UNITED STATES
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 June 30, 1997, or
[ ] Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the transition period from ___________ to _________
Commission file number: 0-13459
DH Technology, Inc.
(Exact name of registrant as specified in its charter)
California 94-2917470
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
15070 Avenue of Science, San Diego, California 92128
(Address of principal executive office)
Registrant's telephone number, including area code: (619) 451-3485
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 XXX No____
As of June 30, 1997 there were 7,994,402 shares of the registrant's Common Stock
outstanding.
<PAGE>
DH TECHNOLOGY, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
ITEM 1 - Financial Statements
Condensed Consolidated Balance Sheets 1
June 30, 1997, and December 31, 1996
Condensed Consolidated Statements of Income 2
Three months and six months ended
June 30, 1997, and June 30, 1996
Condensed Consolidated Statements of Cash Flows 3
Six months ended June 30, 1997, and June 30, 1996
Notes to Condensed Consolidated Financial Statements 4
ITEM 2 -
Management's Discussion and Analysis of 5
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 10
Item 6 - Exhibits and Reports on Form 8-K 10
SIGNATURES 11
EXHIBITS INDEX 12
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<TABLE>
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PART 1 - FINANCIAL INFORMATION
ITEM 1 - Financial Statements
DH TECHNOLOGY, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands)
<S> <C> <C>
June 30 December 31
1997 1996
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $34,751 $30,943
Short-term investment securities held to maturity 11,160 13,835
Accounts receivable, net 15,205 16,006
Inventories 12,947 11,582
Prepaid expenses and other current assets 2,855 2,881
----------------- -------------------
Total current assets 76,918 75,247
----------------- -------------------
Fixed assets 25,947 22,524
Less accumulated depreciation and
amortization 17,299 14,274
----------------- -------------------
8,648 8,250
Intangibles 4,971 12,464
Other assets 3,254 1,144
================= ===================
Total assets $93,791 $97,105
================= ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,005 $4,587
Current portion of long-term debt 550 577
Accrued payroll, payroll taxes and benefits 2,547 2,630
Accrued expenses 3,533 2,441
Income taxes payable 2,631 2,406
Deferred revenue 266 577
----------------- -------------------
Total current liabilities 15,532 13,218
----------------- -------------------
Non-current portion of long-term debt 2,339 1,635
----------------- -------------------
Total liabilities 17,871 14,853
----------------- -------------------
Shareholders' equity:
Preferred shares, no par value
Authorized: 1,000,000 shares, none issued -- --
Common shares:
Common stock, authorized: 28,500,000
shares; issued and outstanding:
7,994,402 shares in 1997 and
7,974,277 shares in 1996 13,340 13,168
Foreign currency translation adjustment (10) 393
Retained earnings 62,590 68,691
----------------- -------------------
Total shareholders' equity 75,920 82,252
----------------- -------------------
Total liabilities and shareholders' equity $93,791 $97,105
================= ===================
The accompanying notes are an integral part of
these condensed consolidated financial
statements.
