UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act
of 1934.
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
COMMISSION FILE NUMBER: 1-6299
ELECTRONICS, MISSILES & COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 13-1926296
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
P. O. BOX 68/WHITE HAVEN, PA 18661-0068
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE AND ZIP CODE)
(REGISTRANT'S PHONE NUMBER, INCLUDING AREA CODE): (717) 443-9575
Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding twelve (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 the latest practicable date: 4,338,033 SHARES OF COMMON
STOCK, PAR VALUE $.01-2/3 PER SHARE, AS OF AUGUST 7, 1995.
This document contains fourteen (14) pages.
ELECTRONICS, MISSILES & COMMUNICATIONS, INC.
AND SUBSIDIARIES
I N D E X
PAGE(S)
PART I. FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEETS -
June 30, 1995 and March 31, 1995............... 3
CONSOLIDATED STATEMENTS OF INCOME -
Three months ended June 30, 1995 and 1994...... 4
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY -
Three months ended June 30, 1995............... 5
CONSOLIDATED STATEMENTS OF CASH FLOWS -
Three months ended June 30, 1995 and 1994..... 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...........7 - 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.....10 - 13
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-KSB.......... 14
SIGNATURES........................................... 14
NOTE: Any questions concerning this report should be addressed to
Mr. Allan J. Harding, Vice President-Finance.
PART I. FINANCIAL INFORMATION
ELECTRONICS, MISSILES & COMMUNICATIONS, INC.
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
- JUNE 30, 1995 and MARCH 31, 1995 -
<CAPTION>
ASSETS
JUNE 30, 1995 MARCH 31, 1995
Unaudited
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 762,850 $1,440,080
U. S. Treasury Bills 590,219 580,528
Accounts Receivable, net of allowance
for doubtful accounts --
June - $116,000 / March - $120,000 1,318,808 1,667,495
Inventories 3,955,310 4,047,946
Prepaid expenses and deferred taxes 358,609 276,047
TOTAL CURRENT ASSETS 6,985,796 8,012,096
NOTE RECEIVABLE 2,100,000 2,100,000
Less Deferred portion (2,100,000) (2,100,000)
0 0
PROPERTY, PLANT & EQUIPMENT:
Land & Land Inprovements 246,841 246,841
Building 621,215 621,215
Machinery & equipment 2,086,487 1,972,808
2,954,543 2,840,864
Less accumulated depreciation 1,928,539 1,896,040
NET PROPERTY, PLANT & EQUIPMENT 1,026,004 944,824
OTHER ASSETS 215,700 215,200
TOTAL ASSETS $ 8,227,500 $9,172,120
<CAPTION>
LIABILITIES & SHAREHOLDERS' EQUITY
JUNE 30, 1995 MARCH 31, 1995
Unaudited
<S> <C> <C>
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $ 200,000 $150,500
Accounts Payable 265,936 632,052
Accrued Expenses 310,201 415,598
Deposits from Customers 427,904 564,203
Accrued income taxes 291,638 1,041,000
TOTAL CURRENT LIABILITIES 1,495,679 2,803,353
LONG-TERM DEBT, net of current portion 1,079,399 1,044,243
SHAREHOLDERS' EQUITY:
Common stock issued, $.01-2/3 par;
authorized 9,000,000 shares 72,245 71,670
Additional paid-in capital 3,496,065 3,472,200
Retained earnings 2,105,173 1,801,715
5,673,483 5,345,585
Less 3,221 shares held in treasury at cost 21,061 21,061
TOTAL SHAREHOLDERS' EQUITY 5,652,422 5,324,524
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $ 8,227,500 $9,172,120
</TABLE>
ELECTRONICS, MISSILES & COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
THREE (3) MONTHS
6/30/95 6/30/94
NET SALES $2,792,704 $4,397,143
COST OF PRODUCTS SOLD 1,759,137 2,764,582
GROSS PROFIT 1,033,567 1,632,561
OPERATING EXPENSES:
Selling 302,198 373,365
General & administrative 265,933 269,336
Research and development 75,600 100,503
TOTAL OPERATING EXPENSES 643,731 743,204
INCOME FROM OPERATIONS 389,836 889,357
OTHER INCOME ( EXPENSES), NET:
Interest expense (33,159) (21,402)
Interest income 25,307 10,006
Other 23,474 1,296
TOTAL OTHER INCOME ( EXPENSE), NET 15,622 (10,100)
Net income before state and
federal income taxes 405,458 879,257
INCOME TAXES:
Federal 102,000 116,000
State 103,000
TOTAL INCOME TAXES 102,000 219,000
NET INCOME $ 303,458 $ 660,257
COMMON SHARES OUTSTANDING 4,331,422 4,246,360
NET INCOME PER
COMMON SHARE OUTSTANDING $ .07 $ .15
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ELECTRONICS, MISSILES & COMMUNICATIONS, INC.
AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED JUNE 30, 1995
(Unaudited)
<CAPTION>
ADDITIONAL
COMMON STOCK PAID -IN RETAINED TREASURY STOCK
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1995 4,300,155 $71,670 $3,472,200 $1,801,715 3,221 ($21,061) $5,324,524
COMMON STOCK ISSUED UNDER
STOCK OPTION PLAN 34,488 575 23,865 24,440
NET INCOME FOR THE PERIOD 303,458 303,458
BALANCE, JUNE 30, 1995 4,334,643 $72,245 $3,496,065 $2,105,173 3,221 ($21,061) $5,652,422
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ELECTRONICS, MISSILES & COMMUNICATIONS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
THREE (3) MONTHS
6/30/95 6/30/94
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 303,458 $ 660,257
Adjustments:
Depreciation 47,505 40,900
Provision (reduction) for doubtful accounts (4,000) 12,500
(Increase) decrease in:
Accounts Receivable 352,687 (733,739)
Inventory 92,636 (622,020)
Prepaid Expenses and Deferred Taxes (82,562) (33,504)
Other Assets (500)
Increase (decrease) in:
Accounts Payable (366,116) 105,139
Accrued Expenses (105,397) 289,496
Deposits from Customers (136,299) 210,038
Accrued income taxes (749,362)
NET CASH USED IN OPERATING ACTIVITIES (647,950) (70,933)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Plant and Equipment (128,685) (81,650)
Increase in U. S. Treasury Bills (9,691)
NET CASH USED IN INVESTING ACTIVITIES (138,376) (81,650)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Reduction) in
Long-term Debt 84,656 (28,129)
Notes Payable, related parties (100,000)
Stock sold under option plans 24,440
NET CASH PROVIDED BY (USED IN) FINANCING 109,096 (128,129)
ACTIVITIES
NET DECREASE IN CASH (677,230) (280,712)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,440,080 1,583,929
CASH AND CASH EQUIVALENTS AT END OF PERIOD 762,850 1,303,217
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period:
Interest Expense $ 43,244 $ 24,327
Income Taxes $ 851,362
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ELECTRONICS, MISSILES & COMMUNICATIONS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The financial information presented as of any date other than March 31 has
been prepared from the books and records of the Company without audit.
Financial information as of March 31 has been derived from the audited
financial statements of the Company, but does not include all disclosures
required by generally accepted accounting principles. In the opinion of
management, the accompanying unaudited consolidated condensed financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly Electronics, Missiles &
Communications, Inc. Missiles & Communications, Inc. and Subsidiaries'
financial position, and the results of their operations and changes in cash
flow for the periods presented.
2. The results of operations for the three-month period ended June 30, 1995
and 1994 are not necessarily indicative of the results to be expected for
the full year.
3. At June 30, 1995, cash held at a financial institution is in excess of the
Federal Deposit Insurance Coverage by $455,520. An additional $197,000 of
cash equivalents is invested in U. S. Treasury Bills. All cash on hand,
except for $10,000, is in interest-bearing accounts.
