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 September 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 November 9, 1999.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
I N D E X
PAGE(S)
PART I. FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEETS -
September 30, 1999 and March 31, 1999 3
CONSOLIDATED STATEMENTS OF INCOME -
Six months and three months ended September 30, 1999 and 1998 4
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY -
Six months ended September 30, 1999 5
CONSOLIDATED STATEMENTS OF CASH FLOWS -
Six months ended September 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
- SEPTEMBER 30, 1999 and MARCH 31, 1999 -
SEPT 30, 1999 MARCH 31,1999
Unaudited
========================================
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,319,689 $1,572,423
U. S. Treasury Bills 1,761,346 1,775,933
Accounts receivable, net of
allowance for doubtful accts.
Sept-$53,000/March-$35,000 645,203 603,248
Inventories 3,352,992 3,522,579
Prepaid expenses 332,702 660,842
Deferred taxes 148,000 132,000
---------------------------------
TOTAL CURRENT ASSETS 7,559,932 8,267,025
---------------------------------
PROPERTY, PLANT & EQUIPMENT:
Land & land improvements 246,841 246,841
Building 617,474 617,670
Machinery & equipment 1,917,304 2,017,084
----------------------------------
2,781,619 2,881,595
Less accumulated depreciation 2,156,865 2,150,315
----------------------------------
NET PROPERTY, PLANT & EQUIPMENT 624,754 731,280
----------------------------------
OTHER ASSETS 518,675 492,149
----------------------------------
NOTE RECEIVABLE 518,750 510,000
Less deferred portion (518,750) (510,000)
----------------------------------
0 0
----------------------------------
TOTAL ASSETS $8,703,361 $9,490,454
===================================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $119,000 $119,000
Accounts payable 114,627 288,029
Accrued expenses 279,431 297,754
Deposits from customers 126,585 76,745
---------------------------------
TOTAL CURRENT LIABILITIES 639,643 781,528
---------------------------------
LONG-TERM DEBT, net of current portion 592,697 649,287
---------------------------------
<PAGE>
SHAREHOLDERS' EQUITY:
Common stock, $.01-2/3 par;
authorized 9,000,000 shares;
issued 4,384,161 73,084 73,084
Additional paid-in capital 3,502,092 3,502,092
Retained earnings 5,756,496 6,345,114
-----------------------------------
9,331,672 9,920,290
Less shares held in treasury at cost:
401,764 shares Sept '99 and Mar '99 1,860,651 1,860,651
-----------------------------------
TOTAL SHAREHOLDERS' EQUITY 7,471,021 8,059,639
-----------------------------------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $8,703,361 $9,490,454
===================================
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
SIX (6) MONTHS THREE (3) MONTHS
9/30/99 9/30/98 9/30/99 09/30/98
==========================================
<S> <C> <C> <C> <C>
NET SALES $1,787,641 $4,364,794 $975,216 $2,166,029
COST OF PRODUCTS SOLD 1,498,037 2,995,766 793,025 1,453,429
---------------------------------------------
GROSS PROFIT 289,604 1,369,028 182,191 712,600
---------------------------------------------
OPERATING EXPENSES:
Selling 493,976 621,880 264,084 298,664
General and administrative 530,914 559,758 305,237 297,250
Research and development 173,507 207,208 97,022 106,929
--------------------------------------------
TOTAL OPERATING EXPENSES 1,198,397 1,388,846 666,343 702,843
--------------------------------------------
INCOME (LOSS) FROM OPERATIONS (908,793) (19,818)(484,152) 9,757
--------------------------------------------
OTHER INCOME (EXPENSE), NET:
Interest expense (26,754) (41,567) (7,890) (24,060)
Interest income 84,140 127,931 43,805 66,496
Other 14,389 5,542 9,696 (2,079)
---------------------------------------------
TOTAL OTHER INCOME (LOSS), NET 71,775 91,906 45,611 40,357
---------------------------------------------
NET INCOME (LOSS)BEFORE INCOME
TAXES(BENEFIT) (837,018) 72,088 (438,541) 50,114
INCOME TAXES (BENEFIT) (248,400) 16,000 (150,250) 10,500
---------------------------------------------
NET INCOME (LOSS) ($588,618) $56,088($288,291) $39,614
=============================================
COMMON SHARE AND COMMON
SHARE EQUIVALENT OUTSTANDING
Basic 3,982,397 4,025,394 3,982,397 4,005,299
=============================================
Diluted 3,982,397 4,025,394 3,982,397 4,005,299
=============================================
EARNINGS (LOSS) PER COMMON AND
COMMON SHARE EQUIVALENT
Basic $(.15) $.01 $(.07) $.01
=============================================
Diluted $(.15) $.01 $(.07) $.01
