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, 1997
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, 1997, there were outstanding 906,464 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 $549,572.
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 1997 the U.S. Government was the
single largest customer, and accounted for 40% of the sales volume. Wilcox
Electric totaled 17% of sales. 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 1998.
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 1997 Antenna Products invested 3.1% 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 1998. The level of
expenditures for R&D in 1996 and 1995 were 2.4% of sales and 5.0% 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, 1997 at Antenna Products amounted to
approximately $5.2 million. Backlog of orders at July 31, 1996 was
approximately $3.1 million. About 90% of the current backlog will be
delivered in the 1998 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, 1997, subsidiaries of Cabre employed a total of 112 employees;
101 at Antenna Products and 11 at Metal Finishing. 18 were employed in
administrative functions, 13 in engineering and support roles, and 81 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 1997, 1996, and 1995 were 8.6%, 5.0%, and 5.5%, 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
A customer of Antenna Products has made a warranty claim for an unspecified
amount.
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 1997.
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 56 President and Chief Executive Officer
Clark D. Wraight 53 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. An additional $2.00 per share tender
offer was made to those shareholders holding 10 shares or less on February
28, 1997. A total of 35 shares were retired due to this tender offer. Since
April 16, 1997 trading is based on 906,471 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 1995 1 5/8
November 1995 1 1
February 1996 1 5/8
May 1996 1 1/2 3/4
August 1996 1 1/8 7/8
November 1996 1 9/16 1 3/16
February 1997 1 1/2 1 7/16
May 1997 3 1/4 2 1/8
Holders
At July 31, 1997 there were approximately 484 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 1993 - 1996) 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 1993. 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
-----------------------------
1997 1996 1995 1994 1993
Net Sales $ 8,475,171 $10,572,140 $13,099,671 $12,312,099 $9,396,731
Income from
continuing
operations $263,246 ($57,861) $141,679 $463,436 $303,469
Income per share
from continuing
operations (1) $.29 ($.06) $.15 $0.52 $0.35
Total Assets $7,173,697 $ 7,728,707 $10,102,631 $8,623,717 $6,115,833
Long Term Debt $2,421,956 $ 2,668,367 $2,814,895 $2,079,166 $2,015,549
Dividends Per
Common Share (1) $0.00 $0.00 $0.00 $0.00 $0.00
(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, 1997 ("1997") Compared with Year Ended May 31, 1996 ("1996")
Antenna Products Corporation
Net sales decreased by $2.0 million or 20% to $8.0 million in 1997. Orders
increased 13% from $8.7 million in 1996 to $9.9 million in 1997. The ending
backlog of firm orders at year end was $5.1 million, up 38% from the
prior year end backlog of $3.7 million. Orders and backlog increased due to
the subsidiary's success in commercial markets in 1997.
Gross margin rates increased from 11.6% in 1996 to 20.7% in 1997 as a result
of the reorganization of the subsidiary in 1996. Sales and administrative
expenses were $1.0 million or 12.8% of sales in 1997. In 1996, sales
and administrative expenses were $838 thousand or 8.4% of sales. R&D
activity decreased slightly from $251 thousand or 2.4% of sales in 1996 to
$224 thousand or 2.7% of sales in 1997.
The R&D effort on a new motorized telescopic mast was completed and the first
production units were delivered in 1997. Additional units are on order for
delivery in 1998.
Antenna Products also completed the development of a new line of commercial
antennas for the wireless communication industry. A total of 30 different
models of directional or sector antennas are currently available
from Antenna Products for the new personal communications system (PCS)
frequency range of 1850-1990 MHz. These antennas have horizontal beam widths
of 65 to 90 degrees with the gain ranging from 4 dBi to 20 dBi. Six
omnidirectional PCS antennas are also available with varying degrees of
electrical downtilt and gain varying from 4 dBi to 11 dBi. The sector and
omnidirectional antennas have successfully completed environmental testing at
an independent laboratory and the first production units have been delivered
for field installation.
