UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Mark one
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) of the Securities
Exchange Act of 1934
For the period ended June 30, 1998
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 Number
0-2545
--------------------
Allied Research Corporation
--------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 04-2281015
- ------------------------------ ---------------------------
(State or other jurisdiction of (I.R.S. Employer Number)
incorporation or organization)
8000 Towers Crescent Drive, Suite 750
Vienna, Virginia 22182
- ------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 847-5268
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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of June 30, 1998: 4,739,754.
<PAGE>
Allied Research Corporation
INDEX
- -------------------------------------------------------------------------------
PAGE
PART I. FINANCIAL INFORMATION - UNAUDITED NUMBER
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1998 and December 31, 1997.......................2, 3
Condensed Consolidated Statements of Earnings
Three months and six months ended June 30, 1998 and 1997.....4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1998 and 1997...................5, 6
Notes to Condensed Consolidated Financial Statements............7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................10
PART II. OTHER INFORMATION..............................................14
<PAGE>
Allied Research Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
ASSETS
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S><C>
CURRENT ASSETS
Cash and equivalents, including restricted cash $ 24,838 $16,421
Accounts receivable 18,406 40,650
Costs and accrued earnings on uncompleted contracts 15,530 7,804
Inventories 5,440 6,966
Prepaid expenses and deposits 13,026 4,094
-------- -------
Total current assets 77,240 75,935
PROPERTY, PLANT AND EQUIPMENT - AT COST
Buildings and improvements 11,765 11,714
Machinery and equipment 30,924 28,897
-------- -------
42,689 40,611
Less accumulated depreciation 32,359 30,259
-------- -------
10,330 10,352
Land 1,204 1,208
-------- -------
11,534 11,560
OTHER ASSETS
Deposits 6,554 6,414
Intangibles, net of amortization 4,899 5,028
Other 764 563
-------- -------
12,217 12,005
-------- -------
$100,991 $99,500
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
Allied Research Corporation
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED
(Thousands of Dollars)
LIABILITIES
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, 1998 December 31, 1997
------------- -----------------
<S><C>
CURRENT LIABILITIES
Notes payable $ 3,495 $ 1,720
Current maturities of long-term debt 841 1,281
Accounts and trade notes payable 13,095 34,656
Accrued liabilities 4,763 4,747
Accrued loss on contracts 392 572
Customer deposits 24,804 6,994
Income taxes 417 848
-------- -------
Total current liabilities 47,807 50,818
LONG-TERM DEBT, less current maturities 4,686 5,311
ADVANCE PAYMENTS ON CONTRACTS 5,850 5,850
DEFERRED INCOME TAXES 627 627
STOCKHOLDERS' EQUITY
Preferred stock, no par value; authorized, 10,000
shares; none issued - -
Common stock, par value, $.10 per share; authorized
10,000,000 shares; issued and outstanding, 4,739,754
in 1998 and 4,443,092 in 1997 474 460
Capital in excess of par value 13,233 12,100
Retained earnings 30,909 26,046
Accumulated foreign currency translation adjustment (2,595) (1,713)
-------- -------
42,021 36,894
-------- -------
$100,991 $99,500
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
Allied Research Corporation
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Thousands of Dollars)
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- ----------------------------
1998 1997 1998 1997
-------- ---------- ---------- ----------
<S><C>
Revenue $ 32,154 $ 24,630 $ 67,907 $ 54,395
Cost and expenses
Cost of sales 24,774 18,012 53,897 42,287
Selling and administrative 3,514 3,107 6,785 6,429
Research and development 273 316 730 683
---------- ---------- ---------- ----------
28,561 21,435 61,412 49,399
---------- ---------- ---------- ----------
Operating income 3,593 3,195 6,495 4,996
Other income (deductions)
Interest expense (470) (612) (877) (1,120)
Interest income 318 191 554 444
Other - net (372) (132) (384) 507
---------- ---------- ---------- ----------
(524) (553) (707) (169)
---------- ---------- ---------- ----------
Earnings before income taxes 3,069 2,642 5,788 4,827
Income taxes 523 335 985 536
---------- ---------- ---------- ----------
NET EARNINGS $ 2,546 $ 2,307 $ 4,803 $ 4,291
========== ========== ========== ==========
Net income per common share
Basic $ .53 $ .51 $ 1.02 $ .95
========== ========== ========== ==========
Diluted $ .53 $ .50 $ .99 $ .94
========== ========== ========== ==========
Weighted average number of shares
Basic 4,781,038 4,532,371 4,687,482 4,502,521
Diluted 4,835,367 4,580,003 4,833,441 4,557,138
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
Allied Research Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended June 30
