FORM 10--Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-14659
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TECHDYNE, INC.
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(Exact name of registrant as specified in its charter)
Florida 59-1709103
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
2230 West 77th Street, Hialeah, Florida 33016
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(Address of principal executive offices) (Zip Code)
(305) 556-9210
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year, if changed
since last report)
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] or No [ ]
Common Stock Outstanding
Common Stock, $.01 par value - 6,451,990 shares as of October 31, 1999.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
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INDEX
PART I -- FINANCIAL INFORMATION
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The Consolidated Condensed Statements of Income (Unaudited) for the
three months and nine months ended September 30, 1999 and September 30, 1998
include the accounts of the Registrant and its subsidiaries.
Item 1. Financial Statements
- ------ --------------------
1) Consolidated Condensed Statements of Operations for the three months
and nine months ended September 30, 1999 and September 30, 1998.
2) Consolidated Condensed Balance Sheets as of September 30, 1999 and
December 31, 1998.
3) Consolidated Condensed Statements of Cash Flows for the nine months
ended September 30, 1999 and September 30, 1998.
4) Notes to Consolidated Condensed Financial Statements as of September
30, 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
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PART II -- OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
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<PAGE>
PART I -- FINANCIAL INFORMATION
---------------------------------
Item 1. Financial Statements
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TECHDYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues:
Sales $14,129,152 $10,972,849 $34,420,939 $34,458,947
Interest and other income 11,897 147,082 50,286 218,178
----------- ----------- ----------- -----------
14,141,049 11,119,931 34,471,225 34,677,125
Cost and expenses:
Cost of goods sold 12,049,967 9,560,778 30,069,334 29,829,518
Selling, general and administrative expenses 1,141,873 1,185,861 3,194,070 3,046,513
Interest expense 212,277 169,586 555,080 490,435
----------- ----------- ----------- -----------
13,404,117 10,916,225 33,818,484 33,366,466
----------- ----------- ----------- -----------
Income before income taxes 736,932 203,706 652,741 1,310,659
Income tax provision 111,328 25,034 173,760 76,607
----------- ----------- ----------- -----------
Net income $ 625,604 $ 178,672 $ 478,981 $ 1,234,052
=========== =========== =========== ===========
Earnings per share:
Basic $.12 $.03 $.09 $.24
==== ==== ==== ====
Diluted $.10 $.03 $.08 $.19
==== ==== ==== ====
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998(A)
---- -------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 816,312 $ 1,659,737
Accounts receivable, less allowances of $50,000
at September 30, 1999 and $47,000 at December 31, 1998 9,068,864 5,769,868
Inventories, less allowances for obsolescence of $731,000 at
September 30, 1999 and $544,000 at December 31, 1998 10,401,534 7,874,500
Prepaid expenses and other current assets 300,360 165,925
Deferred tax asset 466,259 466,259
----------- -----------
Total current assets 21,053,329 15,936,289
Property and equipment:
Land and improvements 198,000 199,200
Buildings and building improvements 764,571 769,204
Machinery and equipment 7,341,813 6,846,863
Tools and dies 842,103 844,988
Leasehold improvements 458,885 308,074
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9,605,372 8,968,329
Less accumulated depreciation and amortization 4,381,282 3,892,293
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5,224,090 5,076,036
Deferred expenses and other assets 130,772 122,578
Costs in excess of net tangible assets acquired, less accumulated
amortization of $284,000 at September 30, 1999
and $192,000 at December 31, 1998 2,880,267 2,682,938
----------- -----------
$29,288,458 $23,817,841
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term bank borrowings $ 2,838,897 $ 962,407
Accounts payable 6,754,318 3,233,202
Accrued expenses 1,964,401 1,534,785
Current portion of long-term debt 2,484,897 764,550
Income taxes payable 161,978 120,027
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Total current liabilities 14,204,491 6,614,971
Deferred gain on sale of real estate 161,047 161,047
Long-term debt, less current portion 2,896,139 4,450,578
Advances from parent 643,333 3,130,588
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value, authorized 10,000,000 shares;
issued and outstanding 6,451,990 shares at September 30, 1999
and 5,250,167 shares at December 31, 1998 64,520 52,501
Capital in excess of par value 11,371,503 11,139,291
Retained earnings (deficit) 171,045 (307,936)
Accumulated other comprehensive loss (60,270) (31,638)
Notes receivable from options exercised (163,350) (113,850)
Advance on subsidiary acquisition price guarantee --- (1,277,711)
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Total stockholders' equity 11,383,448 9,460,657
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$29,288,458 $23,817,841
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</TABLE>
(A) Reference is made to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 filed with the Securities and Exchange Commission
in March 1999.
See notes to consolidated condensed financial statements.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
1999 1998
---- ----
<S> <C> <C>
Operating activities:
Net income $ 478,981 $ 1,234,052
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation 893,922 742,740
Amortization 100,397 86,093
Provision for inventory obsolescence 304,665 368,472
Bad debt expense 1,714 551
Deferred Income taxes --- (92,983)
Consultant stock option expense 8,276 12,750
Increase (decrease) relating to operating activities from:
Accounts receivable (3,302,919) 48,029
Inventories (2,829,972) (556,854)
Prepaid expenses and other current assets (108,352) 364,772
Accounts payable 3,520,171 (502,269)
Accrued expenses 431,321 (119,240)
Income taxes payable 41,951 116,713
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Net cash (used in) provided by operating activities (459,845) 1,702,826
Investing activities:
Additions to property and equipment, net of minor disposals (1,051,912) (503,914)
Subsidiary acquisition payments (1,389,531) (153,818)
Advance toward subsidiary acquisition price guarantee --- (1,277,711)
Deferred expenses and other assets (16,452) (6,489)
----------- -----------
Net cash used in investing activities (2,457,895) (1,941,932)
Financing activities:
Line of credit funding towards subsidiary acquisition price guarantee 600,000
Short-term line of credit borrowings (payments) 1,876,490 (262,504)
Other short-term bank borrowings 375,000 ---
Payments on short-term bank borrowings (375,000) ---
Proceeds from long-term borrowings 766,667 ---
Payments on long-term debt (596,805) (637,724)
Exercise of stock options and warrants 500 1,150
Increase in advances from parent 44,687 789,196
Deferred financing costs --- 374
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Net cash provided by financing activities 2,091,539 490,492
Effect of exchange rate fluctuations on cash (17,224) 17,481
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(Decrease) increase in cash and cash equivalents (843,425) 268,867
Cash and cash equivalents at beginning of year 1,659,737 1,451,564
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Cash and cash equivalents at end of period $ 816,312 $ 1,720,431
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</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 1--Summary of Significant Accounting Policies
Consolidation
The consolidated financial statements include the accounts of Techdyne,
Inc. ("Techdyne") and its subsidiaries, including Lytton Incorporated
("Lytton"), Techdyne (Europe) Limited ("Techdyne (Europe)"), and Techdyne
(Livingston) Limited which is a subsidiary of Techdyne (Europe), collectively
referred to as the "Company." All material intercompany accounts and
transactions have been eliminated in consolidation. The Company is a 72.5%
owned subsidiary of Medicore, Inc. (the "Parent"). See Note 5.
