<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
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 0-9613
NUCLEAR RESEARCH CORPORATION
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(Exact name of registrant as specified in its charter)
Pennsylvania 1343870
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
125 Titus Avenue
Warrington, Pennsylvania 18976
- ---------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 343-5900
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, stated value $5 per share
---------------------------------------
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
There is no trading market for the voting securities of the Registrant.
The Registrant had 28,175 common shares outstanding as of June 30, 1996, of
which 10,725 shares are held by persons who are not officers or directors of the
Registrant.
Documents incorporated by reference: None
<PAGE>
PART I
Item 1. Business.
(a) General. Nuclear Research Corporation (the "Company") was
incorporated on July 17, 1950 under the laws of the Commonwealth of
Pennsylvania. The Company is engaged in the business of designing, manufacturing
and servicing the detection, measurement and monitoring devices and gauges
described below.
(b) Products and Markets. The Company's products consist of: portable
radiation detection and health physics measuring instruments ("Health Physics
Instruments"); environmental systems and equipment for detecting, measuring and
monitoring radiation in air, liquid and gases for nuclear materials
("Environmental Monitoring Systems and Equipment"); and nuclear gauges for
industrial process control ("Nucleonic Gauges"). The Company sells products to
the United States Government (the "Government"), to foreign governments, and to
utilities and companies in the processing industry, including mining, chemical,
petroleum, steel, paper, glass and food and beverage companies.
Net sales contributed by these product categories and their percentage
of total sales are as follows:
<PAGE>
<TABLE>
<CAPTION>
Product Categories Net Sales
------------------ ---------
(Dollars in Thousands)
For the Fiscal Year Ended June 30,
----------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Health Physics Instruments $17,948 $21,704 $16,547
Environmental Monitoring Systems 7,049 5,143 4,136
and Equipment
Nucleonic Gauges 104 205 170
------- ------- -------
TOTAL $25,101 $27,052 $20,853
Product Categories
------------------
Percentage of Net Sales
-----------------------
For the Fiscal Year Ended June 30,
----------------------------------
1996 1995 1994
---- ---- ----
Health Physics Instruments 71.5% 80.2% 79.4%
Environmental Monitoring Systems 28.1 19.0 19.8
and Equipment
Nucleonic Gauges .4 .8 .8
----- ---- ----
TOTAL 100.0% 100.0% 100.0%
</TABLE>
During the fiscal year ended June 30, 1996 ("fiscal 1996"),
the Company continued its efforts to expand its business into two new areas
which the Company believes will increase its competitiveness and lead to new
opportunities for growth. First, as a vehicle for this expansion, in July 1995
the Company entered into an operating agreement for the formation of a New
Jersey limited liability company (the "LLC"). The purpose of the LLC is to
develop, manufacture, produce and sell temperature measurement devices and other
related products or
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services. Pursuant to a contribution agreement among the Company and the other
members of the LLC, the Company contributed property, in the form of cash,
inventory and other business assets with a fair market value of $300,000, in
exchange for a 42% membership interest in the LLC. The Company will produce
under a manufacturing agreement the temperature measurement devices which will
be sold by the LLC and will provide administrative services to the LLC. No
material orders or sales occurred in fiscal 1996; however the Company continues
its commitment to the prospects of the LLC and intends to maintain aggressive
marketing efforts through the fiscal year ending June 30, 1997 ("fiscal 1997").
Second, the Company has continued marketing Geiger Muller tubes for both
military and commercial markets. The Company believes that the discrete sale of
such radiation detectors represents a continuing diversification of its product
line and an opportunity for growth.
In 1986 the Company obtained two United States patents that
are significant to its business. One patent covers a radiation measurement
apparatus that utilizes a technique used in certain of the Company's Health
Physics and Environmental Monitoring devices. The technique of operation, as
described in the patent, permits more extensive use of a stable, inexpensive
radiation detector that, prior to the invention, was limited to a comparatively
narrow scope of use. The possession of this patent allows the Company, in a
protected fashion, to compete in a much broader market. The second patent covers
an apparatus that utilizes a computer program that permits more accurate
measurement of radiation in connection with the apparatus covered by the first
patent and is an improvement over the devices covered by the first patent. The
second patent allows the Company to address additional business opportunities in
specialized low level nuclear measurement. The Government has certain use rights
with respect to these
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<PAGE>
patents. The Company also has obtained corresponding patents in certain foreign
countries. During 1991, the Company obtained a United States patent relating to
a radiation measurement device used in connection with other products
manufactured by the Company. The patents obtained in the United States have a
life of 17 years from the date of grant.
(c) Distribution. The Company's products are marketed directly
to its customers through its own marketing staff and through a variety of
manufacturers' representatives acting as independent commissioned sales agents
and distributors. Commissions range from 3% to 15% depending upon the amount of
follow-up service provided. In certain instances, where opportunities for growth
or expansion are unique, the Company has tailored its agreements with such
representatives with a view to enhance sales efforts. Approximately 75% of all
sales in fiscal 1996 were obtained through the Company's internal marketing
staff which currently consists of six persons.
(d) Backlog. At June 30, 1996, the Company's backlog of orders
was $19,195,000 compared to $20,010,000 at June 30, 1995. Substantially all such
orders are subject to cancellation. In fiscal 1997, the Company expects to ship
approximately $11,000,000 of the June 30, 1996 backlog. Included in the backlog
of orders at June 30, 1996 is $7,300,000 which represents the unfunded amount on
a government contract awarded in May 1996.
The Company was awarded a $10,600,000 contract by the United
States Army in May 1996. The contract represents a continuation of the Company's
manufacturing for the United States Army of a next generation product that
utilizes the Company's patented technique of radiation measurement. Shipments
are expected to commence in fiscal 1997.
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<PAGE>
Domestic commercial orders for fiscal 1996 were $3,022,000
compared to $2,691,000 for fiscal 1995. The Company believes that the increase
in domestic commercial orders was primarily due to customers' needs for upgrades
of radiation monitoring systems resulting from design life expiration of
existing equipment.
(e) Sources of Supply. The Company's products are manufactured
from widely distributed electronic components and fabricated parts made of
metal, plastics and rubber. Nuclear materials are used to calibrate the products
or to create a radiation source for checks or measurements, but are not normally
used in the manufacturing process. Required materials and components have been
readily available from multiple sources at competitive prices and the Company
foresees no significant problem of availability.
(f) Competitive Conditions. The Company has a limited number
of competitors in each of its product categories. Certain of these companies
have greater capital and technical resources than the Company. Competition in
each of the Company's product categories is based primarily upon price,
technology and ability to deliver.
(g) Customers. Contracts with the United States government
(the "government"), including the United States Department of Defense, decreased
from 78.5% of revenues in fiscal 1995 to 65.1% of revenues in fiscal 1996. The
decrease resulted from the fulfillment of certain multi-year contracts. Some of
the products manufactured for the government are proprietary and others are
manufactured in accordance with government specifications and drawings. All of
the Company's contracts with the government provide for termination at the
discretion of the government for reasons of convenience and/or justifiable
cause. Only four of the government contracts accepted by the Company in its
46-year history
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have been terminated by the government. The final negotiated settlements in
three of those instances did not result in a material loss of profits on
completed portions of the contracts because earned profits were paid up to the
points of termination. However, termination does cause a reduction in backlog
and in projected revenues and profits from the terminated portion of the
contract.
The government and one foreign power company are the only
customers that accounted for at least 10% of the Company's total revenues in
fiscal 1996. The loss or significant reduction of government contract work would
be likely to have a material adverse effect on the Company.
Total foreign shipments accounted for 26% of the Company's
total revenues in fiscal 1996 as compared to 12% in fiscal 1995 and 4% in the
fiscal year ended June 30, 1994 ("fiscal 1994").
Domestic commercial sales for fiscal 1996 decreased to
$2,295,989 compared to $2,685,000 for fiscal 1995. The decrease in domestic
commercial sales can be accounted for by a reduction in the previous year's
domestic commercial orders combined with the Company's increased emphasis on
foreign commercial sales in fiscal 1996.
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<PAGE>
All of the Company's sales to unaffiliated customers are
manufactured in and shipped from the United States. Export sales information
appears below:
<TABLE>
<CAPTION>
For the Year Ended June 30,
----------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Export Sales:
Australia $ 106,000 $ -- $ --
Europe 662,000 469,000 453,000
Far East 4,966,000 2,299,000 417,000
Middle East 21,000 36,000 25,000
North America 648,000 313,000 --
Other 24,000 15,000 23,000
-------------- ------------- -------------
TOTAL $ 6,427,000 $ 3,132,000 $ 918,000
</TABLE>
(h) Regulation. The United States Nuclear Regulatory
Commission ("USNRC") imposes controls on the handling of nuclear materials,
including disposal of material waste and toxic material discharge, as well as
security against loss or theft of nuclear material and the protection of
personnel in or near nuclear environments. The Company is subject to these
regulations and has on staff a nuclear physicist who serves as the Company's
radiation safety officer and supervises the Company's compliance. He is
responsible for the preparation, updating and implementation of the Company
Radiation Safety Handbook, a copy of which is on file with the USNRC. The USNRC
periodically conducts spot inspections to determine compliance with its
regulations and license requirements.
