SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the quarterly period ended December 31, 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 February 14, 1997, the Registrant had 28,175 shares of its common
stock outstanding.
<PAGE>
INDEX
Number Page
PART I. Financial Information.
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets - December 31, 1996 and June 30,
1996...........................................................1
Consolidated Statements of Operations - Three Months Ended
December 31, 1996 and 1995.....................................3
Consolidated Statements of Operations - Six Months Ended
December 31, 1996 and 1995.....................................4
Consolidated Statements of Shareholders' Equity - Six Months
Ended December 31, 1996 and the Year Ended June 30,
1996...........................................................5
Consolidated Statements of Cash Flows - Six Months Ended
December 31, 1996 and 1995.....................................6
Notes to Consolidated Financial
Statements.....................................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.....................................10
PART II. Other Information.
Item 1. Legal Proceedings..................................................13
Item 2. Change in Securities...............................................13
Item 3. Defaults Upon Senior Securities....................................13
Item 4. Submission of Matters to a Vote of Security
Holders.......................................................13
Item 5. Other Information..................................................13
Item 6. Exhibits and Reports on Form 8-K...................................13
ii
<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 over one or more
succeeding 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.
iii
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
December 31, 1996 June 30, 1996
<S> <C> <C>
CURRENT ASSETS
Cash $ 64,104 $ 174,737
Accounts receivable 1,796,976 2,872,304
Inventory (Note 3) 4,283,109 4,613,074
Costs and estimated
earnings in excess
of billings
on uncompleted contracts 1,684,388 3,170,206
(Note 4)
Prepaid expenses and
other current assets 366,196 260,259
Prepaid taxes on income 431,100 --
Deferred Income Taxes 46,500 46,500
----------- -----------
Total Current Assets 8,672,373 11,137,080
PROPERTY, PLANT AND EQUIPMENT
(net of accumulated depreciation and
amortization of $3,009,115 at
December 31, 1996 and
$2,801,885 at June 30, 1996) 2,204,990 2,067,531
OTHER ASSETS
Intangible assets (net of
accumulated amortization of
$31,332 at December 31, 1996
and $20,283 at June 30, 1996) 384,668 393,617
Patents (net of accumulated
amortization of $81,723
at December 31, 1996 and
$75,311 at June 30, 1996) 161,565 146,300
Other 57,677 65,412
----------- -----------
Total Other Assets 603,910 605,329
----------- -----------
TOTAL ASSETS $11,481,273 $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>
December 31, 1996 June 30, 1996
<S> <C> <C>
CURRENT LIABILITIES
Short-term borrowings $ 2,125,000 $ 3,325,000
Current portion of
long-term debt 243,336 484,474
Accounts payable 1,011,351 893,314
Accrued expenses 549,934 1,001,480
Accrued payroll and
payroll taxes 255,947 235,967
Taxes payable on income -- 114,145
------------ ------------
Total Current Liabilities 4,185,568 6,054,380
LONG-TERM DEBT 108,333 141,666
DEFERRED INCOME TAXES 27,734 27,734
MINORITY INTEREST IN EQUITY OF
CONSOLIDATED SUBSIDIARY -- 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 6,545,616 6,887,172
Less: treasury stock,
3,698 shares at cost (62,353) (62,353)
------------ ------------
Total Shareholders' Equity 7,159,638 7,501,204
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 11,481,273 $ 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
December 31,
1996 1995
<S> <C> <C>
NET SALES $ 2,750,329 $ 6,132,531
COST OF SALES 2,445,437 4,689,591
----------- -----------
GROSS PROFIT 304,892 1,442,940
SELLING AND ADMINISTRATIVE
EXPENSES 777,073 760,642
RESEARCH AND DEVELOPMENT
EXPENSES 257,174 296,996
INTEREST EXPENSE 40,783 76,766
----------- -----------
INCOME (LOSS) FROM OPERATIONS (770,138) 308,536
OTHER INCOME (LOSS) (5,024) 4,336
----------- -----------
INCOME (LOSS) BEFORE MINORITY
INTEREST (775,162) 312,872
MINORITY INTEREST IN LOSS OF
CONSOLIDATED SUBSIDIARY 12,682 117,631
----------- -----------
INCOME (LOSS) BEFORE INCOME
TAXES (762,480) 430,503
LESS: NET TAX EXPENSE (BENEFIT) (294,352) 166,614
----------- -----------
NET INCOME (LOSS) $ (468,128) $ 263,889
=========== ===========
PRIMARY EARNINGS (LOSS) PER SHARE $ (13.27) $ 7.71
=========== ===========
WEIGHTED AVERAGE COMMON SHARES 35,265 34,236
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1996 1995
<S> <C> <C>
NET SALES $ 7,163,248 $12,343,174
COST OF SALES 5,803,711 9,591,873
----------- -----------
GROSS PROFIT 1,359,535 2,751,301
SELLING AND ADMINISTRATIVE
EXPENSES 1,457,251 1,320,681
RESEARCH AND DEVELOPMENT
EXPENSES 473,425 488,701
INTEREST EXPENSE 94,446 150,414
----------- -----------
INCOME (LOSS) FROM OPERATIONS (665,587) 791,505
OTHER INCOME 7,632 7,126
----------- -----------
INCOME (LOSS) BEFORE MINORITY
INTEREST (657,955) 798,631