Major Customers
A majority of the Company's sales are to certain major customers. The
loss of or substantially reduced sales to any of these customers would have
an adverse effect on the Company's operations if such sales were not
replaced.
A significant customer of the Company, which accounted for 4% of sales
for the nine months ended September 30, 1999 and 9% of sales for the same
period of the preceding year has been slow in paying amounts due to the
Company. The Company has substantial receivables and inventory relating to
a sales contract with the customer. The Company anticipates an ongoing
business relationship with the customer and believes that the receivables
and inventory relating to the customer are recoverable. If any significant
amount of receivables and inventory were not recoverable, this could have a
material adverse effect on the Company's financial position and results of
operations.
Inventories
Inventories, which consist primarily of raw materials used in the
production of electronic components, are valued at the lower of cost (first-
in, first-out method) or market value. The cost of finished goods and work
in process consists of direct materials, direct labor and an appropriate
portion of fixed and variable manufacturing overhead. Inventories are
comprised of following:
September 30, December 31,
1999 1998
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Finished goods $ 1,321,169 $ 794,297
Work in process 2,528,888 1,845,954
Raw materials and supplies 6,551,477 5,234,249
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$10,401,534 $ 7,874,500
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Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities is comprised as follows:
September 30, December 31,
1999 1998
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Accrued compensation $ 699,274 $ 400,680
Other 1,265,127 1,134,105
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$ 1,964,401 $ 1,534,785
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<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
NOTE 1--Summary of Significant Accounting Policies--(Continued)
Earnings per Share
Diluted earnings per share gives effect to potential common shares
that were dilutive and outstanding during the period, such as stock options
and warrants using the treasury stock method and average market price,
shares assumed to be converted relating to the convertible promissory note
to the Company's Parent (with earnings adjusted for interest expense related
to the convertible promissory note which is assumed to be converted) and
contingent shares for the stock price guarantee for the acquisition of
Lytton.
Following is a reconciliation of amounts used in the basic and diluted
computations:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income (loss) - numerator basic
computation $ 625,604 $ 178,672 $ 478,981 $ 1,234,052
Effect of dilutive securities:
Interest adjustment on convertible note 35,823 33,843 105,962 100,104
----------- ----------- ----------- -----------
Net income (loss), as adjusted for
assumed conversion - numerator
diluted computation $ 661,427 $ 212,515 $ 584,943 $ 1,334,156
=========== =========== =========== ===========
Weighted average shares - denominator
basic computation 5,300,167 5,250,167 5,276,541 5,173,922
Effect of dilutive securities:
Stock options 53,167 210,680 152,879 287,811
Contingent stock - acquisition 89,855 319,355 280,565 269,844
Convertible note 1,436,529 1,357,119 1,416,364 1,338,069
----------- ----------- ----------- -----------
Weighted average shares, as
adjusted - denominator 6,879,718 7,137,321 7,126,349 7,069,646
=========== =========== =========== ===========
Earnings (loss) per share:
Basic $.12 $.03 $.09 $.24
==== ==== ==== ====
Diluted $.10 $.03 $.08 $.19
==== ==== ==== ====
</TABLE>
The Company has various potentially dilutive securities, including stock
options, and warrants. See Notes 5, 6 and 7.
Comprehensive Income
In 1998 the Company adopted Financial Accounting Standards Board
Statement No. 130, "Reporting Comprehensive Income" (FAS 130). This state-
ment establishes rules for the reporting of comprehensive income (loss) and
its components. Comprehensive income (loss) consists of net income (loss)
and foreign currency translation adjustments.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
NOTE 1--Summary of Significant Accounting Policies--(Continued)
Below is a detail of comprehensive (loss) income for the three months
and six months ended September 30, 1999 and September 30, 1998:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 625,604 $ 178,672 $ 478,981 $ 1,234,052
Other comprehensive (loss) income:
Foreign currency translation 79,449 44,831 (28,632) 76,868
----------- ----------- ----------- -----------
Comprehensive income $ 705,053 $ 223,503 $ 450,349 $ 1,310,920
=========== =========== =========== ===========
</TABLE>
New Pronouncements
In June, 1998, the Financial Accounting Standards Board issued Financial
Accounting Standards Board Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). FAS 133 is effective for
fiscal years beginning after June 15, 2000. FAS 133 establishes accounting
and reporting standards for derivative instruments and for hedging activities
and requires, among other things, that all derivatives be recognized as either
assets or liabilities in the statement of financial position and that those
instruments be measured at fair value. The Company is in the process of
determining the impact that the adoption of FAS 133 will have on its
consolidated financial statements.
Reclassifications
Certain reclassifications have been made to the 1998 financial state-
ments to conform to the 1999 presentation.
