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 EXCHANGE ACT OF 1934
For the Fiscal Year Ended May 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT OF 1934
Commission file number 0-12866
ANTENNA PRODUCTS, INC.
(fka Cabre Corp)
(Exact name of registrant as specified in its charter)
Delaware 75-1907070
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
1209 Orange St., Wilmington, Delaware 19801 (302) 658-7581
(Address of principal executive offices) (Issuer's telephone number)
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, $0.01 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, 1998, there were outstanding 1,812,928 shares of the
registrant's common stock, par value $0.01, 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 $1,313,825.
Documents Incorporated by Reference
Proxy Statement
PART 1
Item 1. BUSINESS
General
- -------
Antenna Products, Inc. (the Company) was formerly known as Cabre Corp. The
name change was effective close of business January 30, 1998.
Antenna Products, Inc. operates as a holding company with Antenna Products
Corporation, and Thirco, Inc. as its current operating subsidiaries. Antenna
Products, Inc. has no other business activity. Antenna Products, Inc.'s
address is 1209 Orange Street, Wilmington, Delaware 19801. Telephone Number,
(940) 325-3301.
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 Antenna Products, Inc.. Antenna Products' address is 101
S.E. 25th Avenue, Mineral Wells, Texas 76067. The telephone number is (940)
325-3301.
Antenna Products' manufactures and markets standard and custom antennas,
guyed and self supported towers, monopoles, support structures, masts and
communication accessories worldwide. Customers include the U.S. Government,
both military and civil agencies, U.S. Government prime contractors and
commercial clients. Examples of Antenna Products' U.S. Government supplied
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. Examples of the company's commercial products include
panel, sector, omnidirectional and closed loop PCS antennas, automatic meter
reading (AMR), cellular, paging and yagi antennas, guyed towers, self
supported towers and monopoles.
Antenna Products' customer base is primarily government and government prime
contractor focused, but this is slowly changing as Antenna Products continues
to develop and market new commercial products. 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
need 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
1998 AIRSYS ATM, Inc. (fka Wilcox Electric) was the single largest customer,
and accounted for 38% of the sales volume. The U.S. Government totaled 17% of
sales. Orders for equipment in some of these product categories are in
backlog and, therefore, AIRSYS ATM, Inc. and the U.S. Government are expected
to be major clients again in 1999.
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 22% of total
inventory is currently 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 1998 Antenna Products invested 2.8% 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 1999. The level of
expenditures for R&D in 1997 and 1996 were 2.8% of sales and 2.5% 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
- --------------------
Metal Finishing Corporation is a metal finishing and plating operation that
was sold effective February 28, 1998 and has been accounted for in the
accompanying financials as a discontinued operation. The losses from the
operation and disposal of Metal Finishing Corp in 1998 totaled $266,528.
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 Antenna
Products, Inc. The primary lease arrangements are with Antenna Products.
Thirco will occasionally assist in servicing the banking needs of Antenna
Products, Inc.'s operating units. Since all activity is internal to Antenna
Products, Inc. and its operating subsidiaries, financial data is consolidated
with Antenna Products, Inc. Thirco does not intend to engage in any outside
business transactions.
Seasonality
- -----------
Antenna Products, Inc.'s businesses are not dependent on seasonal factors.
Backlog
- -------
The backlog of orders on July 31, 1998 at Antenna Products amounted to
approximately $4.2 million compared to $5.2 million at July 31, 1997. About
95% of the current backlog will be delivered in the 1999 fiscal year.
Raw Material Source and Supply
- ------------------------------
Antenna Products, Inc.'s operating subsidiaries' principal raw materials are
steel, aluminum, other metal alloys, plastic and composite tubing, hardware,
electrical wire, wire rope, 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.
Employees
- ---------
As of July 31, 1998, Antenna Products Corporation employed a total of 108
employees. Of the 108, 16 were employed in administrative functions, 12 in
engineering and support roles, and 80 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 represent
a small percentage of the overall company annual volume. The level of profits
from 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 1998,
1997, and 1996 were 6.0%, 8.6%, and 5.0%, 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 compliment 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.
