U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
Commission file number 0-7438
DYNATECH CORPORATION
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 04-2258582
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3 New England Executive Park
Burlington, Massachusetts 01803-5087
(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code: (617) 272-6100
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 .
At July 14, 1995 there were 17,598,478 shares of common stock of the registrant
outstanding.
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PART I. Financial Information
Item 1. Financial Statements
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<CAPTION>
DYNATECH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
Three Months Ended
June 30
1995 1994
---- ----
<S> <C> <C>
Sales ............................................ $ 118,265 $ 117,772
Cost of sales .................................... 54,611 56,724
--------- ---------
Gross profit ..................................... 63,654 61,048
Selling, general and administrative expense ...... 39,648 39,134
Product development expense ...................... 14,654 12,796
Amortization of intangibles ...................... 1,796 2,048
--------- ---------
Operating income ................................. 7,556 7,070
Interest expense ................................. (549) (1,157)
Interest income .................................. 561 236
Other income ..................................... 205 279
--------- ---------
Income before income taxes ....................... 7,773 6,428
Provision for income taxes ....................... 3,148 2,768
--------- ---------
Net income ....................................... $ 4,625 $ 3,660
========= =========
Income per common share .......................... $ 0.26 $ 0.20
========= =========
Weighted average number of common shares ......... 17,594 18,595
========= =========
See notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
DYNATECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30 March 31
1995 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................... $ 30,369 $ 27,795
Accounts receivable, net ............................ 73,037 72,152
Inventories:
Raw materials .................................. 26,086 26,752
Work in process ................................ 13,331 14,168
Finished goods ................................. 19,846 19,560
--------- ---------
59,263 60,480
Other current assets ................................ 24,267 24,251
--------- ---------
Total current assets ........................... 186,936 184,678
Property and equipment, net ............................. 33,599 34,791
Intangible assets, net .................................. 28,008 29,104
Other assets ............................................ 7,454 7,819
--------- ---------
$ 255,997 $ 256,392
========= =========
LIABILITIES
Current liabilities:
Notes payable and current portion of long-term debt . $ 3,958 $ 4,374
Accounts payable .................................... 17,668 19,651
Streamlining and restructuring accrual .............. 15,933 22,556
Other accrued expenses .............................. 39,002 45,361
Accrued income taxes ................................ 2,619 1,223
--------- ---------
Total current liabilities ...................... 79,180 93,165
Long-term debt .......................................... 16,484 7,915
Deferred income taxes ................................... 831 992
Deferred compensation ................................... 278 --
SHAREHOLDERS' EQUITY
Common stock ............................................ 3,721 3,721
Additional paid-in capital .............................. 7,549 7,432
Retained earnings ....................................... 156,039 151,414
Cumulative foreign currency adjustments ................. 2,596 2,659
Treasury stock .......................................... (10,681) (10,906)
--------- ---------
Total shareholders' equity .......................... 159,224 154,320
--------- ---------
$ 255,997 $ 256,392
========= =========
See notes to condensed consolidated financial statements.
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<TABLE>
<CAPTION>
DYNATECH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
June 30
1995 1994
---- ----
<S> <C> <C>
Operating activities:
Net income .................................................. $ 4,625 $ 3,660
Adjustments for noncash items included in net income:
Depreciation ......................................... 3,547 3,617
Amortization of intangibles .......................... 1,796 2,048
Increase in deferred taxes ........................... 822 1,930
Other ................................................ 95 68
Change in operating assets and liabilities, net of effects
of business acquisitions and divestitures ............ (17,088) (10,801)
-------- --------
Net cash flows provided by (used in) continuing operations (6,203) 522
Net cash flows used in discontinued operations ........... -- (3,121)
-------- --------
Net cash flows used in operating activities .............. (6,203) (2,599)
-------- --------
Investing activities:
Purchases of property and equipment ...................... (3,276) (3,115)
Disposals of property and equipment ...................... 20 127
Proceeds from sale of businesses ......................... 1,668 3,010
Other .................................................... 1,173 495
-------- --------
Net cash flows provided by (used in) investing activities (415) 517
-------- --------
Financing activities:
Debt borrowings .......................................... 8,588 71
Repayment of debt ........................................ (426) (138)
Proceeds from exercise of stock options .................. 170 102
Purchases of treasury stock .............................. -- (63)
-------- --------
Net cash flows provided by (used in) financing activities 8,332 (28)
-------- --------
Effect of exchange rate on cash ............................. 860 812
-------- --------
Increase (decrease) in cash and cash equivalents ............ 2,574 (1,298)
-------- --------
Cash and cash equivalents at beginning of year .............. 27,795 23,101
-------- --------
Cash and cash equivalents at end of period .................. $ 30,369 $ 21,803
======== ========
Supplemental data:
Cash paid during the period for interest ................. $ 486 $ 2,097
Cash paid during the period for income taxes ............. $ 708 $ 785
Tax benefit of disqualifying dispositions of stock options $ 107 --
See notes to condensed consolidated financial statements.