------------------------
Increase (decrease) in cash and equivalents 1998 1997
--------- ---------
<S><C>
Cash flows from operating activities
Net earnings $ 4,803 $ 4,292
Adjustments to reconcile net earnings to net cash provided by
(used in) operating activities
Depreciation and amortization 2,061 992
Changes in assets and liabilities
Accounts receivable 22,040 (9,068)
Costs and accrued earnings on uncompleted contracts (7,635) 9,397
Inventories 1,401 1,491
Prepaid expenses and other assets 8,591 803
Accounts payable, accrued liabilities and customer deposits (21,952) (5,674)
Income taxes (429) 574
-------- --------
Net cash provided by (used in) operating activities 8,880 2,807
Cash flows (used in) investing activities
Capital expenditures (1,840) (346)
-------- --------
Net cash (used in ) investing activities (1,840) (346)
-------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
Allied Research Corporation
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(Thousands of Dollars)
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended June 30
------------------------
1998 1997
--------- ---------
<S><C>
Cash flows from financing activities
Principal payments of long-term debt (1,065) (7,897)
Increase in long-term debt - 1,800
Net (decrease) increase in short-term borrowings 1,775 (2,694)
Stock grant/stock plan 685 581
Options exercised 459 214
Deposits - restricted cash (140) (1,800)
------- --------
Net cash (used in) provided by financing activities 1,714 (9,796)
Effects of exchange rate changes on cash (337) (3,233)
------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 8,417 (10,568)
Cash and equivalents at beginning of year 16,421 32,859
------- --------
Cash and equivalents at end of period $24,838 $ 22,291
======= ========
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for
Interest $ 893 $ 685
Taxes 1,682 405
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
Allied Research Corporation
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
(Thousands of Dollars)
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The condensed consolidated balance sheets as of June 30, 1998 and December
31, 1997, the condensed consolidated statements of earnings and the
condensed consolidated statements of cash flows for the six months ended
June 30, 1998 and 1997, have been prepared by the Company without audit. In
the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and changes in cash flow at June 30, 1998 and 1997
have been made.
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
condensed consolidated financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's December
31, 1997 Form 10-K filed with the Securities and Exchange Commission,
Washington, D.C. 20549. The results of operations for the period ended June
30, 1998 and 1997 are not necessarily indicative of the operating results
for the full year.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of
Allied Research Corporation (a Delaware Corporation) and the Company's
wholly-owned subsidiaries, Mecar, S.A. (a Belgian Company), Allied Research
Corporation Limited (a United Kingdom Company) and Barnes & Reinecke, Inc.
(a Delaware Corporation)
Mecar, S.A.'s wholly-owned Belgian subsidiaries include, Sedachim, S.I.,
Tele Technique Generale, and VSK Electronics, N.V., its wholly-owned
subsidiary Belgian Automation Units, N.V. and I.D.C.S., N.V., (collectively
"The VSK Group").
Significant intercompany transactions have been eliminated in consolidation.
NOTE 3 - RESTRICTED CASH
Mecar is generally required under the terms of its contracts with foreign
governments to provide performance bonds, advance payment guarantees and
letters of credit. The credit facility agreements used to provide these
financial guarantees generally place restrictions on cash deposits and other
liens on Mecar's assets until the customer accepts delivery. Cash deposits
totaling approximately $18,807 and long-term deposits of $6,554 at June 30,
1998 and ($8,727 and $6,414 at December 31, 1997) are restricted or pledged
as collateral for various bank agreements.
NOTE 4 - INVENTORIES
Inventories are composed of raw materials and supplies.
7
<PAGE>
Allied Research Corporation
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
June 30, 1998
(Thousands of Dollars)
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 5 - NOTES PAYABLE
Barnes and Reinecke has a $3,500 revolving line-of-credit agreement which
had an outstanding balance at June 30, 1998 of $3,495 ($1,720 at December
31, 1997). These lines-of-credit expired at the earlier of contract
completion or November, 1999. Borrowings are secured by assets, as defined
in the agreement, and are guaranteed by Allied and prepaid deposits from the
customer. The agreement contains covenants requiring the maintenance of
certain financial ratios and other matters.
Mecar has a $800 line-of-credit agreement with a foreign bank which is
unused at June 30, 1998 and December 31, 1997. The line is secured by a cash
deposit pledge equal to the full amount of the line.
