment increased $3,196,000 primarily from higher
export shipments of power plant equipment, and sales of custom mobile products
increased slightly while sales of thermal products and relocatable medical
shelters and trailers showed modest declines.
Gross profit increased $723,000 but declined as a percentage of sales to 25.0%
from 27.5%. Gross profit in the Electrical Appliances and Electronic Devices
segment increased as a result of higher sales of heat dissipating and
frequency control devices. Gross profit declined on electrical appliances due
to product mix. Gross profit decreased in the Fabricated Metal Products and
Equipment segment due to manufacturing inefficiencies and increased factory
costs at the Scranton facility. Gross profit improved in the Power and
Controlled Environmental Systems segment due to the increased power plant
export shipments.
Selling, general and administrative expenses increased $659,000 but declined
as a percentage of sales. Expenses increased in all segments of business.
Commission expense in the Power and Controlled Environmental Systems segment
increased, particularly due to power plant equipment export sales. Selling
expenses in the Fabricated Metal Products and Equipment segment increased due
to higher staffing and increased promotion costs.
Other income (expense) in the current period reflected a net expense of
$110,000 versus net income of $127,000 in the prior period. Staff reduction
costs of $125,000 were recorded in the current period at the Company's Waring
Products Division, where annualized payroll and related cost savings of
approximately $500,000 will result from the reduction.
The current period included a net income tax benefit of $729,000 versus income
tax expense of $295,000 in the prior period, resulting in a change period-to-
period of $1,024,000. The benefit in the current period of $998,000, or $.26
per share, reflected a favorable resolution of prior year tax matters.
Exclusive of this tax benefit, the income tax rate in the current period was
42.3%, compared to 36.5% for the same period a year ago. The effective tax
rates are higher than the applicable Federal statutory rate of 34% principally
because of state income taxes.
Income from the Company's equity investment in CTS Corporation increased
$431,000, reflecting the $1,187,000 increase in CTS' quarterly net earnings
and the Company's period-to-period increase in percentage of equity ownership
to 43.1% from 41.5%. The increase in the Company's share of net earnings was
reduced by a higher provision for deferred income taxes on undistributed
earnings of CTS.
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<PAGE>
Results of Operations - Nine Months Ended September 30, 1995 Compared to Nine
Months Ended September 30, 1994
Sales increased $11,251,000, or 15.7%. Sales in the Electrical Appliances and
Electronic Devices segment increased $4,074,000. Sales of heat dissipating
devices, especially for computer microprocessors, and of frequency control
devices, largely to the telecommunications industry, increased $5,407,000 and
$2,011,000, respectively. Sales of electrical appliances decreased
$3,344,000, as sales declines for domestic consumer products, primarily
specialty products, and international products were partially offset by
increased sales of commercial products. Sales in the Fabricated Metal
Products and Equipment segment were relatively unchanged, as higher sales of
door and systems products were offset by lower sales of commercial air
products. Sales in the Power and Controlled Environmental Systems segment
increased $7,174,000 due to greater shipments of power plant equipment for
export and of custom mobile products, offset in part by lower sales of thermal
products and relocatable medical shelters and trailers.
Gross profit increased $1,770,000 but declined as a percentage of sales to
25.7% from 27.3%. Gross profit in the Electrical Appliances and Electronic
Devices segment increased from higher sales of frequency control and heat
dissipating devices. Gross profit declined on electrical appliances due to
sales volume declines and sales mix, including lower sales of higher margined
specialty consumer products. Gross profit in the Fabricated Metal Products
and Equipment segment declined due to manufacturing inefficiencies and
increased factory costs at the Scranton facility. Gross profit in the Power
and Controlled Environmental Systems segment increased primarily due to the
increased power plant sales.
Selling, general and administrative expenses increased $1,731,000 but declined
as a percentage of sales. Expenses increased in all segments of business.
Commission expense in the Power and Controlled Environmental Systems segment
increased, particularly due to power plant equipment export sales. Selling
expenses in the Fabricated Metal Products and Equipment segment increased due
to higher staffing and increased promotion costs.
Other income (net) decreased $145,000, as a $198,000 gain on the sale of
excess property and leasehold rights and $74,000 of interest income from the
restructuring of the note acquired in the 1992 sale of the Company's
investment in Farmhand, Inc. were offset by charges of $125,000 for staff
reduction costs at the Company's Waring Products Division, $118,000 for costs
in connection with an electrical appliance recall and $125,000 representing
the value of inventory contributed to generate state income tax credits.
A charge of $360,000 ($227,000, or $.06 per share, after taxes) for additional
projected operating losses of the Fermont division, a business held for sale,
was recorded during the quarter ended June 30, 1995. The charge to income was
necessitated in part by a stop work order issued by the U.S. Government in
April as a consequence of a rival bidder's protest of a contract award to
Fermont. The stop work order was lifted in July and work on the contract has
resumed.
The current period included a net income tax benefit of $355,000, versus
income tax expense of $783,000 in the prior period, resulting in a change
period-to-period of $1,138,000. The benefit in the current period of
$998,000, or $.26 per share, reflected a favorable resolution of prior year
tax matters. Exclusive of this tax benefit, the income tax rate in the
current period was 38.4%, compared to 36.6% for the same period a year ago.
The effective tax rates are higher than the applicable Federal statutory rate
of 34% principally because of state income taxes.
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<PAGE>
Income from the Company's equity investment in CTS Corporation increased
$612,000, reflecting the $2,706,000 increase in CTS' nine month net earnings
and the Company's period-to-period increase in percentage of equity ownership
to 43.1% from 41.5%. The increase in net earnings was reduced by a higher
provision for deferred income taxes on undistributed earnings of CTS.
