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, 1996
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 - 4,156,935 shares as of August 6,
1996.
*formerly Electronics, Missiles & Communications, Inc.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
I N D E X
PAGE(S)
PART I. FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEETS -
June 30, 1996 and March 31, 1996 3
CONSOLIDATED STATEMENTS OF INCOME -
Three months ended June 30, 1996 and 1995 4
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY -
Three months ended June 30, 1996 5
CONSOLIDATED STATEMENTS OF CASH FLOWS -
Three months ended June 30, 1996 and 1995 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:
SIGNATURES 12
NOTE: Any questions concerning this report should be addressed to
Mr. Allan J. Harding, Vice President-Finance.
<PAGE>
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- JUNE 30, 1996 and MARCH 31, 1996 -
<CAPTION>
JUNE 30,1996 MARCH 31,1996
Unaudited
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $740,442 $1,537,759
U. S. Treasury Bills 1,186,112 1,569,026
Accounts receivable, net of allowance
for doubtful accounts --
June-$104,000/March-$95,000 2,574,763 1,818,988
Inventories 3,469,668 3,375,901
Prepaid expenses and deferred taxes 458,404 473,933
Note receivable 2,100,000 2,100,000
Less deferred portion (2,100,000) (2,100,000)
-------------------------
TOTAL CURRENT ASSETS 8,429,389 8,775,607
-------------------------
PROPERTY, PLANT & EQUIPMENT:
Land & land improvements 246,841 246,841
Building 686,814 621,215
Machinery & equipment 2,159,778 2,060,799
------------------------
3,093,433 2,928,855
Less accumulated depreciation 2,038,765 1,982,113
------------------------
NET PROPERTY, PLANT & EQUIPMENT 1,054,668 946,742
------------------------
OTHER ASSETS 154,329 214,900
------------------------
TOTAL ASSETS $9,638,386 $9,937,249
========================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $200,000 $200,000
Accounts payable 948,252 785,159
Accrued expenses 481,180 552,506
Deposits from customers 721,977 526,199
Accrued income taxes 90,451
------------------------
TOTAL CURRENT LIABILITIES 2,441,860 2,063,864
LONG-TERM DEBT, net of current portion 897,214 938,217
------------------------
SHAREHOLDERS' EQUITY:
Common stock issued, $.01-2/3 par;
authorized 9,000,000 shares 72,807 72,653
Additional paid-in capital 3,537,853 3,517,778
Retained earnings 4,034,956 3,396,801
------------------------
7,645,616 6,987,232
Less shares held in treasury at cost:
210,579 shares June 96; 7,325 shares
Mar '96 1,346,304 52,064
-----------------------
TOTAL SHAREHOLDERS' EQUITY 6,299,312 6,935,168
-----------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $9,638,386 $9,937,249
=======================
<PAGE>
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<CAPTION> THREE (3) MONTHS
06/30/96 06/30/95
<S> <C> <C>
NET SALES $4,299,369 $2,792,704
COST OF PRODUCTS SOLD 2,734,713 1,759,137
----------------------
GROSS PROFIT 1,564,656 1,033,567
----------------------
OPERATING EXPENSES:
Selling 438,468 302,198
General and administrative 327,653 265,933
Research and development 69,822 75,600
----------------------
TOTAL OPERATING EXPENSES 835,943 643,731
----------------------
INCOME FROM OPERATIONS 728,713 389,836
----------------------
OTHER INCOME (EXPENSE), NET:
Interest expense (18,371) (33,159)
Interest income 28,305 25,307
Gain on sale of investment securities 106,181
Other 1,327 23,474
----------------------
TOTAL OTHER INCOME, NET 117,442 15,622
----------------------
Net income before income taxes 846,155 405,458
INCOME TAXES 208,000 102,000
----------------------
NET INCOME $638,155 $303,458
======================
SHARES USED IN COMPUTING
EARNINGS PER COMMON SHARE
AND COMMON SHARE EQUIVALENT:
Primary 4,335,705 4,331,422
======================
Assuming full dilution 4,334,218 4,326,006
======================
EARNINGS PER COMMON AND
COMMON SHARE EQUIVALENT:
Primary $.15 $.07
=====================
Assuming full dilution $.15 $.07
=====================
<PAGE>
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED JUNE 30, 1996
(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- 4,359,381 $72,653 $3,517,778 $3,396,801 7,325 $(52,064) $6,935,168
MARCH 31,
1996
COMMON STOCK
ISSUED UNDER 8,133 154 20,075 20,229
STOCK OPTION
PLAN
TREASURY STOCK
PURCHASED 203,254 (1,294,240)(1,294,240)
NET INCOME
FOR THE PERIOD 638,155 638,155
----------------------------------------------------------------------
