UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDED FORM 10 - K
AMENDMENT 1 to Form 10-K of December 31, 1994
The following sections were amended:
Page 17 Para 1 last line - added sentence on cash redemption of
Debentures.
Page 21 Consolidated Balance Sheet - corrected typographical error on
"Prepaid Income Taxes".
Page 26 "Inventories" - line three added the word "factory".
Page 27 "Retainage and Unbilled Receivables" - added sentence about
Unbilled Receivables.
Page 29 para four - added sentence on redeeming of Debentures for cash.
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File Number 0-15011 .
Data Measurement Corporation
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-0774266
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15884 Gaither Drive, Gaithersburg, MD 20877
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 948-2450
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01
-----------------------------
(Title of Class)
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 by check mark if disclosure of delinquent filers
pursuant to item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 28, 1995, the aggregate market value of the
registrant's voting stock, excluding shares held by affiliates, was
$5,211,000.
The number of shares outstanding of the registrant's common
stock, par value $.01 per share, as of February 28, 1995, was
1,331,318.
DOCUMENTS INCORPORATED BY REFERENCE
PART III
Item 10. Directors and Executive Officers (*)
of the Registrant
Item 11. Executive Compensation (*)
Item 12. Security Ownership of Certain (*)
Beneficial Owners and Management
Item 13. Certain Relationships and Related (*)
Transactions
PART IV
Item 14. Exhibits
3. Articles of Incorporation Registrant's Form 10
and By-laws (Registration No. 0-15011)
10. Material Contracts Registrant's Form S-1
(Registration No. 33-15066)
Registrant's Form S-8
(Registration No. 33-50982)
Registrant's Form S-3
(Registration No. 33-54028)
(*) Included in the Proxy Statement filed in connection with
the Company's 1995 Annual Meeting of Stockholders.
FORM 10-K CROSS REFERENCE INDEX
ITEMS PAGE
PART 1
1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . 5-11
2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . 11
3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . 11
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . 12
PART II
5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . 12
6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . 12-13
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . 14-18
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . 19-40
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . 41
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . 42-45
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . 46-47
PART I
Item 1. Business
GENERAL
The Company designs, manufactures, markets, and services
computerized instruments and control systems that measure thickness
and coating weight, and control the manufacturing process in
primary products produced by the metals, plastics, and paper
industries throughout the world. The Company's instruments enable
producers of flat and rolled metal, plastics, rubber, paper, board,
textiles, and particle board to fabricate goods with close
tolerances and without variations in quality that impair the
usefulness of products and waste raw materials. Instrument systems
of the type manufactured by the Company are typically installed as
part of the production line in industrial plants producing
continuously-made extruded or rolled products, such as steel plate,
tin plate, galvanized sheets, copper, aluminum sheets, and plastics
produced in calenders. These instruments provide continuous
quality control capabilities that enable prompt adjustments to be
made in the manufacturing process, thereby permitting goods to be
produced within closer tolerances and with greater assurance of
meeting specifications. Savings of raw materials that result from
manufacturing to closer tolerances can be substantial. Moreover,
the statistical record of the measurements printed by the
instrument increasingly is being required not only by the producer
of such products, but also by their users.
As part of the efforts to expand the line of products offered
and to increase the customer base, the Company's strategy in the
mid 1980's was to acquire other firms in the same general business.
The Company typically sought to acquire suitable businesses with
compatible technological and commercial strengths, and which
experienced financial difficulties as a result of management
deficiencies. Such acquisitions enabled the Company to enter new
industry markets at a substantially lower cost than through new
entry, that is, without such acquisitions. Recently, the Company
has sought to expand by establishing a service and sales presence
in major steel producing areas around the world. The Company
believes that the creation of this local representation network
will enable it to both better defend its customer base in
established markets and to more readily penetrate new geographic
markets.
The Company has had sales, service and manufacturing
facilities in the U.K. since 1982. The Company has had sales and
service operations in Germany since 1987. The Company's sales and
service operations in the remainder of Europe are directed by DMC
U.K.
In 1994 the Company established DMC Foreign Sales Corporation
in St. Thomas, U.S. Virgin Islands. This wholly owned subsidiary
represents the Company in certain export transactions.
PRODUCTS
The equipment made by the Company covers a range of activities
extending from strictly measurement and display of data to control
of a process. A growing share of the Company's sales is in process
control. Process control enables the thickness of the rolled
product, or applied coating, to be altered automatically to preset
targets as a result of the measurements taken by the Company's
instruments. The Company's products can be used with practically
all materials made in flat form on a continuous basis. The Company
also makes pinhole detectors and some laboratory versions of its
on-line instruments.
a. Non-contact thickness gauges for production lines. The
Company presently makes two types of thickness gauges that measure
either the total thickness of a flat rolled product or the
thickness of a coating applied to a flat rolled product. These two
types are distinguished by the method used by the sensor making the
measurements. These measuring systems typically range in price
from $30,000 to $750,000, with an average selling price of
approximately $175,000. In 1994 these items represented 66% of
total sales.
Total Thickness Gauges. These gauges, also known as
transmission gauges, provide measurement of total thickness or
weight per unit area of metals, plastics, rubber, paper, board,
textiles and carpet. The gauges consist of two main parts, the
sensor and the electronic processor. The Company's thickness
gauges operate without touching the material being measured and
measure thickness from 10 microns (0.0004 inches) up to 100
millimeters (4 inches), with an accuracy of a fraction of one
percent.
Transmission gauges operate by directing a beam of radiation
through the material being measured. The radiation beam is
produced either by a radioisotope (cesium, curium, krypton,
promethium, strontium, americium, or cobalt) with fixed emission
energy or by an x-ray tube with variable emission energy. In
either case, the gauge measures the intensities of the radiation
beam before and after passing through the material being gauged.
A micro-computer analyzes the detected radiation, calculates the
thickness of the material, and provides an instantaneous visual or
printed readout of the measurement.
Coating weight gauges. These non-contact gauges measure
organic or metallic coatings on metals using either a fluorescence
or a backscatter principle.
For example, fluorescence gauges are used to measure the
thickness of zinc, tin, or chromium coatings on steel.
Fluorescence gauges direct a radiation beam at a given sample.
Each of the elements encountered by such a beam emits radiation at
a characteristic energy level -- a phenomenon known as x-ray
fluorescence.
Backscatter gauges use the reflection of a beam of radiation
by an underlying material (for example, steel) to measure the
thickness of a coating (for example, paint).
The Company's thickness gauges and coating weight gauges are
offered for hot or cold measurements, high speed production lines,
and varying material sizes and thicknesses. They are equipped with
different radiation sources depending on the thickness and type of
material being gauged. Computer capacity and performance vary
among the Company's models. The Company often specially modifies
its standard thickness gauges to meet particular specifications and
performance requirements of customers. The Company's closed loop
control systems are typically based on the use of one or several
gauges to control the thickness or coating thickness of materials.
b. Pinhole detectors. The Company's line of pinhole
detectors is designed to locate minute holes in sheet materials,
such as tin plate, tin-free steel, galvanized steel, copper, brass,
aluminum and opaque plastic. These detectors are installed on the
production line and, without interrupting the manufacturing
process, identify and locate pinholes and other through-the-strip
flaws as minute as 2.5 microns (0.0001 inches). In 1994 this line
generated less than 2% of total sales.
A pinhole detector operates by projecting a beam from an
ultraviolet light source located above the strip of material
through flaws in the material. An ultraviolet filter collects the
beam passing through a flaw and removes most visible light.
Photomultiplier tubes transform the light passing through the
filter into an electrical signal that is processed to produce a
"pinhole" signal. Interconnected digital computer equipment
identifies, in visual or printed readout form, the position and
number of flaws in the material. The computer may be integrated
with various control units that cut or reject defective material.
The Company's pinhole detectors offer various performance and
sensitivity options which may be selected by a customer depending
upon the intended use of the instrument. The Company's pinhole
detectors typically range in price from $25,000 to $75,000.
c. Laboratory gauges. The Company makes two measuring
systems that are used in laboratories and production facilities,
but are not directly mounted on production lines - the Basis Weight
and Caliper Profiler, and the Laboratory Coating Weight Gauge. In
1994 this line generated less than 1% of total sales.
Basis Weight and Caliper Profilers. This instrument provides
fast and accurate measurement of samples of paper, paperboard,
plastic, and non-woven fabrics. Such samples are fed into the unit
for measurement and then are used to test the accuracy of the
instruments used in the production process.
Laboratory Coating Weight Gauges. This instrument is used in
a laboratory to monitor the thickness or coating weight of zinc or
tin on steel. The instrument inspects samples and records
measurements of the material.
d. New Products. The Company has recently completed
development of a new measuring process whereby the entire width of
the surface is measured instantaneously. (The Company's
traditional measurement systems measure only one spot at any one
time.) This system, which uses the trade name "MIP" -- Measurement
of Instantaneous Profile -- was jointly developed under an
exclusive license agreement with IRSID, the French national steel
research institute. These gauges are particularly useful for
sensitive measurements at the edge of a steel strip. In 1994 the
Company received two orders for MIP systems and expects to ship
both systems during the first half of 1995. The order value of
each system ranges from $600,000 to $900,000.
e. Spare Parts. The Company sells spare parts for all of the
measurement systems it manufactures. Spare parts sales typically
bear higher gross profit margins than do system sales. Customers
generally procure a minimum complement of spare parts, either at
the time of the initial purchase of a gauging system, or at the end
of the warranty period -- generally one year after delivery and
start up. Additional spare parts orders are received as the
measurement system ages. In 1994 spare parts sales accounted for
21% of total sales.