NOTE 6 - CREDIT FACILITY
The Company is obligated under various credit agreements (the Agreements)
with its foreign banking pool and its domestic bank that provided credit
facilities primarily for letters of credit, bank guarantees, performance
bonds and similar instruments required for specific sales contracts. The
Agreements provide for certain bank charges and fees as the line is used,
plus fees of 2% of guarantees issued and annual fees of 1.25% - 1.35% of
letters of credit and guarantees outstanding. As of June 30, 1998,
guarantees and performance bonds of $38.2 million ($28.6 million at December
31, 1997) remain outstanding.
Advances under the Agreements are secured by cash of $18,807 and long-term
cash deposits of $6,554. Amounts outstanding are also collateralized by the
letters of credit received under the contracts financed, and a pledge of
approximately $23 million on Mecar's assets. Certain Agreements provide for
restrictions on payments or transfers to Allied and ARCL for management
fees, intercompany loans, loan payments, the maintenance of certain net
worth levels and other provisions.
NOTE 7 - LONG-TERM FINANCING
Mecar is obligated on an approximately $3,316 mortgage on its manufacturing
and administration facilities. As amended, the balance of the loan is
payable in annual principal installments of approximately $500 and matures
in 2004. The Company is also obligated on several mortgages on The VSK
Group's buildings which has a balance of approximately $1,838 at June 30,
1998. The mortgages are payable in annual installments of approximately $270
plus interest. BRI is obligated on a $373 term loan.
8
<PAGE>
Allied Research Corporation
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
June 30, 1998
(Thousands of Dollars)
(Unaudited)
- -------------------------------------------------------------------------------
NOTE 7 - LONG-TERM FINANCING - Continued
Scheduled annual maturities of long-term obligations as of June 30, 1998 are
approximately as follows:
Year Amount
------ ------
1999 $ 841
2000 1,176
2001 764
2002 825
2003 825
Thereafter 1,096
NOTE 8 - INCOME TAXES
The Company's provision for income taxes differs from the anticipated
combined federal and state statutory rates due to operating loss carryovers
and earnings from foreign subsidiaries.
The Company's Belgian subsidiaries have unused net operating losses of
approximately $700 at June 30, 1998, which under Belgian law cannot be
carried back but may be carried forward indefinitely, and are subject to
certain annual limitations.
As of June 30, 1998, the Company had unused foreign tax credit carryforwards
of approximately $455 which expire through 2009.
Deferred tax liabilities have not been recognized for bases differences
related to investments in the Company's Belgian and United Kingdom
subsidiaries. These differences, which consist primarily of unremitted
earnings intended to be indefinitely reinvested, aggregated approximately
$32,000 at June 30, 1998. Determination of the amount of unrecognized
deferred tax liabilities is not practicable.
NOTE 9 - EARNINGS (LOSS) PER SHARE
Stock options outstanding have been included in the diluted per share
computation on a weighted average basis.
9
<PAGE>
Allied Research Corporation
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS
June 30, 1998
(Thousands of Dollars)
(Unaudited)
- -------------------------------------------------------------------------------
The Company conducts its business through its wholly-owned subsidiaries: Mecar,
S.A., ("Mecar"), a Belgian corporation and Barnes & Reinecke, Inc. ("Barnes"), a
Delaware corporation, headquartered in Illinois; as well as a group of Belgian
corporations acquired in 1994 and 1995 led by VSK Electronics, N.V.,
Teletechnique General, S.A., Belgian Automation Units, N.V. and I.D.C.S., S.A.
(collectively, the "VSK Group"). This discussion refers to the financial
condition and results of operations of the Company on a consolidated basis.
Forward-Looking Statements
- --------------------------
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that are based on current
expectations, estimates and projections about the Company and the industries in
which it operates. In addition, other written or oral statements which
constitute forward-looking statements may be made by or on behalf of the
Company. Words such as "expects", "anticipates", "intends", "may", "plans"
"believes", "seeks", "estimates", or variations of such words or similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions ("Future Factors") which are difficult to predict.
Therefore, actual outcomes and results may differ materially from what is
expressed or forecast in such forward-looking statements. The Company undertakes
no obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
Future Factors include increasing competition from foreign and domestic
competitors, including new entrants; substantial reliance on Mecar's principal
customers to continue to acquire Mecar's products on a regular basis; the
cyclical nature of the Company's military business; rapid technological
developments and changes and the Company's ability to continue to introduce
competitive new products and services on a timely, cost effective basis; the
ability of the Company to successfully continue its transition from a pure
defense firm to a firm with a substantial commercial component; the mix of
products/services; the achievement of lower costs and expenses; domestic and
foreign governmental and public policy changes which may affect the level of
purchases made by customers; changes in environmental and other domestic and
foreign governmental regulations; continued availability for financing,
financial instruments and financial resources in the amounts, at the times and
on the terms required to support the Company's future business. These are
representative of the Future Factors that could affect the outcome of the
forward-looking statements. In addition, such statements could be affected by
general industry and market conditions and growth rates, general domestic and
international economic conditions including interest rate and currency exchange
rate fluctuations and other Future Factors.