In addition, six new models of automatic meter reading (AMR) omnidirectional
and sector antennas that operate in the frequency range of 1410-1450 MHz have
been developed. Forty two of these antennas were delivered in 1997.
Net interest expense decreased from $417 thousand to $205 thousand as the
demand for cash lessened and the revolving loan line was paid down. The
subsidiary experienced a net profit of $283 thousand compared to a net
loss of $67 thousand in 1996. The subsidiary is expected to continue to be
profitable in 1998.
Metal Finishing Corp
Net sales decreased from $616 thousand in 1996 to $509 thousand in 1997.
Sales and administrative expenses were $121 thousand in 1997 compared to $158
thousand in 1996. Net interest expense was $62 thousand in 1997
compared to $77 thousand in 1996. Operations in 1997 resulted in a net loss
of $60 thousand compared to a net loss of $42 thousand in 1996.
Cabre Corp consolidated sales from operations were $8.5 million with an
income before taxes of $409 thousand in 1997. This compares to $10.6 million
in consolidated sales with a loss of $69 thousand before taxes in 1996. Net
income for 1997 was $263 thousand compared to a net loss of $58 thousand in
1996.
Year Ended May 31, 1996 ("1996") Compared With Year Ended May 31, 1995 ("1995")
Net sales decreased $2.5 million or 19% to $10.6 million due to the reduction
in government procurements in 1995 and 1996. Orders for the year were $8.7
million compared to $8.8 million in 1995. Gross margin rates decreased
from 25.8% in 1995 to 12.6% in 1996. Selling and administrative expenses
decreased from $2.70 million in 1995 to $880 thousand in 1996. Expenses
decreased due to the reorganization of Antenna Products. Research and
development expenses decreased from 5.0% of sales or $640 thousand in 1995 to
2.4% of sales or $251 thousand in 1996. Net interest expense was $521
thousand compared to $593 thousand in 1995. Operations in 1996 resulted in a
net loss of $58 thousand compared to a net loss of $337 thousand in 1995.
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 $2.0 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 $1.5
million in tangible net worth and $1.0 million of working capital. At May
31, 1997 Antenna Products had equity of $1.99 million and working capital of
$2.14 million. As of July 31, 1997, the Company had drawn $910 thousand of
the $2.0 million line of credit with $1.1 million available and unused. The
revolving credit line agreement is renewable in September, 1997. 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 1998.
Net cash flow from operations was a positive $972 thousand in 1997 compared
to a positive $2.37 million in 1996. The significant change in cash flow
resulted from the overall decrease in volume. Inventory decreased $134
thousand compared to a decrease of $969 thousand in 1996. Accounts payable
decreased $139 thousand and accounts receivable decreased $48 thousand. In
1996, accounts payable decreased $21 thousand and accounts receivable
increased $781 thousand. Cash and cash equivalents at the end of the year
were $90 thousand, a decrease from $154 thousand at the end of the prior year.
Capital expenditures for 1997 were limited to $23 thousand. The Company
anticipates that the existing facilities and equipment are adequate to handle
the projected volumes in 1998 and intends to limit the 1998 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 $965
thousand 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 $375 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 $255 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-12.
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 16, 1997 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 16,1997 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 16,1997 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 16,1997 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-12:
Consolidated Balance Sheets - May 31, 1997 and 1996
Consolidated Statements of Operations - Years Ended May 31, 1997 and
1996.
Consolidated Statement of Shareholders' Equity -Years Ended May 31,
1997 and 1996.
Consolidated Statements of Cash Flows - Years Ended May 31, 1997, and
1996.
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.
None
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 16, 1997.
