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 March 31, 1997 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 March 31, 1997.
THE DEWEY ELECTRONICS CORPORATION
INDEX
Part I Financial Information Page No.
Condensed balance sheets -
March 31, 1997 and June 30, 1996 1
Condensed statements of income -
Nine months ended Mach 31, 1997
and March 31, 1996 2
Three months ended March 31, 1997
and March 31, 1996 3
Statements of cash flows for the nine months
ended March 31, 1997 and 1996 4
Notes to condensed financial statements 5
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 11
THE DEWEY ELECTRONICS CORPORATION
CONDENSED BALANCE SHEET
MARCH 31 JUNE 30
1997 1996
(UNAUDITED) (AUDITED)*
ASSETS:
CURRENT ASSETS:
CASH $372,481 $ 88,402
ACCOUNTS RECEIVABLE 499,883 1,029,246
INVENTORIES 1,059,034 1,416,163
CONTRACT COSTS & RELATED EST PROFITS
IN EXCESS OF APPLICABLE BILLINGS 1,254,855 1,111,967
PREPAID EXPENSES & OTHER CURRENT ASSETS 1,068 11,333
TOTAL CURRENT ASSETS $3,187,320 $3,657,112
PLANT PROPERTY & EQUIPMENT 1,123,891 1,202,659
OTHER ASSETS:
DEFERRED TAX ASSETS 505,599 422,295
OTHER NON CURRENT ASSETS 61,843 89,876
TOTAL OTHER ASSETS 567,442 512,171
TOTAL ASSETS $4,878,653 $5,371,942
LIABILITIES & STOCKHOLDERS EQUITY:
CURRENT LIABILITIES
TRADE ACCOUNTS PAYABLE $233,003 $370,807
ACCRUED LIABILITIES 384,993 373,401
BILLINGS IN EXCESS OF CONTRACT COSTS &
RELATED ESTIMATED PROFITS 701,608 701,608
CURRENT PORTION OF LONG TERM DEBT 339,904 332,158
TOTAL CURRENT LIABILITIES $1,659,508 $1,777,974
LONG TERM PORTION OF LONG TERM DEBT 1,839,610 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 (1,229,788) (1,104,833)
1,622,506 1,747,461
LESS TREASURY STOCK AT COST (520,150) (520,150)
TOTAL STOCKHOLDERS' EQUITY 1,102,355 1,227,311
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $4,878,653 $5,371,942
*- CONDENSED FROM AUDITED FINANCIAL STATEMENTS--
1
THE DEWEY ELECTRONICS CORPORATION
CONDENSED INCOME STATEMENT
MARCH 31, 1997
NINE MONTHS ENDED MARCH 31,
1997 1996
REVENUES $2,979,357 $3,152,239
COST OF REVENUES 2,294,472 2,138,338
GROSS PROFIT / (LOSS) 684,885 1,013,901
SELLING & ADMIN EXPENSES 727,374 806,783
OPERATING PROFIT / (LOSS) (42,489) 207,118
INTEREST EXPENSE 166,645 186,478
BANK FINANCING FEES 6,054 6,054
OTHER (INCOME)/EXPENSE (6,928) (18,967)
INCOME / (LOSS) BEFORE TAXES (208,260) 33,553
DEFERRED TAX BENEFIT/(EXPENSE) 83,304 (13,421)
NET INCOME / (LOSS) $(124,956) $20,132
INCOME PER SHARE BEFORE TAXES
PRIMARY ($0.16) $0.03
FULLY DILUTED ($0.16) $0.03
NET INCOME PER SHARE
PRIMARY ($0.09) $0.02
FULLY DILUTED ($0.09) $0.02
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
MARCH 31, 1997
THREE MONTHS ENDED MARCH 31,
1997 1996
REVENUES $978,175 $1,197,736
COST OF REVENUES 688,942 847,644
GROSS PROFIT / (LOSS) 289,233 350,092
SELLING & ADMIN EXPENSES 241,723 285,780
OPERATING PROFIT / (LOSS) 47,511 64,312
INTEREST EXPENSE 52,856 61,126
BANK FINANCING FEES 2,018 2,018
OTHER (INCOME)/EXPENSE (1,293) (3,398)
INCOME / (LOSS) BEFORE TAXES (6,071) 4,566
DEFERRED TAX BENEFIT/(EXPENSE) 2,429 (5,402)
NET INCOME / (LOSS) ($3,642) ($836)
INCOME PER SHARE BEFORE TAXES
PRIMARY ($0.00) $0.00
FULLY DILUTED ($0.00) $0.00
NET INCOME PER SHARE
PRIMARY ($0.00) ($0.00)
FULLY DILUTED ($0.00) ($0.00)
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
NINE MONTHS ENDED MARCH 31,
1997 1996
CASH FLOWS FROM OPERATIONS:
NET (LOSS)/INCOME ($124,956) $20,132
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION 97,110 96,741
DECREASE/(INCREASE) IN ACCOUNTS
RECEIVABLE 529,364 (68,593)
DECREASE/(INCREASE) IN INVENTORIES 357,129 (94,177)
(INCREASE) IN CONTRACT COSTS AND RELATED
ESTIMATED PROFITS IN EXCESS
OF APPLICABLE BILLINGS (142,888) (246,115)
DECREASE IN PREPAID EXPENSES