Revenue
- -------
Revenue for the first six (6) months of 1998 was $67,907, an increase of 25%
over the comparable period in 1997, principally due to increased revenue from
Mecar and VSK Group. Mecar's sales were $53,350, up 30% compared to the period
ended June 30, 1997. The VSK Group's revenue for the six months was $9,665, up
14% over the first half of 1997. Barnes' revenue was $4,892, up 2% compared to
the same period in 1997.
10
<PAGE>
Allied Research Corporation
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS - CONTINUED
June 30, 1998
(Thousands of Dollars)
(Unaudited)
- -------------------------------------------------------------------------------
Revenue - Continued
- -------------------
Revenue for the quarter ended June 30, 1998 was $32,154, a 31% increase over the
quarter ended June 30, 1997. Mecar recognized revenue of $24,735 for the quarter
ended June 30, 1998, a 39% increase over the quarter ended June 30 1997; Barnes'
revenue of $2,535 for the quarter ended June 30, 1998 is about the same as the
revenue for the quarter ended June 30, 1997; the revenue of the VSK Group of
$4,884 for the quarter ended June 30, 1998 increased 15% over the comparable
period in 1997
Backlog
- -------
As of June 30, 1998, the Company's backlog was $105,100 compared with $92,800 at
December 31, 1997 and $121,000 at March 31, 1998.
At June 30, 1998 and June 30, 1997, respectively, the backlog of each of the
Company's operating units was as follows:
June 30,
------------------
1998 1997
------- -------
Mecar $78,600 $95,100
Barnes 9,300 12,300
VSK Group 17,200 14,200
The principal portion of the $16,200 of new awards received by the Company
during the second quarter of 1998 was received by the VSK Group. Mecar continues
to aggressively pursue additional ammunition orders for new weapon systems being
developed for Mecar's traditional customers.
Operating Costs and Expenses
- ----------------------------
Cost of sales for the first six months of 1998 was approximately $53,897 or
79% of sales as compared to $42,287 or 78% for the first six months of 1997.
Cost of sales for the second three months of 1998 was approximately
$24,774 or 77% of sales as compared to $18,012, or 73% of sales for the
second quarter of 1997.
Selling and administrative expenses were approximately $6,785 of revenues or 10%
of sales for the six months ended June 30, 1998, as compared to $6,429 or 12% of
sales for the six months ended June 30, 1997.
Selling and administrative expenses were approximately $3,514 or 11% of revenue
for the three months ended June 30, 1998 as compared to $3,107 or 13% for the
three months ended June 30, 1997.
11
<PAGE>
Allied Research Corporation
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS - CONTINUED
June 30, 1998
(Thousands of Dollars)
(Unaudited)
- -------------------------------------------------------------------------------
Research and Development
- ------------------------
Research and development expenses were 1% as a ratio of sales for each of the
six months and three months periods ended June 30, 1998 and 1997.
Interest Expense
- ----------------
Interest expense for the six months ending June 30, 1998 was $877, compared to
$1,120 for the comparable period in 1997. Similarly, interest expense decreased
during the second quarter of 1998 was $470 compared to $612 for the second
quarter of 1997. All such decreases are principally due to reduced levels of
borrowing.
Interest Income
- ---------------
Interest income for each of the six months and three months periods of 1998
increased over the comparable periods of 1997, principally as a result of
increased amounts of cash invested.
Other - Net
- -----------
Other - Net represents primarily net currency losses, resulting from foreign
currency transactions for the six months ended June 30, 1998. The fluctuation of
currency rates resulted in the decrease in the current period.
Net Earnings
- ------------
The Company had a $4,803 net profit ($1.02 per share basic and $.99 per share
diluted) for the first six months of 1998 compared with a $4,291 net profit
($.95 per share basic and $.94 diluted) for the comparable period in 1997. The
Company earned a $2,546 profit ($.53 per share basic and diluted) in the second
quarter of 1998 compared with a $2,307 profit ($.51 per share basic and $.50
diluted) in the second three months of 1997. The VSK Group continued to
experience increased profit margins during the second quarter of 1998.
Liquidity and Capital Resources
- -------------------------------
During the first six months of 1998 and throughout 1997, Allied funded its
operations principally with internally generated cash and back-up credit
facilities required for foreign government contracts.
