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 September 30, 1995
Commission file number 1-6299
EMCEE Broadcast Products, Inc.*
(Exact name of registrant as specified in its charter)
Delaware 13-1926296
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Registrant's telephone number, including area code: 717-443-9575
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 the latest practical date:
Common stock, $ .01-2/3 par value - 4,346,252 shares as of
November 8, 1995.
*formerly Electronics, Missiles & Communications, Inc.
<TABLE>
PART I. FINANCIAL INFORMATION
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
(formerly Electronics, Missiles & Communications, Inc.)
CONSOLIDATED BALANCE SHEETS
- SEPTEMBER 30, 1995 and MARCH 31, 1995 -
<CAPTION>
SEPT 30, 1995 MARCH 31, 1995
<S> Unaudited
ASSETS
CURRENT ASSETS: <C> <C>
Cash and cash equivalents $896,369 $1,440,080
U. S. Treasury Bills 1,179,251 580,528
Accounts Receivable, net of allowance
for doubtful accounts --
Sept- $125,000 / March - $120,000 1,559,097 1,667,495
Inventories 3,739,495 4,047,946
Prepaid expenses and deferred taxes 758,908 276,047
TOTAL CURRENT ASSETS 8,133,120 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 Improvements 246,841 246,841
Building 621,215 621,215
Machinery & equipment 2,096,965 1,972,808
2,965,021 2,840,864
Less accumulated depreciation 1,975,938 1,896,040
NET PROPERTY, PLANT & EQUIPMENT 989,083 944,824
OTHER ASSETS 216,700 215,200
TOTAL ASSETS $9,338,903 $9,172,120
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $200,000 $150,500
Accounts Payable 577,238 632,052
Accrued Expenses 408,406 415,598
Deposits from Customers 939,705 564,203
Accrued income taxes 354,638 1,041,000
TOTAL CURRENT LIABILITIES 2,479,987 2,803,353
LONG-TERM DEBT, net of current portion 1,001,829 1,044,243
SHAREHOLDERS' EQUITY:
Common stock issued, $.01-2/3 par;
authorized 9,000,000 shares 72,527 71,670
Additional paid-in capital 3,502,991 3,472,200
Retained earnings 2,309,654 1,801,715
5,885,172 5,345,585
Less shares held in treasury at cost:
4,099 shares 9/95; 3,221 shares 3/95 28,085 21,061
TOTAL SHAREHOLDERS' EQUITY 5,857,087 5,324,524
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $9,338,903 $9,172,120
<FN> SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
(formerly Electronics, Missiles & Communications, Inc).
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<CAPTION>
SIX (6) MONTHS THREE (3) MONTHS
9/30/95 9/30/94 9/30/95 9/30/94
<S> <C> <C> <C> <C>
NET SALES $5,691,551 $9,256,821 $2,898,847 $4,859,678
COST OF PRODUCTS SOLD 3,518,973 5,696,807 1,759,836 2,932,225
GROSS PROFIT 2,172,578 3,560,014 1,139,011 1,927,453
OPERATING EXPENSES:
Selling 713,384 778,744 411,186 405,379
General & administrative 579,999 569,776 314,066 300,440
Research and development 197,978 175,024 122,378 74,521
TOTAL OPERATING EXPENSES 1,491,361 1,523,544 847,630 780,340
INCOME FROM OPERATIONS 681,217 2,036,470 291,381 1,147,113
OTHER INCOME (EXPENSES), NET:
Interest expense (82,203) (58,690) (49,044) (37,288)
Interest income 43,753 17,659 18,446 7,653
Other 30,172 5,204 6,698 3,908
TOTAL OTHER EXPENSE, NET (8,278) (35,827) (23,900) (25,727)
Net income before state and
federal income taxes 672,939 2,000,643 267,481 1,121,386
INCOME TAXES:
Federal 165,000 278,000 63,000 162,000
State 0 220,000 0 117,000
TOTAL INCOME TAXES 165,000 498,000 63,000 279,000
NET INCOME $507,939 $1,502,643 $204,481 $842,386
COMMON SHARES OUTSTANDING 4,426,411 4,367,419 4,413,564 4,376,679
NET INCOME PER
COMMON SHARE OUTSTANDING $0.12 $0.34 $0.05 $0.19
<FN> SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
(formerly Electronics, Missiles & Communications, Inc.)
