SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended May 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File NO. 0-12866
CABRE CORP
(Exact name of registrant as specified in its charter)
Delaware 75-1907070
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1209 Orange Street 19801
Wilmington, Delaware (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (302) 658-7581
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, $2.00 par value
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 __
As of July 31, 1996, there were outstanding 906,511 shares of the
registrant's common stock, par value $2.00, which is the only class of
common stock of the registrant. As of that date, and based on the closing
bid price, the aggregate market value of the shares of common stock held by
non-affiliates of the registrant was approximately $427,943.
Documents Incorporated by Reference
Proxy Statement
PART I
Item 1. BUSINESS
General
On January 24, 1992 Cabre Corp, a publicly held shell corporation, acquired
all of the issued and outstanding shares of Antenna Products Corporation in
an exchange of stock.
On November 1, 1993 Cabre acquired Audile Inc. in an exchange of stock.
Cabre sold the operation to Audile employees in February 1995, and in May,
1995, based on defaulted payments on notes, wrote off remaining investments.
On November 14, 1994 Cabre formed Metal Finishing Corp and on November 30,
1994 purchased the assets of Edd's Metal Finishing Corp for a combination of
cash and deferred notes. Cabre Corp operates as a holding company with
Antenna Products Corporation, Metal Finishing Corp, and Thirco, Inc. as its
current operating subsidiaries. Cabre Corp has no other business activity.
Cabre Corp's address is 1209 Orange Street, Wilmington, Delaware 19801.
Telephone Number, (302) 658-7581.
Antenna Products Corporation
Antenna Products Corporation was incorporated in Texas in 1984 to continue a
business started in 1972 and operated as a closely held "C" corporation until
January 24, 1992. Thereafter, Antenna Products has operated as a wholly owned
subsidiary of Cabre Corp . Antenna Products address is 101 S.E. 25th Avenue,
Mineral Wells, Texas 76067. The telephone number is (817) 325-3301.
Antenna Products' principal business is to design and manufacture standard
and custom antennas, support structures, and accessories. The company's
principal products generally relate to the high frequency (HF), very high
frequency (VHF), and ultra high frequency (UHF) communication frequency
spectrums. With a diversity of communication and navigation aid products,
Antenna Products' market extends from long range communication circuits to
short range tactical communication lines and includes shipboard applications
as well as ground to air navigation and landing aids. Examples of Antenna
Products' wide variety of products include ground to air collinear antennas,
instrument landing antennas and towers, fixed system multi-port antenna
arrays, tactical quick erect antennas and masts, shipboard antenna tilting
devices, transport pallets, surveillance antennas, antenna rotators,
positioners and controls, and high power broadcast baluns.
Antenna Products' customer base is primarily government and government prime
contractor focused, although a limited industrial and commercial market
exists. Antenna Products' market is international in scope. The company
currently focuses on exploiting the domestic market and has a limited amount
of foreign sales. The specialized needs of the company's customers and the
technology required to meet those needs change constantly. Accordingly,
the company stresses its engineering, installation, service and other support
capabilities. The company uses its own sales and engineering staff to
service its principal markets. Many of the company's contracts are large
relative to total annual sales volume and therefore the composition of the
customer base is different year to year. In 1996 the U.S. Government was the
single largest customer, and accounted for 48% of the sales volume. Wilcox
Electric totaled 12% of sales, and Marconi Communications contributed 11%.
Orders for equipment in some of these product categories are in backlog and,
therefore, the U.S. Government and Wilcox Electric are expected to be major
clients again in 1997.
Antenna Products is one of many suppliers of antennas and related
manufacturing services to the government and government prime contractors.
Antenna Products competes on the basis of cost and product performance in a
market with no dominant supplier. Due to fixed-price contracts and
pre-defined contract specifications prevalent within this market, the company
competes primarily on the basis of its ability to provide state-of-the-art
solutions in the technologically demanding marketplace while maintaining its
competitive pricing.
Because most manufacturing requirements are established on a contract basis,
the majority of the inventory is work in process. Less than 20% of total
inventory is maintained in stock for delivery to customers. Some raw materials
are inventoried to support customer delivery schedules. Antenna Products
performs work for the United States Government primarily under fixed-price
prime contracts and subcontracts. Under fixed-price contracts, Antenna
Products realizes any benefit or detriment occasioned by lower or higher
costs of performance.
Antenna Products is subject to certain risks common to all companies that
derive a portion of their revenues from the United States government. These
risks include rapid changes in technology, changes in levels of government
spending, and possible cost overruns. Recognition of profits on major
contracts is based upon estimates of final performance which may change as
contracts progress. Contract prices and costs incurred are subject to
Government Procurement Regulations, and costs may be questioned by the
Government and are subject to disallowance. United States Government
contracts contain a provision that they may be terminated at any time for the
convenience of the Government. In such event, the contractor is entitled to
recover allowable costs plus any profits earned to the date of termination.
Collections are generally set in accordance with federal acquisition
standards which require payment in accordance with "Net 30" terms after
acceptance of goods. The company is not directly regulated by any
governmental agency in the United States. Most of Antenna Products'
customers, and the antenna and tower industries in general, are subject to
meeting various government standards. These performance standards
necessitate Antenna Products' ability to produce antenna designs which can be
updated to conform to customer requirements in a changing regulatory
environment. These regulations have not adversely affected operations.
