GemSeeker...here is how I see it and obviously this is my opinion only.
The 10-q shows a total of 1.7m shares altho the eps statement shows 1.33m. Even at 1.7m the earnings here will be spread over a small number of shares. That's leverage. 9mo numbers of $5.84m rev vs $1.73m rev and profits of $.26 per sh vs loss of ($.18) signal the effect this contract is having on this small company. March qtr 1999 is even more lopsided w/rev of $2.02m vs $407k and profits of $.16 vs loss of ($.10). That's momentum.
There is also about $2m in LTD but I believe that is the mortgage on the company's facility. Also note here the following from the 10-k:
The Company owns approximately 90 acres of land and the building it
occupies in Bergen County, New Jersey, which are carried on its books at
approximately $800,000 but which are believed to have a fair market value
in excess of this amount. This property is adjacent to a full
interchange of Interstate Route 287. Management continues to investigate
possible uses of this property which would be favorable to the Company's
stockholders' equity.
I think that acreage is worth significantly more than the book value.
Now to the contract for the Army. Since FY end 1998 June DEWY has rec'd approx $8m in add'l orders for the tactical generator sets. That brings total orders to $14m. The company states that they believe the Army will continue to order add'l sets...with the caveat that the Army is not obligated to do so and there is no assurance that they will do so. But this contract process has been in place for about 3 years and now that things are finally rolling it is MY GUESS that they will continue to do so. At March 1999 backlog is $7m and they expect another $2m to be recognized in the 4th qtr.
The company does have other products:
From the K:
The Dewey Electronics Corporation (herein referred to as the "Company") was
incorporated in the State of New York in 1955. It is a systems oriented
military electronics development, design and manufacturing organization based
in Oakland, New Jersey. The Company has two industry segments: electronics,
and leisure and recreation.
In the electronics segment, the Company produces sophisticated electronics
and electromechanical systems for the U.S. military.
In the leisure and recreation segment, the Company, through its HEDCO
division, designs, manufactures and markets advanced, sophisticated
snowmaking equipment......
ELECTRONICS SEGMENT
This segment of business accounted for 86% of total revenues in fiscal year
1998, 74% of total revenues in fiscal 1997 and 85% of total revenues in
fiscal 1996.
In recent years, most of the Company's electronics segment products have
been manufactured, either as prime contractor or subcontractor, for the U.S.
Navy. With the completion of performance of the Company's contracts under
the Navy's ADCAP torpedo program, most electronics segment revenues now
arise from performance of work for the U.S. Army under a tactical
generator set contract awarded in August 1996.
1
The Company has continued to pursue both long-term and short-term awards
from various Government agencies and related business sectors in its areas
of electronic and mechanical expertise. The Company, however, is bidding for
such contracts in competition with other companies, including other small
firms as well as Fortune 500 companies, in a time of diminished and less
predictable military spending.......
The leisure and recreation segment of business accounted for 14% of the
Company's revenues in fiscal 1998, 26% of the Company's revenues in fiscal
1997 and 15% of the Company's revenues in fiscal 1996.
Snowmaking equipment is sold to ski areas as original equipment or as
replacement for existing equipment. Such equipment is sold under a sales
contract that provides for a substantial down payment and retention of a
security interest in the equipment until full payment is received. Most
snowmaking equipment is paid for in full at delivery to the customer.
Typically, in other cases, full payment is made within one year. The Company
has not experienced any losses due to resale of the equipment following
default by customers. The Company services the equipment at the purchaser's
expense after a warranty period that expires at the end of the snowmaking
season in which the sale occurs.
The Company has sold snowmaking equipment to over three hundred different
locations in the United States and abroad. Marketing is done by the
Company's employees in the domestic market and by distributors and
representatives in foreign markets. In fiscal 1998, all revenues
were from domestic sales.
.....so there are other things going on here but they pale against this contract. And this contract will continue for at least the amounts already stated, subject to all the caveats one deals with in a
U.S. gov't contract. So the numbers should continue to look very good here based on the allocations thus far. Thus it appears DEWY will go from a small company to a larger company with strong financial ratios as the qtrs go by...and it remains to be seen as to how the company utilizes their earnings. But it seems the money will be there and growth can beget growth. My own opinion is that good performance on this contract will make the company a more successful bidder in the future...but that is my take on it.
Anyone interested in this situation should review all company filings, get their own information, do their own due diligence. The above is my opinion only.
gpg
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