</TABLE>
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<TABLE>
<CAPTION>
DH TECHNOLOGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income
(June 30, 1997 and 1996)
(In thousands, except per share data)
<S> <C> <C> <C> <C>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30 June 30
(Unaudited) (Unaudited)
---------------- ----------------
----------------------------- -----------------------------
1997 1996 1997 1996
----------------------------- -----------------------------
Net sales $25,468 $29,210 $44,653 $57,406
Cost of net sales 16,815 18,971 29,342 37,441
------------- ------------- ------------- -------------
Gross margin 8,653 10,239 15,311 19,965
Operating expenses:
Selling, general and administrative 4,356 3,944 8,319 7,905
Research and development 1,482 1,414 2,933 2,702
In process technology, intangible assets,
acquisition integration and other charges 390 -- 11,680 --
------------- ------------- ------------- -------------
Total operating expenses 6,228 5,358 22,932 10,607
Income (loss) from operations 2,425 4,881 (7,621) 9,358
Interest income 394 389 816 719
Interest expense 40 44 81 90
------------- ------------- ------------- -------------
Income (loss) before income taxes 2,779 5,226 (6,886) 9,987
Income taxes 996 1,935 (786) 3,662
------------- ------------- ------------- -------------
Net income (loss) $1,783 $3,291 ($6,100) $6,325
============= ============= ============= =============
Net income (loss) per share $0.22 $.39 ($0.76) $.75
Weighted average number of shares outstanding
Per share (primary and fully diluted): 8,282 8,521 7,994 8,490
The accompanying notes are an integral part of
these condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
DH TECHNOLOGY, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
SIX MONTHS ENDED
June 30
<S> <C> <C>
(Unaudited)
-------------------------------------
1997 1996
-------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FROM:
Operating activities:
Net income (loss) ($6,100) $6,325
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization 1,480 1,524
Write down of acquired in-process technology 2,440 --
Intangible writedown related to previous acquisition 7,193 --
Provision for loss on accounts receivable 24 57
Undepreciated value of asset disposals 8 55
Changes in assets and liabilities excluding effect of acquisitions 4,310 510
Provision for deferred income taxes (2,104) --
-------------------------------------
Net cash provided by operating activities 7,251 8,471
Investing activities:
Net (increase) decrease in short-term investment securities held to maturity 2,675 (9,805)
Capital expenditures (955) (2,851)
Payment for acquisition purchases, net of cash acquired (4,850) --
-------------------------------------
Net cash used in investing activities (3,130) (12,656)
Financing activities:
Principal repayments on long-term debt (121) (481)
Proceeds from the exercise of stock options 172 429
-------------------------------------
Net cash provided by (used in) financing activities 51 (52)
Effect of exchange rate changes on cash (364) 89
Net increase (decrease) in cash and cash equivalents 3,808 (4,148)
Cash and cash equivalents at beginning of period 30,943 28,971
-------------------------------------
Cash and cash equivalents at end of period $34,751 $24,823
=====================================
Supplemental Cashflow Disclosures:
Interest paid on debt $30 $55
Income taxes paid $770 $2,717
Supplementary disclosure of noncash investing activity:
Fair market value of assets acquired $3,181 --
Cash paid -- --
Liabilities assumed $3,181 --
The accompanying notes are an integral part of these
condensed consolidated financial statements
</TABLE>
<PAGE>
DH TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(June 30, 1997 - Unaudited)
Note 1: Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared
in accordance with S.E.C. requirements for interim financial statements.
Therefore, they do not include all disclosures that would be presented in the
Company's Annual Report on Form 10-K. The financial statements should be read in
conjunction with the financial statements contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
The information furnished reflects all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of financial position, results of operations, and changes in
cash position for the interim period. The results of operations for the periods
presented are not necessarily indicative of results to be expected for the full
year.
Note 2: Inventories
The composition of inventories at June 30, 1997, and December 31, 1996, were as
follows:
June 30 December 31
1997 1996
------------- ------------
Raw Materials $8,664,000 $6,810,000
Work in Process 764,000 934,000
Finished Goods 3,539,000 3,838,000
------------- ------------
Totals $12,947,000 $11,582,000
============= ============
Note 3: Operations subject to Purchase and Sale Agreements
In October, 1995 the Company acquired certain assets and liabilities of Mos
Magnetics, a privately held company in San Diego, California, for $752,000 cash.
Mos Magnetics designs, manufactures, and markets magnetic read and write heads
and modules for credit card and debit card readers, check readers, and airline
ticket readers. This acquisition was accounted for using the purchase method. In
conjunction with this acquisition, the Company has recorded goodwill of
$239,000, which is being amortized over 25 years using the straight-line method.
In March, 1997 the Company purchased certain assets and liabilities of the card
reader business of American Magnetics Corporation (AMC), a wholly owned
subsidiary of Group 4 Securitas Holding (A) BV headquartered in The Netherlands.
AMC designs, manufactures and markets card reader modules and stand-alone card
readers, including both magnetics and chip card products. Based on fourth
quarter 1996 revenues the card reader business has approximately $12 million in
annualized revenues. The business was profitable in 1996.
