<PAGE>
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 quarterly period ended September 30, 1995
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. 0-9613
NUCLEAR RESEARCH CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 1343870
- ---------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
125 Titus Avenue, Warrington, Pennsylvania 18976
- ------------------------------------------ ----------
(Address of Principal Executive Offices) (Zip Code)
(215) 343-5900
----------------------------------------------------
(Registrant's telephone number, including area code)
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
--- ---
As of November 14, 1995, the Registrant had 28,175 shares of its
common stock outstanding.
<PAGE>
<PAGE>
INDEX
Number
- ------
PART I. Financial Information.
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets - September 30, 1995
and June 30, 1995
Consolidated Statements of Operations - Three
Months Ended September 30, 1995 and 1994
Consolidated Statements of Shareholders' Equity -
Three Months Ended September 30, 1995 and the
Year Ended June 30, 1995
Consolidated Statements of Cash Flows - Three
Months Ended September 30, 1995 and 1994
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. Other Information.
Item 1. Legal Proceedings
Item 2. Change in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security
Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1.
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
---------------------------------------------
ASSETS
September 30, 1995 June 30, 1995
------------------ -------------
CURRENT ASSETS
Cash $ 49,059 $ 66,905
Accounts receivable 3,398,266 4,126,320
Costs and estimated
earnings in excess
of billings)
on uncompleted contracts
(Note 5) 2,026,944 1,733,552
Inventory (Note 3) 3,015,301 3,509,290
Prepaid expenses and
other current assets 404,863 165,715
----------- -----------
Total Current Assets 8,894,433 9,601,782
PROPERTY, PLANT AND EQUIPMENT
(net of accumulated depre-
ciation and amortization of
$2,521,574 at September 30,
1995 and $2,440,061 at
June 30, 1995) 1,408,621 1,405,459
OTHER ASSETS
Intangible assets (net of
accumulated amortization of
$4,313 at September 30,
1995) (Note 2) 409,687 -
Patents (net of accumulated
amortization of $64,062
at September 30, 1995 and
$60,987 at June 30, 1995) 147,357 136,476
Organization costs (net
of accumulated amortization
of $1,083 at September 30,
1995) 36,259 -
Other 23,151 24,951
----------- -----------
Total Other Assets 616,454 161,427
----------- -----------
TOTAL ASSETS $10,919,508 $11,168,668
=========== ===========
See Notes to Consolidated Financial Statements<PAGE>
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
---------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, 1995 June 30, 1995
------------------ -------------
CURRENT LIABILITIES
Short-term borrowings $ 1,200,000 $ 1,850,000
Current portion of
long-term debt 383,800 364,041
Accounts payable 1,644,059 1,554,882
Accrued expenses 408,029 466,015
Accrued payroll and
payroll taxes 249,174 274,803
Taxes payable on income 288,233 457,055
----------- -----------
Total Current Liabilities 4,173,295 4,966,796
LONG-TERM DEBT 248,384 379,131
DEFERRED INCOME TAXES 28,504 28,504
MINORITY INTEREST IN EQUITY OF
CONSOLIDATED SUBSIDIARY 362,487 -
COMMITMENTS AND CONTINGENCY
(Note 6)
SHAREHOLDERS' EQUITY
Common Stock
Stated value $5 per
share, with 60,000 shares
authorized, 31,873 shares
issued and 28,175 shares
outstanding 159,365 159,365
Additional paid in
capital 517,010 517,010
Retained Earnings 5,492,816 5,180,215
Less: treasury stock,
3,698 shares at cost (62,353) (62,353)
----------- -----------
Total Shareholders' Equity 6,106,838 5,794,237
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $10,919,508 $11,168,668
=========== ===========
See Notes to Consolidated Financial Statements<PAGE>
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
-------------------------------------------
Three Months Ended
September 30,
1995 1994
---- ----
NET SALES $6,210,643 $4,167,227
COST OF SALES 4,902,282 3,304,515
---------- ----------
GROSS PROFIT 1,308,361 862,712
SELLING AND ADMINISTRATIVE
EXPENSES 560,039 458,958
RESEARCH AND DEVELOPMENT
EXPENSES 191,705 208,012
INTEREST EXPENSE 73,648 51,951