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<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
A. Condensed Consolidated Financial Statements
In the opinion of management, the unaudited condensed consolidated balance
sheet at June 30, 1995, and the unaudited consolidated statements of
income and unaudited consolidated condensed statements of cash flows for
the interim periods ended June 30, 1995 and 1994 include all adjustments
(including normal recurring adjustments) necessary to present fairly these
financial statements.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The year-end balance
sheet data was derived from audited financial statements, but does not
include disclosures required by generally accepted accounting principles.
It is suggested that these condensed statements be read in conjunction
with the Company's most recent Form 10-K and Annual Report as of March 31,
1995.
B. Divestments
In June 1995, the Corporation sold two businesses for approximately $2.7
million in cash. The effects of these transactions were reflected in the
fiscal 1994 restructuring charge and did not effect fiscal 1996 earnings.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Consolidated sales for the three months ended June 30, 1995 were $118,265,000
compared to $117,772,000 in the prior year's first quarter. Information Support
Products segment sales rose 13% for the three months ended in fiscal 1996
reflecting a 20% growth for communication test products and a 30% increase for
industrial connectivity products. Sales of medical and diagnostic products in
the Diversified Instrumentation segment were flat compared to the prior year
quarter. The sale of twelve businesses and product lines during fiscal 1995 and
1996 coupled with sales declines in nonstrategic businesses held for sale
resulted in an overall sales reduction of 30% for the Diversified
Instrumentation segment. Backlog from ongoing operations was $65.0 million at
June 30, 1995 compared with $72.1 million at March 31, 1995, reflecting planned
backlog reductions in communications test and medical and diagnostic product
lines.
Consolidated gross profit was 53.8% for the current quarter compared to 51.8% in
the prior year quarter. The increase in rate was primarily driven by operating
efficiencies from business restructuring. Information Support Products gross
margin increased to 57.0% compared to 55.7% in the prior year quarter, however,
medical and diagnostic product margins in the Diversified Instrumentation
segment declined to 50.3% compared to 53.2% for the prior year period. Product
development expense was 12.4% of consolidated sales for the current quarter
compared to 10.9% in the first quarter of the prior year. The increase was
attributed to communication test and display businesses. Amortization of
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intangibles, of which $0.8 million in the first quarter of fiscal 1996 and $1.0
million in the first quarter of the prior year related to product technology and
was excluded from cost of sales, declined due to business divestments and
discontinuance of product lines. Interest expense declined in the current
quarter as compared with the prior year as a result of repayment of loan debt
from favorable operating cash flow. Interest income increased due to higher
investment rates and earnings on notes acquired in divestment activities. The
effective tax rate declined to 40.5% for the current quarter compared to 43.1%
in the prior year quarter resulting from lower nondeductible amortization
charges.
Net income increased 26% to $4,625,000, for the current quarter from $3,660,000,
for the first quarter of the prior year, reflecting higher gross margins and
lower amortization and interest costs offset partially by higher product
development costs. Earnings per share increased 30% compared to the year earlier
period.
While the Company believes that the outlook for the second quarter of fiscal
1996 is good, no assurance can be given that operating results for the quarter
will meet those of the second quarter of fiscal 1995 which produced net income
of $.29 per share. Operating results for the second quarter of fiscal 1996 will
depend upon, among other things, the incoming order rate during the quarter for
the Company's various businesses, product mix, and the continued successful
implementation of the Company's reorganization plan.
Capital Resources and Liquidity
The Company's funded debt was 11% of total capital at June 30, 1995, a slight
increase from the lowest year-end level in Company history of 7% at March 31,
1995. The working capital ratio improved to 2.4 to 1 at June 30, 1995 from 2 to
1 at March 31, 1995. Cash outlays for the streamlining and restructuring actions
approximated $1.3 million in the first quarter. Dynatech believes it has
sufficient resources to finance its cash requirements over the next year
including the ongoing streamlining and restructuring actions. The current
capital structure provides sufficient financial flexibility to pursue business
opportunities.
PART I. OTHER INFORMATION
Item 6. (a) Exhibits
Exhibit 27 Financial Data Schedule
PART II. OTHER INFORMATION
Item 6. Reports on Form 8-K
(b) No current reports on Form 8-K were filed by the Registrant during
the quarter ended June 30, 1995.
<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.
DYNATECH CORPORATION
Date August 3, 1995 ROBERT H. HERTZ
-------------- -------------------------------------
Chief Financial Officer and Treasurer
Date August 3, 1995 JOHN C. MAAG
-------------- -------------------------------------
Corporate Controller,
Principal Accounting Officer
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<NAME> DYNATECH CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
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<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
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