AND OTHER CURRENT ASSETS 10,266 22,461
(DECREASE)/INCREASE IN ACCOUNTS PAYABLE (137,804) 43,244
INCREASE IN ACCRUED EXPENSES 11,592 128,986
(INCREASE)/DECREASE IN OTHER ASSETS (55,271) 16,711
TOTAL ADJUSTMENTS $669,498 ($100,742)
NET CASH PROVIDED BY OPERATIONS $544,542 ($80,610)
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT, PROPERTY AND
EQUIPMENT ($18,341) (67,450)
NET CASH (USED IN) INVESTING ($18,341) (67,450)
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS OF LONG TERM DEBT (242,122) (235,040)
NET CASH (USED IN)/PROVIDED BY FINANCING ($242,122) ($235,040)
NET INCREASE/(DECREASE) IN CASH $284,079 ($383,100)
CASH AT BEGINNING OF PERIOD 88,402 578,314
CASH AT END OF PERIOD $372,481 $195,214
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 nine month period ended March 31,
1997 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.
March, 1997 June 30, 1996
(UNAUDITED) (AUDITED)
Finished Goods $236,575 $546,731
Work In Process $345,630 $376,103
Raw Materials $476,829 $493,329
________ ________
Total $1,059,034 $1,416,163
======= =======
NOTE 3: PLANT, PROPERTY AND EQUIPMENT
Property, plant and equipment are stated at cost. Allowance for
depreciation and amortization is provided on a straight-line basis
over estimated useful lives of three to ten years for machinery and
equipment, ten years for furniture and fixtures, and twenty years for
building and improvements.
5
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3:
In 1996, the Company adopted Statement of Financial Accounting
Standards Cont'd("SFAS") 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of ("SFAS
121"). This standard specifies when assets should be reviewed for
impairment, how to determine if an asset is impaired, how to measure
an impairment loss, and what disclosures are necessary in the
financial statements. The effect of adopting SFAS 121 is not
considered significant.
NOTE 4: NET INCOME PER SHARE
Net income per share for the three and nine months ended March 31,
1997 is based upon the weighted average number of shares outstanding.
For the periods ended March 31, 1997, and March 31, 1996, 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 1997 and in 1996.
NOTE 5: 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, 1996, which
describes the Company's loss carryforwards available for financial
reporting and tax return purposes.
6
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6: 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 7: 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 8: 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.
7
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 Company's
report on Form 10-K for the fiscal year ended June 30, 1996.
Reference is made generally to the information contained in the Form
10-K.
Nine months ended March 31, 1997 vs. 1996
- ---------------------------------------------------------------
Revenues for the first nine months of this fiscal year were
$2,979,357, a decrease of $172,882 compared to last year's revenues
for the same period.
Electronic product revenues decreased by $511,020 when compared to the
same nine month period last year (from $2,543,318 to $2,032,298). The
new tactical generator set project, with the U.S. Army, which was
awarded on August 23, 1996, accounted for 40% of electronic product
revenues during the first nine months of this year. The U.S. Navy's
MK48 ADCAP torpedo program, which has in recent years provided most of
such revenues and is now substantially completed, accounted for 20%.
The remaining 40% of electronic product revenues was derived from
various orders, limited in scope and duration, for the Department of
Defense either directly or for major shipyard suppliers.