This acquisition was accounted for under the purchase method, which requires
that the purchase price be allocated to the fair market value of the assets
acquired. Of the total consideration of $5.7 million, which consisted of $4.85
million paid in cash plus additional payments of $800,000 due to American
Magnetics payable in the years 2000 and 2001, $3.2 million was allocated to net
assets acquired based on their estimated fair values, and $2.5 million was
written down as in-process technology. In conjunction with the acquisition, the
Company also incurred $1.2 million of integration costs as discussed below. AMC
is referred to as the Card Reader Division of DH Technology, Inc.
<PAGE>
Note 4: Non-Recurring Charges
In the first quarter of 1997, the Company incurred non-recurring charges
totaling $11.3 million consisting of the items discussed below. In conjunction
with the acquisition of AMC discussed above, the Company wrote down acquired
in-process technology (projects that had not reached technological feasibility
and had no future alternative use) that was valued at $2.5 million.
Additionally, the Company incurred one-time, pre-tax charges of $1.2 million
which included severance, relocation and other integration charges associated
with the acquisition. This amount is included in accrued expenses and is
expected to be paid out over the next 12 months.
In the first quarter of 1997, based on a review of the operating results of
Cognitive Solutions, Inc., which was acquired by the Company in August , 1994,
and projections for subsequent quarters, the Company evaluated the intangible
assets associated with the acquisition in accordance with SFAS 121. Based on
management's analysis of future undiscounted cashflows the Company determined
that the intangible assets were impaired. Accordingly, the Company wrote down
$7.2 million of intangibles, which represented the excess of the carrying value
over the estimated fair value of those assets, in the first quarter of 1997.
Also, the Company incurred an unrelated $400,000 charge in connection with the
discontinuance of certain product lines.
In the second quarter of 1997 the Company incurred non-recurring expenses
totaling $390,000 related to the definitive merger agreement with Axiohm. See
Note 5 of Notes to Condensed Consolidated Financial Statements.
Note 5: Subsequent Event
On July 14, 1997, DH Technology, Inc. and Axiohm S.A., a private French company
(Axiohm), entered into a definitive merger agreement to combine their
operations. Under the terms of the agreement, AX Acquisition Corporation, a
wholly-owned subsidiary of Axiohm, commenced a cash tender offer on July 16,
1997 to acquire no less than 6,500,000 shares and no more than 7,000,000 shares
of the outstanding stock of the Company at $25 per share. The offer is
conditioned upon the valid tender of at least 6,500,000 DH Technology, Inc.
shares, the expiration of termination of the waiting periods under applicable
antitrust and competition laws, and certain other matters. Axiohm has received a
commitment from Lehman Brothers, Inc. to provide up to $199 million in tender
offer financing, subject to certain conditions, including negotiation and
execution of satisfactory documents. If the tender offer is completed, the
merger agreement provides for a subsequent merger of AX Acquisition Corporation
into the Company and certain related transactions which, if they are completed,
will result in Axiohm becoming a wholly-owned subsidiary of the Company. The
Company will be required to use substantially all of its existing cash and cash
equivalents at the time of the merger to pay down a portion of the financing
incurred by Axiohm to finance the tender offer. Upon the closing of the merger
the Company will have access to a $35 million revolving credit facility to
finance operations. The transaction will be accounted for as a reverse merger
using the purchase method of accounting whereby DH Technology, Inc. will be the
acquired entity. In such event, the financial statement presentation for the
third quarter of 1997 will consist of historical and current results for Axiohm
and results for DH Technology, Inc. only for the period of time subsequent to
the acquisition date. Axiohm manufactures thermal and impact transaction
printers, thermal printheads and mechanisms for use by customers engaged in
retail, banking, and industrial activities. For additional information regarding
the transaction see the Company's Schedule 14D-9 dated July 16, 1997, as amended
to date, filed by the Company with the SEC in connection with the Axiohm
transaction.
<PAGE>
ITEM 2 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction with DH
Technology, Inc.'s condensed consolidated financial statements and the notes
related thereto included herein.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997, COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Net sales of $25.5 million for the quarter ended June 30, 1997, decreased 12.8%
compared to net sales of $29.2 million for the same period last year. The
decrease was primarily due to a slowing of orders from several significant
customers and no sales in the second quarter of 1997 to one large 1996 customer.
This was offset to a degree by the inclusion of results for the Card Reader
Division which was acquired from AMC in March 1997.
