SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended October 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 1-8061
FREQUENCY ELECTRONICS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 11-1986657
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
55 CHARLES LINDBERGH BLVD., MITCHEL FIELD, N.Y. 11553
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 516-794-4500
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 __
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of Registrant's Common Stock, par value $1.00
as of December 11, 2000 - 8,283,200
Page 1 of 15
<PAGE>
Frequency Electronics, Inc. and Subsidiaries
INDEX
Part I. Financial Information: Page No.
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets -
October 31, 2000 and April 30, 2000 3-4
Consolidated Condensed Statements of Operations
Six Months Ended October 31, 2000 and 1999 5
Consolidated Condensed Statements of Operations
Three Months Ended October 31, 2000 and 1999 6
Consolidated Condensed Statements of Cash Flows
Six Months Ended October 31, 2000 and 1999 7
Notes to Consolidated Condensed Financial Statements 8-10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-13
Part II. Other Information:
Item 1 - Legal Proceedings 14
Item 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
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Frequency Electronics, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
October 31, April 30,
2000 2000
(UNAUDITED) (NOTE A)
(In thousands)
ASSETS:
Current assets:
Cash and cash equivalents $ 3,701 $ 4,994
Marketable securities 31,981 36,013
Accounts receivable, net 14,386 9,590
Inventories 21,823 13,307
Deferred income taxes 1,340 1,940
Prepaid and other 1,044 1,329
------- -------
Total current assets 74,275 67,173
Property, plant and equipment, net 11,869 9,040
Deferred income taxes 1,552 600
Intangible assets 3,890 -
Other assets 4,432 4,034
------- -------
Total assets $96,018 $80,847
======= =======
See accompanying notes to consolidated condensed
financial statements.
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Frequency Electronics, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets (Continued)
October 31, April 30,
2000 2000
---- ----
(UNAUDITED) (NOTE A)
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current maturities of long-term debt $ 721 $ -
Accounts payable - trade 3,415 1,019
Accrued liabilities and other 7,106 3,989
------- -------
Total current liabilities 11,242 5,008
Deferred compensation 5,606 5,276
Deposit liability and other 12,608 11,573
------- -------
Total liabilities 29,456 21,857
------- -------
Minority interest in subsidiary 198 -
Stockholders' equity:
Preferred stock - $1.00 par value -0- -0-
Common stock - $1.00 par value 9,164 9,009
Additional paid - in capital 42,067 37,929
Retained earnings 18,689 17,239
------- -------
69,920 64,177
Common stock reacquired and held
in treasury- at cost,
880,740 shares at October 31,
2000 and 1,016,552 shares at
April 30, 2000 (3,356) (3,644)
Other stockholders' equity (129) (135)
Accumulated other comprehensive loss (71) (1,408)
------- -------
Total stockholders' equity 66,364 58,990
------- -------
Total liabilities and stockholders' equity $96,018 $80,847
======= =======
See accompanying notes to consolidated condensed
financial statements.
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Frequency Electronics, Inc. and Subsidiaries
Consolidated Condensed Statements of Operations
Six Months Ended October 31,
(Unaudited)
2000 1999
---- ----
(In thousands except per share data)
Net Sales $19,712 $11,500
Cost of sales 11,109 6,427
------- -------
Gross margin 8,603 5,073
Selling and administrative expenses 4,178 2,324
Research and development expenses 2,366 2,490
------- -------
Operating profit 2,059 259
Other income (expense):
Investment income 1,494 1,310
Interest expense (150) (161)
Other income (expense), net (30) 24
------- -------
Earnings before provision for income taxes 3,373 1,432
Income tax provision 1,095 510
------- -------
Net earnings $ 2,278 $ 922
======= =======
Net earnings per common share
Basic $ 0.28 $ 0.12
====== ======
Diluted $ 0.27 $ 0.12
====== ======
Average shares outstanding
Basic 8,109,624 7,566,569
========= =========
Diluted 8,567,859 7,933,654
========= =========
See accompanying notes to consolidated condensed
financial statements.
