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, 2000 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, 2000.
THE DEWEY ELECTRONICS CORPORATION
INDEX
Part I Financial Information Page No.
Item 1 Financial Statements 1
Condensed consolidated balance sheets -
March 31, 2000 and June 30, 1999 2
Condensed consolidated statements of earnings -
three and nine months ended March 31, 2000
and March 31, 1999 3
Condensed consolidated statements of cash flows for the
nine months ended March 31, 2000 and 1999 4
Notes to condensed consolidated financial statements 5
Item 2 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
PART I: FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The following unaudited condensed, consolidated balance sheets,
statements of earnings, and statements of cash flows are of The Dewey
Electronics Corporation. These condensed consolidated financial
statements reflect all adjustments of a normal recurring nature, which
are, in the opinion of management, necessary for a fair presentation
of the financial condition, results of operations and cash flows for
the interim periods reflected herein. The results reflected in the
unaudited statements of earnings for the period ended March 31, 2000
are not necessarily indicative of the results to be expected for the
entire year. The following unaudited condensed consolidated 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,
1999.
1
THE DEWEY ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 JUNE 30, 1999
(UNAUDITED) (AUDITED)*
ASSETS:
CURRENT ASSETS:
CASH $ 594,225 $ 288,859
ACCOUNTS RECEIVABLE 2,292,267 1,211,841
INVENTORIES 940,035 1,064,996
CONTRACT COSTS & RELATED
EST PROFITS IN EXCESS OF
APPLICABLE BILLINGS 735,251 1,819,008
PREPAID EXPENSES & OTHER
CURRENT ASSETS 63,857 28,375
TOTAL CURRENT ASSETS 4,625,635 4,413,079
PLANT PROPERTY & EQUIPMENT - (NET) 837,803 880,045
OTHER ASSETS:
DEFERRED TAX ASSETS 89,030 348,308
OTHER NON CURRENT ASSETS 130,743 134,694
TOTAL OTHER ASSETS 219,773 483,002
TOTAL ASSETS $5,683,211 $5,776,126
LIABILITIES & STOCKHOLDERS EQUITY:
CURRENT LIABILITIES:
TRADE ACCOUNTS PAYABLE $453,572 $ 607,591
ACCRUED LIABILITIES 203,843 284,533
ACCRUED PENSION COSTS 145,722 152,722
BILLINGS IN EXCESS OF CONTRACT
COSTS & RELATED ESTIMATED
PROFITS 701,608 701,608
CURRENT PORTION OF LONG-TERM
DEBT 57,493 254,056
TOTAL CURRENT LIABILITIES 1,562,238 2,000,510
LONG-TERM PORTION OF LONG-TERM
DEBT 2,122,125 2,165,685
OTHER LONG-TERM LIABILITY 61,172 61,172
DUE TO RELATED PARTY 200,000 200,000
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00;
authorized 250,000 shares, issued and
outstanding, none COMMON STOCK,
par value $.01; authorized 3,000,000
shares; issued and outstanding 1,693,397
in 2000 and 1999 16,934 16,934
PAID IN CAPITAL 2,835,307 2,835,307
ACCUMMULATED DEFICIT (594,468) (983,385)
2,257,773 1,868,856
LESS TREASURY STOCK 353,866
SHARES AT COST (520,097) (520,097)
TOTAL STOCKHOLDERS' EQUITY 1,737,676 1,348,759
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $5,683,211 $5,776,126
*CONDENSED FROM AUDITED FINANCIAL STATEMENTS
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
THE DEWEY ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
2000 1999 2000 1999
REVENUES $1,842,929 $2,025,158 $6,595,705 $5,849,781
COST OF REVENUES 1,373,552 1,415,399 5,087,960 4,510,919
GROSS PROFIT 469,377 609,759 1,507,745 1,338,862
SELLING & ADMIN EXPENSES 236,121 196,519 705,775 606,839
OPERATING PROFIT 233,256 413,240 801,970 732,023
INTEREST EXPENSE 49,842 54,007 154,605 159,445
OTHER (INCOME)/EXPENSE (1,533) 39 (830) (5,254)
INCOME BEFORE INCOME TAXES 184,947 359,194 648,195 577,832
INCOME TAXES (73,978) (143,678) (259,278) (231,133)
NET INCOME $110,969 $215,516 $388,917 $346,699
INCOME PER SHARE BEFORE TAXES
BASIC $0.14 $0.27 $0.48 $0.43
DILUTED $0.14 $0.27 $0.48 $0.43
NET INCOME PER SHARE:
BASIC $0.08 $0.16 $0.29 $0.26
DILUTED $0.08 $0.16 $0.29 $0.26
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
BASIC 1,339,531 1,339,531 1,339,531 1,339,531
DILUTED 1,339,531 1,339,531 1,339,531 1,339,531
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
THE DEWEY ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED MARCH 31,
2000 1999
CASH FLOWS FROM OPERATIONS:
NET INCOME $ 388,917 $ 346,699
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
DEPRECIATION 105,819 104,121