Antenna Products plans to reinvest from 2% to 5% of sales in research and
development projects, and bid and proposal activities. The mix of
expenditures between the two areas in any given year is a function of the
demand for new independently developed innovative systems and the level of
requirements solicited. In 1996 Antenna Products invested 2.4% of sales to
independent research and development (R&D). The level of expenditures as a
ratio to sales is expected to continue at this level in 1997. The level of
expenditures for R&D in 1995 and 1994 were 5.0% of sales and 2.3% of sales,
respectively. The company does not consider patents to be material to its
operations nor would the loss of any patents adversely affect operations.
Metal Finishing Corp
Cabre Corp's subsidiary, Metal Finishing Corp, a Texas Corporation, purchased
the assets of Edd's Metal Finishes Corp., a Texas Corporation, on November
30, 1994. Edd's Metal Finishes Corp had been a vendor to Antenna
Products Corporation (a subsidiary of Cabre) for over ten years. Metal
Finishing Corp operates in Grand Prairie, Texas. Metal Finishing Corp offers
a wide range of metal plating, finishing, and surface enhancements.
Industries serviced range from medical, electronics, oil patch, fastener,
packaging, automotive to commercial as well as aerospace and defense
contracted work. Metal finishing is the chemical science of electrolytically
depositing thin layers of metals such as silver, zinc, cadmium, nickel or
copper to base materials such as steel, aluminum, brass etc. The deposits
created are most often utilized for added corrosion and wear resistance as
well as their ability to meet the required aesthetic values. Metal Finishing
competes on the basis of cost and quality of service in a market with
no dominant provider. Due to the nature of the service provided, inventory
consists of small amounts of chemicals and metals.
Thirco, Inc.
Thirco, Inc was formed on November 1, 1993 as a Delaware company to purchase
and lease equipment and facilities to the other operating units of Cabre.
The primary lease arrangements are with Antenna Products. Thirco will
occasionally assist in servicing the banking needs of Cabre's operating
units. Since all activity is internal to Cabre and its operating
subsidiaries, financial data is consolidated with Cabre. Thirco does not
intend to engage in any outside business transactions.
Seasonality
Cabre's businesses are not dependent on seasonal factors.
Backlog
The backlog of orders on July 31, 1996 at Antenna Products amounted to
approximately $3.1 million. Backlog of orders at July 31, 1995 was
approximately $6.1 million. About 90% of the current backlog will be
delivered in the 1997 fiscal year. As a service provider Metal Finishing has
no recorded backlog.
Raw Material Source And Supply
Cabre's operating subsidiaries' principal raw materials are steel, aluminum,
other metal alloys, plastic and composite tubing, hardware, electrical wire,
wire rope, plating chemicals, and electronic or electro-mechanical
components. The materials are commonly available from numerous sources,
including local distributors in quantities sufficient to meet the needs of
the subsidiaries. The availability and supply of raw materials is not
considered to be a problem for Antenna Products or Metal Finishing.
Employees
As of July 31, 1996, subsidiaries of Cabre employed a total of 95 employees;
85 at Antenna Products and 10 at Metal Finishing. 11 were employed in
administrative functions, 16 in engineering and support roles, and 68 in
operational categories. None of the company's employees are subject to
collective bargaining agreements.
Foreign Sales
Antenna Products' sales in international markets are primarily to foreign
governments or prime contractors to foreign governments, and as such
represents a small percentage of the overall Company annual volume. The level
of profits from and the commitment of assets to this portion of the business
is no greater or no less than that of other market segments. International
sales for 1996, 1995, and 1994 were 5.0%, 5.5%, and 4.5%, respectively, of
total sales.
Item 2. PROPERTIES
Antenna Products Corporation owns a ten acre industrial site located along US
Highway 180 in Mineral Wells, Texas. The facility consists of a main
building containing 60,000 square feet of manufacturing area and 10,000
square feet of administrative and engineering offices; a second building
containing 20,000 square feet of manufacturing and shipping area; and a third
building containing 15,000 square feet utilized for receiving and
material control. Three additional auxiliary buildings which total in excess
of 13,350 square feet are utilized for chemical etching, painting and
storage. The facilities are in good condition and with the current
complement of machinery and equipment are suitable and more than adequate to
meet production requirements. Dependent on the mix of product types in
process in any given time period, the Company could potentially more than
double output with current and planned plant, property and equipment.
Antenna Products carries a bank note on the manufacturing facility that is
amortized over twenty years ending in the year 2011.
Metal Finishing owns a 13,000 square foot facility in Grand Prairie, Texas
with state of the art plating equipment and a fully closed loop waste water
treatment system. The facilities are in good condition with ability to
increase capacity by 50 to 100% by adding additional employees. Metal
Finishing has a note payable on the plating facility with the prior owner
that is amortized over 10 years ending in the year 2004.
Thirco owns a fifty acre test site in Mineral Wells, Texas. The site
includes three buildings with 28,000 square feet of space. The space is
currently being leased to Antenna Products for test activity with some
storage of inventory. The two larger buildings, if needed, are suitable with
rearrangement and some conversion expense, for additional manufacturing
utilization.
Item 3. LEGAL PROCEEDINGS
Not Applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of fiscal year
1996.
Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of Cabre Corp are selected and/or reaffirmed by the
Board of Directors at the first meeting after the annual shareholders meeting
to serve at the discretion of the Board of Directors.