SERVICE
The Company's instruments are usually covered by a one year
warranty against defects in workmanship or components. The Company
maintains worldwide product liability insurance. No product
liability claims have ever been brought against the Company.
Warranty services, in addition to services performed on a fee basis
such as commissioning of new equipment, training of equipment
operators, and post-warranty maintenance and repairs, are handled
by personnel based either at the Company's facilities in
Gaithersburg, Michelstadt (Germany) or Northfleet (United Kingdom),
or at field offices currently located in Chicago, Kaoshiung
(Taiwan), Liege (Belgium), Pittsburgh, Pusan (South Korea), and
Gloucester (U.K.). The Company has also contracted with
independent organizations to provide service in Australia, India,
Italy, Japan and the Republic of South Africa and has a joint
venture agreement with Anshan Steel to provide service in China.
RAW MATERIALS
The Company's products require a wide variety of components
and materials. The Company uses multiple vendors to supply its
components and materials. The Company believes that the sources
and availability of its components and materials are adequate.
GOVERNMENT REGULATIONS AND LICENSES
The use of radioisotopes in equipment manufactured by the
Company is licensed by the State of Maryland, Department of Health
and Mental Hygiene, Division of Radiological Health. In the United
Kingdom, the use of radioisotopes in manufacturing is licensed by
the Department of the Environment and is under the control of the
Health and Safety Executive. In Germany, the use of radioisotopes
is licensed by the Factory Inspectorate under the control of the
Staatliches Gewerbeaufsichtsamt, Wiesbaden. The Company does not
believe that there are any risks attendant to the manufacture or
use of the Company's equipment using radioisotopes and,
accordingly, does not maintain supplemental liability insurance
against such risks.
PATENTS AND MANUFACTURING LICENSES
The Company is the assignee of six patents which expire
between 1998 and 2009. The Company has applied for patents on four
other measuring system inventions and expects these patents to be
issued by 1996. The Company has entered into a joint development
and license agreement with IRSID, the French national steel
research institute, to develop an instantaneous profile measurement
system. The license agreement, which expires in 2001, grants the
Company exclusive, worldwide marketing rights.
SALES AND MARKETING
The Company's market is divided in two categories, direct
users and prime contractors, that is, mill manufacturers who
subcontract the gauge part of their orders. Sales to direct users
have, in 1994, been made to Inland Steel, Bethlehem Steel, Usinor,
British Steel, Kawasaki Steel, Nippon Steel, Wuhan Iron and Steel,
Posco, and Yieh United, among others. 1994 sales to prime
contractors in the construction of mills and plants include General
Electric, Mitsubishi, MDS, SMS, Jeumont-Schneider, Davy McKee and
Hitachi, among others.
The Company maintains sales offices in Maryland, Illinois,
Pennsylvania, Northfleet (U.K.), Michelstadt (Germany), Liege
(Belgium), Beijing (PRC) and Paris (France). The Company employs
eight full-time salespeople to service major domestic and foreign
accounts. In addition, the Company has agency arrangements with
technical sales representatives in Australia, Brazil, Canada,
India, Italy, Japan, South Korea, the Philippines, Mexico, South
Africa, Germany, Spain, Sweden, the Netherlands, Taiwan, Thailand,
Turkey and Venezuela.
Excluding intercompany transactions, export sales from the
U.S. were $12,004,000, $10,564,00 and $10,376,000 in 1994, 1993 and
1992, respectively. Export sales from DMC (U.K.) Ltd. were
$3,444,000, $2,100,000 and $2,890,000 in 1994, 1993 and 1992,
respectively.
Excluding intercompany transactions, shipments of new
measurement systems to the Company's major markets over the last
three years were:
The Americas Asia Europe/Africa
1994 $6,295,000 $5,497,000 $4,825,000
1993 4,817,000 5,210,000 2,765,000
1992 3,018,000 2,367,000 6,844,000
The Company does not believe it is dependent upon any single
customer on a continuing basis, although in any one year, one
customer may account for a material portion of the Company's sales.
During 1994, 1993, and 1992, no single customer accounted for 10%
or more of sales.
The Company's business is not seasonal in nature, but is
directly affected by changes in capital expenditures by industry.
Backlog of orders believed to be firm as of December 31, 1994,
1993, and 1992 was approximately $14,406,000, $11,675,000 and
$9,826,000, respectively. Most orders on backlog are expected to
be shipped within one year.
The Company does not typically offer extended payment terms to
customers. Long collection times occur occasionally due to
slowness of payment by some foreign customers, retainages or
receivables not due until the occurrence of certain events such as
the commissioning of equipment or the expiration of the warranty
period, and some customers' habit (contrary to the purchase order
contract) of delaying payment of invoices until the equipment is
proven to work to their satisfaction.
COMPETITION
The company's major market has been sales to the metals
industries and especially to the steel industry. The Company knows
of no competitor that sells more thickness measurement equipment to
the steel industry than it sells. In general, the industrial
measurement and control instruments industry is highly price
competitive. The Company faces vigorous competition for sales of
all products from a number of firms, many of which are larger and
have substantially greater financial resources than the Company.
They include Thermo Instrument Systems (formerly FAG), Measurex,
Accuray, Toshiba, Loral Control Systems, IMS and Yokogawa.
In the opinion of the Company, its ability to obtain business
is based on its technical competence in the design, manufacture and
performance of its products, product quality, and in its ability to
quickly service its instruments in both domestic and foreign
markets. The Company's world-wide network of service centers
allows it to have a service representative at most customer's sites
within 24 hours and at all sites within 48 hours; this is
particularly important in making direct sales to the end users of
the Company's products.
<PAGE>
Development and Engineering
The Company's technical competence is an important factor in
marketing. Most of the Company's development efforts are directed
toward product design, performance enhancements and standardization
of products. The Company is engaged in a continuing program to
develop the hardware and software necessary to further the use of
computer techniques in its products.
EMPLOYEES
At December 31, 1994, the Company employed 226 full-time
employees, 204 of which were based in the U.S., 16 in the U.K., 3
in France, 2 in Germany and 1 in China. There are no collective
bargaining agreements with any of the Company's employees. The
Company considers its relations with its employees to be good.
Item 2. Properties
The Company leases 45,065 square feet of space in a modern
industrial park in Gaithersburg, Maryland, a suburb of Washington,
D.C. The Company's lease, with options, extends until November
2002. The Company's offices occupy 9,600 square feet, and the
remaining 35,465 square feet are dedicated to manufacturing
activities. This facility includes testing and research
laboratories, a complete machine shop, welding and paint rooms, and
assembly and general test areas. Raw materials and work-in-process
inventory are also stored at this facility as well as at two
smaller, off-site facilities. The Company believes that currently
leased space is adequate for business operations for the
foreseeable future. Monthly rent under these leases amounts to
$48,900.
The Company's wholly-owned U.K. subsidiary owns a building and
land in Northfleet, Kent. Of the building's 13,500 square feet,
offices occupy 5,000 square feet, and 8,500 square feet are
dedicated to manufacturing and engineering activities. Raw
materials and work-in-process are also stored at this facility. On
March 1, 1988, a 1,500 square foot storage facility was leased, at
a monthly rental of $1,068. This lease extends until April 1995.
The Company's wholly-owned German subsidiary has office space
in Michelstadt that is subleased, on a month to month basis, from
the Company's German agent as part of the agency agreement. Spare
parts are also stored in the Michelstadt facility. The Company
believes that for the foreseeable future, this facility is adequate
for business operations.
The Company's China division leases a small office in Beijing
under a lease expiring in 1995 at $1,400 per month.
Item 3. Legal Proceedings
The Company has no material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters
The following is a summary of the trading range of the
Company's common stock. Since May 5, 1987, the Company's common
stock has been traded on the NASDAQ National Market System. The
following table sets forth the high and low quotations for the
periods indicated. These prices reflect inter-dealer prices
without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
Quarter Low High
1st 1992 1 3 7/8
2nd 1992 2 7/8 4 1/2
3rd 1992 3 3/8 5 1/4
4th 1992 4 5 3/4
1st 1993 4 3/4 7 1/2
2nd 1993 5 3/4 7 3/4
3rd 1993 4 1/4 6 1/4
4th 1993 3 1/4 5 3/4
1st 1994 3 3/8 4 3/4
2nd 1994 3 1/2 4 5/8
3rd 1994 3 3/4 6 1/2
4th 1994 4 3/4 7 3/8
1st 1995 (to 2/28) 4 3/4 6 3/4
As of December 31, 1994, there were 232 holders of record of
the Company's common stock. The Company believes that there are
approximately an additional 700 shareholders whose holdings are
maintained in street name.
No cash dividends were paid during 1994, 1993 or 1992.
Payment of future cash dividends will be dependent upon the income
and financial condition of the Company, lending covenants then in
effect, and other factors which the Board of Directors may deem
appropriate. The Company's current loan agreements prohibit the
payment of cash dividends without the lender's consent.
Item 6. Selected Financial Data
The following table summarizes selected consolidated financial
data and is qualified in its entirety by the more detailed
consolidated financial statements, related notes thereto, and other
statistical information contained elsewhere herein. The
information has been derived from the Company's audited
consolidated financial statements.