BALANCE- JUNE 30, 1996
4,367,514 $72,807 $3,537,853 $4,034,956 210,579 $(1,346,304) $6,299,312
=======================================================================
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE (3) MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<CAPTION>
THREE (3) MONTHS
06/30/96 06/30/95
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $638,155 $303,458
Adjustments:
Depreciation 56,652 47,505
Provision for doubtful accounts 9,000 (4,000)
(Increase) decrease in:
Accounts receivable (764,775) 352,687
Inventory (93,767) 92,636
Prepaid expenses and deferred taxes 15,529 (82,562)
Other assets 60,571 (500)
Increase (decrease) in:
Accounts payable 163,093 (366,116)
Accrued expenses (71,326) (105,397)
Deposits from customers 195,778 (136,299)
Accrued income taxes 90,451 (749,362)
------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 299,361 (647,950)
------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (164,578) (128,685)
Purchase of U. S. Treasury Bills (217,086) (9,691)
Proceeds from maturities of U.S. Treasury Bills 600,000
-----------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 218,336 (138,376)
-----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (Reduction) in long term debt (41,003) 84,656
Acquisition of treasury stock (1,294,240)
Stock sold under option plans 20,229 24,440
-----------------------
NET CASH PROVIDED BY (USED IN)FINANCING ACTIVITIES (1,315,014) 109,096
-----------------------
NET INCREASE (DECREASE) IN CASH (797,317) (677,230)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,537,759 1,440,080
-----------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $740,442 $762,850
=======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Interest Expense $17,825 $43,244
Income Taxes $108,646 $851,362
=======================
<PAGE>
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
EMCEE BROADCAST PRODUCTS, 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 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 period ended June 30, 1996
and 1995 are not necessarily indicative of the results to be expected
for the full year.
3. At June 30, 1996, cash held at a financial institution is in excess of
the Federal Deposit Insurance Coverage by $314,605. An additional
$197,432 of cash equivalents is invested in U.S. Treasury Bills.
4. INVENTORIES consisted of the following:
June 30,1996 March 31, 1996
(UNAUDITED)
FINISHED GOODS............. $270,000 $554,000
WORK-IN-PROCESS............ $833,000 $681,000
RAW MATERIALS.............. $1,858,000 $1,614,000
MANUFACTURED COMPONENTS.... $508,668 $526,901
--------------------------------------
$3,469,668 $3,375,901
======================================
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).
<PAGE>
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.
6. OTHER ASSETS include stock received in exchange for an account
receivable. In May 1996, Ten Thousand (10,000) shares (28.6%) of this
investment was sold for a net profit of $106,181. The balance of this
investment is recorded at cost. The remainder of other assets of $2,900
are organizational costs of subsidiaries.
7. During fiscal 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, 1996, the Company had an outstanding Letter of Credit
totaling $25,000. All outstanding Letters of Credit were retired in the
first quarter of fiscal 1997.
9. For the three months ended June 30, 1996, 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.On May 28, 1996, the Corporation purchased 200,000 shares of EMCEE
Broadcast Products,Inc. stock from the estate of a former director. This
stock has been recorded as Treasury Stock. In consideration of this
Agreement, the Company has issued a Non-Negotiable, Non-Transferable
Stock Warrant to the beneficiary of the estate which expires on May 22,
2001,for 200,000 shares of the Company stock at an exercise price of
$9.46875 per share.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION
Sales for the first quarter of fiscal 1997 which ended June 30, 1996 totaled
$4,299,000, an increase of $1,506,000 (54%) over the first quarter ended June
30, 1995. Continuing the trend started in fiscal 1996, export sales at
$2,584,000 were 60% of total sales. Domestic sales for the initial quarter of
fiscal 1997 were $1,715,000 compared to $1,088,000 for the quarter ended one
year ago, while export sales increased $880,000 over the like period.
