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, 1999
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 (940) 325-3301
------------------------------------------- --------------
(Address of principal executive offices) (Issuer'stelephone 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 August 10, 1999, there were outstanding 1,862,928
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 $1,375,128.
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 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.
Antenna Products Corporation's customer base is primarily
government and government prime contractor focused, but this is
slowly changing as Antenna Products Corporation continues to
develop and market new commercial products. Antenna Products
Corporation's 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. Some 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 1999 AIRSYS ATM, Inc. (fka Wilcox Electric) was the
single largest customer, and accounted for 21% of the sales
volume. The U.S. Government totaled 18% of sales and Raytheon
totaled 14% of sales. Orders for equipment in some of these
product categories are in backlog and, therefore, AIRSYS ATM,
Inc., Raytheon and the U.S. Government are expected to be major
clients again in 2000.
Antenna Products Corporation is one of many suppliers of antennas
and related manufacturing services to the government and
government prime contractors. The Company 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.
Antenna Products Corporation is primarily a build to order
company and most manufacturing requirements are established on a
contract basis. For this reason, the majority of the inventory
is work in process. Less than 18% of total inventory,
approximately $469,000, is currently maintained in stock for
delivery to customers. Some raw materials are also inventoried
to support customer delivery schedules. The Company 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 Corporation 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 Corporation's 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 Corporation 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 1999 the Company invested 3.4% of sales to
independent research and development (R&D). The level of
expenditures as a ratio to sales is expected to continue at this
level in 2000. The level of expenditures for R&D as a ratio to
sales was 2.8% of sales in 1998 and 1997. 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 employ
any full time employees and does not intend to employ any in the
foreseeable future. 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 at Antenna Products Corporation was $3.3
million at year-end. This compares to $4.2 million in backlog at
the end of fiscal year 1998. In August, an increase in orders
pushed the backlog above $4.0 million. About 80% of this backlog
will be delivered in the 2000 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 August 10, 1999 Antenna Products Corporation employed a
total of 75 employees. Of the 75, 10 were employed in
administration and sales, 10 in engineering and technical
support, and 55 in manufacturing. None of the company's
employees are subject to collective bargaining agreements.
Foreign Sales
- -------------
Antenna Products Corporation's 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 1999, 1998, and 1997 were 9.8%, 6.0%, and
8.6%, 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
None.
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 1999.
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 58 President and Chief
Executive Officer
Clark D. Wraight 55 Vice President,
Secretary, and 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 served as the
President of Antenna Products Corporation from 1996 until April
1999.
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 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".
Since August 6, 1998 trading is based on 1,862,928 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 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
August 1998 2 1
November 1998 1 3/8 1 5/16
February 1999 4 11/32 1 1/8
May 1999 2 3/16 1 7/16
Holders
- -------
At August 10, 1999 there were approximately 545 holders of record
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
-------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Net Sales $7,786,911 $9,003,408 $7,975,96 $10,572,140 $13,099,671
Income (loss) from
continuing
Operations $ 234,369 $351,239 $333,429 ($57,861) $141,679
Income per share
from continuing
operations (1) $.13 $.19 $.18 ($.03) $.08
Total Assets $6,869,002 $7,122,529 $6,918,687 $7,728,707 $10,102,631
Long Term Debt $1,646,900 $1,690,585 $2,200,942 $2,668,367 $2,814,895
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, 1999 ("1999") Compared with Year Ended May 31, 1998 ("1998")
- -------------------------------------------------------------------------------
Antenna Products Corporation
- ----------------------------
Antenna Products Corporation experienced lower sales than
projected in the third and fourth quarter of fiscal year 1999,
resulting in overall sales of $7.8 million in 1999. This is $1.2
million or 13% less than the $9.0 million in sales in 1998.
Orders were down in both military and commercial markets from a
total of $9.3 million in 1998 to $6.6 million in 1999. This
resulted in an ending backlog of firm orders at year-end of only
$3.3 million, down 21% from the prior year end backlog of $4.2
million.
Changes in a major customer's requirements for commercial ILS
equipment delayed deliveries of equipment completed in the third
and fourth quarters of 1999. This equipment remained in Antenna
Products Corporation's inventory at year-end.
The reduced backlog and continued customer delays in accepting
delivery of completed ILS equipment will have a negative affect
on the sales performance in the first quarter of fiscal year
2000. Sales for the first quarter of fiscal year 2000 are
currently estimated to be approximately $1.5 million.
The gross profit margin for fiscal year 1999 was 24% compared
to 19% in 1998. Sales and administrative expenses as a ratio to
sales were 17% of sales in 1999 compared to 11% in 1998. The
Company's operating margin for 1999 was 7.1% compared to 7.5% in
1998. Warranty charges of $109 thousand were higher than last
year's rate of $88 thousand, but averaged less than 2% of sales.
Discretionary products development spending was $263 thousand, or
3.4% of sales in 1999. This was an increase from $255 thousand
or 2.8% of sales in 1998.
Marketing of the new line of commercial antennas for the wireless
telecommunications industry continued in 1999 with small sales to
license holders and system integrators in the "C", "E", and "F"
frequency blocks. Many of these license holders are still in the
planning stage and Antenna Products Corporation is providing
digital patterns for the PCS panel and omni antennas to assist
the design phase.
During the fourth quarter, a new 2.4 - 2.5 GHz ISM panel antenna
and two new models of automatic meter reading (AMR)
omnidirectional and directional antennas that operate in the
frequency range of 1410 - 1450 MHz were developed. The first
production antennas will be delivered in the first quarter of
fiscal year 2000.