=============================================
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED SEPTEMBER 30, 1999
(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-
3/31/1999
4,384,161 $73,084 $3,502,092 $6,345,114 401,764($1,860,651)$8,059,639
NET LOSS
FOR THE
PERIOD
(588,618) (588,618)
BALANCE-
9/30/99
-----------------------------------------------------------------------
4,384,161 $73,084 $3,502,092 $5,756,496 401,764($1,860,651)$7,471,021
=======================================================================
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX (6) MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
SIX (6) MONTHS
09/30/99 9/30/98
=========================
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (Loss) ($588,618) $56,088
Adjustments:
Depreciation 133,398 145,020
Provision for doubtful accounts 18,000 26,775
(Increase) decrease in:
Accounts receivable (59,955) (139,660)
Inventory 169,587 (269,495)
Prepaid expenses 328,140 (105,494)
Deferred taxes (16,000) (39,000)
Other assets (26,526) (79,213)
Increase (decrease) in:
Accounts payable (173,402) (194,568)
Accrued expenses (18,323) (72,842)
Deposits from customers 49,840 (149,229)
Accrued income taxes (61,857)
-----------------------
NET CASH USED IN OPERATING ACTIVITIES (183,859) (883,475)
-----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (26,872) (89,944)
Purchase of US Treasury Bills (2,185,413) (2,285,746)
Proceeds from maturities of US Treasury Bills 2,200,000 2,300,000
-----------------------
NET CASH USED IN INVESTING ACTIVITIES (12,285) (75,690)
-----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (56,590) (47,619)
Acquisition of company stock (185,952)
------------------------
NET CASH USED IN FINANCING ACTIVITIES (56,590) (233,571)
------------------------
NET DECREASE IN CASH (252,734) (1,192,736)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 1,572,423 2,529,594
------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,319,689 $1,336,858
========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period:
Interest Expense $21,375 $41,514
========================
Income Taxes $0 $242,560
========================
<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 and six month periods
ended September 30,1999 and 1998 are not necessarily indicative of the results
to be expected for the full year.
3. At September 30, 1999, cash equivalents included $1,156,650 invested
in a money market portfolio.
4. INVENTORIES consisted of the following:
Sept. 30,1999 March 31, 1999
----------------------------------
(UNAUDITED)
FINISHED GOODS $227,000 $266,000
WORK-IN-PROCESS 698,000 686,000
RAW MATERIALS 1,029,000 1,008,000
MANUFACTURED COMPONENTS 1,398,992 1,562,579
------------------------------------
$3,352,992 $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. EARNINGS 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 September
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 September 30, 1999 and
1998.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION
Although net sales for the second quarter ended September 30, 1999 of $975,000
were 20% higher than the previous quarter, net sales of $1,788,000 for the
first six months of fiscal 2000 were down 59% compared to the first six months
one year ago.
While domestic shipments totaled $609,000 for the quarter and $970,000 for the
six months ended September 30, 1999 representing 63% and 54% of total
shipments, respectively, management anticipates an increase in foreign sales
both in actual volume and as a percent of total sales as the foreign currency
problems have abated and a demand for Multichannel Multipoint Distribution
Systems (MMDS) has increased as indicated by the increase in requests for
quotes in the past three months.
A comparison of export shipments by region is as follows:
<TABLE>
<CAPTION>
Quarter Six Months
ending ending
September 30 September 30
Region 1999* 1998* 1999* 1998*
====== (000's omitted)
========================================
<S> <C> <C> <C> <C>
Asia/Pacific Rim 134 471 275 857
Middle East 43 333 200 352
South America 107 76 142 155
North America 27 44 27 187
Central America 3 46 19 85
Caribbean 19 44 91 85
Europe -- 71 23 222
Africa - 5
Other 33 64 41 74
=========================================
366 1149 818 2022
<FN>
*Based on customers with $2,500 or more of sales
</FN>
</TABLE>
The domestic market for television transmitters for MMDS service, which
historically was the Registrant's principal market, has been almost
non-existent for the last twelve months. Partially replacing this market is a
growing demand for MMDS Internet and telephony applications.
