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, 1997
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 - 4,184,161 shares as of
August 4, 1997.
*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, 1997 and March 31, 1997. . . . . . . . 3
CONSOLIDATED STATEMENTS OF INCOME -
Three Months ended June 30, 1997 and 1996. . . 4
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY -
Three Months ended June 30, 1997. . . . . . . 5
CONSOLIDATED STATEMENTS OF CASH FLOWS -
Three Months ended June 30, 1997 and 1996 . . 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> PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- JUNE 30, 1997 and MARCH 31, 1997 -
JUNE 30, 1997 MARCH 31, 1997
(Unaudited)
---------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,023,911 $ 681,335
U. S. Treasury Bills 4,095,880 1,679,164
Accounts receivable, net of
allowance for doubtful accts.
June -$89,000/March-$100,000 917,451 933,535
Inventories 3,407,001 3,627,803
Prepaid expenses and deferred
taxes 257,685 379,358
Note receivable 2,500,000
---------------------------
TOTAL CURRENT ASSETS 9,701,928 9,801,195
---------------------------
PROPERTY, PLANT & EQUIPMENT:
Land & land improvements 246,841 246,841
Building 629,212 629,212
Machinery & equipment 2,028,875 2,019,717
---------------------------
2,904,928 2,895,770
Less accumulated depreciation 1,908,360 1,836,630
---------------------------
NET PROPERTY,PLANT&EQUIPMENT 996,568 1,059,140
---------------------------
OTHER ASSETS 2,175 108,173
---------------------------
NOTE RECEIVABLE 500,000 500,000
Less deferred portion (500,000) (500,000)
---------------------------
0 0
---------------------------
TOTAL ASSETS $10,700,671 $10,968,508
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $130,000 $108,000
Accounts payable 104,488 355,401
Accrued expenses 261,057 336,784
Deposits from customers 210,511 121,195
Accrued federal income taxes 448,994 554,000
----------------------------
TOTAL CURRENT LIABILITIES 1,155,050 1,475,380
<PAGE>
LONG-TERM DEBT, net of current
portion 839,391 807,189
----------------------------
SHAREHOLDERS' EQUITY:
Common stock issued, $.01-2/3 par;
authorized 9,000,000 shares 72,987 72,987
Additional paid-in capital 3,562,523 3,562,523
Retained earnings 6,432,994 6,412,703
-------------------------
10,068,504 10,048,213
Less shares held in treasury at
cost:201,579 shares June '97 and
Mar '97 1,362,274 1,362,274
-------------------------
TOTAL SHAREHOLDERS' EQUITY 8,706,230 8,685,939
-------------------------
TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $10,700,671 $10,968,508
<FN> =========================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
THREE (3) MONTHS
06/30/97 06/30/96
--------------------------
<S> <C> <C>
NET SALES $1,823,240 $ 4,299,369
COST OF PRODUCTS SOLD 1,324,334 2,734,713
---------------------------
GROSS PROFIT 498,906 1,564,656
---------------------------
OPERATING EXPENSES:
Selling 389,984 438,468
General and administrative 282,874 327,653
Research and development 110,950 69,822
---------------------------
TOTAL OPERATING EXPENSES 783,808 835,943
---------------------------
INCOME (LOSS) FROM OPERATIONS (284,902) 728,713
---------------------------
OTHER INCOME (EXPENSE), NET:
Interest expense (22,068) (18,371)
Interest income 53,305 28,305
Gain of sale of investment
securities 277,324 106,181
Other 3,032 1,327
---------------------------
TOTAL OTHER INCOME, NET 311,593 117,442
---------------------------
Net income before income taxes 26,691 846,155
INCOME TAXES 6,400 208,000
---------------------------
NET INCOME $20,291 $638,155
============================
COMMON SHARE AND COMMON
SHARE EQUIVALENT OUTSTANDING:
Primary 4,165,601 4,335,705
============================
Assuming full dilution 4,165,601 4,334,218
============================
EARNINGS PER COMMON AND
COMMON SHARE EQUIVALENT:
Primary $.01 $.15
============================
Assuming full dilution $.01 $.15
============================
<FN> SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED JUNE 30, 1997
(Unaudited)
ADDITIONAL
COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS
------------------------------------------
<S> <C> <C> <C> <C>
BAL 3/31/1997 4,378,364 $72,987 $3,562,523 $6,412,703
NET INCOME FOR
THE PERIOD 20,291
------------------------------------------------
BAL 6/30/1997 $4,378,364 $72,987 $3,562,523 $6,432,994
===============================================
</TABLE>
<TABLE>
<CAPTION>
