<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended: August 31, 1995
-----------------
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Transition period from _____ to ______
Commission File Number: 0-14779
-------
DATA TRANSLATION, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2532613
-------------------------------- -------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification Number)
of organization or incorporation)
100 Locke Drive
Marlborough, Massachusetts
------------------------------------------------------------
(Address of principal executive offices)
01752
----------------------------------------------------------
(Zip code)
(508) 481-3700
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes ___X___ No ________
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Common Stock, par value $.01 per share 6,189,307 shares
-------------------------------------- ---------------------------------
Class Outstanding at September 30, 1995
<PAGE>
Page 2 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX
-----
Page No.
-------
<S> <C>
Financial Information:
Consolidated Balance Sheets as of
November 30, 1994 and August 31, 1995 ...................... 3
Consolidated Statements of Operations for the
Three and Nine Months Ended August 31, 1994 and 1995 ....... 4
Consolidated Statements of Stockholders' Equity
For the Fiscal Year Ended November 30, 1994
and the Nine Months Ended August 31, 1995 ................ 5
Consolidated Statements of Cash Flows for the
Nine Months Ended August 31, 1994 and 1995 ................. 6
Notes to Consolidated Financial Statements ................... 7-9
Management's Discussion and Analysis of
Financial Condition and Results of Operations .............. 10-12
Part II - Other Information .................................... 13
Signatures ..................................................... 14
</TABLE>
<PAGE>
Page 3 of 14
DATA TRANSLATION, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, August 31,
1994 1995
------------- -------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,592,000 $ 7,072,000
Marketable securities (Note 2) 2,487,000 6,558,000
Accounts receivable, net of reserves of
$435,000 in 1994 and $506,000 in 1995 9,045,000 11,948,000
Inventories 2,759,000 5,915,000
Prepaid expenses 647,000 1,381,000
Prepaid income taxes 61,000 60,000
------------- -------------
Total current assets 16,591,000 32,934,000
Equipment and Leasehold Improvements, net 2,367,000 3,384,000
Other Assets - net 241,000 223,000
------------- -------------
Total Assets $ 19,199,000 $ 36,541,000
============= =============
Current Liabilities:
Accounts payable $ 3,745,000 $ 4,922,000
Due to related party 546,000 273,000
Accrued expenses 3,922,000 7,399,000
------------- -------------
Total current liabilities 8,213,000 12,594,000
Deferred Income Taxes 2,000 3,000
Stockholders' Equity:
Preferred Stock, $.01 par value,
Authorized - 1,000,000 shares, none issued - -
Common Stock, $.01 par value,
Authorized - 10,000,000 shares, issued -
6,766,000 in 1994 and 7,052,000 in 1995 68,000 71,000
Capital in excess of par value 8,739,000 15,685,000
Retained earnings 6,894,000 10,058,000
Cumulative translation adjustment 64,000 34,000
Less treasury stock, at cost, 2,254,000
shares in 1994 and 869,000 shares in 1995 (4,781,000) (1,843,000)
Unrealized holding loss on available for
sale securities - (61,000)
------------- -------------
Total stockholders' equity 10,984,000 23,944,000
Total Liabilities and Stockholders' Equity $ 19,199,000 $ 36,541,000
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
Page 4 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended August 31, Nine Months Ended August 31,
1994 1995 1994 1995
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net sales:
Digital Media $ 3,453,000 $ 8,137,000 $ 7,916,000 $ 20,323,000
Data acquisition and imaging 5,408,000 5,583,000 16,953,000 16,359,000
Networking distribution 3,730,000 5,353,000 10,886,000 14,604,000
------------ ------------ ------------- -------------
Total net sales 12,591,000 19,073,000 35,755,000 51,286,000
Cost of sales 6,688,000 9,933,000 19,122,000 26,679,000
------------ ------------ ------------- -------------
Gross profit 5,903,000 9,140,000 16,633,000 24,607,000
Research and development expenses 1,691,000 1,961,000 5,180,000 5,488,000
Selling and marketing expenses 3,219,000 4,556,000 9,070,000 13,158,000
General and administrative expenses 775,000 1,325,000 2,433,000 3,199,000
------------ ------------ ------------- -------------
Operating income (loss) 218,000 1,298,000 (50,000) 2,762,000
Interest income 34,000 135,000 118,000 494,000
Interest expense (1,000) (9,000) (5,000) (17,000)
Other income (expense) (3,000) 8,000 (39,000) 6,000
------------ ------------ ------------- -------------
Income before provision
