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, 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 December 31, 1999.
THE DEWEY ELECTRONICS CORPORATION
INDEX
Part I Financial Information Page No.
Item 1 Financial Statements 1
Condensed consolidated balance sheets -
December 31, 1999 and June 30, 1999 2
Condensed consolidated statements of earnings -
three and six months ended December 31, 1999
and December 31, 1998 3
Condensed consolidated statements of cash flows for
the six months ended December 31, 1999 and 1998 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 10
Item 6. Exhibits and Reports on Form 8-K 10
PART I: FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
The following unaudited condensed, consolidated statements of
earnings, balance sheets 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
December 31, 1999 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
DECEMBER 31, 1999 JUNE 30, 1999
(UNAUDITED) (AUDITED)*
ASSETS:
CURRENT ASSETS:
CASH $ 735,719 $ 288,859
ACCOUNTS RECEIVABLE 849,256 1,211,841
INVENTORIES 959,788 1,064,996
CONTRACT COSTS & RELATED
EST PROFITS IN EXCESS OF
APPLICABLE BILLINGS 1,570,984 1,819,008
PREPAID EXPENSES & OTHER
CURRENT ASSETS 48,769 28,375
TOTAL CURRENT ASSETS 4,164,516 4,413,079
PLANT PROPERTY & EQUIPMENT-(NET) 854,503 880,045
OTHER ASSETS:
DEFERRED TAX ASSETS 163,008 348,308
OTHER NON CURRENT ASSETS 131,790 134,694
TOTAL OTHER ASSETS 294,798 483,002
TOTAL ASSETS $5,313,817 $5,776,126
LIABILITIES & STOCKHOLDER'S EQUITY:
CURRENT LIABILITIES:
TRADE ACCOUNTS PAYABLE $ 212,210 $ 607,591
ACCRUED LIABILITIES 174,130 284,533
ACCRUED PENSION COSTS 144,722 152,722
BILLINGS IN EXCESS OF CONTRACT
COSTS & RELATED ESTIMATED
PROFITS 701,608 701,608
CURRENT PORTION OF LONG-TERM
DEBT 56,323 254,056
TOTAL CURRENT LIABILITIES 1,288,993 2,000,510
LONG-TERM DEBT 2,136,945 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 1999 and
1998 16,934 16,934
PAID IN CAPITAL 2,835,307 2,835,307
ACCUMMULATED DEFICIT (705,437) (983,385)
2,146,804 1,868,856
LESS TREASURY STOCK 353,866
SHARES AT COST (520,097) (520,097)
TOTAL STOCKHOLDERS' EQUITY 1,626,707 1,348,759
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $5,313,817 $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
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
REVENUES $2,091,283 $2,083,905 $4,752,776 $3,824,623
COST OF REVENUES 1,642,601 1,656,148 3,714,408 3,095,520
GROSS PROFIT 448,682 427,757 1,038,368 729,103
SELLING & ADMIN EXPENSES 268,870 229,312 469,654 410,320
OPERATING PROFIT 179,812 198,445 568,714 318,783
INTEREST EXPENSE 48,259 51,097 104,763 105,438
OTHER (INCOME)/EXPENSE 670 (43) 703 (5,293)
INCOME BEFORE INCOME
TAXES 130,883 147,391 463,248 218,638
INCOME TAXES (52,355) (58,955) (185,300) (87,455)
NET INCOME $78,528 $88,436 $277,948 $131,183
INCOME PER SHARE BEFORE
TAXES
BASIC $0.10 $0.11 $0.35 $0.16
DILUTED $0.10 $0.11 $0.35 $0.16
NET INCOME PER SHARE:
BASIC $0.06 $0.07 $0.21 $0.10
DILUTED $0.06 $0.07 $0.21 $0.10
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
SIX MONTHS ENDED DECEMBER 31,
1999 1998
CASH FLOWS FROM OPERATIONS:
NET INCOME $277,948 $131,183
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH PROVIDED
BY/(USED IN) OPERATING ACTIVITIES:
DEPRECIATION 70,263 69,414
AMORTIZATION 2,904 3,714
DEFERRED TAXES 185,300 87,455
DECREASE/(INCREASE) IN ACCOUNTS
RECEIVABLE 362,585 (249,346)
DECREASE/(INCREASE) IN
INVENTORIES 105,208 (99,918)
DECREASE/(INCREASE) IN CONTRACT
COSTS AND RELATED ESTIMATED
PROFITS IN EXCESS OF APPLICABLE
BILLINGS 248,024 120,329
(INCREASE) IN PREPAID EXPENSES
AND OTHER CURRENT ASSETS (20,394) (14,657)
(DECREASE) IN ACCOUNTS PAYABLE (395,381) 100,605
(DECREASE) IN ACCRUED EXPENSES (118,403) (81,970)
TOTAL ADJUSTMENTS 440,106 (64,374)
NET CASH PROVIDED BY OPERATIONS 718,054 66,809
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT,
PROPERTY AND EQUIPMENT (44,721) (17,457)
NET CASH USED IN INVESTING
ACTIVITIES (44,721) (17,457)
CASH FLOWS FROM FINANCING
ACTIVITIES:
PRINCIPAL PAYMENTS OF
LONG-TERM DEBT (26,473) (24,463)
REPAYMENT OF SHORT-TERM
BORROWINGS (200,000) (100,000)
SHORT-TERM BORROWINGS - 120,000
NET CASH USED IN FINANCING
ACTIVITIES (226,473) (4,463)
NET INCREASE IN CASH 446,860 44,889
CASH AT BEGINNING OF PERIOD 288,859 134,449
CASH AT END OF PERIOD $735,719 $ 179,338
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
4
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
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.