TREASURY STOCK
SHARES AMOUNT TOTAL
-----------------------------------------
<S> <C> <C> <C>
BAL 3/31/1997 12,763 $(1,362,274) $8,685,939
NET INCOME FOR
THE PERIOD
BAL 6/30/1997 20,291
-----------------------------------------
212,763 $(1,362,274) $8,706,230
=========================================
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE (3) MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
THREE (3) MONTHS
06/30/97 06/30/96
-------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 20,291 $ 638,155
Adjustments:
Depreciation 71,730 56,652
Provision for doubtful accounts (11,000) 9,000
(Increase) decrease in:
Accounts receivable 27,084 (764,775)
Inventories 220,802 (93,767)
Prepaid expenses and deferred taxes 121,673 15,529
Other assets 105,998 60,571
Increase (decrease) in:
Accounts payable (250,913) 163,093
Accrued expenses (75,727) (71,326)
Deposits from customers 89,316 195,778
Accrued income taxes (105,006) 90,451
--------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 214,248 299,361
---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property,plant and equipment (9,158) (164,578)
Purchase of U. S. Treasury Bills (3,616,716) (217,086)
Proceeds from maturities of U.S.
Treasury Bills 1,200,000 600,000
Note receivable 2,500,000
---------------------
NET CASH PROVIDED IN INVESTING ACTIVITIES 74,126 218,336
---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long Term Debt:
New borrowings 70,000
Payments (15,798) (41,003)
Stock sold under option plans 20,229
Acquisition of company stock (1,294,240)
---------------------
NET CASH PROVIDED (USED)IN
FINANCING ACTIVITIES 54,202 (1,315,014)
NET INCREASE (DECREASE) IN CASH 342,576 (797,317)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YR 681,335 1,537,759
---------------------
<PAGE>
CASH AND CASH EQUIVALENTS AT END OF Pd. $1,023,911 $740,442
=====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period:
Interest Expense $12,258 $17,825
===================
Income Taxes $0 $108,646
===================
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE> 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 ofthe 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 onlyof 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, 1997 and 1996 are not necessarily indicative of the results to
be expected for the full year.
3. At June 30, 1997, cash held at a financial institution is in
excess of the Federal Deposit Insurance Coverage by $793,436.
4. INVENTORIES consisted of the following:
June 30,1997 March 31, 1997
(UNAUDITED)
FINISHED GOODS $ 314,000 $ 399,000
WORK-IN-PROCESS $ 647,000 $ 738,000
RAW MATERIALS $1,586,000 $1,574,000
MANUFACTURED COMPONENTS $860,001 $ 916,803
-------------------------
$3,407,001 $3,627,803
-------------------------
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.
6. OTHER ASSETS for March 31, 1997 include the balance of stock
received in exchange for an account receivable. In June 1997 this
investment was sold for a net profit of $277,324. The remainder
of other assets of $2,175 are organizational costs of
subsidiaries.
<PAGE>
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 with the balance plus interest at seven (7%) percent
payable December 16, 1996. An agreement between the parties was
executed at the end of March 1997 in which the Company received a
payment in April 1997 of $2,500,000 and a note of $500,000 to be
paid if the license is resold or a material change occurs in the
ownership of the license holder. The remaining $500,000
receivable is recorded on the balance sheet and is fully reserved
because there is no reasonable basis to evaluate the likelihood of
collection.
8. For the three months ended June 30, 1997, 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.
9. 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.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales for quarter ended June 30, 1997 totaled $1,823,000, a
decrease of 58% compared to the quarter ended June 30, 1996.
Included in the latter, which, incidentally was the second best
quarter in the Company's history, were shipments for a large
contract for Saudi Arabia. This contract was placed on hold in
July 1996 and, although approximately $834,000 of additional
shipments occurred in the remaining three quarters of fiscal 1997,
the project has been halted until frequency allocation issues are
resolved (see additional discussion under backlog of unsold orders
section of this report.)
