SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended October 31, 2001
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. 1-8061
FREQUENCY ELECTRONICS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 11-1986657
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
55 CHARLES LINDBERGH BLVD., MITCHEL FIELD, N.Y. 11553
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 516-794-4500
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 __
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of Registrant's Common Stock, par value $1.00
as of December 7, 2001 - 8,314,439
Page 1 of 15
Frequency Electronics, Inc. and Subsidiaries
INDEX
Part I. Financial Information: Page No.
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheets -
October 31, 2001 and April 30, 2001 3-4
Consolidated Condensed Statements of Operations
Six Months Ended October 31, 2001 and 2000 5
Condensed Consolidated Statements of Operations
Three Months Ended October 31, 2001 and 2000 6
Condensed Consolidated Statements of Cash Flows
Six Months Ended October 31, 2001 and 2000 7
Notes to Condensed Consolidated Financial Statements 8-10
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-13
Part II. Other Information:
Item 1 - Legal Proceedings 14
Item 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
Frequency Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
October 31, April 30,
2001 2001
---- ----
(UNAUDITED) (NOTE A)
(In thousands)
ASSETS:
Current assets:
Cash and cash equivalents $10,575 $ 2,121
Marketable securities 24,258 33,407
Accounts receivable, net of allowance for
doubtful accounts of $190 14,431 15,160
Inventories 19,531 20,471
Deferred income taxes 4,559 4,313
Prepaid expenses and other 1,395 4,662
------- --------
Total current assets 74,749 80,134
Property, plant and equipment, at cost,
less accumulated depreciation and
amortization 12,030 11,997
Intangible assets 5,163 4,987
Other assets 5,442 4,921
------- --------
Total assets $97,384 $102,039
======= ========
See accompanying notes to condensed consolidated
financial statements.
Frequency Electronics, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Continued)
October 31, April 30,
2001 2001
---- ----
(UNAUDITED) (NOTE A)
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable - trade $ 2,152 $ 2,408
Accrued liabilities and other 5,667 11,126
------- --------
Total current liabilities 7,819 13,534
Deferred compensation 5,913 5,726
Other liabilities 12,011 12,348
------- --------
Total liabilities 25,743 31,608
------- --------
Minority interest in subsidiary 217 226
Stockholders' equity:
Preferred stock - $1.00 par value -0- -0-
Common stock - $1.00 par value 9,164 9,164
Additional paid-in capital 42,891 42,860
Retained earnings 22,027 21,226
------- --------
74,082 73,250
Common stock reacquired and held in treasury
-at cost, 850,000 shares at October
31, 2001 and 872,669 shares at
April 30, 2001 (2,870) (3,127)
Other stockholders' equity (119) (122)
Accumulated other comprehensive income 331 204
------- --------
Total stockholders' equity 71,424 70,205
------- --------
Total liabilities and stockholders' equity $97,384 $102,039
======= ========
See accompanying notes to condensed consolidated
financial statements.
Frequency Electronics, Inc. and Subsidiaries
Consolidated Condensed Statements of Operations
Six Months Ended October 31,
(Unaudited)
2001 2000
---- ----
(In thousands except per share data)
Net Sales $22,535 $19,712
Cost of sales 14,024 11,109
------- -------
Gross margin 8,511 8,603
Selling and administrative expenses 4,241 4,178
Research and development expenses 2,870 2,366
------- -------
Operating profit 1,400 2,059
Other income (expense):
Investment income 1,177 1,494
Interest expense (154) (150)
Other income (expense), net (29) (30)
------- -------
Income before minority interest and
provision for income taxes 2,394 3,373
Minority Interest in loss of
consolidated subsidiary (8) -
------- -------
Income before provision for income taxes 2,402 3,373
Provision for income taxes 770 1,095
------- -------
Net income $ 1,632 $ 2,278
======= =======
Net earnings per common share
Basic $ 0.20 $ 0.28
====== ======
Diluted $ 0.19 $ 0.27
====== ======
Average shares outstanding
Basic 8,339,458 8,109,624
========= =========
Diluted 8,512,718 8,567,859
========= =========
See accompanying notes to consolidated condensed
financial statements.