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
In August 1998, Antenna Products Inc. settled a lawsuit with a customer of
Antenna Products Corporation. The settlement resulted in the Company being
required to pay the customer an aggregate of $382,000 in cash ($297,000) in
August 1998 and $85,000 in November 1998) and 50,000 shares of Company common
stock. The settlement amount has been recorded by the Company in accrued
liabilities as of May 31, 1998.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By consent of shareholders owning in excess of 50% of the outstanding common
stock, the company amended its Articles of Incorporation, changing its name to
Antenna Products, Inc. and reducing the par value of its common stock to $0.01
per share, and of the preferred stock to $1.00 per share, effective February
12, 1998. There was no meeting of shareholders and no proxies solicited from
shareholders.
Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of Antenna Products, Inc. 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 57 President and Chief Executive Officer
Clark D. Wraight 54 Vice President and Secretary Treasurer
The Board of Directors elected Gary W. Havener as President and Chief
Executive Officer of Antenna Products, Inc. on January 24, 1992. Mr. Havener
has served as the Sole Director of Antenna Products Corporation since 1986.
Mr. Havener has served as the President of Antenna Products Corporation since
1996.
Clark D. Wraight was appointed by the Board of Directors as Vice President and
Secretary Treasurer of Antenna Products, Inc. in January 1996. Mr. Wraight
currently serves as Vice President and General Manager of Antenna Products
Corporation. Mr. Wraight joined Antenna Products Corporation 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
- ---------------------------------------
Antenna Products, Inc.'s common stock is traded in the NASDAQ Smallcap Market
and is quoted under the symbol "ANTP".
The 906,464 outstanding shares of common stock were split two for one based on
a record date of January 30, 1998. Since January 31, 1998 trading is based on
1,812,928 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 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
August 1997 1 7/16 13/16
November 1997 1 3/16 15/16
February 1998 2 5/8 13/16
May 1998 3 1/2 1 3/4
Holders
- -------
At July 31, 1998 there were approximately 548 holders of common stock.
Dividends
- ---------
Antenna Products, Inc. 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 Antenna Products, Inc.
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
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net Sales $9,003,408 $7,975,962 $10,572,140 $13,099,671 $12,312,099
Income (loss)
from continuing
Operations $ 351,239 $333,429 ($57,861) $141,679 $463,436
Income per share
from continuing
operations(1) $.19 $.18 ($.03) $.08 $.26
Total Assets $7,122,529 $6,918,687 $7,728,707 $10,102,631 $8,623,717
Long Term Debt $1,690,585 $2,200,942 $2,668,367 $2,814,895 $2,079,166
Dividends $0.00 $0.00 $0.00 $0.00 $0.00
- ---------
(1) Adjusted to give retroactive effect of the 2 for 1 stock split dated
February 12, 1998.
Results of Operation
- --------------------
Antenna Products, Inc.'s on-going operation is that of its subsidiaries,
Antenna Products Corporation 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, 1998 ("1998") Compared with Year Ended May 31, 1997 ("1997")
- -------------------------------------------------------------------------------
Antenna Products Corporation
- ----------------------------
Net sales increased by $1.0 million or 11% from $8.0 million in 1997 to $9.0
million in 1998. Orders decreased 6% from $9.9 million in 1997 to $9.3
million in 1998. The ending backlog of firm orders at year end was $4.2
million, down 18% from the prior year end backlog of $5.1 million.
Gross margin rates decreased from 20.9% in 1997 to 18.8% in 1998 during a year
of increased sales. This is principally the result of the settlement Antenna
Products Corporation reached in August 1998.
Sales and administrative expenses were $1.0 million or 11% of sales in 1998.
In 1997, sales and administrative expenses were $1.0 million or 13% of sales.
R&D activity increased slightly from $224 thousand or 2.8% of sales in 1997 to
$255 thousand or 2.8% of sales in 1998.
Antenna Products continued to expand the new line of commercial antennas for
the wireless communication industry with the addition of a new line of paging
antennas. These omnidirectional antennas are available in the VHF, UHF and
900 MHz frequency ranges. The new paging antennas are also available with
varying degrees of electrical downtilt and gain varying from unity gain to 14
dBi.