4. INVENTORIES consisted of the following:
JUNE 30,1995 MARCH 31, 1995
(UNAUDITED)
FINISHED GOODS............. $444,000 $533,000
WORK-IN-PROCESS............ $1,069,000 $1,111,000
RAW MATERIALS.............. $1,814,000 $1,589,000
MANUFACTURED COMPONENTS.... $628,310 $814,946
$3,955,310 $4,047,946
Inventories are stated at the lower of standard cost, which approximates
current actual cost (on a first-in, first-out basis) or market (net realizable
value).
5. EARNINGS PER SHARE: Primary earnings per common and common equivalent
share and earnings per common and common equivalent share assuming full
dilution are computed using the weighted average number of shares
outstanding adjusted for the incremental shares attributed to outstanding
options to purchase common stock, if dilutive. At June 30, 1995 and 1994,
it was not dilutive.
6. OTHER ASSETS consists of stock received in exchange for an account
receivable and organizational costs of a subsidiary (see M D & A for
discussion).
7. During 1992, a rural cellular license was sold for $3,100,000. The initial
payment was $845,000, net of closing costs of $155,000. The balance, which
bears interest at 7% payable at maturity, is due December 1996. Security
for the note consists of the personal guarantee of an individual. The
deferred payment and the related interest income was not recognized
because of its extended collection period and because there is no
reasonable basis to evaluate the likelihood of collection. Revenue will be
recognized upon receipt.
8. At March 31, 1995 and June 30, 1995, the Company had outstanding Letters
of Credit totaling $184,000 and $119,000.
9. For the three months ended June 30, 1995, the federal tax provision is less
than the federal statutory provision because the Company has reduced its
estimated federal tax rate used for interim reporting to recognize the
benefit of its foreign sales corporation (FSC) subsidiary.
10. LITIGATION:
In prior fiscal years, an individual who was an officer, director and
shareholder and the Company were named as defendants in various lawsuits
instituted by certain shareholders based on incidents alleged to have
occurred in the early-to-mid 1980's. Of these lawsuits, all were either
settled or were dismissed with prejudice and the appeal periods have
expired.
On July 7, 1995, one of the prior litigants initiated another claim against
the Company and another individual who is a shareholder seeking actual
damages of $700,000. In management's opinion, this claim is essentially
identical to the original lawsuit. Management, and outside counsel,
believe that the lawsuit is without merit and the Company will vigorously
defend against the litigant; however, the final outcome can not be
predicted at this time. No provision for any liability has been included
in the Consolidated Financial Statements.
ELECTRONICS, MISSILES & COMMUNICATIONS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Sales for the first quarter ended June 30, 1995 were $2,793,000, a decrease of
$1,604,000 or 36% from the first quarter ended June 30, 1994. Domestic sales
totaled $1,088,000 for the first quarter of fiscal year 1996 compared to
$3,511,000 for the same period of fiscal 1995. Export sales increased 92% to
$1,705,000 for the first quarter ended June 30, 1995 compared to the first
quarter ended June 30, 1994. A single customer, which accounted for 45% of the
first quarter sales of fiscal 1995, accounted for 3% of the total sales for the
first quarter of fiscal 1996.
Although management believes that its future long-term business will be
predominately foreign, individual quarters will fluctuate between domestic and
foreign and an individual quarter is not indicative of the total year.
Management further believes that the domestic market, including the company's
major customer, is showing indications that the demand for the company's product
will show an increase in the second quarter of fiscal 1996 and beyond, as
compared to the two previous quarters.
Gross profit for the quarter ended June 30, 1995 equaled $1,034,000 (37% to net
sales) compared to $1,633,000 (also 37% to net sales) for the first quarter of
the prior year. The increase in costs associated with reduced volume was offset
by a favorable product mix of 61% foreign shipments (for which prices are
generally higher) for the first quarter of fiscal 1996 vis-a-vis 20% foreign
shipments in the comparable quarter one year ago. In addition, manufacturing
cost reductions, initiated in the fourth quarter of fiscal 1995, reduced
manufacturing expenses for the first quarter of fiscal 1996. It must be noted
that the gross profit of 37% to net sales for the first quarter of fiscal 1996
compares to 42% for the fiscal year ended March 31, 1995.
