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, 1998
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, 1998.
THE DEWEY ELECTRONICS CORPORATION
INDEX
Part I Financial Information Page No.
Condensed balance sheets -
March 31, 1998 and June 30, 1997 1
Condensed statements of income -
Nine months ended March 31, 1998
and March 31, 1997 2
Three months ended March 31, 1998
and March 31, 1997 3
Statements of cash flows for the nine months
ended March 31, 1998 and 1997 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 6. Exhibits and Reports on Form 8-K 10
THE DEWEY ELECTRONICS CORPORATION
CONDENSED BALANCE SHEET
MARCH 31, 1998 JUNE 30, 1997
UNAUDITED (AUDITED)*
ASSETS:
CURRENT ASSETS:
CASH $ 92,223 $318,058
ACCOUNTS RECEIVABLE 557,909 377,478
INVENTORIES 1,020,308 1,057,338
CONTRACT COSTS & RELATED
EST PROFITS IN EXCESS
OF APPLICABLE
BILLINGS 1,481,211 1,271,107
PREPAID EXPENSES & OTHER
CURRENT ASSETS 62,513 52,033
TOTAL CURRENT ASSETS $3,214,164 $3,076,013
PLANT PROPERTY &
EQUIPMENT $1,000,658 $1,085,260
OTHER ASSETS:
DEFERRED TAX ASSETS 580,066 421,280
OTHER NON CURRENT ASSETS 137,803 62,666
TOTAL OTHER ASSETS $ 717,869 $ 483,946
TOTAL ASSETS $4,932,691 $4,645,219
LIABILITIES & STOCKHOLDERS EQUITY:
CURRENT LIABILITIES:
TRADE ACCOUNTS PAYABLE $106,014 $116,082
ACCRUED LIABILITIES 484,655 407,644
BILLINGS IN EXCESS OF
CONTRACT COSTS & RELATED
ESTIMATED PROFITS 701,608 701,608
CURRENT PORTION OF
LONG TERM DEBT 146,353 342,604
TOTAL CURRENT
LIABILITIES $1,438,630 $1,567,938
LONG TERM PORTION OF
LONG TERM DEBT $2,235,001 $1,580,042
OTHER LONG TERM LIABILITY $62,699 $62,699
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 (1,335,783) (1,097,604)
1,516,511 1,754,690
LESS TREASURY STOCK AT
COST (520,150) (520,150)
TOTAL STOCKHOLDERS
EQUITY $ 996,361 $1,234,540
TOTAL LIABILITIES &
STOCKHOLDERS EQUITY $4,932,691 $4,645,219
*CONDENSED FROM AUDITED FINANCIAL STATEMENTS
1
THE DEWEY ELECTRONICS CORPORATION
CONDENSED INCOME STATEMENT
NINE MONTHS ENDED MARCH 31,
1998 1997
REVENUES $1,737,456 $2,979,357
COST OF REVENUES 1,364,044 2,294,472
GROSS PROFIT / (LOSS) 373,412 684,885
SELLING & ADMIN EXPENSES 613,036 727,374
OPERATING PROFIT / (LOSS) (239,624) (42,489)
INTEREST EXPENSE 158,226 166,645
BANK FINANCING FEES 0 6,054
OTHER (INCOME)/EXPENSE (886) (6,928)
INCOME / (LOSS) BEFORE TAXES (396,964) (208,260)
DEFERRED TAX BENEFIT/(EXPENSE) 158,786 83,304
NET INCOME / (LOSS) $(238,178) $(124,956)
INCOME PER SHARE BEFORE TAXES
PRIMARY $(0.30) $(0.16)
FULLY DILUTED $(0.30) $(0.16)
NET INCOME PER SHARE
PRIMARY $(0.18) $(0.09)
FULLY DILUTED $(0.18) $(0.09)
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 MARCH 31,
1998 1997
REVENUES $407,039 $978,175
COST OF REVENUES 369,840 688,942
GROSS PROFIT / (LOSS) 37,199 289,233
SELLING & ADMIN EXPENSES 214,873 241,723
OPERATING PROFIT / (LOSS) (177,672) 47,510
INTEREST EXPENSE 55,062 52,856
BANK FINANCING FEES 0 2,018
OTHER (INCOME)/EXPENSE 492 (1,293)
INCOME / (LOSS) BEFORE TAXES (233,226) (6,071)
DEFERRED TAX BENEFIT/(EXPENSE) 93,291 2,429
NET INCOME / (LOSS) $(139,935) $(3,642)
INCOME PER SHARE BEFORE TAXES
PRIMARY $(0.17) $(0.00)
FULLY DILUTED $(0.17) $(0.00)
NET INCOME PER SHARE
PRIMARY $(0.10) $(0.00)
FULLY DILUTED $(0.10) $(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,
1998 1997
CASH FLOWS FROM OPERATIONS:
NET (LOSS)/INCOME $(238,178) $(124,956)
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
DEPRECIATION 99,972 97,110
(INCREASE)/DECREASE IN ACCOUNTS
RECEIVABLE (180,431) 529,364
