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, 1998
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 - 3,999,397 shares as of August 5,
1998.
*formerly Electronics, Missiles & Communications, Inc.
<PAGE<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
I N D E X
PAGE(S)
PART I. FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEETS -
June 30, 1998 and March 31, 1998 3
CONSOLIDATED STATEMENTS OF INCOME -
Three Months ended June 30, 1998 and 1997 4
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY -
Three Months ended June 30, 1998 5
CONSOLIDATED STATEMENTS OF CASH FLOWS -
Three Months ended June 30, 1998 and 1997 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 - 10
PART II. OTHER INFORMATION:
SIGNATURES 11
NOTE: Any questions concerning this report should be addressed to
Mr. Allan J. Harding, Vice President-Finance.
<PAGE>
<TABLE>
<CAPTION> PART I. FINANCIAL INFORMATION
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- JUNE 30, 1998 and MARCH 31, 1998 -
-------------------------------------
JUNE 30, 1998 MARCH 31, 1998
Unaudited
-------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,854,030 $2,529,594
U. S. Treasury Bills 2,270,974 2,269,549
Accounts receivable, net of
allowance for doubtful accts.
June -$45,000/March-$35,000 1,535,250 1,214,651
Inventories 3,531,985 3,438,599
Prepaid expenses 95,239 115,292
Deferred taxes 102,000 80,000
------------------------------------
TOTAL CURRENT ASSETS 9,389,478 9,647,685
------------------------------------
PROPERTY, PLANT & EQUIPMENT:
Land & land improvements 246,841 246,841
Building 618,686 618,686
Machinery & equipment 2,016,074 1,956,085
------------------------------------
2,881,601 2,821,612
Less accumulated depreciation 2,068,456 1,995,946
------------------------------------
NET PROPERTY, PLANT & EQUIPMENT 813,145 825,666
------------------------------------
OTHER ASSETS 288,313 211,450
------------------------------------
NOTE RECEIVABLE 500,000 500,000
Less deferred portion (500,000) (500,000)
------------------------------------
0 0
------------------------------------
TOTAL ASSETS $10,490,936 $10,684,801
====================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt 117,000 117,000
Accounts payable 212,079 311,424
Accrued expenses 365,315 333,594
Deposits from customers 258,531 260,048
Accrued federal income taxes 58,747 61,857
------------------------------------
TOTAL CURRENT LIABILITIES 1,011,672 1,083,923
------------------------------------
LONG-TERM DEBT,net of current portion 731,060 746,888
------------------------------------
<PAGE>
SHAREHOLDERS' EQUITY:
Common stock issued, $.01-2/3 par;
authorized 9,000,000 shares 73,084 73,084
Additional paid-in capital 3,502,092 3,502,092
Retained earnings 6,944,461 6,927,987
------------------------------------
10,519,637 10,503,163
Less shares held in treasury at
cost:360,764 shares June '98 and
320,764 Mar '98 1,771,433 1,649,173
-----------------------------------
TOTAL SHAREHOLDERS' EQUITY 8,748,204 8,853,990
-----------------------------------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $10,490,936 $10,684,801
====================================
<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, 1998 AND 1997
(Unaudited)
================================
THREE (3) MONTHS
06/30/98 06/30/97
================================
<S> <C> <C>
NET SALES $2,198,765 $1,823,240
COST OF PRODUCTS SOLD 1,542,337 1,324,334
--------------------------------
GROSS PROFIT 656,428 498,906
--------------------------------
OPERATING EXPENSES:
Selling 323,216 389,984
General and administrative 262,508 282,874
Research and development 100,279 110,950
--------------------------------
TOTAL OPERATING EXPENSES 686,003 783,808
--------------------------------
LOSS FROM OPERATIONS (29,575) (284,902)
--------------------------------
OTHER INCOME (EXPENSE), NET:
Interest expense (17,507) (22,068)
Interest income 61,435 53,305
Gain of sale of investment securities 277,324
Other 7,621 3,032
------------------------------
TOTAL OTHER INCOME, NET 51,549 311,593
------------------------------
Net income before income taxes 21,974 26,691
INCOME TAXES 5,500 6,400
------------------------------
