<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(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, 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 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, 1996, the Registrant had 28,175 shares of
its common stock outstanding.
<PAGE>
INDEX
<TABLE>
<CAPTION>
Number Page
- ------ ----
<S> <C>
PART I. Financial Information.
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets - September 30, 1996
and June 30, 1996.......................................1
Consolidated Statements of Operations - Three
Months Ended September 30, 1996 and 1995................3
Consolidated Statements of Shareholders' Equity -
Three Months Ended September 30, 1996 and the
Year Ended June 30, 1996................................4
Consolidated Statements of Cash Flows - Three
Months Ended September 30, 1996 and 1995................5
Notes to Consolidated Financial Statements.......................6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................9
PART II. Other Information.
Item 1. Legal Proceedings...............................................10
Item 2. Changes in Securities...........................................11
Item 3. Defaults Upon Senior Securities.................................11
Item 4. Submission of Matters to a Vote of Security
Holders................................................11
Item 5. Other Information...............................................11
Item 6. Exhibits and Reports on Form 8-K................................11
</TABLE>
-i-
<PAGE>
The Private Securities Litigation Reform Act of 1995 provides
a "safe harbor" for forward-looking statements. Certain information included in
this Quarterly Report contains information that is forward looking, such as
information relating to cash available from the Company's operations and credit
facilities, the effect of reduced backlog on sales and earnings for the next two
fiscal quarters 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.
-ii-
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1: Consolidated Financial Statements
- ------ ---------------------------------
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
---------------------------
<TABLE>
<CAPTION>
ASSETS
September 30, 1996 June 30, 1996
------------------ -------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 77,464 $ 174,737
Accounts receivable 1,755,922 2,872,304
Inventory (Note 3) 3,998,092 4,613,074
Costs and estimated
earnings in excess
of billings
on uncompleted contracts 1,091,556 3,170,206
(Note 4)
Prepaid expenses and
other current assets 364,267 260,259
Deferred Income Taxes 46,500 46,500
--------------- ---------------
Total Current Assets 7,333,801 11,137,080
PROPERTY, PLANT AND EQUIPMENT
(net of accumulated
depreciation and amortization
of $2,895,575 at September 30, 1996 and
$2,801,885 at June 30, 1996) 2,144,957 2,067,531
OTHER ASSETS
Intangible assets (net of
accumulated amortization of
$26,158 at
September 30, 1996
and $20,283 at June 30, 1996) 389,842 393,617
Patents (net of accumulated
amortization of $78,517
at September 30, 1996 and
$75,311 at June 30, 1996) 162,861 146,300
Other 62,245 65,412
--------------- -----------------
Total Other Assets 614,948 605,329
-------------- ----------------
TOTAL ASSETS $ 10,093,706 $ 13,809,940
============ =============
</TABLE>
See Notes to Consolidated Financial Statements
-1-
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
---------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
------------------ -------------
<S> <C> <C>
CURRENT LIABILITIES
Short-term borrowings $ 175,000 $ 3,325,000
Current portion of
long-term debt 364,327 484,474
Accounts payable 974,146 893,314
Accrued expenses 537,500 1,001,480
Accrued payroll and
payroll taxes 245,368 235,967
Taxes payable on income 20,849 114,145
------------- -----------
Total Current Liabilities 2,317,190 6,054,380
LONG-TERM DEBT 108,333 141,666
DEFERRED INCOME TAXES 27,734 27,734
MINORITY INTEREST IN EQUITY OF
CONSOLIDATED SUBSIDIARY 12,683 84,956
COMMITMENTS AND CONTINGENCY
(Note 5)
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 7,013,744 6,887,172
Less: treasury stock,
3,698 shares at cost (62,353) (62,353)
-------------- ------------
Total Shareholders' Equity 7,627,766 7,501,204
------------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 10,093,706 $13,809,940
============ ==========
</TABLE>
See Notes to Consolidated Financial Statements
-2-
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
-------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
---- ----
<S> <C> <C>
NET SALES $4,412,917 $6,210,643
COST OF SALES 3,358,274 4,902,282
--------- ---------
GROSS PROFIT 1,054,643 1,308,361
SELLING AND ADMINISTRATIVE
EXPENSES 680,178 560,039
RESEARCH AND DEVELOPMENT
EXPENSES 216,251 191,705
INTEREST EXPENSE 53,663 73,648
------ ------
INCOME FROM OPERATIONS 104,551 482,969
OTHER INCOME 12,656 2,790
------ -----
INCOME BEFORE MINORITY INTEREST 117,207 485,759
MINORITY INTEREST IN LOSS OF
CONSOLIDATED SUBSIDIARY 72,274 39,167
------ ------