More information on new products at Antenna Products Corporation
is available on the Internet web page at:
//WWW.antennaproducts.com.
Interest expense for Antenna Products Corporation decreased from
$253 thousand in 1998 to $246 in 1999. The Subsidiary
experienced a pre-tax profit of $308 thousand in 1999 compared to
a pre-tax profit of $434 thousand in 1998. The Subsidiary is
expected to continue to be profitable in 2000.
Antenna Products, Inc. consolidated sales from operations were
$7.8 million with an income from continuing operations before
taxes of $359 thousand in 1999. This compares to $9.0 million in
consolidated sales with an income from continuing operations
before taxes of $531 thousand in 1998. Net income for 1999 was
$234 thousand compared to a net income of $85 thousand in 1998.
The lower net earnings in 1998 were the result of the sale of
Metal Finishing Corporation in March 1998 that resulted 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 was recorded by
the Company in accrued liabilities as of May 31, 1998.
Year ended May 31, 1998 ("1998") Compared With Year Ended May 31,1997 ("1997")
- ------------------------------------------------------------------------------
Antenna Products, Inc. consolidated sales from operations were
$9.0 million with an income before taxes from continuing
operations of $531 thousand in 1998. This compares to $8.0
million iincome
available for common stock by the weighted average number of
common shares outstanding during the year. Weighted average
shares outstanding were 1,852,650 and 1,813,083 for the
years ended May 31, 1999 and 1998, 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 and the $229,500 note
payable. The Company has reflected the operations of Metal
Finishing Corp in the accompanying 1998 financial statements
as a discontinued operation. The loss from sale was
recognized in the Company's third fiscal quarter of the 1998
fiscal year.
4. Inventories
The major components of inventories are as follows:
1999 1998
---- ----
Raw Materials $ 646,355 $ 857,014
Work in process 1,523,201 1,085,000
Finished Goods 468,616 753,456
----------- ------------
$ 2,638,172 $ 2,695,470
=========== ============
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, 1999 and
1998 were $952,301 and $883,636, respectively.
5. Property and Equipment
The following is a summary of the Company's property and
equipment:
Estimated
Useful Life 1999 1998
----------- ---- ----
Land $ 375,136 $ 375,136
Buildings and improvements 15-30 years 1,873,216 1,873,217
Machinery and equipment 10 years 2,934,342 2,923,249
Automobiles and trucks 3 years 97,328 97,328
Office furniture and fixtures 10 years 586,788 605,788
----------- -----------
$5,866,810 $5,874,718
Less accumulated depreciation 3,479,892 3,234,158
---------- ----------
Net property and equipment $2,386,918 $2,640,560
========== ==========
6. Notes Payable
At May 31, 1999 and 1998 notes payable consist of a
revolving note payable to a bank, with a maximum amount not
to exceed the lesser of $2,000,000 or a calculated borrowing
base determined by a formula based upon the amount of
certain qualified receivables and inventories as defined in
the loan agreement. Interest is payable monthly at the
prime rate (7.75 % and 8.5% at May 31, 1999 and 1998,
respectively) plus 1% until September 30, 1999, when any
unpaid principal and interest shall be due. Borrowings
under the revolving note payable are collateralized by
accounts receivable and inventories and are guaranteed by a
principal shareholder. Under the agreement, the Company
must maintain minimum net worth of $1,500,000 and working
capital of $1,000,000.
At May 31, 1999 and 1998, note payable to shareholder
consist of subordinated note to a principal shareholder of
the company. In the initial years, only interest at the
prime rate (7.75% and 8.5% at May 31, 1999 and 1998,
respectively) is payable, with monthly principal payments
scheduled to begin in June 2002, and maturing in May 2007.
Interest charged to operations under the note were $64,345
and 68,000 for the years ended May 31, 1999 and 1998,
respectively.
7. Long-Term Debt
At May 31, 1999 and 1998, long-term debt consists
of the following:
1999 1998
---- ----
Mortgage note to a bank, guaranteed 80% by a
U.S. government agency, payable $10,050 per
month, including interest at the prime rate
(7.75% and 8.5% at May 31, 1999 and 1998,
respectively) plus 1/2%; collateralized by certain
real estate, fixtures and assignment of life
insurance policy with a principal shareholder.
The note is also guaranteed by a principal
shareholder and the Company is required to
maintain certain covenants including
$1,000,000 in working capital and a ratio
of maximum debt to net worth of seven to one. $ 895,435 $ 934,273
Less current portion of long-term debt 48,535 43,688
---------- ----------
$ 846,900 $ 890,585
========== ==========
Maturities of long-term debt for each of the five years
subsequent to May 31, 1999 are as follows (including
$160,000 per year beginning in June 2002 for the shareholder
note, although it is subordinated to the note payable to a
bank):
2000 $ 48,535
2001 52,694
2002 57,209
2003 222,111
2004 227,434
Thereafter 1,087,452
----------
$1,695,435
==========
8. Income Taxes
Components of the provision for income tax are as follows:
1999 1998
Income taxes at statutory rate on income before
income taxes $ 121,982 $ 43,300
Non-deductible expenses 2,419 (593)
--------- ----------
Total provision 124,401 $ 42,707
========= ==========
Deferred portion (benefit) of provision $ 145,022 $ (57,475)
Current portion (benefit) (20,621) 100,182
--------- ----------
Total provision