Cost of net sales increased to 66.0% of net sales for the second quarter of 1997
from 64.9% of net sales for the same period of 1996 due to relatively fixed
overhead costs applied to decreased revenue, as well as the inclusion of results
for the Card Reader Division which operated at gross margins below the
historical average for the Company.
Selling, general, and administrative expenses increased to 17.1% of net sales in
the second quarter of 1997 from 13.5% in the same period in 1996 due to the
inclusion of results for the Card Reader Division for the entire second quarter
of 1997 and to a foreign exchange gain resulting from an intercompany cash
transaction in the second quarter of 1996. These expenses increased in absolute
dollars to $4.4 million in the first half of 1997 from $3.9 million in the first
half of 1996.
Research and development expenses as a percentage of sales increased to 5.8% in
the second quarter of 1997 compared to 4.8% in the second quarter of 1996. Total
dollars expended for research and development increased modestly in the second
quarter of 1997 compared to the second quarter of 1996. The Company believes
that the continued timely development of new products and enhancements to its
existing products are essential to maintaining the Company's competitive
position. Accordingly, the Company anticipates that such expenses will increase
in absolute dollars during 1997.
In the second quarter of 1997 the Company incurred non-recurring expenses
totaling $390,000 related to the negotiation of the definitive merger agreement
with Axiohm.
Income from operations as a percentage of net income decreased to 9.5% for the
quarter ended June 30, 1997, compared to 16.7% for the same period in 1996 due
primarily to lower gross margins, higher operating expenses as a percentage of
revenue, and the non-recurring charges discussed above.
Interest income increased to $394,000 in the second quarter of 1997 from
$389,000 in the second quarter of 1996 as a result of higher cash balances in
the second quarter of 1997.
Interest expense decreased to $40,000 in the second quarter of 1997 from $44,000
for the same period in 1996 due to a $500,000 payment of debt in August 1996
related to the Cognitive acquisition.
Income taxes as a percentage of income before income taxes decreased to 35.8%
for the second quarter of 1997 compared to 37.0% for the same period in 1996 due
to the effects of a decrease in income as discussed above, an increase in exempt
interest as a percentage of pre-tax income, and increased benefits from the
federal research and development tax credit.
<PAGE>
SIX MONTHS ENDED JUNE 30, 1997, COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Net sales of $44.7 million for six-months ended June 30, 1997, decreased 22.2%
compared to net sales of $57.4 million for the same period last year. The
decrease was primarily due to a slowing in orders from several customers and no
sales in the first half of 1997 to one large 1996 customer. This was offset to a
degree by the inclusion of results for the Card Reader Division which was
acquired from AMC in March 1997.
Cost of net sales increased slightly to 65.7% of net sales for the first half of
1997 from 65.2% of net sales for the same period of 1996 due to relatively fixed
overhead costs applied to decreased revenue, as well as the inclusion of three
months of results for the Card Reader Division which operates at gross margins
below the historical average for the Company. Selling, general, and
administrative expenses increased to 19.5% of net sales in the first half of
1997 from 13.8% in the same period in 1996 due to the inclusion of results for
the Card Reader Division for the second quarter of 1997. These expenses
increased in absolute dollars to $8.7 million in the first half of 1997 from
$7.9 million in the first half of 1996.
Research and development expenses as a percentage of sales increased to 6.6% in
the first half of 1997 compared to 4.7% in the first half of 1996. Total dollars
expended for research and development increased to $2.9 million in the first
half of 1997 compared to $2.7 million in the same period of 1996 primarily due
to the inclusion of results for the Card Reader Division. The Company believes
that the continued timely development of new products and enhancements to its
existing products are essential to maintaining the Company's competitive
position. Accordingly, the Company anticipates that such expenses will increase
in absolute dollars during 1997.