Frequency Electronics, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months Ended October 31,
(Unaudited)
2001 2000
---- ----
(In thousands except per share data)
Net Sales $11,465 $10,819
Cost of sales 7,024 6,128
------- -------
Gross Margin 4,441 4,691
Selling and administrative expenses 2,026 2,049
Research and development expense 1,757 1,162
------- -------
Operating profit 658 1,480
Other income (expense):
Investment income 660 751
Interest expense (76) (81)
Other income (expense), net (30) 26
------- -------
Income before minority interest and
provision for income taxes 1,212 2,176
Minority Interest in loss of
consolidated subsidiary - -
------- -------
Income before provision for income taxes 1,212 2,176
Provision for income taxes 400 705
------- -------
Net income $ 812 $ 1,471
======= =======
Net earnings per common share
Basic $ 0.10 $ 0.18
====== ======
Diluted $ 0.10 $ 0.17
====== ======
Average shares outstanding
Basic 8,346,359 8,187,718
========= =========
Diluted 8,470,162 8,646,789
========= =========
See accompanying notes to condensed consolidated
financial statements.
Frequency Electronics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Six Months Ended October 31,
(Unaudited)
2001 2000
---- ----
(In thousands)
Cash flows from operating activities:
Net income $ 1,632 $ 2,278
Non-cash charges to earnings 978 1,392
Net changes in other assets and liabilities (134) (1,381)
------- -------
Net cash provided by operating activities 2,476 2,289
Cash flows from investing activities:
Payment for acquisition, net of cash acquired - (8,054)
Sale of marketable securities- net 8,482 5,991
Other - net (1,013) (812)
------- -------
Net cash provided by (used in)
investing activities 7,469 (2,875)
Cash flows from financing activities:
Payment of cash dividend (829) (799)
Payment of debt (573) (517)
Proceeds from stock option exercises 71 716
Other - net (181) (115)
------- -------
Net cash used in financing activities (1,512) (715)
Net increase (decrease) in cash and cash
equivalents before effect of exchange
rate changes 8,433 (1,301)
Effect of exchange rate changes
on cash and cash equivalents 21 8
------- -------
Net increase (decrease) in cash 8,454 (1,293)
Cash at beginning of period 2,121 4,994
------- -------
Cash at end of period $10,575 $ 3,701
======= =======
See accompanying notes to condensed consolidated
financial statements.
Frequency Electronics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE A - CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management of the Company, the accompanying unaudited
condensed consolidated interim financial statements reflect all adjustments
(which include only normal recurring adjustments) necessary to present fairly,
in all material respects, the consolidated financial position of the Company as
of October 31, 2001 and the results of its operations and cash flows for the six
and three months ended October 31, 2001 and 2000. The April 30, 2001 condensed
consolidated balance sheet was derived from audited financial statements.
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 April 30, 2001 Annual
Report to Stockholders. The results of operations for such interim periods are
not necessarily indicative of the operating results for the full year.
NOTE B - EARNINGS PER SHARE
Reconciliation of the weighted average shares outstanding for basic and
diluted Earnings Per Share are as follows:
Periods ended October 31,
Six months Three months
---------- ------------
2001 2000 2001 2000
---- ---- ---- ----
Basic EPS Shares outstanding
(weighted average) 8,339,458 8,109,624 8,346,359 8,187,718
Effect of Dilutive Securities 173,260 458,235 123,803 459,071
--------- --------- --------- ---------
Diluted EPS Shares outstanding 8,512,718 8,567,859 8,470,162 8,646,789
========= ========= ========= =========
Options to purchase 423,250 shares of common stock were outstanding during
the six and three months ended October 31, 2001, but were not included in the
computation of diluted earnings per share. Since the exercise price of these
options was greater than the average market price of the Company's common shares
during the respective periods, their inclusion in the computation would have
been antidilutive. Consequently, these options are excluded from the computation
of earnings per share. For the six and three months ended October 31, 2000, all
exercisable options were included in the computation of diluted earnings per
share.
