-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VtU+VSlinXc45rA/3XRyENEHHW+FSjQ5vrZ0oyFQcSbUDRELwGgqRgnf77LolCoK jd+7xkQbIfv41HEyu4MypA== 0000950168-95-000982.txt : 19951118 0000950168-95-000982.hdr.sgml : 19951118 ACCESSION NUMBER: 0000950168-95-000982 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951109 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIED RESEARCH CORP CENTRAL INDEX KEY: 0000003952 STANDARD INDUSTRIAL CLASSIFICATION: ORDNANCE & ACCESSORIES, (NO VEHICLES/GUIDED MISSILES) [3480] IRS NUMBER: 042281015 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11376 FILM NUMBER: 95589035 BUSINESS ADDRESS: STREET 1: 8000 TOWERS CRESCENT DR STREET 2: STE 750 CITY: VIENNA STATE: VA ZIP: 22182 BUSINESS PHONE: 7038475268 MAIL ADDRESS: STREET 1: 8000 TOWERS CRESCENT DRIVE STREET 2: STE 750 CITY: VIENNA STATE: VA ZIP: 22182 FORMER COMPANY: FORMER CONFORMED NAME: ALLIED RESEARCH ASSOCIATES INC DATE OF NAME CHANGE: 19880601 10-Q 1 ALLIED 10-Q 35853 UNITED STATES 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 period ended September 30, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______________________________ to ___________________________________ Commission File Number 0-2545 ____________________ Allied Research Corporation __________________________________________________ (Exact name of Registrant as specified in its charter) Delaware 04-2281015 (State or other jurisdiction of (I.R.S. Employer Number) incorporation or organization) 8000 Towers Crescent Drive, Suite 750 Vienna, Virginia 22182 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (703) 847-5268 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 the number of shares outstanding of each of the issuer's classes of common stock, as of September 30, 1995: 4,414,062. ALLIED RESEARCH CORPORATION INDEX PAGE PART I. FINANCIAL INFORMATION - UNAUDITED NUMBER Item 1. Financial Statements Condensed Consolidated Balance Sheets December 31, 1994 and September 30, 1995 2,3 Condensed Consolidated Statements of Earnings Three months and nine months ended September 30, 1995 and 1994 4 Condensed Consolidated Statements of Cash Flows Nine months ended September 30, 1995 and 1994 5,6 Notes to Condensed Consolidated Financial Statements 7 Item 2.Management's Discussion and Analysis of Financial Condition and Results of Operations 12 PART II. OTHER INFORMATION 15 Allied Research Corporation CONDENSED CONSOLIDATED BALANCE SHEETS (Thousands of Dollars) ASSETS (Unaudited)
September 30, 1995 December 31, 1994 CURRENT ASSETS Cash and equivalents, including restricted cash $35,295 $ 43,606 Accounts receivable 10,676 21,805 Costs and accrued earnings on uncompleted contracts 12,527 8,391 Inventories 4,703 4,333 Prepaid expenses 1,742 1,004 Total current assets 64,943 79,139 PROPERTY, PLANT AND EQUIPMENT - AT COST Buildings 11,585 11,411 Machinery and equipment 31,845 31,118 43,430 42,529 Less accumulated depreciation 28,605 28,155 14,825 14,374 Land 1,334 1,323 Total property, plant and equipment 16,159 15,697 OTHER ASSETS Deposit - restricted cash - 6,400 Intangibles 6,955 5,919 Other 245 231 Total other assets 7,200 12,550 $88,302 $107,386
The accompanying notes are an integral part of these statements. 2 Allied Research Corporation CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED (Thousands of Dollars) LIABILITIES (Unaudited) September 30, 1995 December 31, 1994 CURRENT LIABILITIES Notes payable $ 1,030 $ 594 Current maturities of long-term debt 18,552 25,802 Accounts and trade notes payable 10,437 21,452 Accrued liabilities 7,895 12,427 Customer deposits 13,085 1,534 Income taxes 856 883 Total current liabilities 51,855 62,692 LONG-TERM DEBT, less current maturities 10,722 14,108 DEFERRED INCOME TAXES 662 765 MINORITY INTEREST - 123 STOCKHOLDERS' EQUITY Preferred stock, no par value; authorized, 10,000 shares none issued - - Common stock, $.10 per share; authorized par value, 10,000,000 shares; issued and outstanding 4,414,062 in 1995 and 4,398,448 in 1994 441 440 Capital in excess of par value 10,715 10,658 Retained earnings 10,422 14,689 Accumulated foreign currency translation adjustment 3,485 3,911 Total stockholders' equity 25,063 29,698 $88,302 $107,386 The accompanying notes are an integral part of these statements. 