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Frequency Electronics, Inc. and Subsidiaries
Consolidated Condensed Statements of Operations
Three Months Ended October 31,
(Unaudited)
2000 1999
---- ----
(In thousands except per share data)
Net Sales $10,819 $ 6,036
Cost of sales 6,128 3,355
------- -------
Gross Margin 4,691 2,681
Selling and administrative expenses 2,049 1,112
Research and development expenses 1,162 1,240
------- -------
Operating profit 1,480 329
Other income (expense)
Investment income 751 570
Interest expense (81) (78)
Other income (expense), net 26 (63)
------- -------
Earnings before provision for income taxes 2,176 758
Income tax provision 705 280
------- -------
Net earnings $ 1,471 $ 478
======= =======
Net earnings per common share
Basic $ 0.18 $ 0.06
====== ======
Diluted $ 0.17 $ 0.06
====== ======
Average shares outstanding
Basic 8,187,718 7,577,010
========= =========
Diluted 8,646,789 7,979,270
========= =========
See accompanying notes to consolidated condensed
financial statements.
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Frequency Electronics, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
Six Months Ended October 31,
(Unaudited)
2000 1999
---- ----
(In thousands)
Cash flows from operating activities:
Net earnings $ 2,278 $ 922
Non-cash charges to earnings 1,392 1,496
Net changes in other assets and liabilities (1,381) 987
------- -------
Net cash provided by operating activities 2,289 3,405
Cash flows from investing activities:
Payment for acquisition, net of cash acquired (8,054) -
Sale (purchase) of marketable securities 5,991 (978)
Other - net (812) (438)
------- -------
Net cash used in investing activities (2,875) (1,416)
Cash flows from financing activities:
Payment of cash dividend (799) (766)
Payment of debt (517) (240)
Proceeds from stock option exercises 716 92
Other - net (115) (102)
------- -------
Net cash used in financing activities (715) (1,016)
Effect of exchange rate changes
on cash and cash equivalents 8 -
------- -------
Net (decrease) increase in cash (1,293) 973
Cash at beginning of period 4,994 567
------- -------
Cash at end of period $ 3,701 $ 1,540
======= =======
See accompanying notes to consolidated condensed
financial statements.
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Frequency Electronics, Inc. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
(Unaudited)
NOTE A - CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management of the Company, the accompanying unaudited
consolidated condensed interim financial statements reflect all adjustments
(which include only normal recurring adjustments) necessary to present
fairly, in all material respects, the consolidated financial position of
the Company as of October 31, 2000 and the results of its operations and
cash flows for the six and three months ended October 31, 2000 and 1999.
The April 30, 2000 consolidated condensed balance sheet was derived from
audited financial statements. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. It
is suggested that these consolidated condensed financial statements be read
in conjunction with the financial statements and notes thereto included in
the Company's April 30, 2000 Annual Report to Stockholders. The results of
operations for such interim periods are not necessarily indicative of the
operating results for the full year.
NOTE B - EARNINGS PER SHARE
Reconciliation of the weighted average shares outstanding for basic and
diluted Earnings Per Share are as follows:
<TABLE>
<CAPTION>
Periods ended October 31,
Six months Three months
---------- ------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic EPS Shares outstanding
(weighted average) 8,109,624 7,566,569 8,187,718 7,577,010
Effect of Dilutive Securities 458,235 367,085 459,071 402,260
--------- --------- --------- ---------
Diluted EPS Shares outstanding 8,567,859 7,933,654 8,646,789 7,979,270
========= ========= ========= =========
</TABLE>
For the six- and three-month periods ended October 31, 2000, all
exercisable options were included in the computation of diluted earnings
per share. Options to purchase 258,375 shares of common stock were
outstanding during the six and three months ended October 31, 1999 but were
not included in the computation of diluted earnings per share because the
exercise price of the options was greater than the average market price of
the Company's common shares during the respective periods. Since the
inclusion of such options would have been antidilutive they are excluded
from the computation.
NOTE C - ACCOUNTS RECEIVABLE
Accounts receivable at October 31, 2000 and April 30, 2000 include costs
and estimated earnings in excess of billings on uncompleted contracts
accounted for on the percentage of completion basis of approximately
$2,915,000 and $2,584,000, respectively. Such amounts represent revenue
recognized on long-term contracts that had not been billed at the balance
sheet dates. Such amounts are billed pursuant to contract terms.
