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, 1996 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 September 30, 1996.
THE DEWEY ELECTRONICS CORPORATION
INDEX
Part I Financial Information Page No.
Condensed balance sheets -
September 30, 1996 and June 30, 1996 1
Condensed statements of income -
Three months ended September 30, 1996
and September 30, 1995 2
Statements of cash flows for the three months
ended September 30, 1996 and 1995 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
1996 1996
(UNAUDITED) (AUDITED)*
ASSETS:
CURRENT ASSETS:
CASH $ 551,384 $ 88,402
ACCOUNTS & NOTES RECEIVABLE 521,932 1,029,246
INVENTORIES 1,284,259 1,416,163
CONTRACT COSTS & RELATED EST PROFITS
IN EXCESS OF APPLICABLE BILLINGS 1,060,756 1,111,967
PREPAID EXPENSES & OTHER CURRENT ASSETS 43,299 11,334
TOTAL CURRENT ASSETS $3,461,630 $3,657,112
PLANT PROPERTY & EQUIPMENT 1,171,301 1,202,659
OTHER ASSETS:
DEFERRED TAX ASSETS 458,225 422,295
OTHER NON CURRENT ASSETS 88,865 89,876
TOTAL OTHER ASSETS 547,090 512,171
TOTAL ASSETS $5,180,021 $5,371,942
LIABILITIES & STOCKHOLDERS EQUITY:
CURRENT LIABILITIES
TRADE ACCOUNTS PAYABLE $380,343 $370,807
ACCRUED LIABILITIES 305,933 373,401
BILLINGS IN EXCESS OF CONTRACT COSTS &
RELATED ESTIMATED PROFITS 701,608 701,608
CURRENT PORTION OF LONG TERM DEBT 334,682 332,158
TOTAL CURRENT LIABILITIES $1,722,566 $1,777,974
LONG TERM PORTION OF LONG TERM DEBT 2,006,861 2,089,478
OTHER LONG TERM LIABILITY 77,179 77,179
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 (1,158,729) (1,104,833)
1,693,565 1,747,461
LESS TREASURY STOCK AT COST (520,150) (520,150)
TOTAL STOCKHOLDERS' EQUITY 1,173,415 1,227,311
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $5,180,021 $5,371,942
*- CONDENSED FROM AUDITED FINANCIAL STATEMENTS
THE DEWEY ELECTRONICS CORPORATION
CONDENSED INCOME STATEMENT
SEPTEMBER 30, 1996
THREE MONTHS ENDED SEPTEMBER 30,
1996 % OF SALES 1995 % OF SALES
REVENUES $954,187 100.00% $766,683 100.00%
COST OF REVENUES 754,610 79.08% 449,153 58.58%
GROSS PROFIT / (LOSS) 199,577 20.92% 317,530 41.42%
SELLING & ADMIN EXPENSES 228,140 23.91% 237,324 30.95%
OPERATING PROFIT / (LOSS) (28,563) -2.99% 80,206 10.46%
INTEREST EXPENSE 59,960 6.28% 63,437 8.27%
BANK FINANCING FEES 2,018 0.21% 2,018 0.26%
OTHER (INCOME)/EXPENSE (715) -0.07% (5,171) -0.67%
INCOME / (LOSS) BEFORE TAXES (89,826) -9.41% 19,922 2.60%
DEFERRED TAX BENEFIT/(EXPENSE) 35,930 3.77% (8,019) -1.05%
NET INCOME / (LOSS) ($53,896) -5.65% $11,903 1.55%
====== ===== ====== =====
INCOME PER SHARE BEFORE TAXES
PRIMARY ($0.07) $0.01
FULLY DILUTED ($0.07) $0.01
NET INCOME PER SHARE
PRIMARY ($0.04) $0.01
FULLY DILUTED ($0.04) $0.01
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
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SEPTEMBER 30,
1996 1995
CASH FLOWS FROM OPERATIONS:
NET INCOME (53,896) 11,903
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION 31,358 30,216
DECREASE/(INCREASE) IN ACCOUNTS AND
NOTES RECEIVABLE 507,314 (113,931)
DECREASE/(INCREASE) IN INVENTORIES 131,904 (310,686)
DECREASE/(INCREASE) IN CONTRACT COSTS
AND RELATED ESTIMATED PROFITS IN EXCESS
OF APPLICABLE BILLINGS 51,211 (4,237)
(INCREASE)/DECREASE IN PREPAID EXPENSES
AND OTHER CURRENT ASSETS (31,965) 29,938
(DECREASE)/INCREASE IN ACCOUNTS PAYABLE 9,536 64,226
(DECREASE)/INCREASE IN ACCRUED EXPENSES (67,468) 48,454
(INCREASE)/DECREASE IN OTHER ASSETS (34,919) 9,393
TOTAL ADJUSTMENTS $596,971 ($246,627)
NET CASH PROVIDED BY/(USED IN) OPERATIONS $543,075 ($234,724)
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT, PROPERTY AND
EQUIPMENT -- (52,675)
NET CASH (USED IN) INVESTING -- ($52,675)
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS OF LONG TERM DEBT (80,093) (77,785)
NET CASH (USED IN) FINANCING ($80,093) ($77,785)
NET (DECREASE)/INCREASE IN CASH $462,982 ($365,184)
CASH AT BEGINNING OF PERIOD 88,402 578,314
CASH AT END OF PERIOD $551,384 $213,130
======= =======
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, 1996
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 period.