Total operating expenses of $644,000 for the quarter ended June 30, 1995 were
$99,000 less than the amount of $743,000 for the first quarter ended June 30,
1994, although higher as a percent to net sales of 23.1 for the first quarter
of fiscal 1996 compared to 16.9% for the first quarter of fiscal 1995. Selling
expense decreased 19%; research and development, 25%; and General and
administrative 1% in dollar values for the first quarter ended June 30, 1995
compared to the like period one year ago.
Income from operations for the first quarter of fiscal 1996 was $390,000
compared to $889,000 for the first quarter one year ago.
Interest expense amounted to $33,000 for the quarter compared to $21,000 for the
like quarter last year. The primary reason for the increase was the cost of
discounting term drafts on a large export receivable. The remainder of the
increase was due to an increase in the bank's lending rates in the latter
quarter versus the former quarter.
Interest income for the period ended June 30, 1995 increased $15,000 to $25,000
compared to the same period in the previous year due to the increase of cash
balances and investments in U. S. treasury bills initiated in September, 1994.
Other income, which included a $20,000 income from the leasing of a capital
asset, totaled $23,000 for the first quarter of fiscal 1996 and brought total
Other Income (Expense), Net to an income of $16,000 compared to a net expense of
$10,000 for the like period one year ago.
Income tax liability was accrued for the first quarter of fiscal 1996 and
amounted to $102,000 compared to $219,000 for the comparable quarter a year ago.
Federal tax liability for both quarters were less than `expected percent'' due
to net operating loss carry forwards and tax credits for fiscal 1995 and reduced
taxes for a newly-formed Foreign Sales Corporation (FSC) for the current year's
first quarter. There is no state income tax liability for the first quarter of
fiscal 1996 since all profitable companies in this consolidated group are
domiciled in states which do not impose income taxes.
Net income totaled $303,000, or 7c per share, for the quarter ended June 30,
1995 compared to $660,000, or 15c per share, for the quarter ended June 30,
1994.
The backlog of unsold orders, at June 30, 1995, was $3,246,000 compared to
$3,162,000 at March 31, 1995 and $9,225,000 as of June 30, 1994. As stated
previously, management believes that the decline in industry demand that started
in December, 1994 due to reduced investment in the domestic MMDS industry has
bottomed out and that interest and inquiries, both domestic and export, have
accelerated in the last several weeks.
Cash and cash equivalents (consisting of U. S. treasury bills) decreased from
$1,440,000 as of March 31, 1994 to $763,000 as of June 30, 1995 due primarily to
the payment of federal taxes of $851,000 on June 17, 1995. U. S. treasury bills
(with contract dates of more than 90 days) increased $9,000 in the first quarter
of fiscal 1996 to $590,000 reflecting earned income for the period.
Accounts receivable, reflecting the reduction of sales volume, decreased
$348,000 to $1,319,000 for the period ended June 30, 1995. Included in the
balance was a reduction of the allowance for doubtful accounts of $4,000 in the
same period due mainly to write-offs against the reserve.
Inventories decreased approximately 2% as of June 30, 1995, compared to March
31, 1995 as purchases have been reduced to balance inventory to industry demand.
This reduction of purchases is reflected in the decrease of accounts payable
from $632,000 at March 31, 1995 to $266,000 as of June 30, 1995.
Prepaid expenses and deferred taxes increased $82,000 as of June 30, 1995
compared to the beginning of the fiscal year as deposits were required for
business insurance and sales shows and expenses for future periods.
Deposits from customers decreased $136,000 from the beginning to end of the
period ended June 30, 1995, reflecting the reduction of sales activity.
Payments of officers' and managers' bonuses, accrued at March 31, 1995, was the
primary reason for the decrease in accrued expenses by $106,000 as of June 30,
1995.
Current portion of long-term debt increased $50,000, as of June 30, 1995 from
March 31, 1995, to $200,000 due to additional borrowings of $115,000 for
equipment purchases to be paid over a five-year span.
Property, plant and equipment purchased in the first quarter of fiscal 1996
totaled $129,000. Depreciation expense for the quarter of $48,000 reduced the
net increase to $81,000. The majority of capital acquisition for the quarter
was for hardware and software for upgrading electronic data processing.
