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 January 31, 2002 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 March 8, 2002 - 8,327,133 Page 1 of 15
Frequency Electronics, Inc. and Subsidiaries INDEX Part I. Financial Information: Page No. Item 1 - Financial Statements: Condensed Consolidated Balance Sheets - January 31, 2002 and April 30, 2001 3-4 Condensed Consolidated Statements of Operations Nine Months Ended January 31, 2002 and 2001 5 Condensed Consolidated Statements of Operations Three Months Ended January 31, 2002 and 2001 6 Condensed Consolidated Statements of Cash Flows Nine Months Ended January 31, 2002 and 2001 7 Notes to Condensed Consolidated Financial Statements 8-10 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 11-14 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 January 31, April 30, 2002 2001 (UNAUDITED) (NOTE A) (In thousands) ASSETS: Current assets: Cash and cash equivalents $ 4,363 $ 2,121 Marketable securities 29,835 33,407 Accounts receivable, net of allowance for doubtful accounts of $270 at January 31, 2002 and $190 at April 30, 2001 12,325 15,160 Inventories 21,278 20,471 Deferred income taxes 4,575 4,313 Prepaid expenses and other 1,551 4,662 ------- -------- Total current assets 73,927 80,134 Property, plant and equipment, at cost, less accumulated depreciation and amortization 12,167 11,997 Intangible assets 5,028 4,987 Other assets 5,285 4,921 ------- -------- Total assets $96,407 $102,039 ======= ======== See accompanying notes to condensed consolidated financial statements.
Frequency Electronics, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Continued) January 31, April 30, 2002 2001 (UNAUDITED) (NOTE A) (In thousands) LIABILITIES AND STOCKHOLDERS' EQUITY: Current liabilities: Accounts payable - trade $ 2,103 $ 2,408 Accrued liabilities and other 4,790 11,126 -------- -------- Total current liabilities 6,893 13,534 Deferred compensation 6,008 5,726 Other liabilities 11,821 12,348 -------- -------- Total liabilities 24,722 31,608 -------- -------- Minority interest in subsidiary 227 226 Stockholders' equity: Preferred stock - $1.00 par value -0- -0- Common stock - $1.00 par value 9,164 9,164 Additional paid-in capital 42,981 42,860 Retained earnings 22,353 21,226 -------- -------- 74,498 73,250 Common stock reacquired and held in treasury -at cost, 836,806 shares at January 31, 2002 and 872,669 shares at April 30, 2001 (2,829) (3,127) Other stockholders' equity (117) (122) Accumulated other comprehensive (loss) income (94) 204 -------- -------- Total stockholders' equity 71,458 70,205 -------- -------- Total liabilities and stockholders' equity $ 96,407 $102,039 ======== ======== See accompanying notes to condensed consolidated financial statements.
Frequency Electronics, Inc. and Subsidiaries Condensed Consolidated Statements of Operations Nine Months Ended January 31, (Unaudited) 2002 2001 (In thousands except per share data) Net sales $32,100 $34,905 Cost of sales 19,963 20,470 ------- ------- Gross margin 12,137 14,435 Selling and administrative expenses 6,404 7,145 Research and development expenses 4,235 3,500 ------- ------- Operating profit 1,498 3,790 Other income (expense): Investment income 1,659 2,423 Interest expense (221) (242) Other income (expense), net (56) (39) ------- ------- Income before minority interest and provision for income taxes 2,880 5,932 Minority interest in income of consolidated subsidiary 2 4 ------- ------- Income before provision for income taxes 2,878 5,928 Provision for income taxes 920 2,018 ------- ------- Net income $ 1,958 $ 3,910 ======= ======= Net earnings per common share Basic $ 0.23 $ 0.48 ======= ======= Diluted $ 0.23 $ 0.46 ======= ======= Average shares outstanding Basic 8,345,439 8,167,970 ========= ========= Diluted 8,531,732 8,464,346 ========= ========= See accompanying notes to consolidated condensed financial statements.