In the first half of 1997 the Company incurred non-recurring charges totaling
$11.7 million consisting of the items discussed below. In conjunction with the
acquisition of certain assets and liabilities of AMC discussed in Note 3 of
Notes to Condensed Consolidated Financial Statements, the Company wrote down
acquired in-process technology that was valued at $2.5 million. The Company also
incurred one-time, pre-tax charges of $1.2 million which included severance,
relocation and other integration charges associated with the acquisition. This
amount is included in accrued expenses and is expected to be paid out over the
next 12 months. Additionally, the Company incurred one-time, non-cash charges of
$7.2 million to write down intangible assets related to the Cognitive
acquisition, and a $400,000 charge in connection with the discontinuance of
certain product lines. In the first half of 1997 the Company incurred
non-recurring expenses totaling $390,000 related to the definitive merger
agreement with Axiohm. See Note 5 of Notes to Condensed Consolidated Financial
Statements.
Income from operations as a percentage of net sales excluding the effect of
non-recurring charges discussed above decreased to 9.1% for the six months ended
June 30, 1997, compared to 16.3% for the same period in 1996 due primarily to
higher operating expenses as a percentage of revenue as discussed above. Income
(loss) from operations as a percentage of net sales including the effect of
non-recurring charges decreased to (15.4%) for the period ended June 30, 1997,
compared to 17.4% for the same period in 1996 due to the one-time charges
discussed above.
Interest income increased to $816,000 in the first half of 1997 from $719,000 in
the first half of 1996 as a result of higher cash balances and higher interest
rates in the first half of 1997.
Interest expense decreased to $81,000 in the first half of 1997 from $90,000 for
the same period in 1996 due to a $500,000 payment of debt in August 1996 related
to the Cognitive acquisition.
Income taxes as a percentage of income (loss) before income taxes excluding the
effect of non-recurring charges, would have been 35.0% for the first half of
1997 compared to 36.7% for the same period in 1996 due to the effects of a
decrease in income as discussed above, an increase in exempt interest as a
percentage of pre-tax income, and increased benefits from the federal research
and development tax credit. Income taxes (benefits) as a percentage of income
(loss) before income taxes (benefits) including the effect of non-recurring
charges decreased to 11.4% for the first half of 1997 from 36.7% for the same
period in 1996 due to a portion of the non-recurring charges being
non-deductible for tax purposes.
<PAGE>
Certain Factors That May Affect Future Results
The Company's representatives may from time to time make forward looking
statements. The factors set forth below are among certain important factors that
could cause actual results to differ materially from those projected in any such
forward looking statements.
Future Operating Results Subject to Fluctuation. The Company's operating results
may fluctuate in the future as a result of a number of factors, including the
timing of customer orders, timing of completion of existing customer contracts,
variations in the Company's sales channels or the mix of products it sells,
changes in pricing policies by the Company's suppliers, fluctuations in
manufacturing yields, the market acceptance of new and enhanced versions of the
Company's products and the timing of acquisitions of other businesses, products
and technologies and any associated charges to earnings. In 1996, purchases of
transaction printers by a single customer accounted for approximately 13% of
total revenue, or $15,042,000. The Company generated no revenue from this
customer in the first half of 1997 and does not expect to generate any revenue
from this customer in the third quarter of 1997. To the extent that sales to
this or other customers decline and are not replaced with sales to other
customers, sales from the introduction of new products, or sales generated from
acquired companies, the Company's results of operations will be adversely
affected.
Further, the Company's expense levels are based in part on expectations of
future revenues. The Company has established a program to decrease expenses in
light of the anticipated reduction in revenue previously discussed. However, the
rate of new orders may vary significantly from month to month; consequently, if
anticipated sales and shipments in any quarter do not occur when expected,
operating expenses and inventory levels could be disproportionately high and the
Company's operating results for that quarter, and potentially for future
quarters, would be adversely affected. The Company's operating results could
also be affected by general economic conditions. Fluctuations in operating
results are likely to cause volatility in the price of the Company's Common
Stock.
Management of Acquisitions. Historically, the Company has achieved a portion of
its growth through acquisitions of other businesses and continues to pursue
additional acquisitions as part of its growth strategy. There are a number of
risks associated with any acquisition or business combination, including the
substantial time and attention required from management of the Company in
connection with such transactions, the difficulty of predicting whether the
operations will perform as expected and other problems inherent with any
transition of one business organization into another. There can be no assurance
that the anticipated benefits of any acquisition will be realized. A failure by
the Company to manage any such acquisitions effectively could materially and
adversely affect the Company's business and operating results. Additionally,
there may be future acquisitions which could result in potentially dilutive
issuances of equity securities, the incurrence of debt and contingent
liabilities and amortization expenses related to goodwill and other intangible
assets associated with the acquisitions of other businesses, any of which could
materially adversely affect the Company's operating results and financial
condition. Presently, the Company has entered into a definitive merger agreement
with Axiohm S.A. In the event the merger is consummated long-term debt will
increase by approximately $157 million. See Note 5 of Notes to Condensed
Consolidated Financial Statements.