---------- ----------
INCOME FROM OPERATIONS 482,969 143,791
OTHER INCOME 2,790 2,689
---------- ----------
INCOME BEFORE MINORITY INTEREST 485,759 146,480
MINORITY INTEREST IN LOSS OF
CONSOLIDATED SUBSIDIARY 39,167 -
---------- ----------
INCOME BEFORE INCOME TAXES 524,926 146,480
LESS: TAXES ON INCOME 212,325 50,059
---------- -----------
NET INCOME $ 312,601 $ 96,421
========== ===========
PRIMARY EARNINGS PER SHARE $ 9.20 $ 3.07
========== ===========
WEIGHTED AVERAGE COMMON SHARES 33,980 31,429
========== ===========
See Notes to Consolidated Financial Statements
<PAGE>
<PAGE>
<TABLE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND YEAR ENDED JUNE 30, 1995
(UNAUDITED)
- --------------------------------------------------------------------------
Common Stock Additional Total
Paid In Retained Shareholders'
Shares Amount Capital Earnings Treasury Stock Equity
------ ------ ----------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at 28,175 $159,365 $517,010 $39,901,739 $(62,353) $4,515,761
June 30, 1994
Net Income for
the year ended
June 30, 1995 - - - 1,278,476 - 1,278,476
------- -------- -------- ----------- -------- ----------
Balance at
June 30, 1995 28,175 159,365 517,010 5,180,215 (62,353) 5,794,237
Net income for
the three months
ended September
30, 1995 - - - 312,601 - 312,601
------- -------- -------- ----------- -------- ----------
Balance at
September 30, 1995 28,175 $159,365 $517,010 $5,492,816 $(62,353) $6,106,838
======= ======== ======== ========== ======== ==========
</TABLE>
See Notes to Consolidated Financial Statements<PAGE>
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
-------------------------------------------
Three Months Ended
September 30,
1995 1994
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 312,601 $ 96,421
Adjustments to reconcile net
income to net cash provided by
(used by) operating activities:
Depreciation and amortization 89,984 85,562
Minority interest in loss of
consolidated subsidiary (39,167) -
(Increase) Decrease in:
Accounts receivable 728,054 892,264
Costs and estimated
earnings in excess
of billings on
uncompleted contracts (293,392) -
Other receivable - 695,335
Inventory 493,989 (420,975)
Prepaid expenses and other
current assets (239,148) (352,346)
Increase (decrease) in:
Accounts payable, accrued
expenses and payroll taxes 5,562 (232,659)
Taxes payable - on income (168,822) (95,778)
---------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 889,661 667,824
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (98,631) (95,828)
Increase in organization costs (37,342) -
---------- -----------
NET CASH USED BY INVESTING ACTIVITIES (135,973) (95,828)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on line of credit (650,000) (600,000)
Payments on long-term debt (110,988) (109,117)
Distributions (12,346) -
Decrease in other assets 1,800 -
---------- -----------
NET CASH USED BY FINANCING
ACTIVITIES (771,534) (709,117)
---------- -----------
NET DECREASE IN CASH (17,846) (137,121)
---------- -----------
CASH - beginning 66,905 163,273
---------- -----------
<PAGE>
<PAGE>
CASH - ending $ 49,059 $ 26,152
========== ===========
SUPPLEMENTARY INFORMATION REGARDING
NON-CASH INVESTING ACTIVITIES
Acquisition of intangible assets $ 414,000 -
========== ===========
See Notes to Consolidated Financial Statements<PAGE>
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1995 and September 30, 1994
Note 1. The Consolidated Financial Statements of Nuclear Research
Corporation have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission ("SEC"). In the
opinion of management, the accompanying Consolidated Financial Statements
contain all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the consolidated financial position as of
September 30, 1995 and June 30, 1995 and the consolidated results of
operations and cash flows for the three months ended September 30, 1995
and 1994. Certain information and footnote disclosures prepared in
accordance with generally accepted accounting principles have either been
condensed or omitted pursuant to SEC rules and regulations. These
financial statements should be read in conjunction with the financial
statements and the notes included in the Company's latest Annual Report on
Form 10-K.