December 31, 1999 June 30, 1999
Finished Goods $231,432 $392,652
Work In Process 315,157 146,075
Raw Materials 413,199 526,269
________ ________
Total $959,788 $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 December 31,
1999, 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 December 31, 1999 and 1998.
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.
Results of Operations
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.
Consolidated revenues for the three and six-month periods
ended December 31, 1999 increased by $7,378 and $929,153,
respectively, as compared with the three and six month
periods ended December 31, 1998.
Consolidated operating income for the three-month period
ended December 31, 1999 was $18,633 lower than the same
three-month period last year and $249,931 higher for the six-
month period as compared to the six-month period last year.
On December 20, 1999, the Company received another production
order for its diesel operated tactical generator sets for the
United States Army in the amount of approximately $6.3
million.
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.
7
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.
Interest and other income and expenses were $48,929 and
$51,054 for the three-month period ended December 31, 1999
and 1998, respectively, and $105,466 and $100,145 for the
six-month periods then ended.
Income tax expense represents an effective tax rate of 40%
for both three and six-month periods of 1999 and 1998.
Information about the Company's operations in these segments
for the fiscal periods ended December 31, 1999 and 1998 is as
follows:
Three months ended Six months ended
December 31, December 31,
1999 1998 1999 1998
Electronic Segment
Revenues $1,806,678 $1,895,108 $4,455,596 $3,599,266
Operating Income 138,773 196,533 563,427 331,305
HEDCO
Revenues 284,605 179,797 297,180 216,357
Operating Income/Loss) 41,039 1,912 5,287 (12,522)
In the Electronic segment revenues were $88,430 lower during
the three-month period ended December 31, 1999 than the same
three-month period last year and $856,330 higher during the
six month period ended December 31, 1999 compared to the same
six-month period of last year.
In 1998, because of engineering changes initiated by the
Company and approved by the U.S. Army, deliveries of tactical
generator sets were rescheduled to begin in November 1998
instead of March 1998. As a result, production efforts were
also delayed causing lower revenue recognition during the
six-month period ended December 31, 1998. Production efforts
have continued since that time and deliveries of those
tactical generator sets are being completed. Production
stages of the recent order for diesel operated tactical
generator sets (received December 20, 1999) are expected to
begin promptly. The generator contract accounted for 85% of
the electronic segment revenues during the six-month period
this year and 95% of the electronic segment revenues last
year for the same six-month period.
The remaining 15% and 5% of electronics segment revenues for
the six-month periods ended December 31, 1999 and 1998,
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.
8
As of December 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 $3.5 million of this backlog will be recognized
as revenues during the fiscal year ending June 30, 2000.
As of December 31, 1998, the aggregate value of the Company's
backlog of electronic products not previously recorded as
revenues was approximately $8 million.
HEDCO Division
In the leisure and recreation segment, revenues increased by
$104,808 and $80,823 during the three and six month period
ended December 31, 1999, respectively, 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 December 31, 1999 was
$2,875,523 compared to $2,412,569 at June 30, 1999.
The ratio of current assets to current liabilities was 3.23
to 1 at December 31, 1999 and 2.21 to 1 at June 30, 1999.
For the six-month period ended December 31, 1999 $718,054 was
provided by operating activities. During the same period
last year, operating activities provided $66,809.
A decrease in "accounts receivable" of $362,585 (due to
collections), a decrease in "inventories" of $105,208 (due to
usage) and a decrease in 'contract costs and related
estimated profits in excess of applicable billings' of
$248,024 (due to increased billings) provided funds to reduce
'accounts payable' by $395,381 and accrued expenses by
$118,403.
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 six month
period were $44,721 as compared with $17,457 in the
comparable period last year. The Company does not anticipate
any significant capital expenditures for the remainder of
this fiscal year.
9
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a vote of Security Holders
- -------------------------------------------------------------
On December 1, 1999, at the Company's annual meeting of
shareholders, the following seven 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 1,045,806 8,833
Frances D. Dewey 1,044,830 9,809
Gordon C. Dewey 1,045,514 9,125
John H.D. Dewey 1,045,689 8,950
John G. McQuaid 1,045,122 9,517
Pasquale A. Nolletti 1,045,806 8,833
Nathaniel Roberts 1,045,122 9,517
Also at that meeting the shareholders approved the Company's
adoption of its 1998 Stock Option Plan. Set forth below are
the number of votes cast for, against or withheld with
respect to such plan.
For Against Withheld
1,012,779 27,302 14,558
Item 6. Exhibits and Reports on Form 8-K
- -------------------------------------------------------------
No reports on Form 8-K have been filed during the quarter
ended December 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
2/11/00 /s/ Thom A. Velto
Date Thom A. Velto, Treasurer
Principal Accounting Officer
2/11/00 /s/ Edward L. Proskey
Date Edward L. Proskey
Vice President, Operations
10
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