Other assets of $216,000 consists of the Company's investment in common stock in
a wireless cable operator at a cost of $212,000 and the remainder is capitalized
organizational costs of a newly-formed FSC subsidiary. The market value of the
investment in the wireless cable operation at the time of this report is in
excess of $295,000.
The Company's current ratio at June 30, 1995 was 4.67, up from 2.86 as of March
31, 1995. The Registrant believes that its working capital funds and financing
provided by its banking institution and others will be sufficient to fund its
anticipated working capital, net equipment and debt payment requirements for
fiscal 1996.
The Company has been provided a line of credit of $975,000 with an interest rate
of prime plus 1/%. This source of funding has not been used since December 31,
1993, although there is a restriction of $119,000 as of June 30, 1995 for
securing letters of credit for importing inventory items and a stand-by letter
of credit.
In December 1992, March 1994 and June 1994, the Board of Directors granted
options to officers, directors and key employees to purchase up to 350,000
shares of common stock at option prices ranging from 34c to $3.4375 per share.
At the beginning of fiscal 1996, 92,754 shares were exercisable. During the
first quarter of fiscal 1996, options for 34,488 shares were exercised which
increased common stock issued $575 and additional paid-in capital $24,000 to
$72,000 and $3,496,000, respectively. Subsequent to the end of the first
quarter of fiscal 1996 and up to the date of this report, an additional 6,611
shares were purchased under these options.
As of June 30, 1995, the Company employed 69 people of which three were part-
time employees, a reduction by 20 from employment at March 31, 1995 at 89 (of
which 7 were part-time). These lay-offs were in various production departments
as the Company maintained staff in the research and development and sales
departments to be poised for response to the anticipated increase in product
demand. Management believes that the area's labor pool is sufficient to respond
to the anticipated increase in market demand.
PART II. OTHER INFORMATION
ITEM 6(B) REPORTS ON FORM 8-KSB
Item 5. Other Events
A Form 8-K dated June 6, 1995 was filed with the Securities & Exchange
Commission announcing the death of Shirley Chalmers, a member of the
Registrant's Board of Directors and its majority shareholder, on June
1, 1995.
Item 5. Other Events
A Form 8-K dated June 6, 1995 was filed with the Securities & Exchange
Commission to announce the election of Michael J. Leib, on June 2,
1995 by unanimous vote by the Registrant's Board of Directors
consisting a quorum, as a member of the Registrant's Board of
Directors until the next annual meeting of Stockholders and until his
successor is elected and qualified.
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 thereto duly authorized.
ELECTRONICS, MISSILES &
COMMUNICATIONS, INC.
Date: August 7, 1995 /s/ JAMES L. DeSTEFANO
JAMES L. DeSTEFANO
President/CEO
Date: August 7, 1995 /s/ ALLAN J. HARDING
ALLAN J. HARDING
Vice President-Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Electronics, Missles & Communications, Inc. 10-QSB for the period ended June 30,
1995 and is qualified in its entirety by reference to such 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 762,850
<SECURITIES> 590,219
<RECEIVABLES> 1,793,417
<ALLOWANCES> 116,000
<INVENTORY> 3,955,310
<CURRENT-ASSETS> 6,985,796
<PP&E> 2,954,543
<DEPRECIATION> 1,928,539
<TOTAL-ASSETS> 8,227,500
<CURRENT-LIABILITIES> 1,495,679
<BONDS> 0
<COMMON> 72,245
0
0
<OTHER-SE> 5,601,238
<TOTAL-LIABILITY-AND-EQUITY> 8,227,500
<SALES> 2,792,704
<TOTAL-REVENUES> 2,792,704
<CGS> 1,759,137
<TOTAL-COSTS> 1,759,137
<OTHER-EXPENSES> (23,474)
<LOSS-PROVISION> 116,000
<INTEREST-EXPENSE> 33,159
<INCOME-PRETAX> 405,458
<INCOME-TAX> 102,000
<INCOME-CONTINUING> 405,458
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 303,458
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
