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, 1999
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: 570-443-9575
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 - 3,982,397 shares as of August 5,
1999.
<PAGE>
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
I N D E X
PAGE(S)
PART I. FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEETS -
June 30, 1999 and March 31, 1999 3
CONSOLIDATED STATEMENTS OF INCOME (LOSS) -
Three Months ended June 30, 1999 and 1998 4
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY -
Three Months ended June 30, 1999 5
CONSOLIDATED STATEMENTS OF CASH FLOWS -
Three Months ended June 30, 1999 and 1998 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8 - 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>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- JUNE 30, 1999 and MARCH 31, 1999 -
JUNE 30, 1999 MARCH 31,1999
Unaudited
========================================
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,303,356 $1,572,423
U. S. Treasury Bills 1,783,484 1,775,933
Accounts receivable, net of allowance
for doubtful accts.June -$44,000/
March-$35,000 476,746 603,248
Inventories 3,502,569 3,522,579
Prepaid expenses 609,162 660,842
Deferred income taxes 111,000 132,000
----------------------------------
TOTAL CURRENT ASSETS 7,786,317 8,267,025
----------------------------------
PROPERTY, PLANT & EQUIPMENT:
Land & land improvements 246,841 246,841
Building 617,670 617,670
Machinery & equipment 2,024,529 2,017,084
----------------------------------
2,889,040 2,881,595
Less accumulated depreciation 2,217,013 2,150,315
----------------------------------
NET PROPERTY, PLANT & EQUIPMENT 672,027 731,280
----------------------------------
OTHER ASSETS 493,649 492,149
----------------------------------
NOTE RECEIVABLE 515,000 510,000
Less deferred portion (515,000) (510,000)
-----------------------------------
0 0
-----------------------------------
TOTAL ASSETS $8,951,993 $9,490,454
===================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $119,000 $119,000
Accounts payable 27,995 288,029
Accrued expenses 305,909 297,754
Deposits from customers 106,355 76,745
-----------------------------------
TOTAL CURRENT LIABILITIES 559,259 781,528
-----------------------------------
<PAGE>
LONG-TERM DEBT, net of current portion 633,422 649,287
-----------------------------------
SHAREHOLDERS' EQUITY:
Common stock issued, $.01-2/3 par;
authorized 9,000,000 shares;
issued-4,384,161 shares 73,084 73,084
Additional paid-in capital 3,502,092 3,502,092
Retained earnings 6,044,787 6,345,114
-----------------------------------
9,619,963 9,920,290
Less shares held in treasury at cost:
401,764 shares June '99 and Mar '99 1,860,651 1,860,651
-----------------------------------
TOTAL SHAREHOLDERS' EQUITY 7,759,312 8,059,639
-----------------------------------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $8,951,993 $9,490,454
===================================
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
=============================
THREE (3) MONTHS
06/30/99 06/30/98
=============================
<S> <C> <C>
NET SALES $812,425 $2,198,765
COST OF PRODUCTS SOLD 705,012 1,542,337
-----------------------------
GROSS PROFIT 107,413 656,428
-----------------------------
OPERATING EXPENSES:
Selling 229,892 323,216
General and administrative 225,677 262,508
Research and development 76,485 100,279
-----------------------------
TOTAL OPERATING EXPENSES 532,054 686,003
-----------------------------
LOSS FROM OPERATIONS (424,641) (29,575)
-----------------------------
OTHER INCOME (EXPENSE), NET:
Interest expense (18,864) (17,507)
Interest income 40,335 61,435
Other 4,693 7,621
------------------------------
TOTAL OTHER INCOME, NET 26,164 51,549
------------------------------
Net income (loss) before income taxes (398,477) 21,974
INCOME TAX EXPENSE (BENEFIT) (98,150) 5,500
------------------------------
NET INCOME (LOSS) $(300,327) $16,474
==============================
COMMON SHARE AND COMMON
SHARE EQUIVALENT OUTSTANDING:
Basic 3,982,397 4,039,880
==============================
Diluted 3,982,397 4,039,880
==============================
EARNINGS (LOSS) PER COMMON AND
COMMON SHARE EQUIVALENT:
Basic $(.08) Nil
==============================
Diluted $(.08) Nil
==============================
<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, 1999
(Unaudited)
ADDDITIONAL
COMMON STOCK PAID-IN RETAINED TREASURY STOCK
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
