<PAGE>
<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-230
_____
For the thirteen weeks ended November 24, 1995
_________________
AEL INDUSTRIES, INC.
____________________________________________________________________
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1353403
____________________________________________________________________
(State or other jurisdiction of (IRS Employer
incorporation of organization) Identification No.)
305 Richardson Road, Lansdale, Pennsylvania
19446
____________________________________________________________________
(Address of principal executive offices and Zip Code)
(215) 822-2929
____________________________________________________________________
(Registrant's telephone number, including area code)
N/A
____________________________________________________________________
(Former name, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all re-
ports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
_______ _______
The number of shares outstanding of each class of common stock is as
follows:
Class Outstanding at January 3, 1996
__________________________________ _________________________________
Class A common stock, $1 par value 3,659,644
Class B common stock, $1 par value 396,461
Page 1 of 14
<PAGE>
<PAGE>
AEL INDUSTRIES, INC.
FORM 10-Q
THIRTY-NINE WEEKS ENDED NOVEMBER 24, 1995
INDEX
<TABLE>
<CAPTION> PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance 3
Sheets - November 24, 1995 and
February 24, 1995
Consolidated Statements of Oper- 4
ations Thirteen and Thirty-Nine
Weeks Ended November 24, 1995 and
November 25, 1994
Consolidated Statements of Cash 5
Flows - Thirty-Nine Weeks Ended
November 24, 1995 and November 25,
1994
Notes to Condensed Consolidated 6
Financial Statements
Management's Discussion and 9
Analysis of Results of Oper-
ations and Financial Condition
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings 13
Item 6 - Exhibits and Reports 13
on Form 8-K
Signature 14
</TABLE>
Page 2 of 14
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION FORM 10-Q
AEL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
November 24 February 24,
1995 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $89 $3,140
Marketable securities 630 724
Receivables, including unbilled amounts
of $29,669 at November 24, 1995 and
$29,244 at February 24, 1995:
U. S. Government 37,264 40,695
Other 5,972 5,273
------------ ------------
43,236 45,968
Inventories 2,659 1,312
Deferred income taxes 1,226 1,928
Other current assets 1,213 208
------------ ------------
Total current assets 49,053 53,280
Property, plant and equipment (net of
accumulated depreciation and amorti-
zation of $61,477 at November 24, 1995
and $56,941 at February 24, 1995) 41,285 42,639
Other assets 5,680 5,499
------------ ------------
$96,018 $101,418
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $2,900
Accounts payable 3,484 $7,732
Accrued salaries, wages and employee benefits 4,514 5,062
Other current liabilities 7,090 7,039
Current portion of long-term debt 3,872 3,857
------------ ------------
Total current liabilities 21,860 23,690
Long-term debt, net of current portion 11,974 15,742
Other liabilities 1,817 1,764
Commitments and contingent liabilities -
Note 4
Shareholders' equity 60,367 60,222
------------ ------------
$96,018 $101,418
============ ============
See accompanying notes.
Page 3 of 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AEL INDUSTRIES, INC. FORM 10-Q
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
Thirteen Thirteen Thirty-Nine Thirty-Nine
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
November 24, 1995 November 25, 1994 November 24, 1995 November 25, 1994
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Sales and service revenues $24,472 $30,939 $86,493 $92,424
Operating costs and expenses:
Cost of products and services 19,446 23,556 66,493 70,356
Administrative and selling 4,368 4,338 12,871 13,024
Bid and proposal costs 1,288 1,228 3,773 4,443
Research and development costs 678 625 2,255 1,608
----------------- ----------------- ----------------- -----------------
25,780 29,747 85,392 89,431
----------------- ----------------- ----------------- -----------------
Operating income (loss) (1,308) 1,192 1,101 2,993
Interest expense (305) (323) (928) (999)
Investment income 12 68 76 210
Other expense, net of other income (14) (42) (333) (323)
----------------- ----------------- ----------------- -----------------
Income (loss) before income taxes (1,615) 895 (84) 1,881
Income tax provision (benefit) (545) 268 (10) 564
----------------- ----------------- ----------------- -----------------
Net income (loss) ($1,070) $627 ($74) $1,317
================= ================= ================= =================
Net income (loss) per share ($0.27) $0.16 ($0.02) $0.34
================= ================= ================= =================
Weighted average shares outstanding 3,940,000 3,819,000 3,933,000 3,818,000
================= ================= ================= =================
See accompanying notes.