for income taxes 248,000 1,432,000 24,000 3,245,000
Tax provision 12,000 6,000 84,000 81,000
------------ ------------ ------------- -------------
Net income (loss) $ 236,000 $ 1,426,000 $ (60,000) $ 3,164,000
=========== ============ ============= =============
Net income (loss) per common and
common equivalent share $0.05 $0.21 ($0.01) $0.48
=========== ============ ============= =============
Weighted average number of common
and common equivalent shares outstanding 4,914,000 6,812,000 4,348,000 6,621,000
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
Page 5 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
$.01 Par Value
---------------------------------------
Unrealized
Holding Loss
Capital in Cumulative on Available Total
Issued Excess of Retained Translation Treasury for Sale Stockholders'
Shares Amount Par Value Earnings Adjustment Stock Securities Equity
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance November 30, 1993 6,564,000 $66,000 $8,289,000 $6,574,000 ($102,000) ($4,781,000) - $10,046,000
Proceeds from stock plans 248,000 2,000 761,000 - - - - 763,000
Effect of stock-for-stock
exercise (46,000) - (311,000) - - - - (311,000)
Translation adjustment - - - - 166,000 - - 166,000
Net income - - - 320,000 - - - 320,000
------------------------------------------------------------------------------------------------------
Balance November 30, 1994 6,766,000 $68,000 $8,739,000 $6,894,000 $64,000 ($4,781,000) - $10,984,000
Proceeds from stock plans 286,000 3,000 1,082,000 - - - - 1,085,000
Public sale of treasury stock, net
of issuance costs of $375,000 - - 5,864,000 - - 2,938,000 - 8,802,000
Translation adjustment - - - - (30,000) - - (30,000)
Net income - - - 3,164,000 - - - 3,164,000
Reserve for unrealized
investment losses - - - - - - (61,000) (61,000)
-----------------------------------------------------------------------------------------------------
Balance August 31, 1995 7,052,000 $71,000 $15,685,000 $10,058,000 $34,000 ($1,843,000) ($61,000) $23,944,000
=====================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
Page 6 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended:
August 31, August 31,
1994 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (60,000) $ 3,164,000
Adjustments to reconcile net income (loss) to
net cash used in operating activities-
Depreciation and amortization 1,254,000 1,287,000
Loss on sale of equipment 9,000 2,000
Loss on sale of marketable securities 3,000 34,000
Change in assets and liabilities-
Accounts receivable (2,207,000) (2,903,000)
Inventories (589,000) (3,156,000)
Prepaid expenses (362,000) (734,000)
Prepaid income taxes 166,000 1,000
Accounts payable 363,000 1,177,000
Due to related party (273,000) (273,000)
Accrued expenses 572,000 3,477,000
------------ -------------
Net cash provided by (used in) operating activities $ (1,124,000) $ 2,076,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and leasehold improvements (785,000) (2,176,000)
Proceeds from sale of equipment - 5,000
Increase in other assets (150,000) (107,000)
Purchases of marketable securities (862,000) (9,132,000)
Proceeds from sales of marketable securities 1,009,000 4,966,000
------------ -------------
Net cash used in investing activities $ (788,000) $ (6,444,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock plans 407,000 1,085,000
Net proceeds from public sale of treasury stock - 8,802,000
------------ -------------
Net cash provided by financing activities $ 407,000 $ 9,887,000
EXCHANGE RATE EFFECTS 134,000 (39,000)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (1,371,000) $ 5,480,000
CASH AND CASH EQUIVALENTS, beginning of period 1,528,000 1,592,000
CASH AND CASH EQUIVALENTS, end of period $ 157,000 $ 7,072,000
============ =============
OTHER TRANSACTIONS NOT PROVIDING (USING) CASH
Decrease in value of marketable securities - 61,000
Increase in unrealized holding loss on
available for sale securities - (61,000)
============ =============
$ - $ -
============ =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes $ 10,000 $ 21,000
============ =============
Cash paid for interest $ 5,000 $ 17,000
============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
Page 7 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
In the opinion of management, these unaudited consolidated financial
statements and disclosures reflect all adjustments necessary for fair
presentation. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. It is suggested that these
consolidated condensed financial statements be read in conjunction with the
consolidated financial statements and the notes thereto included in the
Company's latest audited financial statements, which are contained in the
Company's 1994 Annual Report on Form 10-K, filed with the Securities and
Exchange Commission on February 28, 1995.