CONSOLIDATED STATEMENT OF CASH FLOW
SIX (6) MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
<CAPTION> SIX (6) MONTHS
<S> 9/30/95 9/30/94
CASH FLOWS FROM OPERATING ACTIVITIES: <C> <C>
Net income $507,939 $1,502,643
Adjustments:
Depreciation 95,010 85,780
Provision for doubtful accounts 5,000 31,500
(Increase) decrease in:
Accounts Receivable 103,398 (687,257)
Inventory 308,451 (1,304,463)
Prepaid Expenses and Deferred Taxes (482,861) (31,568)
Other Assets (1,500) 0
Increase (decrease) in:
Accounts Payable (54,814) 320,440
Accrued Expenses (7,192) 132,242
Deposits from Customers 375,502 (190,419)
Accrued income taxes (686,362) 522,000
NET CASH PROVIDED BY OPERATING ACTIVITIES 162,571 380,898
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Plant and Equipment (139,269) (204,318)
Increase in U. S. Treasury Bills (598,723) 0
NET CASH USED IN INVESTING ACTIVITIES (737,992) (204,318)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Reduction) in
Long-term Debt:
New borrowings 115,000 150,000
Payments (107,914) (92,469)
Notes Payable, related parties 0 (150,000)
Stock sold under option plans 31,648 0
Purchase of company stock (7,024) (13,608)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 31,710 (106,077)
NET INCREASE (DECREASE) IN CASH (543,711) 70,503
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,440,080 1,583,929
CASH AND CASH EQUIVALENTS AT END OF PERIOD $896,369 $1,654,432
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period:
Interest Expense $77,591 $58,288
Income Taxes $1,233,280 $7,700
<FN> SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
(formerly Electronics, Missiles & Communications, Inc.)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED SEPTEMBER 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 51,410 857 30,791 31,648
TREASURY STOCK PURCHASED 878 (7,024) (7,024)
NET INCOME FOR THE PERIOD 507,939 507,939
BALANCE-SEPTEMBER 30, 1995 4,351,565 $72,527 $3,502,991 $2,309,654 4,099 ($28,085 $5,857,087
<FN> SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
(formerly Electronics, Missiles & Communications, Inc.)
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 EMCEE Broadcast
Products, 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 and six-month periods
ended September 30, 1995 and 1994 are not necessarily indicative of the
results to be expected for the full year.
3. At September 30, 1995, cash held at a financial institution is in excess
of the Federal Deposit Insurance Coverage by $425,081. An additional
$197,000 of cash equivalents is invested in U.S. Treasury Bills. All
cash on hand, except for $34,000, is in interest-bearing accounts.
4. INVENTORIES consisted of the following:
Sept 30, 1995 March 31, 1995
(UNAUDITED)
FINISHED GOODS............. $501,000 $533,000
WORK-IN-PROCESS............ $1,008,000 $1,111,000
RAW MATERIALS.............. $1,744,000 $1,589,000
MANUFACTURED COMPONENTS.... $486,495 $814,946
$3,739,495 $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 September
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 MD&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, the Company had outstanding Letters of Credit
totaling $184,000 and $119,000. All obligations under the Letters of
Credit were satisfied as of September 30, 1995.
9. For the three months ended September 30, the federal tax provision is
less than the federal statutory 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 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 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 September 1995, a judge in the Circuit
Court of Cook County, Illinois ruled in favor of the Registrant. The
Company has no knowledge that the litigant will re-file or file new
charges against the Company. No provision for any liability has been
included in the consolidated financial statements.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
(formerly Electronics, Missiles & Communications, Inc.)
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION
Sales of $2,899,000 for the second quarter of fiscal 1996 (ended September 30,
1995) were $106,000 over the previous quarter and brought sales for the first
half of fiscal year 1996 to $5,692,000, a decrease of $3,565,000 or 39%
compared to the first half of fiscal year 1995. Domestic sales for the six-
month period totaled $2,970,000 (or 52% of total sales) compared to $5,554,000
for the same period one year ago. Export sales for the six-month period were
$2,722,000 compared to $3,703,000 sales for the first two quarters ended
September 30, 1994. A single customer, accounting for 38% of sales in the
first six months of fiscal year 1995, also accounted for 15% of the reduced
sales for the first six months of fiscal year 1996.