NOTE C - ACCOUNTS RECEIVABLE
Accounts receivable at October 31, 2001 and April 30, 2001 include costs
and estimated earnings in excess of billings on uncompleted contracts accounted
for on the percentage of completion basis of approximately $3,573,000 and
$3,814,000, respectively. Such amounts represent revenue recognized on long-term
contracts that had not been billed at the balance sheet dates. Such amounts are
billed pursuant to contract terms.
NOTE D - INVENTORIES
Inventories, which are reported net of reserves of $4,053,000 and
$4,001,000 at October 31, 2001 and April 30, 2001, respectively, consist of the
following:
October 31, 2001 April 30, 2001
---------------- --------------
(in thousands)
Raw materials and Component parts $ 9,441 $ 9,227
Work in progress and Finished goods 10,090 11,244
------- -------
$19,531 $20,471
======= =======
Frequency Electronics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE E - -COMPREHENSIVE INCOME
For the six months ended October 31, 2001 and 2000, total comprehensive
income was $1,759,000 and $3,615,000, respectively.
NOTE F - SEGMENT INFORMATION
The Company operates under three reportable segments:
1. Commercial communications - consists principally of time and frequency
control products used in two principal markets- commercial communication
satellites and terrestrial cellular telephone or other ground-based
telecommunication stations.
2. U.S. Government - consists of time and frequency control products used for
national defense or space-related programs.
3. Gillam-FEI - the products of the Company's Belgian subsidiary consist
primarily of wireline synchronization and network monitoring systems.
The table below presents information about reported segments with
reconciliation of segment amounts to consolidated amounts as reported in the
statement of operations or the balance sheet for each of the periods (in
thousands):
Six months ended October 31,
2001 2000
---- ----
Net sales:
Commercial Communications $16,432 $17,535
U.S. Government 1,746 1,587
Gillam-FEI 4,856 590
less intercompany sales (499) -
------- -------
Consolidated Sales $22,535 $19,712
======= =======
Operating profit (loss):
Commercial Communications $ 1,661 $ 2,504
U.S. Government 484 325
Gillam-FEI (239) 86
Less intercompany transactions (107) -
Corporate (399) (856)
------- -------
Consolidated Operating Profit $ 1,400 $ 2,059
======= =======
October 31, 2001 April 30, 2001
Identifiable assets:
Commercial Communications $24,683 $ 25,025
U.S. Government 1,497 1,580
Gillam-FEI 18,571 19,237
less intercompany balances (657) (234)
Corporate 53,290 56,431
------- --------
Consolidated Identifiable Assets $97,384 $102,039
======= ========
Frequency Electronics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
NOTE G - ACQUISITION OF GILLAM S.A.
On September 13, 2000, the Company completed its acquisition of
substantially all of the outstanding shares of Gillam S.A. ("Gillam"), a
privately-held company organized under the laws of Belgium. Gillam's business is
based in the telecommunications market and targeted to four main areas:
(i) "Wireline Network Synchronization"--managing timing and
interconnectivity for communication networks; (ii) "Remote
Control"--consisting of network monitoring systems; (iii) "Rural
Telephony"--equipment designed to connect isolated subscribers to a
telephone network via satellite and (iv) "Power Supplies" --produced
through a subsidiary, for telecom service providers. The acquired company
has been renamed Gillam-FEI.
The Gillam acquisition was consummated pursuant to the terms of a Share
Purchase Agreement dated as of August 29, 2000. Under terms of the agreement,
the Company paid $8,400,264 in cash and issued 154,681 shares of common stock
("FEI stock") to acquire the outstanding stock of Gillam. Based upon the market
value of FEI's stock on July 25, 2002, the Share Purchase Agreement may require
the Company to issue to the Gillam shareholders up to 35,000 additional shares
of FEI stock. In addition, the Company paid approximately $496,000 in direct
transaction costs. Thus, the total purchase price is approximately as follows:
(in thousands)
Cash paid for Gillam shares $ 8,400
Fair value of restricted shares issued 3,465
Direct transaction costs 496
-------
Total purchase price $12,361
=======
The Gillam acquisition is treated as a purchase. The purchase price is
allocated to net assets acquired of approximately $7,282,000 and to intangible
assets, principally goodwill, of approximately $5,079,000. On May 1, 2001, the
Company adopted Statement 142 of the Financial Accounting Standards Board ("SFAS
142"), "Goodwill and Other Intangible Assets", under which goodwill is no longer
amortized but is to be tested at least annually for impairment. The adoption of
SFAS 142 reduces general and administrative expenses by approximately $85,000
per quarter.
