U.S. Securities and Exchange Commission
Washington D.C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________ to _______________
Commission file number 0-12866
ANTENNA PRODUCTS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 75-1907070
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
1209 Orange St., Wilmington, Delaware 19801
(Address of principal executive offices)
(302) 658-7581
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 1,862,928 as of November
30, 1998.
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
November 30, 1998 and May 31, 1998
ASSETS
November 30, 1998 May 31, 1998
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 502,453 $ 221,041
Accounts receivable:
Trade, net of allowances for
doubtful accounts of $7,021 each
year 1,221,742 1,009,350
United States Government 109,604 332,230
Inventories 2,634,127 2,695,470
Prepaid expenses and other assets 70,611 9,229
Income taxes receivable - 15,592
Deferred income taxes 199,057 199,057
------------ ------------
Total current assets 4,737,594 4,481,969
------------ ------------
Property and equipment, net 2,528,093 2,640,560
------------ ------------
$ 7,265,687 $ 7,122,529
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,225,000 $ 1,300,000
Current portion of long-term debt 43,688 43,688
Accounts payable 445,622 436,504
Accrued expenses 531,318 670,295
Income taxes payable 21,543 -
------------ -------------
Total current liabilities 2,267,171 2,450,487
------------ -------------
Long-term debt, less current portion 872,667 890,585
Note payable to shareholder, less
current portion 800,000 800,000
Deferred income taxes 448,617 448,617
------------ -------------
Total long-term liabilities 2,121,284 2,139,202
------------ -------------
Total liabilities 4,388,455 4,589,689
------------ -------------
Commitments and Contingencies - -
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. 1,862,928 and
1,812,928 shares issued and outstanding
respectively 18,630 18,130
Additional paid in capital 1,995,951 1,921,451
Retained earnings 862,651 593,259
----------- -----------
Total shareholders' equity 2,877,232 2,532,840
----------- -----------
$ 7,265,687 $ 7,122,529
See accompanying notes to consolidated financial statements.
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Six Months Ended Three Months Ended
Nov 30, 1998 Nov 30, 1997 Nov 30, 1998 Nov 30, 1997
------------ ------------ ------------ ------------
Sales and contract
revenues $ 4,150,133 $ 4,281,247 $ 2,011,447 $ 2,333,435
Cost of sales and
contracts 3,053,095 3,267,147 1,438,390 1,718,361
----------- ------------ ------------- ------------
Gross Profit 1,097,038 1,014,100 573,057 615,074
Sales and
administration
expenses 562,142 350,249 252,829 171,924
---------- ----------- ----------- -----------
Operating Profit 534,896 663,851 320,228 443,150
---------- ----------- ----------- -----------
Other income
(expense):
Interest expense (132,036) (126,511) (66,976) (63,866)
Interest income 1,482 68 28 49
Other 5,261 (12,872) 3,753 (5,850)
---------- ------------ ----------- -----------
Total other income
(expense) (125,293) (139,315) (63,195) (69,667)
---------- ------------ ----------- -----------
Income from
continuing
operations
before income
taxes 409,603 524,536 257,033 373,483
Provision for income
taxes 140,000 178,752 88,126 126,580
---------- ----------- ---------- -----------
Income from
continuing
operations 269,603 345,784 168,907 246,903
Discontinued
operations:
Loss from operations
of discontinued
segment, net of
taxes of 2,865 (5,561) (36,401) - (16,656)
----------- ----------- --------- -----------
Net income $ 264,042 $ 309,383 $ 168,907 $ 230,247
=========== =========== ========= ===========
Basic earnings (loss)
per common share
Continuing
operations $ .14 $ .19 $ .09 $ .14
Discontinued
operations - (.02) - (.01)
----------- ----------- --------- -----------
$ .14 $ .17 $ .09 $ .13
=========== =========== ========= ===========
See accompanying notes to consolidated financial statements.