<TABLE>
For the Year ended December 31<F1>
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Sales . . . . . . . . . . . . . . . $ 24,206 $ 20,221 $ 19,937 $ 20,143 $ 22,034
Costs and expenses:
Cost of sales . . . . . . . . . . . $ 18,204 $ 15,132 $ 14,434 $ 14,912 $ 17,906
% of sales. . . . . . . . . . . . . 75% 75% 72% 74% 81%
Selling, general and admin. . . . . $ 4,559 $ 4,400 $ 4,217 $ 4,240 $ 4,646
% of sales. . . . . . . . . . . . . 19% 22% 21% 21% 21%
Interest expense. . . . . . . . . . $ 410 $ 399 $ 614 $ 886 $ 964
% of sales. . . . . . . . . . . . . 2% 2% 3% 4% 4%
Loss (gain) on foreign exchange . . $ 19 $ 79 $ 41 $ 63 $ (59)
% of sales. . . . . . . . . . . . . - - - - -
Income (loss) before provision
(benefit) for income taxes . . . . $ 1,014 $ 211 $ 630 $ 42 $ (1,423)
% of sales. . . . . . . . . . . . . 4% 1% 3% - (6%)
Provision (benefit) for
income taxes:
Current . . . . . . . . . . . . . . $ 280 $ (2) $ 263 $ 34 $ 8
% of sales. . . . . . . . . . . . . 1% - 1% - -
Deferred. . . . . . . . . . . . . . $ (86) $ 89 $ (150) $ (19) $ (2)
% of sales. . . . . . . . . . . . . - - (1%) - -
Income (loss) before
extraordinary item. . . . . . . . . $ 820 $ 124 $ 517 $ 27 $ (1,429)
% of sales. . . . . . . . . . . . . 3% 1% 3% - (6%)
Extraordinary item. . . . . . . . . $ 4,012 - - - -
% of sales. . . . . . . . . . . . . 17% - - - -
Net income (loss) . . . . . . . . . $ 4,832 $ 124 $ 517 $ 27 $ (1,429)
% of sales. . . . . . . . . . . . . 20% 1% 3% - (6%)
========= ========= ========= ========= =========
Primary net income (loss) per share
before extraordinary item: $ 0.60 $ 0.10 $ 0.42 $ 0.02 $ (1.18)
========= ========= ========= ========= =========
Weighted average shares
outstanding (in thousands) . . . . 1,331 1,286 1,246 1,208 1,208
========= ========= ========= ========= =========
Total assets. . . . . . . . . . . . $ 20,091 $ 17,511 $ 17,227 $ 17,789 $ 20,234
========= ========= ========= ========= =========
Long-term debt. . . . . . . . . . . $ 3,569 $ 8,125 $ 8,474 $ 526 $ 1,404
========= ========= ========= ========= =========
Dividends declared. . . . . . . . . $ - $ - $ - $ - $ -
========= ========= ========= ========= =========
<FN>
<F1>All figures in thousands except per share amounts.
</FN>
</TABLE>
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
COMPARISON OF 1994 TO 1993
Sales for 1994 were $24,206,165, a 19.8% increase over the
prior year amount of $20,211,006. Worldwide system sales increased
by approximately $3,800,000 (29.7%) to $16,617,000 while sales of
spare parts increased approximately $400,000 (8.6%) to $5,052,000.
Worldwide backlog at year end 1994 was $14,406,000, a 23.4%
increase over the prior year.
New orders received during 1994 amounted to $21,652,000, an
increase of 27.8% over 1993 bookings. In actual dollar terms,
orders from North America were up 138%, to $8,860,000, in 1994 as
compared to 1993:
Orders Received by
Location of End User 1994 1993 1992
Asia 32% 46% 32%
North America 40 22 32
Europe 23 16 32
Other 5 16 4
Total 100% 100% 100%
Gross profit margins declined from 25.2% in 1993 to 24.8% in
1994. The large increase in new system sales carrying lower
margins combined with the relatively smaller increase in spare
parts sales carrying higher margins accounted for this decline in
overall margins. Selling, general and administrative expenses
increased only $159,000 in 1994 compared to 1993 and decreased from
21.8% in 1993 to 18.8% in 1994 reflecting the Company's ability to
contain increases in these largely fixed expenses.
Interest expense, while essentially constant in actual terms,
declined as a percent of sales from 2.0% in 1993 to 1.7% in 1994.
The Company recorded losses on foreign exchange transactions of
$78,794 in 1993 and $19,439 in 1994.
The Company's effective tax rate in 1994 was 19.1% as compared
to 41.4% in 1993. The reduction resulted from better utilization
of net operating loss (NOL) carryforwards in the Company's foreign
subsidiaries.
The Company was not impacted by SFAS No. 106 ("Employers'
Accounting for Postretirement Benefits Other Than Pensions") as the
Company does not have a liability for such benefits. In addition,
the Company was not impacted by SFAS No. 112 ("Employers'
Accounting for Postemployment Benefits") since the Company does not
offer benefits of this type to its employees.
COMPARISON OF 1993 TO 1992
During 1993 the Company's gross profit margins were adversely
affected by a change in sales mix and by extremely aggressive price
competition as compared to 1992. The proportion of spare parts
sales in 1993 declined to 22.8% of total sales from 25.0% in 1992.
Since gross profit on spares is approximately double the gross
profit on system sales, this decline resulted in a $200,000
reduction in gross profit contribution. The Company believes,
however, that future spare parts sales will increase over time as
a percentage of total sales as the installed base of measuring
systems grows.
Additionally, aggressive pricing by the Company's major North
American and European competitors resulted in a 2% decline in
average selling prices for new systems. This negatively impacted
gross profits by $200,000.
Sales for 1993 were $20,211,006, a 1.4% increase over the
prior year amount of $19,937,493. Worldwide system sales increased
by approximately $600,000 (4.6%) to $12,797,000 while sales of
spare parts declined approximately $400,000 (7.5%) to $4,610,000.
Worldwide backlog at year end 1993 was $11,675,000, an 18.8%
increase over the prior year. A surge of new orders during the
fourth quarter resulted in year end work in process inventory
increasing by $1,300,000 over 1992's ending amount.
New orders received during 1993 amounted to $16,943,000, an
increase of 1.8% over 1992 bookings.
Gross profit margins declined from 27.6% in 1992 to 25.2% in
1993 due to the aforementioned changes in sales mix and competitive
pricing pressures. Selling, general and administrative expenses,
as a percent of total sales, increased from 21.1% in 1992 to 21.8%
in 1993. This increase was primarily attributable to higher
foreign agent commission expenses which resulted from a relatively
higher proportion of foreign sales.
Interest expense declined by more than $200,000 to 2.0% of
sales in 1993 as compared to 3.1% in 1992. This was primarily a
result of the FDIC debt restructuring which was consummated as of
September 30, 1992.
The Company recorded losses on foreign exchange transactions
of $78,794 in 1993 and $41,366 in 1992. The losses were attributed
to the strengthening of the U.S. Dollar versus major European
currencies. In June 1993, the Company obtained a foreign exchange
facility with which to hedge these transactions but was unable to
fully utilize the facility in 1993 due to the uncertainty of the
timing of its foreign denominated collections.
The Company's effective tax rate in 1993 was 41.4% as compared
to 17.9% in 1992. This difference is primarily due to large net
operating loss (NOL) carryforwards that significantly reduced the
effective tax rate in 1992.
COMPARISON OF 1992 TO 1991
Sales for 1992 declined by 1.0% to $19,937,493 as compared to
$20,142,764 in the prior year. The fall off in sales was primarily
attributable to the weakness of the British economy and its
resulting impact on the Company's subsidiary located in the United
Kingdom. This decrease was only partially offset by increases in
sales in France and Germany; sales in the United States decreased
less than 0.1%. World-wide bookings of major systems for 1992
amounted to $16,664,000 -- a 37% increase over prior year. Year
end back log was $9,826,000 -- a 15% increase over prior year.
This also resulted in the level of advance payments increasing from
$580,607 at the end of 1991 to $933,072 at the end of 1992. The
allowance for doubtful accounts was $187,000 in 1992 compared to
$443,000 in 1991, a decline of $256,000 which is principally the
result of accounts from prior years being written off. The current
reserve is adequate given the composition of accounts receivable at
the end of the year.
Gross margin increased to $5,503,283 or 27.6% of sales in 1992
versus $5,230,723 or 26.0% of sales in 1991. The Company was able
to continue to improve margins as a result of better manufacturing
cost controls and because technical maturity in its products
resulted in lower engineering costs.
Selling, general and administrative costs were relatively
unchanged and amounted to $4,217,244 or 21.2% of sales in 1992 as
compared to $4,239,529 or 21.0% of sales in 1991.
Interest expense declined to $614,281 or 3.1% of sales from
$885,998 or 4.4% of sales in 1991. This reflects a decrease in
total borrowings and the favorable restructuring of the Company's
FDIC debt which is more fully discussed in the Liquidity and
Capital Resources section.
The Company recorded losses on foreign exchange transactions
of $41,366 in 1992 and $63,044 in 1991. The losses were attributed
to the strengthening of the U.S. Dollar versus major European
currencies. The Company did not have a foreign exchange facility
with which to hedge these transactions during 1992.
The Company's effective tax rate in 1992 was 17.9% as compared
to 36.4% in 1991.
During 1992 the Company successfully restructured its FDIC
debt and, as a result, was able to substantially reschedule its
debt obligations (See Liquidity and Capital Resources discussion).