The accompanying condensed consolidated statements of operations for the
six- and three-month periods ended October 31, 2001, include the results of
operations of Gillam-FEI. The six- and three-month periods ended October 31,
2000, include the results of operations of Gillam-FEI only from the date of
acquisition. The pro forma financial information set forth below is based upon
the Company's historical consolidated statements of operations for the six
months ended October 31, 2000, adjusted to give effect to the acquisition of
Gillam-FEI as of the beginning of the period.
The pro forma financial information is presented for informational purposes
only and may not be indicative of what actual results of operations would have
been had the acquisition occurred on May 1, 2000, nor does it purport to
represent the results of operations for future periods.
Pro forma
Six months ended
October 31, 2000
----------------
(In thousands except per share data)
Net Sales $24,113
-------
Operating Profit $2,290
------
Income from continuing operations $2,202
======
Earnings per share- basic $ 0.27
======
Earnings per share- diluted $ 0.25
======
Frequency Electronics, Inc. and Subsidiaries
Item 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
The table below sets forth the percentage of consolidated net sales
represented by certain items in the Company's consolidated statements of
operations for the respective six- and three-month periods of fiscal years 2002
and 2001:
Six months Three months
Periods ended October 31,
2001 2000 2001 2000
---- ---- ---- ----
Net Sales
Commercial Communications 71.7% 89.0% 71.2% 86.3%
US Government 7.7 8.1 6.7 8.2
Gillam-FEI 20.6 2.9 22.1 5.5
----- ----- ----- -----
100.0 100.0 100.0 100.0
Cost of Sales 62.2 56.4 61.3 56.6
Selling and administrative expenses 18.8 21.2 17.7 18.9
Research and development expenses 12.8 12.0 15.3 10.8
----- ----- ----- -----
Operating profit 6.2 10.4 5.7 13.7
Other income (expense)- net 4.4 6.7 4.8 6.4
----- ----- ----- -----
Pretax Income 10.6 17.1 10.6 20.1
Provision for income taxes 3.4 5.6 3.5 6.5
----- ----- ----- -----
Net income 7.2% 11.5% 7.1% 13.6%
===== ===== ===== =====
For the six- and three-month periods ended October 31, 2001, revenues
increased by $2.8 million (14%) and by $646,000 (6%), respectively, over the
same periods of fiscal year 2001. Gross margins on these sales were lower than
in the prior year and the Company invested more in research and development
during the fiscal 2002 periods. Consequently, for the six- and three-month
periods ended October 31, 2001, operating profit decreased by $659,000 (32%) and
$822,000 (56%), respectively, and net income decreased by $646,000 (28%) and
$659,000 (45%), respectively, compared to the same periods of fiscal 2001.
The Company's consolidated financial statements for the fiscal 2002 periods
include the results of operations of Gillam-FEI, which was acquired in September
2000. Excluding Gillam-FEI, in the six- and three-month periods ended October
31, 2001, sales decreased by 5% and 12%, respectively, compared to the same
periods in fiscal 2001 as the Company experienced the effects of the general
slowdown in the telecommunications industry. The lower fiscal 2002 sales and the
increased research and development spending cited above, caused non-Gillam-FEI
operating profits to decline by $233,000 (12%) and $855,000 (61%), respectively,
and net income to decrease by $408,000 (18%) and $716,000 (50%), respectively,
compared to the results for the six- and three-month periods of fiscal 2001.
For the six- and three-month periods ended October 31, 2001, margins on
commercial communications revenues were 41% as compared to 42% and 49%,
respectively, for U.S. Government programs and 25% and 27%, respectively, for
Gillam-FEI. During the comparable periods ended October 31, 2000, gross margins
on commercial communications sales were 44% while margins on U.S. Government
programs were 39% and 40%, respectively. The commercial communications and U.S.
