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 August 31, 1999
[ ] 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 September 30, 1999.
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
August 31, 1999 and May 31, 1999
ASSETS
August 31, 1999 May 31, 1999
(Unaudited) (Audited)
---------------- ------------
Current assets:
Cash and cash equivalents $ 96,460 $ 270,175
Accounts receivable:
Trade, net of allowances for
doubtful accounts of $7,021 each year 616,650 1,077,917
United States Government 149,431 210,360
Inventories 2,592,511 2,638,172
Prepaid expenses and other assets 58,606 33,368
Income taxes receivable 186,212 186,212
Deferred income taxes 65,880 65,880
------------ -------------
Total current assets 3,765,750 4,482,084
------------ -------------
Property and equipment, net 2,315,156 2,386,918
------------ -------------
$ 6,080,906 $ 6,869,002
============ =============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Notes payable $ 505,000 $ 1,300,000
Current portion of long-term debt 48,535 48,535
Accounts payable 259,142 247,407
Accrued expenses 331,558 323,489
------------ ------------
Total current liabilities 1,144,235 1,919,431
------------ ------------
Long-term debt 836,564 846,900
Note payable to shareholder 800,000 800,000
Deferred income taxes 460,462 460,462
----------- ------------
Total long-term liabilities 2,097,026 2,107,362
----------- ------------
Total liabilities 3,241,261 4,026,793
----------- ------------
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 issued
and outstanding 18,630 18,630
Additional paid in capital 1,995,951 1,995,951
Retained earnings 825,064 827,628
---------- -----------
Total shareholders' equity 2,839,645 2,842,209
---------- -----------
$6,080,906 $6,869,002
========== ===========
See accompanying notes to consolidated financial statements.
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Quarters ended August 31, 1999 and 1998
(Unaudited)
1999 1998
---- ----
Sales and contract revenues $1,485,387 $2,138,686
Cost of sales and contracts 1,037,621 1,614,705
---------- ----------
Gross Profit 447,766 523,981
Sales and administration expenses 396,949 309,313
---------- ---------
Operating Profit 50,817 214,668
---------- ---------
Other income (expense):
Interest expense (58,794) (65,060)
Interest income 25 1,454
Other 5,388 1,508
---------- --------
Total other income (expense) (53,381) (62,098)
---------- --------
Income (loss) before taxes (2,564) 152,570
Provision for income taxes - 51,874
---------- --------
Income (loss) from continued operations (2,564) 100,696
Discontinued operations:
Loss from operations of discontinued
segment net of taxes of $2,865 for 1998 - (5,561)
---------- ---------
Net income (loss) $ (2,564) $ 95,135
=========== ===========
Earning (loss) per common shares:
Continued operations $ (0.00) $ .05
Discontinued operations - -
----------- -----------
Net income (loss) $ (0.00) $ .05
=========== ===========
See accompanying notes to consolidated financial statements.
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters ended August 31, 1999 and 1998
(Unaudited)
1999 1998
---- ----
Cash flows from operating activities:
Net income (loss) $ (2,564) $ 95,135
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 71,761 38,216
Changes in assets and liabilities:
Accounts receivable 522,196 (253,186)
Inventory 45,661 112,137
Prepaid expenses (25,237) (9,704)
Accounts payable and accrued expenses 19,804 (17,744)
Income taxes payable - 49,009
---------- ------------
Net cash provided by operating activities 631,621 13,863
---------- ------------
Cash flows from investing activities:
Purchase of property and equipment - (267)
---------- ------------
Net cash used in investing activities - (267)
Cash flows from financing activities:
Net borrowings (payments) under
bank line of credit (795,000) 180,000
Purchase of treasury stock - (9)
Principal payments on long term debt (10,336) (8,320)
--------- -----------
Net cash provided (used) by financing activities (805,336) 171,671
--------- -----------
Net increase (decrease) in cash and cash
equivalents (173,715) 185,267
Cash and cash equivalents at
beginning of period 270,175 221,041
--------- ----------
Cash and cash equivalents at end of period $ 96,460 $ 406,308
========= ==========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest (none capitalized) $ 58,794 $ 65,060
Income taxes - -
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 August
31, 1999, the results of operations for the three months ending August 31,
1999 and 1998, and the cash flows for the three months ended August 31,
1999 and 1998. 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, 1999.