LIQUIDITY AND CAPITAL RESOURCES
During 1992, 1993 and 1994, the Company's primary sources of
liquidity were cash flow from operations and short-term borrowings.
On September 29, 1994, the Company completed a refinancing of its
long term debt which resulted in an extraordinary gain of
$4,012,180. The new long term financing allowed the Company to
fully repay an existing obligation in the amount of $2,821,845,
plus accrued interest, to the Federal Deposit Insurance Corporation
as receiver of the National Bank of Washington ("FDIC"). This
payment completed and terminated the Company's obligations under
the Loan Modification Agreement between the Company and the FDIC
dated as of September 30, 1992 ("Agreement"). That Agreement had
provided for the division of the Company's debt to FDIC into a term
loan and a contingent liability (which was recorded on the
Company's Balance Sheet as a Non Interest Bearing Long Term
Obligation). As a result of the refinancing, the term loan was
paid in full and the contingent liability was terminated.
Additionally, the Company issued to the FDIC a new Convertible
Subordinated Debenture due in 1999 ("Debenture") in the principal
amount of $240,000 in exchange for the Warrant ("Warrant") for
120,000 shares of DMC common stock which was previously issued to
the FDIC as part of the Agreement. The Debenture bears no interest
and may be converted into 120,000 shares of DMC common stock at any
time between October 1, 1996 and September 30, 1999 at an exercise
price of $2.00 per share. If FDIC chooses to convert the
Debenture, the Company has the right to redeem the Debenture for
65% of the market value of the underlying common stock at the time
of conversion.
Also, the FDIC has released all security interests it
previously held on DMC's inventory and fixed assets. Those assets
have now been pledged to the Company's bank as collateral for the
Company's bank loans.
The new banking facility, which is in addition to the
Company's existing bank facilities, totalled $2,600,000 as of
December 31, 1994, is repayable in quarterly installments over a
five year period beginning on September 30, 1994 and ending June
30, 1999 and carries an interest rate of prime plus 1.5%. The bank
loan agreement contains other terms and covenants typical of term
loans of this type. The Company does not believe that these
conditions will impair its ability to operate or expand its
business.
In August 1992, the Company also restructured the long term
debt of its British subsidiary by converting a mortgage note
bearing an interest rate of 14% with a three year maturity to a ten
year note bearing an interest rate of 9.75% which is reset annually
to LIBOR plus 4.0%. As of December 31, 1994, the balance of this
mortgage was $386,052.
In June 1992, the holders of the Company's $625,000
convertible subordinated debentures agreed to extend the principal
redemption date for five years to September 30, 1997. The interest
rate and conversion price remained unchanged at 12% per annum and
$2.50 per common share, respectively. During 1994, 1993 and 1992,
one of the bondholders converted $80,000, $90,000 and $30,000,
respectively, worth of its debentures into 32,000, 36,000 and
12,000 shares, respectively, of common stock.
In August 1994, the Company renewed a $2,000,000 banking
facility from Chase Manhattan Bank of Maryland. This facility
comprises a $1,000,000 working capital line, a $500,000 stand-by
letter of credit line and a $500,000 foreign currency trading line.
The facility is secured by the inventory, fixed assets and accounts
receivable of the domestic operation and bears interest at the rate
of prime plus 0.75%. At December 31, 1994, borrowings against the
working capital line were $603,223. The facility expires in July
1995.
The Company's U.K. and German subsidiaries also have working
capital facilities of which $532,000 was unused at the end of 1994.
The Company has no material commitments for capital
expenditures.
INFLATION
For the past three years, inflation has not had a material
effect on the Company's business.
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Data Measurement Corporation
Gaithersburg, Maryland
We have audited the accompanying consolidated balance sheets of Data
Measurement Corporation and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1994. Our audits also included the financial statement schedule listed in
the Index at Item 14(a)(2). These financial statements and financial
statement schedule are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We did not audit the
financial statements of DMC (U.K.) Limited (a consolidated subsidiary), which
statements reflect total assets constituting 20% and 18% of consolidated total
assets as of December 31, 1994, and 1993, respectively, and total revenues
constituting 19%, 11% and 14% of consolidated total revenues for the years
ended December 31, 1994, 1993, and 1992, respectively. Such financial
statements were audited by other auditors whose report has been furnished to
us, and our opinion, insofar as it relates to the amounts included for DMC
(U.K.) Limited, is based solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the overall financial statment presentation.
We believe that our audits and the report of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, such
consolidated financial statements present fairly, in all material respects,
the financial position of Data Measurement Corporation and subsidiaries as of
December 31, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. Also, in our
opinion, based on our audits and (as to the amounts included for DMC (U.K.
Limited) the report of other auditors, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the information set forth
therein.
/s/ Deloitte & Touche LLP
Washington, D.C.
March 1, 1995
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
DMC (UK) Limited
We have audited the accompanying Balance Sheets of DMC (UK) Limited as of
December 31, 1994 and 1993, and the related statements of Profit and Loss
Account and Cash Flow Statements for each of the three years in the period
ended December 31, 1994. These financial statments are the responsibility
of the Company's management. Our resposibility is to express an opinion
on these financial statments based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to the above present
fairly, in all material respects, the financial position of DMC (UK) Limited
as of December 31, 1994 and 1993, and the results of its Profit and Loss
Account and Cash Flow Statements for each of the three years in the period
ended December 31, 1994 in conformity with generally accepted accounting
principles.
/s/ SINCLAIRS
LONDON, U.K.
1 March 1995
<TABLE>
<CAPTION>
DATA MEASUREMENT CORPORATION
CONSOLIDATED BALANCE SHEETS<F1>
December 31,
ASSETS 1994 1993
<S> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . . . $ 583,384 $ 704,695
Restricted cash . . . . . . . . . . . . . . . . . 102,000 34,000
Accounts receivable:
Trade, less allowance for doubtful accounts
of $162,000 in 1994 and $184,000 in 1993. . . . 5,238,586 3,847,764
Unbilled accounts receivable. . . . . . . . . . 1,544,737 1,007,674
Retainages. . . . . . . . . . . . . . . . . . . 1,521,516 1,587,546
----------- -----------
Total accounts receivable . . . . . . . . 8,304,839 6,442,984
Inventories:
Work-in-process . . . . . . . . . . . . . . . . 2,514,722 2,774,924
Material and parts. . . . . . . . . . . . . . . 6,695,087 5,354,370
----------- -----------
Total inventories . . . . . . . . . . . . 9,209,809 8,129,294
Deferred income taxes . . . . . . . . . . . . . . 188,266 172,240
Prepaid income taxes. . . . . . . . . . . . . . . -- 86,760
Other current assets. . . . . . . . . . . . . . . 316,743 321,892
----------- -----------
Total current assets. . . . . . . . . . . 18,705,041 15,887,865
Property and equipment, at cost:
Land. . . . . . . . . . . . . . . . . . . . . . 39,163 36,925
Building. . . . . . . . . . . . . . . . . . . . 493,952 465,731
Machinery and equipment . . . . . . . . . . . . 1,763,373 1,637,562
Demonstration equipment . . . . . . . . . . . . 1,048,997 1,038,382
Office furniture. . . . . . . . . . . . . . . . 803,945 724,671
Leasehold improvements. . . . . . . . . . . . . 204,644 161,400
----------- -----------
4,354,074 4,064,671
Less accumulated depreciation and amortization 3,410,849 2,875,546
----------- -----------
Net property and equipment . . . . . . . . 943,225 1,189,125
Patents and licenses at cost, less accumulated
amortization of $114,683 in 1994 and
$99,847 in 1993. . . . . . . . . . . . . . 53,551 35,828
Goodwill, less accumulated amortization
of $151,597 in 1994 and $141,996 in 1993. . . . . 388,954 398,555
----------- -----------
TOTAL ASSETS $20,090,771 $17,511,373
=========== ===========
<FN>
<F1>See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<TABLE>
DATA MEASUREMENT CORPORATION
CONSOLIDATED BALANCE SHEETS<F1>
<CAPTION>
December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
<S> <C> <C>
Current liabilities:
Notes payable to banks. . . . . . . . . . $ 706,108 $ 487,397
Accounts payable. . . . . . . . . . . . . 2,347,210 1,399,832
Advance payments on contracts . . . . . . 1,453,509 819,111
Accrued compensation. . . . . . . . . . . 683,753 724,655
Accrued warranty expense. . . . . . . . . 354,096 386,895
Accrued commission expense. . . . . . . . 566,311 451,812
Accrued interest expense. . . . . . . . . 37,427 27,635
Other accrued liabilities . . . . . . . . 497,265 540,595
Income taxes payable. . . . . . . . . . . 197,498 50,513
Current portion of long-term debt . . . . 569,999 382,654
----------- -----------
Total current liabilities . . . . 7,413,176 5,271,099
Deferred income taxes. . . . . . . . . . . . . . . 65,824 136,000
Long-term debt . . . . . . . . . . . . . . . . . . 3,568,533 3,377,763
Non interest bearing long-term obligation. . . . . -- 4,747,569
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, 4,000,000
shares authorized, 1,331,318 and 1,298,818
shares issued, and 1,328,318 and
1,295,818 shares outstanding. . . . . . . 13,313 12,988
Additional paid-in capital. . . . . . . . 5,417,248 5,335,573
Retained earnings/(deficit) . . . . . . . 4,058,060 (774,016)
Currency translation adjustments. . . . . (428,583) (578,803)
Treasury stock, 3,000 shares, at cost . . (16,800) (16,800)
----------- -----------
Total stockholders' equity. . . . 9,043,238 3,978,942
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $20,090,771 $17,511,373
=========== ===========
<FN>
<F1>See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<TABLE>
DATA MEASUREMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS<F1>
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
Sales . . . . . . . . . . . . . . . $24,206,165 $20,221,006 $19,937,493
Costs and expenses:
Cost of sales . . . . . . . . . 18,204,143 15,132,816 14,434,210
Selling, general and
administrative. . . . . . . . . 4,558,752 4,399,733 4,217,244
Interest expense. . . . . . . . 410,056 398,662 614,281
Loss on foreign exchange. . . . 19,439 78,794 41,366
---------- ---------- ----------
Total costs and expenses. . . . . . 23,192,390 20,010,005 19,307,101
---------- ---------- ----------
Income before provision (benefit)
for income taxes and
extraordinary item. . . . . . . 1,013,775 211,001 630,392
Provision (benefit) for income taxes:
Current . . . . . . . . . . . . 280,080 (1,765) 263,089
Deferred. . . . . . . . . . . . (86,201) 89,108 (150,186)
---------- ---------- ----------
193,879 87,343 112,903
---------- ---------- ----------
Income before extraordinary item. . 819,896 123,658 517,489
Extraordinary item -
gain on extinguishment of debt. 4,012,180 -- --
---------- ---------- ----------
Net income. . . . . . . . . . . . . $ 4,832,076 $ 123,658 $ 517,489
=========== ========== ==========
Net income per share. . . . . . . .