NET INCOME $16,474 $20,291
------------------------------
COMMON SHARE AND COMMON
SHARE EQUIVALENT OUTSTANDING:
Basic 4,039,880 4,165,601
==============================
Diluted 4,039,880 4,165,601
==============================
EARNINGS PER COMMON AND
COMMON SHARE EQUIVALENT:
Basic Nil $.01
==============================
Diluted Nil $.01
=============================
<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, 1998
(Unaudited)
=================================================================
ADDITIONAL
COMMON STOCK PAID-IN RETAINED TREASURY STOCK
------------ ---------------
SHARES AMT CAPITAL EARNINGS SHARES AMT TOTAL
=================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
BAL-MARCH
31,1998 4,384,161 $73,084 $3,502,092 $6,927,987 320,764($1,649,173)$8,853,990
NET
INCOME
FOR THE
PERIOD 16,474 16,474
TREASURY
STOCK
PURCHASED 40,000 (122,260) (122,260)
------------------------------------------------------------------------
BAL-JUNE
30,1998
========================================================================
4,384,161 $73,084 $3,502,092 $6,944,461 360,764($1,771,433)$8,748,204
=========================================================================
<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, 1998 AND 1997
(Unaudited)
==========================
THREE (3) MONTHS
06/30/98 06/30/97
==========================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $16,474 $20,291
Adjustments:
Depreciation 72,510 71,730
Provision for doubtful accounts (11,500) (11,000)
(Increase) decrease in:
Accounts receivable (309,099) 27,084
Inventories (93,386) 220,802
Prepaid expenses 20,053 121,673
Deferred taxes (22,000)
Other assets (76,863) 105,998
Increase (decrease) in:
Accounts payable (99,345) (250,913)
Accrued expenses 31,721 (75,727)
Deposits from customers (1,517) 89,316
Accrued federal income taxes (3,110) (105,006)
-----------------------------
NET CASH PROVIDED BY(USED IN)OPERATING ACTIVITIES (476,062) 214,248
-----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant & equipment (59,989) (9,158)
Purchase of U. S. Treasury Bills (1,101,425) (3,616,716)
Proceeds from maturities of U.S.Treasury Bills 1,100,000 1,200,000
Note receivable 2,500,000
-----------------------------
NET CASH PROVIDED BY(USED IN)INVESTING ACTIVITIES (61,414) 74,126
-----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Long Term Debt:
New borrowings 70,000
Payments (15,828) (15,798)
Acquisition of company stock (122,260)
------------------------------
NET CASH PROVIDED BY(USED IN)FINANCING ACTIVITIES (138,088) 54,202
------------------------------
NET INCREASE (DECREASE) IN CASH (675,564) 342,576
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 2,529,594 681,335
------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,854,030 $1,023,911
==============================
<PAGE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Interest Expense $11,687 $12,258
=============================
Income Taxes $0 $0
=============================
<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 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, 1998
and 1997 are not necessarily indicative of the results to be expected for the
full year.
3. At June 30, 1998, cash held at financial institutions is in excess of the
Federal Deposit Insurance Coverage by $140,110.
4. INVENTORIES consisted of the following:
June 30,1998 March 31, 1998
======================================
(UNAUDITED)
FINISHED GOODS $241,000 $454,000
WORK-IN-PROCESS $1,008,000 $777,000
RAW MATERIALS $1,427,000 $1,323,000
MANUFACTURED COMPONENTS $855,985 $884,599
-----------------------------------
$3,531,985 $3,438,599
-----------------------------------
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. INCOME PER SHARE. Basic income per share is computed by dividing earnings
applicable to common shareholders by the weighted average number of common
shares outstanding. Diluted income per share is similar to basic income per
share except that the weighted average of common shares outstanding is
increased to include the number of additional common shares that would have
been outstanding if the dilutive potential common shares had been issued.