Name Age Position
- ---- --- --------
Gary W. Havener 55 President and Chief Executive Officer
Clark D. Wraight 52 Vice President and Secretary Treasurer
Gary W. Havener was elected by the Board of Directors as President and Chief
Executive Officer of Cabre Corp on January 24, 1992. Mr. Havener has served
as the Sole Director of Antenna Products Corporation since 1986. After
the resignation of Gary L. Skaggs in January 1996, Mr. Havener now serves as
the President of Antenna Products. Mr. Havener also served as the Sole
Director of Thirco, Inc. from its inception in November 1994 until January
1996. Since 1984 Mr. Havener has served as the President of Sinan Corp.
Clark D. Wraight was appointed by the Board of Directors as Vice President
and Secretary Treasurer of Cabre Corp in January 1996 following the
resignation of Gary L. Skaggs. Mr. Wraight currently serves as Vice
President and General Manager of Antenna Products. Mr. Wraight joined
Antenna Products in September 1979 and was appointed Vice President of
Engineering in May 1981. Mr. Wraight also serves as Sole Director and
President of Thirco, Inc.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
The information in this item should be read in conjunction with the
Management Discussion and Analysis of Financial Condition and Results of
Operations in Item 6, and the Consolidated Financial Statements and the
Related Notes thereto in Item 7.
Market Information For The Common Stock
Cabre Corp's common stock is traded in the Over-The-Counter market and is
quoted in the NASDAQ System under the symbol "CABR".
Effective June 16, 1994 Cabre Corp stock was reverse split one share for each
twenty outstanding. Trading was based on 943,533 total common stock, par
$2.00, outstanding until July 19, 1995 when 36,943 shares of Cabre stock
were retired. March 18, 1996 Cabre Corp made a $2.00 per share tender offer
to those shareholders holding 10 shares or less. A total of 80 shares were
retired due to this tender offer. Since May 11, 1996 trading is based on
906,511 outstanding shares.
The table below presents the high and low prices for the last two fiscal
years and reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
BID
------------------
Quarter Ended High Low
- ------------- ---- ---
August 1994 4 7/8 3 1/2
November 1994 4 1/4 3 1/2
February 1995 3 1/4 3 1/4
May 1995 2 1/2 2 1/4
August 1995 1 5/8 1
November 1995 1 1
February 1996 1 5/8
May 1996 1 1/8 3/4
Holders
At July 31, 1996 there were approximately 508 holders of record of common
stock.
Dividends
Cabre Corp has never paid a regular cash dividend on common stock and has no
plans to institute payment of regular dividends.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Selected Financial Data
The following table presents selected financial data of Cabre Corp. The
historical data (years 1992 - 1995) represents the audited data for the
subsidiary Antenna Products Corporation and as such the number of common
shares have been adjusted as if the merger with Cabre Corp had been effective
as of the year ending 1990. This historical data should be read in
conjunction with Consolidated Financial Statements and the Related Notes
thereto in Item 7.
FISCAL YEAR ENDING MAY 31
-----------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Net Sales $10,572,140 $13,099,671 $12,312,099 $9,396,731 $8,238,664
Income from
continuing
operations ($57,861) $141,679 $463,436 $303,469 $274,750
Income per share
from continuing
operations (1) ($.06) $.15 $0.52 $0.35 $0.33
Total Assets $ 7,728,707 $10,102,631 $8,623,717 $6,115,833 $5,004,044
Long Term Debt $ 2,668,367 $2,814,895 $2,079,166 $2,015,549 $1,932,257
Dividends Per
Common Share (1) $0.00 $0.00 $0.00 $0.00 $0.0
(1) Adjusted to give retroactive effect to the 1 for 20 reverse stock
split dated June 16, 1994.
Results of Operation
Cabre Corp's on-going operation is that of its subsidiaries, Antenna Products
Corporation, Metal Finishing Corp, and Thirco, Inc. as previously discussed
in item 1. The management discussion presented in this item relates to the
operations of subsidiary units and the associated Consolidated Financials as
presented in item 7.
Year ended May 31, 1996 ("1996") Compared with Year Ended May 31, 1995 ("1995")
Antenna Products Corporation
Net sales decreased by $2.8 million or 22% to $10.0 million in 1996. Orders
were down slightly from $8.8 million in 1995 to $8.7 million in the current
fiscal year. The ending backlog of firm orders at year end was $3.7 million,
down from the prior year end backlog of $5.9 million. Orders and backlog are
expected to remain at these levels in 1997 due to the reduction in government
procurements.
Gross margin rates decreased from 26.1% in 1995 to 11.6% in 1996 as a result
of the lower sales volume in the first six months of 1996. Sales and
administrative expenses were $2.8 million or 21.5% of sales in 1995. In
1996, sales and administration expenses were $838 thousand or 8.4% of sales
as the result of the reorganization of the subsidiary. Antenna Products
eliminated seventeen positions, primarily in the management and
administrative areas and reduced payroll and benefits costs by 31%.
Additional cost controls were implemented in the second half of 1996 to
further reduce expenses. Eight notes payable to three different lending
institutions with monthly payments totaling $33 thousand were consolidated as
one note with a monthly payment of $12 thousand to improve cash flow
without increasing long-term debt. R&D activity was reduced from 5.0% of
sales or $640 thousand in 1995 to 2.4% of sales or $241 thousand in 1996.