NOTE D - INVENTORIES
Inventories, which are reported net of reserves of $1,098,000 and
$1,188,000 at October 31, 2000 and April 30, 2000, respectively, consist
of the following:
October 31, 2000 April 30, 2000
---------------- --------------
(In thousands)
Raw materials and Component parts $ 9,061 $ 6,188
Work in progress 12,762 7,119
------- -------
$21,823 $13,307
======= =======
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Frequency Electronics, Inc. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
(Unaudited)
NOTE E -COMPREHENSIVE INCOME
For the six months ended October 31, 2000 and 1999, total comprehensive
income (loss) was $3,615,000 and ($586,000), respectively. For the second
quarter of fiscal years 2001 and 2000, comprehensive income (loss) was
1,263,000 and ($853,000), respectively.
NOTE F - SEGMENT INFORMATION
The Company operates under three reportable segments:
1. Commercial communications - consists principally of time and frequency
control products used in two principal markets- commercial
communication satellites and terrestrial cellular telephone or other
ground-based telecommunication stations.
2. U.S. Government - consists of time and frequency control products used
for national defense or space-related programs.
3. Wireline and network synchronization systems - consists of the business
of the Company's Belgian subsidiary, Gillam-FEI.
The table below presents information about reported segments with
reconciliation of segment amounts to consolidated amounts as reported in
the statement of operations or the balance sheet for each of the periods
(in thousands):
Six months ended October 31,
2000 1999
---- ----
Net sales:
Commercial Communications $17,535 $9,868
U.S. Government 1,587 1,632
Gillam-FEI 590 0
------- -------
Consolidated Sales $19,712 $11,500
======= =======
Operating profit (loss):
Commercial Communications $ 2,504 $ 189
U.S. Government 325 290
Gillam-FEI 86 0
Corporate (856) (220)
------- ------
Consolidated Operating Profit $ 2,059 $ 259
======= ======
October 31, 2000 April 30, 2000
---------------- --------------
Identifiable assets:
Commercial Communications $21,815 $18,447
U.S. Government 2,625 4,450
Gillam-FEI 19,760 0
Corporate 51,818 57,950
------- -------
Consolidated Identifiable Assets $96,018 $80,847
======= =======
NOTE G - ACQUISITION OF GILLAM S.A.
On September 13, 2000, the Company completed its acquisition of
substantially all of the outstanding shares of Gillam S.A. ("Gillam"), a
privately-held company organized under the laws of Belgium. Gillam's
business is based in the telecommunications market and targeted to four
main fields:
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Frequency Electronics, Inc. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
(Unaudited)
(i) "Network Synchronization"--managing timing and interconnectivity for
communication networks; (ii) "Remote Control"--consisting of network
monitoring systems; (iii) "Rural Telephony"--equipment designed to connect
isolated subscribers to a telephone network via satellite and (iv) "Power
Supplies" --produced through a subsidiary, for telecom service providers.
The acquired company has been renamed Gillam-FEI.
The Gillam acquisition was consummated pursuant to the terms of a Share
Purchase Agreement dated as of August 29, 2000. Under terms of the
agreement, the Company paid $8,400,264 in cash and issued 154,681 shares of
common stock ("FEI stock") to acquire the outstanding stock of Gillam.
Based upon the market value of FEI's stock on July 25, 2002, the Share
Purchase Agreement may require the Company to issue to the Gillam
shareholders up to 35,000 additional shares of FEI stock. Because the
shares issued to the Gillam shareholders are restricted shares, they have
been valued at approximately 65% of the average market price of FEI stock,
as quoted on the American Stock Exchange, for the day immediately prior to,
the day of, and the day immediately after the announcement of the
acquisition. In addition, the Company paid approximately $469,000 in direct
transaction costs. Thus, the total purchase price is approximately as
follows:
(in thousands)
Cash paid for Gillam shares $ 8,400
Fair value of restricted shares issued 3,465
Direct transaction costs 469
-------
Total purchase price $12,334
=======
The Gillam acquisition is treated as a purchase. The purchase price is
allocated to net assets acquired of approximately $8,592,000 and to
intangible assets, including goodwill and customer lists, of approximately
$3,742,000. Goodwill will be amortized on the straightline method over 15
years.
The accompanying condensed consolidated statements of operations for the
six- and three-month periods ended October 31, 2000, include the results of
operations of Gillam from September 13, 2000 through September 30, 2000.
(Gillam will retain its April 1 to March 31 fiscal year for financial
reporting purposes.) The pro forma financial information set forth below is
based upon the Company's historical consolidated statements of operations
for the six months ended October 31, 2000 and 1999, adjusted to give effect
to the acquisition of Gillam as of the beginning of each of the periods
presented.