=====================================================================
==
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE -
3/31/99
4,384,161 $73,084 $3,502,092 $6,345,114 401,764($1,860,651) $8,059,639
NET LOSS
FOR THE
PERIOD (300,327) (300,327)
---------- ---------
BALANCE
6/30-/99
4,384,161 $73,084 $3,502,092 $6,044,787 401,764 ($1,860,651)$7,759,312
=======================================================================
<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, 1999 AND 1998
(Unaudited)
THREE (3) MONTHS
6/30/99 06/30/98
========================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(300,327) $16,474
Adjustments:
Depreciation 66,698 72,510
Provision for doubtful accounts 9,000 (11,500)
(Increase) decrease in:
Accounts receivable 117,502 (309,099)
Inventories 20,010 (93,386)
Prepaid expenses 51,680 20,053
Deferred income taxes 21,000 (22,000)
Other assets (1,500) (76,863)
Increase (decrease) in:
Accounts payable (260,034) (99,345)
Accrued expenses 8,155 31,721
Deposits from customers 29,610 (1,517)
Accrued federal income taxes (3,110)
------------------------
NET CASH USED IN OPERATING ACTIVITIES (238,206) (476,062)
------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (7,445) (59,989)
Purchase of U. S. Treasury Bills (607,551) (1,101,425)
Proceeds from maturities of US Treasury Bills 600,000 1,100,000
------------------------
NET CASH USED IN INVESTING ACTIVITIES (14,996) (61,414)
------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (15,865) (15,828)
Acquisition of company stock 0 (122,260)
------------------------
NET CASH USED IN FINANCING ACTIVITIES (15,865) (138,088)
------------------------
NET DECREASE IN CASH (269,067) (675,564)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR $1,572,423 2,529,594
-------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,303,356 $1,854,030
=========================
<PAGE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period:
Interest Expense $13,839 $11,687
=========================
Income Taxes $0 $0
=========================
</TABLE>
[FN]
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
[FN]
<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 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, 1999
and 1998 are not necessarily indicative of the results to be expected for the
full year.
3. At June 30, 1999, cash equivalents included $943,830 invested in a money
market portfolio.
4. INVENTORIES consisted of the following:
June 30,1999 March 31, 1999
(UNAUDITED)
FINISHED GOODS $242,000 $266,000
WORK-IN-PROCESS $677,000 $686,000
RAW MATERIALS $1,042,000 $1,008,000
MANUFACTURED COMPONENTS $1,541,569 $1,562,579
--------------------------------
$3,502,569 $3,522,579
================================
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 (LOSS) PER SHARE. Basic income (loss) per share is computed by
dividing earnings (loss) applicable to common shareholders by the weighted
average number of common shares outstanding. Diluted income (loss) per share
is similar to basic income (loss) 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, 1999 and 1998 because the assumed exercise of the
options would be anti-dilutive. The number of options and warrants that could
potentially dilute basic earnings (loss) per share that have been
excluded from the computation of diluted earnings (loss) per share were
315,200 at June 30, 1999 and 1998.
<PAGE> EMCEE BROADCAST PRODUCTS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The sales decline that started in the Registrant's third quarter of the last
fiscal year has continued into the first quarter ended June 30, 1999 for both
domestic and foreign sales.
Net sales for the first quarter ended June 30, 1999 totaled $812,000, a
decrease of 63% compared to net sales of $2,199,000 for the quarter ended
June 30, 1998. Domestic sales for the quarter ended June 30, 1999 totaled
$360,000 or 44% of shipments compared to sales of $1,326,000 (60% of total
sales) for the period one year ago as virtually no new Multichannel
Multipoint Distribution Services("MMDS") are being built. Domestic sales for
the quarter are primarily for Internet systems, low power or replacement
transmitters.
Export sales for the quarter ended June 30, 1999 totaled $452,000 or 56% of
shipments and were down 48% from the amount of shipments for the first quarter
one year earlier. The reduction of export shipments is attributed to the
economic and currency problems in foreign countries that commenced in
mid-calendar 1998.