The Company considers the maintenance and upgrading of these
controls as well as the maintenance of adequate storage facilities to be normal
costs of business. The Company believes its current facilities and
administrative procedures meet USNRC requirements.
The Company holds licenses granted by the USNRC for the
receipt, use, storage and distribution of various radioisotope source materials
used in its normal course of business.
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<PAGE>
Each of the licenses is for a term of five years. Prior to their expiration, two
licenses were renewed for an additional five year term. The expiration dates of
the licenses are: April 30, 2000; September 30, 2000; January 31, 2001; November
30, 2002; October 31, 2004.
Radiac (radiation detection, identification and computation)
instruments for military use constitute a portion of the Company's foreign
sales. Approval by the Office of Munitions Control of the United States
Department of State is required prior to the issuance of an export license for
such instruments. The Office of Munitions Control can impose certain
restrictions on the sale of these instruments.
(i) Research and Development. The Company has a six person
staff consisting of electronics engineers, nuclear physicists and computer
programmers who perform research and development activities for the Company.
This group spends from 80% to 85% of its time on a project basis in development
of special products for customers and new and improved products for the
Company's own product lines.
The Company expended $1,096,206 on research in fiscal 1996
compared to $1,052,718 and $1,013,798 in fiscal years 1995 and 1994,
respectively. Customer-sponsored research accounted for $97,382 in fiscal 1996,
$187,854 in fiscal 1995 and $244,940 in fiscal 1994.
(j) Personnel. At September 1, 1996, the Company had a total
of 177 full-time employees, consisting of 106 employees at the Company's
Warrington, Pennsylvania location and 71 employees at the Company's Dover, New
Jersey location. Of these employees, 80 are engineering and production workers
and the balance are officers, managers, clerical personnel and indirect labor.
None of the Company's employees are represented by a labor union.
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<PAGE>
Item 2. Properties.
On March 23, 1981, the Company purchased a building at 125
Titus Avenue, Warrington, Pennsylvania for use as the Company's headquarters and
as a manufacturing facility. The building, which is located on a three-acre
site, originally contained approximately 29,000 square feet with approximately
8,000 square feet reserved for offices and engineering laboratories and 21,000
square feet for manufacturing facilities. During fiscal 1996, the Company
completed construction of a 20,000 square foot addition to the Warrington
facility to accommodate increased space requirements and to provide space for
anticipated growth. See "Liquidity and Capital Resources" under Item 7.
On January 15, 1982, the Company leased 38,000 square feet of
space on the second floor of a building on Richboynton Road in Dover, New
Jersey, to be used for offices, engineering laboratories and manufacturing
facilities. The lease term was for a period of ten years with a five-year
renewal option. Effective March 1, 1992, the Company exercised the renewal
option. See Note 9 to the Consolidated Financial Statements.
The Company believes that its properties are adequate to meet
its current requirements.
Item 3. Legal Proceedings.
In September 1995, the Company's management ("Management") was
notified that the LLC, 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
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<PAGE>
acted in violation of an existing employment and non-compete agreement between
Hanna and Mr. Sitcoske and seeks to enjoin Mr. Sitcoske from his continued
employment with the LLC and to obtain damages; however, Hanna has not yet sought
a hearing to obtain injunctive relief. The matter is now in discovery and
Management expects that the resolution of this matter will have no material
impact on the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
There is no established public trading market for the common
stock of the Company.
As of June 30, 1996, the Company had approximately 1,725
shareholders of record.
The Company did not pay any dividends in fiscal years 1996 and
1995 and does not anticipate paying dividends in the foreseeable future.
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<PAGE>
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
For the Fiscal Year Ended June 30,
--------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------------- ------------------ --------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 25,100,604 $ 27,051,737 $ 20,852,694 $ 22,201,291 $ 22,121,505
Net Income $ 1,706,967 $ 1,278,476 622,353(1) $ 395,179 $ 775,764
Net Income
Per Common
Share $ 48.52 $ 38.25 $ 19.69 $ 12.84 $ 25.74
Total
Assets $ 13,809,940 $ 11,392,003(2) $ 11,024,694 $ 10,296,249 $ 9,157,826
Long-term
Debt $ 141,666 $ 379,131 $ 738,870 $ 913,680 $ 799,301
Dividends
Declared,
Per Common
Share $ 0 $ 0 $ 0 $ 0 $ 0
</TABLE>
(1) During fiscal 1994, the final settlement of the Company's insurance
claim related to the partial roof collapse at the Dover Division in
March 1993 resulted in a recorded gain of $323,209. See Note 1 to the
Consolidated Financial Statements.
(2) Certain items in the 1995 financial statements have been reclassified
to conform with their 1996 presentation.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation
Liquidity and Capital Resources
During fiscal 1996, reductions in accounts receivable of
$1,254,016 combined with an increase in accrued expenses and payroll taxes of
$273,294 were the factors which affected the cash provided by operating
activities. The decrease in accounts receivable can be accounted for primarily
by substantially higher shipments to the government in the last quarter of
fiscal 1995 as compared to fiscal 1996. The increase in accrued expenses and
payroll taxes is primarily a result of increased commission expenses. Increases
in costs and estimated earnings in excess of billings on uncompleted contracts
of $1,436,654 and inventory of $880,449 combined with a decrease in accounts
payable of $661,568 partially offset cash provided by
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<PAGE>
operating activities for fiscal 1996. The costs and estimated earnings in excess
of billings on uncompleted contracts resulted primarily from the Company's use
of the percentage of completion method for income recognition of several
multi-year contracts. The increase in the inventory can be attributed primarily
to shipments on a government contract which occurred in the first quarter of
fiscal 1997.
The Company made capital expenditures in fiscal 1996 in the
aggregate amount of $450,772 to purchase manufacturing and computer equipment
and to make certain expenditures associated with patents. Additionally, $618,377
was expended on the 20,000 square foot addition to the Company's Warrington
facility. Cash provided by financing activities for fiscal 1996 increased to
$1,345,531 as a result of proceeds from the line of credit in the amount of
$1,475,000 and proceeds on long-term debt in the amount of $300,000 partially
offset by payments on long-term debt of $417,032.
During fiscal 1996, the Company increased its working capital
line of credit to the maximum amount of $5,000,000 of which $3,325,000 was
outstanding at June 30, 1996. The interest rate on this line of credit is
payable at the prime rate (8.25% at June 30, 1996) of the Company's lender (the
"Bank") plus 0.5%. The line of credit is secured by accounts receivable,
inventory, certain real property, assignment of a letter of credit confirmed and
negotiated by the Bank and a nonrecourse surety agreement executed by Earl M.
Pollock, the Company's Chairman and President, and Dorothy S. Pollock, the
Company's Secretary and a director, for $1,000,000 secured by a pledge of 8,476
shares of their Company stock. The maximum amounts available for advances under
this line of credit are limited as follows:
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<PAGE>
$3,500,000 - November 7, 1994 through December 31, 1995
$5,000,000 - January 1, 1996 through December 31, 1996
$3,500,000 - January 1, 1997 through June 30, 1997
$3,000,000 - July 1, 1997 through December 31, 1997
The Company also has a long-term note with the Bank at an
interest rate of 7.95%. The note is collateralized by the Company's accounts
receivable, inventory and property, plant and equipment. The principal balance
of this loan at June 30, 1996 was $332,855. See Note 6 to the Consolidated
Financial Statements.
During fiscal 1996, the Company entered into a $300,000 term
loan agreement with the Bank. The note is payable in monthly installments of
$8,334 plus interest at 8.25%, commencing one month after the first advance to
the Company. The note is collateralized by accounts receivable, inventory,
property, plant and equipment, assignment of a letter of credit confirmed and
negotiated by the Bank and the aforementioned nonrecourse surety agreement for
$1,000,000 executed by Earl and Dorothy Pollock which is secured by the
aforementioned pledge of 8,476 shares of their Company stock. The purpose of the
loan was to assist in financing the construction of the addition to the
Company's facility in Warrington, Pennsylvania. The principal balance of this
loan at June 30, 1996 was $241,666.
The Company believes that funds from operations and amounts
available under its present credit facilities will be sufficient to satisfy the
Company's operating cash requirements for the foreseeable future.
Results of Operations
Fiscal 1996 Compared with Fiscal 1995
Sales for fiscal 1996 decreased to $25,100,604 from
$27,051,737 for fiscal 1995. The decrease in sales in fiscal 1996 is primarily
due to the completion of several government
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<PAGE>
contracts. However, the Company's aggressive marketing efforts in foreign
markets have resulted in an increase in foreign sales of 105% from $3,132,000 in
fiscal 1995 to $6,427,000 in fiscal 1996.
Income from operations increased to a record $2,312,394 in
fiscal 1996 from $2,034,346 in fiscal 1995. The increase in income from
operations was primarily due to an increase in shipments of a particular product
line with higher gross margins (which resulted in a more favorable product mix)
which was partially offset by an increase in selling and administrative
expenses. Gross profit as a percentage of sales increased to 27.06% for fiscal
1996 as compared to 20.07% for fiscal 1995.
