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 December 31, 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 - 4,351,390 shares as of February 12,
1996.
*formerly Electronics, Missiles & Communications, Inc.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
(formerly ELECTRONICS, MISSILES & COMMUNICATIONS, INC.)
I N D E X
PAGE(S)
PART I. FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEETS -
December 31, 1995 and March 31, 1995 . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF INCOME -
NINE months and three months ended
December 31, 1995 and 1994 . . . . . . . . . . . . . . . . 4
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY -
Nine months ended December 31, 1995 . . . . . . . . . . . 5
CONSOLIDATED STATEMENTS OF CASH FLOWS -
Nine months ended December 31, 1995 and 1994 . . . . . . 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . 7 - 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . 9 - 11
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-KSB . . . . . . . . . . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 12
NOTE: Any questions concerning this report should be addressed to
Mr. Allan J. Harding, Vice President-Finance.
PART I. FINANCIAL INFORMATION
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
(formerly Electronics, Missiles & Communications, Inc.)
CONSOLIDATED BALANCE SHEETS
- DECEMBER 31, 1995 and MARCH 31, 1995 -
DEC 31,
1995 MARCH 31, 1995
Unaudited
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $317,833 $1,440,080
U. S. Treasury Bills 1,567,220 580,528
Accounts Receivable, net of allowance
for doubtful accounts --
Dec - $128,000 / March - $120,000 1,753,951 1,667,495
Note Receivable 2,100,000
Less Deferred Portion (2,100,000)
0
Inventories 4,017,433 4,047,946
Prepaid expenses and deferred taxes 841,315 276,047
TOTAL CURRENT ASSETS 8,497,752 8,012,096
NOTE RECEIVABLE 2,100,000
Less Deferred portion (2,100,000)
0
PROPERTY, PLANT & EQUIPMENT:
Land & Land Improvements 246,841 246,841
Building 621,215 621,215
Machinery & equipment 2,108,564 1,972,808
2,976,620 2,840,864
Less accumulated depreciation 2,023,443 1,896,040
NET PROPERTY, PLANT & EQUIPMENT 953,177 944,824
OTHER ASSETS 215,700 215,200
TOTAL ASSETS $9,666,629 $9,172,120
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $200,000 $150,500
Accounts Payable 820,456 632,052
Accrued Expenses 363,839 415,598
Deposits from Customers 554,711 564,203
Accrued income taxes 469,638 1,041,000
TOTAL CURRENT LIABILITIES 2,408,644 2,803,353
LONG-TERM DEBT, net of current portion 969,871 1,044,243
OTHER LIABILITIES 37,827
SHAREHOLDERS' EQUITY:
Common stock issued, $.01-2/3 par;
authorized 9,000,000 shares 72,563 71,670
Additional paid-in capital 3,503,703 3,472,200
Retained earnings 2,710,756 1,801,715
6,287,022 5,345,585
Less shares held in treasury at cost:
5,313 shares Dec. 95; 3,221 shares Mar. 95 36,735 21,061
TOTAL SHAREHOLDERS' EQUITY 6,250,287 5,324,524
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $9,666,629 $9,172,120
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
(formerly Electronics, Missiles & Communications, Inc.)