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters ended November 30, 1998 and 1997
(Unaudited)
Six Months Ended
November 30, 1998 November 30, 1997
----------------- -----------------
Cash flows from operating
activities:
Net income $ 264,042 $ 309,383
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 112,732 173,514
Deferred federal income tax - (37,413)
Changes in assets and liabilities:
Accounts receivable 10,236 (676,722)
Inventory 61,343 (481,975)
Prepaid expenses (61,382) (17,846)
Accounts payable and accrued
expenses (49,500) 216,181
Income taxes payable 37,135 123,413
---------- -----------
Net cash provided (used) by
operating activities 374,606 (391,465)
---------- -----------
Cash flows from investing
activities:
Purchase of property
and equipment (267) (4,992)
---------- -----------
Cash flows from financing
activities:
Net borrowings (payments) under
bank line of credit (75,000) 505,000
Purchase of treasury stock (9) (5)
Principal payments on long term
debt (17,918) (115,365)
--------- -----------
Net cash provided (used) by
financing activities (92,927) 389,630
--------- -----------
Net increase (decrease) in cash
and cash equivalents 281,412 (6,827)
Cash and cash equivalents at
beginning of period 221,041 90,461
--------- -----------
Cash and cash equivalents at end
of period $ 502,453 $ 83,634
========= ===========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest (none capitalized) $ 132,036 $ 156,102
Income taxes 100,000 74,000
See accompanying notes to consolidated financial statements.
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATD FINANCIAL STATEMENTS
(Unaudited)
1. Statement of Information Furnished
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-QSB instructions and in the opinion of
management contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of
November 30, 1998, the results of operations for the six months ended
and three months ended November 30, 1998 and 1997, and the cash flows for
the six months ended November 30, 1998 and 1997. These results have been
determined on the basis of generally accepted accounting principles and
practices applied consistently with those used in the preparation of the
Company's audited financial statements for its fiscal year ended May 31, 1998.
2. Business
Antenna Products Corporation
- ----------------------------
The Company operates as a "Holding" company with Antenna Products
Corporation and Thirco, Inc. as its subsidiaries. Antenna Products
Corporation is an operating subsidiary with Thirco serving as an equipment
leasing company to Antenna Products, Inc.'s operating unit.
Antenna Products Corporation designs, 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 Corporation's 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.
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 Corporation. 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 November 30, 1998 at Antenna Products amounted to
approximately $3.2 million. About 90% of the current backlog will be
delivered in the 1999 fiscal year.
Inventories
- -----------
The major components of inventories are as follows:
November 30, 1998 May 31, 1998
Raw materials $ 617,470 $ 857,014
Work in process 1,471,436 1,085,000
Finished goods 545,221 753,456
-------------- -------------
$ 2,634,127 $ 2,695,470
4. Notes Payable
At November 30, 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, 1999, when any unpaid principal and interest
shall be due.
Prime rate was 7.75% at November 30, 1998 and 8.50% at November 30, 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 November 30, 1998,
available borrowings under this credit facility were limited to the
borrowing base amount of $2,305,268. Borrowings are guaranteed by a
principal shareholder and the Company must maintain a minimum net worth of
$1,500,000 and working capital of $1,000,000.
5. Long-Term Debt
At November 30, 1998 and 1997, long-term debt consists of the following:
1998 1997
---- ----
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 $1,500,000 in working capital and $1,000,000
in equity. 916,356 950,048
Note payable to a finance company payable in monthly
installments of $12,429, including interest at 9.47%
until March 1999. - 194,798
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. - 357,528
-------- -----------
$1,716,356 $2,302,374
========== ==========
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OPERATION AND FINANCIAL CONDITION
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and operating
results for the period included in the accompanying financial statements.
Results of Operations
- ---------------------
Second Quarter Ended November 30, 1998 Compared to Second Quarter Ended
November 30, 1997
The Company's net profit for the quarter ended November 30, 1998 was $168,907
compared to $230,247 in the quarter ended November 30, 1997. The decreased
profitability was the result of lower margins on some product lines and lower
sales of Antenna Products. The Company's operating margin for the second
quarter of fiscal year 1999 was 15.9% compared to 19% in the second quarter of
fiscal year 1998. Overall sales were 14% lower this year with $2.01 million
total deliveries in the second quarter of fiscal year 1999 compared to $2.33
million of deliveries for the same time period of fiscal year 1998. However,
due to the nature of long term contracts, individual quarterly results may
vary dramatically and not be indicative of a trend.
Sales and administrative expenses were higher in the second quarter of fiscal
year 1999, $253 thousand versus $172 thousand in the second quarter of fiscal
year 1998. Interest expense in the second quarter of fiscal year 1999 was
slightly higher, $67 thousand versus $64 thousand in the same time period of
fiscal year 1998.