Government margins are within the Company's expectations given the current mix
of production and long-term contracts. Margins on Gillam-FEI sales are
historically lower than the rest of the Company due to the higher cost structure
in Europe. One of the goals of the Company is to introduce products and
procedures which will increase Gillam-FEI's margins to a level comparable to
that of the other segments. With the present mix of orders and recent contract
bookings, the Company expects to maintain its profit margins at or near the
current level for the remainder of fiscal 2002.
Frequency Electronics, Inc. and Subsidiaries
(Continued)
Selling and administrative costs increased by $63,000 (2%) for the
six-month period ended October 31, 2001 and decreased by $23,000 (1%) for the
three-month period then ended, compared to the same periods of fiscal 2001.
Excluding Gillam-FEI, selling and administrative expenses decreased by $848,000
(21%) and $443,000 (23%), respectively, over the six- and three-month periods
ended October 31, 2000. The principle causes of these decreases are the
approximately $235,000 reduction in amortization of certain non-employee stock
options as the options became exercisable in the prior year, lower accruals
(approximately $400,000) for employee incentive plans due to lower profits, and
reduced legal fees and costs due to a litigation settlement in fiscal 2001 for
which the Company paid $245,000. The Company anticipates that fiscal 2002
selling and administrative expenses will be approximately the same amount as
that incurred in fiscal 2001, but, as a percentage of sales, the ratio is
expected to decrease.
Research and development costs in the fiscal 2002 periods increased by
$504,000 (21%) and $595,000 (51%), respectively, over the comparable six- and
three-month periods ended October 31, 2000. The Company has used the slowdown in
the telecommunications market as an opportunity to allocate additional resources
to develop new products that achieve higher performance and are more
cost-effective. Approximately 15% of development spending in the fiscal 2002
periods were incurred by Gillam-FEI. The Company intends to introduce
Gillam-FEI's wireline synchronization product to the growing U.S market as well
as to the rest of the world. In addition, the Company is completing development
of a high precision quartz oscillator, dubbed the "poor man's rubidium," which
has performance characteristics approaching that of a rubidium oscillator but at
a fraction of the cost. In addition, development continues on products to
support third generation (3G) wireless infrastructure systems, products which
increase the capability of existing TDMA and GSM systems (2.5G or EDGE), as well
as products for interconnectivity with wireline and fiber optic networks. The
Company expects that as business volume increases in 2002, the level of research
and development spending will approach the Company's target of 10% of sales.
Internally generated cash and cash reserves are adequate to fund this
development effort.
Net nonoperating income and expense decreased by $320,000 (24%) and by
$142,000 (20%), respectively, in the six- and three-month periods ended October
31, 2001 as compared to the fiscal 2001 periods. Investment income declined by
$317,000 (21%) and $91,000 (12%), respectively, as a result of lower interest
rates on marketable securities and a 17% decrease in invested assets. The
decrease in the level of marketable securities in fiscal 2002 is due to the
investment in Gillam-FEI which was made in September 2000. Interest expense is
approximately the same in both fiscal years. Other income (expense), net,
consists principally of certain non-recurring transactions and is generally not
significant to net income. For the six-month periods ended October 31, 2001 and
2000, the net amounts are approximately the same but for the three-month periods
then ended, the fiscal 2002 period recorded $30,000 of expenses, net, while the
2001 period recorded $26,000 of income, net.
The Company is subject to income taxes in both the United States and
Europe. The federal statutory rates vary from 34% to 40%. The Company's
effective tax rate is lower than the statutory rates primarily due to the
availability of Research and Development Tax Credits in the United States.
LIQUIDITY AND CAPITAL RESOURCES
The Company's balance sheet continues to reflect a strong working capital
position of $67 million at October 31, 2001 which is comparable to working
capital at April 30, 2001. Included in working capital at October 31, 2001 is
$34.8 million of cash, cash equivalents and marketable securities, including
$11.8 million of REIT units which are convertible to Reckson Associates Realty
Corp. common stock.