Primary
-Income before extraordinary
item $ 0.60 $ 0.10 $ 0.42
-Extraordinary item 2.93 -- --
-Net income 3.53 0.10 0.42
Fully Diluted
-Income before extraordinary
item $ 0.56 $ 0.10 $ 0.37
-Extraordinary item 2.58 -- --
-Net income 3.14 0.10 0.37
<FN>
<F1>See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<TABLE>
DATA MEASUREMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 1994, 1993, and 1992<F1>
<CAPTION>
Common Stock Common Addt'l Currency
$.01 par Stock $.01 Paid-in Retained Translation Treasury
value par value Capital Earnings Adjustments Stock TOTAL
Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1992 1,211,085 12,111 5,117,118 (1,415,163) 91,165 (16,800) 3,788,431
Net Income -- -- -- 517,489 -- -- 517,489
Conversion of debentures 12,000 120 29,880 -- -- -- 30,000
Currency translation
adjustment . -- -- -- -- (541,172) -- (541,172)
----------- -------- ----------- ------------ ---------- ---------- ------------
Balance,
December 31, 1992 1,223,085 12,231 5,146,998 (897,674) (450,007) (16,800) 3,794,748
Net Income -- -- -- 123,658 -- -- 123,658
Exercise of options 39,733 397 98,935 -- -- -- 99,332
Conversion of debentures 36,000 360 89,640 -- -- -- 90,000
Currency translation
adjustment . -- -- -- -- (128,796) -- (128,796)
----------- -------- ----------- ------------ ---------- ---------- ------------
Balance,
December 31, 1993 1,298,818 12,988 5,335,573 (774,016) (578,803) (16,800) 3,978,942
Net Income -- -- -- 4,832,076 -- -- 4,832,076
Exercise of options 500 5 1,995 -- -- -- 2,000
Conversion of debentures 32,000 320 79,680 -- -- -- 80,000
Currency translation
adjustment . -- -- -- -- 150,220 -- 150,220
----------- -------- ----------- ------------ ---------- ---------- ------------
Balance,
December 31, 1994 $ 1,331,318 $ 13,313 $ 5,417,248 $ 4,058,060 $(428,583) $ (16,800) $ 9,043,238
=========== ======== =========== ============ ========== ========== ============
<FN>
<F1> See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<TABLE>
DATA MEASUREMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS<F1>
<CAPTION>
Year Ended December 31,
1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . $ 4,832,076 $ 123,658 $ 517,489
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation. . . . . . . . . . . . . . . . 474,747 379,093 519,387
Amortization. . . . . . . . . . . . . . . . 31,683 26,503 30,408
Deferred income taxes . . . . . . . . . . . (86,202) 89,108 (149,926)
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . (2,391,773) 223,742 319,655
Inventories . . . . . . . . . . . . . . (945,911) (1,303,852) 171,086
Prepaid income taxes. . . . . . . . . . 82,760 (82,760) --
Other current assets. . . . . . . . . . 17,242 (8,285) 10,678
Patents and licenses. . . . . . . . . . (32,050) (17,378) (19,094)
Accounts payable. . . . . . . . . . . . 920,997 451,714 (397,781)
Advance payments on contracts . . . . . 1,235,827 (98,441) 366,860
Accrued compensation. . . . . . . . . . (51,412) 110,215 256,756
Other accrued liabilities . . . . . . . 12,583 167,200 (222,430)
Current income taxes. . . . . . . . . . 142,102 (182,897) 214,318
--------------- --------------- ---------------
Net cash provided by (used in)
operating activities 4,242,669 (122,380) 1,617,406
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment . . . . (191,273) (45,743) (282,685)
Proceeds (purchase) of short-term
investments - 176,500 (176,500)
Change in restricted cash . . . . . . . . . (68,000) (34,000) --
--------------- --------------- ---------------
Net cash (used in) provided by
investing activities . . . . . (259,273) 96,757 (459,185)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock. . . . . 2,000 99,332 --
Payments on long-term debt. . . . . . . . . (4,314,608) (282,774) (65,961)
Net borrowings (payments) on notes payable 208,619 94,077 (413,744)
--------------- --------------- ---------------
Net cash used in
financing activities . . . . . . . . . . . (4,103,989) (89,365) (479,705)
--------------- --------------- ---------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS . . . . . . . . . (718) (168,480) (140,470)
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS. . . . . . . . . . . . . . (121,311) (134,480) 538,046
CASH AND CASH EQUIVALENTS, Beginning of year 704,695 873,175 335,129
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS, End of year $ 583,384 $ 704,695 $ 873,175
=============== =============== ===============
Supplemental cash flow information:
Interest paid $ 401,128 $ 404,013 $ 276,218
Income taxes paid $ 54,560 $ 278,707 $ 45,495
Capitalized equipment leases $ 73,030 $ -- $ --
Termination of Contingent Obligation $ 4,012,180 $ -- $ --
Line of credit borrowings converted
to long-term debt . . . . . . . . . . . . . $ -- $ -- $ 7,749,659
Conversion of debentures to common stock. . $ 80,000 $ 90,000 $ 30,000
Capitalized demonstration equipment . . . . $ -- $ -- $ 230,292
<FN>
<F1>See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
DATA MEASUREMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
NOTE 1. Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly-owned and majority-owned subsidiaries, DMC
(U.K.) Limited, DMC Mess- & Regeltechnik GmbH, DMC France,
S.A.R.L., DMC Foreign Sales Corporation and Industrial Gauging
Disc, Inc., a former interest charge domestic international sales
corporation ("DISC"). All intercompany transactions have been
eliminated.
Revenue Recognition
The Company manufactures gauging systems, pinhole detectors, and
other industrial instruments pursuant to specific contract orders.
Revenues related to the production of these items are recognized
either using the percentage of completion method or upon completion
and shipment of units to customers, depending on the magnitude and
duration of the contract. Revenues related to the installation and
service of equipment at customers' locations are recognized when
the installation or service work is performed.
Foreign Currency Translation
Gains or losses resulting from translating foreign currency
financial statements are accumulated in a separate component of
stockholders' equity. Gains or losses resulting from foreign
exchange transactions (transactions denominated in a currency other
than the entity's local currency) are included in determining net
income.
Inventories
Material and parts inventory is stated at the lower of cost
(first-in, first-out basis) or market. Work-in-process inventory
represents accumulated labor, material, and overhead costs related
to specific uncompleted contracts. Provisions are made to reduce
accumulated costs on uncompleted contracts to net realizable value
when losses are anticipated.
Depreciation
Depreciation is computed on the straight-line method using the
following estimated useful lives:
Building. . . . . . . . . . . . . . . . 50 years
Machinery and equipment . . . . . . . . 3-7 years
Demonstration equipment . . . . . . . . 3-10 years
Office furniture. . . . . . . . . . . . 5-7 years
Leasehold improvements. . . . . . . . . 5-7 years
Amortization
Patents and licenses are amortized on a straight-line basis over
five-year periods. Goodwill is amortized over a forty-year period.
Income Taxes
The Company provides for federal and state income taxes at the
statutory rates in effect on taxable income. Deferred income taxes
result primarily from the temporary differences in recognizing
depreciation, vacation pay and reserves.
Income taxes have not been provided for the undistributed
earnings of the Company's subsidiary, DMC (U.K.) Ltd., because the
Company intends to continue these operations and reinvest the
undistributed earnings indefinitely. Undistributed earnings of the
subsidiary amounted to $2,122,355 at December 31, 1994.
Net Income Per Share
Primary net income per share is based on the weighted average
number of common shares outstanding including common stock
equivalents from dilutive stock options and warrants. Common
equivalent shares were computed using the treasury stock method.
The Company's convertible subordinated debentures (see Note 2) are
not common stock equivalents. Shares used in the primary net
income per share calculation were 1,371,622, 1,285,768 and
1,246,357 in 1994, 1993, and 1992, respectively. Fully diluted net
income per share assumes the conversion of the convertible
subordinated debentures. Shares used in the fully diluted net
income per share computation were 1,558,022, 1,505,768 and
1,509,906 in 1994, 1993, and 1992, respectively.