3 Allied Research Corporation CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Thousands of Dollars) (Unaudited) Three months ended Nine months ended September 30, September 30, 1995 1994 1995 1994 Revenue $16,530 $ 8,694 $38,958 $53,085 Cost and expenses Cost of sales 13,947 9,128 33,741 47,762 Selling and administrative 2,128 3,020 7,903 9,175 Research and development 181 448 674 1,623 16,256 12,596 42,318 58,560 Operating income (loss) 274 (3,902) (3,360) (5,475) Other income (deductions) Interest expense (695) (245) (2,273) (1,740) Interest income 546 1,254 1,617 2,483 Other - net 160 330 372 318 11 1,339 (284) 1,061 Earnings (loss) before income taxes 285 (2,563) (3,644) (4,414) Income taxes 70 70 623 250 NET EARNINGS (LOSS) $ 215 $(2,633) $(4,267) $(4,664) Net income (loss) per common share $ .05 $ (.60) $ (.97) $ (1.06) Weighted average number of shares 4,409,577 4,359,091 4,404,146 4,394,197 The accompanying notes are an integral part of these statements. 4 Allied Research Corporation CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars) (Unaudited) Nine months ended September 30 Increase (decrease) in cash and equivalents 1995 1994 Cash flows from operating activities Net earnings (loss) $(4,267) $(4,664) Adjustments to reconcile net earnings to net cash provided by (used in) operating activities Depreciation and amortization 1,734 920 Common stock award - 202 Changes in assets and liabilities (Increase) decrease in Accounts receivable 11,187 40,917 Costs and accrued earnings on uncompleted contracts (3,039) 7,201 Inventories (130) 1,348 Prepaid expenses and other assets (453) (2,880) Increase (decrease) in Accounts payable, accrued liabilities and customer deposits (4,129) (34,536) Income taxes (125) (3,406) Net cash provided by operating activities 778 5,102 Cash flows (used in) investing activities Capital expenditures (925) (3,206) Acquisitions (net of cash acquired) (2,600) (3,800) Net cash (used in) (3,525) (7,006) investing activities The accompanying notes are an integral part of these statements. 5 Allied Research Corporation CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (Thousands of Dollars) (Unaudited) Nine months ended September 30 1995 1994 Cash flows from financing activities Principal payments of long-term debt (4,309) (227) Net increase in long-term borrowings 1,281 433 Net increase (decrease) in short-term borrowings (9,180) (6,088) Stock option/stock plan 58 40 Common shares purchased and retired - (3,513) Deposits - restricted cash 6,400 7,647 Net cash (used in) financing activities (5,750) (708) Effects of exchange rate changes on cash 186 3,311 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (8,311) 699 Cash and equivalents at beginning of year 43,606 44,641 Cash and equivalents at end of period $35,295 $45,340 Supplemental Disclosures of Cash Flow Information Cash paid during the period for Interest $ 1,002 $ 1,924 Taxes 373 5,508 The accompanying notes are an integral part of these statements. 6 Allied Research Corporation NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 1995 (Thousands of Dollars) (Unaudited) NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The condensed consolidated balance sheets as of September 30, 1995 and December 31, 1994, the condensed consolidated statements of earnings and the condensed consolidated statements of cash flows for the nine months ended September 30, 1995 and 1994, have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and changes in cash flow at September 30, 1995 and 1994 have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's December 31, 1994 Form 10-K filed with the Securities and Exchange Commission, Washington, D.C. 20549. The results of operations for the period ended September 30, 1995 and 1994 are not necessarily indicative of the operating results for the full year. NOTE 2 - PRINCIPLES OF CONSOLIDATION The condensed consolidated financial statements include the accounts of Allied Research Corporation (a Delaware Corporation) and the Company's wholly-owned subsidiaries, Mecar, S.A. (a Belgian Company), Allied Research Corporation Limited (a United Kingdom Company), Barnes & Reinecke, Inc. (a Delaware Corporation), and ARC Services, Inc. (a Delaware Corporation). Mecar, S.A.'s wholly-owned Belgian subsidiaries include, Mecar Immobliere S.A., Sedachim, S.I., Tele Technique Generale, Management Export Services, N.V., I.D.C.S., N.V. (which was acquired May 9, 1995), VSK France (which was recently formed) and VSK Electronics N.V. and its wholly-owned subsidiaries, Classics, B.V.B.A. Detectia, N.V. and