Selling and administrative expenses increased $994,761 to
$3,027,078 in fiscal 1996. The increase was primarily due to increased
commission expenses and costs associated with the LLC. As a percentage of sales,
selling and administrative expenses increased to 12.06% for fiscal 1996 as
compared to 7.51% for fiscal 1995.
The Company has continued its practice of reinvesting part of
its earnings to develop new technologies and new applications of its existing
technologies in an effort to create new business opportunities. Research and
development expenses increased $43,488 to $1,096,206 for fiscal 1996. The amount
of research and development expenses funded internally from new product
development was $998,824 in fiscal 1996, compared to $864,864 in fiscal 1995. As
a percentage of sales, research and development expenses increased to 4.37% for
fiscal 1996 as compared to 3.89% for fiscal 1995.
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<PAGE>
Interest expenses increased $48,650 to $357,396 for fiscal
1996 as a result of higher borrowings and related costs associated with letters
of credit for several multi-year contracts.
The effective tax rate decreased from 38% in fiscal 1995 to
36% in fiscal 1996.
FAS 106 - Post Retirement Benefits Other than Pensions and FAS
109 - Accounting for Income Taxes have been issued and are effective for the
years beginning after December 15, 1992. In the opinion of Management, the
adoption of these pronouncements has not had a material effect on the Company's
financial position or its results of operations.
Fiscal 1995 Compared with Fiscal 1994
Sales for fiscal 1995 increased to a record $27,051,737 from
$20,852,694 in fiscal 1994. The increase in sales in fiscal 1995 was primarily
due to the resumption of the Company's ability to operate at normal shipping
levels as compared to the prior year when the partial roof collapse at the
Company's Dover Division facility prevented the Company from maintaining normal
shipping levels. Additionally, as a result of increased marketing efforts in
foreign markets, foreign sales increased 11.58% to $3,132,000 in fiscal 1995 as
compared to $918,000 in fiscal 1994.
Income from operations increased to $2,034,346 in fiscal 1995
from $672,754 in fiscal 1994. The increase in income from operations was
primarily due to an increase in gross profit which was partially offset by an
increase in selling and administrative expenses. Gross profit as a percentage of
sales increased to 20.07% for fiscal 1995 compared to 17.62% for fiscal 1994.
The increase in gross profit as a percentage of sales is attributed to the
Company's ability
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to operate at normal shipping levels combined with increased shipments of
products with higher gross margins.
Selling and administrative expenses increased $306,424 to
$2,032,317 in fiscal 1995. The increase was primarily due to increased marketing
expenses, commission expenses and costs related to negotiating an enhancement of
the Company's credit facility. As a percentage of sales, selling and
administrative expenses decreased to 7.51% for fiscal 1995 as compared to 8.28%
for fiscal 1994.
During fiscal 1995, the Company continued its practice of
reinvesting part of its earnings to develop new technologies and new
applications of its existing technologies in an effort to create new business
opportunities. Research and development expenses increased $38,920 to $1,052,718
for fiscal year 1995. $864,864 was internally funded from new product
development in fiscal 1995 compared to $768,858 for fiscal 1994. As a percentage
of sales, research and development expenses decreased to 3.89% for fiscal 1995
as compared to 4.86% for fiscal 1994. The decrease was primarily due to the fact
that all programming costs were fully amortized as of June 30, 1994. See Note 4
to the Consolidated Financial Statements.
Interest expenses increased $46,147 to $308,746 for fiscal
1995 as a result of higher interest rates and related costs associated with
letters of credit for a multi-year contract.
The effective tax rate of 38% remained unchanged from fiscal
1994 to fiscal 1995.
FAS 106 - Post Retirement Benefits Other than Pensions and FAS
109 Accounting for Income Taxes have been issued and are effective for the years
beginning after
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December 15, 1992. In the opinion of Management, the adoption of these
pronouncements has not had a material effect on the Company's financial position
or its results of operations.
Item 8. Financial Statements and Supplementary Data.
The financial statements are listed under Item 14 in this
Report on Form 10-K.
Item 9. Disagreements on Accounting and Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Directors and officers of the Company are elected for a term
of one year and until their successors are elected and qualified. The Company's
directors and executive officers, and their business experience during the past
five years, are as follows.
Earl M. Pollock, age 77, has been Chairman, President and
Chief Executive Officer of the Company for more than five years.
Dorothy S. Pollock, age 67, is the wife of the President and
has been a Director and Secretary of the Company for more than five years. Mrs.
Pollock takes no active role in the operation of the business.
Charles H. Sulzberger, Jr., age 69, was elected a Director of
the Company on August 10, 1981. Mr. Sulzberger was employed by Lincoln Bank
(since merged with Continental Bank, Norristown, Pennsylvania) from 1973 to
1984, at which time he held the position of Vice President. He is currently
engaged in private investment counseling.
Mark S. Pollock, age 37, was appointed Treasurer and Chief
Financial Officer in May 1988. Mr. Pollock had been the Controller of the
Corporation since November 1987. Mr.
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Pollock is a Certified Public Accountant. Mr. Pollock is the nephew of Earl
and Dorothy Pollock.
Harold J. Cooley, age 62, was appointed Senior Vice President
of Operations in 1988. Mr. Cooley had been the Vice President of Technical
Support since November 1983
Compliance with Section 16(a) of the Securities Exchange Act
of 1934
Section 16(a) of the Securities Exchange Act of 1934 (the
"Act"), and the regulations thereunder, requires the Company's officers and
directors and persons who own more than 10% of the registered class of the
Company's equity securities (collectively, the "reporting persons") to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission and to furnish the Company with copies of these reports. Based solely
on the Company's review of the copies of these reports received by it, and
written representations received from reporting persons, the Company believes
that all filings required to be made by the reporting persons for the period
July 1, 1995 through June 30, 1996 were made on a timely basis.
Item 11. Executive Compensation.
SUMMARY COMPENSATION TABLE
The following table provides certain summary information
concerning compensation paid or accrued by the Company, for its fiscal year
ended June 30, 1996, to or on behalf of the Company's Chief Executive Officer
and the other most highly compensated executive officers of the Company (the
Company had only three executive officers during fiscal 1996).
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<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
Other Annual Restricted LTIP
Name and Compensation Stock Options Payouts
Principal Position Year Salary ($) Bonus ($) ($) Award(s) ($) SARs (#) ($)
- ------------------ ---- ---------- --------- ------------ -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Earl M. Pollock 1996 $226,622 -0- -0- -0- -0- -0-
Chairman of the 1995 $229,546 -0- -0- -0- -0- -0-
Board, President 1994 $217,317 -0- -0- -0- -0- -0-
and Chief
Executive Officer
Harold J. Cooley 1996 $225,514 $ 46,153 -0- -0- -0- -0-
Senior Vice 1995 $280,198 -0- -0- -0- -0- -0-
President, 1994 $260,881 $ 15,000 -0- -0- -0- -0-
Operations
Mark S. Pollock 1996 $106,212 -0- -0- -0- -0- -0-
Treasurer and 1995 $ 96,065 -0- -0- -0- -0- -0-
Chief Financial 1994 $ 79,615 $ 25,000 -0- -0- -0- -0-
Officer
===================================================================================================================================
===================================================================================================================================
(Broken Table)
(a) (i)
All Other
Name and Compensa-
Principal Position tion ($)
- ------------------ --------------
Earl M. Pollock $ -0-
Chairman of the $ -0-
Board, President $ -0-
and Chief
Executive Officer
Harold J. Cooley $17,384*
Senior Vice $ -0-
President, $ -0-
Operations
Mark S. Pollock $ -0-
Treasurer and $ -0-
Chief Financial $ -0-
Officer
============================================
============================================
</TABLE>
* Payments for accrued, unused vacation time.
Option Holdings
The following table provides information regarding Company
options held by the Company's named executive officers at the end of the
Company's most recent fiscal year (such officers did not exercise any options
during the most recent fiscal year).
-20-
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
Number of Unexercised
Options/SAR at Fiscal Value of Unexercised
Year-End (#) In-the-Money Options/SARs
Shares Acquired (#) Exercisable/ at Fiscal Year-End ($)(1)
Name on Exercise (#) Value Realized ($) Unexercisable Exercisable/Unexercisable
- ------------------- --------------- ------------------ --------------------- -------------------------
<S> <C> <C> <C> <C>
Earl M. Pollock(2) - - -0- -
Harold J. Cooley - - 2,150/600 413,014/63,576
Mark S. Pollock - - 600/400 98,716/42,384
======================== ===================== ====================== ============================ ==============================
======================== ===================== ====================== ============================ ==============================
</TABLE>
(1) There is no trading market for the Company's securities. The fair market
value of the Company's Common Stock is determined by the book value of the
Company's Common Stock. On June 30, 1996, the book value of the Company's Common
Stock was $266.24 per share.