Mecar continues to finance its activities via credit facilities supplied by a
foreign bank pool. In the second quarter of 1998, Mecar paid in full a
short-term loan from Allied. Mecar is limited by its bank pool agreement in the
amounts it may transfer to Allied or other affiliates.
Barnes will seek an addition to its bank line-of-credit in order to obtain
additional funds necessary principally to continue work on a project for a
foreign-based customer which is expected to be delivered in mid-1999.
The VSK Group continues to reduce its bank and other long-term indebtedness.
12
<PAGE>
Allied Research Corporation
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS - CONTINUED
June 30, 1998
(Thousands of Dollars)
(Unaudited)
- -------------------------------------------------------------------------------
Liquidity and Capital Resources - Continued
- -------------------------------
At June 30, 1998, the Company had unrestricted cash (i.e., cash note required by
the terms of the bank pool agreement to collateralize contracts) of
approximately $6,031 compared with approximately $2,097 and $7,694 at June 30,
1997 and at December 31, 1997, respectively.
Accounts receivable at June 30, 1998 decreased from December 31, 1997 levels by
$22,244 due to substantial collections in the first half of 1998. Cost and
accrued earnings on uncompleted contracts increased by $7,726 from December 31,
1997 levels due to increased levels of work-in-progress. Inventories decreased
from year-end levels by $1,526 due to decreases in purchases during the first
half of 1998. Prepaid expenses and deposits increased by $8,932 primarily due to
increases in prepaid expenses. Current liabilities decreased by $3,513 from
December 31, 1997 levels principally as a result of reductions in accounts
payable and increases in customer deposits.
In summary, working capital was approximately $29,433 at June 30, 1998, which is
an increase of $4,316 from working capital at December 31, 1997. The increase is
primarily attributable to the Company's continuing profitability, increased
work-in-progress, customer deposits and a substantial reduction in accounts
payable.
13
<PAGE>
Allied Research Corporation
June 30, 1998
- -------------------------------------------------------------------------------
PART II. OTHER INFORMATION
14
<PAGE>
Allied Research Corporation
June 30, 1998
- -------------------------------------------------------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company's annual meeting of shareholders was held on June
3, 1998.
(b) The matters voted upon at the meeting referred to in the
foregoing Item 4(a) were (i) the ratification of the selection of Grant Thornton
LLP as the Company's independent auditors for 1998 (ii) the election of five (5)
directors to serve for the ensuing year and until their successors are elected
and qualified and (iii) the approval of the Company's 1998 Incentive Stock Plan
(the "Plan"). As to the ratification of the selection of Grant Thornton as the
Company's independent auditors for 1998, 3,273,164 shares was voted for, 3,543
shares were voted against, 170,165 shares abstained from voting and there were
no shares counted as broker non-votes. With respect to the election of directors
to serve for the ensuing year, shares were voted for (or votes were withheld)
for the five (5) nominees, all of whom were elected, as follows: J. R. Sculley -
3,113,379 (333,493); Clifford C. Christ - 2,870,209 (576,663); Earl P. Smith -
2,870,497 (576,375); Robert W. Hebel - 2,863,666 (583,206); and Harry H. Warner
- - 3,067,126 (379,746). With respect to the approval of the Plan, 2,527,991
shares were voted for, 689,844 shares were voted against, 172,215 shares
abstained from voting and there were 47,822 shares counted as broker non-votes.
15
<PAGE>
Allied Research Corporation
SIGNATURE
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.
ALLIED RESEARCH CORPORATION
/s/ J. R. Sculley
______________________________
Date: July 28, 1998 J. R. Sculley
Chairman of the Board,
Chief Executive Officer and
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 24,838,000
<SECURITIES> 0
<RECEIVABLES> 18,406,000
<ALLOWANCES> 0
<INVENTORY> 5,440,000
<CURRENT-ASSETS> 77,240,000
<PP&E> 43,893,000
<DEPRECIATION> 32,359,000
<TOTAL-ASSETS> 100,991,000
<CURRENT-LIABILITIES> 47,807,000
<BONDS> 0
0
0
<COMMON> 474,000
<OTHER-SE> 41,547,000
<TOTAL-LIABILITY-AND-EQUITY> 100,991,000
<SALES> 67,907,000
<TOTAL-REVENUES> 67,907,000
<CGS> 53,897,000
<TOTAL-COSTS> 61,412,000
<OTHER-EXPENSES> 384,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 877,000
<INCOME-PRETAX> 5,788,000
<INCOME-TAX> 985,000
<INCOME-CONTINUING> 4,803,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,803,000
<EPS-PRIMARY> 1.02
<EPS-DILUTED> .99
</TABLE>