2. Cash Equivalents and Marketable Securities
Cash equivalents are carried at cost which approximates market value and
have maturities of less than three months. Cash equivalents include money market
accounts and U.S. Treasury bills.
Marketable securities held as of August 31, 1995, consist of the
following:
<TABLE>
<CAPTION>
Maturity Market Value
---------------------------------
<S> <C> <C>
Investments held to maturity:
U.S. Treasury Bills less than 1 year $3,930,000
Investments available for sale:
U.S. Treasury Notes 1 - 3 years 1,489,000
U.S. Agency Bonds 1 - 5 years 553,000
U.S. Agency Bonds 6 - 10 years 286,000
--------
Total U.S. Agency Bonds 839,000
Utility Bonds 1 - 5 years 295,000
Corporate Obligations 10+ years 5,000
---------
Total Investments Available for Sale $2,628,000
=========
</TABLE>
Marketable securities had a cost of $2,600,000 and $6,619,000 at
November 30, 1994 and August 31, 1995, respectively, and a market value of
$2,487,000 and $6,558,000, respectively. To reduce the carrying amount of the
portfolio to market value, a valuation allowance in the amount of $113,000 and
$61,000 for November 30, 1994 and August 31, 1995 was established with a
corresponding charge to net income on November 30, 1994. The valuation allowance
has been reflected as a separate component of shareholders' equity on August 31,
1995 due to the Company's adoption of the provisions of Statement of Financial
Accounting Standard (SFAS) No. 115, "Accounting of Certain Investments in Debt
and Equity Securities" as of December 1, 1994.
<PAGE>
Page 8 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. Inventories
Inventories are stated at the lower of first-in, first-out (FIFO) cost
or market and consist of the following:
<TABLE>
<CAPTION>
November 30, August 31,
1994 1995
----------- -----------
<S> <C> <C>
Raw materials $ 617,000 $ 2,256,000
Work-in-process 434,000 226,000
Finished goods 1,708,000 3,433,000
--------- ---------
$ 2,759,000 $ 5,915,000
========= =========
</TABLE>
Work-in-process and finished goods inventories include material, labor and
manufacturing overhead. Management performs periodic reviews of inventory and
disposes of items not required by their manufacturing plan.
4. Net Income <Loss> Per Common Share
Net income <loss> per common share is based upon dividing net income
<loss> by the weighted average number of common shares out-standing during each
period. Common equivalent shares have been computed in accordance with the
treasury stock method and are included for all periods where their effect is
dilutive. Fully dilute net income <loss> per common share has not been
separately presented, as the amounts would not be materially different from the
amount presented.
5. Contingencies
On June 7, 1995, a lawsuit was filed against the Company by Avid
Technology, Inc., in the United States District Court for the District of
Massachusetts. The complaint generally alleges patent infringement by the
Company arising from the manufacture, sale, and use of the Company's Media 100
product. In July, 1995 the Company filed an Answer and Counterclaim denying any
infringement and asserting that the patent in question is invalid. The Company
intends vigorously to defend the lawsuit, which is currently early in the pre-
trial stage.
From time to time the Company is involved in disputes and/or litigation
encountered in its normal course of business. The Company does not believe that
the ultimate impact of the resolution of any outstanding matters will have a
material effect on the Company's financial condition or results of operations.
6. Capitalized Software Development Costs
The Company capitalizes certain computer software development costs.