Net cash provided by operating activities for the six months ended October
31, 2001, was $2.5 million compared to $2.3 million in the comparable fiscal
2001 period. In fiscal 2002, the Company received $3.0 million for reimbursement
of certain legal expenses covered under directors' and officers' liability
insurance. This inflow was partially offset by payments against certain accrued
expenses, including income taxes payable of $2.0 million and the payment of cash
bonuses under incentive compensation plans. Cash was also generated by
collections on accounts receivable and reductions in inventory, offset by
repayment of amounts due to customers. The Company anticipates that it will
continue to generate positive cash flow from operating activities this fiscal
year.
Frequency Electronics, Inc. and Subsidiaries
(Continued)
Net cash provided by investing activities for the six months ended October
31, 2001, was $7.5 million. Approximately $8.5 million was obtained from the
sale or redemption of certain marketable securities, most of which was
reinvested in shorter term cash equivalents. These inflows were offset by the
acquisition of capital equipment for approximately $576,000 and investments
aggregating approximately $437,000 in the Company's China subsidiary, FEI-Asia,
and a minority interest in a Russian crystal manufacturer. The Company may
continue to acquire or sell marketable securities as dictated by its investment
strategies as well as by the cash requirements for its development activities.
The Company will continue to acquire more efficient equipment to automate its
production process and expand its capacity. The Company intends to spend
approximately $2 million on capital equipment during fiscal 2002. Internally
generated cash will be adequate to acquire this capital equipment.
Net cash used in financing activities for the six months ended October 31,
2001, was $1.5 million compared to $715,000 for the comparable fiscal 2001
period. Included in both fiscal periods is payment of the Company's semiannual
dividend in the aggregate amount of $829,000 and $799,000, respectively. In
addition, the Company made scheduled debt payments of $573,000 in fiscal 2002
and $517,000 in 2001. Offsetting the cash outflows is approximately $71,000 in
fiscal 2002 and $716,000 in fiscal 2001 received on the exercise of stock
options to acquire approximately 10,000 and 129,000 shares, respectively, of
Company stock.
At October 31, 2001, the Company's backlog amounted to approximately $39
million, similar to the backlog at April 30, 2001. Approximately 69% of the
backlog represent orders for the commercial communications segment, 18% for the
Gillam-FEI segment and 13% for the U.S. Government segment. Of this backlog,
approximately 80% is realizable in the next 12 months.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995:
The statements in this quarterly report on Form 10Q regarding future
earnings and operations and other statements relating to the future constitute
"forward-looking" statements pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
inherently involve risks and uncertainties that could cause actual results to
differ materially from the forward-looking statements. Factors that would cause
or contribute to such differences include, but are not limited to, continued
acceptance of the Company's products in the marketplace, competitive factors,
new products and technological changes, product prices and raw material costs,
dependence upon third-party vendors, competitive developments, changes in
manufacturing and transportation costs, changes in contractual terms, the
availability of capital, and other risks detailed in the Company's periodic
report filings with the Securities and Exchange Commission. By making these
forward-looking statements, the Company undertakes no obligation to update these
statements for revisions or changes after the date of this report.
PART II
ITEM 1 - Legal Proceedings
On March 14, 2000, FEI commenced an action in the state court against
National Union Fire Insurance of Pittsburgh, PA ("National"). The complaint set
forth causes of action for declaratory judgment and breach of contract relating
to certain directors and officers' liability insurance policies in connection
with the Muller qui tam action and certain other litigations. Pursuant to a
Settlement Agreement dated April 18, 2001, the action against National was
settled, FEI was paid $3.0 million representing the full amount of the available
coverage under the applicable National policy, FEI released its claims and the
action was discontinued.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Registrant's Form 8-K and 8-K/A, dated October 3, 2001, containing
disclosure under Item 5 thereof (declaration of semi-annual dividend),
was filed with the Securities and Exchange Commission during the
quarter ended October 31, 2001.
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.
FREQUENCY ELECTRONICS, INC.
(Registrant)
Date: December 17, 2001 BY /s/ Joseph P. Franklin
----------------------
Joseph P. Franklin
Chairman of the Board of Directors
Date: December 17, 2001 BY /s/ Alan Miller
----------------
Alan Miller
Chief Financial Officer
and Controller