Notes to Financial Statements
(unaudited)

April 28, 1995

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION -- The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month period ending April 28, 1995 are not necessarily indicative of the results that may be expected for the year ending October 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in the Registrant Company's annual report on Form 10-K for the year ended October 31, 1994.

EARNINGS PER SHARE -- Net income per share is computed using the weighted average number of shares of common stock outstanding and common equivalent shares from stock options (using the treasury stock method).

INVESTMENTS -- Effective November 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments in Debt and Equity Securities." In accordance with SFAS 115, prior period financial statements have not been restated to reflect the change in accounting principle. The impact of adoption at November 1, 1994 was immaterial.

As of April 28, 1995, investments consist of U.S. Treasury securities and are classified as held-to maturity. Such investments are carried at cost, net of amortized purchased discount/premium, which approximates market.

The components of inventories consist of the following (in thousands):

                                   April 28, 1995     October 31, 1994

          Raw Materials               $   464               $   253

          Work in Process               6,957                 2,174

          Finished Goods                  297                   231
                                      _______               _______

                                        7,718                 2,658

          Precontract Costs               843                    56
                                      _______               _______

                                      $ 8,561               $ 2,714

Under the Company's accounting practice, the Company records contract revenues and costs for interim reporting purposes based on annual targeted indirect (overhead and general and administrative) rates. At year end, the revenues and costs are adjusted for actual indirect rates. During the interim reporting periods variances may accumulate between the actual indirect rates and the annual targeted rates. All timing-related indirect spending variances are inventoried as part of work in process during these interim reporting periods. These rates are reviewed regularly and any permanent variances are reflected in the income statement as they become known. At April 28, 1995, the inventoried variance was $3,245,989 ($9,716 at April 29, 1994) and was included in work in process. At October 31, 1994, the variance was zero since all revenues and costs were recorded at the actual indirect rates for each fiscal year end.

The remaining $2.6 million growth in inventory is the result of the Company-authorized buildup of product inventory to support the needs of the government for quick-reaction off-the-shelf product sales.

On to Item 2

Return to | Form 10-Q Index

Return to Pre EDGAR Filings