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 September 30, 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 September 30, 2000.
THE DEWEY ELECTRONICS CORPORATION
INDEX
Part I Financial Information Page No.
Item 1 Financial Statements 1
Condensed consolidated balance sheets -
September 30, 2000 and June 30, 2000 2
Condensed consolidated statements of earnings -
three months ended September 30, 2000
and September 30, 1999 3
Condensed consolidated statements of cash flows for the
three months ended September 30, 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 8
Part II Other Information
Item 4. Submission of Matters to a Vote of Security
Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
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 September 30, 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, 2000.
1
THE DEWEY ELECTRONICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, JUNE 30,
2000 2000
(UNAUDITED) (AUDITED)*
ASSETS:
CURRENT ASSETS:
CASH $1,153,561 $1,176,479
ACCOUNTS RECEIVABLE 1,387,697 1,349,965
INVENTORIES 539,927 534,181
CONTRACT COSTS & RELATED EST
PROFITS IN EXCESS OF APPLICABLE
BILLINGS 1,423,606 1,087,863
DEFERRED TAX ASSET 170,475 170,475
PREPAID EXPENSES & OTHER CURRENT ASSETS 61,144 33,849
TOTAL CURRENT ASSETS 4,736,410 4,352,812
PLANT PROPERTY & EQUIPMENT - (NET) 811,678 841,956
OTHER ASSETS:
OTHER NON CURENT ASSETS 129,462 130,512
TOTAL OTHER ASSETS 129,462 130,512
TOTAL ASSETS $5,677,550 $5,325,280
LIABILITIES & STOCKHOLDERS EQUITY:
CURRENT LIABILITIES:
TRADE ACCOUNTS PAYABLE $341,291 $334,701
ACCRUED LIABILITIES 142,948 158,203
ACCRUED CORP INCOME TAXES 536,153 379,807
ACCRUED PENSION COSTS 146,271 155,772
CURRENT PORTION OF LONG TERM DEBT 103,343 97,827
TOTAL CURRENT LIABILITIES 1,270,006 1,126,310
LONG-TERM PORTION OF LONG-TERM DEBT 1,541,913 1,567,859
OTHER LONG-TERM LIABILITY 61,172 61,172
DEFERRED TAX LIABILITY 95,320 95,320
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 16,934 16,934
PAID IN CAPITAL 2,835,307 2,835,307
ACCUMMULATED EARNINGS/(DEFICIT) 176,995 (57,525)
3,029,236 2,794,716
LESS TREASURY STOCK 353,866 SHARES
AT COST (520,097) (520,097)
TOTAL STOCKHOLDERS' EQUITY 2,509,139 2,274,619
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $5,677,550 $5,325,280
*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
SEPTEMBER 30,
2000 1999
REVENUES $2,267,404 $2,661,493
COST OF REVENUES 1,630,439 2,071,807
GROSS PROFIT 636,965 589,686
SELLING & ADMIN EXPENSES 201,976 200,784
OPERATING PROFIT 434,989 388,902
INTEREST EXPENSE 39,750 56,504
OTHER (INCOME)/EXPENSE 4,373 33
INCOME BEFORE INCOME TAXES 390,866 332,365
INCOME TAXES 156,346 132,945
NET INCOME $234,520 $199,420
INCOME PER SHARE BEFORE TAXES
BASIC $0.29 $0.25
DILUTED $0.29 $0.25
NET INCOME PER SHARE:
BASIC $0.18 $0.15
DILUTED $0.18 $0.15
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING
BASIC 1,339,531 1,339,531
DILUTED 1,339,531 1,339,531
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
THE DEWEY ELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,
2000 1999
CASH FLOWS FROM OPERATIONS:
NET INCOME $234,520 $199,420
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY
OPERATING ACTIVITIES:
DEPRECIATION 38,475 34,706
AMORTIZATION 1,050 1,857
DEFERRED TAXES 0 132,945
(INCREASE)/DECREASE IN ACCOUNTS
RECEIVABLE (37,732) 189,425
(INCREASE) IN INVENTORIES (5,746) (40,166)
(INCREASE)/DECREASE IN CONTRACT COSTS
AND RELATED ESTIMATED PROFITS IN EXCESS
OF APPLICABLE BILLINGS (335,743) 147,762
(INCREASE) IN PREPAID EXPENSES
AND OTHER CURRENT ASSETS (27,295) (17,434)
INCREASE/(DECREASE) IN ACCOUNTS
PAYABLE 6,590 (293,105)
(DECREASE) IN ACCRUED LIABILITIES (15,255) (31,586)
INCREASE IN ACCRUED CORPORATE INCOME
TAXES 156,346 0
INCREASE IN ACCRUED PENSION COSTS (9,501) (9,000)
TOTAL ADJUSTMENTS (228,811) 115,404
