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, 1999 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, 1999.
THE DEWEY ELECTRONICS CORPORATION
INDEX
Part I Financial Information Page No.
Item 1 Financial Statements 1
Condensed balance sheets -
March 31, 1999 and June 30, 1998 2
Condensed statements of operations -
Nine months ended March 31, 1999
and March 31, 1998 3
Three months ended March 31, 1999
and March 31, 1998 4
Statements of cash flows for the
nine months ended March 31, 1999
and 1998 5
Notes to condensed financial
statements 6
Item 2 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
PART I: FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The following unaudited Statements of Operations, Consolidated Balance Sheets
and Statements of Cash Flows are of The Dewey Electronics Corporation. These
reports reflect all adjustments of a normal recurring nature which are, in the
opinion of management, necessary for a fair presentation of the results of
operations for the interim periods reflected therein. The results reflected
in the unaudited Statements of Operations for the periods ended March 31, 1999
are not necessarily indicative of the results to be expected for the entire
year. The following unaudited Condensed Financial Statements should be read
in conjunction with the notes thereto, and Management's Discussion and
Analysis of Financial Condition and Results of Operations set forth in Item 2
of Part I of this report, as well as the audited financial statements and
related notes thereto contained in the Form 10-K filed for the fiscal year
ended June 30, 1998.
1
THE DEWEY ELECTRONICS CORPORATION
CONDENSED BALANCE SHEET
MARCH 31, 1999 JUNE 30, 1998
(UNAUDITED) (AUDITED)*
ASSETS:
CURRENT ASSETS:
CASH $ 207,224 $ 134,449
ACCOUNTS RECEIVABLE 643,435 449,534
INVENTORIES 1,118,175 1,050,027
CONTRACT COSTS & RELATED EST
PROFITS IN EXCESS OF APPLICABLE
BILLINGS 2,097,014 1,193,520
PREPAID EXPENSES & OTHER CURRENT
ASSETS 46,624 60,556
TOTAL CURRENT ASSETS $3,812,475 $2,888,086
PLANT PROPERTY & EQUIPMENT $ 905,690 $ 963,932
OTHER ASSETS:
DEFERRED TAX ASSETS 491,175 722,308
OTHER NON CURRENT ASSETS 133,305 138,876
TOTAL OTHER ASSETS 624,480 861,184
TOTAL ASSETS $5,342,645 $4,713,202
LIABILITIES & STOCKHOLDERS EQUITY:
CURRENT LIABILITIES:
TRADE ACCOUNTS PAYABLE $ 499,342 $ 181,525
ACCRUED LIABILITIES 392,742 411,627
BILLINGS IN EXCESS OF CONTRACT
COSTS & RELATED ESTIMATED
PROFITS 701,608 701,608
CURRENT PORTION OF LONG TERM DEBT 172,850 149,788
TOTAL CURRENT LIABILITIES $1,766,542 $1,444,548
LONG TERM PORTION OF LONG TERM
DEBT $2,180,496 $2,219,746
OTHER LONG TERM LIABILITY 61,172 61,172
DUE TO RELATED PARTY $ 200,000 $ 200,000
STOCKHOLDERS' EQUITY:
COMMON STOCK, par value $.01;
authorized 3,000,000 shares;
issued and outstanding 1,693,397 in
1998 and 1997 16,934 16,934
PAID IN CAPITAL 2,835,360 2,835,360
RETAINED EARNINGS (1,197,709) (1,544,408)
1,654,585 1,307,886
LESS TREASURY STOCK 353,866
SHARES AT COST (520,150) (520,150)
TOTAL STOCKHOLDERS' EQUITY $1,134,435 $ 787,736
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $5,342,645 $4,713,202
*CONDENSED FROM AUDITED FINANCIAL STATEMENTS
2
THE DEWEY ELECTRONICS CORPORATION
STATEMENT OF OPERATIONS
March 1999
NINE MONTHS ENDED MARCH 31,
1999 1998
REVENUES $5,849,781 $1,737,456
COST OF REVENUES 4,510,919 1,364,044
GROSS PROFIT 1,338,862 373,412
SELLING & ADMIN EXPENSES 606,839 613,036
OPERATING PROFIT / (LOSS) 732,023 (239,624)
INTEREST EXPENSE 159,445 158,226
OTHER (INCOME) (5,254) (886)
INCOME/(LOSS) BEFORE INCOME TAXES 577,832 (396,964)
INCOME TAX (EXPENSE)/BENEFIT (231,133) 158,786
NET INCOME / (LOSS) $346,699 $(238,178)
NET INCOME PER SHARE:
BASIC $0.26 $(0.18)
DILUTED $0.26 $(0.18)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING
BASIC 1,339,531 1,339,531
DILUTED 1,339,531 1,339,531
3
THE DEWEY ELECTRONICS CORPORATION
STATEMENT OF OPERATIONS
MARCH 1999
THREE MONTHS ENDED MARCH 31,
1999 1998
REVENUES $2,025,158 $407,040
COST OF REVENUES 1,415,399 369,840
GROSS PROFIT 609,759 37,200
SELLING & ADMIN EXPENSES 196,519 214,872
OPERATING PROFIT / (LOSS) 413,239 (177,672)
INTEREST EXPENSE 54,007 55,062
OTHER EXPENSE 39 492
INCOME / (LOSS) BEFORE INCOME TAXES 359,193 (233,226)
INCOME TAX (EXPENSE)/BENEFIT (143,678) 93,291
NET INCOME / (LOSS) 215,515 (139,935)
NET INCOME PER SHARE:
BASIC $0.16 $(0.10)
DILUTED $0.16 $(0.10)
