SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended September 30, 1995 Commission File No 0-2892
THE DEWEY ELECTRONICS CORPORATION
A New York Corporation I.R.S. Employer Identification
No. 13-1803974
27 Muller Road
Oakland, New Jersey 07436
(201) 337-4700
Indicate by check mark whether the registrant (1) has filed all
reports requiredto be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No .
The number of shares outstanding of the registrant's common stock, $.01 par
value was 1,339,531 at September 30, 1995.
THE DEWEY ELECTRONICS CORPORATION
INDEX
Part I Financial Information Page No.
Condensed balance sheets -
September 30, 1995 and June 30, 1995 1
Condensed statements of income -
Three months ended September 30, 1995
and September 30, 1994 2
Statements of cash flows for the three months
ended September 30, 1995 and 1994 3
Notes to condensed financial statements 4
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 9
THE DEWEY ELECTRONICS CORPORATION
CONDENSED BALANCE SHEET
SEPTEMBER 30 JUNE 30
1995 1995
(UNAUDITED) (AUDITED)*
ASSETS:
CURRENT ASSETS:
CASH $213,130 $578.314
ACCOUNTS & NOTES RECEIVABLE 620,131 406,200
INVENTORIES 1,661,089 1,350,403
CONTRACT COSTS & RELATED EST PROFITS
IN EXCESS OF APPLICABLE BILLINGS 1,192,426 1,188,189
PREPAID EXPENSES & OTHER CURRENT
ASSETS 17,081 47,019
TOTAL CURRENT ASSETS $3,703,857 $3,670,125
PLANT PROPERTY & EQUIPMENT 1,225,700 1,203,241
OTHER ASSETS:
DEFERRED TAX ASSETS 579.319 587,338
OTHER NON CURRENT ASSETS 92,545 93,919
TOTAL OTHER ASSETS 671,864 681,257
TOTAL ASSETS $5,601,421 $5,554,623
LIABILITIES & STOCKHOLDERS EQUITY:
CURRENT LIABILITIES
TRADE ACCOUNTS PAYABLE $333,334 $269,108
ACCRUED LIABILITIES 312,099 263,645
BILLINGS IN EXCESS OF CONTRACT COSTS &
RELATED ESTIMATED PROFITS 1,045,214 1,045,214
CURRENT PORTION OF LONG TERM DEBT 324,915 322,608
TOTAL CURRENT LIABILITIES $2,015,562 $1,900,575
LONG TERM PORTION OF LONG TERM DEBT 2,333,472 2,413,564
OTHER LONG TERM LIABILITY 57,318 57,318
DUE TO RELATED PARTY 200,000 200,000
STOCKHOLDERS' EQUITY:
COMMON STOCK 16,934 16,934
PAID IN CAPITAL 2,835,360 2,835,360
RETAINED EARNINGS (1,337,075) (1,348,978)
1,515,219 1,503,316
LESS TREASURY STOCK AT COST (520,150) (520,150)
TOTAL STOCKHOLDERS' EQUITY 995,069 983,166
TOTAL LIABILITIES & STOCKHOLDERS
' EQUITY $5,601,421 $5,554,623
*- CONDENSED FROM AUDITED FINANCIAL STATEMENTS
1
THE DEWEY ELECTRONICS CORPORATION
CONDENSED INCOME STATEMENT
SEPTEMBER 30, 1995
YEAR TO DATE (3 MONTHS)
THIS YEAR % OF SALES LAST YEAR % OF SALES
REVENUES $766,683 100.00% $2,075,340 100.00%
COST OF REVENUES 449,153 58.58% 1,604,982 77.34%
GROSS PROFIT / (LOSS) 317,530 41.42% 470,358 22.66%
SELLING & ADMIN
EXPENSES 237,324 30.95% 252,095 12.15%
OPERATING PROFIT / (LOSS) 80,206 10.46% 218,263 10.52%
INTEREST EXPENSE 63,437 8.27% 80,284 3.87%
BANK FINANCING FEES 2,018 0.26% 14,884 0.72%
OTHER (INCOME)/EXPENSE (5,171) -0.67% (5,041) -0.24%
INCOME / (LOSS) BEFORE
TAXES 19,922 7.19% 128,137 6.17%
DEFERRED TAX BENEFIT/
(EXPENSE) (8,019) -1.05% (51,580) -2.49%
NET INCOME / (LOSS) $11,903 1.55% $76,557 3.69%
====== ===== ====== =====
INCOME PER SHARE BEFORE TAXES
PRIMARY $0.01 $0.10
FULLY DILUTED $0.01 $0.10
NET INCOME PER SHARE
PRIMARY $0.01 $0.06
FULLY DILUTED $0.01 $0.06
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
PRIMARY
FULLY DILUTED 1,339,531 1,339,531
1,339,531 1,339,531
2
THE DEWEY ELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30,
CASH FLOWS FROM OPERATIONS 1995 1994
CASH FLOWS FROM OPERATIONS:
NET INCOME 11,903 76,557
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION 30,216 30,208
(INCREASE)/DECREASE IN ACCOUNTS AND
NOTES RECEIVABLE (113,931) (51,102)
(INCREASE)/DECREASE IN INVENTORIES (310,686) (164,954)
(INCREASE)/DECREASE IN CONTRACT COSTS
AND RELATED ESTIMATED PROFITS IN EXCESS
OF APPLICABLE BILLINGS (4,237) 830,923
DECREASE/(INCREASE) IN PREPAID EXPENSES
AND OTHER CURRENT ASSETS 29,938 (34,537)
INCREASE/(DECREASE) IN ACCOUNTS
PAYABLE 64,226 137,399
INCREASE/(DECREASE) IN ACCRUED
EXPENSES 48,454 (61,038)
DECREASE/(INCREASE) IN OTHER
ASSETS 9,393 82,666
TOTAL ADJUSTMENTS ($246,627) $769,565
NET CASH (USED IN)/PROVIDED BY
OPERATIONS ($234,724) $846,122