The R&D development of new telescopic mast designs continued in 1996. Net
interest expense decreased from $484 thousand to $417 thousand as the demand
for cash lessened and the revolving loan line was paid down. The subsidiary
experienced a net loss of $67 thousand in 1996 compared to a net profit of
$135 thousand in 1995. The steps taken to realign costs with the current
volume will improve Antenna Products' competitive position and the subsidiary
is expected to be profitable in 1997.
Metal Finishing Corp
Net sales for 1996 were $616 thousand and sales and administrative expenses
were $158 thousand. Net interest expense was $77 thousand due to the high
level of long-term debt the new subsidiary has. Operations resulted in a
net loss of $42 thousand. Since this is the first full year of operation,
there is not comparative period data, only the results of six months of
operation in 1995. Net sales for this six month period was $267 thousand
with a net loss of $61 thousand.
Cabre Corp consolidated sales from continuing operations were $10.6 million
with a loss from continuing operations of $58 thousand in 1996. This
compares to $13.1 million in consolidated sales with an income from
continuing operations of $142 thousand in 1995. Net loss for 1996 was
$58 thousand compared to a net loss of $337 thousand in 1995.
Year Ended May 31, 1995 ("1995") Compared With Year Ended May 31, 1994 ("1994")
Net sales increased $800 thousand or 7% to $13.1 million primarily as the
result of deliveries of antennas and related structural equipment to the U.S.
Government, APTI, Marconi Communications, and Litton Data Systems. Orders
for the year were $8.8 million compared to $10.3 million in 1994. Gross
margin rates increased from 23.4% in 1994 to 25.8% in 1995. Selling and
administrative expenses increased from $1.93 million in 1994 to $2.70
million in 1995. Expenses increased due to an increase in personnel and
marketing activity. Research and development expenses increased to 5.0% of
sales or $640 thousand in 1995 compared to 2.3% of sales or $285 thousand in
1994. Net interest expense was $593 thousand compared to $235 thousand in
1994. Operations in 1995 resulted in a net loss of $337 thousand compared to
a net income of $349 thousand in 1994. The loss in 1995 is attributed to the
40% increase in selling and administrative expenses during a period when
sales increased only 7% and the loss from the sale of the discontinued
Audile operations of $276 thousand.
Liquidity and Capital Resources
Funds generated from company operations are the major internal sources of
liquidity and are supplemented by funds derived from capital markets,
principally bank facilities. The Company has available for the funding of its
operations a $2.5 million revolving demand line of credit guaranteed by a
principal shareholder. The credit line is regulated under a borrowing base
formula using inventories and accounts receivable as collateral. The
interest rate is established as one percentage point over Wall Street prime
and is subject to a loan agreement with restrictive covenants. The most
restrictive financial covenant requires Antenna Products to maintain $1.25
million in tangible net worth and $750 thousand of working capital. At year
end Antenna Products' had equity of $1.71 million and working capital of
$1.73 million. As of July 31, 1996, the Company had drawn $750 thousand of
the $2.5 million line of credit with $1.75 million available and unused.
The revolving credit line agreement is renewable in September, 1996. The
Company anticipates renewal of this credit line and has projected that the
credit available is sufficient to cover the financing needs of the Company in
1997.
Net cash flow from operations was a positive $2.37 million in 1996 compared
to a negative $977 thousand in 1995. The significant change in cash flow
resulted from the overall decrease in volume and the completion and shipment
of a major contract for Marconi Communications. Inventory decreased $969
thousand compared to an increase of $877 thousand in 1995. Accounts payable
decreased from the higher levels of 1995 and accounts receivable increased
$781 thousand. Cash and cash equivalents at the end of the year were $154
thousand, unchanged from the prior year.
Capital expenditures for 1996 were limited to $48 thousand for three
replacement items. The items consisted of one diesel truck for Antenna
Products and two wastewater evaporators for Metal Finishing. All scheduled
equipment additions, facility upgrades, and computer hardware/software
upgrades were completed in 1995 at a cost of $1.0 million. The Company
anticipates that the existing facilities and equipment are adequate to handle
the projected volumes in 1997 and intends to limit the 1997 capital program
to less than $100 thousand for replacement items.
The Company has a long-term bank note for $1.2 million collateralized by the
Antenna Products plant, property, and equipment. The current balance is
$1.0 million with payments amortized over 20 years ending in 2011. The
interest is variable at one half point over prime interest rate with the note
supported by an FmHA guarantee under the federal guidelines of a rural
business industry loan. The note is guaranteed by a principal shareholder.
Antenna Products also has an $800 thousand note to a principal stockholder
on which it pays interest at the prime interest rate. The commencement of
principal payments are prohibited under the terms of the bank note until the
bank debt is first paid.
The Company has a long-term bank note for $450 thousand collateralized by
Metal Finishing equipment and machinery. Interest is variable at one point
over prime with payments amortized over ten years ending in 2004. The
balance at year end was $409 thousand. The company also has a note to the
prior owner of the Metal Finishing operation for $340 thousand collateralized
by the Metal Finishing facility. Interest is variable at one point over
prime with payments amortized over ten years ending in 2004. The balance on
the note at year end was $289 thousand.