The consolidated results of operations for the three months ended
September 30, 1995 and 1994 are not necessarily indicative of the results
for the full year.
Note 2. Principles of Consolidation.
---------------------------
The Consolidated Financial Statements include the accounts of Nuclear
Research Corporation, NRC Acquisition Corporation and Northeast Nuclear,
Ltd., wholly-owned subsidiaries hereafter referred to collectively as the
"Company." Also included in the Consolidated Financial Statements are the
accounts of Measurement Dynamics LLC ("MDLLC").
In July, 1995 the Company entered into an operating agreement to form
MDLLC, a New Jersey limited liability company, the purpose of which is to
develop, manufacture, produce and sell temperature measurement devices and
other related products or services. Pursuant to the operating agreement,
the Company is to contribute property, in the form of cash, inventory and
other business assets having a fair market value of $300,000, in exchange
for 42% of MDLLC. The Company will produce temperature measurement
devices to be sold by MDLLC under a manufacturing agreement and will
provide administrative services to MDLLC.
In connection with the formation of MDLLC, the Company recorded an
intangible asset of $414,000 which represents certain rights, proprietary
information and intellectual property contributed by the minority interest
in MDLLC. The intangible asset is being amortized over it's estimated
useful life of twenty years.
All significant inter-company accounts and transactions have been
eliminated in consolidation.
<PAGE>
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Note 3. Inventory.
---------
(UNAUDITED)
September 30, June 30,
1995 1995
------------- -------------
Inventory consists of:
Work-In-Process
United States Government
contracts $4,201,323 $4,748,683
Commercial contracts 526,856 496,603
Purchased and manufactured
parts 364,634 637,739
---------- ----------
$5,092,813 $5,883,025
Less: Progress payments
on United States Government
contracts
2,077,512 2,373,735
---------- ----------
Total $3,015,301 $3,509,290
========== ==========
The Company uses the last-in, first-out (LIFO) method to determine its
material inventory costs. The following information will facilitate
comparison with operating results of companies using the FIFO method. If
the Company's inventory had been determined using the FIFO method at
September 30, 1995, reported inventories would have been $985,932 higher
and reported net income would have decreased by $25,765 ($.76 per share).
The pro forma effect relating to the use of the FIFO method would have
resulted in the following balances for the statement of operations
presentation for the three months ended September 30, 1995:
Gross Profit $1,265,420
==========
Income from Operations $ 440,028
==========
Net Income $ 286,836
==========
Note 4. Other Receivable.
----------------
On March 15, 1993, a portion of the roof collapsed at the Company's Dover,
New Jersey division resulting in the disruption of production at this
facility. The property, inventory and business interruption losses
resulting from the partial roof collapse were insured. The other
receivable represents the final settlement as of June 30, 1994 of the
Company's insurance claim related to the partial roof collapse. The claim
was paid in the quarterly period ended September 30, 1994.<PAGE>
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 5. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON
UNCOMPLETED CONTRACTS.
The Company recognizes revenues on several fixed-price contracts using the
percentage-of-completion method, measured by the percentage of cost
incurred to date compared to the estimated total cost for the contracts.
That method is used because management considers total cost to be the best
available measure of progress on the contracts. Because of inherent
uncertainties in estimating costs, it is at least reasonably possible that
the estimates used will change within the near term.
Contract costs include all direct material, direct labor and indirect
costs related to contract performance. Provisions for estimated losses on
the uncompleted contracts are made in the period in which such losses are
determined. Changes in estimated job profitability resulting from job
performance, job conditions, claims, change orders, and settlements, are
accounted for in the period in which the changes occur.