NOTE 2--Interim Adjustments
The financial summaries for the three months and nine months ended
September 30, 1999 and September 30, 1998 are unaudited and include, in the
opinion of management of the Company, all adjustments (consisting of normal
recurring accruals) necessary to present fairly the earnings for such periods.
Operating results for the three months and nine months ended September 30,
1999 are not necessarily indicative of the results that may be expected for
the entire year ending December 31, 1999.
While the Company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these Consoli-
dated Condensed Financial Statements be read in conjunction with the
financial statements and notes included in the Company's latest annual
report for the year ended December 31, 1998.
NOTE 3--Long-term Debt
The Company's $1,600,000 line of credit effective December 29, 1997 was
fully drawn down with an outstanding balance of $1,600,000 at September 30,
1999 and December 31, 1998. This line matures May 1, 2000 and has monthly
payments of interest at prime. The commercial term loan effective December
29, 1997 with an initial principal balance of $1,500,000 had an outstanding
balance of $975,000 at September 30, 1999 and $1,200,000 at December 31, 1998,
matures December 15, 2002 with monthly principal payments of $25,000 plus
interest. In connection with the term loan, the Company entered into an
interest rate swap agreement with the bank to manage the
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
NOTE 3--Long-term Debt--(Continued)
Company's exposure to interest rates by effectively converting a variable
rate obligation with an interest rate of LIBOR plus 2.25% to a fixed rate
of 8.60%.
The bank also extended two commercial term loans to the Company in
February 1996, one for $712,500 for five years expiring on February 7, 2001
at an annual rate of interest equal to 8.28% with a monthly payment of
principal and interest of $6,925 based on a 15-year amortization schedule
with the unpaid principal and accrued interest due on the expiration date.
This term loan had an outstanding balance of approximately $614,000 at
September 30, 1999 and $636,000 at December 31, 1998 and is secured by a
mortgage on properties in Hialeah, Florida owned by the Company's Parent.
The second commercial term loan was for the principal amount of $200,000 for
a period of five years bearing interest at a per annum rate of 1.25% over
the bank's prime rate and requiring monthly principal payments with accrued
interest of $3,333 through expiration on February 7, 2001. This $200,000 term
loan which had a balance of approximately $57,000 at September 30, 1999 and
$87,000 at December 31, 1998 is secured by all of Techdyne's tangible personal
property, goods and equipment, and all cash or noncash proceeds of such
collateral.
The Parent has unconditionally guaranteed the payment and performance
by the Company of the revolving loan and the three commercial term loans and
has subordinated the Company's intercompany indebtedness to the Parent to the
bank's position.
Lytton had a $1,500,000 revolving bank line of credit requiring monthly
interest payments at prime plus 1/2% maturing June 30, 1999 which was
increased to $3,000,000 and extended to June 30, 2000. The interest rate on
this loan was 8.75% at September 30, 1999 and 8.25% at December 31, 1998.
There was an outstanding balance on this loan of $2,839,000 as of September
30, 1999 with $962,000 outstanding at December 31, 1998. Lytton had a
$1,000,000 installment loan with the same bank maturing August 1, 2002, at
an annual rate of 9% until July 1999, with monthly payments of $16,667 plus
interest, at which time Lytton was to have an option to convert the note to
a variable rate. Lytton replaced this loan at June 30, 1999 with a
$1,400,000 installment loan with monthly payment of $23,333 payable in 60
monthly installments commencing August 1, 1999 with the final installment
due June 30, 2004 with interest at prime plus 1/2%. The balance outstanding
on this loan was approximately $1,353,000 at September 30, 1999 and $733,000
as of December 31, 1998. Lytton also has a $500,000 equipment loan agreement
with the same bank payable through June 30, 2004 which replaced an agreement
of the same amount which had a maturity of August 1, 2003, with interest at
prime plus 1%. There was no balance outstanding on this loan as of September
30, 1999 or December 31, 1998. All of these bank loans are secured by the
business assets of Lytton.
The prime rate was 8.25% as of September 30, 1999 and 7.75% as of
December 31, 1998.
Lytton conducts a portion of its operations with equipment acquired
under equipment financing obligations which extended through July 1999 with
interest rates ranging from 8.55% to 10.09%. The remaining principal
balance under these financing obligations amounted to $112,000 at December
31, 1998. Lytton has an equipment loan at an annual interest rate of 5.5%
maturing in April 2001 with monthly payments of principal and interest of
$4,298. This loan had a balance of approximately $124,000 at September 30,
1999 and $157,000 at December 31, 1998 and is secured by equipment.
Techdyne (Europe) has a mortgage on its facility which had a principal
balance with a U.S. dollar equivalency of $513,000 at September 30, 1999 and
$545,000 at December 31, 1998.
Interest payments on long-term debt amounted to approximately $151,000
and $405,000 for the three months and nine months ended September 30, 1999
and $130,000 and $389,000 for the same periods of the preceding year.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
NOTE 4--Income Taxes
The Company files separate federal and state income tax returns from
its Parent, with its income tax liability reflected on a separate return basis.
Deferred income taxes reflect the net tax effect of temporary differ-
ences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. For
financial reporting purposes a valuation allowance has been recognized to
offset a portion of the deferred tax assets.
The Company had domestic income tax expense of approximately $62,000 and
$174,000 for the three months and nine months ended September 30, 1999 and
$54,000 and $169,000 for the same periods of the preceding year.
Techdyne (Europe) had an income tax benefit of approximately $29,000
and $93,000 for the three months and nine months ended September 30, 1998
with no such benefit or provision for the same periods of 1999.
Income tax payments (refunds) amounted to $30,000 and $132,000 for the
three months and nine months ended September 30, 1999 and $(2,000) and
$51,000 for the same periods of the preceding year.
NOTE 5--Transactions with Parent
The Parent provides certain administrative services to the Company
including providing office space and general accounting assistance. Effec-
tive October 1, 1996, the services provided to the Company by the Parent
were formalized under a service agreement for $408,000 per year. The amount
of expenses covered under the service agreement totaled $102,000 and $306,000
for the three months and nine months ended September 30, 1999 and for the
same periods of the preceding year.