(2) See Item 13 "Certain Relationships and Related Transactions" for a
description of warrants for the purchase of the Company's Common Stock that were
granted to Earl M. Pollock in connection with and as partial consideration for a
loan to the Company by Mr. Pollock and the execution of a nonrecourse surety
agreement by Mr. Pollock as security for the Company's credit facilities.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
On July 1, 1995, the Company entered into a seven-year
employment agreement with Harold J. Cooley. Pursuant to the employment
agreement, Mr. Cooley is presently entitled to receive base compensation at the
annual rate of $225,992. In addition, at the end of each fiscal year Mr. Cooley
is eligible for a bonus based on certain performance-based criteria. In the
event that the Company terminates Mr. Cooley's employment without cause, the
Company is required to continue to pay Mr. Cooley's base compensation,
determined in accordance with the agreement, for the full term of the agreement.
In the event that Mr. Cooley's employment is terminated due to death, the
Company is required to continue to make all payments otherwise payable pursuant
to the agreement to Mr. Cooley or his beneficiary, as applicable, for a period
of one year following his death. If Mr. Cooley's employment is terminated due to
disability, the Company's sole obligation is to pay Mr. Cooley's last full
year's base compensation for one year following termination due to disability.
-21-
<PAGE>
If the Company merges or consolidates with a company that
controls over 50% of the voting control of the Company or is acquired by any
party not an affiliate of the Company, the Company may terminate the employment
agreement and Mr. Cooley's employment. In the event of such termination, the
Company is required to pay Mr. Cooley his accrued base compensation plus a sum
equal to his most recent two full years' base compensation. One half of such sum
must be paid within thirty days of termination and the balance must be paid
within thirteen months of termination.
COMPENSATION OF DIRECTORS
Charles H. Sulzberger receives a fee of $500 per meeting of
the Board of Directors that he attends. During the fiscal year ended June 30,
1996, the Company paid fees in the aggregate amount of $1,000 to Mr. Sulzberger.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The following table sets forth, as of June 30, 1996, the
number of shares of common stock owned beneficially by all persons known to the
Company who are the beneficial owners of more than 5% of the Company's Common
Stock, by all directors of the Company and by all directors and officers of the
Company as a group.
Amount and Nature of Percent
Beneficial Owner(1) Beneficial Ownership (2) of Class
- ------------------- ------------------------ --------
Earl M. Pollock 15,751 (3) 43.5%
Dorothy S. Pollock 7,751 (4) 27.5%
Harold J. Cooley 2,327 (5) 7.6%
Mark S. Pollock 2,406 (6) 8.3%
Charles H. Sulzberger, Jr. 1,896 6.7%
Directors and officers as 30,131 (3)(5)(6) 76.9%
a group (5 persons)
-22-
<PAGE>
- -----------------
(1) The address of each of the persons listed above is 125 Titus Avenue,
Warrington, Pennsylvania 18976.
(2) Based on information furnished to the Company by the directors and
officers of the Company, these persons hold sole voting and dispositive
power with respect to the shares of stock owned by them as of June 30,
1996.
(3) Includes 8,000 shares issuable upon exercise of warrants. Does not
include shares owned by his wife, Dorothy S. Pollock, as to which Mr.
Pollock disclaims beneficial ownership.
(4) Does not include shares owned by her husband, Earl M. Pollock, as to
which Mrs. Pollock disclaims beneficial ownership.
(5) Includes 2,300 shares that Mr. Cooley has the option to purchase, 2,150
of which are currently exercisable and 150 of which will become
exercisable on November 8, 1996. Excludes an aggregate of 450 shares
issuable upon exercise of options held by Mr. Cooley that are not
exercisable within 60 days.
(6) Includes an aggregate of 700 shares issuable upon the exercise of options
granted to Mark S. Pollock, 600 of which are currently exercisable and
100 of which become exercisable on November 8, 1996; also includes 1,681
shares owned by his father's estate, of which he is a co-executor, as to
which shares he disclaims beneficial ownership. Excludes an aggregate of
300 shares issuable upon exercise of options held by Mark S. Pollock
which are not exercisable within 60 days.
PART IV
Item 13. Certain Relationships and Related Transactions.
In connection with and as partial consideration for a loan
from the Company's President, Earl M. Pollock, which loan was repaid in fiscal
1993, the Company issued to Earl M. Pollock in March 1989 warrants for the
purchase of 5,000 shares of the Company's common stock exercisable in 1,000
share multiples at $100 per share. The warrants initially were to expire on
March 31, 1994 but, as a result of an amendment in July 1991, now expire on
March 31, 2004. In November 1994, in connection with and as partial
consideration for a nonrecourse surety agreement executed by Earl M. Pollock as
security for the Company's credit
-23-
<PAGE>
facilities, the Company issued to Mr. Pollock warrants for the purchase of 3,000
shares of the Company's common stock exercisable in 1,000 share multiples at
$160.28 per share. The warrants expire on November 8, 2004. None of the warrants
issued to Earl M. Pollock have yet been exercised. See Note 12 to the
Consolidated Financial Statements.
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) The following documents are filed as part of this Report.
1. Consolidated Financial Statements:
Report of Independent Public Accountants.
Consolidated Balance Sheets.
Consolidated Statements of Operations.
Consolidated Statements of Stockholders'
Equity.
Consolidated Statements of Cash Flows.
Notes to Consolidated Financial Statements.
2. Consolidated Financial Statement Schedules:
Not applicable.
3. Reports on Form 8-K.
During the fiscal year ended June 30, 1996, the Company
has not filed any Reports on Form 8-K.
4. Exhibits:
Exhibit
Number Description of Exhibits.
3(a) Articles of Incorporation (incorporated herein by reference
to Exhibit 1 to the Company's Form 10 filed on April 15,
1981).
-24-
<PAGE>
Exhibit
Number Description of Exhibits.
3(b) By-laws, as amended (incorporated herein by reference to the
Company's Form 10-K for the fiscal year ended June 30,
1987).
4 Specimen stock certificate (incorporated herein by
reference to Exhibit 3 to the Company's Form 10 filed on
April 15, 1981).
10(a) Articles of Agreement between Bucks County Industrial
Development Corporation and the Company (relating to
Warrington, Pennsylvania building) (incorporated herein by
reference to Exhibit 5(ii) to the Company's Form 10 filed on
April 15, 1981).
10(b) Lease dated January 15, 1982 between Dayco Corporation and
the Company (relating to Dover, New Jersey building)
(incorporated herein by reference to Exhibit 3 to the
Company's Report on Form 10-K for the fiscal year ended June
30, 1981).
10(c) Agreement for Merger and Plan of Reorganization dated August
5, 1986 among NRC Acquisition Corp., RIL Electronics, Inc.
and the Company (incorporated herein by reference to Exhibit
2 to the Company's Report on Form 8-K filed on August 29,
1986).
10(d)* Stock option issued to Harold J. Cooley dated March 30, 1989
(incorporated herein by reference to Exhibit 10-e to the
Company's Report on Form 10-K for the fiscal year ended June
30, 1989).
10(e)* Warrants issued to Earl Pollock dated March 30, 1989
(incorporated herein by reference to Exhibit 10-f to the
Company's Report on Form 10-K for the fiscal year ended June
30, 1989).
10(f) $150,000 note issued to Earl Pollock dated March 2, 1989
(incorporated herein by reference to Exhibit 10-g to the
Company's Report on Form 10-K for the fiscal year ended June
30, 1989).
10(g)* 1990 Incentive Stock Option and Non-Qualified Option Plan
(incorporated herein by reference to Exhibit 10(h) to the
Company's Report on Form 10-K for the fiscal year ended June
30, 1991).
10(h)* Amendment No. 1 to stock option issued to Harold J. Cooley
(incorporated herein by reference to Exhibit 10(i) to the
Company's Report on Form 10-K for the fiscal year ended June
30, 1991).
10(i)* Amendment No. 1 to warrant issued to Earl Pollock
(incorporated herein by reference to Exhibit 10(j) to the
Company's Report on Form 10-K for the fiscal year ended June
30, 1991).
-25-
<PAGE>
Exhibit
Number Description of Exhibits.
10(j) Amended note issued to Earl Pollock (incorporated herein by
reference to Exhibit 10(k) to the Company's Report on Form
10-K for the fiscal year ended June 30, 1991).
10(k) Line of Credit Agreement between Bucks County Bank and Trust
Company and the Company, dated November 7, 1994
(incorporated herein by reference to Exhibit 10(k) to the
Company's Report on Form 10-K for fiscal 1995).
10(l) Demand Note, dated November 7, 1994, of the Company in favor
of Bucks County Bank and Trust Company (incorporated herein
by reference to Exhibit 10(l) to the Company's Report on
Form 10-K for fiscal 1995).
10(m) Open-End Mortgage dated November 7, 1994 by the Company in
favor of Bucks County bank and Trust Company (incorporated
herein by reference to Exhibit 10(m) to the Company's Report
on Form 10-K for fiscal 1995).
10(n)* Warrant issued to Earl M. Pollock dated November 8, 1994
(incorporated herein by reference to Exhibit 10(n) to the
Company's Report on Form 10-K for fiscal 1995).