Belgian Automation Units, N.V., (collectively "The VSK Group"). A minority interest owned by VSK Electronics in Building Control Services, N.V. (BCS) was accounted for under the equity method in 1994. BCS was liquidated in 1995. The VSK Group acquisitions were accounted for as purchases, and revenue and results of operations from June 1, 1994 and May 9, 1995 (dates of acquisition), have been consolidated. Significant intercompany transactions have been eliminated in consolidation. NOTE 3 - ACQUISITION On May 31, 1994, the Company's wholly-owned subsidiary, Mecar S.A., acquired The VSK Group, a group of Belgian companies, as well as a minority interest in a Belgian company, for approximately $6,072 and on May 9, 1995, Mecar, S.A. acquired I.D.C.S., N.V. a Belgian company and its minority interest in Belgian Automation Unites, N.V. for a total of $2,972. 7 Allied Research Corporation NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED September 30, 1995 (Thousands of Dollars) (Unaudited) NOTE 3 - ACQUISITION - Continued The companies manufacture, distribute and service an integrated line of industrial security products, including devices such as building access control, parking control, intrusion and fire detection and intrusion and fire alarms. The acquisitions have been accounted for as purchases and the purchase prices in excess of the net assets acquired have been reflected in intangibles. The financial statements include the result of operations since the dates of acquisition. Pro forma financial data for these acquisitions prior to the dates of acquisition would not have a material effect on reported results. May 9, 1995 May 31, 1994 Fair value of tangible $2,587 $7,720 assets acquired Liabilities assumed 855 6,285 Net assets acquired 1,732 1,435 Cash paid 2,972 6,072 Excess of cost over assets $1,240 $4,637 acquired NOTE 4 - RESTRICTED CASH Mecar is generally required under the terms of its contracts with foreign governments to provide performance bonds, advance payment guarantees and letters of credit. The credit facility agreements used to provide these financial guarantees generally place restrictions on cash deposits and other liens on Mecar's assets, until the customer accepts delivery. Cash deposits totaling approximately $32,413 and $35,848 ($6,400 of which is classified as long-term) at September 30, 1995 and December 31, 1994, respectively, are restricted or pledged as collateral for various bank agreements and are comprised as follows: 1995 1994 Credit facility and related $32,047 $34,542 term loan agreements Other bank guarantees and 366 1,222 letters of credit Notes payable - 84 $32,413 $35,848 8 Allied Research Corporation NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED September 30, 1995 (Thousands of Dollars) (Unaudited) NOTE 5 - INVENTORIES Inventories consist of the following: September 30, 1995 December 31, 1994 Raw materials and supplies $4,703 $4,333 NOTE 6 - NOTES PAYABLE At September 30, 1995 and December 31, 1994, secured short- term loans of $1,030 and $594, respectively, were outstanding. In June 1995, BRI amended its credit facility to two $500 term loan facilities for capital improvements and a $750 revolving line-of-credit which had an outstanding balance of $345 at September 30, 1995. The current portion of term note outstanding at September 30, 1995 is $148. The line bears interest at the rate of prime plus 1.75% and is secured by BRI's eligible accounts receivable and Allied's guarantee. The former agreement was a $1,000 revolving line-of-credit agreement which had an outstanding balance of $500 as of December 31, 1994. NOTE 7 - CREDIT FACILITY Mecar is obligated under an amended credit agreement (the Agreement) with a banking pool comprised of four foreign banks that provided credit facilities primarily for letters of credit, bank guarantees, performance bonds and similar instruments required for specific sales contracts. The Agreement provides for certain bank charges and fees as the line is used, plus an annual fee of approximately 1.1% of guarantees issued. In July, 1995, the credit facility was amended to cover certain new orders received. As of September 30, 1995, guarantees of $3,441 under the former agreement remain outstanding. Advances under the credit facility were secured by deposits of $27,064 at September 30, 1995 and deposits of $31,360 at December 31, 1994, $6,400 of which is classified