There were no dilutive potential common shares in the period ended June 30,
1998 and 1997 because the assumed exercise of the options would
be anti-dilutive.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales for the first quarter ended June 30, 1998 totaled $2,199,000, a 21%
increase over the depressed first quarter ended June 30, 1997.
Domestic shipments for the first quarter of fiscal 1999 totaled $1,326,000 or
60% compared to $1,084,000 or 59% for the first quarter one year ago.
Shipments for both of these periods are not indicative of a trend as
management believes that the export market demand will predominate for the
next two years.
Gross profit totaled $656,000 for the first quarter ended June 30, 1998, a 32%
increase over the same period last year. In addition to the higher volume for
the latest quarter, EMCEE manufactured equipment, as opposed to equipment
manufactured by others (O.E.M.), in which there are higher margins,
constituted 82% of shipments compared to 77% for the comparable
quarter one year ago.
Total operating expenses for the first quarter of fiscal 1999 equaled
$686,000, a decrease of $98,000 or 13% compared to the first quarter of fiscal
1998. Management is continuing controls on expenses as it is believed that
demand for both low power television transmitters ("LPTV") and Multichannel
Multipoint Distribution Service ("MMDS") will be reduced for at least the next
three quarters. Selling expense decreased $67,000 (17%) primarily in
salaries, salary related expense and shows and convention expense. General
and administrative expense decreased $20,000 or 7% for the periods under
discussion primarily due to a reduction of shareholder
expense in the quarter ended June 30, 1998 compared to the quarter one year
earlier. Research and development expense of $100,000 for the period ended
June 30, 1998 was $11,000 less than the period ended June 30, 1997 due to a
payment of $10,000 received for non-recurring engineering (NRE) charged to a
customer. Management is committed to continue research and development
expense at previous levels to retain a leadership role in the MMDS
industry including new concepts in high speed Internet and telephony.
Although total operating expenses were reduced, they produced a loss from
operations of $30,000 for the first three months ended June 30, 1998 compared
to a loss from operations of $285,000 for the like period ended June 30, 1997.
Total other income (expense),net was $52,000 for the first quarter of fiscal
1999 compared to $312,000 for the first quarter of fiscal 1998. The later
included a gain on the sale of an investment in a wireless cable operator of
$277,000. Interest expense for the current quarter totaled $18,000 compared
to $22,000 for the prior year first quarter; the decrease attributed to
the decrease of debt. Interest income equaled $61,000 for the period ended
June 30, 1998 versus $53,000 for the like period one year ago as interest was
earned on a segment of receivables in the most recent quarter. Other income
for the current quarter of $8,000 consisting primarily of rental income and
cancellation fees exceeded the amount of $3,000 for the first quarter of
fiscal 1998 and which had no cancellation fees.
<PAGE>
Net income before taxes was $22,000 for the first quarter of fiscal 1999
compared to $27,000 for the first quarter of fiscal 1998. Estimated federal
tax of $5,500 and $6,400 for the quarters ended June 30, 1998 and 1997,
respectively, reduced net income to $16,000 for the quarter ended June 30,
1998 and $20,000 for the quarter ended June 30, 1997. The income for the
current quarter equals $.00 per share of common shares outstanding compared to
$.01 per share for the quarter one year ago.
Cash and cash equivalents decreased $676,000 from $2,530,000 as of March
31,1998 to $1,854,000 as of June 30, 1998. The U.S. Treasury bill balance as
of June 30, 1998 of $2,771,000 was virtually unchanged from the balance of
$2,270,000 as of March 31, 1998.
The decrease in cash and cash equivalents was used primarily to finance
accounts receivable which increased from $1,215,000 as of March 31, 1998 to
$1,535,000 as of June 30, 1998 and inventory build-up of $93,000 to $3,532,000
as of June 30, 1998.
Cash was also used to reduce accounts payable balance from $311,000 at March
31, 1998 to $212,000 as of June 30, 1998.