In addition, three new models of automatic meter reading (AMR) omnidirectional
and sector antennas that operate in the frequency range of 1410 - 1450 MHz
have been developed.
Sales of the commercial antennas have been slower than expected, but have
continued to improve as the product line increases and the customer base
expands.
Net interest expense increased from $205 thousand in 1997 to $253 thousand in
1998 to support the additional work in progress during the year. The
Subsidiary experienced a net profit of $287 thousand compared to a net profit
of $283 thousand in 1997. The Subsidiary is expected to continue to be
profitable in 1999.
Antenna Products, Inc. consolidated sales from operations were $9.0 million
with an income from continuing operations before taxes of $531 thousand in
1998. This compares to $8.0 million in consolidated sales with an income from
continuing operations before taxes of $510 thousand in 1997. Net income for
1998 was $85 thousand compared to a net income of $263 thousand in 1997.
The lower net earnings in 1998 are the result of the sale of Metal Finishing
Corporation in March resulting in a loss of $267 thousand and the settlement
of a lawsuit with a customer of Antenna Products Corporation in August 1998.
The settlement resulted in the Company being required to pay the customer an
aggregate of $382 thousand in cash and 50,000 shares of Company common stock.
The settlement amount was approximately the amount that had been reserved for
this contingency and has been recorded by the Company in accrued liabilities
as of May 31, 1998.
Year ended May 31, 1997 ("1997") Compared With Year Ended May 31, 1996 ("1996")
- -------------------------------------------------------------------------------
Antenna Products, Inc. consolidated sales from operations were $8.0 million
with an income before taxes from continuing operations of $510 thousand in
1997. This compares to $10.0 million in consolidated sales with a loss
from continuing operations of $23 thousand before taxes in 1996. Net income
for 1997 was $263 thousand compared to a net loss of $58 thousand in 1996.
Orders for the year were $9.9 million compared to $8.7 million in 1996.
Gross margin rates increased from 11.6% in 1996 to 20.9% in 1997. Sales and
administrative expenses increased from $759 thousand in 1996 to $930 thousand
in 1997. Research and Development expenses decreased slightly from $251
thousand or 2.5% of sales in 1996 to $224 thousand or 2.8% of sales in 1997.
Net interest expense was $235 thousand in 1997 compared to $444 thousand in
1996.
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 Corporation to maintain $1.5
million in tangible net worth and $1.0 million of working capital. At May 31,
1998 Antenna Products Corporation had equity of $1.63 million and working
capital of $1.90 million. As of July 31, 1998, the Company had drawn $980
thousand of the $2.0 million line of credit with $1.02 million available and
unused. The revolving credit line agreement is renewable in September 1998.
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
1999.
Net cash flow from operations was a positive $112 thousand in 1998 compared to
a positive $898 thousand in 1997. Inventory increased $297 thousand
compared to a decrease of $130 thousand in 1997. Accounts payable and accrued
liabilities decreased $133 thousand and accounts receivable increased $309
thousand. In 1997 accounts payable increased $139 thousand and accounts
receivable increased $48 thousand. Cash flow from financing activities
increased $19 thousand compared to a decrease of $945 thousand in 1997.
Net borrowings from the bank lines of credit were primarily used to pay down
long term debt from $2,200,942 on May 31, 1997 to $1,690,585 on May 31, 1998.
Cash and cash equivalents at the end of 1998 were $221 thousand, an increase
from $90 thousand at the end of the prior year.
There were no capital expenditures for 1998. In 1997, capital expenditures
were limited to $17 thousand. The company anticipates that the existing
facilities and equipment are adequate to handle the projected volumes in 1999
and intends to limit the 1999 capital program to less than $100 thousand for
improvements and 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 $934
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
is prohibited under the terms of the bank note until the bank dept is first
paid.
The company does not expect any changes in payments or other provisions of the
loan agreements now in place.