Page 4 of 14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AEL INDUSTRIES, INC. FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Thirty-Nine Thirty-Nine
Weeks Weeks
Ended Ended
Novembert 24, 1995 Novembert 25, 1994
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ($74) $1,317
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 4,734 4,749
Amortization of other assets 328 312
Deferred income taxes 94 594
Other 139 (92)
Decrease in receivables 2,732 984
(Increase) decrease in inventories and other
current assets (2,352) 1,805
Decrease in accounts payable, accrued
liabilities and other current liabilities (4,745) (8,931)
------------------ ------------------
Net cash provided by operating activities 856 738
------------------ ------------------
Cash flows from investing activities:
Additions to property, plant and equipment (3,398) (3,465)
Liquidations of marketable securities 132 904
Other 18 26
------------------ ------------------
Net cash absorbed by investing activities (3,248) (2,535)
------------------ ------------------
Cash flows from financing activities:
Short-term borrowings, net of repayments 2,900
Reductions in long-term debt (3,753) (5,438)
Other 194 53
------------------ ------------------
Net cash absorbed by financing activities (659) (5,385)
------------------ ------------------
Decrease in cash and equivalents (3,051) (7,182)
Cash and equivalents at beginning of period 3,140 10,414
------------------ ------------------
Cash and equivalents at end of period $89 $3,232
================== ==================
See accompanying notes.
Page 5 of 14
</TABLE>
<PAGE>
<PAGE>
FORM 10-Q
AEL INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and,
therefore, do not include all information necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. In the opinion of management, all
adjustments necessary for a fair presentation of the results of the interim
periods have been made and are of a normal, recurring nature.
The condensed consolidated financial statements should be read in
conjunction with the Registrant's Annual Report on Form 10-K for the fiscal
year ended February 24, 1995.
2. The Company announced on October 2, 1995 that it had signed a definitive
agreement with Tracor, Inc. providing for the merger of the Company with a
subsidiary of Tracor, Inc. pursuant to which the Company will become a wholly
owned subsidiary of Tracor, Inc. and each holder of the Company's outstanding
class A and class B shares will have the right to receive a cash payment equal
to $28 per share. The transaction is subject to customary terms and
conditions, review by government regulatory agencies and approval by the
Registrant's shareholders. In addition to the acquisition agreement, the
Company's shareholders must also approve agreements, announced on February 28,
1995 and described below, between the Company and its controlling
shareholders, Dr. and Mrs. Leon Riebman. The acquisition is expected to be
completed during the fourth quarter of the Company's fiscal year 1996.
On February 28, 1995, the Riebmans transferred all of their class A
nonvoting and class B voting common stock into a voting trust controlled by
four independent directors of the Company to provide the Company's Board of
Directors with the flexibility it needed to pursue the sale of the Company.
The voting trust has an initial term of nine months with an extension period
of up to one additional year, subject to certain conditions. The voting
trustees have full power to vote the Riebmans' stock with regard to any
proposed transaction for the sale of the Company. At November 24, 1995, such
stock constituted approximately 7% of all outstanding shares, excluding the
180,947 class A shares described below, and 55% of all outstanding class B
shares.
In consideration of the Riebmans entering the voting trust agreement,
transferring their shares to the voting trust, and agreeing to accept the same
per share price for their voting stock as other shareholders receive for their
stock in the event of a sale of the Company, the Company issued 180,947 shares
of class A nonvoting stock to the Riebmans on February 28, 1995. These shares
have also been transferred into the voting trust and will be returned to the
Company for cancellation without any payment to the Riebmans if a sale of the
Company does not occur while the voting trust is in effect. If a sale does
occur, the issuance of 180,947 shares will result in a charge against income
for an amount equal to market value of the shares at the time the sale of the
Company is final.
Under separate agreements also entered into on February 28, 1995, the
Company has agreed to make the following payments to Dr. Riebman if the
Company is sold while the voting trust is in effect: payments totalling
$675,000 for consulting services to be provided by Dr. Riebman for a
three-year period commencing with his employment termination; a change-in-
control payment of $500,000 if Dr. Riebman's employment terminates after the
sale of the Company; and a noncompetition payment of up to $1,900,000.