MINORITY INTEREST IN LOSS
OF CONSOLIDATED SUBSIDIARY 84,956 156,798
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (572,999) 955,429
LESS: NET TAX EXPENSE (BENEFIT) (231,433) 378,939
----------- -----------
NET INCOME (LOSS) $ (341,566) $ 576,490
=========== ===========
PRIMARY EARNINGS (LOSS) PER SHARE $ (9.68) $ 16.84
=========== ===========
WEIGHTED AVERAGE COMMON SHARES 35,265 34,236
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND YEAR ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Paid In Retained Treasury Shareholders'
Common Stock Capital Earnings Stock Equity
Shares Amount
<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 loss for
the six months
ended December 31,
1996 -- -- -- (341,566) -- (341,566)
------ -------- -------- ---------- -------- ----------
Balance at
December 31, 1996 28,175 $159,365 $517,010 $6,545,616 $(62,353) $7,159,638
====== ======== ======== ========== ======== ==========
</TABLE>
5
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (341,566) $ 576,490
Adjustments to reconcile net income (net loss)
to net cash provided by (used by) operating
activities:
Depreciation and amortization 224,691 188,858
Minority interest in loss of
consolidated subsidiary (84,956) (156,798)
(Increase) decrease in:
Accounts receivable 1,075,328 898,177
Inventory 329,965 (30,443)
Prepaid expenses and other assets (105,937) (408,545)
Prepaid taxes or income (431,100) --
Costs and estimated earnings in
excess of billings on
uncompleted contracts 1,485,818 (968,511)
Increase (decrease) in:
Accounts payable 118,037 (28,352)
Accrued expenses and payroll taxes (431,566) 111,527
Taxes payable - on income (114,145) (445,867)
----------- -----------
NET CASH PROVIDED BY (USED BY) OPERATING
ACTIVITIES 1,724,569 (263,464)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (368,466) (526,536)
(Increase) decrease in other assets 7,735 (37,342)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (360,731) (563,878)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (payments) proceeds on line of credit (1,200,000) 775,000
Net (payments) proceeds of long-term debt (274,471) 92,055
Other -- (16,546)
----------- -----------
NET CASH (USED BY) PROVIDED BY FINANCING ACTIVITIES (1,474,471) 850,509
----------- -----------
NET DECREASE (INCREASE) IN CASH (110,633) 23,167
----------- -----------
CASH - beginning 174,737 66,905
----------- -----------
CASH - ending $ 64,104 $ 90,072
----------- -----------
SUPPLEMENTARY INFORMATION REGARDING
NON-CASH INVESTING ACTIVITIES
Acquisition of intangible assets $ -- $ 414,000
=========== ===========
</TABLE>
6
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
December 31, 1996 and December 31, 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 December 31, 1996 and June 30, 1996
and the consolidated results of operations and cash flows for the three months
and six months ended December 31, 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 six months ended December 31,
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.
MDLLC now has a deficit in its equity account. Therefore, according to generally
accepted accounting principles, the liability in Minority Interest in Equity of
Consolidated Subsidiary has been reduced to zero on the Consolidated Balance
Sheet at December 31, 1996.
All significant inter-company accounts and transactions have been eliminated in
consolidation.
7
<PAGE>
NUCLEAR RESEARCH CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Note 3. Inventory.
(Unaudited)
December 31, June 30,
1996 1996
Inventory consists of:
Work-In-Process
United States Government
contracts $2,363,509 $3,226,042
Commercial contracts 1,634,358 865,157
Purchased and manufactured
parts 582,175 521,875
---------- ----------
4,580,042 4,613,074
Less: Progress payments on United
States Government contracts 296,933 --
---------- ----------
Total $4,283,109 $4,613,074
========== ==========
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 December 31, 1996, reported
inventories would have been $979,896 higher and reported net loss would have
increased by $27,741 (.78 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 six months ended December 31, 1996:
Gross Profit $ 1,313,203
===========
Loss from Operations $ (711,919)
===========
Net Loss $ (369,307)
===========
8
<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:
Costs incurred and estimated
earnings on uncompleted
contracts $8,377,242
Billings to date 6,692,854
----------
$1,684,388
==========
Included in accompanying balance sheet under
the following caption:
Costs and estimated earnings
in excess of billings on
uncompleted contracts $1,684,388
==========
9
<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 Operations
Liquidity and Capital Resources
During the six months ended December 31, 1996, reductions in accounts
receivable of $1,075,328, inventory of $329,965, and costs and estimated
earnings in excess of billings on uncompleted contracts of $1,485,818 were the
factors that 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 six months ended
December 31, 1996. The Company was able to reduce inventory due to government
shipments which occurred during the six months ended December 31, 1996.