Year 2000 Readiness
- -------------------
Antenna Products is currently working to assess the potential impact of the
year 2000 on the Company's computer systems and computer programs. Any of the
Company's computerized information systems that recognize a date using "00"
as the year 1900 rather than the year 2000 could result in errors or system
failures. The Company has not completed its assessment, but management
believes that the costs of addressing this issue will not materially affect
the financial position or results of operation of the Company. Antenna
Products Corporation plans to commit the resources required to resolve any
significant year 2000 issues by June 1, 1999.
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-13.
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 21, 1998 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 21, 1998 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 21, 1998 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 21, 1998 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 Antenna Products, Inc. and subsidiaries and
independent auditors' report are presented on pages F-1
through F-12:
Independent Auditor's Report
Consolidated Balance Sheets - May 31, 1998 and 1997
Consolidated Statements of Operations - Years Ended May 31, 1998 and
1997
Consolidated Statement of Shareholders' Equity - Years Ended
May 31, 1998 and 1997
Consolidated Statements of Cash Flows - Years Ended May 31,
1998 and 1997
Notes To Consolidated Financial Statements
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
and Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DATE: August 21, 1998.
Antenna Products, Inc.
BY: S/O/F: Gary W. Havener
Principal Executive Officer
and Director
Pursuant to the requirements of the Securities and 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 21, 1998
And Director
s/o/f: Sam B. Ligon Director August 21, 1998
s/o/f: William D. Poulin Director August 21, 1998
ANTENNA PRODUCTS, INC
____________
CONSOLIDATED FINANCIAL STATEMENTS
for the years ended May 31, 1998 and 1997
ANTENNA PRODUCTS, INC. AND SUBSIDIARES
CONSOLIDATED BALANCE SHEETS
MAY 31, 1998 AND 1997
ASSETS
1998 1997
Current assets:
Cash and cash equivalents $ 221,041 $ 90,461
Accounts receivable:
Trade, net of allowances for
doubtful accounts of $7,021 in 1998 and
$59,822 in 1997 1,009,350 835,828
United States Government 332,230 196,815
Inventories 2,695,470 2,398,443
Prepaid expenses and other assets 9,229 8,162
Income taxes receivable 15,592 -
Deferred income taxes 199,057 162,609
Net assets of discontinued operations - 283,807
---------- ----------
Total current assets 4,481,969 3,976,125
Property and equipment, net 2,640,560 2,942,562
--------- ---------
$7,122,529 $6,918,687
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $1,300,000 $ 615,000
Current portion of long-term debt 43,688 199,800
Accounts payable 436,504 502,733
Accrued expenses 670,295 471,204
Income taxes payable - 11,225
---------- ----------
Total current liabilities 2,450,487 1,799,962
---------- ----------
Long-term debt, less current portion 890,585 1,400,942
Note payable to shareholder 800,000 800,000
Deferred income taxes 448,617 469,644
--------- ---------
Total long-term liabilities 2,139,202 2,670,586
--------- ---------
Total liabilities 4,589,689 4,470,548
--------- ---------
Commitments and contingencies (Note 10) - -
Shareholders' equity:
Preferred stock, $1.00 par, 2,000,000 shares
authorized,no shares issued and outstanding - -
Common stock, $0.01 par, 8,000,000 shares
authorized, 1,812,928 shares in 1998 and
1,813,038 shares in 1997issued and outstanding 18,130 18,130
Additional paid-in capital 1,921,451 1,921,451
Retained earnings 593,259 508,558
--------- ---------
Total shareholders' equity 2,532,840 2,448,139
--------- ---------
$7,122,529 $6,918,687
See accompanying notes to consolidated financial statements.