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
BASIC 1,339,531 1,339,531
DILUTED 1,339,531 1,339,531
4
THE DEWEY ELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31,
1999 1998
CASH FLOWS FROM OPERATIONS:
NET INCOME/(LOSS) $ 346,699 $(238,178)
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY/(USED IN)
OPERATING ACTIVITIES:
DEPRECIATION 104,121 99.972
DECREASE/(INCREASE) IN ACCOUNTS
RECEIVABLE 106,098 (180,431)
(INCREASE)/DECREASE IN INVENTORIES (68,148) 37,030
(INCREASE) IN CONTRACT COSTS
AND RELATED ESTIMATED PROFITS
IN EXCESS OF APPLICABLE BILLINGS (903,497) (210,104)
DECREASE/(INCREASE) IN PREPAID
EXPENSES AND OTHER CURRENT ASSETS 13,932 (10,480)
INCREASE/(DECREASE) IN ACCOUNTS
PAYABLE 317,817 (10,068)
(DECREASE)/INCREASE IN ACCRUED
EXPENSES (18,885) 77,011
DECREASE/(INCREASE) IN OTHER ASSETS 236,704 (233,923)
TOTAL ADJUSTMENTS $(211,858) $(430,993)
NET CASH PROVIDED BY/(USED IN)
OPERATIONS $134,841 $(669,171)
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT, PROPERTY AND
EQUIPMENT (45,878) (15,370)
NET CASH USED IN INVESTING $(45,878) $(15,370)
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS OF LONG
TERM DEBT (36,188) (1,941,294)
REPAYMENT OF SHORT TERM BORROWINGS (100,000) 0
SHORT TERM BORROWINGS 120,000 100,000
DEBT REFINANCED 0 2,300,000
NET CASH (USED IN)/PROVIDED BY
FINANCING $ (16,188) $ 458,706
NET INCREASE/(DECREASE) IN CASH $72,775 $(225,835)
CASH AT BEGINNING OF PERIOD 134,449 318,058
CASH AT END OF PERIOD $207,224 $92,223
5
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and on deposit in banks. The
carrying amount of cash and cash equivalents approximates fair value due to
the short maturity of such investments.
NOTE 2: 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 3: 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, 1999 June 30, 1998
(UNAUDITED) (AUDITED)
Finished Goods $306,532 $458,104
Work In Process $307,665 $159,757
Raw Materials $503,978 $432,166
________ ________
Total $1,118,175 $1,050,027
======= =======
NOTE 4: 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
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5: 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.
Whenever events indicate that the carrying values of Long-Lived assets may not
be recoverable, the Company evaluates the carrying values of such assets using
future undiscounted cash flows. Management believes that, as of March 31,
1999, the carrying values of such assets are appropriate.
NOTE 6: NET INCOME PER SHARE
Net income per share for the three months ended March 31, 1999 is based upon
the weighted average number of shares outstanding. For the periods ended
March 31, 1999, and March 31, 1998, 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 1999 and in 1998.
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, 1998 (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, 1999 vs. 1998
Revenues for the nine month period this year were $5,849,781 which is an
increase of $4,112,325 compared to last year's revenues of $1,737,456. This
increase is the result of increased electronic product revenues.
Electronic product revenues increased by $4,162,023 (from $1,423,455 last year
to $5,585,478 this year) as a result of greater production under the Company's
contract with the U.S. Army for tactical generator sets. This contract
accounted for 96% of the electronic segment revenues.
The delivery of tactical generator sets had been scheduled to begin in March
1998. However, because of engineering changes initiated by the Company and
approved by the U.S. Army, deliveries were rescheduled to begin in November
1998. As a result of this delay in delivery, production efforts were also
delayed causing lower revenue recognition last year.
Since fiscal year end, June 30, 1998, the Company has received approximately
$8 million in additional orders for tactical generator sets. This brings the
total amount of orders received for the tactical generator sets program to
approximately $14 million. The Company anticipates that the U.S. Army will
continue to place additional orders; however, the Army is not obligated to do
so and no assurances can be given to the quantity or scheduling of additional
generator set orders. Though the Company's contract with the Army
contemplated annual orders in roughly equal amounts, actual order placements
have varied in timing and size.