The Company had a demand convertible promissory note payable to the
Parent bearing interest at 5.7% which had a balance, including accrued
interest, of approximately $2,427,000 at December 31, 1998, which was
convertible into common stock of the Company at the option of the Parent at
a conversion price of $1.75 per share. On September 30, 1999, the Parent
converted the note balance which amounted to $2,531,941 into 1,446,823 shares
of the Company's common stock resulting in an increase in the Parent's
ownership interest to 72.5%. Advances from the Parent on the balance sheet
includes the convertible note balance and an advance payable to the Parent
of approximately $704,000 at December 31, 1998 with interest at 5.7%.
Interest on the advances amounted to $45,000 and $134,000 for the three
months and nine months ended September 30, 1999 and $43,000 and $112,000 for
the same periods of the preceding year and is included in the net balance
due the Parent. The Parent has agreed not to require repayment of the
intercompany advances prior to October 1, 2000 and, therefore, the advances
have been classified as long-term at September 30, 1999.
The Company has manufactured certain products for the Parent. Sales of
the products were $23,000 for the nine months ended September 30, 1999 with
no such sales during the third quarter of 1999. These sales amounted to
$41,000 and $140,000 for the three months and nine months ended September
30, 1998.
NOTE 6--Commitments and Contingencies
Lytton sponsors a 401(k) Profit Sharing Plan covering substantially all
of its employees. The Company adopted this plan as a participating employer
effective July 1, 1998. The discretionary profit sharing and matching
expense, including that of the Company and Lytton for the nine months ended
September 30, 1999 amounted to approximately $63,000, with such expense
amounting to approximately $33,000 and including only Lytton for the nine
months ended September 30, 1998.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
NOTE 6--Commitments and Contingencies--(Continued)
Lytton had a deferred compensation agreement with its former President.
The agreement called for monthly payments of $8,339 provided that Lytton's
cash flow was adequate to cover these payments with interest to be calculated
on any unpaid balance as of August 1, 1999. During the nine months ended
September 30, 1999, a total of $58,000 was paid under this agreement, which
fully paid the agreement.
Lytton leases its operating facilities from an entity owned by the
former President of Lytton and his wife, the former owner. The lease
expires July 31, 2002 and requires annual lease payments of approximately
$218,000, adjusted each year based upon the Consumer Price Index. During
the nine months ended September 30, 1999, $164,000 was paid under the lease
compared to $161,000 paid for the same period last year.
The Company entered into a one year agreement for investor relations
and corporate communications services as of April 1, 1999 with a monthly fee
of $3,500. The agreement provided for issuance of up to 50,000 stock options
if the consultant satisfied various performance criteria and could be
cancelled upon 15 days written notice by either party. The agreement was
cancelled effective August 1, 1999.
NOTE 7--Stock Options
In May 1994, the Company adopted a stock option plan for up to 250,000
options. Pursuant to this plan, in May 1994, the board of directors granted
227,500 options to certain of its officers, directors and employees. These
options were exercisable at $1 per share through May 24, 1999. On June 30,
1998, 115,000 of these options were exercised and on May 10, 1999, 50,000 of
the remaining options were exercised. The Company received cash payment of
the par value and the balance in three year promissory notes, presented in
the Stockholders' Equity Section of the balance sheet with interest at 5.16%
for the June 1998 exercise and 4.49% for the May 1999 exercises.
On February 27, 1995 the Company granted stock options, not part of the
1994 Plan, to directors of Techdyne and its subsidiaries for 142,500 shares
exercisable at $1.75 per share through February 26, 2000. In April 1995, the
Company granted a stock option for 10,000 shares, not part of the 1994 Plan,
to its general counsel at the same price and terms as the directors' options.
In June 1997, the Company adopted a Stock Option Plan for up to 500,000
options, and pursuant to the plan the board granted 375,000 options exercis-
able for five years through June 22, 2002 at $3.25 per share. On June 30,
1999, the board granted 52,000 options exercisable for three years through
June 29, 2002 at $4.00 per share. On August 25, 1999 the board granted
16,000 options exercisable for three years through August 24, 2002 exercis-
able at $4.00 per share.
As part of the consideration pursuant to an agreement for investor
relations and corporate communications services, the Company granted options
for 25,000 shares of its common stock exercisable for three years through
May 14, 2001 at $4.25 per share with the options to vest quarterly on the
basis of 25% at the end of each quarter commencing June 30, 1998. 6,250
options vested during the quarter ended June 30, 1998 with no additional
options to vest due to cancellation of this agreement in August 1998.
Pursuant to FAS 123, the Company recorded $13,000 expense for options
vesting under this agreement.
The Company entered into a consulting agreement on July 1, 1999 for
financial advisory services with the agreement to end on September 15, 2000.
As compensation, the consultant received non-qualified stock options to
purchase 100,000 shares of the Company's common stock exercisable at $3.50
per share that will expire on September 15, 2000. These options were valued
at $40,000 resulting in $8,300 expense during the quarter ended September
30, 1999.
<PAGE>
TECHDYNE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
September 30, 1999
(Unaudited)
NOTE 8--Common Stock
Pursuant to a 1995 public offering, 1,000,000 shares of common stock
and 1,000,000 redeemable common stock purchase warrants were issued. The
warrants provided for the purchase of one common share each. In February
1999, the Company reduced the exercise price to $4.00 and extended the
exercise period of the remaining approximately 959,000 outstanding warrants
to May 17, 1999 at which time the warrants expired. The underwriter
received warrants to purchase 100,000 shares of common stock and/or
100,000 warrants exercisable through September 12, 2000 at $6.60 per
share of common stock and $.25 per warrant with each warrant exercisable
into common stock at $8.25 per share.
