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 December 31, 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 required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No .
The number of shares outstanding of the registrant's common stock, $.01 par
value was 1,339,531 at December 31, 1995.
THE DEWEY ELECTRONICS CORPORATION
INDEX
Part I Financial Information Page No.
Condensed balance sheets -
December 31, 1995 and June 30, 1995 1
Condensed statements of income -
Six months ended December 31, 1995
and December 31, 1994 2
Three months ended December 31, 1995
and December 31, 1994 3
Statements of cash flows for the six months
ended December 31, 1995 and 1994 4
Notes to condensed financial statements 5
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
Part II Other Information
Item 4. Submission of Matters to a Vote of Security
Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
THE DEWEY ELECTRONICS CORPORATION
CONDENSED BALANCE SHEET
DECEMBER 31 JUNE 30
1995 1995
(UNAUDITED) (AUDITED)*
ASSETS:
CURRENT ASSETS:
CASH $169,288 $ 578,314
ACCOUNTS & NOTES RECEIVABLE 660,557 506,200
INVENTORIES 1,540,294 1,350,403
CONTRACT COSTS & RELATED
EST PROFITS IN EXCESS OF
APPLICABLE BILLINGS 1,319,823 1,188,189
PREPAID EXPENSES & OTHER
CURRENT ASSETS 71,515 47,019
TOTAL CURRENT ASSETS $3,761,477 $3,670,125
PLANT PROPERTY & EQUIPMENT 1,204,933 1,203,241
OTHER ASSETS:
DEFERRED TAX ASSETS 579,319 587,338
OTHER NON CURRENT ASSETS 91,379 93,919
TOTAL OTHER ASSETS 670,698 681,257
TOTAL ASSETS $5,637,108 $5,554,623
LIABILITIES & STOCKHOLDERS EQUITY:
CURRENT LIABILITIES
TRADE ACCOUNTS PAYABLE $383,920 $269,108
ACCRUED LIABILITIES 366,478 263,645
BILLINGS IN EXCESS OF
CONTRACT COSTS & RELATED
ESTIMATED PROFITS 1,045,214 1,045,214
CURRENT PORTION OF LONG
TERM DEBT 327,276 322,608
TOTAL CURRENT LIABILITIES $2,122,888 $1,900,575
LONG TERM PORTION OF LONG
TERM DEBT 2,252,769 2,413,565
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 (1,328,010)(1,348,978)
1,524,284 1,503,316
LESS TREASURY STOCK AT COST (520,150) (520,150)
TOTAL STOCKHOLDERS' EQUITY 1,004,133 983,165
TOTAL LIABILITIES & STOCK-
HOLDERS' EQUITY $5,637,108 $5,554,623
*- CONDENSED FROM AUDITED FINANCIAL STATEMENTS
1
THE DEWEY ELECTRONICS CORPORATION
CONDENSED INCOME STATEMENT
SIX MONTHS ENDED DECEMBER 31,
1995 % OF SALES 1994 % OF SALES
REVENUES $1,954,503 100.00% $4,189,268 100.00%
COST OF REVENUES 1,290,694 66.04% 3,294,875 78.65%
GROSS PROFIT / (LOSS) 663,809 33.96% 894,393 21.35%
SELLING & ADMIN
EXPENSES 521,003 26.66% 547,035 13.06%
OPERATING PROFIT / (LOSS) 142,806 7.31% 347,358 8.29%
INTEREST EXPENSE 125,352 6.41% 150,422 3.59%
BANK FINANCING FEES 4,036 0.21% 29,768 0.71%
OTHER (INCOME)/EXPENSE (15,569) -0.80% (12,536) -0.30%
INCOME / (LOSS) BEFORE
TAXES 28,987 2.44% 179,705 4.29%
DEFERRED TAX BENEFIT/
(EXPENSE) (8,019) -0.41% (51,580) -1.23%
NET INCOME / (LOSS) $20,968 1.07% $128,125 3.06%
====== ===== ====== =====
INCOME PER SHARE BEFORE
TAXES
PRIMARY $0.02 $0.13
FULLY DILUTED $0.02 $0.13
NET INCOME PER SHARE
PRIMARY $0.02 $0.10
FULLY DILUTED $0.02 $0.10
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
PRIMARY 1,339,531 1,339,531
FULLY DILUTED 1,339,531 1,339,531
2
THE DEWEY ELECTRONICS CORPORATION
CONDENSED INCOME STATEMENT
THREE MONTHS ENDED DECEMBER 31,
1995 % OF SALES 1994 % OF SALES
REVENUES $1,187,820 100.00% $2,113,929 100.00%
COST OF REVENUES 841,540 70.85% 1,689,893 79.94%
GROSS PROFIT / (LOSS) 346,280 29.15% 424,036 20.06%
SELLING & ADMIN
EXPENSES 283,680 23.88% 294,940 13.95%
OPERATING PROFIT / (LOSS) 62,600 5.27% 129,096 6.11%
INTEREST EXPENSE 61,915 5.21% 70,138 3.32%
BANK FINANCING FEES 2,018 0.17% 14,884 0.70%
OTHER (INCOME)/EXPENSE (10,398) -0.88% (7,495) -0.35%
INCOME / (LOSS) BEFORE
TAXES 9,06 0.76% 51,569 2.44%
DEFERRED TAX BENEFIT/
(EXPENSE) 0 0.00% 0 0.00%
NET INCOME / (LOSS) $9,065 0.76% $51,569 2.44%
====== ===== ====== =====
INCOME PER SHARE BEFORE
TAXES
PRIMARY $0.01 $0.04
FULLY DILUTED $0.01 $0.04
NET INCOME PER SHARE
PRIMARY $0.01 $0.04
FULLY DILUTED $0.01 $0.04
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
PRIMARY 1,339,531 1,339,531
FULLY DILUTED 1,339,531 1,339,531
3
THE DEWEY ELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31,
1995 1994
CASH FLOWS FROM OPERATIONS:
NET (LOSS)/INCOME $20,968 $128,126
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION 61,529 60,419
(INCREASE)/DECREASE IN ACCOUNTS AND
NOTES RECEIVABLE (154,357) (267,692)
(INCREASE)/DECREASE IN INVENTORIES(189,891) (8,299)
(INCREASE)/DECREASE IN CONTRACT COSTS
AND RELATED ESTIMATED PROFITS IN EXCESS
OF APPLICABLE BILLINGS (131,635) 907,469
(INCREASE)/DECREASE IN PREPAID EXPENSES
AND OTHER CURRENT ASSETS (24,496) (30,994)
INCREASE/(DECREASE) IN ACCOUNTS
PAYABLE 114,812 32,463
INCREASE/(DECREASE) IN ACCRUED
EXPENSES 102,833 (65,324)
DECREASE IN OTHER ASSETS 10,559 72,991
TOTAL ADJUSTMENTS ($210,646) $701,033
NET CASH (USED IN)/PROVIDED BY
OPERATIONS ($189,678) $829,159
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT, PROPERTY AND
EQUIPMENT (63,221) (2,455)
NET CASH (USED IN) INVESTING ($63,221) ($2,455)
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS OF LONG TERM
DEBT (156,127) (707,529)
NET CASH (USED IN)/PROVIDED BY
FINANCING ($156,127) ($707,529)
NET INCREASE/(DECREASE) IN CASH ($409,026) $119,175
CASH AT BEGINNING OF PERIOD 578,314 367,202
CASH AT END OF PERIOD $169,288 $486,377
======= =======
4
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 six month period ended December 31, 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.
December 31, 1995 June 30, 1995
(UNAUDITED) (AUDITED)
Finished Goods $587,301 $445,001
Work In Process $391,268 $373,967
Raw Materials $561,725 $531,435
________ ________
Total $1,540,294 $1,350,403
======= =======
NOTE 3: NET INCOME PER SHARE
Net income per share for the three and six months ended December 31, 1995 is
based upon the weighted average number of shares outstanding. For the
periods ended December 31, 1995, and December 31, 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.
5
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.
6
THE DEWEY ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis contains certain forward-looking
statements that should be read in conjunction with the continuing statements
appearing at the end of the discussion.
Six months ended December 31, 1995 vs. 1994
- ---------------------------------------------------------------
Revenues for the first six months this year were $1,954,503, a decrease of
$2,234,765 compared to last year's revenues for the same period. This decrease
in revenues is the result of a reduction in both the electronic product segment
and the leisure product segment.
Electronic product revenues decreased by $2,045,957 compared to the same six
month period last year (from $3,568,663 to $1,522,706). Production curtailments
due to engineering changes in the Fleet Exercise Section (FES) project adversely
impacted this year's first quarter revenues. FES production was delayed pending
government approval of these engineering changes, which was received in
September. FES production resumed during the second quarter with a revised
delivery schedule. Although the Company expects that production will continue
more steadily, revenues and profits will be lower than in recent years.
It is expected however, that the Company will show a profit for the second half
of this fiscal year.
For the first six month period this year, 76.5% of electronic product revenues
were the result of production efforts under the Navy's MK48 ADCAP Torpedo
Program, of which the FES project provided 48.8%, the MK21 Exploder Assembly
upgrade project provided 24.5% and the original awards under the ADCAP Torpedo
program provided 3.2%. The remaining 23.5% 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.
In the first six months of last year, 72.3% of electronic product revenues were
attributable to the ADCAP Torpedo Program, of which the FES project provided
53.5%, the Exploder Assembly upgrade project provided 18.0% and original awards
provided .8%. Revenues from short term, government related projects provided
the remaining 27.7%.
7
Delivery of the FES project is scheduled to be completed in January 1997. The
contract awarded for the upgrade of MK21 Exploder Assemblies requires the Navy
to provide exploder assemblies to be upgraded. Based on the current rate at
which the assemblies are being received, scheduled completion is estimated to be
July 1997. However, this delivery schedule is currently being reviewed.