AMORTIZATION 3,951 5,571
DEFERRED TAXES 259,278 231,133
(INCREASE)/DECREASE IN ACCOUNTS
RECEIVABLE (1,080,426) 106,098
DECREASE/(INCREASE) IN INVENTORIES 124,961 (68,148)
DECREASE/(INCREASE) IN CONTRACT
COSTS AND RELATED ESTIMATED
PROFITS IN EXCESS OF APPLICABLE
BILLINGS 1,083,757 (903,497)
(INCREASE) IN PREPAID EXPENSES
AND OTHER CURRENT ASSETS (35,482) 13,932
(DECREASE)/INCREASE IN ACCOUNTS
PAYABLE (154,019) 317,817
(DECREASE) IN ACCRUED EXPENSES (87,690) (18,885)
TOTAL ADJUSTMENTS $ 220,149 $ (211,858)
NET CASH PROVIDED BY OPERATIONS $609,066 $134,841
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT, PROPERTY
AND EQUIPMENT (63,577) (45,878)
NET CASH USED IN INVESTING
ACTIVITIES $(63,577) $(45,878)
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS OF LONG-TERM
DEBT (40,123) (36,188)
REPAYMENT OF SHORT-TERM
BORROWINGS (200,000) (100,000)
SHORT-TERM BORROWINGS 0 120,000
NET CASH (USED IN) FINANCING
ACTIVITIES $(240,123) $(16,188)
NET INCREASE IN CASH $305,366 $72,775
CASH AT BEGINNING OF PERIOD 288,859 134,449
CASH AT END OF PERIOD $594,225 $ 207,224
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 2000
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, 2000 June 30, 1999
Finished Goods $228,432 $ 392,652
Work In Process 274,166 146,075
Raw Materials 437,437 526,269
________ _________
Total $940,035 $1,064,996
======= ========
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.
5
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5: PLANT, PROPERTY AND EQUIPMENT
Plant, property 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, 2000, the carrying values of such assets are
recoverable.
NOTE 6: EARNINGS PER SHARE
The weighted average number of shares outstanding used in the
computation of earnings per share was 1,339,531 in each of the three-
month periods ended March 31, 2000 and 1999. Since the computation of
diluted earnings per share is not materially dilutive or anti-
dilutive, the amounts reported for basic and diluted earnings per
share are the same.
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, within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934. Forward-looking statements in this report are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Persons reading this report are cautioned that risks and
uncertainties are inherent to forward-looking statements.
Accordingly, the Company's actual results could differ materially from
those suggested by such forward-looking statements.
The Company's operating cycle is long-term and includes various types
of products and varying delivery schedules. Accordingly, results of a
particular period or period-to-period comparisons of recorded revenues
and earnings, may not be indicative of future operating results. The
following comparative analysis should be viewed in this context.
Operating Segments
The Dewey Electronics Corporation is organized into operating segments
on the basis of the type of products offered.
In the electronics segment, the Company produces sophisticated
electronics and electromechanical systems for the Department of
Defense and other projects performed as a subcontractor.
In the leisure and recreation segment, the Company, through its HEDCO
Division, designs, manufactures and markets advanced, sophisticated
snowmaking equipment.
There are no intersegment sales.
Some operating expenses, including general corporate expenses, have
been allocated by specific identification or based on labor for items
which are not specifically identifiable. In computing operating
profit, none of the following items have been added or deducted:
interest expense, income taxes, and non-operating income and expenses.
Consolidated Results of Operations
Consolidated revenues for the nine-month period ended March 31, 2000
increased by $745,924 as compared with the same period last year.
Consolidated revenues for the three month period ended March 31, 2000
were lower by $182,229 than the revenues of the same period last year.
Operating income continues to be higher for the year, thus far,
compared to last year. The nine-month period ended March 31, 2000
operating income was $69,947 higher than the same period last year.
7
For the three month period ended March 31, 2000, operating income was
lower than last year by $179,984 reflecting overall lower revenues in
the beginning of the third quarter.