Frequency Electronics, Inc. and Subsidiaries Condensed Consolidated Statements of Operations Three Months Ended January 31, (Unaudited) 2002 2001 (In thousands except per share data) Net sales $ 9,565 $15,193 Cost of sales 5,939 9,361 ------- ------- Gross margin 3,626 5,832 Selling and administrative expenses 2,163 2,967 Research and development expense 1,365 1,134 ------- ------- Operating profit 98 1,731 Other income (expense): Investment income 482 929 Interest expense (67) (92) Other income (expense), net (27) (9) ------- ------- Income before minority interest and provision for income taxes 486 2,559 Minority interest in income of consolidated subsidiary 10 3 ------- ------- Income before provision for income taxes 476 2,556 Provision for income taxes 150 923 ------- ------- Net income $ 326 $ 1,633 ======= ======= Net earnings per common share Basic $ 0.04 $ 0.20 ======= ======= Diluted $ 0.04 $ 0.19 ======= ======= Average shares outstanding Basic 8,357,402 8,285,506 ========= ========= Diluted 8,539,114 8,554,436 ========= ========= See accompanying notes to condensed consolidated financial statements.
Frequency Electronics, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows Nine Months Ended January 31, (Unaudited) 2002 2001 (In thousands) Cash flows from operating activities: Net income $1,958 $3,910 Non-cash charges to earnings 1,081 1,679 Net changes in other assets and liabilities (199) (610) ------ ------ Net cash provided by operating activities 2,840 4,979 Cash flows from investing activities: Payment for acquisition, net of cash acquired - (8,208) Proceeds from sale of marketable securities 10,641 7,150 Purchase of marketable securities (7,540) (2,317) Other - net (1,447) (1,027) ------ ------ Net cash provided by (used in) investing activities 1,654 (4,402) Cash flows from financing activities: Payment of cash dividend (1,660) (1,627) Payment of debt (509) (573) Proceeds from stock option exercises 96 716 Other - net (185) (175) ------ ------ Net cash used in financing activities (2,258) (1,659) ------ ------ Net increase (decrease) in cash and cash equivalents before effect of exchange rate changes 2,236 (1,082) Effect of exchange rate changes on cash and cash equivalents 6 39 ------ ------ Net increase (decrease) in cash 2,242 (1,043) Cash at beginning of period 2,121 4,994 ------ ------ Cash at end of period $4,363 $3,951 ====== ====== 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 January 31, 2002 and the results of its operations and cash flows for the nine and three months ended January 31, 2002 and 2001. 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 January 31, Nine months Three months 2002 2001 2002 2001 Basic EPS Shares outstanding (weighted average) 8,345,439 8,167,970 8,357,402 8,285,506 Effect of Dilutive Securities 186,293 296,376 181,712 268,930 --------- --------- --------- --------- Diluted EPS Shares outstanding 8,531,732 8,464,346 8,539,114 8,554,436 ========= ========= ========= ========= Options to purchase 243,250 and 265,000 shares of common stock were outstanding during the nine and three months ended January 31, 2002 and 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. NOTE C - ACCOUNTS RECEIVABLE Accounts receivable at January 31, 2002 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 $4,262,000 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 $3,896,000 and $4,001,000 at January 31, 2002 and April 30, 2001, respectively, consist of the following: January 31, 2002 April 30, 2001 (In thousands) Raw materials and Component parts $ 9,937 $ 9,227 Work in progress and Finished goods 11,341 11,244 ------- ------- $21,278 $20,471 ======= =======
Frequency Electronics, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) NOTE E - COMPREHENSIVE INCOME For the nine months ended January 31, 2002 and 2001, total comprehensive income was $1,660,000 and $5,524,000, 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): Nine months ended January 31, 2002 2001 ---- ---- Net sales: Commercial Communications $22,652 $27,865 U.S. Government 2,894 2,610 Gillam-FEI 7,322 4,508 less intercompany sales (768) (78) ------- ------- Consolidated Sales $32,100 $34,905 ======= ======= Operating profit (loss): Commercial Communications $1,906 $4,206 U.S. Government 709 513 Gillam-FEI (359) 186 less intercompany transactions (213) - Corporate (545) (1,115) ------ ------ Consolidated Operating Profit $1,498 $3,790 ====== ====== January 31, 2002 April 30, 2001 Identifiable assets: Commercial Communications $ 23,765 $ 25,025 U.S. Government 2,418 1,580 Gillam-FEI 18,437 19,237 less intercompany balances (1,061) (234) Corporate 52,848 56,431 -------- -------- Consolidated Identifiable Assets $ 96,407 $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 t 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 nine- and three-month periods ended January 31, 2002, include the results of operations of Gillam-FEI. The nine- and three-month periods ended January 31, 2001, 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 nine months ended January 31, 2001, 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 Nine months ended January 31, 2001 (In thousands except per share data) Net Sales $39,374 ------- Operating Profit $3,505 ------ Income from continuing operations $3,510 ====== Earnings per share- basic $ 0.43 ====== Earnings per share- diluted $ 0.41 ======