<PAGE>
Included in the shipments for the quarter were $1,279,000 (30% of net sales)
for a portion of a large contract for Saudi Arabia.
This contract, which constitutes approximately 76% of the Registrant's total
backlog as of June 30, 1996 had been put on a "hold" status in July 1996 due
to frequency allocation issues. While this will have a detrimental effect for
second quarter shipments and income of the Company, additional effect will
depend upon agreements between the Contractor and the customer which are not
known as of this date.
Aided by the high volume of sales, gross profit for the quarter ended June 30,
1996 equaled $1,565,000, a 51% increase over the first quarter one year ago.
The gross profit margin was 36.4% of net sales for the current quarter,
compared to 37.0% for the first quarter of fiscal 1996. Lower pricing on the
contract mentioned above was partially offset by favorable manufacturing
variance due to the high volume of production.
Total operating expenses were $836,000 and $644,000 for the first quarters
ended June 30, 1996 and 1995, respectively. Selling expense increased
$136,000 (45%) for the first quarter compared to the same period last year due
to increased costs for foreign travel, trade shows and volume related
commissions. General and administrative expense of $328,000 for the first
quarter of fiscal 1997 increased $62,000 (23%) compared to the first quarter
of fiscal 1996 due primarily to increases in costs of recruiting, salaries,
public relations and an increase in reserve for bad debts. Research and
Development expense of $70,000 for the first quarter ended June 30, 1996
decreased $6,000 compared to the first quarter ended June 30, 1995 due
primarily to increased non-recurring engineering (NRE) payments on a new
project received in the first quarter of the current fiscal year. While total
operating expense increased in dollars for the quarter compared to the same
quarter one year ago, the amount as a percent to net sales decreased from
23.0% for the quarter ended June 30, 1995 to 19.4% for the current quarter.
Management anticipates that the trend (higher dollar amounts but lower percent
to net sales) will continue for the remainder of fiscal 1997.
Income from operations was $729,000 for the initial quarter of fiscal 1997, an
increase of $339,000 or 87% over the same period one year ago due primarily to
the increase in sales volumes.
Other income (expense) netted income of $117,000 for the quarter ended June
30, 1996 compared to net other income of $16,000 one year ago. Included in
the amount for the current fiscal year was $106,000 net proceeds on the sale
of stock of a wireless cable operator held as an investment. Interest expense
for the current quarter was $18,000 compared to $33,000 for the quarter ended
June 30, 1996 which included interest expense of approximately $8,000 in
connection with discounting a foreign letter of credit.
Net income before federal income tax liability was $846,000 and $405,000 for
the first quarter ended June 30, 1996 and 1995, respectively. Estimated
federal income tax liability for the periods were $208,000 and $102,000
respectively resulting in net income for the quarter ended June 30, 1996 of
<PAGE>
$638,000 or $.15 per common share outstanding compared to $303,000 for the
quarter ended June 30, 1995 or $.07 per common share of stock outstanding.
Federal tax liability for both periods under discussion was less than the
"expected percent" due to tax reductions effected by a Foreign Sales
Corporation (FSC) formed in April 1995. There is no state income tax
liability for the first quarter of fiscal 1996 and 1997 since all profitable
companies in this consolidated group are domiciled in states which do not
impose income taxes.
The backlog of unsold orders was $9,988,000 as of June 30, 1996 compared to
$3,246,000 at June 30, 1995 and $10,912,000 as of March 31, 1996. As we
mentioned at the beginning of this discussion, $7,600,000 of the current
backlog is for a contract for transmitters and ancillary equipment destined
for Saudi Arabia and which, for the present, is on a "hold" status. The
Company, which, as subcontractor on this project, cannot determine when this
contract will resume. However, the management believes that the industry
demand, both domestic and foreign is strong enough that any decision on this
contract would not have a damaging long-term affect on the Registrant.
Cash and cash equivalents (consisting of U.S. Treasury Bills) balance of
$740,000 and the investment in U.S. Treasury Bills of $1,186,000 at June 30,
1996 were decreased from the March 31, 1996 balance by a total of $1,180,000
due to transferring matured T-Bills to cash and utilizing the cash balance to
purchase 200,000 shares of Company stock.