In May 1994, the Company agreed to accept $6,450,000 from the Government in
settlement of the preproduction portion of its proposed change order on a
contract for 3KW generator sets to be manufactured by the Company's Fermont
division, which contract has since been terminated by the Government for
convenience. The settlement, net of related expenses and income taxes,
amounted to $3,334,000, or $.86 per share, and was reported as income from
discontinued operation.
Financial Condition
Cash and cash equivalents decreased $5,631,000 during the nine months ended
September 30, 1995. Cash of $3,364,000 was used in operating activities,
principally to fund increases in accounts receivable and inventories. Cash of
$988,000 was used in investing activities, primarily to purchase CTS common
stock and to acquire production equipment, offset in part by receipt of
payment of a note and proceeds from a sale of excess property and leasehold
rights. Cash of $1,279,000 was used in financing activities to fund the
Company's dividend payment, treasury stock purchases, and principal payments
under capital leases.
Cash at September 30, 1995 amounted to $1,206,000. During the nine month
period, the Company did not borrow under its $37,000,000 Revolving Credit
Agreement or its $9,000,000 uncommitted line with its banks. Subsequent to
September 30, 1995, the Company has borrowed under its Revolving Credit
Agreement for working capital requirements and presently has $34,000,000
available under the Agreement, in addition to the $9,000,000 uncommitted line.
Subsequent to September 30, 1995, and through November 10, 1995, the Company
has purchased 61,000 additional shares of CTS common stock at a cost of
$2,070,000, which raises the Company's percentage of equity ownership in CTS
to 44.2%.
Subsequent to September 30, 1995, the Company disposed of current marketable
securities having a cost basis of $604,000 for proceeds of $528,000. The
realized loss of $76,000 had previously been provided for.
Liquidity and financial resources are considered adequate to fund planned
Company operations, including capital expenditures, and payment of dividends
and additional stock purchases, if any. The Company intends to continue its
stated policy of reviewing potential acquisitions of companies and product
lines which it believes would enhance its growth and profitability.
Management anticipates that the Company's deferred tax assets will be realized
based upon its expectation of future taxable income. The Company will require
taxable income of $15,616,000 to realize its deferred tax assets, which are
$5,493,000 at September 30, 1995. Also, under applicable carryback provisions
of the Internal Revenue Code, prior years' taxable income could be utilized to
realize a substantial portion of the deferred tax assets.
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<PAGE>
With respect to the Company's Fermont Division (see Note 2 - Division Held for
Sale - Fermont Division in the Notes to the Condensed Consolidated Financial
Statements), Fermont has resumed performance of its $68 million TQ contract
with the Government. The Company has continued its efforts to sell Fermont.
During the quarter ended September 30, 1995, management determined to cease
further bidding by Fermont pending sale of the operation or winding down of
the division in the course of performing the TQ Contract.
With respect to environmental matters (see Note 6 - Contingencies in the Notes
to the Condensed Consolidated Financial Statements), the Company incurred
costs of $117,000 and $231,000 for managing hazardous substances or pollutants
during the current three and nine month periods, respectively, compared to
$110,000 and $338,000 for the comparable prior year periods. Also, during the
current year's first quarter, the Company had capital expenditures at a
Company site in California of $17,000 to limit and/or monitor hazardous
substances or pollutants. In complying with federal, state and local
environmental protection statutes and regulations, the Company has altered or
modified certain manufacturing processes and expects to continue to do so in
the future. Such modifications to date have not significantly increased
capital expenditures or materially affected earnings or the competitiveness of
the Company. It is possible, but unanticipated at this time, that future
results of operations or cash flows could be materially affected by an
unfavorable resolution of environmental matters.
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<PAGE>
Part II - Other Information
Item 6 - Exhibits and Reports on Form 8-K
(b) On July 26, 1995, the Company reported on Form 8-K under
Item 5, Other Events, that the U.S. Army Aviation and Troop
Command ("ATCOM") advised the Company that ATCOM had
completed the reevaluation of its January 13, 1995 award to
the Company's Fermont Division ("Fermont") of a $57.8
million contract to manufacture tactical quiet generator
sets ("TQ Contract"), and had confirmed the award of the TQ
Contract to Fermont and lifted the stop work order on the
contract issued by ATCOM on April 25, 1995. The
reevaluation by ATCOM had been ordered by the U.S. Army
Materiel Command ("AMC") following AMC's determination that
there was some merit to the protest filed by Libby
Corporation with respect to the January 13, 1995 award of
the TQ Contract.
Fermont has resumed performance of the TQ Contract and is
preparing for submission to ATCOM its claim for an equitable
adjustment based on the delay occasioned by the stop work
order.
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<PAGE>
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.
DYNAMICS CORPORATION OF AMERICA
(Registrant)
/s/ Patrick J. Dorme
(Signature)
Patrick J. Dorme
Vice President - Finance and
Chief Financial Officer
Date: November 13, 1995
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 1206
<SECURITIES> 0
<RECEIVABLES> 19567
<ALLOWANCES> 552
<INVENTORY> 22508
<CURRENT-ASSETS> 51521
<PP&E> 36808
<DEPRECIATION> 33247
<TOTAL-ASSETS> 130980
<CURRENT-LIABILITIES> 23808
<BONDS> 441
<COMMON> 383
0
0
<OTHER-SE> 103467
<TOTAL-LIABILITY-AND-EQUITY> 130980
<SALES> 82697
<TOTAL-REVENUES> 82697
<CGS> 61408
<TOTAL-COSTS> 61408
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 39
<INCOME-PRETAX> 1676
<INCOME-TAX> (355)
<INCOME-CONTINUING> 5112
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5112
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.33
</TABLE>