Frequency Electronics, Inc. and Subsidiaries Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies and Estimates The Company's significant accounting policies are described in Note 1 to the consolidated financial statements included in the Company's April 30, 2001 Annual Report to Stockholders. The Company believes its most critical accounting policies to be the recognition of revenue and costs on production contracts and the valuation of inventory. Revenues under larger, long-term contracts, generally defined as orders in excess of $100,000, are reported in operating results using the percentage of completion method. For U.S. Government and other fixed-price contracts that require initial design and development of the product, revenue is recognized on the cost-to-cost method. Under this method, revenue is recorded based upon the ratio that incurred costs bear to total estimated contract costs with related cost of sales recorded as the costs are incurred. Each month management reviews estimated contract costs. The effect of any change in the estimated gross margin percentage for a contract is reflected in revenues in the period in which the change is known. Provisions for anticipated losses on contracts are made in the period in which they become determinable. On production-type contracts, revenue is recorded as units are delivered with the related cost of sales recognized on each shipment based upon a percentage of estimated final contract costs. Changes in job performance may result in revisions to costs and income and are recognized in the period in which revisions are determined to be required. Provisions for anticipated losses on contracts are made in the period in which they become determinable. For contracts in the Company's Gillam-FEI segment, and smaller contracts or orders in the other business segments, sales of products and services to customers are reported in operating results based upon shipment of the product or performance of the services pursuant to contractual terms. When payment is contingent upon customer acceptance of the installed system, revenue is deferred until such acceptance is received. Contract costs include all direct material, direct labor costs, manufacturing overhead and other direct costs related to contract performance. Selling, general and administrative costs are charged to expense as incurred. In accordance with industry practice, inventoried costs contain amounts relating to contracts and programs with long production cycles, a portion of which will not be realized within one year. Inventory reserves are established for slow-moving and obsolete items and are based upon management's experience and expectations for future business. Any changes in reserves arising from revised expectations are reflected in cost of sales in the period the revision is made.
Frequency Electronics, Inc. and Subsidiaries (Continued) 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 nine- and three-month periods of fiscal years 2002 and 2001: Nine months Three months Periods ended January 31, 2002 2001 2002 2001 Net sales Commercial Communications 68.9% 79.6% 62.4% 67.5% US Government 9.0 7.5 12.0 6.7 Gillam-FEI 22.1 12.9 25.6 25.8 ----- ----- ----- ----- 100.0 100.0 100.0 100.0 Cost of sales 62.2 58.6 62.1 61.6 ----- ----- ----- ----- Gross margin 37.8 41.4 37.9 38.4 Selling and administrative expenses 19.9 20.5 22.6 19.5 Research and development expenses 13.2 10.0 14.3 7.5 ----- ----- ----- ----- Operating profit 4.7 10.9 1.0 11.4 Other income (expense)- net 4.3 6.1 4.1 5.4 ----- ----- ----- ----- Pretax income 9.0 17.0 5.1 16.8 Provision for income taxes 2.9 5.8 1.7 6.1 ----- ----- ----- ----- Net income 6.1% 11.2% 3.4% 10.7% ===== ===== ===== ===== For the nine- and three-month periods ended January 31, 2002, revenues declined by $2.8 million (8%) and by $5.6 million (37%), respectively, over the same periods of fiscal year 2001. These results reflect the general slowdown in the telecommunications industry. Gross margins were similarly impacted by the weaker economic environment. In spite of this weakness the Company continued to invest in research and development during the fiscal 2002 periods in order to prepare for the expected economic upturn when it occurs. The immediate consequence of these economic and strategic spending factors is lower profitability. For the nine- and three-month periods ended January 31, 2002, operating profit decreased by $2.3 million (60%) and $1.6 million (94%), respectively, and net income decreased by $2.0 million (50%) and $1.3 million (80%), respectively, compared to the same periods of fiscal 2001. For the nine- and three-month periods ended January 31, 2002, margins on Commercial Communications revenues were 41% and 40%, respectively, as compared to 41% and 39%, respectively, for U.S. Government programs and 28% and 33%, respectively, for Gillam-FEI. During the comparable periods ended January 31, 2001, gross margins on Commercial Communications sales were 44% while margins on U.S. Government programs were 38% and 37%, respectively, and Gillam-FEI realized margins of 25% and 23%, 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 as well as the lower sales volume which causes a higher level of overhead absorption. 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. Selling and administrative costs decreased by $741,000 (10%) and by $804,000 (27%) for the nine- and three-month periods ended January 31, 2002, compared to the same periods of fiscal 2001. Excluding Gillam-FEI, selling and administrative expenses decreased by $1.55 million (22%) and $702,000 (31%), respectively, over the nine- and three-month periods ended January 31, 2002. The principal causes of these decreases were the reduction in amortization of certain non-employee stock options as the options became exercisable in the prior year, reduced travel-related costs, lower accruals for employee incentive
