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, 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 December 31, 1996.
THE DEWEY ELECTRONICS CORPORATION
INDEX
Part I Financial Information Page
No.
Condensed balance sheets -
December 31, 1996 and June 30, 1996 1
Condensed statements of income -
Six months ended December 31, 1996
and December 31, 1995 2
Three months ended December 31, 1996
and December 31, 1995 3
Statements of cash flows for the six months
ended December 31, 1996 and 1995 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
1996 1996
(UNAUDITED) (AUDITED)*
ASSETS:
CURRENT ASSETS:
CASH $449,256 $ 88,402
ACCOUNTS & NOTES RECEIVABLE 532,244 1,029,246
INVENTORIES 1,185,198 1,416,163
CONTRACT COSTS & RELATED EST PROFITS
IN EXCESS OF APPLICABLE BILLINGS 1,084,359 1,111,967
PREPAID EXPENSES & OTHER CURRENT
ASSETS 36,675 11,334
TOTAL CURRENT ASSETS $3,287,732 $3,657,112
PLANT PROPERTY & EQUIPMENT 1,154,680 1,202,659
OTHER ASSETS:
DEFERRED TAX ASSETS 503,170 422,295
OTHER NON CURRENT ASSETS 87,854 89,876
TOTAL OTHER ASSETS 591,024 512,171
TOTAL ASSETS $5,033,436 $5,371,942
LIABILITIES & STOCKHOLDERS EQUITY:
CURRENT LIABILITIES
TRADE ACCOUNTS PAYABLE $335,100 $370,807
ACCRUED LIABILITIES 352,710 373,401
BILLINGS IN EXCESS OF CONTRACT COSTS &
RELATED ESTIMATED PROFITS 701,608 701,608
CURRENT PORTION OF LONG TERM DEBT 337,264 332,158
TOTAL CURRENT LIABILITIES $1,726,682 $1,777,974
LONG TERM PORTION OF LONG TERM DEBT 1,923,577 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 (1,226,146) (1,104,833)
1,626,148 1,747,461
LESS TREASURY STOCK AT COST (520,150) (520,150)
TOTAL STOCKHOLDERS' EQUITY 1,105,998 1,227,311
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $5,033,436 $5,371,942
*- CONDENSED FROM AUDITED FINANCIAL STATEMENTS
1
THE DEWEY ELECTRONICS CORPORATION
CONDENSED INCOME STATEMENT
DECEMBER 31, 1996
SIX MONTHS ENDED DECEMBER 31,
1996 % OF SALES 1995 % OF SALES
REVENUES $2,001,182 100.00% $1,954,50 100.00%
COST OF REVENUES 1,605,530 80.23% 1,290,694 66.04%
GROSS PROFIT / (LOSS) 395,652 19.77% 663,809 33.96%
SELLING & ADMIN
EXPENSES 485,651 24.27% 521,003 26.66%
OPERATING PROFIT / (LOSS) (89,999 -4.50% 142,806 7.31%
INTEREST EXPENSE 113,789 5.69% 125,352 6.41%
BANK FINANCING FEES 4,036 0.20% 4,036 0.21%
OTHER (INCOME)/EXPENSE (5,635) -0.28% (15,569) -0.80%
INCOME / (LOSS) BEFORE
TAXES (202,189) -10.10% 28,987 1.48%
DEFERRED TAX
BENEFIT/(EXPENSE) 80,875 4.04% (8,019) -0.41%
NET INCOME / (LOSS) $(121,314) -6.06% $20,968 1.07%
INCOME PER SHARE BEFORE
TAXES
PRIMARY ($0.15) $0.02
FULLY DILUTED ($0.15) $0.02
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
DECEMBER 31, 1996
THREE MONTHS ENDED DECEMBER 31,
1996 % OF SALES 1995 % OF SALES
REVENUES $1,046,995 100.00% $1,187,820 100.00%
COST OF REVENUES 850,920 81.27% 841,541 70.85%
GROSS PROFIT / (LOSS) 196,075 18.73% 346,279 29.15%
SELLING & ADMIN
EXPENSES 257,511 24.60% 283,679 23.88%
OPERATING PROFIT/(LOSS)(61,436) -5.87% 62,600 5.27%
INTEREST EXPENSE 53,829 5.14% 61,915 5.21%
BANK FINANCING FEES 2,018 0.19% 2,018 0.17%
OTHER (INCOME)/
EXPENSE (4,920) -0.47% (10,398) -0.88%
INCOME / (LOSS) BEFORE
TAXES (112,363) -10.73% 9,065 0.76%
DEFERRED TAX
BENEFIT/(EXPENSE) 44,945 4.29% 0 0.00%
NET INCOME / (LOSS) ($67,418) -6.44% $9,065 0.76%
INCOME PER SHARE BEFORE
TAXES
PRIMARY ($0.08) $0.01
FULLY DILUTED ($0.08) $0.01
NET INCOME PER SHARE
PRIMARY ($0.05) $0.01
FULLY DILUTED ($0.05) $0.01
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,
1996 1995
CASH FLOWS FROM OPERATIONS:
NET (LOSS)/INCOME ($121,314) $20,968
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION 62,718 61,529
DECREASE/(INCREASE) IN ACCOUNTS AND
NOTES RECEIVABLE 497,002 (154,357)
DECREASE/(INCREASE) IN INVENTORIES 230,965 (189,891)
DECREASE/(INCREASE) IN CONTRACT
COSTS AND RELATED ESTIMATED
PROFITS IN EXCESS OF APPLICABLE
BILLINGS 27,608 (131,635)
(INCREASE)/DECREASE IN PREPAID
EXPENSES AND OTHER CURRENT
ASSETS (25,342) (24,496)
(DECREASE)/INCREASE IN ACCOUNTS
PAYABLE (35,707) 114,812
(DECREASE)/INCREASE IN ACCRUED
EXPENSES (20,691) 102,833
(INCREASE)/DECREASE IN OTHER ASSETS (78,853) 10,559
TOTAL ADJUSTMENTS $657,700 ($210,646)
NET CASH PROVIDED BY OPERATIONS $536,386 ($189,678)
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT, PROPERTY
AND EQUIPMENT (14,737) (63,221)
NET CASH (USED IN) INVESTING ($14,737) ($63,221)
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS OF LONG TERM
DEBT (160,795) (156,127)
NET CASH (USED IN)/PROVIDED BY
FINANCING ($160,795) ($156,127)
NET INCREASE/(DECREASE) IN CASH $360,854 ($409,026)
CASH AT BEGINNING OF PERIOD 88,402 578,314
CASH AT END OF PERIOD $449,256 $169,288
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, 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 periods.