NET CASH PROVIDED BY OPERATIONS 5,709 314,824
CASH FLOWS FROM INVESTING ACTIVITIES:
EXPENDITURES FOR PLANT, PROPERTY AND
EQUIPMENT (8,198) (21,212)
NET CASH USED IN INVESTING (8,198) (21,212)
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS OF LONG-TERM DEBT (20,429) (13,101)
PRINCIPAL PAYMENT OF LINE OF CREDIT 0 (200,000)
NET CASH (USED IN) FINANCING (20,429) (213,101)
NET INCREASE/(DECREASE) IN CASH (22,918) 80,511
CASH AT BEGINNING OF PERIOD 1,176,479 288,859
CASH AT END OF PERIOD $1,153,561 $ 369,370
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
NOTE 1: REVENUE RECOGNITION
Revenues and estimated earnings under defense contracts are recorded using
the percentage-of-completion method of accounting, measured as the
percentage of costs incurred to estimated total costs for each contract.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined. Changes in job performance,
job conditions, and estimated profitability may result in revisions to costs
and income and are recognized in the period in which the revisions are
determined.
Since substantially all of the Company's electronics business comes from
contracts with various agencies of the United States Government or
subcontracts with prime Government contractors, the loss of Government
business would have a material adverse effect on this segment of business.
In the Leisure and Recreation segment, revenues and earnings are recorded
when deliveries are made.
NOTE 2: CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity of
three months or less at the date of purchase to be cash equivalents.
NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of the Company's long-term debt and line of credit
borrowings are estimated based upon interest rates currently available
for borrowings with similar terms and maturities and approximate the
carrying values.
Due to the short-term nature of cash, accounts receivable, accounts
payable, accrued expenses and other current liabilities, 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.
5
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 2000 June 30, 2000
Finished Goods $ 67,000 $ 67,000
Work In Process 193,109 192,828
Raw Materials 279,818 274,353
________ ________
Total $539,927 $534,181
======= =======
NOTE 5: USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NOTE 6: PLANT, PROPERTY AND EQUIPMENT
Plant, property and equipment are stated at cost. Allowance for
depreciation 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.
NOTE 7: LOAN FEES
Loan fees are capitalized by the Company and amortized utilizing the
straight-line basis over the term of the loan.
NOTE 8: LONG-LIVED ASSETS
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 September 30, 2000, the carrying values of such assets are appropriate.
6
THE DEWEY ELECTRONICS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9: RECENT PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133), establishes
accounting and reporting standards for derivative instruments and for
hedging activities. It requires companies to recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. We have adopted SFAS No. 133 in
the first quarter of fiscal 2001, in accordance with the deferral provision
in SFAS No. 137. The adoption of SFAS No. 133 did not have a material
effect on our financial statements.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition in
Financial Statements." SAB 101 summarizes certain of the SEC's views in
applying generally accepted accounting principles to revenue recognition
in financial statements. We are required to adopt SAB 101 in the fourth
quarter of fiscal 2001. We anticipate that the adoption of SAB 101 will
not have a significant impact on our financial statements.
NOTE 10: 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 September 30, 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.