Cabre Corp
BY 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 16, 1997
---------------- and Director
S/O/F: Sam B. Ligon Director August 16, 1997
----------------
CABRE CORP
_______
CONSOLIDATED FINANCIAL STATEMENTS
for the years ended May 31, 1997 and 1996
CABRE CORP AND SUBSIDIARIES
Index To Consolidated Financial Statements
Page
Independent Auditors' Report F-2
(Filed as EX-99)
Financial Statements:
Consolidated Balance Sheets - May 31, 1997 and 1996 F-3
Consolidated Statements of Operations - F-4
years ended May 31, 1997 and 1996
Consolidated Statements of Shareholders' Equity- F-5
years ended May 31, 1997 and 1996
Consolidated Statements of Cash Flows - F-6
years ended May 31, 1997 and 1996
Notes to Consolidated Financial Statements F-7
CABRE CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 31, 1997 and 1996
ASSETS
1997 1996
---- ----
Current assets:
Cash and cash equivalents $ 90,461 $ 154,363
Accounts receivable:
Trade, net of allowances for
doubtful accounts of $59,822 in 1997 and
7,022 in 1996 835,828 779,954
United States Government 196,815 210,103
Inventories 2,419,086 2,553,415
Prepaid expenses and other assets 8,162 5,674
Income taxes receivable - 118,594
Deferred income taxes 162,609 100,320
----------- -----------
Total current assets 3,712,961 3,922,423
Property and equipment, net 3,460,736 3,806,284
----------- -----------
$ 7,173,697 $ 7,728,707
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 615,000 $ 1,390,000
Current portion of long-term debt 233,796 225,037
Accounts payable 502,733 381,446
Accrued expenses 471,204 453,499
Income taxes payable 11,225 -
---------- -----------
Total current liabilities 1,833,958 2,449,982
---------- -----------
Long-term debt, less current portion 1,621,956 1,868,367
Note payable to shareholder, less
current portion 800,000 800,000
Deferred income taxes 469,644 425,375
---------- -----------
Total long-term liabilities 2,891,600 3,093,742
---------- -----------
Total liabilities 4,725,558 5,543,724
---------- -----------
Commitments and contingencies (Note 10) - -
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, 906,466 shares in 1997 and
906,511 shares in 1996 issued and
outstanding 1,813,111 1,813,201
Additional paid-in capital 126,381 126,381
Retained earnings 508,647 245,401
---------- ----------
Total shareholders' equity 2,448,139 2,184,983
---------- ----------
$7,173,697 $7,728,707
========== ==========
See accompanying notes to consolidated financial statements.
CABRE CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years ended May 31, 1997 and 1996
1997 1996
---- ----
Sales and contract revenues $ 8,475,171 $10,572,140
Cost of sales and contracts 6,721,847 9,235,375
----------- -----------
Gross profit 1,753,324 1,336,765
Sales and administrative expenses 1,056,264 880,266
----------- -----------
Operating profit 697,060 456,499
----------- -----------
Other income (expense):
Interest expense (297,256) (520,637)
Interest income 779 9,709
Loss on disposal of assets - (35,128)
Other 8,472 20,598
----------- -----------
Total other income (expense) (288,005) (525,458)
----------- -----------
Income (loss) before income taxes 409,055 (68,959)
Provision (benefit) for income taxes 145,809 (11,098)
----------- -----------
Net income (loss) $ 263,246 $ (57,861)
=========== ===========
Earnings (loss) per common share: $ .29 $ (.06)
See accompanying notes to consolidated financial statements.
CABRE CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
For the Years ended May 31, 1997 and 1996
Common Stock
------------
Additional
Number Paid In Retained
of Shares Amount Capital Earnings Total
--------- ------ ------- -------- -----
Balance, May 31, 1995 906,591 $1,813,361 $126,381 $303,262 $2,243,004
Retirement of stock (80) (160) - - (160)
Net loss - - - (57,861) (57,861)
------- ---------- ------- --------- ----------
Balance, May 31, 1996 906,511 1,813,201 126,381 245,401 2,184,983
Retirement of stock (45) (90) - - (90)
Net income - - - 263,246 263,246
------- ---------- ------- --------- ---------
Balance, May 31, 1997 906,466 $1,813,111 $126,381 $ 508,647 $2,448,139
======= ========== ======== ========= ==========
See accompanying notes to consolidated financial statements.