Page 6 of 14<PAGE>
<PAGE>
FORM 10-Q
AEL INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company also has agreements with eight other officers which could
result in severance payments to those officers if their employment were to
terminate during a period up to two years following a change in control of the
Company. Aggregate severance payments under such agreements could range up to
approximately $3,100,000 depending on the number of officers terminated and
the timing of the terminations.
3. Under fixed price contracts, the Company may encounter, and on certain
programs from time to time has encountered, cost overruns caused by increased
material, labor or overhead costs, design or production difficulties and
various other factors such as technical and manufacturing complexity, which
must be, and in such cases have been, borne by the Company. Adjustments to
contract cost estimates are made in the periods in which the facts requiring
such revisions become known. When the revised estimate indicates a loss, such
loss is provided for currently in its entirety. In addition, the Company from
time to time commits to invest its own funds, particularly in the case of
high-technology seed programs. The estimated costs of such investments in
excess of the related contract values are provided for currently in their
entirety upon receipt of such contracts by the Company. During the quarter
and nine months ended November 24, 1995, contract cost estimates and profit-
ability adjustments resulted in net charges to income of $100,000 and
$1,300,000, respectively, compared with net charges of $600,000 and $3,900,000
for adjustments of the same nature during the comparable periods ended
November 25, 1994.
Other current liabilities at November 24, 1995 and February 24, 1995
include allowances for contract losses and other contract allowances
aggregating $2,400,000 and $3,600,000, respectively. In addition, receivables
at November 24, 1995 include unbilled amounts of $3,100,000 for costs subject
to future negotiations with the U.S. Government which may not be billed within
one year.
4. From time to time, the Company may be involved in lawsuits,
investigations and other legal proceedings arising from the ordinary conduct
of its business with the U.S. Government and others. One such action relates
to the U.S. Environmental Protection Agency (EPA) which, in 1989, placed a
site that includes the Company's Richardson Road property on the National
Priorities List for detailed study and cleanup of alleged environmental
contamination. The Company continues to cooperate with the EPA in the study
of this site. In the opinion of management, except for the matter described
below, these legal proceedings will not have a material adverse effect on
consolidated financial position.
The Company continues to cooperate with the Department of Defense in an
investigation which commenced in 1992 regarding the AN/MLQ-T4 Ground Jammer
program. At this time, management is unable to determine when the Government
will complete its inquiry or whether it will seek any remedies.
On November 14, 1995, a complaint was filed against the Company's
controlling shareholders, Dr. Riebman and Claire Riebman, and the Company.
The complaint is asserted as a class action brought on behalf of all
shareholders of the Company other than the defendants, the officers and
directors of the Company and relatives of or entities controlled by such
persons. The complaint alleges that the individual defendants, as controlling
Page 7 of 14<PAGE>
<PAGE>
FORM 10-Q
AEL INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
shareholders, breached certain fiduciary duties allegedly owed to the
plaintiffs by entering into an agreement whereby the individual defendants
were issued 180,947 shares of class A nonvoting stock. The complaint also
alleges that the Company aided and abetted the alleged breach of fiduciary
duty of the individual defendants. Plaintiff seeks to enjoin the defendants
from consummating the transactions under an acquisition agreement entered into
by the Company, have the acquisition agreement declared null and void, and be
awarded compensatory damages as well as costs and reasonable attorneys' and
experts' fees. (See Note 2 above for additional information regarding the
referenced agreements.) The defendants have filed preliminary objections, a
motion to require the plaintiffs to post a statutory bond and a motion for
expedited treatment with the court. At this early stage of the proceedings,
management is unable to determine whether this matter will result in a
liability for the Company.
Page 8 of 14<PAGE>
<PAGE>
FORM 10-Q
AEL INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion and analysis provides information which
management believes is relevant to an assessment and understanding of the
Company's consolidated results of operations for the thirteen weeks (quarter)
and thirty-nine weeks (nine months) ended November 24, 1995, as compared with
the thirteen weeks (quarter) and thirty-nine weeks (nine months) ended
November 25, 1994, and its consolidated financial condition at November 24,
1995. The discussion should be read in conjunction with the condensed
consolidated financial statements and notes thereto which appear elsewhere in
this Form 10-Q.