INCOME BEFORE INCOME TAXES 189,481 524,926
LESS: TAXES ON INCOME 62,919 212,325
------ -------
NET INCOME $ 126,562 $ 312,601
========== ==========
PRIMARY EARNINGS PER SHARE $ 3.59 $ 9.20
========== ==========
WEIGHTED AVERAGE COMMON SHARES 35,217 33,980
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
-3-
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND YEAR ENDED JUNE 30, 1996
(UNAUDITED
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional Total
-------------------- Paid In Retained Shareholders'
Shares Amount Capital Earnings Treasury Stock Equity
------ ------ ------- -------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1995 28,175 $159,365 $517,010 $5,180,215 $(62,353) $5,794,237
Net Income for
the year ended
June 30, 1996 -- -- -- 1,706,967 -- 1,706,967
--------- -------- -------- ---------- --------- ----------
Balance at
June 30, 1996 28,175 159,365 517,010 6,887,182 (62,353) 7,501,204
Net income for
the three months
ended September 30,
1996 -- -- -- 126,562 -- 126,562
--------- -------- -------- ---------- --------- ----------
Balance at
September 30, 1996 28,175 $159,365 $517,010 $7,013,744 $(62,353) $7,627,766
========= ======== ======== ========== ========= ==========
</TABLE>
See Notes to Consolidated Financial Statements
-4-
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
-------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 126,562 $ 312,601
Adjustments to reconcile net income to
net cash provided by (used by) operating
activities:
Depreciation and amortization 103,081 89,984
Minority interest in loss of
consolidated subsidiary (72,274) (39,167)
(Increase) decrease in:
Accounts receivable 1,116,382 728,054
Inventory 614,982 493,989
Prepaid expenses and other assets (104,008) (239,148)
Costs and estimated earnings in
excess of billings on
uncompleted contracts 2,078,650 (293,392)
Increase (decrease) in:
Accounts payable 80,832 89,177
Accrued expenses and payroll taxes (454,579) (83,615)
Taxes payable - on income (93,296) (168,822)
------------ ---------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 3,396,332 889,661
------------ ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (193,293) (98,631)
(Increase) decrease in other assets 3,168 (35,542)
------------ ---------
NET CASH USED BY INVESTING ACTIVITIES (190,125) (134,173)
------------ --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on line of credit (3,150,000) (650,000)
Payments of long-term debt (153,480) (110,988)
Other -- (12,346)
----------- ---------
NET CASH USED BY FINANCING ACTIVITIES (3,303,480) (773,334)
----------- ---------
NET DECREASE IN CASH (97,273) (17,846)
----------- ------------
CASH - beginning 174,737 66,905
----------- ------------
CASH - ending $ 77,464 $ 49,059
=========== ============
SUPPLEMENTARY INFORMATION REGARDING
NON-CASH INVESTING ACTIVITIES
Acquisition of intangible assets -- $ 414,000
============ =============
</TABLE>
-5-
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1996 and September 30, 1995
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, 1996 and June 30, 1996
and the consolidated results of operations and cash flows for the three months
ended September 30, 1996 and 1995. 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,
1996 and 1995 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
contributed 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 its estimated useful life of twenty
years.
All significant inter-company accounts and transactions have been eliminated in
consolidation.
-6-
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 3. Inventory.
<TABLE>
<CAPTION>
(Unaudited)
September 30, June 30,
1996 1996
------------------------------ --------------------------
<S> <C> <C>
Inventory consists of:
Work-In-Process
United States Government
contracts $2,466,934 $3,226,042
Commercial contracts 1,095,460 865,157
Purchased and manufactured
parts 525,158 521,875
---------- ----------
4,087,552 4,613,074
Less: Progress payments on United
States Government contracts 89,460 --
---------- ----------
Total $3,998,092 $4,613,074
========== ==========
</TABLE>
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, 1996, reported
inventories would have been $914,957 higher and reported net income would have
decreased by $66,194 ($1.88 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,
1996:
<TABLE>
<CAPTION>
<S> <C>
Gross Profit $943,372
=========
Loss from Operations $ (6,720)
=========
Net Income $ 60,368
=========
</TABLE>
-7-
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 4. 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:
<TABLE>
<CAPTION>
<S> <C>
Costs incurred and estimated
earnings on uncompleted
contracts $7,190,488
Billings to date 6,098,932
----------
$1,091,556
==========
</TABLE>
Included in accompanying balance sheet under the following
caption:
<TABLE>
<CAPTION>
<S> <C>
Costs and estimated earnings
in excess of billings on
uncompleted contracts $1,091,556
==========
</TABLE>
-8-
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 5. Commitments and Contingency.