CABRE CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years ended May 31, 1997 and 1996
1997 1996
---- ----
Cash flows from operating activities:
Net income (loss) $ 263,246 $ (57,861)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 368,224 370,322
Deferred federal income tax 23,458 66,334
Loss on sale of assets - 35,128
Changes in assets and liabilities
Accounts receivable (47,990) 780,927
Inventory 134,329 968,793
Payments received 5,404 (30,934)
Prepaid expenses (2,488) 12,298
Accounts payable and accrued expenses 138,992 21,213
Income taxes payable/receivable 88,341 205,569
---------- ----------
Net cash provided by operating activities 971,516 2,371,789
========== ==========
Cash flows from investing activities:
Purchase of property and equipment (22,676) (48,238)
Proceeds from sale of assets - 56,352
---------- ----------
Net cash provided (used) by investing activities (22,676) 8,114
---------- ----------
Cash flows from financing activities:
Net payments under bank lines of credit (775,000) (2,010,000)
Issuance of long-term debt - 400,000
Principal payments on long-term debt (237,652) (769,407)
Purchase of common stock (90) (160)
----------- -----------
Net cash used by financing activities (1,012,742) (2,379,567)
---------- -----------
Net increase (decrease) in cash and cash equivalents (63,902) 336
Cash and cash equivalents at beginning of period 154,363 154,027
---------- ----------
Cash and cash equivalents at end of period $ 90,461 $ 154,363
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (none capitalized) $ 296,236 $ 520,637
Income taxes 100,000 11,120
See accompanying notes to consolidated financial statements.
CABRE CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended May 31, 1997 and 1996
1. Business
The Company operates as a "Holding" company with Antenna Products
Corporation, 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
-----------------
1997 1996
---- ----
Federal Government 40% 48%
Marconi Communications * 11%
Wilcox Electric 17% 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
utilizes 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, 1997 and 1996 were $224,300 and $250,515, 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 three months or less.
Shares, Per Share Data, Earnings (Loss) Per Share
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
906,466 and 906,511 for the years ended May 31, 1997 and 1996, respectively.
3. Inventories
The major components of inventories are as follows:
1997 1996
---- ----
Raw materials $ 975,492 $ 675,876
Work in process 792,471 859,120
Finished goods 651,123 1,018,419
------------ -----------
$ 2,419,086 2,553,415
============ ===========
Certain allocable overhead costs such as depreciation, insurance, property
taxes and utilities are included in inventory based upon percentages
developed by the Company. The aggregate amount of these costs included in
inventory during the years ended May 31, 1997 and 1996 were $368,225 and
$443,145, respectively.
4. Property and Equipment
The following is a summary of the Company's property and equipment:
Estimated
Useful Life 1997 1996
----------- ---- ----
Land __ $ 475,136 $ 475,136
Buildings and improvements 15 - 30 years 2,023,217 2,023,217
Machinery and equipment 10 years 3,308,302 3,285,625
Automobiles and trucks 3 years 97,328 97,328
Office furniture and fixtures 10 years 615,788 615,788
--------- ---------
6,519,771 6,497,094
Less accumulated depreciation (3,059,035) (2,690,810)
---------- -----------
Net property and equipment $3,460,736 $3,806,284
========== ==========
5. Notes Payable
At May 31, 1997 notes payable consist of a revolving note payable to a bank,
maximum amount $2,000,000, interest payable monthly at the prime rate plus 1%
until September 30, 1997, when any unpaid principal and interest shall be due.
Prime rate was 8.50% and 8.25% at May 31, 1997 and 1996, 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, 1997, 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.