Results of Operations
Sales and service revenues for the quarter ended November 24, 1995 were
$24,472,000, down 21% from the revenues reported for the quarter ended
November 25, 1994. The decline was primarily due to the decrease in revenues
from electronic countermeasures and avionics programs. Electronic
countermeasures programs provided $4,518,000, or 18%, of total revenues in the
current year's quarter, down from $9,128,000, or 30%, of total revenues in the
comparable prior year's quarter. Individually, the TACJAM-A electronic
countermeasures program generated 14% and 16% of revenues for the quarters
ended November 24, 1995 and November 25, 1994, respectively, and an electronic
countermeasures program with a foreign government provided no revenues in the
current year's quarter compared with 9% of revenues in the prior year's
quarter. Revenues from avionics programs dropped to $ 9,949,000 in the
current year's quarter from $12,511,000 in the prior year's quarter. Despite
the overall decrease in the avionics program group, the revenues from the
ANVIS/ HUD program increased to 21% of total revenues in the current year's
quarter from 15% in the prior year's quarter. Sales and service revenues for
the nine months ended November 24, 1995 were $86,493,000, down 6% from the
revenues reported for the nine months ended November 25, 1994. As noted above
regarding the quarter, the year-to-date decline was also primarily due to a
reduction in revenues from electronic countermeasures and avionics programs.
However, for the nine month period, that decline was partially offset by
higher revenues from radar warning receiver programs. Although the revenues
from countermeasures and avionics program groups were down overall, revenues
from certain individual programs, as a percentage of total revenues, were
constant with, or increased from, the amounts reported in the prior year. The
TACJAM-A electronic countermeasures program provided 15% of total revenues in
the nine month periods for both the current and prior years, and the ANVIS/HUD
avionics program provided 16% of total revenues in the current year, up from
10% in the prior year.
For the quarter ended November 24, 1995, the Company had an operating
loss of $1,308,000 compared with operating income of $1,192,000 for the
quarter ended November 25, 1994. For the nine months ended November 24, 1995,
the operating profit of $1,101,000 was 63% lower than the operating profit of
$2,993,000 for nine months ended November 25, 1994. The declines in operating
results in the current year were primarily caused by significant decreases in
the gross margins, while maintaining fairly constant administrative and
selling expenses. The lower gross margins were the result of overall lower
revenues in the current year, as well as a higher concentration of revenues
from less profitable and loss programs in the current year.
Page 9 of 14<PAGE>
<PAGE>
FORM 10-Q
AEL INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Interest expense for the quarter and nine months ended November 24, 1995
decreased slightly from the comparable periods of the prior year due to lower
average debt levels. In the first quarters of fiscal years 1996 and 1995, the
Company repaid $3,300,000 and $5,000,000, respectively, of its 10.03%
unsecured note payable.
The income tax provision for the nine months ended November 24, 1995 is
based on an annual effective tax rate of 12% compared with an annual effective
tax rate of 30% in fiscal year 1995. The annual effective tax rate is lower
in fiscal year 1996 due to projected lower income and higher permanent
differences in the current year .
The Company had a firm orders backlog of approximately $79,000,000 (11%
unfunded) at November 24, 1995 compared to $106,600,000 (7% unfunded) at
February 24, 1995. The firm orders backlog is expected to increase throughout
the remainder of the current fiscal year.
As described in Note 2 to the consolidated financial statements, the
Company announced on October 2, 1995 that it had signed a definitive agreement
with Tracor, Inc. providing for the merger of the Company with a subsidiary of
Tracor, Inc. pursuant to which the Company will become a wholly owned
subsidiary of Tracor, Inc. and each holder of the Company's outstanding class
A and class B shares will have the right to receive a cash payment equal to
$28 per share. The transaction is subject to customary terms and conditions,
review by government regulatory agencies and approval by the Registrant's
shareholders. In addition to the acquisition agreement, the Company's share-
holders must also approve agreements, announced on February 28, 1995 and
described in Note 2 to the consolidated financial statements, between the
Company and its controlling shareholders, Dr. and Mrs. Leon Riebman. The
acquisition is expected to be completed during the fourth quarter of the
Company's fiscal year 1996. Tracor, Inc. provides a broad range of electronic
products, systems, and services for numerous U.S. government agencies
primarily within the Department of Defense, other governments and commercial
customers.