December 31, 1996 June 30, 1996
(UNAUDITED) (AUDITED)
Finished Goods $424,421 $546,731
Work In Process $315,157 $376,103
Raw Materials $445,620 $493,329
________ ________
Total $1,185,198 $1,416,163
======= =======
NOTE 3: NET INCOME PER SHARE
Net income per share for the three and six months ended December 31, 1996 is
based upon the weighted average number of shares outstanding. For the
periods ended December 31, 1996, and December 31, 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.
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, 1996, 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.
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 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.
Six months ended December 31, 1996 vs. 1995
- ---------------------------------------------------------------
Revenues for the first six months of this fiscal year were $2,001,182,
an increase of $46,679 compared to last year's revenues for the same
period.
Electronic product revenues decreased by $277,352 when compared to the
same six month period last year (from $1,522,706 to $1,245,354). The
new tactical generator set project, with the U.S. Army, which was
awarded on August 23, 1996, accounted for 22% of electronic product
revenues during the first six months of this year. The U.S. Navy's
MK48 ADCAP torpedo program, which has in recent years provided most of
such revenues, accounted for 33%. The remaining 45% 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 six months of fiscal 1995, 76% 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 24%.
As of December 31, 1996, the aggregate value of the Company's backlog
of electronic product revenues not previously recorded as revenues was
approximately $1 million. Most of this December 31 backlog was
accounted for by the U.S. Army tactical generator set project and will
be recorded as revenues during the 1997 fiscal year.
As of June 30, 1996 and December 31, 1995, 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.
7
In the leisure and recreation segment, revenues increased by $324,031
(from $431,797 to $755,828) when compared to the same six 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.
The major portion of revenues from this segment of business have been
traditionally recorded during the second quarter.
Spare part sales in this segment are below last year's levels, because
of a slower start in the industry due to weather conditions.
Overall, the Company experienced an operating loss for the first six
months, in contrast to a profitable six month period last year. This
is primarily the result of lower production levels in the electronics
segment, and a lower first quarter profit margin in this segment, as
compared to last year when production curtailments reduced costs. The
Company has been emphasizing overhead cost reductions and, based on
current estimates, believes that the balance of the current fiscal
year will show improvements as a result of these efforts. As of
January 31, 1997, the Company had a work force of 27 employees, of
whom seven were technical or professional personnel (in contrast to 33
and nine at August 30, 1996 as reported in the Company's Form 10-K).
Three Months Ended December 31, 1996 vs 1995
======================================
Revenues for the second quarter this year were $1,046,995 compared to
$1,187,820 last year. The decrease of $140,825 resulted from a
reduction in revenues in the electronic segment of $274,179, offset in
part by an increase in revenues of $133,354 in the leisure segment of
business.
This year, the Company incurred a second quarter operating loss of
$61,436 compared to last year's operating income of $62,600. This is
principally a result of reduced production levels in the electronics
segment.
See the discussions of six-month results above.
Liquidity and Capital Resources at December 31, 1996
==========================================
The Company's working capital as of December 31, 1996 was $1,561,050
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 the
application of current assets to reduce trade payables.
8
For the six month period ended December 31, 1996, operations provided
$536,386 in net cash flow. This amount reflects the impact of the
reduced trade receivables during the period.
During the same period last year, operations used $189,678 in net cash
flow as a result of increased inventory levels.
Expenditures for plant, property and equipment used $14,737. Last
year, capital expenditures amounted to $63,221 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 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, 1996 was $1,670,000. The amount
outstanding under its note to the New Jersey Economic Development
Authority was $410,662.
9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders
- -----------------------------------------------------------------
On December 4, 1996, 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 1,127,819 9,661
Frances D. Dewey 1,127,937 9,543
Gordon C. Dewey 1,127,937 9,543
Peter Eustis 1,127,937 9,543
John G. McQuaid 1,127,937 9,543
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------------------------------
No reports on Form 8-K have been filed during the quarter ended
December 31, 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
February 12, 1997
Date Thom A. Velto, Treasurer
Principal Accounting Officer
February 12, 1997
Date Edward L. Proskey
Vice President, Operations
10
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> DEC-31-1996
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<PP&E> 4,773,498
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<COMMON> 16,934
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