6. Long-Term Debt
At May 31, 1997 and 1996, long-term debt consists of the following:
1997 1996
---- ----
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
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. 964,673 1,015,764
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. 255,010 289,006
Note payable to a finance company payable in
monthly installments of $12,429, including
interest at 9.47% until March 1999. 260,922 380,033
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. 375,147 408,601
--------- ---------
2,655,752 2,893,404
Less current portion of long-term debt 233,796 225,037
--------- ---------
Non-current portion of long-term debt $2,421,956 $2,668,367
========== ==========
Maturities of long-term debt for each of the five years subsequent to May 31,
1997 are as follows (including $160,000 per year beginning in June 1999 for
the shareholders note, although it is subordinated to the note payable to a
bank):
1998 $ 233,796
1999 242,388
2000 278,383
2001 285,653
2002 293,596
Thereafter 1,321,936
7. Income Taxes
Components of the net income tax expense (benefit) for the years ended May
31, 1997 and 1996 are as follows:
1997 1996
---- ----
Income taxes at statutory
rate on income (loss) before income taxes $ 139,000 $ (18,135)
Non-deductible losses 6,809 7,037
---------- -----------
Total provision (benefit) $ 145,809 $ (11,098)
=========== ===========
Deferred portion of provision $ 23,458 $ 66,334
Current portion (benefit) 122,351 (77,432)
----------- -----------
Total $ 145,809 $ (11,098)
=========== ===========
The components of the deferred income tax provision (benefit) at May 31, 1997
and 1996 are as follows:
1997 1996
---- ----
Accrued warranty claims $ (6,800) $ (17,000)
Provision for allowance for
valuation of inventory (10,200) 23,800
Depreciation 56,700 59,900
Bad debt provision (17,952) -
Other 1,710 (366)
----------- ------------
Total $ 23,458 $ 66,334
============ ============
Components of the net deferred tax liability at May 31,1997 and 1996 are as
follows:
1997 1996
---- ----
Deferred tax liability for
taxable temporary differences $ 469,644 $ 425,375
Deferred tax assets for deductible
temporary differences (162,609) (100,320)
------------ ------------
$ 307,035 $ 325,055
============ ============
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, bad debts and group insurance and
from an inventory valuation allowance for financial statement purposes.
8. 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 $9,500 in 1997 and
1996. 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 $36,985 and $35,030 for the years ended May 31,
1997 and 1996, respectively.
9. 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, 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 each year.
10. Commitments and Contingencies
The Company is involved in certain legal actions arising from normal business
activities. Outside counsel an management believe that the outcome of such
proceedings will not materially affect the financial position or results of
operations of the company.
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 funding of the defense industry, management does not
believe significant credit risk exists at May 31, 1997.
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.
Fair Value of Financial Instruments
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS No. 107, Disclosures
about Fair Value of Financial Instruments. The estimated fair value amounts
have been determined by the Company, using available market information and
appropriate valuation methodologies.
The fair value of financial instruments classified as current assets or
liabilities including cash and cash equivalents, receivables and accounts
payable approximate carrying a value due to the short-term maturity of
the instruments. The fair value of short-term and long-term debt approximate
carrying value based on their effective interest rates compared to current
market rates.
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, 1997 and 1996, 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, 1997 and 1996 and the results of
their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Jackson & Rhodes, P.C.
Dallas, Texas
July 18,1997
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<CASH> 90,461
<SECURITIES> 0
<RECEIVABLES> 1,092,465
<ALLOWANCES> 59,822
<INVENTORY> 2,419,086
<CURRENT-ASSETS> 3,712,961
<PP&E> 3,460,736
<DEPRECIATION> 368,224
<TOTAL-ASSETS> 7,173,697
<CURRENT-LIABILITIES> 1,833,958
<BONDS> 0
0
0
<COMMON> 1,813,111
<OTHER-SE> 635,028
<TOTAL-LIABILITY-AND-EQUITY> 7,173,697
<SALES> 8,475,171
<TOTAL-REVENUES> 8,484,422
<CGS> 6,721,847
<TOTAL-COSTS> 1,056,264
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 297,256
<INCOME-PRETAX> 409,055
<INCOME-TAX> 145,809
<INCOME-CONTINUING> 263,246
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 263,246
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