Decreases in accrued expenses and payroll taxes of $431,566 combined with an
increase in prepaid taxes on income of $431,100 partially offset cash provided
by operating activities. The decrease in accrued expenses is primarily a result
of the reduction of accrued commission expenses and the repayment of an
outstanding liability. The increase in prepaid taxes on income results from the
payment of estimated income taxes combined with the tax benefit associated with
the net loss for the six months ended December 31, 1996. The costs and estimated
earnings in excess of billings 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 six months ended December 31, 1996, the Company made capital
expenditures in the aggregate amount of $117,514 to purchase manufacturing and
computer equipment and to make certain expenditures associated with patents.
Additionally, $250,952 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 $1,200,000 and on long-term debt of $274,471.
10
<PAGE>
The Company's backlog of orders as of January 31, 1997 was $15,838,000 as
compared to $15,410,000 as of January 31, 1996. The recent completion of several
government contracts may reduce sales and earnings over one or more succeeding
quarters and until existing backlog and new orders are sufficient to reverse the
trend.
Subsequent to December 31, 1996, the Company increased its working capital
line of credit to $5,500,000. The interest rate of this facility is payable at
the bank's prime rate. Additionally, a $1,800,000 term loan was negotiated with
an interest rate of 7.85% with a repayment based on a five year term. Both the
working capital line of credit and the term loan are secured by accounts
receivable, inventory and certain real property and assignments of government
contracts and a letter of credit confirmed and negotiated by the bank.
The Company believes that funds from operations and amounts available under
its 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
Three Months Ended December 31, 1996 Compared to Three Months Ended
December 31, 1995.
Sales for the three months ended December 31, 1996 decreased to $2,750,329
from $6,132,531 for the three months ended December 31, 1995 primarily due to
the completion of several government contracts.
Income (loss) from operations decreased to a loss of $770,138 for the three
months ended December 31, 1996 as compared to income of $308,536 for the three
months ended December 31, 1995, because of reduced sales. Due to reduced sales,
gross profit as a percentage of sales decreased to 11.09% as compared to 23.53%
for the three months ended December 31, 1995.
Selling and administrative expenses increased to $770,073 for the three
months ended December 31, 1996 compared to $760,642 for thee months ended
December 31, 1995. Due to reduced sales, as a percentage of sales, selling and
administrative expenses increased to 28.25% for the three months ended December
31, 1996 as compared to 12.40% for the three months ended December 31, 1995.
Research and development expenses decreased to $257,174 for the three
months ended December 31, 1996 as compared to $296,996 for the three months
ended December 31, 1995. Due to reduced sales, as a percentage of sales,
research and development expenses increased to 9.35% as compared to 4.84% for
the three months ended December 31, 1995.
Interest expense decreased $35,983 to $40,783 for the three months ended
December 31, 1996. The decrease can be accounted for by decreased borrowings and
a reduction in related costs associated with letters of credit for several
multi-year contracts.
11
<PAGE>
Six Months Ended December 31, 1996 Compared to Six Months Ended
December 31, 1995.
Sales for the six months ended December 31, 1996 decreased to $7,163,248
from $12,343,174 for the six months ended December 31, 1995 primarily due to the
completion of several government contracts.
Income (loss) from operations decreased to a loss of $665,587 for the six
months ended December 31, 1996 from income of $791,505 for the six months ended
December 31, 1995 because of reduced sales. Due to reduced sales, gross profit
as a percentage of sales decreased to 18.98% as compared to 22.29% for the six
months ended December 31, 1995.
Selling and administrative expenses increased $136,570 to $1,457,251 for
the six months ended December 31, 1996 compared to the six months ended December
31, 1995 primarily due to increased commission expenses. Due to reduced sales,
as a percentage of sales, selling and administrative expenses increased to
20.34% for the three months ended December 31, 1996 as compared to 10.70% for
the six months ended December 31, 1995.
Research and development expenses decreased to $473,425 from $488,701 for
the six months ended December 31, 1995. Due to reduced sales, as a percentage of
sales, research and development expenses increased to 6.61% for the six months
ended December 31, 1996 as compared to 3.96% for the three months ended December
31, 1995.