as long-term deposit at December 31, 1994. Amounts outstanding were also collateralized by pledges of approximately $25,000 on Mecar's assets, letters of credit and certain funds received under the contracts financed. The Agreement provides for restrictions on payments or transfers to Allied and ARCL for management fees, intercompany loans, loan payments, the maintenance of certain net worth, income and loss levels and the payment of bank fees and charges as defined in the Agreement. The term deposits were borrowed to secure approximately $17,474 and $34,500 of financing for the period ended September 30, 1995 and December 31, 1994, respectively. The Company is also liable for guarantees and other instruments issued on its behalf by other banks which approximate $366 at September 30, 1995, which are collateralized by $469 of time deposits. 9 Allied Research Corporation NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED September 30, 1995 (Thousands of Dollars) (Unaudited) NOTE 7 - CREDIT FACILITY - Continued Mecar is obligated on a $5,000 mortgage on its manufacturing and administration facilities. As amended, the balance of the loan is payable in annual principal installments of approximately $600 commencing in January 1996 (except for the annual principal installment in the year 2000 which is approximately $800) and the entire balance matures in 2004. The Company is also obligated on a mortgage on The VSK Group's building which has a balance due of $400 due in 20 years. The mortgage is payable in annual installments of $20 plus interest. In addition, the Company is obligated on an outstanding loan for the acquisition of I.D.C.S., N.V. in the amount of $1,822 payable in annual installments of $91 plus interest. NOTE 8 - LONG-TERM FINANCING Scheduled annual maturities of long-term obligations as of September 30, 1995 are as follows: Year Amount 1996 $18,552 1997 650 1988 650 1999 650 Thereafter 8,772 $29,274 NOTE 9 - INCOME TAXES The Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109") in 1993. The provision for income taxes differs from the anticipated combined federal and state statutory rates due to operating losses and earnings from foreign subsidiaries. The Company's Belgian subsidiaries have unused net operating losses of approximately $20,000 at September 30, 1995, which under Belgian law cannot be carried back but may be carried forward indefinitely, and are subject to annual limitations. As of December 31, 1995, the Company had unused foreign tax credit carryforwards of approximately $1,003 which expire through 2009. Deferred tax liabilities have not been recognized for bases differences related to investments in the Company's Belgian and United Kingdom subsidiaries. These differences, which consist primarily of unremitted earnings intended to be indefinitely reinvested, aggregated approximately $30,000 at December 31, 1994. Determination of the amount of unrecognized deferred tax liabilities is not practicable. 10 Allied Research Corporation NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED September 30, 1995 (Thousands of Dollars) (Unaudited) NOTE 10 - EARNINGS (LOSS) PER SHARE Stock options outstanding have not been included in the per share computation because there would not be a material effect on earnings (loss) per share. NOTE 11 - RESTRUCTURING CHARGE In the fourth quarter of 1993, the Company recorded an accrual for restructuring costs totaling $2,883 ($.44 per share after taxes) related to its Belgian manufacturing operations. The charge provided for estimated employee severance, retraining, early retirements and related costs attributable to a planned workforce reduction initiated in late 1993. The company anticipated that it would eliminate over the next years approximately 32 permanent and 120 temporary factory and administrative positions. The reductions were the result of efficiencies implemented over the past several years, current backlog levels and anticipated future workforce requirements for Mecar's core defense operations, as well as those expected to be redeployed as part of prospective diversification ventures. During 1994, the Company increased the provision by $326 to cover additional terminations. As of December 31, 1994, the restructuring has been substantially completed, and the provision has been fully utilized, except for approximately $64 which was disbursed in early 1995. 