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Years ended May 31, 1998 and 1997
1998 1997
---- ----
Sales and contract revenues $9,003,408 $7,975,962
Cost of sales and contracts 7,307,587 6,309,183
---------- ----------
Gross profit 1,695,821 1,666,779
Sales and administrative expenses 908,743 930,317
---------- ----------
Operating profit 787,078 736,462
---------- ----------
Other income and (expense):
Interest expense (272,669) (235,373)
Interest income 1,901 779
Other 14,938 8,472
---------- ----------
Total other income and (expense) (255,830) (226,122)
---------- ----------
Income from continuing operations
before income taxes 531,248 510,340
Provision for income taxes 180,009 176,911
---------- ----------
Income from continuing operations 351,239 333,429
Discontinued operations (Note 3):
Loss from operations of discontinued
metal finishing segment, net of $36,572 and
$31,102 tax benefit (70,993) (70,183)
Loss on disposal of metal finishing segment,
net of $100,730 in tax benefit (195,535) -
---------- ---------
Net income $ 84,711 $ 263,246
========== =========
Earnings (loss) per common share:
Continuing operations $ 0.19 $ 0.18
Discontinued operations (0.14) (0.03)
---------- ---------
Net earnings $ 0.05 $ 0.15
========== =========
See accompanying notes to consolidated financial statements.
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
For the years ended May 31, 1998 and 1997
Common Stock
Additional
Number Paid In Retained
of Shares Amount Capital Earnings Total
--------- ------ ------- -------- ------
Balance, May 31, 1996 1,813,128 $18,131 $1,921,451 $245,401 $2,184,983
Retirement of Stock (90) (1) - (89) (90)
Net income - - - 263,246 263,246
--------- -------- ---------- --------- ---------
Balance, May 31, 1997 1,813,038 18,130 1,921,451 508,558 2,448,139
Retirement of stock (10) - - (10) (10)
Net income - - - 84,711 84,711
--------- ------- -------- -------- --------
Balance, May 31, 1998 1,812,928 $18,130 $1,921,451 $593,259 $2,532,840
See accompanying notes to consolidated financial statements.
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended May 31, 1998 and 1997
1998 1997
---- ----
Cash flows from operating activities: $ 84,711 $ 263,246
Net income
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 301,999 322,189
Net liabilities from discontinued operations 283,807 (23,601)
Deferred federal income tax (57,475) 23,458
Changes in assets and liabilities:
Accounts receivable (308,937) (47,990)
Inventory (297,027) 130,804
Payments received - 5,404
Prepaid expenses (1,067) (2,488)
Accounts payable and accrued expenses 132,866 138,992
Income taxes payable/receivable (26,816) 88,341
---------- ---------
Net cash provided by operating activities 112,061 898,355
---------- ---------
Cash flows from investing activities:
Purchase of property and equipment - (16,965)
---------- ---------
Cash flows from financing activities:
Net borrowings (payments) under bank lines
of credit 685,000 (775,000)
Principal payments on long-term debt (666,471) (170,202)
Purchase of common stock (10) (90)
---------- ---------
Net cash provided (used) by
financing activities 18,519 (945,292)
---------- ----------
Net increase (decrease) in cash and
cash equivalents 130,580 (63,902)
Cash and cash equivalents at
beginning of period 90,461 154,363
---------- ----------
Cash and cash equivalents at end of period $ 221,041 $ 90,461
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (none capitalized) $ 272,669 $ 235,373
Income taxes 127,000 100,000
See accompanying notes to consolidated financial statements.
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended May 31, 1998 and 1997
1. Business
Antenna Products, Inc. changed its name from Cabre Corp on January 30,
1998.
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
Antenna Products, Inc.'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 (see Note 3).
Following is a schedule of the Company's sales to major customers, as a
percentage of total sales:
YEAR ENDED MAY 31
1998 1997
---- ----
Federal Government 17% 40%
AIRSYS ATM, Inc. 38% 17%
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.
Reclassification
- ----------------
Certain amounts in the 1997 financial statements have been reclassified
to conform to the 1998 presentation.
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, 1998 and 1997 were $254,810 and $224,300,
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 Per Share, and Stock Split, and Common
- -----------------------------------------------------------------------
Stock Par Value
- ---------------
Earnings per share are computed by dividing net income available for
common stock by the weighted average number of common shares outstanding
during the year. Weighted average shares outstanding were 1,813,033 and
1,813,083 for the years ended May 31, 1998 and 1997, respectively. No
dilutive securities exist in the company's capital structure.