The asset, "Costs and estimated earnings in excess of billings on
uncompleted contracts" represents revenues recognized in excess of amounts
billed.
Costs, estimated earnings, and billings on uncompleted contracts are
summarized as follows:
Costs incurred and estimated
earnings on uncompleted
contracts $2,651,378
Billings to date 624,434
----------
$2,026,944
==========
Included in accompanying balance sheet under
the following caption:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $2,026,944
==========
<PAGE>
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 6. COMMITMENTS AND CONTINGENCY.
In September 1995, the Company was notified that MDLLC, Mark A. Sitcoske
and a company controlled by Mr. Sitcoske, Measurement Dynamics, Inc., had
been named co-defendants in a suit filed by Hanna Manufacturing, Inc.
("Hanna"), a Rhode Island Company that previously employed Mr. Sitcoske.
The suit alleges that the defendants acted in violation of an existing
employment and non-compete agreement between Hanna and Mr. Sitcoske and
seeks to enjoin and obtain damages; however, Hanna has not yet sought a
hearing to obtain injunctive relief. Although the matter is in its early
stages, management expects that the resolution of this matter will have no
material impact on the Company.
ITEM 2.
- ------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
--------------------------------------------
Liquidity and Capital Resources
- -------------------------------
During the three months ended September 30, 1995, reductions in
accounts receivable of $728,054 and inventory of $493,989 were the major
factors which affected the cash provided by operating activities. The
reduction in accounts receivable occurred due to the Company's ability to
collect year end receivables (typically the highest during the year)
during the three months ended September 30, 1995. The Company was able to
reduce inventory due to increased sales volume. The days' sales in
inventory which is a measure of the supply of inventory that the Company
maintains decreased to 93 days in the three months ended September 30,
1995 as compared to 226 days in the three months ended September 30, 1994.
Increases in costs and estimated earnings in excess of billings on
uncompleted contracts of $293,332 and prepaid expenses and other current
assets of $239,148 were the principal factors offsetting cash provided by
operating activities for the three months ended September 30, 1995.
The costs and estimated earnings in excess of billings on uncompleted
contracts resulted from the Company using the percentage-of-completion
method of income recognition for several multi-year contracts.
Additionally, during the three months ended September 30, 1995, the
Company had capital expenditures of $98,631 to purchase manufacturing and
computer equipment, to make building improvements and to make certain
expenditures associated with patents. Cash in the amount of $37,340 was
also expended for organization costs associated with MDLLC. Cash used by
financing activities for the three months ended September 30, 1995
increased by $771,534 as a result of payments on the line of credit of
$650,000, payments on long term debt of $110,988 and cash distributions
associated with MDLLC of $12,346.
The Company's backlog of orders as of October 31, 1995 was
$20,181,000 compared to $32,882,000 as of October 31, 1994.
<PAGE>
<PAGE>
The Company believes that funds from operations and amounts available
under its credit facilities will be sufficient to satisfy the Company's
cash requirements for the foreseeable future.
Results of Operations
- ---------------------
Sales for the three months ended September 30, 1995 were $6,210,643,
an increase of $2,043,416 compared to sales of $4,167,227 for the three
months ended September 30, 1994. This was in part a result of more
aggressive marketing abroad, as foreign sales increased to $1,378,048 for
the three months ended September 30, 1995 as compared to $127,270 for the
three months ended September 30, 1994.
Income from operations increased to $482,969 for the three months
ended September 30, 1995 from $143,791 for the three months ended
September 30, 1994, due to a more favorable product mix and a higher
volume of sales. Gross profit as a percentage of sales increased to 21.07%
for the three months ended September 30, 1995 compared to 20.70% for the
three months ended September 30, 1994.
Selling and administrative expenses increased $101,081 to $560,039
for the three months ended September 30, 1995. The increase was primarily
due to increased commission expenses and costs associated with MDLLC. As
a percentage of sales, however, selling and administrative expense
decreased to 9.02% for the three months ended September 30, 1995 as
compared to 11.01% for the three months ended September 30, 1994.