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS AND THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Unaudited)
NINE(9) MONTHS THREE (3) MONTHS
12/31/95 12/31/94 12/31/95 12/31/94
<S> <C> <C> <C> <C>
NET SALES $9,523,529 $13,667,177 $3,831,978 $4,410,356
COST OF PRODUCTS SOLD 5,978,048 8,175,851 2,459,075 2,479,044
GROSS PROFIT 3,545,481 5,491,326 1,372,903 1,931,312
OPERATING EXPENSES:
Selling 1,094,625 1,123,564 381,241 344,820
General & administrative 897,969 854,716 317,970 284,940
Research and development 340,112 271,593 142,134 96,569
TOTAL OPERATING EXPENSES 2,332,706 2,249,873 841,345 726,329
INCOME FROM OPERATIONS 1,212,775 3,241,453 531,558 1,204,983
OTHER INCOME (EXPENSE), NET:
Interest expense (112,094) (87,109) (29,891) (28,419)
Interest income 73,266 36,736 29,513 19,077
Other 15,094 18,880 (15,078) 13,676
TOTAL OTHER EXPENSE, NET (23,734) (31,493) (15,456) 4,334
Net income before federal and
state income taxes 1,189,041 3,209,960 516,102 1,209,317
INCOME TAXES:
Federal 280,000 450,000 115,000 172,000
State 344,000 124,000
TOTAL INCOME TAXES 280,000 794,000 115,000 296,000
NET INCOME $909,041 $2,415,960 $401,102 $913,317
COMMON SHARES OUTSTANDING 4,394,930 4,452,419 4,406,594 4,494,810
NET INCOME PER
COMMON SHARE OUTSTANDING $0.21 $0.54 $0.09 $0.20
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
(formerly Electronics, Missiles & Communications, Inc.)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED DECEMBER 31, 1995
(Unaudited)
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 53,610 893 31,503 32,396
TREASURY STOCK PURCHASED 2,092 (15,674) (15,674)
NET INCOME FOR THE PERIOD 909,041 909,041
BALANCE - DECEMBER 31, 1995 4,353,765 $72,563 $3,503,703 $2,710,756 5,313 ($36,735) $6,250,287
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
<TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
(formerly Electronics, Missiles & Communications, Inc.)
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE (9) MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Unaudited)
NINE (9) MONTHS
12/31/95 12/31/94
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $909,041 $2,415,960
Adjustments:
Depreciation 142,515 115,953
Provision for doubtful accounts 8,000 41,100
(Increase) decrease in:
Accounts receivable (94,456) (565,544)
Inventory 30,513 (759,623)
Prepaid expenses and deferred taxes (565,268) (15,284)
Other assets (500)
Increase (decrease) in:
Accounts payable 188,404 (349,742)
Accrued expenses (51,759) 151,581
Deposits from customers (9,492) (787,581)
Accrued income taxes (571,362) 818,000
Other liabilities 37,827
NET CASH PROVIDED BY OPERATING ACTIVITIES 23,463 1,064,820
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (150,868) (286,948)
Increase in U. S. Treasury Bills (986,692)
NET CASH USED IN INVESTING ACTIVITIES (1,137,560) (286,948)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Reduction) in
Long-term Debt:
New borrowings 115,000 150,000
Payments (139,872) (116,411)
Notes payable, related parties (150,000)
Stock sold under option plans 32,396 14,191
Purchase of company stock (15,674) (17,128)
NET CASH USED IN
FINANCING ACTIVITIES (8,150) (119,348)
NET INCREASE (DECREASE) IN CASH (1,122,247) 658,524
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,440,080 1,583,929
CASH AND CASH EQUIVALENTS AT END OF PERIOD $317,833 $2,242,453
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Interest Expense 96,134 $75,676
Income Taxes 1,353,280 $8,888
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 nine-month periods ended
December 31, 1995 and 1994 are not necessarily indicative of the results
to be expected for the full year.
3. At December 31,1995, cash held at a financial institution is in excess of
the Federal Deposit Insurance Coverage by $4,116. An additional $198,000
of cash equivalents is invested in U.S. Treasury Bills.
4. INVENTORIES consisted of the following:
<TABLE>
Dec 31, 1995 March 31, 1995
(UNAUDITED)
<S> <C> <C>
FINISHED GOODS............. $591,000 $533,000
WORK-IN-PROCESS............ $897,000 $1,111,000
RAW MATERIALS.............. $1,981,000 $1,589,000
MANUFACTURED COMPONENTS.... $548,433 $814,946
$4,017,433 $4,047,946
</TABLE>
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 December 31, 1994 and
December 31, 1995 it was not material.<PAGE>
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. Other liabilities consist of deferred payment portion of a capital asset
purchased in fiscal 1996.
9. 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 December 31, 1995.
10. For the nine months ended December 31,1995 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.
11. 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
Net sales of $3,832,000 for the third quarter of fiscal 1996 (ended December 31,
1995) showed an increase of $933,000 (32%) over the previous quarter and
brought sales for the first nine months of fiscal year 1996 to $9,524,000 or 70%
of the total of $13,667,000 for the first nine months of fiscal 1995.