Cash, Cash Equivalents and Restricted Cash
For purposes of the statements of cash flows, the Company
considers all temporary investments with an original maturity of
three months or less to be cash equivalents. Included in cash at
December 31, 1994 and 1993, is restricted cash in the amount of
$102,000 and $34,000, respectively. These amounts collateralize
performance bonds established by the Company.
Short-Term Investments
The Company considers temporary investments with a maturity
exceeding three months but less than one year to be short-term
investments.
Retainages and Unbilled Receivables
The Company expects to realize substantially all retainages and
unbilled receivables within one year.
Reclassifications
Certain reclassifications have been made to the 1993
consolidated financial statements to conform with the 1994
presentation.
<TABLE>
NOTE 2. Financing Arrangements
Long-term debt and notes payable consist of the following:
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Non interest bearing long-term obligation,
contingently due 1997 . . . . . . . . . . . . . $ -- $ 4,747,569
5 year term loan, repayment based on quarterly
domestic after-tax cash flow through 1997,
9.0% interest . . . . . . . . . . . . . . . . . -- 2,821,845
5 year term loan, repayment based on quarterly
payments through June 30, 1999 at prime plus
1.5% interest . . . . . . . . . . . . . . . . . 2,600,000 --
Convertible subordinated debentures,
due 1997, interest rate of 12%. . . . . . . . . 425,000 505,000
Convertible subordinated debentures,
due 1999, interest rate of 0% . . . . . . . . . 663,000 --
10 year real property mortgage, due 2002,
interest rate 9.750%, reset annually at
LIBOR plus 4.0% . . . . . . . . . . . . . . . . 385,692 427,797
Revolving credit lines, secured by current
assets and net fixed assets, interest
rates from 9.25% to 9.75% . . . . . . . . . . . 706,108 487,397
Various installment loan and capital lease
obligations (excluding interest) due in
varying amounts through 1996, with interest
from 8.6% to 13%, secured by vehicles and
other equipment . . . . . . . . . . . . . . . . 64,840 5,775
-------------- --------------
4,844,640 8,995,383
Less current portions:
Long-term debt. . . . . . . . . . . . . . . 569,999 382,654
Revolving credit lines. . . . . . . . . . . 706,108 487,397
--------- ----------
$ 3,568,533 $ 8,125,332
============== ==============
</TABLE>
Estimated future maturities on long-term debt at December 31, 1994,
were as follows:
1995 $ 570,000
1996 666,000
1997 1,088,000
1998 642,000
1999 1,005,000
2000 and thereafter 167,532
----------
$4,138,532
==========
During 1990, the Company negotiated with its principal lender,
National Bank of Washington, for increases to the Company's line of
credit. The Company expected that such a credit facility could be
put in place. However, in August 1990, the Federal Deposit
Insurance Corporation (FDIC) seized the National Bank of Washington
and effectively closed out all lending activities.
The Company restructured its debt obligation with the FDIC
effective September 30, 1992. The restructuring modified the debt
by converting the principal and accrued interest obligation from a
demand note to a $3,000,000 term note at 9.0% interest with
quarterly repayments equal to 65% of the after-tax free cash flow
generated by the domestic operations of the Company for five years.
As part of the restructuring, the FDIC released the lien it held on
the Company's domestic accounts receivable but has maintained its
lien on the domestic inventory and fixed assets until the
$3,000,000 obligation was repaid. In addition, the Company granted
the FDIC warrants, exercisable from April 1, 1997 through September
30, 1997, to purchase 120,000 common shares at $5.00 per share.
On September 29, 1994, the Company completed a refinancing of its
long term debt with the FDIC. The new long term financing allowed
the Company to fully repay its existing obligation in the amount of
$2,821,845, plus accrued interest. This payment completed and
terminated the Company's obligations under the Loan Modification
Agreement between the Company and the FDIC dated as of September
30, 1992. The debt forgiveness resulted in an extraordinary gain
of $4,012,180. Since the gain had been previously recognized by
the Company for tax purposes and since a valuation allowance had
been recorded against the deferred tax asset, it has no current
income tax effect.
Additionally, the Company issued to the FDIC a new Convertible
Subordinated Debenture due in 1999 ("Debenture") in the principal
amount of $240,000 in exchange for the Warrant ("Warrant") for
120,000 shares of DMC common stock which was previously issued to
the FDIC as part of the Agreement. The Debenture bears no interest
and may be converted into 120,000 shares of DMC common stock at any
time between October 1, 1996 and September 30, 1999 at an exercise
price of $2.00 per share. If the FDIC chooses to convert the
Debenture, the Company has the right to redeem the Debenture for
65% of the market value of the underlying common stock at the time
of conversion. The Company has determined that the fair market
value of the debenture, under these conversion terms, is $663,000.
That amount has been recorded in the accompanying consolidated
balance sheet at December 31, 1994.
The new banking facility, which is in addition to the Company's
existing bank facilities, totalled $2,600,000 as of December 31,
1994, is repayable in quarterly installments over a five year
period beginning on September 30, 1994 and ending June 30, 1999 and
carries an interest rate of prime plus 1.5%.
During 1990, the Board of Directors authorized the Company to
sell $625,000 of convertible subordinated debentures to certain key
investors and directors of the Company. These debentures bear
interest at 12%, were originally due September 30, 1992, and were
extended to September 30, 1997, under the same terms, on June 30,
1992. The debentures are convertible to shares of the Company's
common stock at the conversion price of $2.50 per share, for a
maximum total conversion of 250,000 shares, of which 32,000 and
36,000 shares, respectively, were converted in 1994 and 1993. The
Company has the right to call the debentures, subject to certain
call premiums, beginning October 1, 1994; the Company has not
called any debentures. The debentures are subordinate to all of
the Company's current and future borrowing from banks, insurance
companies, or other financial institutions regularly engaged in the
business of lending of money.
In August 1992, the Company restructured the long-term debt of
its British subsidiary by converting a mortgage note bearing an
interest rate of 14% with a three year maturity to a ten year
mortgage note currently bearing an interest rate of 9.750%. The
interest rate is reset annually to LIBOR plus 4.0%.
In August 1994, the Company renewed its $2,000,000 banking
facility from Chase Manhattan Bank of Maryland. This facility
comprises a $1,000,000 working capital line, a $500,000 stand by
letter of credit line and a $500,000 foreign currency trading line.
The facility is secured by the assets of the domestic operations
and bears interest at the rate of prime plus 0.75%. The facility
expires on July 31, 1995. At December 31, 1994 and 1993,
borrowings against the working capital line were $603,223 at 9.25%
and $263,649 at 6.75%, respectively.
The Company's wholly-owned United Kingdom subsidiary, DMC (U.K.)
Ltd., has a line of credit that provides for borrowing up to
280,000(pounds) ($438,000 at December 31, 1994). Under this line,
borrowings denominated in pounds sterling bear interest at 3.5%
over the U.K. base rate. The facility expires in June 1995. At
December 31, 1994 and 1993, total borrowings under this line
amounted to $102,883 at 9.75% and $223,748 at 9.0%, respectively.
These borrowings are secured by substantially all of DMC (U.K.)
Ltd.'s assets.
The Company's wholly-owned German subsidiary, DMC Mess- &
Regeltechnik GmbH, has a line of credit of $197,000. Borrowings
under this line bear interest at 10.5%, and are secured by
substantially all of this subsidiary's assets. There were no
borrowings against this line at December 31, 1994 and 1993,
respectively.
NOTE 3. Income Taxes
The provision (benefit) for income taxes is composed of the
following:
1994 1993 1992
Current:
Federal . . . . . $136,000 $ (55,228) $ 195,896
State . . . . . . 21,327 3,164 43,395
Foreign . . . . . 122,453 50,299 23,798
--------- ---------- ----------
280,080 (1,765) 263,089
--------- ---------- ----------
Deferred:
Federal . . . . . (75,928) 88,760 (119,361)
State . . . . . . (10,273) 348 (26,441)
Foreign . . . . . -- -- (4,384)
--------- ---------- ----------
(86,201) 89,108 (150,186)
--------- ---------- ----------
$193,879 $ 87,343 $ 112,903
========= ========== ==========
The provision (benefit) for income taxes differs from that
computed by applying the statutory federal income tax rate to
income (loss) before income taxes due to the following:
1994 1993 1992
Statutory rate. . . . . . . . . . 34.0% 34.0% 34.0%
Effect of tax loss carry forward. -- -- (106.1)
Difference in effective rates on
earnings of foreign subsidiaries (0.8) 1.5 4.4
State income taxes (benefit), net
of federal income tax benefit. . 2.4 4.6 1.8
Debt restructuring. . . . . . . . -- -- 94.2
Valuation allowance adjustment. . -- -- (17.2)
Other . . . . . . . . . . . . . . -- 1.3 6.8
Reversal of previously provided
income tax. . . . . . . . . . . . (16.5) -- --
------ ------ -------
19.1% 41.4% 17.9%
====== ====== =======
The approximate tax effect of each type of temporary difference and
carryforward that gave rise to the Company's deferred tax assets
(liabilities), as of December 31, 1994 and 1993, are as follows:
1994 1993
Accelerated depreciation $ (33,000) $ (36,000)
Bad debt reserves 21,000 46,000
Rent expense 5,000 4,000
Vacation expense 163,000 141,000
Commission Expense 55,000 --
Warranty Expense 42,000 --
Inventory reserves (8,000) --
Debt restructuring -- 1,898,000
Interest Expense OID (4,000) --
DISC distributions (39,000) (61,000)
Tax credit carryforward -- 65,000
Other (80,000) (123,000)
Less: valuation allowance -- (1,898,000)
------------- ------------
$ 122,000 $ 36,000
============= ============
As a result of the debt restructuring and resulting extraordinary
gain in 1994, the Company reversed the valuation allowance of $1,898,000
recorded at December 31, 1992, and therefore, the extraordinary gain had
no income tax effect.