DECREASE/(INCREASE) IN
INVENTORIES 37,030 357,129
(INCREASE)/DECREASE IN CONTRACT
COSTS AND RELATED ESTIMATED
PROFITS IN EXCESS OF
APPLICABLE BILLINGS (210,104) (142,888)
(INCREASE)/DECREASE IN PREPAID
EXPENSES AND OTHER CURRENT
ASSETS (10,480) 10,266
INCREASE/(DECREASE) IN ACCOUNTS
PAYABLE (10,068) (137,804)
INCREASE IN ACCRUED EXPENSES 77,011 11,592
(INCREASE) IN OTHER ASSETS (233,923) (55,271)
TOTAL ADJUSTMENTS $(430,993) $ 669,498
NET CASH (USEDIN)/PROVIDED BY
OPERATIONS $(669,171) $ 544,542
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT, PROPERTY AND
EQUIPMENT (15,370) (18,341)
NET CASH (USED IN) INVESTING $ (15,370) $ (18,341)
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS OF LONG TERM
DEBT (1,941,294) (242,122)
DEBT REFINANCED 2,400,000 0
NET CASH PROVIDED BY/(USED IN)
FINANCING $458,706 $(242,122)
NET INCREASE/(DECREASE) IN CASH $(225,835) $284,079
CASH AT BEGINNING OF PERIOD 318,058 88,402
CASH AT END OF PERIOD $92,223 $372,481
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,
1998 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2: CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and on deposit in banks
and 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 3: FAIR VALUE OF FINANCIAL INSTRUMENTS
Due to short term nature of accounts receivable and accounts payable
their carrying value is a reasonable estimate of fair value.
NOTE 4: 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.
March 31, 1998 June 30, 1997
(UNAUDITED) (AUDITED)
Finished Goods $297,893 $219,890
Work In Process $317,535 $344,032
Raw Materials $404,880 $493,416
________ ________
Total $1,020,308 $1,057,338
======== ========
5
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5: 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.
NOTE 6: 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.
In 1996, the Company adopted Statement of Financial Accounting
Standards (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 7: NET INCOME PER SHARE
Net income per share for the three months ended March 31, 1998 is
based upon the weighted average number of shares outstanding. For the
periods ended March 31, 1998, and March 31, 1997, 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 1998 and in 1997.
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 Companys
report on Form 10-K for the fiscal year ended June 30, 1997 (including
the section captioned Current Business Environment). Reference is
made generally to the information contained in the Form 10-K.
Nine months ended March 31, 1998 vs. 1997
Revenues for the nine month period of this fiscal year were
$1,737,456, a decrease of $1,241,901 compared to last years revenues
for the same period. Electronic product revenues decreased by
$608,843 (from $2,032,298 last year to $1,423,455 this year). Leisure
product revenues decreased by $633,058 (from $947,059 last year to
$314,001 this year).
In the electronic product segment, 35% of revenues were derived from a
contract with the U.S. Army for the production of tactical generator
sets and 65% of revenues were derived from various orders which are
more limited in scope and duration and were generally for replacement
parts for previously supplied Department of Defense equipment and
other projects performed as a subcontractor. A large part of such
other revenues continue to be attributable to the Companys Pitometer
Log Division, which manufactures speed and distance measuring
instrumentation for the U.S. Navy.