Interest expense decreased to $94,446 for the six months ended December 31,
1996 as compared to $150,414 for the six months ended December 31, 1995. The
decrease can be accounted for by decreased borrowings and a reduction in related
costs associated with letter 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.
Item 2. Changes in Securities.
12
<PAGE>
Not Applicable.
Item 3. Defaults upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its 1996 Annual Meeting of Stockholders on
December 11, 1996. At the Meeting, Earl M. Pollock, Dorothy S. Pollock
and Charles H. Sulzberger were re-elected to the Company's Board of
Directors. Shareholders cast 22,543 votes for the election of each
director; 16 votes were withheld with respect to the election of each
director.
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10(a) Amended and Restated Lease Agreement, dated December 31, 1996,
by and between Cadillac Plastic Group, Inc. and the Company.
11 Computation of earnings per share.
27 Financial Data Schedules
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
December 31, 1996.
13
<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
(Registrant)
Date: February 14, 1997 /s/ Earl M. Pollock
-------------------
Earl M. Pollock
Chairman of the Board and President
(Principal Executive Officer)
Date: February 14, 1997 /s/ Mark S. Pollock
-------------------
Mark S. Pollock
Treasurer and Chief Financial Officer
(Principal Financial and Accounting
Officer)
14
<PAGE>
EXHIBIT INDEX
Exhibit Method of Filing
10(a) Amended and Restated Lease Filed electronically
Agreement, dated December 31, 1996, herewith
by and between Cadillac Plastic
Group, Inc. and the Company
11 Computation of Earnings per share Filed electronically
herewith
27 Financial Data Schedule Filed electronically
herewith
AMENDED AND RESTATED
LEASE AGREEMENT
This Agreement of Lease ("Lease") executed on this 31st day of December, 1996,
by and between Cadillac Plastic Group, Inc. a Michigan corporation hereinafter
referred to as "Lessor" and Nuclear Research Corporation, a Pennsylvania
corporation, hereinafter referred to as "Lessee", is to evidence the following:
RECITALS
Lessor and Lessee, or their predecessors, have entered into two separate Lease
Agreements initiated January 15, 1982 and September 27, 1984 relating to the
lease of approximately 37,800 square feet of space on the second floor of real
property located at Richboynton Road, Dover, Morris County, New Jersey (the
"Original Leases").
Lessor currently is occupying an additional 10,000 square feet of storage space
at the real property referred to above.
Lessor and Lessee desire to consolidate the Original Leases into this Lease and
amend and restate in their entirety the terms and conditions on which the
premises currently occupied by the Lessee at the Richboynton Road property is to
be leased, effective from and after March l, 1997.
Now, Therefore, the Original Leases are hereby consolidated, amended and
restated, effective as of March 1, 1997 to read as follows:
1. Premises
The Lessor, in consideration of the rents to be paid and the covenants
and agreements to be performed by Lessee, does hereby demise and let
unto the Lessee, the following described portions of the building and
other improvements situate on the property located at Richboynton
Road, Dover, Morris County, New Jersey, being a portion of Block 603,
Lot 3 and designated as 37,800 square feet located on the second floor
of Building #3, and approximately 10,000 square feet of floor space
located on the second floor of Building #3A totaling approximately
47,800 square feet.
The above hereinafter is referred to as the "Premises".
2. Term
The term of this Lease shall be two (2) years, commencing on the first
day of March, 1997, and ending on the 28th day of February, 1999.
Lessee shall have the option to renew the term of this Lease for three
separate renewal option terms
<PAGE>
of one year each, exercisable by delivery of written notice of renewal
to Lessor no later than ninety (90) days prior to the expiration of
the preceding term.
3. Base Rental
The base monthly rental during the initial term and the renewal terms
shall be as follows:
March 1, 1997 to February 28, 1999 $ 6,833.33/month
March 1, 1999 to February 29, 2000 $ 8,333.33/month
March 1, 2000 to February 28, 2001 $ 8,633.33/month
March 1, 2001 to February 28, 2002 $ 8,833.33/month
Lessee acknowledges that late payment to Lessor of Rent and other
charges provided for under the Lease will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of such costs being
extremely difficult or impractical to fix. Such costs include but are
not limited to, processing and accounting charges, and late charges
that may be imposed on Lessor by the terms of any encumbrance and
notes secured by any encumbrance covering the Premises.
In the event the Lessee fails to pay the monthly rent or other charges
provided for under the lease within five (5) days from the date on
which it is due, the Lessee agrees to pay an additional charge of five
percent (5%) of such amount. Lessee covenants and agrees to pay the
aforesaid rent without notice of demand and without abatement,
deduction, counter-claim, set-off or defense, unless otherwise
provided in this Lease. Rent for less than a full month shall be
prorated.