The pro forma financial information is presented for informational purposes
only and may not be indicative of what actual results of operations would
have been had the acquisition occurred on May 1, 1999, nor does it purport
to represent the results of operations for future periods.
Pro forma
Six months ended October 31
2000 1999
---- ----
(In thousands except per share data)
Net Sales $24,113 $19,403
------- -------
Operating Profit $2,290 $ 550
------ ------
Income from continuing operations $2,202 $ 960
====== ======
Earnings per share- basic $ 0.27 $ 0.12
====== ======
Earnings per share- diluted $ 0.25 $ 0.12
====== ======
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<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
RESULTS OF OPERATIONS
The table below sets forth the percentage of consolidated net sales represented
by certain items in the Company's consolidated statements of operations for the
respective six- and three-month periods of fiscal years 2001 and 2000:
Six months Three months
Periods ended October 31,
2000 1999 2000 1999
---- ---- ---- ----
Net Sales
Commercial Communications 89.0% 85.8% 86.3% 87.0%
US Government 8.1 14.2 8.2 13.0
Gillam-FEI 2.9 0.0 5.5 0.0
----- ----- ----- -----
100.0 100.0 100.0 100.0
Cost of Sales 56.4 55.9 56.6 55.6
Selling and administrative expenses 21.2 20.2 18.9 18.4
Research and development expenses 12.0 21.7 10.8 20.6
----- ----- ----- -----
Operating profit 10.4 2.2 13.7 5.4
Other income (expense)- net 6.7 10.2 6.4 7.1
----- ----- ----- -----
Pretax Income 17.1 12.4 20.1 12.5
Provision for income taxes 5.6 4.4 6.5 4.6
----- ----- ----- -----
Net earnings 11.5% 8.0% 13.6% 7.9%
===== ===== ===== =====
On September 13, 2000, the Company completed its acquisition of Gillam S.A.,
since renamed Gillam-FEI. The consolidated financial statements of the Company
were impacted by this acquisition by inclusion of the results of operations for
Gillam-FEI for the period from September 13, 2000 through September 30, 2000,
the end of Gillam-FEI's fiscal second quarter.
For the six- and three-month periods ended October 31, 2000, the Company's
revenues increased by 71% and 79%, respectively, over the same periods of fiscal
2000. Similarly, operating profit increased by $1.8 million (695%) and $1.15
million (350%), respectively, and net income improved by $1.36 million (147%)
and $993,000 (208%), respectively. Excluding Gillam-FEI, revenues for the fiscal
2001 periods increased by 66% and 70%, respectively, over the same periods of
fiscal 2000 and net income increased by 143% and 199%, respectively.
These outstanding results derive from continued growth in demand for the
Company's proprietary technology products, including its commercial
communications products for the cellular telephone infrastructure industry as
well as wireless application products for the commercial satellite industry. The
Company expects demand for such products to continue to
grow. Consequently, the Company will experience continued growth in revenue and
profitability. The rate of such growth is dependent on the specific requirements
of the Company's customers which may vary over time.
Gross margins for the six- and three-month periods of fiscal 2001 were 44% and
43%, respectively, compared to 44% for each of the same periods ended October
31, 1999. Margins on commercial revenues, including Gillam-FEI, were 44% in each
of the fiscal 2001 periods while gross margins on US Government revenues were
39% and 40%, respectively. These gross margin rates are comparable to
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Frequency Electronics, Inc. and Subsidiaries
(Continued)
the fiscal 2000 margins realized in these segments. In addition, during the
fiscal 2001 periods, the Company has been engaged in a significant development
effort which is customer-funded. The costs of this effort, which approximate the
revenue recognized on the contract, are a component of cost of sales. If this
development contract is excluded, aggregate gross margins for each of the fiscal
2001 periods would exceed 46%. The Company expects its overall gross margin rate
to continue to exceed 40% of consolidated sales but the actual rate realized
from quarter to quarter will vary based on product mix, as illustrated above.