The Company does not expect any changes in payments or other provisions of
the loan agreements now in place.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements listed in Item 14 are included in this
report on pages F-1 through F-14.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information is included in Part I as Item 4A., entitled "Executive
Officers of the Registrant", and will be included in the definitive Proxy
Statement dated August 12, 1996 as filed with the Securities and Exchange
Commission, and is incorporated herein by reference.
Item 10. EXECUTIVE COMPENSATION
This information will be included in the Company's definitive Proxy Statement
dated August 12,1996 filed with the Securities and Exchange Commission and is
incorporated herein by reference.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information will be included in the Company's definitive Proxy Statement
dated August 12,1996 filed with the Securities and Exchange Commission and is
incorporated herein by reference.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information will be included in the Company's definitive Proxy Statement
dated August 12,1996 filed with the Securities and Exchange Commission and is
incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements. The following consolidated financial
statements of Cabre Corp and subsidiaries and independent
auditors' report are presented on pages F-1 through F-14:
Consolidated Balance Sheets - May 31, 1996 and 1995
Consolidated Statements of Operations - Two Years Ended May 31, 1996
and 1995.
Consolidated Statement of Shareholders' Equity - Two Years Ended May
31, 1996 and 1995.
Consolidated Statements of Cash Flows - Two Years Ended May 31,
1996, and 1995.
Notes To Consolidated Financial Statements
Independent Auditors' Report
2. Financial Statement Schedules. Not applicable.
All other schedules have been omitted because the required
information is shown in the consolidated financials or notes
thereto, or they are not applicable.
3. Exhibits
None
(b) Reports On Form 8-K. On January 15, 1996 the registrant filed
a Form 8-K for the purpose of disclosing the resignation of Gary
L. Skaggs from all positions in Cabre Corp and its subsidiaries.
Mr. Skaggs resignation did not precipitate from any
disagreements with the registrant on any matters relating to
the registrant's operations, policies or practices.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DATED: August 25, 1996.
Cabre Corp
s/o/f: Gary W. Havener
----------------------------------------
Principal Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
s/o/f: Clark D. Wraight Principal Financial Officer August 25, 1996
----------------
s/o/f: Sam B. Ligon Director August 25, 1996
----------------
s/o/f: Paul St. Amant Director August 25, 1996
________________
CABRE CORP
_______
CONSOLIDATED FINANCIAL STATEMENTS
for the years ended May 31, 1996 and 1995
CABRE CORP AND SUBSIDIARIES
Index To Consolidated Financial Statements
Page
Independent Auditors' Report (Filed as Exhibit EX-99)
Financial Statements:
Consolidated Balance Sheets - May 31, 1996 and 1995 F-3
Consolidated Statements of Operations - F-4
years ended May 31, 1996 and 1995
Consolidated Statements of Shareholders' Equity- F-5
years ended May 31, 1996 and 1995
Consolidated Statements of Cash Flows - F-6
years ended May 31, 1996 and 1995
Notes to Consolidated Financial Statements F-7
CABRE CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 31, 1996 and 1995
ASSETS
1996 1995
---- ----
Current assets:
Cash and cash equivalents $ 154,363 $ 154,027
Accounts receivable:
Trade, net of allowances for doubtful
accounts of $7,022 each year 779,954 1,106,111
United States Government 210,103 659,469
Inventories 2,553,415 3,496,678
Prepaid expenses and other assets 5,674 17,972
Income taxes receivable 118,594 324,163
Deferred income taxes 100,320 124,363
---------- ----------
Total current assets 3,922,423 5,882,783
---------- ----------
Property and equipment, net 3,806,284 4,219,848
---------- ----------
$ 7,728,707 $10,102,631
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,390,000 $ 3,400,000
Current portion of long-term debt 225,037 447,916
Accounts payable 381,446 474,812
Accrued expenses 453,499 338,920
----------- -----------
Total current liabilities 2,449,982 4,661,648
----------- -----------
Long-term debt, less current portion 1,868,367 2,014,895
Note payable to shareholder, less
current portion 800,000 800,000
Deferred income taxes 425,375 383,084
----------- -----------
Total long-term liabilities 3,093,742 3,197,979
----------- -----------
Total liabilities 5,543,724 7,859,627
----------- -----------
Commitments and contingencies (Note 11) - -
Shareholders' equity
Preferred stock, $2.00 par, 2,000,000
shares authorized, no shares issued
and outstanding - -
Common stock, $2.00 par, 6,000,000
shares authorized, 906,511 and
906,591 shares issued and outstanding 1,813,201 1,813,361
Additional paid in capital 126,381 126,381
Retained earnings 245,401 303,262
----------- -----------
Total shareholders' equity 2,184,983 2,243,004
----------- -----------
$ 7,728,707 $10,102,631
=========== ===========
See accompanying notes to consolidated financial statements.
CABRE CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years ended May 31, 1996 and 1995
1996 1995
---- ----
Sales and contract revenues $10,572,140 $13,099,671
Cost of sales and contracts 9,235,375 9,715,939
----------- -----------
Gross profit 1,336,765 3,383,732
Sales and administrative expenses 880,266 2,704,594
----------- -----------
Operating profit 456,499 679,138
----------- -----------
Other income (expense):
Interest expense (520,637) (592,648)
Interest income 9,709 77,844
Gain (loss) on disposal of assets (35,128) 1,355
Other 20,598 55,610
---------- ----------
Total other income (expense) (525,458) (457,839)
---------- ----------
Income (loss) from continuing
operations before income taxes (68,959) 221,299
Provision (benefit) for income taxes (11,098) 79,620
---------- ----------
Income (loss) from continuing operations (57,861) 141,679
Discontinued operations (Note 3):
Loss from discontinued operations, net of
income tax benefit of $104,227 and $58,789 - (202,324)
Loss from sale of discontinued operations,
plus income taxes of $25,071 - (276,360)
---------- ----------
Net loss $ (57,861) $ (337,005)
========== ==========
Earnings (loss) per common share:
Continuing operations $ (.06) $ .15
Discontinued operations - (.51)
Net loss $ (.06) $ (.36)
See accompanying notes to consolidated financial statements.