Technological Change; Competition; Dependence on New Products. The markets for
some of the Company's products are characterized by frequent new product
introductions and declining average selling prices over product life cycles. The
Company's future success is highly dependent upon the timely completion and
introduction of new products at competitive price/performance levels. In
addition, the Company must respond to current competitors, who may choose to
increase their presence in the Company's markets, and to new competitors, who
may choose to enter those markets. If the Company is unable to make timely
introduction of new products or respond to competitive threats, its business and
operating results could be materially adversely affected.
Fluctuation in Demand. The Company's customers encounter uncertain and changing
demand for their products. They typically order products from the Company based
on their forecasts. If demand falls below customers' forecasts, or if customers
do not control their inventories effectively, they may cancel or reschedule
shipments previously ordered from the Company. The Company has in the past
experienced, and may at any time and with minimal notice in the future
experience, cancellations and postponements of orders.
<PAGE>
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
The Company's primary source of liquidity has been cash flow generated from
operations. Cash, cash equivalents, and short-term investment securities held to
maturity totaled approximately $45.9 million on June 30, 1997, compared to $44.8
million on December 31, 1996.
OPERATING ACTIVITIES
For the six months ended June 30, 1997, the Company generated approximately $7.3
million in net cash from operating activities primarily as a result of
approximately $6.1 million in net loss, offset by $1.5 million in depreciation
and amortization, $2.5 million write down of in-process technology, $7.2 million
intangible write down related to the Cognitive acquisition, an increase in net
operating assets of $4.3 million, and a provision for deferred income taxes of
$2.1 million.
INVESTING ACTIVITIES
The Company's principal investing activities in the six months ended June 30,
1997 were the $4.9 million payment for acquisition purchases, net of cash
acquired offset by a decrease in short-term securities held to maturity . As of
June 30, 1997, the Company had no material commitments for capital expenditures.
However, the Company anticipates capital expenditures of $3 to $4 million in
1997, principally for new product tooling and manufacturing equipment.
The Company is also required to make additional payments, not to exceed an
aggregate of $3 million, to the former shareholder of Cognitive based upon the
attainment of specified net sales of a particular Cognitive product line. The
Company does not expect the payments to be material in 1997.
FINANCING ACTIVITIES
The Company's major financing activities in the six months ended June 30, 1997
were the principal repayment of debt and proceeds from the exercise of stock
options. As of June 30, 1997, the Company had $2.9 million in debt outstanding
of which the current portion was approximately $600,000. This debt includes $1.5
million payable to the former owner of Cognitive in annual installments of
$500,000 each due in 1997 through 1999. The debt also includes $800,000 due to
American Magnetics payable in the years 2000 and 2001. The Company has entered
into a definitive merger agreement with Axiohm S.A. In the event the merger is
consummated long-term debt will increase by approximately $157 million. See Note
5 of Notes to Condensed Consolidated Financial Statements.
The Company currently expects that cash generated from operations and a $35
million revolving credit facility to be made available upon consumation of the
merger with Axiohm will adequately fund the Company's anticipated cash needs for
the next 12 months. The financing involved to combine the operations of DH
Technology, Inc. and Axiohm would result in the use of all of the Company's
current cash and cash equivalents. Please see Note 5 of Notes to Condensed
Consolidated Financial Statements.
The Company reviews potential foreign currency risks on an ongoing basis and to
date has been able to effectively manage this risk without the use of hedging
instruments.
<PAGE>
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
(a) The 1997 Annual Meeting of the Shareholders of DH Technology,
Inc. was held at the Sheraton Hotel West Tower on Harbor
Island, San Diego, California, 92101, on April 24, 1997,
at 10:00 a.m. (the "Annual Meeting").