Research and development expenses decreased $16,307 to $191,705 for
the three months ended September 30, 1995 as compared to $208,012 for the
three months ended September 30, 1994. The decrease can be accounted for
by a reduction in customer-sponsored research. As a percentage of sales,
research and development expenses decreased to 3.09% for the three months
ended September 30, 1995 as compared to 4.99% for the three months ended
September 30, 1994.
Interest expense increased to $73,648 for the three months ended
September 30, 1995 compared to $51,951 for the three months ended
September 30, 1994. The increase can be accounted for by costs associated
with letters of credit for a multi-year contract.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
In September 1995, management was notified that MDLLC, Mark A.
Sitcoske and a company controlled by Mr. Sitcoske, Measurement Dynamics,
Inc., had been named as co-defendants in a suit filed on September 7, 1995
in the Superior Court of the State of Rhode Island by Hanna Manufacturing,
Inc. ("Hanna"), a Rhode Island company that previously employed
Mr. Sitcoske. The suit alleges that the defendants acted in violation of
an existing employment and non-compete agreement between Hanna and
Mr. Sitcoske and seeks to enjoin and obtain damages; however, Hanna has
not yet sought a hearing to obtain injunctive relief. Although the matter
is still in its early stages, management expects that the resolution of
this matter will have no material impact on the Company.
Item 2. Changes in Securities.
---------------------
Not Applicable.
Item 3. Defaults upon Senior Securities.
-------------------------------
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
Not applicable.
Item 5. Other Information.
-----------------
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits.
27. Financial Data Schedules
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
September 30, 1995.
<PAGE>
<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.
NUCLEAR RESEARCH CORPORATION
By: /s/ Earl M. Pollock
----------------------------
Earl M. Pollock
President
By: /s/ Mark S. Pollock
----------------------------
Mark S. Pollock
Treasurer
Dated: November 14, 1995
<PAGE>
EXHIBIT INDEX
Exhibit Method of Filing
- ------- ----------------
27. Financial Data Schedules............Filed Herewith Electronically
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED FINANCIAL STATEMENTS FOUND IN THE ACCOMPANYING QUARTERLY REPORT
ON FORM 10-Q OF NUCLEAR RESEARCH CORPORATION FOR THE QUARTER ENDED
SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS. THIS EXHIBIT SHALL NOT BE DEEMED FILED FOR PURPOSES
OF SECTION 11 OF THE SECURITIES ACT OF 1933 AND SECTION 18 OF THE SECURITIES
ACT OF 1934, OR OTHERWISE SUBJECT TO THE LIABILITIES OF SUCH SECTIONS, NOR
SHALL IT BE DEEMED PART OF ANY OTHER FILING THAT INCORPORATES THIS REPORT BY
REFERENCE, UNLESS SUCH OTHER FILING EXPRESSLY INCORPORATES THIS EXHIBIT BY
REFERENCE.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 49,059
<SECURITIES> 0
<RECEIVABLES> 5,425,210
<ALLOWANCES> 0
<INVENTORY> 3,015,301
<CURRENT-ASSETS> 8,894,433
<PP&E> 3,930,195
<DEPRECIATION> (2,521,574)
<TOTAL-ASSETS> 10,919,508
<CURRENT-LIABILITIES> 4,173,295
<BONDS> 0
<COMMON> 159,365
0
0
<OTHER-SE> 5,947,473
<TOTAL-LIABILITY-AND-EQUITY> 10,919,508
<SALES> 6,210,643
<TOTAL-REVENUES> 6,210,643
<CGS> 4,902,282
<TOTAL-COSTS> 5,093,987
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,648
<INCOME-PRETAX> 524,926
<INCOME-TAX> 212,325
<INCOME-CONTINUING> 312,601
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 312,601
<EPS-PRIMARY> 9.20
<EPS-DILUTED> 9.20
</TABLE>