All share and per share information herein has been retroactively
adjusted for a 2 for 1 stock split approved by shareholders on April 20,
1998. Common stock par value herein has also been retroactively
adjusted for the decrease in par value from $1.00 to $0.01.
3. Discontinued Operations
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. Metal Finishing Corp. as
a wholly owned subsidiary of Antenna Products, Inc., operates in the
metal finishes market.
The Company sold Metal Finishing Corp back to its former owner on March
2, 1998 for $100. The Company has reflected the operations of Metal
Finishing Corp in the accompanying financial statements as a
discontinued operation. The loss from sale was recognized in the
Company's third fiscal quarter.
4. Inventories
The major components of inventories are as follows:
1998 1997
Raw Materials $ 857,014 $ 954,849
Work in process 1,085,000 792,471
Finished Goods 753,456 651,123
----------- -----------
$ 2,695,470 $ 2,398,443
=========== ===========
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, 1998 and 1997
were $833,636 and $772,084, respectively.
5. Property and Equipment
The following is a summary of the Company's property and equipment:
Estimated
Useful Life 1998 1997
----------- ---- ----
Land $ 375,136 $ 375,136
Buildings and improvements 15-30 years 1,873,217 1,873,217
Machinery and equipment 10 years 2,923,249 2,938,070
Automobiles and trucks 3 years 97,328 97,328
Office furniture and fixtures 10 years 605,788 605,788
----------- -----------
$ 5,874,718 $ 5,889,539
Less accumulated depreciation (3,234,158) (2,946,977)
----------- -----------
Net property and equipment $ 2,640,560 $ 2,942,562
=========== ===========
6. Notes Payable
At May 31, 1998 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, 1998, when any unpaid principal and
interest shall be due.
Prime rate was 8.5% at May 31, 1998 and May 31, 1997.
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, 1998, available borrowings under this credit facility were limited
to the borrowing base amount of $2,425,000. Borrowings are guaranteed
by a principal shareholder and the Company must maintain minimum net
worth of $1,500,000 and working capital of $1,000,000.
7. Long-Term Debt
At May 31, 1998 and 1997, long-term debt consists of the following:
1998 1997
---- ----
Subordinated note payable to a 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 $10,050 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. 934,273 964,673
Note payable to a finance company payable in
monthly installments of $12,429, including
interest at 9.47% until March 1999. - 260,922
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
--------- -----------
$1,734,273 $2,400,742
Less current portion of long-term debt (43,688) (199,800)
---------- -----------
Non-current portion of long-term debt $1,690,585 $2,200,942
========== ===========
Maturities of long-term debt for each of the five years subsequent to
May 31, 1998 are as follows (including $160,000 per year beginning in
June 1999 for the shareholder note, although it is subordinated to the
note payable to a bank):
1999 $ 43,688
2000 207,787
2001 212,269
2002 217,173
2003 222,536
Thereafter 830,820
8. Income Taxes
Components of the net income tax expense (benefit) for the years ended
May 31, 1998 and 1997 are as follows:
1998 1997
---- ----
Income taxes at statutory rate on income before
income taxes $ 43,300 $ 139,000
Non-deductible losses (593) 6,809
--------- ----------
Total provision (benefit) $ 42,707 $ 145,809
========= ==========
Deferred portion (benefit) of provision $ (57,475) $ 23,458
Current portion (benefit) 100,182 122,351
--------- ----------
Total $ 42,707 $ 145,809
========= ==========
The components of the deferred income tax provision (benefit) were as
follows:
1998 1997
---- ----
Accrued warranty claims $ (51,000) $ (6,800)
Provision for allowance for valuation of
inventory - (10,200)
Depreciation (21,027) 56,700
Bad debt provision 17,952 (17,952)
Other (3,400) 1,710
----------- -----------
Total $ (57,475) $ 23,458
=========== ===========
Components of the net deferred tax liability at May 31, 1998 and 1997
are as follows:
1998 1997
---- ----
Deferred tax liability for
taxable temporary differences $ 448,617 $ 469,644
Deferred tax assets for deductible
temporary differences (199,057) (162,609)
----------- -----------
$ 249,560 $ 307,035
========== ===========
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.