NOTE 4. Employee Benefit Plans
The Company and DMC (U.K.) Ltd. maintain separate defined
contribution employee benefit plans. U.S. and U.K. employees over the
age of 21 and with more than 1 year of experience with the Company are
eligible to participate. Eligible employees can defer a portion of
their total compensation through contributions, a portion of which is
matched by the Company. Participant contributions are immediately 100%
vested, while Company contributions vest over four years.
Expense related to these employee benefit plans was $96,236 for
1994, $73,844 for 1993, and $59,705 for 1992.
<PAGE>
NOTE 5. Commitments
The Company is obligated under various operating and capital lease
agreements, primarily for office space, a manufacturing facility, and
office equipment through 1998. The Company entered into a lease for
office and manufacturing space in the United States during 1987 which,
with options, extends until November 2002 and contains an escalation
clause related to increases in the Consumer Price Index.
The following is a schedule by years of future minimum rental
payments required under operating and capital leases that have initial
or remaining noncancellable lease terms in excess of one year as of
December 31, 1994:
1995 $ 633,378
1996 577,614
1997 534,907
1998 52,117
1999 and thereafter 28,800
----------
$1,826,816
==========
Rental expense was $595,167 in 1994, $558,000 in 1993, and
$516,000 in 1992.
NOTE 6. Stockholders' Equity
Options
The Company adopted an Incentive Stock Option Plan ("ISO Plan") in
1985, and established a non-qualified stock option policy ("Warrant
Plan") in 1984. In 1988, the Company adopted the 1988 Stock Option Plan
("1988 Plan"). In 1992, the Company adopted the 1991 Stock Option Plan
("1991 Plan") which was intended to supersede and replace the shares
granted under the previous plans. As such, no grants were made under
the old plans after the Shareholders approved the 1991 Plan on June 6,
1992. During 1992, employees holding option grants under the old plans
were given a one time opportunity to transfer their options to the 1991
Plan at a conversion price of the higher of the original conversion
price or $3.75. Consequently, 116,379 options were transferred to the
1991 Plan. In 1992, the Company also adopted the Outside Directors
Stock Option Plan ("Directors Plan").
The ISO Plan is administered by a Committee appointed by the Board
of Directors, which determines the officers and key employees to be
granted options on shares of the Company's common stock, at prices no
lower than the fair market value on the date of grant. As of December
31, 1994, there were options outstanding to purchase 20,000 shares of
common stock, with expiration dates through December 31, 1997. At
December 31, 1994, there were no shares available for future grants of
options under the ISO Plan.
The following table summarizes the activity under the ISO Plan:
Shares Option Price Range
Options outstanding at
January 1, 1992 . . . . . . 93,965 $2.50 - $8.00
Transferred to 1991 Plan. . . . . . 59,499 $5.00 - $8.00
Granted . . . . . . . . . . . . . . --
Canceled or terminated. . . . . . . 3,533 $6.00 - $7.87
Exercised . . . . . . . . . . . . . --
------- -------------
Options outstanding at
December 31, 1992 . . . . . 30,933 $2.50 - $7.87
Granted . . . . . . . . . . . . . . -- --
Canceled or terminated. . . . . . . 533 $7.87 - $7.87
Exercised . . . . . . . . . . . . . 10,400 $2.50 - $2.50
------- -------------
Options outstanding at
December 31, 1993 . . . . . 20,000 $2.50 - $2.50
Granted . . . . . . . . . . . . . . -- --
Canceled or terminated. . . . . . . -- --
Exercised . . . . . . . . . . . . . -- --
------- -------------
Options outstanding at
December 31, 1994 . . . . . 20,000 $2.50 - $2.50
======= =============
Options exercisable at
December 31, 1994 . . . . . 20,000 $2.50 - $2.50
======= =============
The Warrant Plan is administered by the Board of Directors, which
determines those individuals to be granted options on shares of the
Company's common stock, at prices no lower than the fair market value on
the date of grant. As of December 31, 1994, there were options
outstanding to purchase 15,500 shares of common stock, with an
expiration date of December 31, 1997. At December 31, 1994 there were
no shares available for future grants of options under the Warrant Plan.
The following table summarizes the activity under the Warrant Plan:
Shares Option Price Range
Options outstanding at
January 1, 1992 . . . . . . 76,680 $2.50 - $12.00
Transferred to 1991 Plan. . . . . . 37,080 $2.50 - $ 8.00
Granted . . . . . . . . . . . . . . 520 $2.50 - $ 2.50
Canceled or terminated. . . . . . . 400 $6.00 - $12.00
Exercised . . . . . . . . . . . . . --
------- --------------
Options outstanding at
December 31, 1992 . . . . . 39,720 $2.50 - $12.00
Granted . . . . . . . . . . . . . . --
Canceled or terminated. . . . . . . 720 $7.85 - $12.00
Exercised . . . . . . . . . . . . . 23,500 $2.50 - $ 2.50
------- --------------
Options outstanding at
December 31, 1993 . . . . . . . . . 15,500 $2.50 - $ 6.00
Granted . . . . . . . . . . . . . . --
Canceled or terminated. . . . . . . -- --
Exercised . . . . . . . . . . . . . -- --
------- --------------
Options outstanding at
December 31, 1994 . . . . . 15,500 $2.50 - $ 6.00
======= ==============
Options exercisable at
December 31, 1994 . . . . . 15,500 $2.50 - $ 6.00
====== ==============
The Company adopted the 1988 Stock Option Plan in September 1988.
Of the 80,000 shares of common stock issuable under the 1988 Plan, there
were options under the plan outstanding to purchase 5,000 shares at
December 31, 1994. Options to purchase common stock granted under the
1988 Plan are not intended to qualify as "incentive stock options"
within the meaning of Section 422A of the Internal Revenue Code. As of
December 31, 1994, there were no shares available for future grants of
options under the 1988 Plan.
The following table summarizes the activity under the 1988 Option
Plan:
Shares Option Price Range
Options outstanding at
January 1, 1992 . . . . . . 28,300 $2.50 - $8.75
Transferred to 1991 Plan. . . . . . 19,800 $2.50 - $8.75
Granted . . . . . . . . . . . . . . 1,500 $2.50 - $2.50
Canceled or terminated. . . . . . . --
Exercised . . . . . . . . . . . . . --
------- -------------
Options outstanding at
December 31, 1992 . . . . . 10,000 $2.50 - $2.50
Granted . . . . . . . . . . . . . . --
Canceled or terminated. . . . . . . 1,667 $2.50 - $2.50
Exercised . . . . . . . . . . . . . 3,333 $2.50 - $2.50
------- -------------
Options outstanding at
December 31, 1993 . . . . . 5,000 $2.50 - $2.50
Granted . . . . . . . . . . . . . . --
Canceled or terminated. . . . . . . -- --
Exercised . . . . . . . . . . . . . -- --
------- -------------
Options outstanding at
December 31, 1994 . . . . . 5,000 $2.50 - $2.50
======= =============
Options exercisable at
December 31, 1994 . . . . . 5,000 $2.50 - $2.50
======= =============
At the 1992 Annual Meeting, the Shareholders approved the 1991
Stock Option Plan and authorized 250,000 shares to replace shares issued
under the old plans. The 1991 Plan is administered by the Board of
Directors, which determines those individuals to be granted options on
shares of the Company's common stock, at prices no lower than the fair
market value on the date of grant. As of December 31, 1994, there were
options outstanding to purchase 146,626 shares of common stock, with an
expiration date of December 31, 1997. At December 31, 1994 there were
102,874 shares available for future grants of options under the 1991
Plan.
The following table summarizes the activity under the 1991 Option
Plan:
Shares Option Price Range
Options outstanding at
January 1, 1992 . . . . . . --
Transferred from old plans. . . . . 116,379 $3.75 - $8.75
Granted . . . . . . . . . . . . . . 8,000 $5.00 - $5.00
Canceled or terminated. . . . . . . --
Exercised . . . . . . . . . . . . . --
------- -------------
Options outstanding at
December 31, 1992 . . . . . 124,379 $3.75 - $8.75
Granted . . . . . . . . . . . . . . 21,000 $6.75 - $6.75
Canceled or terminated. . . . . . . 26,253 $5.00 - $8.75
Exercised . . . . . . . . . . . . . --
------- -------------
Options outstanding at
December 31, 1993 . . . . . 119,126 $3.75 - $8.75
Granted . . . . . . . . . . . . . . 28,000 $3.50 - $5.37
Canceled or terminated. . . . . . . -- --
Exercised . . . . . . . . . . . . . 500 $4.00 $4.00
------- -------------
Options outstanding at
December 31, 1994 . . . . . 146,626 $3.50 - $8.75
======= =============
Options exercisable at
December 31, 1994 . . . . . 121,287 $3.50 - $8.75
======= =============
At the 1992 Annual Meeting, the Shareholders approved the Outside
Directors Stock Option Plan and authorized 50,000 shares for granting to
non-employee directors of the Company. The Directors Plan provides
that, upon joining the Board, each outside director is awarded 5,000
shares at a price equal to the higher of $2.50 or the fair market value
on the date of grant. As of December 31, 1994, there were options
outstanding to purchase 28,750 shares of common stock, with an
expiration date of December 31, 1997. At December 31, 1994, there were
18,750 shares available for future grants of options under the Directors
Plan.