----------------------------
In September 1995, the Company's management ("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 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 Mr. Sitcoske from his continued employment with MDLLC and to
obtain damages; however, Hanna has not yet sought a hearing to obtain injunctive
relief. The matter is now in discovery. 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 Operations
---------------------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
During the three months ended September 30, 1996, reductions
in accounts receivable of $1,116,382, inventory of $614,982, and costs and
estimated earnings in excess of billings on uncompleted contracts of $2,078,650
were the 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, 1996. The Company was able to reduce inventory
due to government shipments which occurred in the three months ended September
30, 1996. Decreases in accrued expenses and payroll taxes partially offset cash
provided by operating activities. The decrease in accrued expenses is primarily
a result of the reduction of commission expenses and the repayment of an
outstanding liability. The costs and estimated earnings in excess of billing on
uncompleted contracts resulted from the Company's use of the percentage of
completion method for income recognition of several multi-year contracts.
During the three months ended September 30, 1996, the Company
made capital expenditures in the aggregate amount of $59,126 to purchase
manufacturing and computer equipment and to make certain expenditures associated
with patents. Additionally, $134,167 was expended on the 20,000 square foot
addition to the Company's Warrington facility. Cash used by financing activities
was a result of payments on the line of credit of $3,150,000 and on long-term
debt of $153,480.
The Company's backlog of orders as of October 31, 1996 was
$16,717,000 as compared to $20,181,000 as of October 31, 1995. The reduced
backlog, and related factors, may cause sales and earnings for the next two
fiscal quarters to be substantially reduced.
-9-
<PAGE>
The Company believes that funds from operations and amounts
available under its present credit facilities continue to be sufficient to
satisfy the Company's cash requirements.
The Company believes that inflation has had no material impact
on its operations.
Results of Operations
- ---------------------
Sales for the three months ended September 30, 1996 decreased
to $4,412,917 from $6,210,643 for the three months ended September 30, 1995
primarily due to the completion of several government contracts.
Income from operations decreased to $1,054,643 for the three
months ended September 30, 1996 from $1,308,361 for the three months ended
September 30, 1995 because of reduced sales; however, due to a more favorable
product mix, gross profit as a percentage of sales increased to 23.90% as
compared to 21.07% for the three months ended September 30, 1995.
Selling and administrative expenses increased $120,139 to
$680,178 for the three months ended September 30, 1996 compared to the three
months ended September 30, 1995 primarily due to increased commission expenses
and costs associated with MDLLC. As a percentage of sales, selling and
administrative expenses increased to 15.41% for the three months ended September
30, 1996 as compared to 9.02% for the three months ended September 30, 1995.
Research and development expenses increased to $216,251 for
the three months ended September 30, 1996 as compared to $191,705 for the three
months ended September 30, 1995. As a percentage of sales, research and
development expenses increased to 4.90% for the three months ended September 30,
1996 as compared to 3.09% for the three months ended September 30, 1995.
Interest expense decreased $19,985 to $53,663 for the three
months ended September 30, 1996. The decrease can be accounted for by a decrease
in related costs associated with letters of credit for several multi-year
contracts.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
In September 1995, the Company's 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 Mr. Sitcoske from his continued employment with MDLLC and to obtain
damages; however, Hanna has not yet sought a hearing to obtain injunctive
relief. The matter is now in discovery. Management expects that the resolution
of this matter will have no material impact on the Company.
-10-
<PAGE>
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, 1996.
-11-
<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 19, 1996
-12-
<PAGE>
Exhibit Index
Exhibit Method of Filing
- ------- ----------------
27. Financial Data Schedules . . . . . . . . Filed Herewith Electronically
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000073296
<NAME> NUCLEAR RESEARCH CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 77,464
<SECURITIES> 0
<RECEIVABLES> 2,847,478
<ALLOWANCES> 0
<INVENTORY> 3,998,092
<CURRENT-ASSETS> 7,333,801
<PP&E> 5,040,532
<DEPRECIATION> (2,895,575)
<TOTAL-ASSETS> 10,093,706
<CURRENT-LIABILITIES> 2,317,190
<BONDS> 0
0
0
<COMMON> 159,365
<OTHER-SE> 7,468,401
<TOTAL-LIABILITY-AND-EQUITY> 10,093,706
<SALES> 4,412,917
<TOTAL-REVENUES> 4,412,917
<CGS> 3,358,274
<TOTAL-COSTS> 3,574,525
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,663
<INCOME-PRETAX> 189,481
<INCOME-TAX> 62,919
<INCOME-CONTINUING> 126,562
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 126,562
<EPS-PRIMARY> 3.59
<EPS-DILUTED> 3.59
</TABLE>