Due to slower sales in both military and commercial markets, the Company's
backlog totaled $3.2 million on November 30, 1998, compared to a backlog of
$5.5 million on November 30, 1997.
Six Months Ended November 30, 1998 Compared to Six Months Ended November 30,
1997
For the six month period ending November 30, 1998 the net profit was $264,042
compared to a net profit of $309,383 in the same six month period of 1997.
Sales were $4.15 million in the first half of fiscal year 1999, 3% lower than
the $4.28 million of sales in the first half of fiscal year 1998. The gross
profit margin for the first six months was 26% compared to 24% for the first
six months of last year. Sales and administrative expenses as a ratio to
sales were 14% in the first six months of this year compared to 8% in the same
period last year. The Company's operating margin for the first half of fiscal
year 1999 was 12.9% compared to 15.5% in the first half of fiscal year 1998.
Warranty charges of $73,333 were higher than last year's rate, and averaged
less than 2% of sales. Discretionary products development spending was
$153,312, or 4% of sales, 1% higher than the comparable period last year.
In response to customer antenna requirements, two new AMR antennas that
operate at 1428 MHz were developed during the second quarter. The first
antenna is a unity gain omni antenna and the second antenna is a 3 dBd gain
omni antenna. Initial orders for a total of 160 of the two new antennas were
received during the second quarter.
More information on new products at Antenna Products is available on the
Internet web page at://WWW.antennaproducts.com.
Liquidity and Capital Resources
The Company's current assets total $4,737,594 as of November 30, 1998 with
$3,965,473 in inventory and accounts receivable. Receivables are $1,331,346
at the quarter ending November 30, 1998 compared to $1,341,580 at fiscal 1998
year-end. Net inventories have decreased slightly from $2,695,470 at May 31,
1998 to $2,634,127. Cash accounts have increased $281,412 from May 31, 1998.
There were nominal capital additions during this period. Current liabilities
of the company decreased $183,316 from fiscal year end due to the decrease in
material requirements for work-in- process on contracts at Antenna Products.
Approximately 90% of this work in-process will deliver in FY99.
Management believes that cash flows from operations of the operating
subsidiaries and current cash balances, together with available lines of
credit, will be sufficient to fund operations and expenses for the near and
mid term future. On September 30, 1998, Antenna Products renewed its annual
working credit line of $2.0 million with loan advances subject to a borrowing
base formula applied to inventory and receivable balances.
Year 2000 Readiness
Antenna Products has completed a product line assessment and none of the
products sold by the Company are at risk for Year 2000 compliance. The
computer system at Antenna Products has been tested and it will accurately
recognize Year 2000 dates. All required internal process software upgrades
are scheduled to be installed and tested by June 1, 1999. Assessment of all
vendors continues. Approximately 90% of the vendors surveyed have responded.
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, INC. AND SUBSIDIARIES
PART II-OTHER INFORMATION
No Applicable Items.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Antenna Products, Inc.
Date: Janaury 4, 1999 s/o/f: Clark D. Wraight
-----------------
Vice President
and Principal Financial Officer
1
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] MAY-31-1999
[PERIOD-END] NOV-30-1998
[CASH] 502,453
[SECURITIES] 0
[RECEIVABLES] 1,338,367
[ALLOWANCES] (7,021)
[INVENTORY] 2,634,127
[CURRENT-ASSETS] 4,737,594
[PP&E] 5,874,986
[DEPRECIATION] 3,346,893
[TOTAL-ASSETS] 7,265,687
[CURRENT-LIABILITIES] 2,267,171
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 18,630
[OTHER-SE] 2,858,602
[TOTAL-LIABILITY-AND-EQUITY] 7,265,687
[SALES] 4,150,133
[TOTAL-REVENUES] 4,150,133
[CGS] 3,053,095
[TOTAL-COSTS] 562,142
[OTHER-EXPENSES] (6,743)
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 132,036
[INCOME-PRETAX] 409,603
[INCOME-TAX] 140,000
[INCOME-CONTINUING] 269,603
[DISCONTINUED] (5,561)
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 264,042
[EPS-PRIMARY] .14
[EPS-DILUTED] .14
</TABLE>