NOTE 9--Acquisition
On July 31, 1997, the Company acquired Lytton, which manufactures and
assembles printed circuit boards and other electronic products, for $2,500,000
cash, and issuance of 300,000 shares of the Company's common stock. The
Company guaranteed that the seller would realize a minimum of $2,400,000 from
the sale of these shares of common stock based on Lytton having achieved
certain earnings objectives resulting in an increase of $400,000 in the
valuation of $2,000,000 originally recorded for these securities. The total
purchase price in excess of the fair value of net assets acquired, which
originally amounted to approximately $2,230,000, is being amortized over 25
years. Additional contingent consideration is due if Lytton achieves pre-
defined sales levels. Additional consideration of approximately $290,000 and
$154,000 was paid in April 1999 and April 1998, respectively, based on sales
levels with the Stock Purchase Agreement providing for a possible additional
sales level incentive for a specified one year period. As the contingencies
are resolved, if additional consideration is due, the then current fair value
of the consideration will be recorded as goodwill, which will be amortized
over the remainder of the initial 25 year life.
The terms of the Guaranty in the Stock Purchase Agreement were modified
in June, 1998 by the Company and the seller ("Modified Guaranty"). The
modified terms provided that the seller would sell an amount of common stock
which would provide $1,300,000 gross proceeds, and the Company guaranteed
that, to the extent that the seller has less than 150,000 shares of the
Company's common stock remaining, the Company would issue additional shares
to the seller. In July 1998, the Company advanced the seller approximately
$1,278,000 ("Advance") toward the $1,300,000 from the sale of the Company's
common stock in addition to the seller having sold 5,000 shares of common
stock in July, 1998. Proceeds from the sale of the Company's common stock
by the seller, up to 195,000 shares, were to repay the Advance and to the
extent proceeds from the sale of these shares were insufficient to pay the
Advance, the balance of the Advance would be forgiven. The Advance has been
presented in the Stockholder's Equity section of the balance sheet. The
Company guaranteed the seller aggregate proceeds of no less than $1,100,000
from the sale of the remaining common stock if sold on or prior to July 31,
1999.
In July 1999, the Company forgave the Advance to the seller and issued
payment of $1,100,000 to the seller, which together with the proceeds
realized by the seller from the sale of stock in July 1998 satisfied the
Company's remaining obligation under the $2,400,000 guarantee. The
remaining 295,000 shares of common stock held by the seller as security for
the remaining $2,378,000 guarantee were returned to the Company and have
been cancelled.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
- ---------------------
Forward-Looking Information
The statements contained in this Quarterly Report on Form 10-Q that are
not historical are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of the 1934. The Private Securities Litigation Reform Act of 1995 (the
"Reform Act") contains certain safe harbors regarding forward-looking
statements. Certain of the forward-looking statements include management's
expectations, intentions and beliefs with respect to the growth of the
Company, the nature of the electronics industry in which it is engaged as a
manufacturer, the Company's business strategies and plans for future
operations, its needs for capital expenditures, capital resources, liquidity
and operating results, and similar expressions concerning matters that are
not historical facts. Such forward-looking statements are subject to risks
and uncertainties that could cause actual results to materially differ from
those expressed in the statements. All forward-looking statements included
in this document are based on information available to the Company on the
date hereof, and the Company assumes no obligation to update any such forward-
looking statement. The following cautionary statements are being made
pursuant to the provisions of the Reform Act with the intention of the
Company obtaining the benefits of the safe harbor provisions of the Reform
Act. Among the factors that could cause actual results to differ materially
are the factors detailed in the risks discussed in the "Risk Factors" section
included in the Company's Registration Statements, as filed with the Securi-
ties and Exchange Commission ("Commission") Form SB-2 (effective September
13, 1995), and Form S-3 (effective November 11, 1996) and as amended or
supplemented.
The Company has continued to depend upon a relatively small number of
customers for a significant percentage of its net revenue. Significant
reductions in sales to any of the Company's large customers would have a
material adverse effect on the Company's results of operations. The level
and timing of orders placed by a customer vary due to, among other variables,
attempts to balance inventory, design changes, demand for products, competi-
tion and general economic conditions. Termination of manufacturing
relationships or changes, reductions or delays in orders as had occurred in
the past, could have an adverse effect on the Company's results of operations
or financial condition.
The industry segments served by the Company and the electronics
industry as a whole, are subject to rapid technological change and product
obsolescence. Discontinuance or modification of products containing com-
ponents manufactured by the Company could adversely affect the Company's
results of operations. The electronics industry is also subject to economic
cycles and has in the past experienced, and is likely in the future to
experience, recessionary periods. A general recession in the electronics
industry could have a material adverse effect on Techdyne's business,
financial condition and results of operations.
Due to the Company's utilization of just-in-time inventory techniques,
the timely availability of many components is dependent on the Company's
ability to continuously develop accurate forecasts of customer volume
requirements. Component shortages could result in manufacturing and
shipping delays or increased component prices which could have a material
adverse effect on the Company's results of operations. It is important for
the Company, and there are significant risks involved, to efficiently manage
inventory, proper timing of expenditures and allocations of physical and
personnel resources in anticipation of future sales, the evaluation of
economic conditions in the electronics industry and the mix of products,
whether PCBs, wire harnesses, cables or turnkey products, for manufacture.
Although management believes that the Company's operations utilize the
assembly and testing technologies and equipment currently required by the
Company's customers, there can be no assurance that the Company's process
development efforts will be successful or that the emergence of new
technologies, industry standards or customer requirements will not render
the Company's technology, equipment or processes obsolete or noncompetitive.
In addition, to the extent that the Company determines that new assembly
and testing technologies and equipment are required to remain competitive,
the acquisition and implementation of such technologies and equipment are
likely to require significant capital investment.
The Company's results of operations are also affected by other factors,
including price competition, the level and timing of customer orders,
fluctuations in material costs, the overhead efficiencies achieved by the
Company in managing the costs of its operations, the Company's experience
in manufacturing a particular product, the timing of expenditures in
anticipation of increased orders, and selling, general and administrative
expenses. Accordingly, gross margins and operating income margins have
generally improved during periods of high volume and high capacity utiliza-
tion. The Company generally has idle capacity and reduced operating margins
during periods of lower-volume production.