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT, PROPERTY AND
EQUIPMENT (52,675) (2,455)
NET CASH (USED IN) INVESTING ($52,675) ($2,455)
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS OF LONG TERM
DEBT (77,785) (642,609)
NET CASH (USED IN) FINANCING ($77,785) ($642,609)
NET (DECREASE)/INCREASE IN CASH ($365,184) $201,058
CASH AT BEGINNING OF PERIOD 578,314 367,202
CASH AT END OF PERIOD $213,130 $568,260
======= =======
3
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the three month period ended September 30,
1995 are not necessarily indicative of the results to be expected for the
full year.
NOTE 2: INVENTORIES
Inventories are valued at lower of cost (first-in, first-out method) or
market. Components of cost include materials, direct labor and plant
overhead.
As there is no segregation of inventories as to raw materials, work in
progress and finished goods for interim reporting periods (this information
is available at year end when physical inventories are taken and recorded),
estimates have been made for the interim periods.
September 30, 1995 June 30, 1995
(UNAUDITED) (AUDITED)
Finished Goods $575,900 $445,001
Work In Process $527,396 $373,967
Raw Materials $557,793 $531,435
________ ________
Total $1,661,089 $1,350,403
======== ========
NOTE 3: NET INCOME PER SHARE
Net income per share for the three months ended September 30, 1995
is based upon the weighted average number of shares outstanding. For the
periods ended September 30, 1995, and September 30, 1994, stock options have
not been considered as the effect would have been antidilutive. The number
of shares used in the computation of net income per share was: 1,339,531
in 1995 and in 1994.
4
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4: INCOME TAXES
Effective July 1, 1993 the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes". This Statement
supersedes SFAS No. 96, "Accounting for Income Taxes", which was adopted by the
Company in 1988.
Deferred income taxes reflect the net tax effects of (a) temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and (b) operating loss
and tax credit carryforwards.
Federal income tax net operating loss carryforwards mainly arise from temporary
differences between financial and taxable income. See Note G ("Taxes on
Income") of the Notes to Financial Statements in the Company's Form 10-K for
the fiscal year ended June 30, 1995, which describes the Company's loss
carryforwards available for financial reporting and tax
return purposes.
NOTE 5: CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and on deposit in banks and U.S.
Treasury Securities with a maturity date not in excess of three months. The
carrying amount of cash and cash equivalents approximates fair value due to the
short maturity of such investments.
NOTE 6: FAIR VALUE OF FINANCIAL INSTRUMENTS
Due to the short term nature of accounts receivable and accounts payable their
carrying value is a reasonable estimate of fair value.
5
THE DEWEY ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
information set forth under Item 7 of the Company's Report on Form 10-K for its
fiscal year ended June 30, 1995.
Three months ended September 30, 1995 vs. 1994
- -----------------------------------------------
For the first quarter of this fiscal year, revenues were $766,683, a decrease
of $1,308,657 from last years first quarter revenues of $2,075,340. This
decrease in revenues is the result of a reduction in both the electronic segment
and the leisure product segment.
Electronic product revenues during this quarter decreased by $1,243,942 (from
$1,933,642 last year to $689,700 this year). Leisure product revenues decreased
by $64,715 (from $141,698 to $76,983).
Production curtailments due to engineering changes in the Fleet Exercise Section
(FES) project adversely impacted this year's first quarter electronic segment
revenues. FES production was delayed pending government approval of these
engineering changes, which was received in September. Although the Company
anticipates an increase in second quarter revenue's, compared to the first
quarter's, on the basis of business presently in hand it also expects fiscal
1996 revenues to be substantially lower than those of recent years.