The Company shipped its initial high definition television (HDTV) transmitters
in the quarter ended September 30, 1999 and is confident this segment will
continue to grow in the next two quarters.
Also, the Company has continued its efforts to become involved in high speed
Internet service by integrating developed technology with the installation and
operation of the service. The
<PAGE>
Company is involved in raising capital to secure Federal Communications
Commission ("FCC") licenses for the domestic areas to develop 40-50 additional
high speed Internet sites.
The low volume of shipments for the quarter ended September 30, 1999 produced
a gross profit of $182,000 or 19% of net sales and increased the gross profit
to $290,000 or 16% of net sales for the six month period ended September 30,
1999. This latter amount compared to a gross profit of $1,369,000 (31% of net
sales) for the six months ended September 30, 1998.
Total operating expenses of $666,000 for the second quarter of fiscal 2000 was
5% less than the comparable quarter one year ago. Total operating expenses
for the six months ended September 30, 1999 accumulated $1,198,000 compared to
$1,389,000 for the like period one year ago.
Selling expenses for the quarter of $264,000 was $35,000 less than the
comparative quarter one year ago while expenses totaled $494,000 for the first
two quarters of the current fiscal year compared to $622,000 for the
comparable first half of the previous year. Reductions were shown in all
categories for the periods under discussion except for the travel expense as
additional expense was incurred as foreign contracts were pursued.
General and administrative expense for the second quarter ended September 30,
1999 at $305,000 was 3% higher than the second quarter ended September 30,
1998 due to expenses relating to the Registrant's continuing involvement with
new potential revenue sources. General and administrative expense for the six
months ended September 30, 1999 totaled $531,000 or 5% less than the like
period one year ago.
Research and development expenses totaled $97,000 and $174,000 for the second
quarter and first half of fiscal 2000. These costs were 9% and 16% less,
respectively, compared to the same periods for fiscal 1999. The Company is
committed to research and development in order to remain competitive in the
MMDS and HDTV industries, including digital applications for television and
high speed Internet service.
The low sales volume for the quarter and six months ended September 30, 1999
resulted in a loss from operations of $484,000 and $909,000, respectively,
compared to income from operations of $10,000 for the quarter and a loss from
operations of $20,000 for the six months ended September 30, 1998.
Interest expense for the quarter of $8,000 increased the amount for the first
six months of fiscal 2000 to $27,000 compared to $42,000 for the same period
one year ago. The reduction of interest for the current year is due primarily
to the reduction of debt. Payment of interest to the Internal Revenue Service
("IRS") of approximately $8,000 is included in the previous years' quarter and
six months.
Interest income for the quarter ended September 30, 1999 of $44,000 increased
interest income for the first two quarters of fiscal 2000 to $84,000 , a
reduction of $23,000 and $44,000 compared to the same periods, respectively,
one year ago. These reduction were due to the reduction of funds available
for investment. Also, approximately $18,000 was earned on financing sales in
the prior year.
Other income was $10,000 for the quarter and $14,000 for the first six months
ended September 30, 1999 compared to other income of $6,000 for the first six
<PAGE>
months for the previous fiscal year. A total of $13,000 was earned in the six
month period of fiscal 2000 for rental of equipment.
Net loss before income tax benefit was $439,000 for the quarter and $837,000
for the six months ended September 30, 1999. Tax benefits reduced the net
loss to $288,000 for the quarter (equal to $(.07) cents per common share
outstanding ) and $589,000 for the six months ended September 30, 1999 (equal
to $(.15) per share of common stock outstanding). The comparative amounts for
fiscal 1999 were net income of $40,000 for the second quarter and net income
of $56,000 for the first six months. Both amounts were equal to $.01 cent per
share of common stock outstanding. There are no state tax liabilities for any
of the periods under discussion since all profitable companies in the
consolidated reporting groups are domiciled in jurisdictions that do not
impose income taxes.