Management believes that the reduction of product demand (especially domestic)
that started in the third quarter of fiscal year 1995 has abated and
indications of stronger demand for the registrant's products in the Multichannel
Multipoint Distribution Service (MMDS or "wireless cable") segment are apparent.
Gross profit for the six months ended September 30, 1995 totaled $2,173,000,
or a reduction of 39% from the amount of $3,560,000 for the first six months one
year ago. Gross margin as a percent-to-sales decreased slightly in the current
six-month period to 38.2% from 38.4% for the first six months of the prior
year. An increase in the sales product mix of 48% export (for which prices are
generally higher) in the current six month period compared to 40% for the
prior fiscal year's first half almost offset additional manufacturing expenses
related to the decrease in sales volume. It must be stated that gross profit
for the full 1995 fiscal year, aided by higher volume, was 42%.
Total operating expenses of $848,000 for the second quarter of fiscal year
1996 increased these expenses for the first two quarters to $1,491,000 compared
to $1,524,000 for the first two quarters ended September 30, 1995. Although
these expenses were reduced in dollar amounts, the total increased as a percent-
to-sales from 16% at September 30, 1994 to 26% at September 30, 1995.
Selling expenses were reduced due to volume sensitive costs such as commissions
and reduction of rental costs incurred last year when a leased facility
(started in April 1994) was discontinued later in fiscal year 1995. General
and administrative expense increased both in dollar amount ($10,000) and as a
percent-to-sales due to increased expenses for the upgrade of hardware and
software for the data processing systems and an increase in legal expenses
associated with changing the name of the corporation and other on-going legal
matters.
It is management's intention to maintain operating expenses at or above the
present level, especially in the advertising, sales promotion and R&D areas in
order to keep the corporation in the forefront for the expected increase in
the demand for transmitters in the MMDS industry.
Income from operations for the six month period ended September 30, 1995 was
$681,000 compared to $2,036,000 for the like period one year ago.
Interest expense for the six month period ended September 30, 1995 totaled
$82,000 compared to $59,000 for the first six months ended September 30, 1994.
The increased expense for the current fiscal year was due to expense for a
large export receivable on a term letter of credit discounted.
Interest income, aided by an increase in down payments which are invested in
U. S. Treasury bills, totaled $44,000 for the first six months ended September
30, 1995 versus $18,000 for the first six months ended September 30, 1994.
Other income for fiscal year 1996 of $30,000 included an amount of
approximately $24,000 from the leasing of a capital asset compared to a total
other income of $5,000 for the same period of fiscal 1995.
Income tax liability was accrued for the first half of fiscal year 1996 in the
amount of $165,000 compared to $498,000 for the first half of fiscal year 1995.
Federal tax liability for both periods was less than the "expected percent" due
to net operating loss carry forwards and tax credits for fiscal year 1995 and
reduced taxes for a newly-formed Foreign Sales Corporation (FSC) for the
current fiscal period. There is no state income tax liability for the first
half of fiscal year 1996 since all profitable companies in this consolidated
group are domiciled in states which do not impose income taxes.
Net income was $508,000 - or 12 cents per share - for the first two quarters
of the fiscal year ending March 31,1996 compared to $1,503,000 - or 34 cents per
share - for the first two quarters of the fiscal year ended March 31, 1995.
The backlog of unsold orders at September 30, 1995 was $3,793,000 compared to
$3,162,000 at March 31, 1995 and $7,566,000 at September 30, 1994. An
additional amount of $2,100,000 of new orders for shipment through January
1996 has been received by the Registrant in October 1995 solidifying
management's belief in the increase in demand of the MMDS industry for the
remainder of fiscal 1996 and beyond.
Cash and cash equivalents decreased as of September 30, 1995 compared to March
31, 1995 as $600,000 was invested in U.S. Treasury bills. This investment was
possible due to: an increase in deposits from customers from $564,000 to
$940,000; a decrease of accounts receivable from $1,667,000 to $1,559,000 and
a decline in inventories from $4,048,000 to $3,739,000 as of September 30, 1995
from March 31, 1995.
Payments of state and federal income taxes during the first and second
quarters of fiscal year 1996 totaled $1,233,000, which reduced accrued income
tax liability from $1,041,000 as of March 31, 1995 to $354,000 at September 30,
1995 and increased prepaid expenses and deferred taxes to $759,000 from $276,000
for the same periods.