A comparison of export shipments by region is as follows:
<TABLE>
<CAPTION>
Quarter ending June 30
Region 1999* 1998*
(000's omitted)
=========================
<S> <C> <C>
Asia/Pacific Rim 141 386
Middle East 157 19
South America 35 79
North America --- 143
Central America 16 39
Caribbean 72 41
Europe 23 151
Africa --- 5
Other 8 10
=========================
452 873
<FN>
*Based on customers with $2,500 or more of sales
</FN>
</TABLE>
<PAGE>
The Company recognizes that the domestic market for its traditional television
transmitters for MMDS service is almost non-existent and that export shipments
will not compensate for this reduction for at least the next six months.
Therefore, the Company has entered into the following two activities to
increase sales and earnings.
1. The Company is becoming involved in high speed Internet service by
integrating developed technology with the installation and operation of this
service. The Registrant has partnered with other companies to develop two
sites in the next four months. The Company further is involved in raising
capital to secure Federal Communications Commission ("FCC") licenses for
domestic areas to develop 40-50 additional high speed Internet sites.
2. The Registrant has continued its efforts in developing high
definition television (HDTV) transmitters to compete in the new service
mandated by the FCC. The Company has developed a low cost transmitter that
management believes will be well received.
The low volume of shipments and the higher ratio (34% vs. 18%) of original
equipment manufactured by others (O.E.M), for which the Company receives lower
margins, for the quarter ended June 30, 1999 reduced gross profit to $107,000
or 13% of net shipments compared to gross profit of $656,000 or 30% of net
shipments for the quarter ended June 30, 1998.
Total operating expenses of $532,000 for the first quarter of fiscal 2000
decreased 22% compared to the first quarter of the previous year. Selling
expense for the quarter ended June 30, 1999 of $230,000 was $93,000 less than
the same quarter one year ago with decreases in all major categories; however,
more than half of the decrease is due to decreases in salary and
salary related expenses.
General and administrative expense totaled $226,000 for the quarter ended June
30, 1999 compared to $263,000 for the quarter ended June 30, 1998 with the
decrease primarily in salary and related expenses.
Research and development totaled $76,000 for the first quarter of fiscal year
2000, a decrease of $24,000 compared to the first quarter of fiscal 1999.
Although the expense was less than the prior year period, the Company has
continued its efforts in developing new products for the digital Internet,
HDTV and low power transmitter services.
Although total operating expenses were reduced for this quarter compared to
the same quarter one year ago, the reduced volume of net shipments produced a
loss from operations of $425,000 for the quarter ended June 30, 1999 compared
to a loss from operations of $30,000 for the quarter ended June 30, 1998.
Interest expense for the quarter ended June 30, 1999 totaled $19,000 compared
to $18,000 for the same period one year ago. Interest income decreased from
$61,000 for the first quarter ended June 30, 1998 to $40,000 for the first
quarter ended June 30, 1999 due to the reduction of cash and cash equivalent
available for investment.
<PAGE>
Other income, net for the first quarter of fiscal 2000 totaled $26,000 and
reduced the loss from operations to a net loss before income tax benefits to
$398,000. One year ago, other income, net of $52,000 created a net profit
before income tax of $22,000.
Income tax benefits reduced the net loss to $300,000 or $.08 cents per share
outstanding for the quarter ended June 30, 1999. A tax provision of $6,000
reduced the net income to $16,000 for the quarter ended June 30, 1998. The
amount calculates to less than one half of a cent per share outstanding.
There are no state tax liabilities for either periods under discussion since
all profitable companies in the consolidated reporting group are domiciled in
jurisdictions that do not impose income taxes.
Cash and cash equivalents (consisting of a money market portfolio) decreased
$269,000 from March 31, 1999 to June 30, 1999 as cash was used primarily for
ongoing operations. United States Treasury Bills increased $8,000 to
$1,783,000 for the same period for interest and net transfers.
Accounts receivable, net of reserve for doubtful accounts, decreased from
$603,000 as of March 31, 1999 to $477,000 as of June 30, 1999 due to the
reduced sales volume. The allowance for doubtful accounts was increased from
$35,000 as of March 31, 1999 to $44,000 as of June 30, 1999 and is believed by
management to be adequate to cover anticipated losses for the fiscal year
ended March 31, 2000.