The remaining 4% of electronic product revenues resulted from various orders,
more limited in scope and duration, that 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 Company's Pitometer Log Division, which manufactures
speed and distance measuring instrumentation for the U.S. Navy.
Last year, the tactical generator set project accounted for 35% of electronic
segment revenues and the remaining 65% were derived from short term projects.
As of March 31, 1999, the aggregate value of the Company's backlog of
electronic products not previously recorded as revenues was approximately $7
million. It is estimated that approximately $2 million of this backlog will
be recognized as revenues during the June 30, 1999 fiscal year.
8
As of March 31, 1998, the aggregate value of the Company's backlog of
electronic products not previously recorded as revenues was approximately $4
million.
In the leisure and recreation segment, revenues decreased by $49,698 compared
to last year's revenues (from $314,001 to $264,303). The major portion of
revenues from this segment of business have been traditionally recorded during
the second quarter. This year, the sale of a snowmaking machine during this
third quarter resulted in machine sales being comparable to last year. The
sale of replacement parts in this segment has been lower then recent years.
The Company does not anticipate any significant revenues from this segment for
the balance of the current fiscal year.
Operations resulted in an operating profit of $.55 per share compared to an
operating loss of $.18 per share last year. Net earnings per share were $.26
per share compared to a net loss of $.18 per share last year.
Three Months Ended March 31, 1999 vs. 1998
Revenues for the third quarter this year were $2,025,158 compared to $407,040
last year resulting in an increase of $1,618,118 in revenues. This increase
is the result of increased electronic product revenues.
The increase in electronic product revenues is the result of continued efforts
made towards the tactical generator project with the U.S. Army as discussed
above.
During last year's third quarter, the Company had been awaiting final
acceptance by the U.S. Army of it's first article test units. The contract
schedule had included production efforts being made during that third quarter,
which did not begin until the first quarter of this fiscal year.
In the leisure and recreation segment, revenues during the third quarter
decreased by $23,962 (from $62,907 to $38,945). This decrease is the result
of lower replacement parts sales discussed above, compared to last year.
Operating profit for the third quarter this year was $.31 per share and net
income resulted in a profit of $.16 per share. Last year the Company's
operations resulted in a loss of $.13 per share and net income showed a loss
of $.10 per share.
Liquidity and Capital Resources at March 31, 1999
The Company's working capital ratio as of March 31, 1999 was 2.16 to 1
compared to 2.00 to 1 at June 30, 1998.
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.
9
Management believes that the Company's anticipated cash flow from operations,
combined with its line of credit with Sovereign Bank, will be sufficient to
support working capital requirements and capital expenditures at their current
or expected levels. Capital expenditures in the nine month period were
$45,878 as compared with $15,370 in the comparable period last year. The
Company does not anticipate any significant capital expenditures for the
remainder of this fiscal year.
Year 2000 Issue
The Year 2000 ("Y2K") problem arises from the inability of uncorrected
computer programs using only two digits to identify a year in the date field
to distinguish between years beginning with 19 and 20. The Company has been
preparing for the impact of the Y2K problem on its business by testing its own
computer systems and by analyzing the possible impact of computer system
failures of its significant vendors.
As a prime contractor for the U.S. Government, the Company is required to
maintain precise records for job costing as well as provide timely and
accurate information. It is subject to periodic audits by government agencies
of its systems and controls. The Company has never had any difficulty in
meeting government requirements. However, Y2K problems could be detrimental
to the Company or any other company in this type of business.
The Company has reviewed its internal computer systems for Y2K compliance by
identifying and testing all of its internal systems. All critical programs
and systems have been analyzed and tested. The operational tests were
successful and included the actual processing applications under Y2K
conditions.
In November 1996, the Company hired an outside service to upgrade hardware and
make modifications to its main software. The cost of these services was
$5,085. Further expenditures of this sort are not anticipated.
Based on information obtained to date in the course of surveys of key
suppliers, the Company does not foresee any significant impact arising from
third party computer system failures. However, the Company is not able to
identify all Y2K issues that may exist at supplier levels and has not received
sufficient information from all major third parties to confirm their Year 2000
preparedness. The Company's key vendor is a foreign manufacturer that
provides engines for the U.S. Army tactical generator set project and is the
Company's sole source of supply of this particular component. Such
information as has been received to date through the supplier's U.S.
distributor does not indicate that there will be a Y2K problem which could
result in delay of the Company's performance.
In this instance and in the case of other important suppliers, the Company has
been investigating other sources as well as the use of other products and
intends to continue contingency planning to eliminate any material financial
impact on the Company.
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,
1999.
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 13, 1999 _________________________________
Date Thom A. Velto, Treasurer
Principal Accounting Officer
May 13, 1999 ________________________________
Date Edward L. Proskey
Vice President, Operations
11
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<PERIOD-END> MAR-31-1999
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