CABRE CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years ended May 31, 1996 and 1995
Common Stock
Additional
Number Paid In Retained
of Shares Amount Capital Earnings Total
--------- ------ ------- --------- -----
Balance, May 31, 1994 943,534 $1,887,247 $135,617 $640,267 $2,663,131
Acquisition of common
stock in connection
with sale of Audile (36,943) (73,886) (9,236) - (83,122)
Net loss - - - (337,005) (337,005)
--------- -------- -------- --------- --------
Balance, May 31, 1995 906,591 1,813,361 126,381 303,262 2,243,004
Retirement of stock (80) (160) - - (160)
Net income - - - (57,861) (57,861)
--------- --------- -------- ---------- ---------
Balance, May 31, 1996 906,511 $1,813,201 $126,381 $245,401 $2,184,983
========= ========== ======== ======== ==========
See accompanying notes to consolidated financial statements.
CABRE CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years ended May 31, 1996 and 1995
1996 1995
---- ----
Cash flows from operating activities:
Net loss $ (57,861) $ (337,005)
Adjustments to reconcile net loss to
net cash provided (used) by operating
activities:
Depreciation and amortization 370,322 367,278
Deferred federal income tax 66,334 154,616
Loss (gain) on sale of assets 35,128 (1,355)
Loss on sale of subsidiary before
income taxes - 251,288
Changes in assets and liabilities:
Accounts receivable 780,927 291,026
Inventory 968,793 (873,434)
Payments received (30,934) (144,332)
Prepaid expenses 12,298 (21,104)
Accounts payable and accrued expenses 21,213 (172,932)
Income taxes payable/receivable 205,569 (491,352)
--------- ----------
Net cash provided (used) by operating
activities 2,371,789 (977,306)
---------- ----------
Cash flows from investing activities:
Acquisition of Edd's Metal Finishing - (655,000)
Purchase of property and equipment (48,238) (1,059,327)
Proceeds from sale of assets 56,352 20,955
---------- -----------
Net cash provided (used) by investing
activities 8,114 (1,693,372)
---------- -----------
Cash flows from financing activities:
Net borrowings under bank lines of credit (2,010,000) 1,190,000
Issuance of long-term debt 400,000 1,297,895
Principal payments on long-term debt (769,407) (317,510)
Purchase of common stock (160) -
---------- ----------
Net cash provided (used) by financing
activities (2,379,567) 2,170,385
---------- ----------
Net increase (decrease) in cash and
cash equivalents 336 (500,293)
Cash and cash equivalents at beginning
of period 154,027 654,320
---------- ----------
Cash and cash equivalents at end of period $ 154,363 $ 154,027
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (none capitalized $ 520,637 $ 540,633
Income taxes 11,120 170,000
See accompanying notes to consolidated financial statements
CABRE CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended May 31, 1996 and 1995
1. Business
The Company operates as a "Holding" company with Antenna Products
Corporation, Audile, Inc. (see Note 3), Thirco, Inc. and Metal Finishing
Corp. as its wholly owned subsidiaries. Antenna Products and Metal Finishing
Corp. are operating subsidiaries with Thirco serving as an equipment leasing
company to Cabre's operating units.
Antenna Products Corporation designs, manufactures and markets antenna
systems, towers, and communications accessories worldwide for the U.S.
Government, both military and civil agencies, and prime contractors
representing Antenna Products principal customers.
Metal Finishing Corp performs a wide range of metal finishes and surface
enhancements to industries ranging from medical, electronics, oil & gas,
fastener, packaging, and automotive as well as aerospace and defense
contract work.
Following is a schedule of the Company's sales to major customers, as a
percentage of total sales:
Year ended May 31
-----------------
1996 1995
---- ----
Federal Government 48% 26%
APTI * 26%
Marconi Communications 11% 11%
Litton Data Systems * 10%
Wilcox Electric 12% *
* Less than 10%
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany balances and transactions are
eliminated in consolidation.
Sales and Contract Revenues and Related Costs
Sales and major production contract revenues, and related costs, are recorded
as completed units are shipped (unit price method). Estimated losses on
production contracts are reported in full at such time as the contract
estimate indicates a loss.
Inventories
Inventories are stated at the lower of first-in, first-out cost or market,
net of any applicable progress payments.
Property and Equipment
Property and equipment are recorded at cost and depreciated by the
straight-line method over the expected useful lives of the assets.
Expenditures for normal maintenance and repairs are charged to income, and
significant improvements are capitalized. The cost of assets sold or
abandoned and the related accumulated depreciation are eliminated from the
accounts and the net amount, less proceeds from disposal, is charged or
credited to income.