11 Allied Research Corporation MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONS September 30, 1995 (Thousands of Dollars) (Unaudited) The Company conducts its business through its wholly-owned subsidiaries: Mecar, S.A., ("Mecar"), a Belgian corporation, and its subsidiaries, Mecar Immobliere, S.A., Sedachim, S.I., as well as Tele Technique Generale, VSK Electronics, N.V., Management Export Services, N.V., Classics, B.V.B.A., Detectia, N.V., I.D.C.S., N.V., VSK France and Belgian Automation Units, N.V. ("The VSK Group"); Barnes & Reinecke, Inc., ("Barnes") a Delaware corporation, headquartered in Illinois; Allied Research Corporation Limited, ("Limited") a U.K. Company; and ARC Services, Inc., ("Services") a Delaware corporation, headquartered in Vienna, Virginia. This discussion refers to the financial condition and results of operations of the Company on a consolidated basis. Sales Revenue for the first nine months of 1995 was $38,958, a 27% decrease from the comparable period in 1994, due to Mecar's decrease in revenue. Mecar revenue was $18,687, or down 40% compared to the period ended September 30, 1994. Barnes revenues was $7,236, up 24% compared to the same period in 1995. Limited did not have revenues this period or in last year's comparable period. Services had revenues of $35 in the 1995 period but did not have revenues in the comparable 1994 period. VSK had revenues of $13,000 for the period and did not have comparable revenues in last year's period since it was acquired May, 1994. Revenue for the quarter ended September 30, 1995 was $16,530, a 90% increase from revenue for the quarter ended September 30, 1994 of $8,694. Mecar recognized revenue of $10,938 for the quarter ended September 30, 1995, a 63% increase from the quarter ended September 30, 1994. Barnes' revenue of $3,231 for the quarter ended September 30, 1995 constituted a 64% increase over the quarter ended September 30, 1994. VSK's revenue for the quarter ended September 30, 1995 and 1994 was $2,361 and $3,400, respectively. Mecar's increase in revenue for the current quarter is due to the receipt of contracts that were scheduled to be received earlier in the year. In the third quarter that Mecar was in a position to perform revenue generating services on such contracts. Barnes' revenue increased in the first half of 1995 over the first half of 1994 principally due to a contract to provide systems technical services to an international customer. Backlog As of September 30, 1995, the Company's backlog was $81,144 compared with $23,100 at December 31, 1994 and $94,041 at June 30, 1995. Mecar's backlog as of September 30, 1995 was $50,507 compared with $65,272 at June 30, 1995. The decrease is primarily attributable to the shipment of orders during the quarter and the elimination of several small contracts with a new customer due to licensing problems. Barnes' backlog as of September 30, 1995 was $10,943 compared with $5,658 at June 30, 1995. The increase is primarily due to the receipt by Barnes of a contract to provide services to an international customer. The backlog of The VSK Group as of September 30, 1995 was $19,694 compared with $23,111 as of June 30, 1995. The decrease is attributable to the cyclical nature of customer orders. 12 Allied Research Corporation MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONS-CONTINUED September 30, 1995 (Thousands of Dollars) (Unaudited) Operating Costs and Expenses Cost of sales for the first nine months of 1995 were approximately $33,741 or 87% of sales as compared to $47,762 or 90% for the first nine months of 1994. The percentage decrease is primarily due to product mix. Cost of sales for the quarter ended September 30, 1995 were approximately $13,947, or 84% of sales as compared to a loss in 1994 principally due to increased revenue. Selling and administrative expenses were approximately $7,903 or 20% of revenues for the nine months ended September 30, 1995 as compared to $9,175 or 17% for the nine months ended September 30, 1994. Such expenses were $2,128 for the third quarter of 1995 as compared to $3,020 for the third quarter of 1994. These decreases reflect Company wide reductions in expenditures. Research and Development Research and development expenses were 2% of sales for the nine month period and 1% for three month period ended September 30, 1995 as compared with 3% and 5% for the corresponding periods in 1994. The decreases are the result of