In the first nine months of fiscal 1996, 78% of electronic product
revenues were the result of production efforts under the ADCAP
program. Various orders, generally for replacement parts for
previously supplied Department of Defense equipment, accounted for the
remaining 22%.
As of March 31, 1997, the aggregate value of the Company's backlog of
electronic product orders not previously recorded as revenues was
approximately $.5 million. This is lower than the $1 million amount
at June 30, 1996 and March 31, 1996. It is anticipated that all of
this backlog will be recorded as revenues during the 1997 fiscal year.
On May 9, 1997, the Company received the first production order
quantity from the U.S. Army to provide tactical generator sets. This
order is in the amount of approximately $4.6 million. On August 23,
1996, when the company was awarded this contract, the Army placed an
initial order for approximately $1 million. The contract allows for
production orders spanning a 5 year period, with 5 separate ordering
periods and has the potential for sales of up to approximately $40
million. The order received on May 9,1997 was for the first of such
ordering periods and to date, the Company has received orders in the
amount of approximately $5.6 million of this award. There are four
more ordering periods remaining. However, there are no assurances
that the Army will continue to order any additional amounts.
8
As of June 30, 1996 and March 31, 1996, the aggregate value of the
Company's backlog of electronic product revenues not previously
recorded as revenues was also approximately $1 million. It consisted
of work to be performed under the ADCAP program, which the Company has
substantially completed.
In the leisure and recreation segment, revenues increased by $338,138
(from $608,921 to $947,059) when compared to the same nine month
period of last year. Sales of snowmaking machines continue to exceed
those of last year. By utilizing inventories, snowmaking machines
were made available for delivery earlier in the season than last year.
Machine sales continue to be stronger than in recent years. Spare
part sales in this segment are below last year's levels, because of a
slower start in the industry due to weather conditions.
The major portion of revenues from this segment of business have been
traditionally recorded during the second quarter.
Overall, the Company experienced an operating loss for the first nine
months, in contrast to a profitable nine month period last year. This
is primarily the result of lower production levels in the electronics
segment. The Company has been emphasizing overhead cost reductions
and, based on current estimates, believes that the balance of the
current fiscal year will show continued improvements as a result of
these efforts. As of April 30, 1997, the Company had a work force of
24 employees, of whom seven were technical or professional personnel
(in contrast to 33 and nine at August 30, 1996.
Three Months Ended March 31, 1997 vs 1996
======================================
Revenues for the third quarter this year were $978,175 compared to
$1,197,736 last year. The decrease of $219,561 in revenues was
attributable to a $233,668 decrease in electronic product revenues.
It was offset by lower costs, resulting in an operating profit of
$47,511 compared to an operating profit of $64,312 last year.
See the discussions of nine month results above.
Liquidity and Capital Resources at March 31, 1997
==========================================
The Company's working capital as of March 31, 1997 was $1,527,812
compared to $1,879,138 at June 30, 1996. This reduction of $318,088
can be attributed to the Company's operating loss and to a reduction
in snowmaking inventories through sales.
9
For the nine month period ended March 31, 1997, operations provided
$544,542 in net cash flow. This amount reflects the impact of the
reduced trade receivables and inventories which resulted in reduced
payables and increased cash balances.
During the same period last year, operations used $80,610 in net cash
flow as a result of increased inventory levels.
Expenditures for plant, property and equipment used $18,341. Last
year, capital expenditures amounted to $67,450 for the same period (of
which $40,000 was used towards the purchase of production machinery
which had previously been leased).
The Company continues to meet its short term liquidity needs 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 Fleet Bank ("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 March 31, 1997 was $1,614,800. The amount outstanding
under its note to the New Jersey Economic Development Authority was
$382,307.
10
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 March
31, 1997.
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
May 14, 1997
Date Thom A. Velto, Treasurer
Principal Accounting Officer
May 14, 1997
Date Edward L. Proskey
Vice President, Operations
11
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 372,481
<SECURITIES> 0
<RECEIVABLES> 499,883
<ALLOWANCES> 0
<INVENTORY> 1,059,034
<CURRENT-ASSETS> 3,187,320
<PP&E> 4,774,069
<DEPRECIATION> 3,650,179
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<CURRENT-LIABILITIES> 1,659,508
<BONDS> 0
0
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<COMMON> 16,934
<OTHER-SE> 1,085,421
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<SALES> 0
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<INCOME-PRETAX> (208,260)
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<INCOME-CONTINUING> (124,956)
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