Selling and administrative costs for the six- and three-month periods ended
October 31, 2000, increased by $1.85 million (80%) and $937,000 (84%) compared
to the same periods of fiscal year 2000. Excluding Gillam-FEI, the increases
would be 75% and 74%, respectively. Of the increase, approximately $400,000 is
attributable to settlement of certain litigation (see Part II, Item 1- Legal
Proceedings) and related legal costs. Excluding these litigation-related costs,
selling and administrative expenses as a percentage of sales would be less than
20% for the six-month period ended October 31, 2000, which is within the
Company's target for these costs. However, the absolute dollar spending for
selling and administrative expenses is expected to increase as the Company
continues to grow. Examples of this growth include the cost of additional
support personnel, greater sales and marketing expenditures, including
commissions to sales representatives, and increases for incentive compensation
programs that the Company initiated in prior years. In addition, amortization of
certain non-employee stock options was approximately $200,000 greater in the
six-month period ended October 31, 2000 than that recorded in the comparable
period of the prior year as a result of the rising value of the Company's common
stock.
Research and development costs in the fiscal 2001 periods decreased by $124,000
(5%) and $78,000 (6%), respectively, over the comparable six- and three-month
periods ended October 31, 1999. Development spending by Gillam-FEI was not
significant for the fiscal 2001 periods. The apparent decrease in research and
development spending is not indicative of a decrease in the Company's
development efforts. As indicated above, some of the Company's development
spending during fiscal 2001 was customer-funded, thus decreasing self-funded
research and development expenditures but increasing cost of sales. The Company
continues to devote significant resources to develop new products and enhance
existing products for the commercial communications market. The products in
development will be used to increase the capability of existing TDMA and GSM
systems (2.5G and EDGE) and to support the development of third generation (3G)
wireless networks. The Company is supplying these products for beta-site
field-testing of 2.5G and 3G systems. In addition, during the second quarter of
fiscal 2001, the Company delivered the first R/T (receive/transmit) modules that
utilize the Company's proprietary microwave technology to increase the
throughput of fiber optic networks. The Company anticipates that research and
development spending will continue at approximately the same level for the
remainder of fiscal 2001, targeting aggregate spending at approximately 10% of
revenues. Internally generated cash and cash reserves will be adequate to fund
this development effort.
Net nonoperating income and expense increased by $141,000 (12%) and $267,000
(62%) in the six- and three-month periods ended October 31, 2000 from the
comparable fiscal 2000 periods. Investment income increased by $184,000 (14%)
and $181,000 (32%), respectively, in the fiscal year 2001 periods over the
comparable 2000 periods. This is principally the result of net realized gains on
the sale of certain marketable securities during the second quarter of fiscal
2001. Interest expense, including Gillam-FEI, was approximately the same in both
the fiscal 2001 and 2000 periods. Other income (expense), net, which consists
principally of certain non-recurring transactions, was a net expense of $30,000
for the six months of fiscal 2001 versus net income of $24,000 in fiscal 2000.
For the second quarter of each fiscal year, the nature of these items switched
to income of $26,000 in fiscal 2001 compared to $63,000 of expense in fiscal
2000. The net amount of these items generally has a nominal effect on the
overall earnings of the Company.
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Frequency Electronics, Inc. and Subsidiaries
(Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's balance sheet continues to reflect a strong working capital
position of $63 million at October 31, 2000 compared to working capital at April
30, 2000, of $62 million. Included in working capital at October 31, 2000 is
approximately $36 million of cash, cash equivalents and marketable securities,
including $12 million of REIT units which are convertible to Reckson Associates
Realty Corp. common stock.
Net cash provided by operating activities for the six months ended October 31,
2000, was $2.3 million compared to a net cash inflow of $3.4 million in the
comparable fiscal 2000 period. The principal cause for the decrease in cash flow
in fiscal 2001 is due to a $2.5 million increase in inventory, partially offset
by the $1.4 million increase in net earnings. Due to long lead time requirements
for certain component parts and work in process inventory, the Company has built
up its inventory levels in order to meet the increased demand for its products.
The Company anticipates that it will continue to generate positive cash flow
from operating activities for the balance of fiscal year 2001.