Export shipments were $2,224,000 (58% of total sales) for the quarter and
$4,946,000 (52%) for the nine months ended December 31, 1995 compared to
$3,019,000 (69% of total sales) and $6,323,000 (46% of total sales) for the
quarter and first nine months, respectively, for fiscal 1995. The high export
sales for the third quarter one year ago was unusual as export orders for the
entire year ended March 31, 1995 equaled 42%. Management believes that the high
export sales for the quarter is an indication of the strength of international
demand for the registrants products in the Multichannel Multipoint Distribution
Service (MMDS or "wireless cable") industry.
Gross profit for the nine months ended December 31, 1995 totaled $3,545,000
compared to $5,491,000 for the same period for the prior year. The reduction of
gross profit percent from 40.2% for the first nine months of fiscal 1995 to
37.2% for the first nine months of fiscal 1996 was due to reduction in sales
volume and the higher content of O.E.M (original equipment manufactured by
others) of 23% of total sales for fiscal 1996 compared to 15% for (the first
nine months) 1995. These items carry less of a mark-up than EMCEE manufactured
products.
Total operating expenses amounted to $841,000 for the quarter ended December
31, 1995 compared to $726,000 for the quarter ended December 31, 1994. Total
operating expenses for the nine months ended December 31, 1995 totaled
$2,333,000 compared to $2,250,000 for the same period one year ago. While
selling expense was less in fiscal 1996 compared to fiscal 1995 due to volume
sensitive costs such as commissions, other categories showed increases in
expenditures, especially research and development which, at $340,000 for the
nine month period of fiscal 1996 exceeded the same period of fiscal 1995 by
25%. Management believes that these expenses are necessary to maintain the
Company's presence in this high technology market and to react quickly to the
renewed demand, especially worldwide, that management believes is imminent.
Income from operations for the quarter ended December 31, 1995 was $532,000 and
increased the year to date amount to $1,213,000 compared to $1,205,000 and
$3,241,000 for the quarter and nine months ended December 31, 1994.
Interest expense for the nine month period ended December 31, 1995 amounted to
$112,000 compared to $87,000 for the same period one year ago due to expense for
a large export receivable on a term letter of credit discounted, and higher
expense on interest tied to prime (see further discussions in the paragraph
describing the prime lending institution).
Interest income, aided by cash infusions from profits and invested in U.S.
Treasury Bills, increased from $37,000 for the first three quarters ended
December 31, 1994 to $73,000 for the three quarters ended December 31, 1995.
Other expenses totaled $15,000 for the year to date for fiscal 1996 compared to
$19,000 for the same period for fiscal 1995.
The estimated income tax liability was accrued at $280,000 for the first nine
months ended December 31, 1995 compared to $794,000 for the first nine months of
the prior year due primarily to the reduced pre-tax income and no state income
tax liability for the nine months ended December 31, 1995. Federal tax liability
was less than the "expected percent" due to the net operating loss carry forward
and tax credits for fiscal year 1995 and formation of a Foreign Sales
Corporation (FSC) on March 27, 1995 for the fiscal year 1996. There is no
state income tax liability for the nine months ended December 31, 1995 since all
profitable companies in the consolidated group are domiciled in states which do
not impose income taxes.
The backlog of unsold orders was $2,473,000 as of December 31, 1995 compared to
$3,793,000 at September 30, 1995 and $3,162,000 at March 31, 1995. The Company
booked $2,259,000 of new orders in January 1996 which included a contract of
approximately $1,700,000 of EMCEE transmitters and associated hardware for a
twenty seven (27) city MMDS system in a foreign market. On February 7th, 1996
the company announced that a contract has been signed for supplying transmitters
and O.E.M. equipment for a forty (40) city MMDS system in the international
market for approximately $10,000,000. This contract, which will provide the
registrant with a strong core business for approximately eighteen months, is a
confirmation of the strong demand for new orders in the MMDS market, especially
the foreign market.