10(o)* Employment Agreement, dated June 27, 1995, by and between
the Company and Harold J. Cooley (incorporated herein by
reference to Exhibit 10(o) to the Company's Report on Form
10-K for fiscal 1995).
10(p) Operating Agreement of Measurement Dynamics LLC, a New
Jersey limited liability company, dated July 12, 1995, by
and between the Company, Mark Sitcoske and Ernest W. DeLany
(incorporated herein by reference to Exhibit 10(p) to the
Company's Report on Form 10-K for fiscal 1995).
11 Computation of earnings per share.
21 The Company's three subsidiaries are NRC Acquisition Corp.,
a Pennsylvania corporation; Northeast Nuclear, Ltd., a
Virgin Islands corporation; and Measurement Dynamics LLC, a
New Jersey limited liability company.
27 Financial Data Schedule
- -----------------------
*Constitutes management contract or compensatory plan or arrangement
required to be filed as an exhibit to this form.
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A "SAFE
HARBOR" FOR FORWARD-LOOKING STATEMENTS. CERTAIN INFORMATION INCLUDED IN THIS
ANNUAL REPORT ON FORM 10-K CONTAINS INFORMATION THAT IS FORWARD LOOKING, SUCH AS
INFORMATION RELATING TO
-26-
<PAGE>
FUTURE SALES AND SHIPMENTS, INCOME FROM OPERATIONS, BACKLOG ORDERS TO BE FILLED
DURING FISCAL 1997, CAPITAL EXPENDITURES, AVAILABILITY OF MATERIALS AND
COMPONENTS, ADEQUACY OF CASH AVAILABLE FROM THE COMPANY'S OPERATIONS AND CREDIT
FACILITIES AND THE IMPACT ON THE COMPANY OF THE OUTCOME OF CERTAIN LITIGATION
DESCRIBED HEREIN. SUCH FORWARD LOOKING INFORMATION INVOLVES IMPORTANT RISKS AND
UNCERTAINTIES THAT COULD SIGNIFICANTLY AFFECT EXPECTED RESULTS IN THE FUTURE
FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY, OR ON BEHALF OF,
THE COMPANY. THESE RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO,
UNCERTAINTIES RELATING TO ECONOMIC CONDITIONS, ACQUISITIONS AND DIVESTITURES,
GOVERNMENT AND REGULATORY POLICIES, THE PRICING AND AVAILABILITY OF EQUIPMENT,
MATERIALS AND PROGRAMMING, TECHNOLOGICAL DEVELOPMENTS AND CHANGES IN THE
COMPETITIVE ENVIRONMENT IN WHICH THE COMPANY OPERATES.
-27-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on October 8, 1996.
NUCLEAR RESEARCH CORPORATION
By: /s/ Earl M. Pollock
----------------------------
Earl M. Pollock, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on October 8, 1996.
/s/ Earl M. Pollock
- -----------------------------------
Earl M. Pollock, Chairman of the
Board and President (Principal
Executive Officer)
/s/ Mark S. Pollock
- ------------------------------------
Mark S. Pollock, Treasurer and
Chief Financial Officer (Principal
Financial and Accounting Officer)
/s/ Dorothy S. Pollock
- ------------------------------------
Dorothy S. Pollock, Director
/s/ Charles H. Sulzberger, Jr.
- ------------------------------------
Charles H. Sulzberger, Jr., Director
-28-
<PAGE>
INDEX
-----
PAGE
----
Independent Auditors' Report F-2
Consolidated Financial Statements F-3
Consolidated Statements of Operations F-3
Consolidated Balance Sheets F-4
Consolidated Statements of Cash Flows F-5
Consolidated Statements of Stockholders' Equity F-6
Notes to Consolidated Financial Statements F-8
<PAGE>
SMG
- -------------------------------------------------------------------------------
SCHMELTZER . MASTER & GORSKY
<TABLE>
<CAPTION>
<S> <C> <C>
Professional Corporation Richard A. Schmeltzer, CPA Craig L. Alberts, CPA
Certified Public Accountants/Business Consultants Harold A. Gorsky, CPA Roger J. Davis, CPA
400 Greenwood Avenue Mark A. Master, CPA Stephen F. Raab, CPA
Wyncote, PA 19095-1897 Gary S. Master, CPA John P. Wiaziwsky, CPA
(215) 572-7100 FAX (215) 572-5048 Neal H. Keitz, CPA
</TABLE>
To the Board of Directors
Nuclear Research Corporation
Warrington, Pennsylvania
Independent Auditors' Report
We have audited the accompanying consolidated balance sheets of
Nuclear Research Corporation and Subsidiaries as of June 30, 1996 and 1995 and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended June 30, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Nuclear Research Corporation and Subsidiaries as of June 30, 1996 and 1995 and
the results of their operations and their cash flows for each of the three years
in the period ended June 30, 1996 in conformity with generally accepted
accounting principles.
SCHMELTZER, MASTER & GORSKY, P. C.
/s/ Schmeltzer Master & Gorsky P.C.
------------------------------------
Certified Public Accountants
Wyncote, Pennsylvania
September 16, 1996
F-2
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES (Note 10) $25,100,604 $27,051,737 $20,852,694
COST OF SALES 18,307,530 21,623,610 17,177,650
----------- ----------- -----------
GROSS PROFIT 6,793,074 5,428,127 3,675,044
SELLING AND ADMINISTRATIVE EXPENSES 3,027,078 2,032,317 1,725,893
RESEARCH AND DEVELOPMENT EXPENSES (Note 1) 1,096,206 1,052,718 1,013,798
INTEREST EXPENSE 357,396 308,746 262,599
----------- ----------- -----------
INCOME FROM OPERATIONS 2,312,394 2,034,346 672,754
OTHER INCOME
Insurance settlement (Notes 1 and 11) - - 323,206
Miscellaneous 41,764 12,252 6,615
Interest 5,922 5,778 1,132
----------- ----------- -----------
Other income 47,686 18,030 330,953
----------- ----------- -----------
INCOME BEFORE MINORITY INTEREST 2,360,080 2,052,376 1,003,707
MINORITY INTEREST IN LOSS OF CONSOLIDATED
SUBSIDIARY 316,427 - -
----------- ----------- -----------
INCOME - before income taxes 2,676,507 2,052,376 1,003,707
Less: taxes on income (Note 11) 969,540 773,900 381,354
----------- ----------- -----------
NET INCOME $ 1,706,967 $ 1,278,476 $ 622,353
=========== =========== ===========
PRIMARY EARNINGS PER SHARE (Note 1) $ 48.52 $ 38.25 $ 19.69
=========== ========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
1996 1995
------------ --------
ASSETS
CURRENT ASSETS
Cash (Note 1) $ 174,737 $ 66,905
Accounts receivable (Notes 1, 5, and 6) 2,872,304 4,126,320
Inventory (Notes 1, 2, 5, and 6) 4,613,074 3,732,625
Prepaid expenses and other current assets 260,259 165,715
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 1) 3,170,206 1,733,552
Deferred income taxes (Note 11) 46,500 -
----------- -----------
Total current assets 11,137,080 9,825,117
PROPERTY, PLANT AND EQUIPMENT - Net
(Notes 1, 3, 5, and 6) 2,067,531 1,405,459
OTHER ASSETS
Intangible assets, net (Note 1) 539,917 136,476
Other 65,412 24,951
----------- -----------
Total other assets 605,329 161,427
----------- -----------
TOTAL ASSETS $13,809,940 $11,392,003
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings (Note 5) $3,325,000 $ 1,850,000
Current portion of long-term debt (Note 6) 484,474 364,041
Accounts payable 893,314 1,554,882
Accrued expenses 1,001,480 689,350
Accrued payroll and payroll taxes 235,967 274,803
Taxes payable - on income (Note 11) 114,145 457,055
---------- -----------
Total current liabilities 6,054,380 5,190,131
LONG-TERM DEBT (Note 6) 141,666 379,131
DEFERRED INCOME TAXES (Note 11) 27,734 28,504
MINORITY INTEREST IN EQUITY OF CONSOLIDATED
SUBSIDIARY 84,956 -
COMMITMENTS AND CONTINGENCY (Note 9)
STOCKHOLDERS' 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 6,887,182 5,180,215
Less: treasury stock, 3,698 shares at cost (62,353) (62,353)
----------- -----------
Total stockholders' equity 7,501,204 5,794,237
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $13,809,940 $11,392,003
=========== ===========
See Notes to Consolidated Financial Statements
F-4
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,706,967 $ 1,278,476 $ 622,353
Adjustments to reconcile net income to
net cash provided by (used by) operating
activities:
Deferred income taxes (47,270) (770) 29,274
Depreciation and amortization 428,008 388,699 468,712
Gain on disposition of property and
equipment (4,000) - (74,241)
Minority interest in loss of consolidated
subsidiary (316,427) - -
(Increase) decrease in:
Accounts receivable 1,254,016 (365,542) (778,545)
Other receivable - 695,335 (283,515)
Inventory (880,449) 1,494,431 135,125
Prepaid taxes - on income - - 249,427
Prepaid expenses and other assets (94,544) (144,235) (16,736)
Costs and estimated earnings in
excess of billings on uncompleted
contracts (1,436,654) (1,733,552) -
Increase (decrease) in:
Accounts payable (661,568) (425,164) 378,420
Accrued expenses and payroll taxes 273,294 (417,727) 134,527
Taxes payable - on income (342,910) 350,804 106,251
----------- ----------- -----------
NET CASH PROVIDED BY (USED BY) OPERATING
ACTIVITIES (121,537) 1,120,755 971,052
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (1,069,149) (343,427) (149,737)
Proceeds from sale of equipment 4,000 - -
Increase in other assets (50,833) (8,716) (6,726)
----------- ----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (1,115,982) (352,143) (156,463)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (payments) on line of credit 1,475,000 (525,000) (425,000)
Proceeds of long-term debt 300,000 - -
Payments of long-term debt (417,032) (339,980) (300,273)
Other (12,617) - -
----------- ----------- -----------
NET CASH PROVIDED BY (USED BY) FINANCING
ACTIVITIES 1,345,351 (864,980) (725,273)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 107,832 (96,368) 89,316
CASH - beginning 66,905 163,273 73,957
----------- ----------- -----------
CASH - ending $ 174,737 $ 66,905 $ 163,273
=========== =========== ===========