The current portion and deferred long-term debt totaled $1,202,000 as of
September 30, 1995 compared to $1,195,000 as of March 31, 1995. Additional
borrowings of $115,000 for equipment purchases to be paid off over a five-year
term was almost offset by principal payments of $108,000 on long-term loans
including a $50,000 accelerated payment to a local municipal authority.
Additions to property, plant and equipment totaled $139,000 for the six month
period ended September 30, 1995. Depreciation charges of $95,000 for the same
period resulted in a net increase of $44,000 for Net Property, Plant and
Equipment as of September 30, 1995 compared to March 31, 1995.
Other Assets of $217,000 as of September 30, 1995 increased $1,500 from the
beginning of the current fiscal. Of this amount, $212,000 represents the
Company's investment in a wireless cable operator which has a market value in
excess of $400,000. The remaining amount is organization costs associated
with new subsidiaries formed by the Corporation.
The primary lending institution used by the company has renewed and increased
the Registrant's line of credit to $1,000,000 from $975,000 of which $200,000
is reserved to secure letters of credit for importing inventory items and for
stand-by letters of credit. This source of funding has not been utilized
since December, 1993. The primary lending institution has also reduced the
company's interest rates, effective October 26, 1995, to one-half percent under
prime rate for the line of credit and reduced other lending rates to prime plus
one-quarter percent for equipment loans and prime plus three-eighths percent for
mortgage-based loans.
The Company believes that its working capital fundings (including deposits on
sales orders) and financing provided by its primary lending institution and
others will be sufficient to fund its anticipated working capital, new
equipment and debt payment requirements for fiscal year 1996.
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 thirty-four cents to
$3.4375 per share. At the beginning of fiscal 1996, 92,754 shares were
exercisable. During the first half of fiscal year 1996, options for 51,410
shares were exercised which increased common stock issued by $857 and
additional paid-in capital by $31,000.
The Company sponsors an ESOP plan in which the company will purchase stock
issued to employees from the plan upon termination of employment. Eight
hundred seventy-eight (878) shares were purchased and held as treasury stock
during the first six months ended September 30, 1995 at a cost of $7,024. An
additional 1,214 shares were purchased, at a cost of $8,650, between September
30, 1995 and the date of this report.
Total employment, including five part-time employees, amounted to 78 as of
September 30, 1995 compared to 89 as of March 31, 1995 and the company's
recent high of 95 at December 31, 1994. Total employment increased to 81 as of
the date of this report due to the actual and anticipated growth of product
demand.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In prior 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 September 1995, the presiding judge in the Circuit Court of
Cook County, Illinois ruled in favor of the Company to dismiss plaintiff's
complaint with prejudice. It is unknown at this time whether an appeal will be
taken.
ITEM 6. REPORTS ON FORM 8-KSB
A Form 8-K dated September 8, 1995 was filed with the Securities & Exchange
Commission to announce shareholder approval at its Annual Meeting, by majority
vote a quorum being present, to change the Registrant's name to EMCEE
Broadcast Products, Inc. and the acquiring of a new CUSIP number which is
268650-10-8.
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.
EMCEE BROADCAST PRODUCTS, INC.
Date: November 8, 1995 /s/ JAMES L. DeSTEFANO
JAMES L. DeSTEFANO
President/CEO
Date: November 8, 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 EMCEE
Broadcast Products, Inc.'s 1996 Second Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000032312
<NAME> EMCEE BROADCAST PRODUCTS, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 896,369
<SECURITIES> 1,179,251
<RECEIVABLES> 1,684,097
<ALLOWANCES> 125,000
<INVENTORY> 3,739,495
<CURRENT-ASSETS> 8,133,120
<PP&E> 2,965,021
<DEPRECIATION> 1,975,938
<TOTAL-ASSETS> 9,338,903
<CURRENT-LIABILITIES> 2,479,987
<BONDS> 0
<COMMON> 72,527
0
0
<OTHER-SE> 5,784,560
<TOTAL-LIABILITY-AND-EQUITY> 9,338,903
<SALES> 5,691,551
<TOTAL-REVENUES> 5,691,551
<CGS> 3,518,973
<TOTAL-COSTS> 5,010,334
<OTHER-EXPENSES> (30,172)
<LOSS-PROVISION> 3,000
<INTEREST-EXPENSE> 82,203
<INCOME-PRETAX> 672,939
<INCOME-TAX> 165,000
<INCOME-CONTINUING> 507,939
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 507,939
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
</TABLE>