<PAGE>
Forward-Looking Information (continued)
The Company competes with much larger electronic manufacturing entities
for expansion opportunities. Any such transactions may result in potentially
dilutive issuance of equity securities, the incurrence of debt and amortiza-
tion expenses related to goodwill and other intangible assets, and other
costs and expenses, all of which could materially adversely affect the
Company's financial results. Such transactions also involve numerous
business risks, including difficulties in successfully integrating acquired
operations, technologies and products or formalizing anticipated synergies,
and the diversion of management's attention from other business concerns.
Year 2000 Readiness
The Year 2000 computer information processing challenge associated
with the upcoming millennium change concerns the ability of computerized
information systems to properly recognize date sensitive information, with
which many companies, public and private, are faced to ensure continued
proper operations and reporting of financial condition. Failure to correct
and comply with the Year 2000 change may cause systems that cannot recognize
the new date and millenium information to generate erroneous data or to fail
to operate. Management is fully aware of the Year 2000 issues, has made its
assessments, has evaluated its computerized systems and equipment to insure
each component operates properly with the date advanced to the year 2000,
and has communicated with its major vendors, and has substantially made the
operations of Techdyne Year 2000 compliant.
In 1997 we commenced upgrading our operations software program by
acquiring a new Visual Manufacturing software package. To a lesser extent
our Parent also acquired certain hardware and software of the Visual Manufac-
turing system. We have been integrating this new software system into all of
our facilities. Our European facility went on line July 1, 1999. Our Lytton
subsidiary, with its existing ERP system being Year 2000 compliant, is in
the process of installing the Visual Manufacturing software system, which
should be operational for that subsidiary in mid-2000. This new system has
greatly enhanced our ERP system, essential to bids for new business, produc-
tion scheduling, inventory and information technology and overall operations.
We believe this new system is providing us with leverage in material pricing,
production, timely-delivery and thereby enabling us to be more competitive in
bidding for manufacturing business. This Visual Manufacturing system also
enables us to better track actual costs against our quotes, thereby allowing
us to more effectively control costs and manage operating margins. The
system has been pre-tested and guaranteed by the manufacturer to be Year 2000
compliant. The Visual Manufacturing system also provides bookkeeping,
accounting and financial recording and information functions for Techdyne,
its Parent and Dialysis Corporation of America, a 68% owned public subsidiary
of the Parent. The costs for this new software program for our four domestic
and one European facilities has been approximately $590,000. We have an
ongoing consulting, training and servicing arrangement with the system's
manufacturer for $25,000 per year.
With respect to non-information technology systems which typically
include embedded technology such as microcontrollers, the major equipment
used in our manufacturing operations is not date sensitive and should not
pose any threat of system breakdown. All date-sensitive manufacturing
equipment has been tested and is compliant. Personal computer hardware
and software systems have been checked and have been determined to be Year
2000 compliant.
We have communicated with our key vendors, customers and other third
parties with whom our operations are essential to inquire of their assessment
of their Year 2000 issues and actions being taken to resolve those issues.
We have received a significant response rate for which most have given
written assurance that they are Year 2000 compliant, with the balance
assuring us they will be Year 2000 compliant before the millenium change.
To the extent such third parties are potentially adversely affected by the
Year 2000 issues, and such is not timely and properly resolved by such
persons, this could disrupt our operations to the extent that we will have
to find alternative vendors or customers that have resolved their Year 2000
issues.
No assurance can be given that our new Visual Manufacturing software
program will be successful in its anticipated operational benefits as
assessed above or that our key vendors and customers will have successful
conversion programs, and that any such failures, whether relating to the
manufacturing operational efficiencies or the Year 2000 issue, will not have
a material adverse effect on our business, results of operations or financial
condition. Based upon our current assessments, but subject to the uncer-
tainties discussed below, we do not believe Techdyne has any material
exposure to significant business interruptions as a result of the Year 2000
issues, or that the cost of any necessary remediation will have a material
adverse effect on our business, financial condition or results of operations.
<PAGE>
Year 2000 Readiness (continued)
One of the more significant Year 2000 issues relates to the readiness
of our suppliers. Most of our products are manufactured to customer
specifications, requiring specialized tooling as well as customer directed
supplies and suppliers. Any Year 2000 problems with such suppliers could
adversely affect our production of these specific products. However, this
would only impact a limited range of products, since we manufacture over 850
products for our 100 customers. For any significant worse case scenario,
such supplier failure would have to be widespread which would also impact
many of our competitors. This would seem remote based upon responses we
have had from our suppliers. Assuming a worse case scenario that our
critical suppliers have a millenium problem and limit, delay or are unable
to deliver supplies, we are identifying other sources of supplies and, if
necessary, will seek customer approval to purchase from these alternate
sources, as well as request our major suppliers to carry more inventory
earmarked for us, and maintain specific contacts with those suppliers.
Another area that could significantly impact our operations that relates
to third-party providers are the utility companies providing necessary power
for our manufacturing operations. These providers and services are beyond
our control, and we do not have a separate generator for electricity.
Should any of these utilities fail to provide services, that contingency
would seriously adversely impact our operations in such affected areas.
Our continuing plans to reduce the impact of such utility shortages or
outages includes notification to our utility companies of our manufacturing
locations and schedules, and notification to each of our landlords to assure
access to the facility for our staff and key service providers.
We may experience material unanticipated negative consequences beginning
in the Year 2000 due to Year 2000 problems that have gone undetected. Al-
though we believe our assessment and implementation of our Year 2000 issues
have been satisfactorily completed, there are many uncertainties involved,
which include two primary areas. One is our ability to deal with Year 2000
contingencies that may arise that we were unaware of, and second is how third
parties with whom we deal have dealt with the Year 2000 issue. Accordingly,
the results of our Year 2000 program and the extent of any impact on our
results of operations could vary materially from what we have disclosed.