The contract with the U.S. Army for the production of tactical
generator sets initially funded $1 million for first article test
units with estimated production quantities for each of the following
five years. The first such production order in the amount of $5
million was received in May 1997 and was increased by approximately
11% in July 1997. The first article test units from the initial
funding were delivered to the U.S. Army and final acceptance of these
units by the Army was received on March 13, 1998. These units
included engineering changes initiated by the Company and the
acceptance by the Army of these changes requires official
incorporation of the changes into project drawings and material
requirements. The Company is now in the process of placing orders for
these requirements with its vendors. Although costs are being
incurred with respect to the first production order, full production
is not anticipated until material requirements are filled during the
first quarter of the next fiscal year (August 1998). The original
contract schedule had included production stages to begin during the
past second quarter. Delivery of these tactical generator sets to the
U.S. Army is anticipated to begin November 1998.
In the first nine months of last year, the tactical generator set
project accounted for 40% of electronic product revenues. The U.S.
Navys MK48 ADCAP torpedo program, which in prior years had provided
most of such revenues, accounted for 20%. The remaining 40% of
electronic product revenues was derived from various orders, generally
for replacement parts for previously supplied Department of Defense
equipment.
7
As of March 31, 1998, the aggregate value of the Companys backlog of
electronic products not previously recorded as revenues was
approximately $4 million, attributable to the tactical generator set
contract. Most of this backlog should be recognized as revenues
during the 1999 fiscal year.
As of March 31, 1997, the aggregate value of the Companys backlog of
electronic products not previously recorded as revenues was
approximately $.5 million. Most of this backlog was accounted for by
the tactical generator set contract and was recorded as revenues
during the 1997 fiscal year.
In the leisure and recreation segment, revenues decreased by $633,058
when compared to the same nine month period last year. The major
portion of revenues from this segment of business have been
traditionally recorded during the second quarter. Last year, sales of
snowmaking machines began in the first quarter, continued with a
higher sales level during the second quarter than experienced in
recent years, and continued into the third quarter. This year, no
machine sales were made during the first quarter, the second quarter
sales were lower than last year, and no sales were made during the
third quarter. General market conditions are weaker as a result of
last years overall poor season for domestic ski areas. Funds
generated by the ski areas are being directed towards other capital
improvements as a result of safety and environmental concerns.
Foreign markets continue to be very competitive, however, the sales of
replacement parts in these areas remains level with prior years.
Overall, the Company experienced an operating loss for the nine month
period of $239,624 compared to an operating loss of $42,489 last year.
Costs in overhead and administrative expenses are continuing to be
reduced to help offset lower revenues.
Three Months Ended March 31, 1998 vs 1997
Revenues for the third quarter this year were $407,039 compared to
$978,175 last year. The decrease of $571,136 resulted from lower
revenues in the electronic segment of $442,812, particularly from the
tactical generator set project, and lower sales in the leisure and
recreation segment of $128,324 which were discussed above.
Overall, the Company experienced an operating loss for the third
quarter this year of $177,672 in contrast to an operating profit of
$47,511 for the same period last year.
See the discussion of nine-month results above.
Liquidity and Capital Resources at March 31, 1998
The Companys working capital as of March 31, 1998 was $1,775,535.
This amount reflects an increase of $267,461 when compared to working
capital at June 30, 1997 of $1,508,074.
8
Working capital increased as a result of an increase in contract costs
and related estimated profits in excess of applicable billings in the
amount of $210,104, a reduction in the current portion of long term
debt of $196,251 and an increase in accounts receivable of $180,431,
all partially offset by a reduction in cash of $225,835 and an
increase in accrued liabilities of $77,011.
The Company expended $15,370 for plant, property and equipment during
the nine month period. Last year, capital expenditures amounted to
$18,341.
The Company has no material commitments for capital expenditures as of
March 31, 1998.
The current portion of long term debt was reduced as a result of
borrowing arrangements which the Company entered into with Sovereign
Bank on September 18, 1997. Terms of the borrowing arrangements are
summarized in the Companys reports on Form 10-Q for the first quarter
of the current fiscal year.
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 Companys liquidity will be dependent on the
ability to maintain borrowing arrangements with its new lender
Sovereign Bank or other lenders.
9
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, 1998.
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 8, 1998
Date Thom A. Velto, Treasurer
Principal Accounting Officer
May 8, 1998
Date Edward L. Proskey
Vice President, Operations
10
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
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<RECEIVABLES> 557,909
<ALLOWANCES> 0
<INVENTORY> 1,020,308
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<PP&E> 4,790,035
<DEPRECIATION> 3,789,377
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<COMMON> 16,934
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<SALES> 0
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<CGS> 0
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<INCOME-PRETAX> (396,964)
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