Frequency Electronics, Inc. and Subsidiaries (Continued) 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 continue to be less than those incurred in fiscal 2001 and should approximate 20% of revenues. Research and development costs in the fiscal 2002 periods increased by $735,000 (21%) and $231,000 (20%), respectively, over the comparable nine- and three-month periods ended January 31, 2001. 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 20% of development spending in the fiscal 2002 periods was incurred by Gillam-FEI. The Company intends to introduce Gillam-FEI's wireline synchronization product to the growing U.S market during calendar year 2002. In addition, during fiscal 2002 the Company completed development and began marketing a high precision quartz oscillator which has performance characteristics approaching that of a rubidium oscillator but at a fraction of the cost. 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), and products for interconnectivity with wireline and fiber optic networks. The Company expects the level of research and development spending to decline from current levels as several of these projects near completion. However, to remain at the leading edge of its technologies, the Company will continue to invest in new products and markets as opportunities present themselves. Internally generated cash and cash reserves are adequate to fund this development effort. Net nonoperating income and expense decreased by $760,000 (35%) and by $440,000 (53%), respectively, in the nine- and three-month periods ended January 31, 2002 as compared to the fiscal 2001 periods. Investment income declined by $764,000 (32%) and $447,000 (48%), respectively, from the same periods of fiscal 2001. The sale or redemption of marketable securities during the fiscal 2002 periods resulted in capital gains which were lower by $260,000 and $300,000, respectively, than those realized during the fiscal 2001 nine- and three-month periods. In addition, lower interest rates on marketable securities and a decrease in invested assets reduced investment income by $500,000 and $140,000, respectively, during the fiscal 2002 periods. 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 during the nine- and three-month periods ended January 31, 2002, is lower by $21,000 (9%) and $25,000 (27%), respectively, over the same periods of fiscal 2001. These reductions are principally the result of the paydown of debt by Gillam-FEI during fiscal 2002. Other income (expense), net, consists principally of certain non-recurring transactions and is generally not significant to net income. 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 $67.0 million at January 31, 2002 which is comparable to the $66.6 million working capital at April 30, 2001. Included in working capital at January 31, 2002 is $34.2 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 nine months ended January 31, 2002, was $2.84 million. 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 $2.6 million and the payment of cash bonuses under incentive compensation plans. Cash was also generated by collections on accounts receivable, 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 nine months ended January 31, 2002, was $1.65 million. Approximately $10.6 million was obtained from the sale or redemption of certain marketable securities, most of which ($7.5 million) was reinvested in higher yielding marketable securities. The net inflows were offset by the acquisition of capital equipment for approximately $1.1 million and an approximately $300,000 investment in 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 nine months ended January 31, 2002, was $2.3 million. This amount includes payment of the Company's semiannual dividend in the aggregate amount of $1.7 million. In addition, the Company made scheduled debt payments of $509,000. Offsetting the cash outflows is approximately $96,000 received on the exercise of stock options to acquire approximately 14,000 shares of Company stock. At January 31, 2002, the Company's backlog amounted to approximately $34 million, as compared to the backlog at April 30, 2001 of $39 million. Approximately 65% of the backlog represent orders for the Commercial Communications segment, 20% for the Gillam-FEI segment and 15% 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, dated March 6, 2002, containing disclosure under Item 5 thereof (declaration of semi-annual dividend), was filed with the Securities and Exchange Commission.
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: March 15, 2002 BY /s/ Joseph P. Franklin ---------------------- Joseph P. Franklin Chairman of the Board of Directors Date: March 15, 2002 BY /s/Alan Miller --------------- Alan Miller Chief Financial Officer and Controller