Account receivables increased from $1,819,000 as of March 31, 1996 to
$2,575,000 as of June 30, 1996 reflecting a change of payment (percent of
production vs. down payments) for the contract for Saudi Arabia.
Inventories, which can fluctuate plus or minus $150,000 from month to month,
increased by $94,000 as of June 30, 1996 compared to March 31, 1996.
Prepaid expenses and deferred tax totaled $458,000 as of June 30, 1996, a
reduction of $16,000 due to amortizing a portion of convention expenses
incurred in the last quarter of fiscal 1996.
Capital equipment was purchased in the first quarter of fiscal 1997 in the
amount of $164,000 of which approximately 90% was for testing equipment for
production and research and development. Depreciation expense of $56,000
reduced net additions to $108,000 for a balance of net property plant and
equipment of $1,055,000 as of June 30, 1996 compared to $947,000 as of the
beginning of this quarter.
Other assets totaled $154,000 as of June 30, 1996, a reduction of $61,000 from
March 31, 1996 which was the amount of stock of the Company's investment in a
wireless cable operator, at cost, sold in the first quarter ended June 30,
1996.
Accounts payable increased $163,000 to $948,000 as of June 30, 1996 compared
to March 31, 1996, the increase due primarily to timing of payments.
<PAGE>
Accrued expenses were reduced by $72,000 during this same period as the
incentive bonus for officers and managers accrued as of March 31, 1996 was
paid in June 1996.
The Company's current ratio decreased from 4.25 as of March 31, 1996 to 3.45
as of June 30, 1996 due primarily to the reduction of cash used in purchasing
the Company's stock. The Registrant believes that its existing working
capital coupled with the cash flow generated from its operations, including
advance deposits on sales orders, will be sufficient to fund its anticipated
working capital and debt payment requirements for fiscal 1997. The Company
has an additional resource, a line of credit of $2,000,000 with an interest
rate of prime less 1/2%. There is no borrowing against this source of funding
as of June 30, 1996.
As of March 31, 1996, there were 65,611 shares of Company stock exercisable at
prices ranging from $.34 to $3.4375 per share under the nonqualified stock
option plans. In the first quarter ended June 30, 1996, 8,133 of these shares
were exercised which increased the balance of common stock issued and
additional paid-in capital by a total amount of $20,000.
The Company stock held in treasury amount increased from $52,000 as of March
31, 1996 to $1,346,000 as of June 30, 1996. In addition to the 200,000 shares
purchased from the estate of a former director as previously mentioned, 3,254
shares were purchased from former employees under a provision of the KSOP plan
at a cost of $32,000.
As of June 30, 1996 a total of 95 people were employed by the Company of which
10 were part- time employees. The Company does not anticipate a change of any
magnitude for the reminder of fiscal 1997.
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.
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.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC.
Date: August 9, 1996 /s/ JAMES L. DeSTEFANO
-----------------------------
JAMES L. DeSTEFANO
President/CEO
Date: August 9, 1996 /s/ ALLAN J. HARDING
----------------------------
ALLAN J. HARDING
Vice President-Finance
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000032312
<NAME> EMCEE BROADCAST PRODUCTS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 740,442
<SECURITIES> 1,186,112
<RECEIVABLES> 2,678,763
<ALLOWANCES> 104,000
<INVENTORY> 3,469,668
<CURRENT-ASSETS> 8,429,389
<PP&E> 3,093,433
<DEPRECIATION> 2,038,765
<TOTAL-ASSETS> 9,638,386
<CURRENT-LIABILITIES> 2,441,860
<BONDS> 0
<COMMON> 72,807
0
0
<OTHER-SE> 6,226,505
<TOTAL-LIABILITY-AND-EQUITY> 9,638,386
<SALES> 4,299,369
<TOTAL-REVENUES> 4,299,369
<CGS> 2,734,713
<TOTAL-COSTS> 3,570,656
<OTHER-EXPENSES> (117,442)
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> 18,371
<INCOME-PRETAX> 846,155
<INCOME-TAX> 208,000
<INCOME-CONTINUING> 638,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 638,155
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