Cash and cash equivalents (primarily money market funds) totaled $1,320,000 as
of September 30, 1999, a reduction of $253,000 from the balance as of March
31, 1999 due primarily to the loss sustained for the first half of fiscal
2000. United States Treasury Bills decreased $15,000 during this same period
as interest was transferred to the cash account.
Accounts receivable increased from $603,000 as of March 31, 1999 to $645,000
due to the timing of payments.
Inventories decreased $170,000 for the six months ended September 30, 1999 as
internal restrictions on purchasing inventories has been maintained.
Prepaid expense totaled $333,000 as of September 30, 1999 compared to $661,000
as of March 31,1999 due primarily to the Registrant receiving $367,000 of tax
refunds. Deferred income taxes increased from $132,000 as of March 31, 1999
to $148,000 in recognition of timing differences between current and future
tax liabilities.
An amount of $27,000 of new equipment purchased during the six month period
ended September 30, 1999 was offset by depreciation of $133,000 resulting in a
net decrease of $106,000 for property, plant and equipment at September 30,
1999 compared to March 31, 1999.
Other assets increased by $27,000 from March 31, 1999 to September 30, 1999 as
an additional investment in the Company's high speed Internet service was
made.
Accounts payable balance of $288,000 as of March 31, 1999 was reduced to
$115,000 as normal payments to vendors were made and the Company maintained
its internally imposed restrictions on purchasing inventories. Accrued
expense decreased a modest $18,000 during the same period due to timing of
accruals and payments.
Long term debt, including the current portion, was reduced from $768,000 as of
March 31, 1999 to $712,000 as scheduled payments were processed.
Deposits from customers increased from $77,000 as of March 31, 1999 to
$127,000 as of September 30, 1999 indicating a modest upturn in orders.
The backlog of unsold orders totaled $454,000 as of September 30, 1999
compared to a backlog of $239,000 as of March 31, 1999. A large export order
booked in October increased the backlog to $869,000 at October 31, 1999.
<PAGE>
The Company had a total of 45 persons (including 2 part time) as of September
30, 1999, the same as of March 31, 1999. The Company does not anticipate any
sizable increase in the next three months.
The Registrant has now entered into its third quarter of fiscal 2000 and
encountered minimal software problems, all of which have been resolved.
Contingency plans for the year 2000 have been completed with the exception of
a potential failure of a power grid or public telecommunication systems which
is still in the planning stage.
Management believes that its working capital coupled with cash flow from
operations will be sufficient to fund anticipated working capital and debt
payment requirements for fiscal 2000. The Company plans to operate high speed
Internet systems which will entail outside funding.
Large corporations such as MCI WorldComm and Sprint have been acquiring MMDS
spectrum (licenses) in the past nine months. These companies will utilize
equipment currently manufactured by the Company. While this will have a
favorable effect on future sales, the improvement is not expected until the
first quarter of calendar year 2000.
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, high speed Internet, telephony and
HDTV 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
There is no information relevant to the Registrant which must be disclosed
under this item.
EMCEE BROADCAST PRODUCTS, INC.
Date: November 10, 1999 /s/ James L. DeStefano
==========================
JAMES L. DeSTEFANO
President/CEO
Date: November 10, 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> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,319,689
<SECURITIES> 1,761,346
<RECEIVABLES> 698,203
<ALLOWANCES> 53,000
<INVENTORY> 352,992
<CURRENT-ASSETS> 7,559,932
<PP&E> 2,781,610
<DEPRECIATION> 2,156,865
<TOTAL-ASSETS> 8,703,361
<CURRENT-LIABILITIES> 639,643
<BONDS> 0
<COMMON> 73,084
0
0
<OTHER-SE> 7,397,937
<TOTAL-LIABILITY-AND-EQUITY> 8,703,361
<SALES> 1,787,641
<TOTAL-REVENUES> 1,787,641
<CGS> 1,498,037
<TOTAL-COSTS> 2,696,434
<OTHER-EXPENSES> (71,775)
<LOSS-PROVISION> 18,000
<INTEREST-EXPENSE> 26,741
<INCOME-PRETAX> (837,018)
<INCOME-TAX> (248,400)
<INCOME-CONTINUING> (588,618)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (588,618)
<EPS-BASIC> (.15)
<EPS-DILUTED> (.15)
</TABLE>
