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 June 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 July 30, 1995:
Voting 3,828,794
Non-Voting 4,544
<PAGE>
DYNAMICS CORPORATION OF AMERICA
AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information:
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
As of June 30, 1995 and December 31, 1994 2
Condensed Consolidated Statements of
Income - For the Three and Six Months
Ended June 30, 1995 and 1994 3
Condensed Consolidated Statement of
Stockholders' Equity - For the Six
Months Ended June 30, 1995 4
Condensed Consolidated Statements of
Cash Flows - For the Six Months
Ended June 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 4. Submission of Matters to a Vote of
Security Holders 13
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
AT JUNE 30, 1995 (Unaudited) and DECEMBER 31, 1994
(DOLLAR AMOUNTS IN THOUSANDS)
June 30, December 31,
ASSETS 1995 1994
Current Assets:
Cash and cash equivalents $ 3,801 $ 6,837
Accounts Receivable, less allowances of
$509 and $604 17,083 15,214
Inventories - Note 1 20,640 17,893
Other current assets 2,756 3,065
Current assets of division held for sale -
Note 2 1,246 1,185
Deferred income taxes 5,433 5,418
TOTAL CURRENT ASSETS 50,959 49,612
Property, Plant and Equipment - at cost, less
accumulated depreciation and amortization
of $32,942 and $32,454 3,641 3,472
Equity Investment in CTS Corporation - Note 3 72,196 69,291
Other Assets 2,047 1,719
Deferred Income Taxes 83
TOTAL ASSETS $128,843 $124,177
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt $ 106 $ 126
Accounts payable 5,844 4,454
Accrued expenses and sundry liabilities 15,600 15,648
Federal income taxes payable 2,546 2,006
TOTAL CURRENT LIABILITIES 24,096 22,234
Long-term Debt 436 401
Other Liabilities 1,641 1,817
Deferred Income Taxes 842
TOTAL LIABILITIES 27,015 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 101,828 99,725
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $128,843 $124,177
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
<TABLE>
DYNAMICS CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED June 30, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS,
EXCEPT PER SHARE DATA)
Unaudited
<CAPTION>
For the three months For the six months
ended June 30, ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $27,501 $23,998 $52,620 $46,714
Cost of sales 20,293 17,309 38,857 33,998
Gross profit 7,208 6,689 13,763 12,716
Selling, general and administrative
expenses 6,368 5,883 12,706 11,634
840 806 1,057 1,082
Other income, net - Note 4 109 201 343 251
Provision for division held for sale -
Note 2 (360) (360)
Income from continuing operations before
items shown below 589 1,007 1,040 1,333
Provision for income taxes - Note 5 204 375 374 488
Income from continuing operations before
equity in CTS Corporation 385 632 666 845
Income from equity investment in CTS
Corporation 1,200 1,101 2,002 1,821
Income from continuing operations 1,585 1,733 2,668 2,666
Income from discontinued operation, net
of income tax charge of $2,022 - Note 2 3,334 3,334
Net income $ 1,585 $ 5,067 $ 2,668 $ 6,000
Weighted average number of common and
common equivalent shares outstanding 3,839,622 3,880,117 3,843,082 3,882,964
Income per common share:
Continuing operations $ .41 $ .45 $ .69 $ .69
Discontinued operation .86 .86
Net income $ .41 $ 1.31 $ .69 $ 1.55
Dividends per common share - - $ .10 $ .10
<FN>
See accompanying notes to condensed consolidated financial statements.