expense reduction efforts throughout the Company. Operating Results There was an operating loss of $3,360 for the first nine months of 1995 (or 9% of revenue). This compares with an operating loss of $5,475 (or 10% of revenue) for the nine months ended September 30, 1994. During the third quarter of 1995, the Company experienced an operating profit of $274 (or 2% of revenues) compared with an operating loss of $3,902 (or 45% of revenues) for the quarter ended September 30, 1994. The 1995 third quarter operating profit is primarily attributable to increased levels of revenue at Mecar and BRI. Interest Expense Interest expense for the first nine months of 1995 increased, compared to the same period in 1994, as a result of increased borrowing. Interest expense for the third quarter of 1995 increased compared to the third quarter of 1994 as a result of increased borrowing under the Term Loan (as hereinafter defined). Interest Income Interest income decreased for the first nine months of 1995 over the comparable period in 1994 as a result of lower levels of cash. Other - Net For the nine months ended September 30, 1995, Other - Net represents the net gain resulting from foreign currency transactions plus other miscellaneous income. 13 Allied Research Corporation MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONS-CONTINUED September 30, 1995 (Thousands of Dollars) (Unaudited) Liquidity and Capital Resources During the first nine months of 1995 and throughout 1994, Allied funded its operations principally with internally generated cash and back-up credit facilities required for foreign government contracts. At September 30, 1995, the Company had unrestricted cash (i.e., cash not required by the terms of the bank agreement to collateralize contracts) of approximately $2,882, as compared with approximately $3,976 as of June 30, 1995. Mecar's bank agreement requires substantial amounts of cash collateral to secure the performance bonds, advance payment guarantees and import letters of credit required by Mecar's contracts. Accounts receivable at September 30, 1995 decreased over December 31, 1994 by $11,129, due to lower shipments at the end of the quarter. Costs and accrued earnings on uncompleted contracts increased by $4,136 from December 31, 1994 levels as a result of increases in work-in-process. Inventories remained relatively level. Prepaid expenses and deposits increased $738 primarily due to advance payments. Current liabilities decreased by $10,837 from December 31, 1994 levels as a result of lower accounts payable and accrued liabilities. Long-term debt (including current maturities thereof) as of September 30, 1995, decreased by $10,636 from December 31, 1994 as a result of payments made during the first six months of 1995 under the term loan provided by Mecar's bank pool (the "Term Loan"). The principal amount of the Term Loan increased in the third quarter of 1995 to finance the contracts received by Mecar in the second quarter of 1995. As has been the past practice, the proceeds of the Term Loan are deposited with the banks as collateral and the Term Loan is supported, in part, by a guarantee of the Walloon Region in Belgium. In summary, working capital was approximately $13,088 at September 30, 1995, which is a decrease of $3,359 from December 31, 1994. The decrease is primarily attributable to cash used for operating activities. The liquidity of the Company continues to remain principally dependent upon Mecar's ability to generate cash from operations. While Mecar has broadened its customer base, it remains chiefly reliant on orders from its principal customers. 14 Allied Research Corporation MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONS-CONTINUED September 30, 1995 (Thousands of Dollars) (Unaudited) PART II. OTHER INFORMATION None. 15 Allied Research Corporation SIGNATURE 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. ALLIED RESEARCH CORPORATION _________________________________ Date: November 9, 1995 J. R. Sculley Chairman of the Board, Chief Executive Officer and Chief Financial Officer 16 EX-27 2 EXHIBIT 27
5 9-MOS DEC-31-1995 SEP-30-1995 35,295,000 0 10,676,000 0 4,703,000 64,943,000 43,430,000 28,605,000 88,302,000 51,855,000 0 441,000 0 0 24,622,000 88,302,000 38,958,000 38,958,000 33,741,000 42,318,000 0 0 2,273,000 (3,644,000) 623,000 0 0 0 0 (4,267,000) (.97) (.97)
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