The rentals herein provided for shall-be paid to L. E. Carpenter c/o
Cadillac Plastic Group, Inc., P.O. Box 151, Dover, New Jersey
07801-0151, Attention: Dave Condon or at such other address as the
Lessor may designate in writing to the Lessee.
4. Taxes, Assessments and Insurance
As additional rent, Lessee shall pay throughout the term of this Lease
or any extension thereof, its proportionate share of all real estate
taxes, levies, assessments, and charges of any nature whatsoever
imposed or charged to the Premises or any improvements thereto. Lessor
shall furnish to Lessee invoices or statements setting forth the
amount of such taxes, levies, assessments or charges, together with a
copy of the tax bill. Lessee shall pay its proportionate share of the
same to Lessor before any fine, penalty, interest or cost may be added
thereto for the non-payment thereof. Lessee shall be responsible for
any increased taxes that occur as a result of assessment increases in
respect of future improvements to the Premises made by the Lessee.
-2-
<PAGE>
Lessor shall be responsible to carry fire and extended coverage
insurance protection (including standard all risk perils insurance)
upon the Premises insuring the interests of Lessor and Lessee therein
as the same may appear. Lessee's proportionate share of the cost of
such insurance, as the same relates to the Premises demised to Lessee
hereunder, shall be paid by Lessee to Lessor, as additional rent upon
billing by Lessor to Lessee not more than thirty (30) days prior to
the due date of such insurance costs. Lessee, however, shall be
responsible and pay for insurance protection for its owned property
upon the Premises. Further, Lessee shall obtain general liability
insurance, including contractual liability insurance, of not less than
$500,000 for each person or $1,000,000 for each occurrence in respect
of bodily injury or death, and $1,000,000 for each occurrence in
respect of property damage. Lessee shall further have the Lessor named
as an additional insured under such coverage and shall provide Lessor
with a certificate of insurance evidencing such coverage.
For purposes of this Section 4, Lessee's proportionate share of
Buildings #1, 2 and 3, identified as Block Number 603, Lot 3, equals
29.54%.
5. Use of Premises
The Lessor represents that the zoning laws for this leased location
currently permit the use of the leased Premises as an office,
manufacturing and storage facility. Nothing herein shall be construed
as restricting Lessee's other use of said Premises, provided Lessee
occupies said Premises in a careful and proper manner and does not use
said Premises for any unlawful purpose, or operation in violation of
the Zoning laws for these Premises.
6. Destruction of Premises
If the Premises are totally destroyed (or so substantially damaged as
to be untenantable) by storm, fire, earthquake or other casualty, this
Lease shall terminate as of the date of such destruction or damage,
and the rental charges payable hereunder shall be equitably and
proportionately adjusted as between Lessor and Lessee as of such date.
If the Premises are damaged but not rendered wholly untenantable by
any such casualty, rental shall abate in such proportion as the
Premises have been damaged, and the Lessor shall restore as speedily
as practical, whereupon full rent shall recommence. Each and both
parties shall agree as to the condition following partial or total
destruction. All funds received from insurance policies shall be used
by Lessor for remodeling, repairing and rebuilding.
Notwithstanding anything contained in this Section 6, if within 180
days after the date of such casualty the Premises are not fully
restored and full access to the Premises available to Lessee, Lessee
shall have the option, exercisable by written
-3-
<PAGE>
notice, to terminate this Lease. If Lessee exercises such option, this
Lease shall be deemed terminated as of the date of such destruction
and the rental charges payable hereunder shall be equitably and
proportionately adjusted as between Lessor and Lessee as of such date.
7. Utilities
(a) The Lessee shall pay Lessor for electricity consumed at the
Premises on a monthly basis, based on the electric submeter bills. (b)
Heat shall be solely the responsibility of the Lessee. (c) Water shall
be supplied by the Lessor, based on prior years' usage and water
charges at the Premises. Sewerage services shall be supplied by Lessor
and Lessee shall pay its proportionate share of the water and sewer
charges, which is approximately 98%, based on the water meter serving
Building #3.
8. Approaches, Exits, etc.
The Lessor agrees that all entrances, exits and approaches now enjoyed
by said Premises shall be and remain intact and uninterrupted by any
act of the Lessor during the term of this Lease. The Lessee, at all
times, shall have unobstructed ingress and egress between the
entrances to the Premises and a public street, highway or alley. The
Lessee shall succeed to all of the rights of the Lessor in the
protection of entrances, exits and approaches, should the Lessor not
exercise such rights.
9. Repairs by Lessor
The Lessor hereby agrees to maintain the roof, walls, gutters and
downspouts of the demised Premises, in a good and weatherproof
condition and to repair promptly any structural defects at its own
expense, during the term of this Lease.