Production costs will be correspondingly lower and fiscal 1996 should still
be profitable.
In last year's first quarter, 78% of electronic product revenues were the result
of production efforts under the Navy's MK48 ADCAP Torpedo Program, of which the
FES project provided 61%, the MK21 Exploder Assembly upgrade project provided
15% and the original award under the ADCAP Torpedo program provided 2%.
The remaining 22% of electronic product revenues were derived from various
orders, limited in scope and duration, that were generally for
replacement parts for previously supplied Department of Defense equipment
and other projects.
This year, 87% of first quarter electronic product revenues were attributable to
the ADCAP Torpedo Program, of which the FES project provided 45% , the Exploder
upgrade project provided 35% and the original award provided 7%. Revenues
from short term, government related projects provided the remaining 13%.
6
Delivery of the FES project is scheduled to be completed in January 1997. The
contract awarded for the upgrade of MK21 Exploder assemblies has a final
delivery schedule of September 1996.
As of September 30, 1995, the aggregate value of the Company's backlog of
electronic products to be shipped was approximately $11 million.
The portion of this backlog not previously recorded as revenues is
approximately $2 million. It is estimated that the present
backlog will be shipped during the next 18 months and that approximately
$1.5 million of this backlog, not previously recorded as revenues, will be
recognized as revenues during the 1996 fiscal year.
The decrease in revenues from leisure products in the amount of $64,715 is the
result of delayed orders for snowmaking machines.
Taking advantage of intensified machine supplier competition, ski areas are
reluctant to make purchasing commitments by placing orders prior to required
delivery. This requires the Company to build up machine inventories and
accentuates the recognition of revenues in the second fiscal quarter, when
the major portion of revenues from this segment of business are
traditionally recorded. The foreign market continues to be very
competitive, though this year orders have been received for snowmaking
machines ahead of last year's pace.
Operating profit decreased by $138,057 compared to the first quarter of last
year, principally as a result of reduced production levels in the electronics
segment. Operating profit remained at 10.5% of revenues as it was for last
year's first quarter.
Interest expense of $63,437 was lower than the prior years expense of $80,284
due to further principal reductions of outstanding indebtedness.
Liquidity and Capital Resources at September 30, 1995
- --------------------------------------------------------------------------
The Company's working capital as of September 30, 1995 was $1,688,295 compared
to $1,769,550 at June 30, 1995. This reduction of $81,255 can be attributed to
an increase in trade payables and accrued expenses.
It is during the first quarter that the greatest demand is made on working
capital due to the investment required to produce snowmaking machines for
sale in subsequent fiscal quarters.
7
For the three month period ending September 30, 1995, $234,724 net cash flow was
used in operations. This reflects the impact of increased inventory levels
during the period in the amount of $310,686.
During the same period last year, $846,122 in net cash flow was provided by
operations. The major portion of this was the result of billings of contract
costs and related estimated profits, reducing this account by $830,923.
This cash flow was used in making principal payments of the Company's long
term debt in the amount of $642,609. This year, principal payments of long
term debt used $77,785 in net cash.
Expenditures for plant, property and equipment used $52,675, of which $40,000
was used towards the purchase of production machinery which had previously been
leased. Last year, capital expenditures amounted to $2,455 during the same
period.
The Company continues to meet its short term liquidity needs arising out of
electronic product operations through a combination of progress payments on
government contracts (based on costs incurred) and billings at the time of
delivery of products.
On a long term basis, the Company's liquidity will be dependent on the ability
to maintain borrowing arrangements with National Westminster Bank NJ ("the
Bank") or other lenders. The Company's term loan agreement with the Bank
requires monthly principal payments of $18,400 plus accrued interest.
The interest rate is nine percent per annum.
The loan agreement requires that the Company maintain working capital of
$1,500,000 and net worth (excluding subordinated shareholder loans,
characterized as "due to related party" on the balance sheet) of at least
$750,000. The Company is also required to have earnings before
interest, taxes, depreciation and amortization of intangibles (EBITDA) for each
fiscal year which shall exceed the current principal payments due plus all
interest payments due during such fiscal year and EBITDA shall not be less
than twice the aggregate amount of all interest payments due for the same
fiscal year. The loan agreement contains other covenants.
The principal amount outstanding under the Company's term loan agreement as of
September 30, 1995 was $1,946,000. The amount outstanding under its note to
the New Jersey Economic Development Authority was $543,286.
8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------------------------------
No reports on Form 8-K have been filed during the quarter ended September 30,
1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of l934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE DEWEY ELECTRONICS CORPORATION
November 13, 1995
Date Thom A. Velto, Treasurer
Principal Accounting Officer
November 13, 1995
Date Edward L. Proskey
Vice President, Operations
9
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