Such costs, net of accumulated amortization, were approximately $215,000 and
$195,000 as of November 30, 1994 and August 31, 1995, respectively and are
included in other assets. These costs are amortized on a straight-line basis
over two years which approximates the life of the product. Amortization expense,
included in cost of goods sold, was approximately $35,000 and $55,000 for the
three months ended August 31, 1994 and 1995, respectively. During the nine
months ended August 31, 1994 and 1995, amortization expense was $125,000,
respectively.
<PAGE>
Page 9 of 14
DATA TRANSLATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
7. Income Taxes
In February 1992, the Financial Accounting Standards Board issued SFAS
No. 109, "Accounting for Income Taxes." The Company adopted the provisions of
SFAS No. 109 on December 1, 1993. There was no effect on net income of adopting
the provisions of SFAS No. 109.
The tax provision of $81,000 for the first nine months of fiscal 1995
compares to a tax provision of $84,000 in fiscal 1994. Any potential tax
provision resulting from operating income by the Company's domestic operations
has been offset by net operating loss carryforwards.
The components of the net deferred tax amount recognized in the
accompanying balance sheets are:
<TABLE>
<CAPTION>
November 30, August 31,
1994 1995
------------ -------------
<S> <C> <C>
Deferred tax assets $ 3,563,000 $ 2,746,000
Deferred tax liabilities (271,000) (291,000)
Valuation allowance (3,294,000) (2,458,000)
---------- ----------
$ (2,000) $ (3,000)
========== ==========
</TABLE>
The approximate tax effect of each type of temporary difference and
carryforward before allocation of the valuation allowance is:
<TABLE>
<S> <C> <C>
Net operating losses $ 1,638,000 $ 263,000
Other temporary differences 989,000 1,347,000
Alternative minimum tax credits 50,000 50,000
General business credits 615,000 795,000
---------- ----------
$ 3,292,000 $ 2,455,000
========== ==========
</TABLE>
The tax credit and net operating loss carryforwards expire at various
dates through 2008. Due to the uncertainty surrounding the timing of realizing
the benefits of its favorable tax attributes in future tax returns, the Company
has placed a valuation allowance against its otherwise recognizable net deferred
tax assets.
The United States Tax Reform Act of 1986 contains provisions which may
limit the net operating loss and tax credit carryforwards available to be used
in any given year in the event of significant changes in ownership, as defined.
8. Recapitalization
On June 28, 1995, the Board of Directors approved a 2 for 1 stock split
effected in the form of a dividend for all shareholders of record as of July 17,
1995. All share and per share data included in these financial statements have
been retroactively restated to reflect the stock split.
<PAGE>
Page 10 of 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table shows certain consolidated statement of operations
data as a percentage of total net sales.
Three Months Nine Months
Ended Ended
August 31, August 31,
---------------- ---------------
1994 1995 1994 1995
---- ---- ---- ----
[S] [C] [C] [C] [C]
Net sales:
Digital media............... 27.4% 42.7% 22.1% 39.6%
Data acquisition and imaging 43.0 29.3 47.4 31.9
Networking distribution..... 29.6 28.0 30.5 28.5
----- ----- ----- -----
Total net sales................. 100.0 100.0 100.0 100.0
Gross margin.................... 46.9 47.9 46.5 48.0
Research and development........ 13.4 10.3 14.5 10.7
Selling and marketing........... 25.6 23.9 25.3 25.7
General and administrative...... 6.2 6.9 6.8 6.2
----- ----- ----- -----
Income <loss> from operations... 1.7 6.8 <0.1> 5.4
Other income, net............... 0.3 0.7 0.2 0.9
Provision for taxes............. 0.1 - 0.2 0.1
----- ----- ----- -----
Net income <loss>............... 1.9 7.5 <0.1> 6.2
===== ===== ===== =====
Comparison of Third Fiscal Quarter of 1995 to
Third Fiscal Quarter of 1994:
Total net sales for the fiscal quarter ended August 31, 1995 were
$19,073,000, an increase of 51.5% or $6,482,000 from the same period a year ago.