Besides the potential impact on future operations resulting from the
sale of the Company, fiscal year 1996 operating results will be influenced by
various other internal and external factors. The Company continues to be
engaged in programs involving complicated engineering development efforts and,
as is the case with most development efforts, technical and other complexities
are often encountered. These complexities have resulted in increased contract
cost estimates in the past and could have the same result in the future. The
Company could also encounter similar risks on other long-term contracts and
such factors could impact future operating results. The Company presently has
a program for which certain unanticipated costs are subject to negotiations
with the U.S. Government and the outcome of those negotiations could impact
future operating results. At November 24, 1995, the Company had recorded an
unbilled receivable of $3,100,000 relating to such costs. In addition, the
Company in the past has sought high-technology seed programs and may do so
again in the future. Such programs, which are intended to provide a base for
the Company's future operations, may require contract investment provisions or
significant Company-sponsored research and development expenditures, both
reflecting the Company's commitment of its own funds.
Page 10 of 14<PAGE>
<PAGE>
FORM 10-Q
AEL INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Management is continuing its strategic planning efforts in order to
enhance the Company's ability to be responsive to the Government's national
defense requirements and to select products and business areas which will
enable the Company to effectively compete and perform in a very demanding
marketplace. Although the uncertainties of future world events and changes in
national defense spending hang over the defense industry, the Company's
products, heavily concentrated in the field of defense electronics, and
management's constant thrust to improve its design, manufacturing and quality
systems, provide the Company with the prerequisites to be competitive. The
U.S. Government and its suppliers continue to be the most significant
customers of the Company, and a significant reduction in one or more of the
Company's major defense programs, existing or anticipated, could adversely
affect the Company's future operating results. In addition to its business
with the U.S. Government, the Company continues to seek commercial
applications for its products and services, including the development of wide
dynamic range fiber optic links for use in CATV and cellular communications
systems, and the expansion of its aircraft modification business into
commercial aviation.
The Company from time to time is subject to claims and investigations
arising from the conduct of its business with the U.S. Government. In one
such instance, the Company continues to cooperate with the Department of
Defense in an investigation which commenced in 1992 regarding the AN/MLQ-T4
Ground Jammer program. At this time, management is unable to determine when
the Government will complete its inquiry or whether it will seek any remedies.
On November 14, 1995, a complaint was filed against the Company's
controlling shareholders, Dr. Riebman and Claire Riebman, and the Company.
The complaint is asserted as a class action brought on behalf of all
shareholders of the Company other than the defendants, the officers and
directors of the Company and relatives of or entities controlled by such
persons. The complaint alleges that the individual defendants, as controlling
shareholders, breached certain fiduciary duties allegedly owed to the
plaintiffs by entering into an agreement whereby the individual defendants
were issued 180,947 shares of class A nonvoting stock. The complaint also
alleges that the Company aided and abetted the alleged breach of fiduciary
duty of the individual defendants. Plaintiff seeks to enjoin the defendants
from consummating the transactions under an acquisition agreement entered into
by the Company, have the acquisition agreement declared null and void, and be
awarded compensatory damages as well as costs and reasonable attorneys' and
experts' fees. (See Note 2 to the consolidated financial statements for
additional information regarding the referenced agreements.) The defendants
have filed preliminary objections, a motion to require the plaintiffs to post
a statutory bond and a motion for expedited treatment with the court. At this
early stage of the proceedings, management is unable to determine whether this
matter will result in a liability for the Company.
These matters and other ongoing legal matters which may impact future
operating results and liquidity are described in Note 4 to the consolidated
financial statements.
Page 11 of 14<PAGE>
<PAGE>
FORM 10-Q
AEL INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Liquidity and Capital Resources
The Company's primary source of short-term financing is cost
reimbursements under contracts with the U.S. Government and its suppliers.
That financing is supplemented, when necessary, through borrowings under a
line of credit agreement. The absorption of cash flows for the thirty-nine
weeks ended November 24, 1995 was primarily to repay long-term debt and fund
capital expenditures. At November 24, 1995, the Company had cash and
equivalents of approximately $700,000 and a line of credit agreement, which
expires August 15, 1998, providing for borrowings up to $10,000,000.
Borrowings under the line of credit agreement totalled $2,900,000 at November
24, 1995.
The ratio of current assets to current liabilities was 2.0 to 1 at
November 24, 1995 compared with 2.2 to 1 at February 24, 1995. The decline in
the current ratio was due to the use of cash as described above. The long-
term debt to equity ratio was reduced from .3 to 1 at February 24, 1995 to .2
to 1 at November 24, 1995 due to an April 1995 repayment of $3,300,000 on the
Company's 10.03% unsecured note obligation. The Company's next installment
repayment of $3,300,000 on its 10.03% unsecured note obligation is due April
1996.