Use of Estimates and Assumptions
Management uses estimates and assumptions in preparing financial statements
in accordance with generally accepted accounting principles. Those estimates
and assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could vary from the estimates that were used.
Income Taxes
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109) which
requires a change from the deferred method to the asset and liability method
of computing deferred income taxes. The objective of the asset and liability
method is to establish deferred tax assets and liabilities for the temporary
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities at enacted tax rates expected to be in
effect when such amounts are realized or settled.
Research and Development Costs
Research and development costs are charged to operations when incurred and
are included in operating expenses. The amounts charged for the years ended
May 31, 1996 and 1995 were $250,515 and $640,453, respectively.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
and certificates of deposit with original maturities of less than three months.
Shares, Per Share Data, Earnings (Loss) Per Share and Reverse Stock Split
Earnings (loss) per share are computed by dividing net income (loss)
available for common stock by the weighted average number of common shares
outstanding during the year. Weighted average shares outstanding
were 906,511 and 934,298 for the years ended May 31, 1996 and 1995,
respectively. All share and per share information herein has been
retroactively adjusted for a 1 for 20 reverse stock split approved by
shareholders on June 14, 1994.
3. Acquisitions and Sale of Subsidiary
The Company sold Audile, a wholly owned subsidiary of Cabre, to one of its
former shareholders in February 1995 for a note of $592,000 and 36,943 shares
of Company common stock valued at $83,122. In May 1995, the Company
foreclosed on the note and repossessed the collateral, subsequently selling
the repossessed assets for approximately $10,000. The Company has reflected
the operations of Audile in the accompanying financial statements as a
discontinued operation. The loss from sale of discontinued operations was
recognized in the Company's fourth fiscal quarter of 1995.
On November 30, 1994, the Company's subsidiary, Metal Finishing Corp,
purchased the assets of Edd's Metal Finishes Corp. for cash of $315,000 and a
note payable to the seller of $340,000. The acquisition has been
accounted for as a purchase and accordingly, the operations of the acquired
business have been included in the accompanying consolidated financial
statements since the date of acquisition. Pro forma information as if the
acquisition had taken place at the beginning of the year is not presented
since the operations are not material to the Company's consolidated results
of operations.
4. Inventories
The major components of inventories are as follows:
1996 1995
---- ----
Raw materials $ 675,876 $ 1,596,022
Work in process 859,120 1,257,521
Finished goods 1,018,419 668,665
------------ -----------
$ 2,553,415 $ 3,522,208
Less progress payments: - (25,530)
------------ -----------
$ 2,553,415 $ 3,496,678
============ ===========
Certain general and administrative expenses such as depreciation, insurance,
property taxes and utilities are included in inventory based upon percentages
developed by the Company. Total general and administrative expenses included
in inventory during the years ended May 31, 1996 and 1995 were $443,145 and
$885,709, respectively.
5. Property and Equipment
The following is a summary of the Company's property and equipment:
Estimated
Useful Life 1996 1995
----------- ---- ----
Land __ $ 475,136 $ 475,136
Buildings and improvements 15 - 30 years 2,023,217 2,023,217
Machinery and equipment 10 years 3,285,625 3,306,478
Automobiles and trucks 3 years 97,328 100,096
Office furniture and fixtures 10 years 615,788 652,453
------------ -----------
6,497,094 6,557,380
Less accumulated depreciation (2,690,810) (2,337,532)
------------ ----------
Net property and equipment $ 3,806,284 $4,219,848
============ ==========
6. Notes Payable
At May 31, 1996 and 1995 notes payable consist of a revolving note payable to
a bank, maximum amount $2,500,000, interest payable monthly at the prime rate
plus 1% until September 30, 1996, when any unpaid principal and interest
shall be due.
Prime rate was 8.25% and 9.5% at May 31, 1996 and 1995, respectively.
Borrowings under the revolving note payable are collateralized by accounts
receivable and inventories and cannot exceed an amount determined by a
formula based upon the amount of certain qualified receivables and
inventories as defined in the loan agreement. At May 31, 1996, available
borrowings under this credit facility were limited to the borrowing base
amount of $2,130,000. Borrowings are guaranteed by a principal
shareholder and the Company must maintain a minimum net worth of $1,250,000
and working capital of $750,000.