SUPPLEMENTARY DISCLOSURES:
Interest paid $ 355,700 $ 307,195 $ 286,644
=========== =========== ===========
Income taxes paid (refunded) $ 889,935 $ 434,171 $ (24,763)
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
Common Stock
---------------------
Number
of Shares Amount
--------- ------
Balance at July 1, 1993 28,175 $ 159,365
Net income for the year
ended June 30, 1994 - -
-------- ---------
Balance at June 30, 1994 28,175 159,365
Net income for the year
ended June 30, 1995 - -
-------- ---------
Balance at June 30, 1995 28,175 159,365
Net income for the year
ended June 30, 1996 - -
-------- ---------
Balance at June 30, 1996 28,175 $ 159,365
======== =========
F-6
<PAGE>
Additional Total
Paid-in Retained Treasury Stockholders'
Capital Earnings Stock Equity
- ----------- ---------- ---------- -------------
$ 517,010 $3,279,386 $ (62,353) $3,893,408
- 622,353 - 622,353
- ----------- ---------- ---------- ----------
517,010 3,901,739 (62,353) 4,515,761
- 1,278,476 - 1,278,476
- ----------- ---------- ---------- ----------
517,010 5,180,215 (62,353) 5,794,237
- 1,706,967 - 1,706,967
- ----------- ---------- ---------- ----------
$ 517,010 $6,887,182 $ (62,353) $7,501,204
=========== ========== ========== ==========
See Notes to Consolidated Financial Statements
F-7
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
- -------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Nuclear Research Corporation (the Company) was incorporated on
July 17, 1950 under the laws of the Commonwealth of Pennsylvania.
The Company is engaged in the business of designing, manufacturing
and servicing detection, measurement and monitoring devices and
gauges for customers throughout the world, with a majority of its
revenue derived from products primarily manufactured for use by
the United States Department of Defense.
Principles of Consolidation
The consolidated financial statements include the accounts of
Nuclear Research Corporation (parent corporation), NRC Acquisition
Corporation and Northeast Nuclear, Ltd., wholly-owned
subsidiaries, and Measurement Dynamics LLC (MDLLC), owned 42% by
Nuclear Research Corporation, hereafter referred to collectively
as the "Company". All significant intercompany accounts and
transactions have been eliminated in consolidation. Northeast
Nuclear, Ltd. is a foreign sales corporation (FSC) and as such
files its own corporate tax return (see Note 11). MDLLC is a
limited liability company (LLC) and as such files its own
partnership tax return.
Use of Estimates
Management uses estimates and assumptions in preparing these
financial statements in accordance with generally accepted
accounting principles. Those estimates and assumptions affect the
reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from estimates that were used.
Accounting for Contracts
Substantially all of the Company's contracts are firm-fixed price.
The units of delivery method (a modification of the percentage-of-
completion method) recognizes as revenue the contract price of
units delivered during a period and recognizes the costs allocable
to the delivered units. Estimates of cost to complete are reviewed
and revised periodically throughout the lives of the contracts,
and adjustments to profit resulting from such revisions are
recorded in the accounting period in which the revisions are made.
Losses on specific contracts are recorded by charging any amounts
in excess of estimated realizable value to cost of sales as they
are identified.
The Company has a cost-plus-fixed-fee contract with the United
States Government. The Company recognizes revenue on the contract
on the basis of partial performance where the circumstances are
such that total profit can be estimated with reasonable accuracy
and ultimate realization is reasonably assured.
F-8
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- ------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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
at June 30 are summarized as follows:
1996 1995
----------- -------
Costs incurred and
estimated earnings
on uncompleted contracts $6,316,693 $1,733,552
Less: Billings to date 3,146,487 -
---------- ----------
$3,170,206 $1,733,552
========== ==========
Included in accompanying balance sheet under the following
caption:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $3,170,206 $1,733,552
========== ==========
Cash
The Company maintains cash at a financial institution
headquartered in Philadelphia, Pennsylvania which may exceed
federally insured amounts at times and which may at times
significantly exceed balance sheet amounts due to outstanding
checks.
F-9
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- -------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts Receivable
Accounts receivable at June 30, consists of:
1996 1995
-------- -------
United States Government $ 777,137 $3,505,277
Commercial contracts 409,385 418,733
Foreign contracts 1,669,094 185,622
Unbilled receivables -
U. S. Government 16,688 16,688
---------- ----------
Total $2,872,304 $4,126,320
========== ==========
The Company does not provide an allowance for doubtful accounts
because of the composition of its customer base, the use of
irrevocable letters of credit for export sales and the lack of any
significant uncollectible amounts in prior years.
Insurance Settlement
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 Company recorded a gain on the final
settlement of the claim of $323,206 in 1994.
Inventory
Inventories, other than inventoried costs relating to long-term
contracts, are stated at the lower of cost (principally last-in,
first-out - LIFO) or market and include material, labor and
factory overhead. Market represents the lower of replacement cost
or estimated net realizable value (see Note 2). Inventoried costs
relating to long-term contracts are stated at the actual
production cost including factory overhead incurred to date,
reduced by amounts identified with revenue recognized on delivered
units. The costs attributed to delivered units under long-term
contracts are based on the estimated average cost of all
manufactured units.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for
maintenance and repairs are charged against operations. Renewals
and betterments that materially extend the life of the assets are
capitalized (see Note 3). Depreciation and amortization are
computed using straight-line and accelerated methods over the
estimated useful lives of the related assets.
F-10
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- -------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Intangible Assets
Intangible assets at June 30, consists of: 1996 1995
------ ------
Patents and trademarks, net $ 142,988 $ 136,476
Copyrights, net 3,312 -
Other, net 393,617 -
--------- ---------
$ 539,917 $ 136,476
========= =========
The cost of the patents and trademarks are being amortized using
the straight line method over their remaining useful lives, not to
exceed seventeen years. Accumulated amortization was $74,943 at
June 30, 1996 and $60,987 at June 30, 1995. Amortization expense
amounted to $13,956, $12,261 and $10,978 in 1996, 1995 and 1994,
respectively.
The cost of the copyrights is being amortized using the straight
line method over their remaining useful lives, which has been
determined by management to be five years. Accumulated
amortization and amortization expense was $368 as of and for the
year ended June 30, 1996.
Other intangible assets represent the assets contributed to MDLLC
by the minority members of the LLC and include products, product
ideas and various trade names. The assets are being amortized
using the straight line method over their remaining useful lives,
not to exceed nineteen years. Accumulated amortization and
amortization expense was $20,383 as of and for the year ended June
30, 1996.
Income Taxes
Deferred income taxes are recorded based upon differences between
the financial statement and the tax basis of assets and
liabilities. The temporary differences include the inclusion of
the loss from MDLLC in the consolidated tax returns of the parent
corporation and depreciation from an involuntary conversion of
property (see Note 11).
Research and Development
Research and development costs related to both present and future
products are charged to operations as incurred. These costs
amounted to $1,096,206, $1,052,718 and $1,013,798 in 1996, 1995
and 1994, respectively. Customer-sponsored research accounted for
$97,382, $187,854 and $244,940 in 1996, 1995 and 1994,
respectively.
Earnings Per Share
Primary earnings per share amounts are based upon the weighted
average number of common shares outstanding during the periods,
including the common stock equivalents associated with stock
options and warrants (see Note 12).
The weighted average number of shares outstanding and stock
equivalents amounted to 35,178, 33,422 shares and 31,605 shares
for the years ended June 30, 1996, 1995, and 1994, respectively.
F-11
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- -------------------------------------------------------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reclassifications
Certain items in the 1995 financial statements have been
reclassified to conform with their 1996 presentation.