Interest and other income and expenses were $153,775 and $154,191 for
the nine-month period ended March 31, 2000 and 1999 respectively, and
$48,309 and $54,046 for the three-month period then ended.
Information about the Company's operations in the two segments for the
fiscal periods ended March 31, 2000 and 1999 is as follows:
Three months ended Nine months ended
March 31, March 31,
2000 1999 2000 1999
Electronic Segment
Revenues $1,808,773 $1,986,212 $6,264,369 $5,585,478
Operating Income 261,452 430,886 824,879 762,191
HEDCO
Revenues 34,156 38,946 331,336 264,303
Operating (Loss) (28,196) (17,646) (22,909) (30,168)
Electronics Segment
In the electronics segment, revenues and operating income were lower
during the three-month period ended March 31, 2000 than the same
three-month period last year. This reflects the commencement of
production in February 2000 under the diesel operated tactical
generator set award of December 20, 1999.
Revenues for the nine months ended March 31, 2000 were $678,891 higher
than the same nine-month period of last year. The tactical generator
set project accounted for 84% of the electronic segment revenues
during the nine-month period ended March 31, 2000 and 96% of the
electronic segment revenues last year for the same nine-month period.
The remaining 16% and 4% of electronics segment revenues for the nine-
month periods ended March 31, 2000 and 1999, respectively, was derived
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 continues to be attributable to the
Company's Pitometer Log Division, which manufactures speed and
distance measuring instrumentation for the U.S. Navy.
The contract with the U.S. Army for diesel operated tactical generator
sets allows for orders to be placed at any time through August 2001.
Though it is not obligated to do so, the Army has placed an annual
production order each year plus some additional orders. The amount of
orders for this product has amounted to approximately $21 million
since its initial award which funded $1 million in 1996.
8
The Company has been receiving smaller generator set orders throughout
the contract period, in addition to annual production orders, for
delivery to the Army, Navy, Air Force and the Marines.
The Department of Defense had issued a fuel policy requiring that all
mobile electric power sets use diesel fuels only and that those using
gasoline fuels be eliminated.
As of March 31, 2000, the aggregate value of the Company's backlog of
electronic products not previously recorded as revenues was
approximately $6 million. It is estimated that approximately $2.5
million of this backlog will be recognized as revenues during the
fiscal year ending June 30, 2000.
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.
HEDCO Division
In the leisure and recreation segment, revenues were lower by $4,790
during the three-month period ended March 31, 2000 and $67,033 higher
during the nine-month period ended March 31, 2000, when compared to
the same periods last year.
This increase in revenues is attributed to more snowmaking machine
sales than last year. Traditionally, the major portion of revenues in
this segment are recorded during the second quarter when snowmaking
machines are normally delivered. The Company had anticipated this
stronger market as a result of its marketing efforts and by providing
its years of snowmaking expertise to ski areas. The Company has not
received any orders for snowmaking machines for export this year or
last year.
Liquidity and Capital Resources
The Company's working capital at March 31, 2000 was $3,063,397
compared to $2,412,569 at June 30, 1999.
The ratio of current assets to current liabilities was 2.96 to 1 at
March 31, 2000 and 2.21 to 1 at June 30, 1999.
For the nine-month period ended March 31, 2000, $609,066 was provided
by operations. During the same period last year, operating activities
provided $134,841.
"Accounts receivable" increased by $1,080,426 as a result of billings
made for final deliveries of diesel operated tactical generator sets
from the award dated January 6, 1999. These billings decreased
"contract costs and related estimated profits in excess of applicable
billings" by $1,083,757.
9
Deferred tax assets was reduced by $259,278 to record income tax
expenses. This "other asset" is a result of prior years net operating
losses. Its usage allowed for the cash provided to increase prepaid
expenses by $35,482 and reduce accounts payable and accrued expenses
by $154,019 and $87,690, respectively.
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 $63,577 as compared with
$45,878 in the comparable period last year. The Company does not
anticipate any significant capital expenditures for the remainder of
this fiscal year.
10
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders
- --------------------------------------------------------------
None
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------------------------------
No reports on Form 8-K have been filed during the quarter ended March
31, 2000.
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 12, 2000 /s/ Thom A. Velto
Date Thom A. Velto, Treasurer
Principal Accounting Officer
May 12, 2000 /s/ Edward L. Proskey
Date Edward L. Proskey
Vice President, Operations
11
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<PERIOD-END> MAR-31-2000
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