This increase was primarily a result of higher unit sales from the Company's
digital media product line, Media 100(R), which accounted for $8,137,000 or
42.7% of the Company's total net sales compared to $3,453,000 or 27.4% in the
same period a year ago. The third quarter shipments include Version 2.5 of Media
100 which is compatible with the latest Power Macintosh (TM) computers utilizing
the PCI Bus architecture. Networking distribution sales increased $1,623,000 or
43.5% from the comparable quarter in 1994 to $5,353,000 or 28.0% of the
Company's total net sales. The increase in networking products represent the
continued steady growth in demand for networking products in the United Kingdom.
Net sales from the Company's data acquisition and imaging products were up 3.2%
or $175,000 compared to the third quarter of fiscal 1994.
While total net sales increased 51.5%, cost of sales increased by 48.5%
increasing the gross margin to 47.9% of total net sales compared to 46.9% in the
comparable quarter of the prior year. The increase in gross margin was primarily
a result of higher gross margins on the Company's manufactured product sales due
to the higher utilization of the Company's manufacturing capacity as well as a
favorable product mix.
<PAGE>
Page 11 of 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Comparison of Third Fiscal Quarter of 1995 to
Third Fiscal Quarter of 1994 (continued):
The income from operations for the third fiscal quarter of 1995 was
$1,298,000, compared to $218,000 in the third quarter of the prior year. The
operating income reflects the higher net sales and gross margins as mentioned
above, offset by an increase in operating expenses of $2,157,000. Selling and
marketing expenses increased by $1,337,000 over the comparable quarter largely
due to higher sales and promotional expenses for Media 100. General and
administrative expenses increased by $550,000 reflecting higher fees for
professional services as well as higher personnel levels. Research and
development expenses increased by $270,000 demonstrating the Company's continued
investment in product development.
Interest income was $135,000 for the third fiscal quarter of 1995
compared to $34,000 in the comparable period of 1994 reflecting the increase in
cash balance on hand during 1995.
The tax provision of $6,000 for the third quarter of fiscal 1995
compares to a tax provision of $12,000 in fiscal 1994 which was due to the
taxable operations in the United Kingdom. Any potential tax provision resulting
from operating income by the Company's domestic operations has been offset by
net operating loss carryforwards.
Net income for the fiscal quarter ended August 31, 1995 was $1,426,000
or $0.21 per share and 504.2% over net income of $236,000 or $0.05 per share for
the same period in 1994.
Comparison of First Nine Months of Fiscal 1995 to
First Nine Months of Fiscal 1994:
Net sales for the nine month period ended August 31, 1995 was
$51,286,000, an increase of 43.4% or $15,531,000 over the same period a year
ago. The increase was primarily a result of higher unit sales from Media 100
which has accounted for $20,323,000 or 39.6% of the Company's total net sales
compared to $7,916,000 or 22.1% in the same period a year ago. During the first
nine months of fiscal 1995, networking distribution sales have increased
$3,718,000 or 34.2% from the comparable period in fiscal 1994. Data acquisition
and imaging net sales were down slightly from the same period in fiscal 1994 and
represented 31.9% of the Company's total net sales compared to 47.4% in fiscal
1994. These lower net sales represent a shift in the data acquisition and
imaging market toward new, lower priced hardware and software solutions.
Gross margins for the first nine months of fiscal 1995 were 48.0%
compared to 46.5% in the comparable period of a year ago. This increase reflects
higher margins on the Company's manufactured products as mentioned previously.
In addition, networking product sales constituted a lesser percentage of the
Company's total net sales, thereby increasing gross margins since the networking
products carry a significantly lower gross margin than the Company's
manufactured products.
<PAGE>
Page 12 of 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Comparison of First Nine Months of Fiscal 1995 to
First Nine Months of Fiscal 1994 (continued):
Income from operations for the first half of fiscal 1995 was $2,762,000
compared to a loss on operations of $50,000 in the same period of last year. The
operating income reflects the higher net sales and gross margins, partially
offset by higher operating expenses of $5,162,000. Selling and marketing
expenses increased by $4,088,000 reflecting the additional costs associated with
the sales and promotion of Media 100 including higher personnel levels. General
and administrative expenses increased $766,000 from the first nine months of
fiscal 1994 which reflects higher fees for professional services and higher
personnel levels. Research and development expenses increase $308,000 from the
comparable period in the prior year, reflecting the continued investment in
product development. Although operating expenses were higher than the same
period of a year ago, as a percent of total net sales, operating expenses
decreased from 46.6% to 42.6%.