7. Long-Term Debt
At May 31, 1996 and 1995, long-term debt consists of the following:
1996 1995
---- ----
Subordinated note payable to a principal
shareholder.In the initial years only
interest (at the prime rate) is payable
with monthly principal payments scheduled
to begin in June 1999 and maturing in May
2004. $ 800,000 $ 800,000
Notes payable to a finance company,
payable in monthly installments of $19,955
including interest at rates ranging from
8.5% to 10.1% until September 1997,
collateralized by equipment with a net
book value of $142,514. - 327,829
Note payable to a bank, guaranteed 80%
by a U.S. Government Agency, payable
$8,900 per month, including interest at the
prime rate plus 1/2%; collateralized by
certain real estate and fixtures and
guaranteed by a principal shareholder;
the Company is required to maintain
$1,100,000 in working capital and
$1,000,000 in equity. 1,015,764 1,044,422
Notes payable to banks, payable in
monthly installments of $11,779
including interest at prime plus 1.5%
until November 1998, collateralized by
equipment with a net book value of $527,166. - 292,045
Note payable to a bank payable in monthly
installments of $1,080 plus interest at
10% until May 1998, collateralized by
equipment with a net book value of $43,749. - 38,888
Note payable to an individual payable in
monthly installments of $2,833 plus
interest at prime plus 1%, collateralized
by a first lien deed of trust on land
and buildings. 289,006 323,002
Note payable to a finance company payable
in monthly installments of $12,429, including
interest at 9.05% until March 1999. 380,033 -
Note payable to a bank, payable in monthly
installments of $5,820, plus interest at
prime plus 1%, collateralized by all
machinery and equipment, inventory and
accounts receivable of Metal Finishing Corp. 408,601 436,625
---------- ----------
2,893,404 3,262,811
Less current portion of long-term debt 225,037 447,916
---------- ----------
Non-current portion of long-term debt $2,668,367 $2,814,895
========== ==========
Maturities of long-term debt for each of the five years subsequent to May 31,
1996 are as follows:
1997 $ 225,037
1998 238,303
1999 231,369
2000 278,383
2001 285,633
Thereafter 1,634,679
8. Income Taxes
Components of the net income tax expense (benefit) for the years ended May
31, 1996 and 1995 are as follows:
1996 1995
---- ----
Income taxes at statutory
rate on income (loss) before income taxes $ (18,135) $ (114,424)
Non-deductible loss on sale of subsidiary - 110,508
Other 7,037 4,380
----------- -----------
Total provision (benefit), including
discontinued operations $ (11,098) $ 464
=========== ===========
Deferred portion of provision $ 66,334 $ 154,616
Current portion of benefit (77,432) (154,152)
----------- -----------
Total $ (11,098) $ 464
=========== ===========
The components of the deferred income tax provision (benefit) at May 31, 1996
and 1995 are as follows:
1996 1995
---- ----
Accrued warranty claims $ (17,000) $ 27,200
Provision for allowance for
valuation of inventory 23,800 30,600
Depreciation 59,900 88,400
Other (366) 8,416
----------- ----------
Total $ 66,334 $ 154,616
=========== ==========
Components of the net deferred tax liability at May 31,1996 and 1995 are as
follows:
1996 1995
---- ----
Deferred tax liability for
taxable temporary differences $ 425,375 $ 383,084
Deferred tax assets for deductible
temporary differences (100,320) (124,363)
----------- -----------
$ 325,055 $ 258,721
Taxable temporary differences arise from differences between depreciation of
property, plant and equipment for tax and financial purposes. Deductible
temporary differences result from differences in timing of deduction
of certain expenses, principally warranties, vacation accruals and group
insurance and from an inventory valuation allowance for financial statement
purposes.
9. Profit Sharing Plan
The Company has an employee profit sharing plan under Section 401(k) of the
Internal Revenue Code. All employees with a minimum of one year of
employment are eligible to participate. Employees may contribute
to the plan up to 20% of their salary with a maximum of $9,240 in 1996 and
1995. The Company will match employee contributions for an amount up to 3%
of each employee's salary if certain earnings requirements are
met. Contributions are invested at the direction of the employee in one or
more funds. Company contributions vest after three years of service.
Company contributions amounted to $35,031 and $62,065 for the years ended
May 31, 1996 and 1995, respectively.
10. Segment Information
The Company has historically operated in one business segment, the
manufacture of antenna systems, antenna towers, and communications
accessories. Effective November 30, 1994 (see Note 3), the Company also began
to operate in the metal finishes market. The metal finishes segment amounted
to less than 10% of the Company's consolidated operations during the period.
11. Concentration of Credit Risk
The Company deposits its cash primarily in deposits with major banks.
Certain cash deposits may occasionally be in excess of federally insured
limits. The Company has not incurred losses related to its cash.
The Company sells many of its products to the U.S. Government, both military
and civil agencies, and prime contractors. Although the Company might be
directly affected by the well-being of the defense industry, management does
not believe significant credit risk exists at May 31, 1996.
Ongoing credit evaluations of customers' financial condition are performed
and, generally, no collateral is required. The Company maintains reserves
for potential credit losses and such losses have not exceeded management's
expectations.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 154,363
<SECURITIES> 0
<RECEIVABLES> 997,079
<ALLOWANCES> 7,022
<INVENTORY> 2,553,415
<CURRENT-ASSETS> 3,922,423
<PP&E> 4,176,606
<DEPRECIATION> 370,322
<TOTAL-ASSETS> 7,728,707
<CURRENT-LIABILITIES> 2,449,982
<BONDS> 0
0
0
<COMMON> 1,813,201
<OTHER-SE> 371,782
<TOTAL-LIABILITY-AND-EQUITY> 7,728,707
<SALES> 10,572,140
<TOTAL-REVENUES> 10,602,447
<CGS> 9,235,375
<TOTAL-COSTS> 880,266
<OTHER-EXPENSES> 35,128
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 520,637
<INCOME-PRETAX> (68,959)
<INCOME-TAX> (11,098)
<INCOME-CONTINUING> (57,861)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (57,861)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Cabre Corp:
We have audited the consolidated balance sheets of Cabre Corp and
subsidiaries as of May 31, 1996 and 1995, and the related statements of
operations, shareholders' equity and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cabre
Corp and subsidiaries at May 31, 1996 and 1995 and the results of
their operations and their cash flows for the years then ended, in conformity
with generally accepted accounting principles.
s/o/f: Jackson & Rhodes, P.C.
---------------------------
Dallas, Texas
July 18,1996