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</TABLE>
<PAGE>
<TABLE>
DYNAMICS CORPORATION OF AMERICA
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 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 283 13 13
Shares acquired for
treasury and pursuant to
benefit plans (12,959) (1) (69) (233) (303)
Amortization of deferred
compensation and related
tax credit 34 76 110
Net income 2,668 2,668
Cash dividends (385) (385)
Balance at June 30, 1995 3,834,001 $384 $11,676 $90,183 $(415) $101,828
<FN>
* Net of shares held in treasury at $.10 par value per share (3,341,160 voting shares at June 30, 1995 and 3,328,484
voting shares at December 31, 1994). The cumulative cost of treasury shares held at June 30, 1995 amounted to
approximately $35,200. Includes non-voting shares outstanding of 4,592 at June 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 SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(DOLLAR AMOUNTS IN THOUSANDS)
Unaudited
June 30, June 30,
1995 1994
Operating activities:
Net income $ 2,668 $6,000
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 553 553
Deferred income taxes 910 124
Income from equity investment in CTS
before income taxes (2,975) (1,994)
Dividends from CTS 673 386
Gain on sale of property (198)
Increase in other assets (286) (68)
Decrease in other liabilities (176) (328)
Issuance of Company common stock 13 14
Other--net 110 47
Changes in operating assets and liabilities:
Accounts receivable (1,869) (426)
Inventory (2,747) (2,331)
Other current assets 31 90
Accounts payable, accrued expenses and
sundry liabilities 1,342 664
Federal income taxes payable 540 1,741
Increase in current assets of division held
for sale (61) (337)
Net cash provided by (used in) operating
activities (1,472) 4,135
Investing activities:
Purchases of CTS common stock (603) (543)
Purchases of property, plant and equipment (627) (342)
Proceeds from note receivable 476
Other (42) 24
Net cash used in investing activities (796) (861)
Financing activities:
Principal payments under capital lease
obligations and mortgages (80) (340)
Purchases of treasury stock (303) (723)
Dividends paid (385) (389)
Net cash used in financing activities (768) (1,452)
Increase (decrease) in cash and cash equivalents (3,036) 1,822
Cash and cash equivalents at beginning of period 6,837 8,969
Cash and cash equivalents at end of period $ 3,801 $10,791
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 six months ended June 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:
June 30, December 31,
1995 1994
(in thousands)
Raw materials and supplies $ 8,118 $ 7,579
Work in process 8,024 6,791
Finished goods 4,498 3,391
20,640 17,761
Inventories subject to progress billings 666
Progress billings (534)
0 132
$20,640 $17,893
Note 2 - Division Held for Sale - Fermont Division:
Income from discontinued operation for the three and six month periods
ended June 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. The Company is proceeding with the
preparation of a proposal to the Government for compensation due Fermont
as a result of this termination.
On July 17, 1995, 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 has confirmed the award of the TQ Contract to
Fermont and lifted the stop work order on the TQ 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
("Libby") with respect to the January 13, 1995 award of the TQ Contract.
On July 20, 1995, Libby renewed its protest to the U.S. Government
Accounting Office ("GAO") of the award of the TQ Contract to Fermont.
Fermont has been advised by ATCOM that no stop work order will be issued
as a result of the renewal by Libby of its protest and 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>
Note 2 - Division Held for Sale - Fermont Division (continued):
The Company continues to believe that the TQ Contract has been properly
awarded to Fermont and that there is no merit to Libby's protest to the
GAO.
In the quarter ended June 30, 1995, the Company recorded a provision of
$360,000 ($227,000, or $.06 per share, after taxes) for additional
projected operating losses at Fermont in the ensuing twelve month
period.
Note 3 - Equity Investment in CTS Corporation:
At June 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%.
The market value of the Company's investment in CTS amounted to
$68,384,000 at June 30, 1995 and $61,663,000 at December 31, 1994. The
market value at August 9, 1995 was $74,270,000. 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 July 2, 1995 follows:
Three Months Ended Six Months Ended
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
(in thousands)
Net sales $76,413 $70,618 $152,391 $134,975
Gross earnings $17,121 $15,633 $ 32,071 $ 29,760
Net earnings $ 4,642 $ 3,889 $ 7,898 $ 6,379
Certain reclassifications have been made by CTS for all years
presented in their financial statements to conform to the
classifications adopted by CTS in 1995.
Note 4 - Other Income, Net:
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(in thousands)
Interest:
Income $64 $ 46 $135 $ 98
Expense (14) (18) (26) (45)
50 28 109 53
Gain on sale of property and
leasehold rights 198 198
Other, net (139) 173 36 198
$109 $201 $343 $251
Note 5 - Provision for Income Taxes:
The effective tax rate for the three and six months ended June 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 year by state tax
credits.
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<PAGE>
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 materially 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 position 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 addition, 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 such matters 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 June 30, 1995 Compared to Three
Months Ended June 30, 1994
Sales increased $3,503,000 or 14.6%. Sales in the Electrical Appliances and
Electronic Devices segment increased $695,000. Sales of heat dissipating
devices, especially for computer microprocessors, and of frequency control
devices, largely to suppliers to the telecommunications industry, showed gains
of $1,485,000 and $896,000, respectively. Sales of electrical appliances,
primarily specialty consumer products, declined $1,686,000. Sales in the
Fabricated Metal Products and Equipment segment increased $66,000, as strong
sales increases for door and systems products were offset by lower sales of
commercial air products. Sales in the Power and Controlled Environmental
Systems segment increased $2,742,000 primarily from higher shipments of power
plant equipment to an export market and of custom mobile products, while sales
of thermal products and relocatable medical shelters and trailers were lower.