In June 1995, the Company began construction of a building addition at
its Richardson Road facility. The building addition is expected to be
completed by the end of fiscal year 1996 at an estimated cost, including
related expenditures, of approximately $1,300,000. Expenditures for the addi-
tion have been, and will continue to be, funded through cash provided from
operations and short-term borrowings.
Management believes that the Company's current working capital position
and available borrowing capacity should provide sufficient capital resources
to meet the Company's operating needs, capital improvements and debt
maturities for the foreseeable future.
Page 12 of 14<PAGE>
<PAGE>
FORM 10-Q
PART II. OTHER INFORMATION
AEL INDUSTRIES, INC.
ITEM 1 - LEGAL PROCEEDINGS
On November 14, 1995, a complaint was filed in the Court of Common
Pleas of Montgomery County, Pennsylvania against the Company's
controlling shareholders, Dr. Riebman and Claire Riebman, and the
Company. The complaint is asserted as a class action brought on
behalf of all shareholders of the Company other than the defendants,
the officers and directors of the Company and relatives of or
entities controlled by such persons. The complaint alleges that the
individual defendants, as controlling shareholders, breached certain
fiduciary duties allegedly owed to the plaintiffs by entering into an
agreement whereby the individual defendants were issued 180,947
shares of class A nonvoting stock. The complaint also alleges that
the Company aided and abetted the alleged breach of fiduciary duty of
the individual defendants. Plaintiff seeks to enjoin the defendants
from consummating the transactions under an acquisition agreement
entered into by the Company, have the acquisition agreement declared
null and void, and be awarded compensatory damages as well as costs
and reasonable attorneys' and experts' fees. (See Note 2 to the con-
solidated financial statements for additional information regarding
the referenced agreements.) The defendants have filed preliminary
objections, a motion to require the plaintiffs to post a statutory
bond and a motion for expedited treatment with the court. At this
early stage of the proceedings, management is unable to determine
whether this matter will result in a liability for the Company.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number Description
27 Financial Data Schedule (Schedule submitted in
electronic format only.)
(b) Reports on Form 8-K
On October 18, 1995, the Registrant filed a Form 8-K regarding its
announcement on October 2, 1995 that it had signed an agreement with
Tracor, Inc. providing for the merger of the Registrant with a
subsidiary of Tracor, Inc. pursuant to which the Registrant will
become a wholly owned subsidiary of Tracor, Inc. and each holder of
the Registrant's outstanding class A and class B shares will have the
right to receive a cash payment equal to $28 per share. The
transaction is subject to customary terms and conditions, review by
government regulatory agencies and approval by the Registrant's
shareholders.
The items reported in the Form 8-K were: Item 5 (Other Events) and
Item 7 (Financial Statements and Exhibits).
Page 13 of 14<PAGE>
<PAGE>
FORM 10-Q
AEL INDUSTRIES, INC.
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.
AEL INDUSTRIES, INC.
____________________________________________________________________
(Registrant)
Date: January 5, 1996 /S/ John F. Sharkey
_______________ _______________________
John F. Sharkey
Vice President, Finance
Page 14 of 14<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
AEL INDUSTRIES, INC. FORM 10-Q FOR PERIOD ENDED NOVEMBER 24, 1995
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-23-1996
<PERIOD-END> NOV-24-1995
<CASH> 89
<SECURITIES> 630
<RECEIVABLES> 43,236
<ALLOWANCES> 0
<INVENTORY> 2,659
<CURRENT-ASSETS> 49,053
<PP&E> 102,762
<DEPRECIATION> 61,477
<TOTAL-ASSETS> 96,018
<CURRENT-LIABILITIES> 21,860
<BONDS> 11,974
<COMMON> 4,024
0
0
<OTHER-SE> 56,343
<TOTAL-LIABILITY-AND-EQUITY> 96,018
<SALES> 86,493
<TOTAL-REVENUES> 86,493
<CGS> 66,493
<TOTAL-COSTS> 66,493
<OTHER-EXPENSES> 2,255
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 928
<INCOME-PRETAX> (84)
<INCOME-TAX> (10)
<INCOME-CONTINUING> (74)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