Of the total sales for the quarter, $1,084,000 (59%) were domestic
sales, reversing a trend toward a higher percent of sales to
foreign markets. The Registrant believes that the foreign
market will dominate sales for the next two (2) years as the
domestic market holds back on developing new systems until digital
compression, which will provide more than one hundred fifty (150)
programming channels with enhanced picture quality, is proven from
a technical perspective.
Gross profit for the first quarter of fiscal 1998 which ended June
30, 1997 totaled $499,000 or 27.4% of net sales compared to
$1,565,000 or 36.4% of net sales for the quarter ended June
30, 1996. The decrease of volume for the first quarter of the
current fiscal year was the primary factor in the decrease of the
gross profit compared to the prior year's first quarter. Although
gross margin was slightly less for the sales for the contract to
Saudi Arabia in the first quarter of the prior year, unfavorable
manufacturing variances due to the lower volume in the first quarter
of fiscal 1998 produced the lower gross margin percent.
Operating expenses of $784,000 for the quarter ended June 30, 1997
was $52,000 less than the previous year's quarter. Reductions
were in all categories except research and development which, at
$111,000, exceeded the previous amount by $41,000. Included in
last years total was a credit of $50,000 for reimbursement of
non-recurring engineering costs on a new project.
Although management believes that the domestic market will not
resurge until calendar year 1998, and has reduced expenses, the
Company continues to actively pursue sales in the foreign markets
and continues its research and development programs to remain a
leader in the technical side of the industry.
<PAGE> The relatively high operating expenses and low sales volume
produced a loss from operations of $285,000 for the first quarter
of fiscal 1998 compared to income from operations of $729,000
for the same period one year ago.
The Registrant sold the balance of its investment in a wireless
cable operator (which had been purchased by BellSouth Corporation)
in June, 1997 which produced a gain of $277,000 for the
first quarter ended June 30, 1997. Interest income for the
quarter increased from $28,000 for the first quarter of fiscal
1997 to $53,000 for the first quarter of fiscal 1998 due to the
increase of cash receipts that were invested primarily in U. S.
Treasury Bills. Interest expense increased approximately $4,000
for the current quarter compared to the corresponding quarter of
the prior year. Total other income of $312,000 for the quarter
increased by $194,000 over the prior year's first quarter.
The amount of other income reversed the loss from operations to a
net income before income taxes of $27,000 for the three months
ended June 30, 1997 which compares to an amount of $846,000 for
the three months ended June 30, 1996. Estimated federal income
tax liability for the periods were $6,400 and $208,000,
respectively, resulting in net income of $20,000 for the
quarter ended June 30, 1997. Federal tax liability for both
periods under discussion are less than the "expected percent" as the
Corporation utilizes a Foreign Sales Corporation (FSC) formed
in April, 1995. There are no state income tax liability for these
periods since all profitable companies in this consolidated group
are domiciled in states which do not impose income taxes.
In April, 1997 the Company collected $2,500,000 for a note
receivable and interest. That was the primary reason that cash
and cash equivalents and U.S. Treasury Bills totaled $5,120,000
as of June 30, 1997, an increase of $2,760,000 over the amount of
$2,360,000 at March 31,1997.
Accounts receivable decreased $17,000 from $934,000 as of March
31, 1997 to $917,000 as of June 30, 1997.
Inventories were $3,407,000 as of June 30, 1997, a decrease of
$221,000 from the balance at March 31, 1997 and accounts payable
of $104,000 decreased $251,000 for the same periods as the Company
controlled purchases to reduce inventory levels to expected sales.
Prepaid expenses and deferred taxes totaled $258,000 as of June
30, 1997 or a reduction of $122,000 compared to March 31, 1997.
Concurrently, accrued federal income tax liability decreased
$105,000. Both reductions are primarily a result of a reversal of
temporary differences for federal income tax. Also, included in
the decrease of the former was a reduction of prepaid expense of
approximately $18,000 as costs associated with an industry show
were expensed.