7
THE DEWEY ELECTRONICS CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements in this Form 10-Q may be deemed "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange
Act of 1934. All statements, other than statements of historical fact,
that address activities, events or developments that the Company or
management intends, expects, projects, believes or anticipates will or
may occur in the future are forward-looking statements. Such statements
are based upon certain assumptions and assessments made by management of
the Company in light of its experience and its perception of historical
trends, current conditions, expected future developments and other
factors it believes to be appropriate. The forward-looking statements
included in this Form 10-Q are also subject to a number of material risks
and uncertainties, including but not limited to economic, governmental,
competitive and technological factors affecting the Company's
operations, markets, products, services and prices. Such forward-looking
statements are not guarantees of future performance and actual results,
developments and business decisions may differ from those envisaged 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.
8
Consolidated Results of Operations
Consolidated revenues for the first quarter this year were $394,089 lower
than they were last year. Cost of revenues were $441,368 lower than the
same period last year, and general administration expenses increased by
$1,192.
As a result, operating income increased over last year by $46,086 which
is $.03 per share.
In June 2000, the Company made a voluntary principal reduction payment
toward its mortgage in the amount of $500,000. This principal payment
reduced interest expenses during the first quarter this year.
First quarter net income after taxes amounted to $234,520 or $.18 per
share this year compared to $199,420 or $.15 per share last year.
Information about the Company's operations in the two segments for the
first fiscal periods ended September 30, 2000 and 1999 is as follows:
Three months ended
September 30,
2000 1999
Electronic Segment
Revenues $2,240,665 $2,648,918
Operating Income $ 442,349 $ 424,655
HEDCO
Revenues $ 26,739 $ 12,575
Operating (Loss) $ (7,360) $ (35,753)
Electronics Segment
In the electronics segment, both revenues and cost of revenues were lower
during the first quarter this year as compared to the same period last year.
Revenues are recorded under defense contracts using the percentage of
completion method of accounting, measured as the percentage of costs
incurred to estimated total costs for each contract. Fewer material
receipts during the first quarter this year as compared to last year
resulted in lower revenues.
Continued production under the Company's contract with the U.S. Army for
diesel operated tactical generator sets provided 87% of the electronic
segment revenues this year. This program accounted for 93% of electronic
segment revenues last year during the same three-month period.
9
The remaining 13% and 7% of electronics segment revenues for the three-
month period ended September 30, 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 $22 million since its initial award
which funded $1 million in 1996.
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 September 30, 2000, the aggregate value of the Company's backlog of
electronic products not previously recorded as revenues was approximately
$2 million. It is estimated that all of this backlog will be recognized
as revenues during the fiscal year ending June 30, 2001.
As of September 30, 1999, the aggregate value of the Company's backlog of
electronic products not previously recorded as revenues was approximately
$2.5 million.
HEDCO Division
In the leisure and recreation segment, revenues were higher by $14,164
during the first quarter ended September 30, 2000, when compared to the
same periods last year.
This increase in revenues is attributed to a higher volume of snowmaking
machine part 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 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 September 30, 2000 was $3,466,404
compared to $3,226,502 at June 30, 2000.
The ratio of current assets to current liabilities was 3.73 to 1 at
September 30, 2000 and 3.86 to 1 at June 30, 2000.
10
For the three-month period ended September 30, 2000, $5,709 was provided
by operations. During the same period last year, operating activities
provided $314,824.
"Contract costs and related estimated profits in excess of applicable
billings" increased by $335,743 as production efforts increase towards
diesel operated tactical generator set orders scheduled for delivery
during the third fiscal quarter. Accrued corporate income taxes amounted
to $156,346 for this first quarter.
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 three-month period were $8,198 as compared with $21,212 in the
comparable period last year. The Company does not anticipate any
significant capital expenditures for the remainder of this fiscal year.
11
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
September 30, 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
Date September 13, 2000 Thom A. Velto, Treasurer
Principal Accounting Officer
Date September 13, 2000 Edward L. Proskey
Vice President, Operations
12