The complexity of the Year 2000 issues does not allow us the ability to
predict with any significant accuracy or to qualify its impact upon us for
the following reasons:
o third party systems, whether suppliers, utilities and others, are
beyond our control
o complexity of testing interconnected systems and networks that depend
on third-party systems
o uncertainty of costs we might incur as a result of Year 2000 failures
that occur despite implementation of our program to deal with the issues
Results of Operations
Sales increased approximately $3,156,000 (29%) for the three months
ended September 30, 1999 with a small decrease of approximately $38,000 for
the nine months ended September 30, 1999 compared to the same periods of the
preceding year. There was an increase in domestic sales of $3,321,000 (33%)
and $1,313,000 (4%) and a decrease in European sales of $165,000 (17%) and
$1,351,000 (35%) for the three months and nine months ended September 30,
1999 compared to the same periods of the preceding year. Interest and other
income decreased by approximately $135,000 and $168,000 for the three months
and nine months ended September 30, 1999 compared to the same periods of the
preceding year, which includes a decrease in interest as a result of a
reduction in invested cash balances.
Significant reductions in sales of Techdyne (Europe) have resulted in
net losses for this subsidiary amounting to $164,000 and $442,000 for the
three months and nine months ended September 30, 1999 and $141,000 and
$283,000 for the same periods of the preceding year. Management has been
evaluating the future prospects for this facility and has formulated a plan
which includes outside purchase of certain products previously produced
internally in an effort to reduce costs for more competitive bidding. There
can be no assurances to the future success of management's plan.
<PAGE>
Results of Operations (continued)
There was a decrease in sales to Compaq (Europe) by Techdyne (Europe),
of $294,000 (84%) and $925,000 (85%) for the three months and nine months
ended September 30, 1999 compared to the same periods of the preceding year.
Sales of Techdyne (Europe) to Compaq, which was at one time a major customer
of Techdyne (Europe), accounted for only approximately 6% of sales for the
nine months ended September 30, 1999 compared to 29% for the same period of
the preceding year. Techdyne (Europe) has been pursuing new business
development to offset the substantial reduction in Compaq sales as well as
substantial reductions in sales to other customers; however its efforts have
not been successful to date.
Approximately 44% of the Company's consolidated sales for the nine
months ended September 30, 1999 were made to five customers. Customers
generating at least 10% of sales included PMI Food Equipment Group (15%) and
Motorola (11%). PMI Food Equipment Group is Lytton's major customer and
represented 31% of Lytton's sales for the nine months ended September 30,
1999. The loss of, or substantially reduced sales to any major customer,
would have an adverse effect on the Company's operations if such sales are
not replaced.
Cost of goods sold as a percentage of sales amounted to 85% and 87% for
the three months and nine months ended September 30, 1999 compared to 87%
for the same periods of the preceding year reflecting changes in product mix
and a diversification of the Company's customer base.
Selling, general and administrative expenses decreased by $44,000 for
the three months ended September 30, 1999 and increased by $148,000 for the
nine months ended September 30, 1999 compared to the same periods of the
preceding year, including costs associated with increased sales of Lytton.
Interest expense increased $43,000 and $65,000 for the three months and
nine months ended September 30, 1999 compared to the same periods of the
preceding year. Interest on advances from the Parent increased approximately
$10,000 and $23,000 for these periods as a result of higher outstanding
balances with other increases resulting primarily from net additional
borrowings on other debt. The prime rate was 8.25% at September 30, 1999
and 7.75% at December 31, 1998.
Liquidity and Capital Resources
The Company had working capital of approximately $6,849,000 at September
30, 1999, a decrease of $2,472,000 (27%) during the first nine months of 1999.
Included in the changes in components of working capital was a decrease of
$843,000 in cash and cash equivalents, which included net cash used in
operating activities of $460,000, net cash used in investing activities of
$2,458,000 (including $1,052,000 from additions to property and equipment
and payments of $1,390,000 regarding the Lytton acquisition) and net cash
provided by financing activities of $2,092,000 (including Lytton's net
borrowings on its line of credit of $1,876,000, proceeds from Lytton debt
refinancing of $767,000, and payments on long-term debt of $597,000).
The Company has a five-year $1,500,000 ("notional amount under interest
rate swap agreement") commercial term loan with monthly principal payments
of $25,000 plus interest at 8.60%, which had an outstanding balance of
$975,000 at September 30, 1999 and $1,200,000 at December 31, 1998 and a
$1,600,000 commercial revolving line of credit with interest at prime which
was fully drawn down as of September 30, 1999 and December 31, 1998. The
commercial term loan matures December 15, 2002 and the commercial line of
credit matures May 1, 2000. See Note 3 to "Notes to Consolidated Condensed
Financial Statements."
The Company had obtained in 1996 two other term loans from its Florida
bank. One is a $712,500 term loan, which had a remaining principal balance
of $614,000 at September 30, 1999 and $636,000 at December 31, 1998, and is
secured by two buildings and land owned by the Parent. The second term loan
for $200,000, which had a remaining principal balance of $57,000 at September
30, 1999 and $87,000 at December 31, 1998, is secured by the Company's
tangible personal property, goods and equipment. The Parent has guaranteed
the revolving line and the three term loans and subordinated the intercompany
indebtedness due it from the Company to the bank's position. See Note 3 to
"Notes to Consolidated Condensed Financial Statements."
The Company has outstanding borrowings of $145,000 from a local bank
with interest payable monthly with the note, which was renewed during 1997,
maturing April 2000.
<PAGE>
Liquidity and Capital Resources (continued)
In July, 1994 Techdyne (Scotland) purchased the facility housing its
operations for approximately $730,000, obtaining a 15-year mortgage which
had a U.S. dollar equivalency of approximately $513,000 at September 30,
1999 and $545,000 at December 31, 1998, based on exchange rates in effect
at each of these dates. See Note 3 to "Notes to Consolidated Condensed
Financial Statements."