Net cash used in investing activities for the six months ended October 31, 2000,
was $2.9 million. The major transaction during the six-month period was the
acquisition of the shares of Gillam S.A. for which the Company paid an aggregate
of $8.8 million, including transaction costs. This purchase was partially funded
by the redemption of certain marketable securities of approximately $6 million
and was also offset by the acquired cash of Gillam-FEI of approximately
$758,000. In addition, the Company acquired additional capital equipment for
approximately $800,000. The Company may continue to acquire or redeem marketable
securities as dictated by its investment opportunities as well as by the cash
requirements for its development activities. The Company will continue to
acquire more efficient equipment to automate its test and production processes
and intends to spend approximately $2 million on capital equipment during fiscal
2001. Internally generated cash will be adequate to acquire this capital
equipment.
Net cash used in financing activities for the six months ended October 31, 2000,
was $715,000 compared to $1.0 million for the comparable fiscal 2000 period.
Included in the fiscal 2001 amount is payment of the Company's semi-annual
dividend in the aggregate amount of $799,000. An additional $632,000 was used to
make regularly scheduled long-term liability payments, including $517,000 paid
by Gillam-FEI. These outflows were partially offset by receipts of $716,000 from
certain employees and independent contractors in connection with stock option
exercises.
Although insignificant in the current period, new features included in the
Company's balance sheet and statement of cash flows are adjustments for foreign
currency fluctuations. During the six-month period ended October 31, 2000, such
fluctuations added $8,000 of cash to the Company's reported balance sheet. In
the equity section of the balance sheet, included in accumulated other
comprehensive income (loss) is a foreign currency translation gain of $242,000.
The recent volatility experienced in rates of exchange between the US dollar and
the Euro, indicates that future currency adjustments could be substantial.
Backlog
At October 31, 2000, the Company's backlog amounted to approximately $45 million
compared to the approximately $24 million backlog at April 30, 2000. Of this
backlog, approximately $5 million is attributable to Gillam-FEI. The Company
expects to realize more than 90% of this backlog in the next 12 months.
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Frequency Electronics, Inc. and Subsidiaries
(Continued)
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995:
The statements in this quarterly report on Form 10Q regarding future earnings
and operations and other statements relating to the future constitute
"forward-looking" statements pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
inherently involve risks and uncertainties that could cause actual results to
differ materially from the forward-looking statements. Factors that would cause
or contribute to such differences include, but are not limited to, continued
acceptance of the Company's products in the marketplace, competitive factors,
new products and technological changes, product prices and raw material costs,
dependence upon third-party vendors, competitive developments, changes in
manufacturing and transportation costs, the availability of capital, and other
risks detailed in the Company's periodic report filings with the Securities and
Exchange Commission. By making these forward-looking statements, the Company
undertakes no obligation to update these statements for revisions or changes
after the date of this report.
PART II
ITEM 1 - Legal Proceedings
On August 2, 2000, a Stipulation of Settlement was executed by all parties
and filed with the Court in the action pending against FEI and others in the
Court of Chancery, State of Delaware, New Castle county, entitled In re
Frequency Electronics, Inc., Derivative Litigation, Civil Action No. 13266: the
proposed settlement called for a total payment by FEI for legal fees and
disbursements not exceeding $245,000; the proposed settlement was subject to
notice to stockholders and Court approval. On October 4, 2000, the Court issued
an Order and Final Judgment of Dismissal of Derivative Action and awarded
attorneys' fees and expenses in the amount of $218,684. FEI paid such fees and
expenses in October 2000.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) On September 28, 2000, the Company's report on Form 8-K, containing
disclosure under Item 2-Acquisition or Disposition of Assets and Item
7- Financial Statements and Exhibits, was filed with the Securities and
Exchange Commission. This filing provided information on the Company's
acquisition of Gillam S.A. The Form 8-K filing was amended on November
27, 2000 to file the audited financial statements of Gillam S.A. for
the year ended March 31, 2000 and the pro forma financial statements of
the Registrant for the year ended April 30, 2000.
(c) On October 20, 2000, the Company's report on Form 8-K, containing
disclosure under Item 5 thereof (declaration of semi-annual dividend),
was filed with the Securities and Exchange Commission.
(d) On November 1, 2000, the Company's report on Form 8-K, containing
disclosure under Item 5 thereof (litigation settlement), was filed with
the Securities and Exchange Commission.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FREQUENCY ELECTRONICS, INC.
(Registrant)
Date: December 15, 2000 BY /s/ Joseph P. Franklin
----------------------
Joseph P. Franklin
Chief Executive Officer
Date: December 15, 2000 BY /s/ Alan Miller
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Alan Miller
Chief Financial Officer
and Treasurer
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