(b) At the Annual Meeting, the following five persons were elected
to the Company's Board of Directors, constituting all members
of the Board of Directors:
<TABLE>
<CAPTION>
Number of Votes
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Withheld or Against Broker
Nominees Cast For Non-Votes
------------------------- -------------------------- ------------------------- ------------------------
William J. Bowers 7,358,723 10,735 0
William H. Gibbs 7,358,708 10,750 0
Bruce G. Klaas 7,302,716 66,742 0
Don M. Lyle 7,358,723 10,735 0
George M. Ryan 7,358,723 10,735 0
</TABLE>
(c) Additional proposals considered at the Annual Meeting are set
forth below, each of which was approved according to the
respective vote of the shareholders:
<TABLE>
<CAPTION>
(1) Ratification and approval of the appointment of KPMG Peat Marwick LLP as the
Company' s independent accountants for the current fiscal year.
<S> <C> <C> <C>
Cast For Against Abstentions or Broker Non-Votes
------------------------- ------------------------------ ----------------------------------------------
7,362,888 6,570 0
</TABLE>
Item 6 - Exhibits and reports on Form 8-K
(a) Exhibits:
Exhibit 11 Computation of Net Income Per Share.
Exhibit 27 Financial Data Schedule.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter
ended June 30, 1997.
(c) Agreement and Plan of Merger among Axiohm S. A., AX
Acquisition Corporation and DH Technology, Inc., dated
as of July 14, 1997 (incorporated by reference from
Exhibit (c)(1) to the Company's Schedule 14D-9,
dated July 16, 1997, as amended, relating to the
Axiohm transaction).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DH Technology, Inc. by:
August 12, 1997 /s/Janet W. Shanks
- ---------------------- -----------------------------------------
Date Janet W. Shanks, Chief Accounting Officer
(Chief Accounting Officer)
<PAGE>
DH TECHNOLOGY, INC.
EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
SEQUENTIALLY
EXHIBIT DESCRIPTION NUMBERED PAGE
- -------------------------------------------------------------------------------
11 Computation of Net Income Per Share 13
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11
DH TECHNOLOGY, INC. AND SUBSIDIARIES
Computation of Net Income Per Share
(In thousands, except per share data)
<S> <C> <C> <C> <C>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30 June 30
----------- ----------- ----------- -----------
------------------------- --------------------------
1997 1996 1997 1996
------------------------- --------------------------
Primary and fully diluted:*
Average shares outstanding 7,991 7,955 7,994 7,910
Net effect of dilutive stock
options and warrants based on
the treasury stock method using
average market price 291 566 -- 580
----------- ----------- ----------- -----------
Average common and common
equivalent shares outstanding 8,282 8,521 7,994 8,490
Net income (loss) $1,783 $3,291 ($6,100) $6,325
Per share (primary and fully diluted)
=========== =========== =========== ===========
Net income (loss) per share $.22 $.39 ($.76) $.75
=========== =========== =========== ===========
* There is no significant difference between primary and fully diluted earnings
per share.
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
DH Technology, Inc. 2nd Qtr 10Q 1997
</LEGEND>
<CIK> 0000728376
<NAME> DH TECHNOLOGY, INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 34,751
<SECURITIES> 11,160
<RECEIVABLES> 16,508
<ALLOWANCES> 1,303
<INVENTORY> 12,947
<CURRENT-ASSETS> 76,918
<PP&E> 25,947
<DEPRECIATION> 17,299
<TOTAL-ASSETS> 93,791
<CURRENT-LIABILITIES> 15,532
<BONDS> 0
0
0
<COMMON> 13,340
<OTHER-SE> 62,580
<TOTAL-LIABILITY-AND-EQUITY> 93,791
<SALES> 44,653
<TOTAL-REVENUES> 44,653
<CGS> 29,342
<TOTAL-COSTS> 29,342
<OTHER-EXPENSES> 22,932
<LOSS-PROVISION> 15
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> (6,886)
<INCOME-TAX> (786)
<INCOME-CONTINUING> (6,100)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,100)
<EPS-PRIMARY> (.76)
<EPS-DILUTED> (.76)
</TABLE>