10. Repairs, Maintenance and Alterations by Lessee
Lessee, by occupancy hereunder, accepts the Premises in its current
state of repair and condition. Throughout the term of this Lease
Lessee, at its sole cost and expense, shall maintain the interior of
the leased Premises and every part thereof in its current state of
order and condition, and make all necessary repairs, including all
necessary replacements, ordinary and extraordinary, thereto and to
deliver the interior of the Premises to the Lessor at the expiration
of the term of this Lease in the same order, repair and condition,
ordinary wear and tear, and damages by casualty and causes beyond the
control of Lessee excepted.
Lessee shall not make or suffer to be made any alterations, additions
or improvements to or of the leased Premises or any part thereof
without prior
-4-
<PAGE>
written consent of Lessor, which consent shall not be unreasonably
withheld, except for (i) installation of trade fixtures and equipment
and (ii) do not exceed Two Thousand Five Hundred and 001/00 Dollars
($2,500.00) in cost on any one occasion. In the event Lessor consents
to the proposed alterations, additions or improvements, the same shall
be at Lessee's sole cost and expense, and Lessee shall hold the Lessor
harmless on account of the cost thereof. Any such alterations shall be
made at such times and in such manner as not to unreasonably interfere
with the occupation, use and enjoyment of the remainder of the
building by the other lessees thereof. If required by Lessor, such
alterations shall be removed by Lessee upon the termination or sooner
expiration of the term of this Lease and Lessee shall repair damage to
the Premises caused by such removal, all at Lessee's cost and expense.
11. Assignment and Sublease
The Lessee covenants and agrees not to encumber or assign this Lease
or to sublet all or any part of the leased Premises without the prior
written consent of the Lessor. The Lessor covenants and agrees that
consent shall not be unreasonably withheld. From and after such
assignment or transfer, if any, the obligations of each such assignee
and/or transferee and the Lessee, named as such under this Lease,
shall be joint and several, and the Lessee shall not thereby be
relieved of its obligations and liabilities under the provisions of
this Lease. In the event the Lessee sublets during the term of this
Lease, after a reasonable return on tenant improvements to be agreed
upon by the Lessor and Lessee, any additional rent above that
specified in this Lease shall be divided equally between the Lessee
and the Lessor.
12. Additional Items
(a) An office presently occupied by the Lessor's Property Manager
located on the third (3rd) floor of Building #3 shall continue to be
occupied by Lessor until it has no further need for that office, and
it shall then be the right of the Lessee to occupy this space at no
additional rental. In the interim, the Lessee agrees to supply
services for the Lessor's personnel situated in this office.
(b) Lessor shall maintain the elevator serving the second floor of the
Premises during the term of this Lease.
(c) Lessee shall have the use of twenty-five (25) parking places in
the parking lot South of Building #3, behind the office building known
as Building #6 on Block 604, Lots l and 2, and shall have seventy-five
(75) parking spaces in Block 604; Lots 1 and 2 and located to the
Southeast of Building #3. Lessee also shares additional parking spaces
adjacent to Building #3 in Block 603, Lot 3 with
-5-
<PAGE>
another Tenant from Building #3. The areas in which Lessee shall have
such parking spaces are identified on Exhibit A to this Lease.
(d) Lessor shall supply snow removal to the parking areas designated
in Section l2(c) and in accordance with current practices.
13. Signs
Lessee may, with Lessor's consent, place such signs as it may deem
proper, on the Premises, so long as said signs do not endanger the
structure of the building nor violate the local code.
14. Subordination
This Lease is subject to any mortgage or underlying lease now or
hereafter placed upon or affecting the land or building or leased
Premises. To that effect Lessee agrees to execute any and all
instruments necessary to effect said subordination. The liability of
the Lessor or his assigns under this Lease shall exist as long as such
person is the owner of the subject real estate.
If any such mortgage is foreclosed or such underlying Lease is
terminated, then, upon request of the mortgagee or underlying Lessor,
Lessee will attorn to the purchaser at any foreclosure sale thereunder
or the underlying Lessor and will execute such instruments as may be
necessary or appropriate to evidence such attornment.
Lessee shall deliver to Lessor or to its mortgagee, or auditors, or
prospective purchaser, or the owner of the fee, when requested by
Lessor, a certificate to the effect that this Lease is in full force
and that Lessor is not in default therein, or stating as specifically
any exceptions thereto. Failure to give such a certificate within ten
(10) business days after written request shall be conclusive evidence
that the Lease is in full force and effect and Lessor is not in
default and Lessee shall be estopped from asserting any defaults known
to him at that date.
15. Lessor's Right to Inspect and Display
The Lessor shall have the right, at reasonable times during the term
of this Lease, to enter the leased Premises for the purpose of
examining or inspecting same and of making such repairs or alterations
therein as the Lessor shall deem necessary. The Lessor shall also have
the right to enter the leased Premises at all reasonable hours for the
purpose of displaying said Premises to prospective lessees within
ninety (90) days prior to the termination of this Lease.