The following table summarizes the activity under the Directors
Plan:
Shares Option Price Range
Options outstanding at
January 1, 1992 . . . . . . --
Granted . . . . . . . . . . . . . . 25,000 $2.50 - $2.50
Canceled or terminated. . . . . . . --
Exercised . . . . . . . . . . . . . --
------- -------------
Options outstanding at
December 31, 1992 . . . . . 25,000 $2.50 - $2.50
Granted . . . . . . . . . . . . . . 5,000 $6.00 - $6.00
Canceled or terminated. . . . . . . 3,750 $2.50 - $2.50
Exercised . . . . . . . . . . . . . 2,500 $2.50 - $2.50
------- -------------
Options outstanding at
December 31, 1993 . . . . . 23,750 $2.50 - $6.00
Granted . . . . . . . . . . . . . . 5,000 $4.00 - $4.00
Canceled or terminated. . . . . . . -- --
Exercised . . . . . . . . . . . . . -- --
------- -------------
Options outstanding at
December 31, 1994 . . . . . 28,750 $2.50 - $6.00
======= =============
Options exercisable at
December 31, 1994 . . . . . 17,500 $2.50 - $6.00
======= =============
NOTE 7. Business Segment Information
<TABLE>
Geographic area results were as follows (000's omitted):
<CAPTION>
Year Ended December 31, 1994
United United Elimi- Consol-
States Kingdom Germany France nations idated
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated
customers . . . . . . . $ 17,868 $ 4,658 $ 1,660 $ 20 $ -- $ 24,206
Intercompany sales. . . . . 2,455 651 38 -- (3,144) --
-------- --------- --------- --------- --------- ---------
Total sales $ 20,323 $ 5,309 $ 1,698 $ 20 $ (3,144) $ 24,206
========= ========= ========= ========= ========= =========
Pre tax income. . . . . . . $ 263 $ 392 $ 209 $ 150 $ -- $ 1,014
========= ========= ========= ========= ========= =========
Identifiable assets at
December 31 . . . . . . $ 14,575 $ 4,339 $ 1,019 $ 158 $ -- $ 20,091
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
Year Ended December 31, 1993
<CAPTION>
United United Elimi- Consol-
States Kingdom Germany France nations idated
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated
customers . . . . . . . $ 16,458 $ 2,100 $ 1,411 $ 252 $ -- $ 20,221
Intercompany sales. . . . . 817 1,184 89 164 (2,254) --
--------- --------- --------- --------- --------- ---------
Total sales . . . . . . . . $ 17,275 $ 3,284 $ 1,500 $ 416 $ (2,254) $ 20,221
========= ========= ========= ========= ========= =========
Pre tax income. . . . . . . $ (106) $ 141 $ 178 $ (2) $ -- $ 211
========= ========= ========= ========= ========= =========
Identifiable assets at
December 31 . . . . . . $ 13,286 $ 2,734 $ 1,242 $ 249 $ -- $ 17,511
========= ========= ========= ========= ========= =========
</TABLE>
<TABLE>
Year Ended December 31, 1992
<CAPTION>
United United Elimi- Consol-
States Kingdom Germany France nations idated
<S> <C> <C> <C> <C> <C> <C>
Net sales to unaffiliated
customers . . . . . . . $ 15,647 $ 2,890 $ 508 $ 892 $ -- $ 19,937
Intercompany sales. . . . . 604 782 64 1 (1,450) --
--------- --------- --------- --------- --------- ---------
Total sales $ 16,251 $ 3,672 $ 572 $ 893 $ (1,450) $ 19,937
========= ========= ========= ========= ========= =========
Pre tax income. . . . . . . $ 629 $ 74 $ (70) $ (3) $ -- $ 630
========= ========= ========= ========= ========= =========
Identifiable assets at
December 31 . . . . . . $ 12,840 $ 2,959 $ 808 $ 451 $ -- $ 17,058
========= ========= ========= ========= ========= =========
Export sales to geographic areas outside the United States, excluding intercompany transactions, were as
follows (in thousands):
1994 1993 1992
From the United States. . . . . . . $ 12,004 $ 10,564 $ 10,376
From DMC (U.K.) Limited
in the United Kingdom . . . . . 4,658 2,100 2,890
From DMC Mess - & Regeltechnik
GmbH in West Germany. . . . . . 1,660 1,411 508
From DMC France,S.A.R.L. in France. 20 252 892
--------- --------- ---------
$ 18,342 $ 14,327 $ 14,666
========= ========= =========
The Company does not believe it is dependent upon any single
customer on a continuing basis, although in any one year one
customer may account for a material portion of the Company's sales.
During 1994, 1993, and 1992, no customer accounted for 10% or more
of sales.
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure
No Form 8-K reports were filed during 1994, 1993 or 1992 regarding
changes in and disagreements with accountants.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
a. (1) Financial Statements:
Page
a. Independent Auditors' Report . . . . . . . . . . . . 19
b. Independent Auditors' Report . . . . . . . . . . . . 20
c. Consolidated balance sheets as of December 31,
1994 and 1993. . . . . . . . . . . . . . . . 21-22
d. Consolidated statements of operations for the years
ended December 31, 1994, 1993, and 1992. . . 23
e. Consolidated statements of stockholders'
equity for the years ended December 31,
1994, 1993 and 1992. . . . . . . . . . . . . 24
f. Consolidated statements of cash flows for the years
ended December 31, 1994, 1993 and 1992 . . . 25
g. Notes to consolidated financial statements 26-41
(2) Financial statement schedules. The following financial statement
schedule is filed as part of this report. If any schedule is omitted, it
is because either it is not applicable or because it is included in the
financial statements or notes thereto.
Page
Schedule VIII. Valuation and qualifying accounts for
the years ended December 31, 1994, 1993 and 1992. 43
b. Exhibits (numbered according to Item 601 of Regulation S-K)
3. Articles of incorporation and by-laws (Registrant's
Form 10. Registration No. 0-15011)
10. Material contracts (Registrant's Form 10, Registration
No. 0-15011, and Prospectus on Form S-8,
Registration No. 33-12129, Registrant's Form S-1,
Registration No. 33-15066)
11. Statement re computation of per share earnings (See Note 1
of Notes to Consolidated Financial Statements)
22. Subsidiaries of the Registrant (Registrant's Form 10,
Registration No. 0-15011)
24. a. Consent of Deloitte & Touche 44
b. Consent of Sinclairs 45
</TABLE>
<TABLE> SCHEDULE VIII
DATA MEASUREMENT CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993, AND 1992<F1>
Column A Column B Column C Column D Column E
Additions
<CAPTION>
Balance at Charged to Charged to
Beginning Costs and Other Acct Deductions Balance at
Description of Year Expenses Describe Describe (1) End of Year
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for doubtful
accounts $184,000 $ 72,000 $ -- $ 94,000 $162,000
======== ======== ======== ======== =========
Year ended December 31, 1993
Allowance for doubtful
accounts $187,000 $ 70,000 $ -- $ 73,000 $184,000
======== ======== ======== ======== =========
Year ended December 31, 1992
Allowance for doubtful
accounts $443,000 $ 97,000 $ -- $353,000 $187,000
======== ======== ======== ======== =========
<FN>
<F1>(1) The decrease in allowance for doubtful accounts is principally the
result of accounts written off.
</FN>
</TABLE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
No. 33-50982 and 33-54028 of Data Measurement Corporation on Forms S-8 and
S-3, respectively, of our report dated March 1, 1995, appearing in this
Annual Report on Form 10-K of Data Measurement Corporation for the year
ended December 31, 1994.
/s/ Deloitte & Touche LLP
Washington, D.C.
March 15, 1995
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
No. 33-50982 and 33-54028 of Data Measurement Corporation on Forms S-8
and S-3, respectively, of our report dated March 1, 1995, appearing in
this Annual Report on Form 10-K of Data Measurement Corporation for the
year ended December 31, 1994.
/s/ SINCLAIRS
LONDON, U.K.
15 March 1995
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DATA MEASUREMENT CORPORATION
(Registrant)
Date: By:/s/ Dominique Gignoux
March 16, 1995 Dominique Gignoux
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following person on
behalf of the registrant and in the capacities and on the dates
indicated.
/s/ James F. Collins
James F. Collins
Director
March 16, 1994
/s/ Dominique Gignoux
Dominique Gignoux
Chairman of the Board of Directors,
President (Principal Executive Officer)
March 16, 1994
/s/ Marshal Greenblatt
Marshal Greenblatt
Director
March 16, 1994
/s/ Gregory A. Harrison
Gregory A. Harrison
Director
March 16, 1994
/s/ Ira A. Hunt, Jr.
Ira A. Hunt, Jr.
Director
March 16, 1994
/s/ Frederick S. Rolandi
Frederick S. Rolandi
Vice President, Chief
Financial Officer and Director
March 16, 1994
/s/ John D. Sanders
John D. Sanders
Director
March 16, 1994
/s/ Bonnie K. Wachtel
Bonnie K. Wachtel
Director
March 16, 1994
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