As of December 31, 1995, the aggregate value of the Company's backlog of
electronic products not previously recorded as revenues was approximately
$1.2 million. It is estimated that approximately $1 million of this amount will
be recognized as revenues during the balance of the 1996 fiscal year. The
following were the approximate aggregate values on the following dates of the
Company's backlog of electronic products not theretofore recorded as
revenues: June 30, 1995 - $1 million; December 31, 1994 $3 million;
June 30, 1994 - $6 million.
Revenues from leisure products decreased by $188,808 (from $620,605 to
$431,797) compared to the same six months of last year, as the result of fewer
snowmaking machines being sold.
The major portion of revenues from this segment of business have been
traditionally recorded during the second quarter. This season, weather
conditions have been favorable for ski areas in general, and orders continue to
be received into the third quarter.
Operating profit decreased by $204,552 compared to last year. This was
partially offset by lower interest expense and Bank fees resulting from
principal reduction payments being made.
Three Months Ended December 31, 1995 vs 1994
======================================
Revenues for the second quarter this year were $1,187,820 compared to $2,113,929
last year. The decrease of $929,106 resulted from a reduction in revenues in
the electronic segment of $802,015 and $124,094 in the leisure segment of
business.
Operating income of $62,600 this year is $66,496 less than last year,
principally as a result of reduced production levels in the electronics
segment.
See the discussions of six-month results above.
8
Liquidity and Capital Resources at December 31, 1995
==========================================
The Company's working capital as of December 31, 1995 was $1,638,589 compared
to $1,769,550 at June 30, 1995. This reduction of $130,961 can be attributed
to an increase in trade payables and accrued expenses.
For the six month period ended December 31, 1995, operations used $189,678 in
net cash flow. This amount reflects the impact of increased inventory levels
during the period.
During the same period last year, operations provided $829,159 in net cash flow
as a result of the billing of contract costs and related estimated profits.
This cash flow was used to make additional principal reduction payments of the
Company's long term debt.
Expenditures for plant, property and equipment used $63,221 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 for 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
December 31, 1995 was $1,890,800. The amount outstanding under its note to the
New Jersey Economic Development Authority was $517,936.
9
Business Uncertainties
==================
Each of the Company's two business segments, electronic products and leisure
products, are experiencing intense competition and the impact of the difficult
economic environment.
Electronic Products
Most of the Company's revenues are derived from the electronic product segment
of its business. Virtually all electronic product revenues are attributable to
business with the Department of Defense of the federal government (or with prime
government contractors). During the last two fiscal years and periods
subsequent thereto, a single U.S. Navy program, the MK48 ADCAP Torpedo Program,
has been responsible for all of the Company's long-term
government contract revenues and has accounted for from two-thirds to three-
quarters of total revenues from government-related business. The Company
expects that the U.S. Navy will continue to consider this program as necessary
to national defense.
Electronic product revenues are determined by the percentage of completion
method of accounting. The use of estimates to complete projects is required
under this accounting method. These estimates are reviewed by management on an
ongoing basis and are adjusted when necessary in the opinion of management.
No significant adjustments are anticipated to be made to current estimates; but
changes in contract requirements and the efforts needed to meet such changes are
normal events in the defense electronics industry
and have affected work under aspects of the ADCAP Torpedo Program.
Leisure Products
Taking advantage of competitive pressures in the snow-making machine industry,
ski areas have become reluctant to make purchase commitments for machines in
advance of required delivery dates, forcing manufacturers to carry larger
inventories and adding to such uncertainties of the snow-making machine business
as weather conditions.
Properties
The Company owns approximately 90 acres of land and the building it occupies in
Bergen County, New Jersey, which are carried on its books at approximately
$1,000,000 but which are believed to have a fair market value substantially in
excess of this amount. This property is adjacent to a full interchange of
Interstate Route 287. The Company has for some time
been exploring alternative methods of increasing its shareholders' equity by
realizing the value of this property, such as the sale of some or all of the
property, a sale lease-back arrangement or long-term financing. The northern
New Jersey real estate market has not been favorable for such a transaction in
recent years and no assurances can be made that any transaction will occur.
10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders
- ---------------------------------------------------------------------------
On December 6, 1995, at the Company's annual meeting of shareholders, the
following five directors were elected to serve for the ensuing year. Set forth
below are the numbers of votes cast for, or withheld with respect to, each such
person (who were the only nominees for directors):
Name For Withheld
Alexander A. Cameron 1,128,040 3,200
Frances D. Dewey 1,128,157 3,083
Gordon C. Dewey 1,128,157 3,083
Peter Eustis 1,128,157 3,083
John G. McQuaid 1,128,157 3,083
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------------------------------
No reports on Form 8-K have been filed during the quarter ended December 31,
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
February 14, 1996 _________________________________
Date Thom A. Velto, Treasurer
Principal Accounting Officer
February 14, 1996 ________________________________
Date Edward L. Proskey
Vice President, Operations
11
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> DEC-31-1995
<CASH> 169,288
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<RECEIVABLES> 660,557
<ALLOWANCES> 0
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<COMMON> 16,934
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<CGS> 0
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<INCOME-TAX> (8,019)
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