NOTE 2 - INVENTORY
Inventory at June 30, consists of:
1996 1995
----------- -----------
Work-In-Process
United States Government
contracts $ 3,226,042 $ 4,748,683
Commercial contracts 865,157 496,603
Purchased and manufactured parts 521,875 637,739
----------- -----------
4,613,074 5,883,025
Less: Progress payments on United
States Government contracts - 2,150,400
----------- -----------
Total $ 4,613,074 $ 3,732,625
=========== ===========
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 June 30, 1996 and 1995, reported
inventories would have been higher by $1,026,228 and $1,028,873,
respectively. Reported net income for the year ended June 30, 1996
would have decreased by $1,617 ($.05 per share). Reported net
income for the years ended June 30, 1995 and 1994 would have
increased by $92,119 ($2.76 per share) and $80,012 ($2.53 per
share), respectively. The proforma effect relating to the use of
the FIFO method would have resulted in the following balances for
the consolidated statements of operations presentation for the
years ended June 30, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- --------
<S> <C> <C> <C>
Gross profit $ 6,790,429 $ 5,583,242 $ 3,810,223
=========== =========== ===========
Income from operations $ 2,309,749 $ 2,189,461 $ 807,933
=========== =========== ===========
Net income $ 1,616,850 $ 1,370,595 $ 702,365
=========== =========== ===========
</TABLE>
In the year ended June 30, 1996, a reduction in inventory resulted
in a liquidation of LIFO inventory carried at lower costs in prior
years as compared with the cost of 1996 purchases. The effect of
this liquidation was to increase net income by $96,663 ($2.75 per
share).
F-12
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- -------------------------------------------------------------------------------
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30, consists of:
1996 1995
------------ ---------
Land and land improvements $ 79,207 $ 79,207
Building and improvements 1,352,404 740,804
Equipment and furniture 3,070,928 2,664,410
Leasehold improvements 120,701 114,923
Equipment held under capital leases 246,176 246,176
---------- ----------
4,869,416 3,845,520
Less: accumulated depreciation
and amortization 2,801,885 2,440,061
---------- ----------
Total $2,067,531 $1,405,459
========== ==========
Depreciation and amortization expense amounted to $379,022,
$373,334 and $346,582 in 1996, 1995 and 1994, respectively.
NOTE 4 - PROGRAMMING COSTS
Programming costs represented software production costs. These
costs were being amortized using the straight line method over a
period of five years and were fully amortized in the year ended
June 30, 1994. Accumulated amortization was $459,349 at June 30,
1994. Amortization expense amounted to $101,525 in 1994.
NOTE 5 - SHORT-TERM BORROWINGS
The Company maintains a working capital line of credit in the
maximum amount of $5,000,000, payable on demand of which
$3,325,000 and $1,850,000 was outstanding at June 30, 1996 and
1995, respectively. Interest is payable at the bank's prime rate
(8.25% and 9% at June 30, 1996 and 1995, respectively) plus .5%.
The line is secured by accounts receivable, inventory, certain
real property, assignment of a letter of credit confirmed and
negotiated by the bank and a nonrecourse surety agreement executed
by the President and a director for $1,000,000 secured by a pledge
of 8,476 shares of the Company's stock (see Notes 1, 2, and 3).
Notwithstanding the availability under this line of credit of
$5,000,000, the actual availability for advances under this line
of credit is limited as follows:
$3,500,000 - November 7, 1995 - December 31, 1995
$5,000,000 - January 1, 1996 - December 31, 1996
$3,500,000 - January 1, 1997 - June 30, 1997
$3,000,000 - July 1, 1997 - December 31, 1997
F-13
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- ------------------------------------------------------------------------------
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C> <C>
Note payable - bank - payable in monthly installments of $28,292,
including interest at 7.95%, collateralized by accounts
receivable, inventory and property, plant and equipment, (see
Notes 1, 2, and 3). Payments extend through June, 1997. $ 332,855 $ 631,299
Note payable - bank - payable in monthly installments of $8,334
plus interest at 8.25%, collateralized by accounts receivable,
inventory, property, plant and equipment, assignment of a letter
of credit confirmed and negotiated by the bank and a nonrecourse
surety agreement executed by the President and a director for
$1,000,000 secured by a pledge of 8,476 shares of the Company's
stock. Payments extend through November, 1998. 241,666 -
Capital lease obligation - payable in monthly installments of $5,334
including interest at 7.2%, collateralized by certain equipment
(see Note 9). Payments extend through May, 1997. 51,619 111,873
---------- ----------
626,140 743,172
Less: current portion (484,474) (364,041)
---------- ----------
Total long-term debt $ 141,666 $ 379,131
========== ==========
</TABLE>
The following schedule represents the annual obligations on
long-term debt outstanding at June 30, 1996:
Year Amount
---- ------
1997 $ 484,474
1998 100,000
1999 41,666
----------
Total $ 626,140
==========
F-14
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- -------------------------------------------------------------------------------
NOTE 7 - STATEMENT OF CASH FLOWS
Supplementary information regarding non-
cash investing and financing activities:
1996 1995 1994
-------- -------- -------
Non-cash acquisition of
intangible assets $414,000 $ - $ -
======== ======== ========
Disposition of fully
depreciated property and
equipment $ - $ 12,721 $ -
======== ======== ========
Non-cash acquisition of
property and equipment $ - $ - $257,133
======== ======== ========
Non-cash financing of
property and equipment $ - $ - $182,892
======== ======== ========
NOTE 8 - RETIREMENT PLAN
The Company sponsors a 401(k) retirement plan which is funded
entirely by employee contributions and covers substantially all
full-time eligible employees.
NOTE 9 - COMMITMENTS AND CONTINGENCY
Lease Obligations
The Company leases certain equipment under capital leases and
administrative and manufacturing facilities under an operating
lease which expires February, 1997. The leases generally provide
that the Company pays the taxes, insurance and maintenance
expenses related to the leased property.
The following is a summary of equipment held under capital leases
at June 30:
1996 1995
-------- ------
Machinery and equipment - cost $246,176 $246,176
Less: accumulated amortization (155,983) (116,382)
-------- --------
$ 90,193 $129,794
======== ========
The minimum future rentals and lease payments under these leases
as of June 30, 1996 are as follows:
Operating Capital
Year ending June 30, Lease Leases
-------------------- --------- --------
1997 $ 39,344 $ 58,674
Total minimum lease payments
Less: amount representing interest (7,055)
--------
Present value of net minimum lease
payments $ 51,619
========
F-15
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- -------------------------------------------------------------------------------
NOTE 9 - COMMITMENTS AND CONTINGENCY (CONTINUED)
Rent expense associated with operating leases amounted to $54,103,
$59,022 and $57,680 in 1996, 1995 and 1994, respectively.
Employment Agreements
The Company has employment agreements with two officers which call
for future minimum payments for each of the next five years and
thereafter as follows:
Years ending June 30, Amount
--------------------- --------
1997 $345,992
1998 $345,992
1999 $225,992
2000 $225,992
2001 $225,992
Thereafter $225,992
Standby Letters of Credit
The Company is contingently liable for standby letters of credit
aggregating $1,178,750 as of June 30, 1996, as collateral for
performance on long-term contracts and bids.
NOTE 10 - MAJOR CUSTOMERS AND EXPORT SALES
Total sales in fiscal 1996 included 65.1% to various branches of
the United States Department of Defense excluding sales to private
contractors who in turn sell to the United States Government.
Sales to the United States Department of Defense in 1995 and 1994
accounted for 78.5% and 78% of total sales, respectively.
Export sales in U. S. dollars were as follows:
1996 1995 1994
---------- ---------- ----------
Australia $ 106,000 $ - $ -
Europe 662,000 469,000 453,000
Far East 4,966,000 2,299,000 417,000
Middle East 21,000 36,000 25,000
North America 648,000 313,000 -
Other 24,000 15,000 23,000
---------- ---------- ----------
Total $6,427,000 $3,132,000 $ 918,000
========== ========== ==========
The majority of export sales is secured by irrevocable letters of
credit.
F-16
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- -------------------------------------------------------------------------------
NOTE 11 - INCOME TAXES
Provision for income taxes consisted of the following:
1996 1995 1994
---------- ---------- ----------
Federal:
Current $ 834,484 $ 589,581 $ 265,727
Deferred provision
(benefit) (41,708) (708) 26,897
State:
Current 182,326 185,089 86,353
Deferred provision
(benefit) (5,562) (62) 2,377
---------- ---------- ----------
Total $ 969,540 $ 773,900 $ 381,354
========== ========== ==========
The following is a reconciliation of income taxes at the Federal
statutory rate with income taxes recorded by the Company:
1996 1995 1994
---------- ---------- ----------
Federal tax at statutory
rate from continuing
operations $ 910,012 $ 697,808 $ 341,260
State income taxes, net
of Federal benefit 120,335 122,159 88,730
Other (4,972) 8,291 14,967
Minority interest in loss
of consolidated
subsidiary 19,085 - -
Research and development
and other credits (4,074) (27,848) (63,603)
Federal tax savings
attributable to foreign
sales corporation (70,846) (26,510) -
---------- ---------- ----------
Provision for taxes
on income $ 969,540 $ 773,900 $ 381,354
========== ========== ==========
The tax effect of the following temporary differences gives rise
to the deferred tax asset (liability) at June 30, 1996:
Inclusion of the loss from MDLLC in the consolidated tax
returns of the parent corporation $120,584
========
Depreciation from an involuntary conversion of property ($70,433)
========
Income taxes payable at June 30, 1996, 1995 and 1994 were
$114,145, $457,055 and $106,251, respectively.