Gross profit increased $519,000 but declined as a percentage of sales to 26.2%
from 27.9%. Gross profit in the Electrical Appliances and Electronic Devices
segment increased as a result of the higher sales of heat dissipating and
frequency control devices. Reduced margins on electrical appliance sales were
primarily responsible for the Company's gross profit percentage decline. Gross
profit in the Fabricated Metal Products and Equipment segment decreased
slightly as cost increases for materials were not completely recovered through
selling price increases due to competitive pricing pressures. Gross profit in
the Power and Controlled Environmental Systems segment increased with the
increased power plant shipments.
Selling, general and administrative expenses increased $485,000 but declined as
a percent of sales. Commission expense increased significantly, especially in
the Power and Controlled Environmental Systems segment.
Other income (net) declined $92,000 despite a nonrecurring gain of $198,000
from the sale of excess property and leasehold rights recorded in the current
quarter. Also included in other income (net) were costs in connection with an
electric appliance recall and 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 in the current period. The charge to income was necessitated in
part by a stop work order issued by the U.S. Government in the quarter ended
June 30, 1995 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 provision for income taxes declined $171,000 due principally to the
$418,000 decrease in income before taxes. The income tax rate in the quarter
ended June 30, 1995 decreased to 34.6% compared to 37.2% for the same period a
year ago primarily due to the Company's ability to generate state income tax
credits. The effective tax rates are higher than the federal statutory rate of
34% principally because of state income taxes.
Income from the Company's equity investment in CTS Corporation increased
$99,000 reflecting CTS' increase in quarterly net earnings and the Company's
period-to-period increase in percentage of equity ownership to 43.1% from
38.0%, reduced by the provision for deferred income taxes on the Company's
proportionate share of the undistributed earnings of CTS Corporation, which,
except to a small extent, was not required in the prior year's quarter.
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<PAGE>
During the quarter ended June 30, 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 now been terminated by the
Government for convenience. The settlement, net of related expenses and income
taxes, amounting to $3,334,000, or $.86 per share, was reported as income from
discontinued operations.
Results of Operations - Six Months Ended June 30, 1995 Compared to Six Months
Ended June 30, 1994
Sales increased $5,906,000 or 12.6%. Sales in the Electrical Appliances and
Electronic Devices segment increased $1,755,000. Sales of heat dissipating
devices, especially for computer microprocessors, and frequency control
products, largely to suppliers to the telecommunications industry, showed gains
of $3,811,000 and $1,231,000, respectively. Sales of electrical appliances,
primarily specialty consumer products, declined $3,287,000. Sales in the
Fabricated Metal Products and Equipment segment increased $173,000, as strong
sales increases for door and systems products were offset significantly by
lower sales of commercial air products. Sales in the Power and Controlled
Environmental Systems segment increased $3,978,000 due to greater shipments of
power plant equipment to an export market and of custom mobile products, while
sales of thermal products and relocatable medical shelters and trailers were
lower.
Gross profit increased $1,047,000 but declined as a percentage of sales to
26.2% from 27.2%. Gross profit in the Electrical Appliances and Electronic
Devices segment increased from higher sales of heat dissipating and frequency
control devices. Reduced margins on electrical appliance sales were a
significant reason for the Company's gross profit percentage decline. Gross
profit in the Fabricated Metal Products and Equipment segment increased
slightly as improved product mix generated by increased door and systems
product sales offset cost increases for materials that were not completely
recovered through selling price increases due to competitive pricing pressures.
Gross profit in the Power and Controlled Environmental segment increased
primarily because of increased sales; however, gross profit as a percent of
sales declined on power plant shipments, contributing to the decline in the
Company's gross profit percentage.
Selling, general and administrative expenses increased $1,072,000 but declined
as a percent of sales. Commission, insurance and professional services
expenses registered significant increases.
Other income (net) increased $92,000, including a $198,000 gain on the sale of
excess property and leasehold rights and $74,000 of income from a restructuring
of the note receivable acquired in the 1992 sale of the Company's investment in
Farmhand, Inc., offset by costs in connection with an electric appliance recall
and 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 in the current period. The charge to income was necessitated in
part by a stop work order issued by the U.S. Government in the quarter ended
June 30, 1995 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 provision for income taxes declined $114,000 due principally to the
$293,000 decrease in income before taxes. The income tax rate for the six
months ended June 30, 1995 decreased to 36.0% from 36.6% for the same period a
year ago primarily due to the Company's ability to generate state income tax
credits. The effective tax rates are higher than the 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
$181,000 reflecting the increase in CTS' six month net earnings and the
Company's period-to-period increase in percentage of equity ownership to 43.1%
from 38.0%, reduced by the provision for deferred income taxes on the Company's
proportionate share of the undistributed earnings of CTS Corporation, which,
except to a small extent, was not required in the prior year's six months.