Interest income was $494,000 for the first nine months of fiscal 1995
compared to $118,000 in the comparable period of 1994 reflecting the increase in
cash balances on hand during 1995.
The tax provision of $81,000 for the first nine months of fiscal 1995
compares to a $84,000 tax provision for the same period of a year ago. These tax
provisions are a result of profitable operations in the United Kingdom. Any
potential tax provision resulting from profitable operations in the Company's
domestic operations has been offset by net operating loss carryforwards.
Net income for the first nine months of fiscal 1995 was $3,164,000 or
$0.48 per share compared to net loss of $60,000 for the same period in 1994.
Liquidity and Capital Resources:
During the first nine months of fiscal 1995, the Company's cash and cash
equivalents balance increased by $5,480,000 while marketable securities
increased $4,071,000. These increases were primarily a result of a secondary
public stock offering generating net proceeds of approximately $8,802,000. The
net proceeds were invested in U.S. Treasury bills with maturities ranging from
three months to less than one year. Cash generated from operations amounted to
$2,076,000. This was the result of net income of $3,164,000 offset by higher
working capital requirements for the Company's growing operations.
As of August, 1995, the Company had a line of credit in the United
Kingdom equivalent to approximately $600,000 of which $544,000 was outstanding.
The Company is currently negotiating a higher line of credit of approximately
$1,200,000 for its networking operations in the United Kingdom.
The Company plans to fund and support its business plans which include
continuing investment in research and development for both the digital media and
other product areas, as well as increased focus on the international sales and
marketing efforts for Media 100. The Company believes that the net proceeds from
its secondary stock offering, together with existing cash and other resources
along with cash generated from future operations, will be sufficient to meet the
Company's cash requirements for the foreseeable future.
<PAGE>
Page 13 of 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
On June 7, 1995, a lawsuit was filed against the Company by Avid Technology,
Inc., in the United States District Court for the Distict of Massachusetts. The
complaint generally alleges patent infringement by the Company arising from the
manufacture, sale, and use of the Company's Media 100 product. In July, 1995,
the Company filed an Answer and Counterclaim denying any infringement and
asserting that the patent in question is invalid. The Company intends vigorously
to defend the lawsuit, which is currently early in the pre-trial stage.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits
Exhibit
Number Description
------- ------------------------
27 Financial Data Schedule
b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
<PAGE>
Page 14 of 14
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.
Data Translation, Inc.
Date: October 13, 1995 By: /s/ Peter J. Rice
--------------------------------
Peter J. Rice
Vice President & Treasurer
(Chief Financial Officer)
Date: October 13, 1995 By: /s/ Gary B. Godin
--------------------------------
Gary B. Godin
Chief Accounting Officer &
Corporate Controller
<PAGE>
Exhibits
<TABLE>
<CAPTION>
Exhibits
Number Description Page
- -------- -------------------------------- ----
<S> <C> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-START> DEC-01-1994
<PERIOD-END> AUG-31-1995
<CASH> 7,072,000
<SECURITIES> 6,558,000
<RECEIVABLES> 11,948,000
<ALLOWANCES> 506,000
<INVENTORY> 5,915,000
<CURRENT-ASSETS> 32,934,000
<PP&E> 21,264,000
<DEPRECIATION> 17,880,000
<TOTAL-ASSETS> 36,541,000
<CURRENT-LIABILITIES> 12,594,000
<BONDS> 0
<COMMON> 71,000
0
0
<OTHER-SE> 23,873,000
<TOTAL-LIABILITY-AND-EQUITY> 36,541,000
<SALES> 51,286,000
<TOTAL-REVENUES> 51,286,000
<CGS> 26,679,000
<TOTAL-COSTS> 26,679,000
<OTHER-EXPENSES> 21,845,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,000
<INCOME-PRETAX> 3,245,000
<INCOME-TAX> 81,000
<INCOME-CONTINUING> 3,164,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,164,000
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