Inventories of $3,503,000 as of June 30, 1999 were reduced by $20,000 compared
to March 31, 1999. Although the Company has attempted to reduce inventories
through sales, the high content of O.E.M. shipments (which are not stocked)
hindered this endeavor for the quarter ended June 30, 1999.
Prepaid expenses decreased $52,000 from March 31, 1999 to June 30, 1999 due to
expensing a portion of shows and conventions during the first quarter ending
June 30, 1999.
Deferred income taxes decreased $21,000 during the same period due to the
timing of temporary differences.
Purchase of capital assets for the first quarter of fiscal 2000 was nominal at
$7,000 for computer equipment. Depreciation for the same period totaled
$67,000 thus reducing net property, plant and equipment from $731,000 as of
March 31, 1999 to $672,000 as of June 30, 1999.
Other assets totaled $494,000 as of June 30, 1999 which increased less than
$2,000 from the balance as of March 31, 1999 and consisted primarily of the
Registrant's investments in two high speed Internet systems. Also included in
this balance is a note receivable of $109,000 due from a principal in these
investments.
Note Receivable increased from $510,000 as of March 31, 1999 to $515,000 as of
June 30,1999 reflecting additional accrued interest. This receivable was a
settlement of a sale of a cellular license in which the Registrant received a
<PAGE>
prior payment of $2,500,000. As there is no definite collection period, and
there is not a reasonable basis to evaluate the likelihood of collection, the
full amount, including interest, is reserved.
Accounts payable was reduced from $288,000 as of March 31, 1999 to $28,000 as
of June 30,1999 reflecting timing of payments.
Accrued expenses of $305,000 as of June 30, 1999 increased a non-significant
$8,000 as compared to March 31, 1999.
Deposits from customers increased $30,000 to $106,000 as of June 30, 1999 as
the backlog, which is still depressed, did increase from $239,000 as of March
31, 1999 to $482,000 as of June 30, 1999.
Long term debt, including the current portion, decreased from $768,000 as of
March 31, 1999 to $752,000 as scheduled payments were made.
The Registrant believes that its working capital coupled with the cash flow
from operations will be sufficient to fund anticipated working capital and
debt payment requirements for fiscal 2000. However, an expected entrance and
operating high speed Internet systems will involve outside funding anticipate
to be at least $50,000,000.
Large corporations such as MCI WorldCom and Sprint have been acquiring MMDS
spectrum in the last six months. These companies will need equipment such as
manufactured by the Registrant to utilize this communication venue. While
this is expected to have a favorable impact on the Registrant's sales, this
improvement is not anticipated until the fourth quarter of
the present fiscal year.
Employment for the Company as of June 30, 1999 was 44 persons including 2 part
time employees. The Registrant does not anticipate any sizeable increase in
employment for the next three months.
The Registrant has now entered into its second quarter of fiscal Year 2000 and
has encountered minimal software problems that have been resolved.
Contingency plans for the Year 2000 related interruptions have been basically
completed. A potential failure of a power grid or public telecommunication
system, including international in nature, is still in final
planning.
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,
<PAGE>
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.
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
There is no information relevant to the Registrant which must be disclosed
under this item.
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 12 , 1999 /s/ JAMES L. DeSTEFANO
JAMES L. DeSTEFANO
President/CEO
Date: August 12, 1999 /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-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,303,356
<SECURITIES> 1,783,484
<RECEIVABLES> 520,746
<ALLOWANCES> 44,000
<INVENTORY> 3,502,569
<CURRENT-ASSETS> 7,786,317
<PP&E> 2,889,040
<DEPRECIATION> 2,217,013
<TOTAL-ASSETS> 8,951,993
<CURRENT-LIABILITIES> 559,259
<BONDS> 0
<COMMON> 73,084
0
0
<OTHER-SE> 7,886,228
<TOTAL-LIABILITY-AND-EQUITY> 8,951,993
<SALES> 812,425
<TOTAL-REVENUES> 812,425
<CGS> 705,012
<TOTAL-COSTS> 1,237,066
<OTHER-EXPENSES> (26,164)
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> 18,864
<INCOME-PRETAX> (398,477)
<INCOME-TAX> (98,150)
<INCOME-CONTINUING> (300,327)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (300,327)
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
</TABLE>