On July 31, 1997, the Company acquired Lytton which is engaged in the
manufacture and assembly of PCBs and other electronic products for commer-
cial customers. This acquisition required $2,500,000 cash, funded by the
modified bank line of credit, as well as 300,000 shares of the Company's
common stock which had a fair value of approximately $1,031,000 based on
the closing price of the Company's common stock on the date of acquisition.
The Company guaranteed $2,400,000 minimum proceeds from the sale of these
securities based on Lytton having achieved certain earnings objectives. The
Stock Purchase Agreement also provided for incentive consideration to be
paid in cash based on specific sales levels of Lytton for each of three
successive specified years, resulting in additional consideration of
approximately $290,000 and $154,000 for the first two years of sales levels
paid in April 1999 and April 1998, respectively. The Lytton acquisition has
expanded the Company's customer base, broadened its product line, enhanced
its manufacturing capabilities and provided a new geographic area to better
serve the Company's existing customer base with opportunities to attract
new customers. The Guaranty in the Stock Purchase Agreement was modified by
the Company and the seller. In July 1999, the Company issued a payment of
$1,100,000 and forgave an advance of $1,278,000 made in July 1998 to satisfy
its remaining obligation under the $2,400,000 guarantee. See Note 9 to
"Notes to Consolidated Condensed Financial Statements."
With one bank, Lytton had (i) a $1,500,000 revolving bank line of credit
requiring monthly interest payments at prime plus 1/2%; (ii) a $1,000,000
installment loan maturing August 1, 2002, at an annual rate of 9% until July
1999, with monthly payments of $16,667 plus interest, at which time Lytton
had an option to convert the note to a variable rate; and (iii) a $500,000
equipment loan agreement payable through August 1, 2003 with interest at
prime plus 1%. These loans were replaced effective June 30, 1999 with a
$3,000,000 revolving line of credit maturing June 30, 2000, with interest at
prime plus 1/2%, a $1,400,000 installment loan payable in 60 installments
commencing August 1, 1999 with the final installment due June 30, 2004 with
interest at prime plus 1/2% and a $500,000 equipment loan agreement payable
through June 30, 2004 with interest at prime plus 1%. All of these bank
loans are secured by the business assets of Lytton. See Note 3 to "Notes
to Consolidated Condensed Financial Statements."
A significant customer of the Company, which accounted for 4% of sales
for the nine months ended September 30, 1999 and 9% of sales for the same
period of the preceding year has been slow in paying amounts due to the
Company. The Company has substantial receivables and inventory relating to
a sales contract with the customer. See "Major Customers" under Note 1 to
"Notes to Consolidated Condensed Financial Statements."
The Company anticipates that current levels of working capital and
working capital from operations, will be adequate to successfully meet
liquidity demands for at least the next twelve months.
New Pronouncements
In June, 1998, the Financial Accounting Standards Board issued
Financial Accounting Standards Board Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). FAS 133 is
effective for fiscal years beginning after June 15, 2000. FAS 133
establishes accounting and reporting standards for derivative instruments
and for hedging activities and requires, among other things, that all
derivatives be recognized as either assets or liabilities in the statement
of financial position and that those instruments be measured at fair value.
The Company is in the process of determining the impact that the adoption
of FAS 133 will have on its consolidated financial statements.
Inflation
Inflationary factors have not had a significant effect on the Company's
operations. The Company attempts to pass on increased costs and expenses by
increasing selling prices when and where possible and by developing different
and improved products for its customers that can be sold at targeted profit
margins.
<PAGE>
PART II -- OTHER INFORMATION
----------------------------
Item 6. Exhibits and Reports on Form 8-K.
- ------ ---------------------------------
(a) Exhibits
Part I Exhibits
(27) Financial Data Schedule (for SEC use only)
Part II Exhibits
None
(b) Reports on Form 8-K
(i) Item 5, "Other Events," re: execution of consulting agree-
ment, filed July 22, 1999
(ii) Item 4, "Changes in Registrant's Certifying Accountant,"
filed August 13, 1999
(iii) Amendment to Item 4, "Changes in Registrant's Certifying
Accountant," filed August 27, 1999
(iv) Item 5, "Other Events," re: issuance of stock to parent on
conversion of note filed October 12, 1999
No financial statements were filed with any of the current reports
on Form 8-K.
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.
TECHDYNE, INC.
/s/ Daniel R. Ouzts
By:-----------------------------------
DANIEL R. OUZTS, Vice
President/Finance, Controller and
Chief Financial Officer
Dated: November 12, 1999
<PAGE>
EXHIBIT INDEX
Exhibit
No
- -------
Part I Exhibits
(27) Financial Data Schedule (for SEC use only)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 816,312
<SECURITIES> 0
<RECEIVABLES> 9,068,864
<ALLOWANCES> 0
<INVENTORY> 10,401,534
<CURRENT-ASSETS> 21,053,329
<PP&E> 9,605,372
<DEPRECIATION> 4,381,282
<TOTAL-ASSETS> 29,288,458
<CURRENT-LIABILITIES> 14,204,491
<BONDS> 2,896,139
0
0
<COMMON> 64,520
<OTHER-SE> 11,318,928
<TOTAL-LIABILITY-AND-EQUITY> 29,288,458
<SALES> 34,420,939
<TOTAL-REVENUES> 34,471,225
<CGS> 30,069,334
<TOTAL-COSTS> 30,069,334
<OTHER-EXPENSES> 3,194,070
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 555,080
<INCOME-PRETAX> 652,741
<INCOME-TAX> 173,760
<INCOME-CONTINUING> 478,981
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 478,981
<EPS-BASIC> .09
<EPS-DILUTED> .08
<FN>
<F1>Accounts receivable are net of allowance of $50,000 at September 30, 1999.
<F2>Inventories are net of reserve of $731,000 at September 30, 1999.
</FN>
</TABLE>