9. Profit Sharing Plan
The Company has adopted 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 1998 and 1997. 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 $46,672 and
$36,985 for the years ended May 31, 1998 and 1997, respectively.
10. Commitments and Contingencies
Subsequent to May 31, 1998, the Company settled a law suit with a
customer (See note 12).
The Company is involved in certain other legal actions arising from
normal business activities. Outside counsel and 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 US Government, both
military and civil agencies, and prime contractors. Although the
Company might be directly affect by the well-being of the defense
industry, management does not believe significant credit risk exists at
May 31, 1998.
Ongoing credit evaluations of customer's 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 estimate 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.
11. New Accounting Pronouncements
In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS
128"). SFAS 128 provides a different method of calculating earnings
per share than was used in APB Opinion 15. SFAS 128 provides for the
calculation of basic and diluted earnings per share. Basic earnings per
share includes no dilution and is computed by dividing income available
to common stockholders by the weighted average number of common shares
outstanding for the period. Dilutive earnings per share reflects the
potential dilution of securities that could share in the earnings of an
entity, similar to existing fully diluted earnings per share.
The Company was required to adopt this standard in the year ended May
31, 1998. The new standard had no effect on the Company's calculation
of earnings per share.
In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards. Results of operations and financial position will
be unaffected by implementation of these new standards.
Statement of Financial Accounting Standards (SFAS) 130, "Reporting
Comprehensive Income" establishes standards for reporting and display
of comprehensive income, its components and accumulated balances.
Comprehensive income is defined to include all changes in equity except
those resulting from investments by owners and distributions to owners.
Among other disclosures, SFAS 130 requires that all items that are
required to be recognized under current accounting standards as
components of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial
statements.
SFAS 131, "Disclosure about Segments of a Business Enterprise",
establishes standards for the way that public enterprises report
information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in
interim financial statements issued to the public. It also establishes
standards for disclosures regarding products and services, geographic
areas and major customers. SFAS 131 defines operating segments as
components of an enterprise about which separate financial information
is available that is evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and in assessing
performance.
Both of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative
information for earlier years to be restated. The Company does not
believe that SFAS 130 nor SFAS 131 will have any effect on its future
financial statement disclosures.
12.0 Subsequent Event
Subsequent to May 31, 1998, the Company settled a lawsuit with a
customer. The settlement resulted in the Company being required to pay
the customer an aggregate of $382,000 in cash ($297,000 in August 1998
and $85,000 in November 1998) and 50,000 shares of Company common stock.
The settlement amount has been recorded by the Company in accrued
liabilities as of May 31, 1998.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Antenna Products, Inc.
We have audited the accompanying consolidated balance sheets of Antenna
Products, Inc. as of May 31, 1998 and 1997, and the related
consolidated statements of income, changes in 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 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 financial statements referred to above present
fairly, in all material respects, the consolidated financial position
of Antenna Products, Inc. as of May 31, 1998 and 1997 and the results
of operations and its cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Dallas, Texas
July 16, 1998 (Except as to Note 12, which is as of August 5, 1998)
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> MAY-31-1998
<CASH> 221,041
<SECURITIES> 0
<RECEIVABLES> 1,009,350
<ALLOWANCES> 7,021
<INVENTORY> 2,695,470
<CURRENT-ASSETS> 4,481,969
<PP&E> 2,640,560
<DEPRECIATION> 301,999
<TOTAL-ASSETS> 7,122,529
<CURRENT-LIABILITIES> 2,450,487
<BONDS> 0
0
0
<COMMON> 18,130
<OTHER-SE> 2,514,710
<TOTAL-LIABILITY-AND-EQUITY> 7,122,529
<SALES> 9,003,408
<TOTAL-REVENUES> 9,020,247
<CGS> 7,307,587
<TOTAL-COSTS> 908,743
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 272,669
<INCOME-PRETAX> 531,248
<INCOME-TAX> 180,009
<INCOME-CONTINUING> 351,239
<DISCONTINUED> 266,528
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84,711
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