16. Liens
-6-
<PAGE>
The Lessee herein shall not have any authority to create any liens for
labor or materials on the Lessor's interest in the described Premises,
and all persons contracting with the Lessee for the erection,
installation, alterations, or repair of any building or other
improvements on the described Premises. All materialmen, contractors,
mechanics and laborers, are hereby charged with notice that they must
look to the Lessee and to the Lessee's interests only to secure the
payment of any bill for work done or material furnished to Lessee
during the term created by this Lease. Lessor shall not be liable nor
shall the leased Premises be subject to any mechanics, materialmen or
other type liens. Lessee shall keep the Premises and property in which
the leased Premises are situated free from any such liens and shall
indemnify Lessor against and satisfy any such liens which may obtain
because of acts of Lessee notwithstanding the foregoing provision.
17. Holding Over
If the Lessee retains possession of the Premises or any part thereof
after the termination of the term of this Lease or any extension
thereof, the Lessee shall pay to the Lessor rent during such holding
over in an amount equal to 150% of the monthly rent in effect for the
month immediately preceding said holdover, for the time the Lessee
thus remains in possession. The provisions of this paragraph do not
waive the Lessor's rights of re-entry or any other right hereunder.
Any retention of the Premises after the termination of this Lease or
any extension thereof shall be considered as a month-to-month holding
over unless otherwise agreed to in writing by both parties.
18. Indemnification
Lessee shall indemnify and hold Lessor harmless from and against any
and all loss, cost, damage and expense resulting from all claims for
damage or injury to any person or property arising out of any or in
any way connected with Lessee's use and occupancy of the leased
Premises and adjoining area or resulting from any act or omission of
Lessee, its employees, agents, guests, invitees or otherwise with
respect to the Premises, unless such injury or damage results from the
negligence or improper conduct of Lessor, its employees, agents,
guests, invitees or otherwise.
19. Condemnation
In the event the whole or any part of the leased Premises shall be
taken or condemned for any public or quasi-public use or purpose, the
Lessor or Lessee may, at its option, to be exercised in writing within
ten (10) days after the Lessor shall have given Lessee written notice
of such taking (or in the absence of such notice, within ten (10) days
after the condemning authority shall have taken
-7-
<PAGE>
possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this
Lease in accordance with the foregoing, this Lease shall remain in
full force and effect as to the portion of the Premises remaining,
except that the rent shall be reduced in the proportion that the floor
area of the Premises taken bears to the total floor area of the
Premises. In the event this Lease is not terminated by reason of such
condemnation, Lessor shall, to the extent of severance damages
received by Lessor in connection with such condemnation, repair any
damage to the Premises caused by such condemnation except to the
extent that Lessee has been reimbursed therefor by the condemning
authority.
Lessor reserves and excepts all rights to damages to the Premises
accruing in case of exercise of eminent domain or by reason of
anything lawfully done in pursuance of public or other authority, and
Lessee hereby grants, assigns and releases to Lessor all Lessee's
rights to damages so accruing and agrees to deliver such further
instruments of assignment thereof as Lessor may from time to time
request, hereby irrevocably designating, and appointing Lessor as its
attorney-in-fact to execute and deliver in Lessee's name and behalf
all such further assignments thereof; provided, however, that Lessee
shall be entitled to any award for loss of or damage to Lessee's trade
fixtures and removable personal property. Lessee shall be entitled to
any rights to any award for its moving expenses or to any other
special award (including without limitation a special award
attributable to Lessee's trade fixtures and equipment) not
constituting part of the compensation for the Premises and not
diminishing the amount of the award to which Lessor would otherwise be
entitled.
20. Waiver of Subrogation
The Lessor hereby waives any and all right of recovery against Lessee
to the extent of Lessor's insurance coverage from fire or other hazard
to any property covered by the customary fire insurance policies with
extended coverage endorsement, whether caused by or contributed to by
the negligence of Lessee, its employees, agents or otherwise.
21. Default
In the event the Lessee shall default in the payment of rent or any
other sums payable by Lessee herein and such default shall continue
for a period of ten (10) days after notice, or if the Lessee shall:
(1) abandon the Premises and remove or attempt to remove therefrom the
major portion of its furniture or fixtures; (2) default in the
performance of any other covenants or agreements of this Lease and
such default shall continue for thirty (30) days; or (3) become
bankrupt, insolvent or any debtor proceedings be taken by or against
the Lessee, then and in addition to any and all other legal remedies
and rights, the Lessor may, without first
-8-
<PAGE>
obtaining a distress warrant: (a) lock up the leased Premises; or (b)
terminate this Lease and retake possession of the leased Premises; or
(c) enter the leased Premises and relet the same without termination.