September 30, 1996 June 30, 1996
(UNAUDITED) (AUDITED)
Finished Goods $362,324 $546,731
Work In Process $500,384 $376,103
Raw Materials $421,551 $493,329
________ ________
Total $1,284,259 $1,416,163
======== ========
NOTE 3: NET INCOME PER SHARE
Net income per share for the three months ended September 30, 1996
is based upon the weighted average number of shares outstanding. For the
periods ended September 30, 1996, and September 30, 1995, 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
1996 and in 1995.
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.
NOTE 7: USE OF ESTIMATES
The process of preparing financial statements in conformity with Generally
Accepted Accounting Principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses.
Such estimates primarily relate to unsettled transactions and events as of the
date of the financial statements. Accordingly, upon settlement, actual
results may differ from estimated amounts.
5
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 cautionary statements
appearing under "Current Business Environment" and elsewhere in Item 7 of the
Company's Report on Form 10-K for its fiscal year ended June 30, 1996.
Reference is made generally to the information contained in the Form
10-K.
Three months ended September 30, 1996 vs. 1995
- ---------------------------------------------
For the first quarter of this fiscal year, revenues were $954,187, an increase
of $187,504 from last year's first quarter revenues of $766,683. This increase
in revenues is the result of an increase in leisure segment revenues
discussed below.
Electronic product revenues during this quarter decreased by $3,173 (from
$689,700 last year to $686,527 this year). Leisure product revenues
increased by $190,677 (from $76,983 to $267,660).
Electronic product revenues remained virtually level with the same period
last year. While the new tactical generator set project with the U.S. Army
awarded on August 23, 1996 accounted for a portion of the revenues, most
such revenues from long-term projects continued to be derived from the U.S.
Navy's MK48 ADCAP Torpedo Program. The ADCAP program provided
54% of the quarter's electronic product revenues (with the FES project
contributing 42% and the MK21 Exploder Assembly upgrade project contributing
12%) and the new Army project provided 6%. The remaining 40% of electronic
product revenues was derived from various orders, limited in scope and
duration, for Department of Defense and other replacement
equipment.
In last year's first quarter, the FES project provided 45% of revenues, the
Exploder Assembly upgrade project provided 35% and the original ADCAP
Torpedo project provided 7%. Revenues from short term projects provided the
remaining 13%.
6
As of September 30, 1996, the aggregate value of the Company's backlog of
electronic products not previously recorded as revenues was approximately
$1 million. It is estimated that this backlog will be recognized as
revenues during the 1997 fiscal year. Virtually all of the
September 30 backlog was accounted for by the new Army tactical generator
set contract. The contract allows for additional production orders spanning
a 5 year period, with 5 separate ordering periods, and has a potential for
sales of up to approximately $40 million. The Company anticipates that the
Army will place these additional production orders in succeeding
years but the Army is not obligated to do so and there can be no assurance
that it will.
At June 30, 1996, the aggregate value of the Company's backlog of electronic
products not previously recorded as revenues, similarly amounting to
approximately $1 million, consisted of the then remaining work on the ADCAP
Torpedo program.
In the leisure and recreation segment, revenues increased by $190,677
primarily as a result of increased snowmaking machine sales compared to last
year. By utilizing current inventory levels, snowmaking machines were made
available for delivery earlier in the season than they had been in past
years. Production efforts are still in process and it is anticipated that
second quarter revenues will exceed those of the second quarter of last year.
Spare parts sales in this segment are below last year levels, which is
attributable to a slower start in the industry compared to last year due to
weather conditions.
Operations resulted in a loss for the first quarter, in contrast to a profit
shown for the corresponding quarter of the last fiscal year, due primarily
to lower profit margins on electronics segment business. The Company is
emphasizing overhead cost reduction and, based on current estimates,
believes that the balance of the current fiscal year should show
improvement.
Liquidity and Capital Resources at September 30, 1996
- -----------------------------------------------------
The Company's working capital as of September 30, 1996 was $1,739,014
compared to $1,879,138 at June 30, 1996. The reduction of $140,074 is
attributable to a reduction in inventory levels in the amount of $131,904.
It is during the first quarter that the greatest demand is made on working
capital due to the strong inventory requirements and investment required to
produce snowmaking machines for sale in subsequent fiscal quarters.
7
For the three month period ending September 30, 1996, $543,075 net cash flow
was provided by operations. This reflects the impact of reduced accounts
receivable during the period in the amount of $507,314, which at the end of
the period was reflected in cash balances.
During the same period last year, $234,724 in net cash flow was used in
operations. This was primarily the result of increased inventory levels
during the period in the amount of $310,686.
This year, no expenditures were made for investing activities. Last year,
expenditures for plant, property and equipment used $52,675, of which
$40,000 was applied to the purchase of production machinery which had
previously been leased.
The principal amount outstanding under the Company's term loan agreement
with Fleet Bank NJ as of September 30, 1996 was $1,725,200. The amount
outstanding under its note to the New Jersey Economic Development Authority
was $438,389.
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, 1996.
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, 1996 _________________________________
Thom A. Velto, Treasurer
Principal Accounting Officer
November 13, 1996 ________________________________
Edward L. Proskey
Vice President, Operations
9
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<FISCAL-YEAR-END> JUN-30-1997
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<COMMON> 16,934
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