F-17
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- -------------------------------------------------------------------------------
NOTE 12 - RELATED PARTY TRANSACTIONS
Stock Option Plan
The Company maintains an Incentive Stock Option and Non-Qualified
Option Plan (the Plan). Pursuant to the terms of the Plan, 10,000
shares of the Company's common stock are reserved for issuance.
The Plan provides for the granting of incentive stock options as
defined under the Internal Revenue Code. Also under the Plan,
non-qualified options may be granted to selected officers and
employees. The Plan was effective October 29, 1990 and expires
October 28, 2000. The exercise price is fair market value on the
date of grant.
Outstanding Stock Options
Incentive stock options to purchase an aggregate amount of 1,500
shares were issued to three key employees and are exercisable at
an aggregate rate of 300 shares per year beginning October 29,
1991. The exercise price is $90 per share.
Prior to the adoption of the Plan, the Company granted to the
Senior Vice President an option to purchase 2,000 shares of common
stock. The option expires March 31, 2004. The option is
exercisable at $67.68 per share.
During the year ended June 30, 1995, incentive stock options to
purchase an aggregate amount of 2,550 shares were issued to four
key employees and one consultant and are exercisable at an
aggregate rate of 510 shares per year beginning November 8, 1995.
The exercise price is $160.28.
Non-
Option shares Exercisable Exercisable
------------- ----------- -----------
Outstanding, July 1, 1995 3,200 2,850
Issued during year ended
June 30, 1996 - -
Exercisable during year
ended June 30, 1996 810 (810)
-------- --------
Outstanding June 30, 1996 4,010 2,040
======== ========
Exercisable June 30, 1996 $352,103
========
F-18
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
- -------------------------------------------------------------------------------
NOTE 12 - RELATED PARTY TRANSACTIONS (CONTINUED)
Stock Warrants
The Company issued stock warrants to the President of the Company.
The warrants are exercisable into 5,000 shares of the Company's
stock in 1,000 share increments at a price of $100 per share. The
warrants, which expire March 31, 2004, were outstanding at June
30, 1996, 1995 and 1994.
The Company issued additional warrants during the year ended June
30, 1995 to the President that are exercisable into 3,000 shares
of the Company's stock in 1,000 share increments at a price of
$160.28 per share. The warrants, which expire November 8, 2004,
were outstanding at June 30, 1996 and 1995.
F-19
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
Number Description of Exhibit Filing
- ------ ---------------------- ---------
<S> <C> <C>
3(a) Articles of Incorporation (incorporated herein by
reference to Exhibit 1 to the Company's Form 10 filed on
April 15, 1981).
3(b) By-laws, as amended (incorporated herein by reference to
the Company's Form 10-K for the fiscal year ended June
30, 1987).
4 Specimen stock certificate (incorporated herein by
reference to Exhibit 3 to the Company's Form 10 filed
on April 15, 1981).
10(a) Articles of Agreement between Bucks County Industrial
Development Corporation and the Company (relating to
Warrington, Pennsylvania building) (incorporated
herein by reference to Exhibit 5(ii) to the Company's
Form 10 filed on April 15, 1981).
10(b) Lease dated January 15, 1982 between Dayco
Corporation and the Company (relating to Dover, New
Jersey building) (incorporated herein by reference to
Exhibit 3 to the Company's Report on Form 10-K for
the fiscal year ended June 30, 1981).
10(c) Agreement for Merger and Plan of Reorganization dated
August 5, 1986 among NRC Acquisition Corp., RIL
Electronics, Inc. and the Company (incorporated herein
by reference to Exhibit 2 to the Company's Report on
Form 8-K filed on August 29, 1986).
10(d) Stock option issued to Harold J. Cooley dated March 30,
1989 (incorporated herein by reference to Exhibit 10-e
to the Company's Report on Form 10-K for the fiscal
year ended June 30, 1989).
10(e) Warrants issued to Earl Pollock dated March 30, 1989
(incorporated herein by reference to Exhibit 10-f to the
Company's Report on Form 10-K for the fiscal year
ended June 30, 1989).
<PAGE>
Exhibit Method of
Number Description of Exhibit Filing
- ------- ---------------------- ---------
10(f) $150,000 note issued to Earl Pollock dated March 2,
1989 (incorporated herein by reference to Exhibit 10-g
to the Company's Report on Form 10-K for the fiscal
year ended June 30, 1989).
10(g) 1990 Incentive Stock Option and Non-Qualified Option
Plan (incorporated herein by reference to Exhibit 10(h)
to the Company's Report on Form 10-K for the fiscal
year ended June 30, 1991).
10(h) Amendment No. 1 to stock option issued to Harold J.
Cooley (incorporated herein by reference to Exhibit
10(i) to the Company's Report on Form 10-K for the
fiscal year ended June 30, 1991).
10(i) Amendment No. 1 to warrant issued to Earl Pollock
(incorporated herein by reference to Exhibit 10(j) to the
Company's Report on Form 10-K for the fiscal year
ended June 30, 1991).
10(j) Amended note issued to Earl Pollock (incorporated
herein by reference to Exhibit 10(k) to the Company's
Report on Form 10-K for the fiscal year ended June 30,
1991).
10(k) Line of Credit Agreement between Bucks County Bank
and Trust Company and the Company, dated November
7, 1994 (incorporated herein by reference to Exhibit
10(k) to the Company's Report on Form 10-K for fiscal
1995).
10(l) Demand Note, dated November 7, 1994, of the
Company in favor of Bucks County Bank and Trust
Company (incorporated herein by reference to Exhibit
10(l) to the Company's Report on Form 10-K for fiscal
1995).
10(m) Open-End Mortgage dated November 7, 1994 by the
Company in favor of Bucks County bank and Trust
Company (incorporated herein by reference to Exhibit
10(m) to the Company's Report on Form 10-K for fiscal
1995).
<PAGE>
Exhibit Method of
Number Description of Exhibit Filing
- ------- ---------------------- ---------
10(n) Warrant issued to Earl M. Pollock dated November 8,
1994 (incorporated herein by reference to Exhibit 10(n)
to the Company's Report on Form 10-K for fiscal 1995).
10(o) Employment Agreement, dated June 27, 1995, by and
between the Company and Harold J. Cooley
(incorporated herein by reference to Exhibit 10(o) to the
Company's Report on Form 10-K for fiscal 1995).
10(p) Operating Agreement of Measurement Dynamics LLC,
a New Jersey limited liability company, dated July 12,
1995, by and between the Company, Mark Sitcoske and
Ernest W. DeLany (incorporated herein by reference to
Exhibit 10(p) to the Company's Report on Form 10-K
for fiscal 1995).
11 Computation of earnings per share. *
21 The Company's three subsidiaries are NRC Acquisition
Corp., a Pennsylvania corporation; Northeast Nuclear,
Ltd., a Virgin Islands corporation; and Measurement
Dynamics LLC, a New Jersey limited liability company.
27 Financial Data Schedule *
</TABLE>
- -----------------------
* Filed herewith electronically.
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
EXHIBIT 11
CALCULATIONS OF EARNINGS PER SHARE
June 30, 1996 June 30, 1995 June 30, 1994
------------- ------------- -------------
NET INCOME $1,706,967 $1,278,476 $ 622,353
AVERAGE SHARES ISSUED 31,873 31,873 31,873
AVERAGE NET EFFECT OF DILUTIVE
STOCK OPTIONS-BASED ON THE
TREASURY STOCK METHOD 7,003 5,247 3,430
LESS: AVERAGE TREASURY STOCK (3,698) (3,698) (3,698)
--------- ---------- ---------
TOTAL STOCK AND STOCK
EQUIVALENTS 35,178 33,422 31,605
========= ========== =========
EARNINGS PER SHARE $ 48.52 $ 38.25 $ 19.69
========= ========== =========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000073296
<NAME> NUCLEAR RESEARCH CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 174,737
<SECURITIES> 0
<RECEIVABLES> 6,042,510
<ALLOWANCES> 0
<INVENTORY> 4,613,074
<CURRENT-ASSETS> 11,137,080
<PP&E> 4,869,416
<DEPRECIATION> 2,801,885
<TOTAL-ASSETS> 13,809,940
<CURRENT-LIABILITIES> 6,054,380
<BONDS> 0
0
0
<COMMON> 159,365
<OTHER-SE> 7,341,839
<TOTAL-LIABILITY-AND-EQUITY> 13,809,940
<SALES> 25,417,031
<TOTAL-REVENUES> 25,417,031
<CGS> 18,307,530
<TOTAL-COSTS> 19,403,736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 357,396
<INCOME-PRETAX> 2,676,507
<INCOME-TAX> 969,540
<INCOME-CONTINUING> 1,706,967
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,706,967
<EPS-PRIMARY> 48.52
<EPS-DILUTED> 48.52
</TABLE>