<PAGE> Capital expenditures of $9,000 were minimal for the quarter ended
June 30, 1997 and with depreciation expense of $72,000 net
property, plant and equipment decreased from $1,059,000
as of March 31, 1997 to $997,000 as of June 30, 1997.
Other assets were $2,000 as of June 30, 1997 and decreased
$106,000 from March 31, 1997 as the investment in a wireless cable
operator was sold.
Note receivable amounts of $500,000 less the deferred portion of
the same amount for both periods ended March 31, 1997 and June 30,
1997 represent the balance due on the sale of a cellular license
in which the Registrant received $2,500,000 on April 3, 1997. No
income has been recognized for the $500,000 Note Receivable
as the timing and likelihood of collection cannot be readily
determined as of the date of this report.
Current portion of long-term debts increased from $108,000 as of
March 31, 1997 to $130,000 and the non-current portion increased
$32,000 at June 30, 1997, compared to March 31, 1997,
reflecting additional borrowing in the first quarter of fiscal
1998.
As of March 31, 1997 there were 48,050 shares of Company stock
options exercisable at $3.4375 per share. There were no options
exercised in the first quarter ended June 30, 1997.
The backlog of unsold orders at June 30, 1997 totaled $2,765,000
compared to $2,853,000 as of March 31, 1997 and $9,988,000 as of
June 30, 1996. The balance at June 30, 1996 included
approximately $7,600,000 for the sub-contract for transmitters
destined for Saudi Arabia. The amount for this contract is
$2,100,000 as of June 30, 1997 reflecting the amounts
shipped and a reduction of orders as it is anticipated that the
system will be changed to digital compression requiring less
transmitters.
The Registrant believes that its existing working capital coupled
with cash flows from operations will be sufficient to fund
anticipated working capital and debt payment requirements
for fiscal 1998.
As of June 30, 1997 the Company employed 60 people including 2
part-time employees. This total compares to 95 people including 10
part-time employees at June 30, 1996.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Any statements contained in this report which are not historical
facts are forward looking statements; and, therefore, many
important factors could cause actual results to differ materially
from those in the forward looking statements. Such factors
<PAGE>
include, but are not limited to, changes (legislative, regulatory
and otherwise) in the MMDS or LPTV industry, demand for the
Company's products (both domestically and internationally), the
development of competitive products, competitive pricing, the
timing of foreign shipments (including, but not limited to, the
resumption and/or further modification of the subcontract for
Saudi Arabia mentioned above), market acceptance of new product
introductions (including, but not limited to, the Company's
digital products), technological changes, economic conditions,
litigation and other factors, risks and uncertainties identified
in the Company's Securities and Exchange Commission filings.
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.
On January 16, 1997 the Registrant initiated a claim against a
partnership and an individual seeking judgment in the principal
amount of $2,100,000 plus interest and attorneys fees. On
March 27, 1997, the parties agreed to a settlement of $2,500,000
to be paid (and which was paid) on April 3, 1997 and an additional
$500,000 to be paid to the Company upon the occurrence of certain
events, including a sale or material change in ownership of the
obligor.
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 6, 1997 /s/ JAMES L. DeSTEFANO
-----------------------
JAMES L. DeSTEFANO
President/CEO
Date: August 6, 1997 /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-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,023,911
<SECURITIES> 4,095,880
<RECEIVABLES> 1,006,451
<ALLOWANCES> 98,000
<INVENTORY> 3,407,001
<CURRENT-ASSETS> 9,701,928
<PP&E> 2,904,928
<DEPRECIATION> 1,908,360
<TOTAL-ASSETS> 10,770,671
<CURRENT-LIABILITIES> 1,155,050
<BONDS> 0
<COMMON> 72,987
0
0
<OTHER-SE> 8,633,423
<TOTAL-LIABILITY-AND-EQUITY> 10,700,671
<SALES> 1,823,240
<TOTAL-REVENUES> 1,823,240
<CGS> 1,324,334
<TOTAL-COSTS> 2,108,142
<OTHER-EXPENSES> (311,593)
<LOSS-PROVISION> 7,500
<INTEREST-EXPENSE> 22,068
<INCOME-PRETAX> 26,691
<INCOME-TAX> 6,400
<INCOME-CONTINUING> 20,291
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,291
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