In the latter event, the Lessee covenants and agrees to pay any
deficiency after Lessee is credited with the rent thereby obtained,
less all repairs and expenses (including the expenses of obtaining
possession). Adoption of one or more such remedies or right by Lessor
shall not necessarily prevent the enforcement of others concurrently
or thereafter.
The Lessee also covenants and agrees to pay reasonable attorney's
fees, costs and expenses of the Lessor if the Lessor employs an
attorney to collect rent or enforce other rights herein in event of
any breach as aforesaid.
22. Quiet Enjoyment
The Lessor covenants and agrees the Lessee, on paying said monthly
rent and performing the covenants herein, shall and may peaceably and
quietly hold and enjoy the said leased Premises and common areas
including, but not limited to, parking areas, sidewalks, entrances,
exits, lobbies, restrooms and lounges for the term aforesaid.
23. Notices
All notices, demands and requests required under this Lease shall be
in writing. All such notices, demands and requests shall be deemed
sufficiently given for all purposes hereunder if sent by U. S.
certified or registered mail, postage prepaid, to the Lessor or Lessee
at the addresses indicated below, or at such other addresses as Lessor
or Lessee may from time to time designate by written notice addressed
to the other. Such notices, demands and requests shall be deemed
sufficiently given upon receipt by the party to whom such notice is
addressed.
Notices to Lessor- Cadillac Plastic Group, Inc.
Suite 36-5000
200 Public Square
Cleveland, Ohio 44114
Attention: Secretary
Notices to Lessee - Nuclear Research Corporation
125 Titus Ave.
Warrington, Pennsylvania 18976
Attention: President
-9-
<PAGE>
24. Waiver
No failure by either party hereto to insist upon the strict
performance of any covenant, term or condition of this Lease or to
exercise any right or remedy consequent upon a breach thereof shall
not waive such covenant, term, condition, right or remedy. Either
party shall have the right to seek performance of any covenant, term
or condition at any time and take such action as may be lawful or
authorized, either in law or in equity. This Lease shall be binding
upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
25. Written Agreement
This Lease, and any other executed documents of even date herewith,
contain the entire Lease between the parties hereto with respect to
the transactions contemplated herein and there are no representations,
warranties, understandings and agreements other than those expressly
set forth herein and therein. This Lease may not be modified, altered,
terminated or discharged in any manner except by an instrument in
writing, signed on or subsequent to the date hereof by the duly
authorized representatives of the party charged therewith.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease on the date
first above written.
WITNESS: LESSOR
_____________________ CADILLAC PLASTIC GROUP, INC.
_____________________ By:/s/ John S. Pyke, Jr.
Its: Vice President & Secretary
WITNESS: LESSEE
_____________________ NUCLEAR RESEARCH CORPORATION
_____________________ By: /s/ Earl M. Pollock
Its: President
<PAGE>
EXHIBIT A
[GRAPHIC OMITTED - MAP OF LEASED PREMISES]
NUCLEAR RESEARCH CORPORATION AND SUBSIDIARIES
EXHIBIT 11
CALCULATIONS OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended December 31, Six Months Ended December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Income (Loss) $(468,128) $ 263,889 $(341,566) $ 576,490
Average shares issued 31,873 31,873 31,873 31,873
Average net effect of
dilutive stock options-
based on the treasury stock
method 7,090 6,061 7,090 6,061
Less: average treasury
stock (3,698) (3,698) (3,698) (3,698)
--------- --------- --------- ---------
Total stock and
stock equivalents 35,265 34,236 35,265 34,236
========= ========= ========= =========
Primary Earnings (Loss)
per share $ (13.27) $ 7.71 $ (9.68) $ 16.84
========= ========= ========= =========
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000073296
<NAME> NUCLEAR RESEARCH CORPORATION
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 64,104
<SECURITIES> 0
<RECEIVABLES> 3,481,364
<ALLOWANCES> 0
<INVENTORY> 4,283,109
<CURRENT-ASSETS> 8,672,373
<PP&E> 5,214,105
<DEPRECIATION> (3,009,115)
<TOTAL-ASSETS> 11,481,273
<CURRENT-LIABILITIES> 4,185,568
<BONDS> 0
0
0
<COMMON> 159,365
<OTHER-SE> 7,000,273
<TOTAL-LIABILITY-AND-EQUITY> 11,481,273
<SALES> 7,163,248
<TOTAL-REVENUES> 7,163,248
<CGS> 5,803,711
<TOTAL-COSTS> 6,277,136
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,446
<INCOME-PRETAX> (572,999)
<INCOME-TAX> (231,433)
<INCOME-CONTINUING> (341,566)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (341,566)
<EPS-PRIMARY> (9.68)
<EPS-DILUTED> (9.68)
</TABLE>