During the six months ended June 30, 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 now been
terminated by the Government for convenience. The settlement, net of related
expenses and income taxes, amounting to $3,334,000, or $.86 per share, was
reported as income from discontinued operations.
Financial Condition
Cash and cash equivalents decreased $3,036,000 during the six months ended June
30, 1995. Cash of $1,472,000 was used in operating activities, principally to
fund increases in accounts receivable and inventories. Cash of $796,000 was
used in investing activities, primarily to purchase CTS common stock and to
acquire production equipment, offset in part by payment in full of a note
receivable. Cash of $768,000 was used in financing activities, principally to
fund the Company's dividend payment and treasury stock purchases.
Cash at June 30, 1995 amounted to $3,801,000. During the six 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. The entire amount of these credit
facilities is available for use by the Company.
Liquidity and financial resources are considered adequate to fund planned
Company operations, including capital expenditures and payment of dividends.
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 $17,318,000 ($16,735,000 of ordinary income and $583,000 of
capital gain income) to realize its deferred tax assets, which are $5,433,000
at June 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.
With respect to the pending protest concerning the TQ Contract (see Note 2 -
Division Held for Sale - Fermont Division in the Notes to the Condensed
Consolidated Financial Statements), the Company believes that the TQ Contract
was properly awarded to Fermont and expects that the U.S. Government Accounting
Office will dismiss the protest of Libby Corporation.
With respect to environmental matters (see Note 6 - Contingencies in the Notes
to the Condensed Consolidated Financial Statements), the Company incurred costs
of $62,000 and $114,000 for managing hazardous substances or pollutants
during the current three and six month periods, respectively, compared to
$106,000 and $228,000 for the comparable prior year periods. Also, during the
current year's first quarter, the Company had capital expenditures at the
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
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<PAGE>
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.
With respect to the product recall by the Company's Waring Products Division
(see Note 6 - Contingencies in the Notes to the Condensed Consolidated
Financial Statements), the remaining impact on the Company's results of
operations and cash flows is not expected to be significant.
Subsequent to the end of the quarter, a restructuring was announced and
implemented at the Company's Waring Products Division, which will result in a
charge of approximately $125,000 in the third quarter for severance and related
costs, and payroll and fringe benefit savings of approximately $500,000 on an
annualized basis.
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<PAGE>
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders
(a) On May 5, 1995, the Annual Meeting of Shareholders was held at
Cole Auditorium, Greenwich Library, West Putnam Avenue and
Dearfield Drive, Greenwich, Connecticut.
(b) Four Class A directors were elected to serve until the Annual
Meeting of Shareholders in 1997. The voting results were as
follows:
Votes Votes
Director For Against
Harold Cohan 3,536,583 47,584
Frank A. Gunther 3,536,243 47,924
Henry V. Kensing 3,510,035 74,132
Andrew Lozyniak 3,509,930 74,237
There were no abstentions in the directors' election.
(c) The proposal relating to the selection of Ernst & Young LLP as
independent auditors of the Company for the year 1995 was
approved and ratified. Of the total number of votes cast,
3,530,115 were cast in favor of the proposal, 14,017 were cast
against the proposal and 40,035 shares abstained.
(d) The proposal submitted by a shareholder to require that all
directors be elected annually and not by classes was disapproved
by the shareholders. Of the total number of votes cast, 815,358
were cast in favor of the proposal, 2,202,994 were cast against
the proposal, 51,615 shares abstained and 514,200 shares did not
vote.
Information included in the definitive proxy statement for the
May 5, 1995 Annual Meeting of Shareholders is incorporated
herein by reference.
Item 6 - Exhibits and Reports on Form 8-K
(b) On April 27, 1995, the Company reported on Form 8-K under Item
5, Other Events, that the U.S. Army Materiel Command had
determined there was some merit to the protest filed by Libby
Corporation with the U.S. Government Accounting Office on the
award to the Company's Fermont Division of a $57.8 million
contract to manufacture tactical quiet generator sets, and had
directed a reevaluation of the award, and also that Fermont had
been ordered to stop all work called for by that contract.
-13-
<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: August 11, 1995
-14-
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BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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