Positive cash flow from operations for the nine months ended December 31, 1995
was generated by net income of $909,000, depreciation of $143,000, and increases
in accounts payable of $188,000 and other of $76,000 for a total of $1,316,000.
In addition, the cash balance of $1,440,000 as of March 31, 1995 was reduced by
$1,122,000 and new long term borrowings totaled $115,000. These funds were used
to pay federal and state income taxes (both due and pre-payments) of $1,353,000,
$986,000 was transferred to a U.S. Treasury Bills investment account, and
$151,000 was used for capital equipment.
Inventories totaled $4,017,000 as of December 31, 1995, approximately the same
as the March 31, 1995 balance of $4,048,000.
Other assets as of December 31, 1995 totaled $215,700 compared to $215,200 at
March 31, 1995. Of these amounts, $212,000 represented the registrants
investment in a wireless cable operator which has a market value in excess of
$350,000.
The primary lending institution used by Company has agreed to increase the
registrants line of credit to $2,000,000 with a reduced interest rate of one-
half percent under prime rate. This source of funding has not been utilized
since December, 1993. This financial institution has also agreed to reduce the
lending rates for long term loans to prime plus one-quarter percent for
equipment loans and prime plus three-eighths percent for mortgage based loans.
The agreements for these loans will be finalized by February 29, 1996 and will
be retroactive to October 26, 1995.
The Company believes that its working capital fundings (including deposits on
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 and fiscal 1997.
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 nine months of fiscal year 1996, options for
53,610 shares were exercised which increased common stock issued by $893 and
additional paid-in capital by $31,503. Subsequent to the end of the third
quarter and up to the date of this report, an additional 4,950 shares of common
stock was issued under these options for a total proceeds amount of $13,293.
The Company sponsors an ESOP plan in which the Company will purchase stock
issued to employees from the plan upon termination of employment. Two thousand
ninety-two (2,092) shares were purchased and held as treasury stock during the
first nine months ended December 31, 1995 at a cost of $15,674. An additional
2,012 shares were purchased, at a cost of $15,329, between December 31, 1995 and
the date of this report.
Total employment, including eight part-time employees, amounted to 88 as of
December 31, 1995 compared to 89 as of March 31, 1995 and the Company's recent
high of 95 at December 31, 1994. The Company anticipates total employment,
including part-time employees, will approach 100 by the fiscal 1996 year end
of March 31.
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 November 22, 1995 was filed with the Securities & Exchange
Commission to announce the election of Richard J. Nardone, on November 13, 1995,
by unanimous vote, by the Registrants' Board of Directors consisting of a
quorum, as a member of the Registrants' 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.
EMCEE BROADCAST PRODUCTS, INC.
DATE: February 8, 1996 /s/ JAMES L. DeSTEFANO
JAMES L. DeSTEFANO
President/CEO
Date: February 8, 1996 /s/ ALLAN J. HARDING
ALLAN J. HARDING
Vice President-Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 3rd Quarter
10-Q for EMCEE Broadcast Products, Inc. for 1995 and is qualified in its
entirety by reference to such 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> DEC-31-1995
<CASH> 317,833
<SECURITIES> 1,567,220
<RECEIVABLES> 1,881,951
<ALLOWANCES> 128,000
<INVENTORY> 4,017,433
<CURRENT-ASSETS> 8,497,752
<PP&E> 2,976,620
<DEPRECIATION> 2,023,443
<TOTAL-ASSETS> 9,666,629
<CURRENT-LIABILITIES> 2,408,644
<BONDS> 0
0
0
<COMMON> 72,563
<OTHER-SE> 6,177,724
<TOTAL-LIABILITY-AND-EQUITY> 9,666,629
<SALES> 9,523,529
<TOTAL-REVENUES> 9,523,529
<CGS> 5,978,048
<TOTAL-COSTS> 8,310,754
<OTHER-EXPENSES> 15,094
<LOSS-PROVISION> 8,000
<INTEREST-EXPENSE> 112,094
<INCOME-PRETAX> 1,189,041
<INCOME-TAX> 280,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 909,041
<EPS-PRIMARY> .21
<EPS-DILUTED> 0
</TABLE>