The deferred taxes balance of $102,000 as of June 30, 1998 increased $22,000
over the balance at March 31, 1998 due to temporary timing differences.
Increase to property, plant and equipment totaled $60,000 of which
approximately $50,000 was inventory capitalized. Depreciation for the same
period amounted to $73,000 for a net reduction of $13,000 for net property,
plant and equipment as of June 30, 1998 compared to March 31, 1998.
Other assets of $288,000 as of June 30, 1998 consisted of $186,000 for an
investment in a start-up company for Internet service, a note receivable of
$100,000 from an investor in this enterprise with the remainder of the balance
consisting of organizational costs of subsidiaries of the parent corporation.
This balance increased from $211,000 as of March 31, 1998.
Note receivable of $500,000 at March 31, 1998 and June 30, 1998 represents the
balance owed the Registrant for the sale of a cellular license. As there is
no definite collection period set and because there is not a reasonable basis
of collection, the receivable is fully reserved.
Accrued expenses totaled $365,000 as of June 30, 1998 compared to $334,000 as
of March 31, 1998 with the increase due to timing differences of payroll
related accruals.
Deposits from customers of $259,000 as of June 30, 1998 was only slightly less
than the amount of $260,000 as of March 31, 1998 as was the case with accrued
federal income tax balances of $59,000 and $62,000 for the periods of June 30,
1998 and March 31, 1998,respectively.
Changes in shareholders' equity from $8,748,000 at June 30, 1998 compared to
$8,854,000 at March 30, 1998, other than the net income for the first quarter
ended June 30, 1998 is attributed to the purchase of 40,000 shares of Company
stock by a subsidiary for approximately$122,000. The Registrant has continued
this purchase program as an additional 20,000 shares have been purchased in
the open market as of the date of this report.
<PAGE>
The backlog of unsold orders amounted to $1,884,000 at June 30, 1998 compared
to $2,421,000 at March 31, 1998 and $2,765,000 at June 30, 1997. The
Registrant recognizes that the demand for product will remain low for the next
two quarters, especially in the domestic market, but is confidant that demand
for digital transmitting equipment, including Internet transmitters, will
increase by calendar 1999.
The Registrant believes that its existing working capital coupled with cash
flow from operations will be sufficient to fund anticipated working capital
and debt payment requirements for fiscal 1999.
Employment for the Company was 65 persons including 2 part-time employees as
of June 30, 1998 compared to a total of 66 persons as of March 31, 1998 and 60
persons as of June 30, 1997.
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 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, market acceptance of new product introductions (including,
but not limited to, the Company's digital and Internet products,),
technological changes, economic conditions, litigation and other factors,
risks and uncertainties identified in the Company's Securities and Exchange
Commission filings.
<PAGE>
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.
EMCEE BROADCAST PRODUCTS, INC.
Date: August 10, 1998 /s/ JAMES L. DeSTEFANO
-----------------------
JAMES L. DeSTEFANO
President/CEO
Date: August 10, 1998 /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-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 398,339
<SECURITIES> 3,726,665
<RECEIVABLES> 1,580,250
<ALLOWANCES> 45,000
<INVENTORY> 3,531,985
<CURRENT-ASSETS> 9,389,478
<PP&E> 2,881,601
<DEPRECIATION> 2,068,456
<TOTAL-ASSETS> 10,490,936
<CURRENT-LIABILITIES> 1,011,672
<BONDS> 0
<COMMON> 73,084
0
0
<OTHER-SE> 8,675,120
<TOTAL-LIABILITY-AND-EQUITY> 10,490,936
<SALES> 2,198,765
<TOTAL-REVENUES> 2,198,765
<CGS> 1,542,337
<TOTAL-COSTS> 2,228,390
<OTHER-EXPENSES> (51,549)
<LOSS-PROVISION> 11,711
<INTEREST-EXPENSE> 17,507
<INCOME-PRETAX> 21,974
<INCOME-TAX> 5,500
<INCOME-CONTINUING> 16,474
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,474
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