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 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 on September 30, 1999 at Antenna Products Corporation
amounted to approximately $4.0 million. Eighty percent or $3.2 million of
this backlog consists of products designed and manufactured by Antenna
Products Corporation. The balance of the backlog, $800 thousand, is
equipment manufactured in accordance with customer drawings and
specifications commonly called "build to print work."
About 90% of the current backlog will be delivered in the 2000 fiscal year.
Inventories
- -----------
The major components of inventories are as follows:
August 31, 1999 May 31, 1999
Raw materials $ 642,491 $ 646,355
Work in process 1,605,545 1,523,201
Finished goods 344,475 468,616
---------------- -------------
$ 2,592,511 $ 2,638,172
================ ==============
4. Notes Payable
At August 31, 1999 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 8.25% at August 31, 1999 and 8.50% at August 31, 1998.
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 August 31, 1999,
available borrowings under this credit facility were limited to the
borrowing base amount of $1,804,277. 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 August 31, 1999 and 1998, long-term debt consists of the following:
1999 1998
---- ----
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 2002 and maturing in
May 2007. $ 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. 885,099 925,953
----------- -----------
$ 1,685,099 $ 1,725,953
=========== ===========
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
- ---------------------
First Quarter Ended August 31, 1999 Compared to First Quarter Ended August 31,
1998
The Company recorded a net loss of $(2,564) for the quarter ended August 31,
1999 compared to a net profit of $95,135 in the quarter ended August 31, 1998.
A slow-down in orders for military and commercial products coupled with
continued customer delays in accepting delivery of completed ILS equipment
depressed sales in the first quarter. Sales for the first quarter of fiscal
year 2000 were only $1.49 million compared to $2.14 million in the first
quarter of fiscal year 1999.
To reduce costs during the first quarter, Antenna Products Corporation reduced
employment to 75 employees, eliminated all overtime and placed the production
personnel on a 36 hour work week for the three month period. In August,
demand for products began to improve and as a result, the backlog has
increased to $4.0 million on September 30, 1999. In September, an agreement
was reached with a major customer and deliveries of ILS equipment will resume
in the second quarter. As a result, all Antenna Products Corporation
personnel are scheduled to return to a 40 hour week in October, but staffing
will remain at the current level.
Sales and administrative expenses were higher in the first quarter of fiscal
year 2000, $397 thousand versus $309 thousand in the first quarter of fiscal
year 1999. Operating expenses including supplies, utilities, maintenance and
premium pay decreased , but indirect charges increased due to the decrease in
production volume. This resulted in an overall increase in sales and
administrative expenses in the first quarter of this year.
Interest expense in the first quarter of fiscal year 2000 was slightly lower,
$59 thousand versus $65 thousand in the same time period of fiscal year 1999.
During the first quarter, a new 33 degree PCS sector antenna was developed .
The antenna is available in seven gain configurations from 15 dBi to 24 dBi.
Customer field tests of two configurations of this new PCS antenna will be
conducted in the second quarter. A new 180 degree ISM sector antenna was also
developed during the first quarter. It has a frequency range of 2.4 - 2.5
GHz and is rated for 300 watts of continuous RF power in a
14.2 dBi gain configuration. The first production 180 degree ISM sector
antennas will be delivered in the second quarter of fiscal year 2000.
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 $3,765,750 as of August 31, 1999 with
$3,358,592 in inventory and accounts receivable. Receivables are $766,081 at
quarter ending August 31, 1999 compared to $1,288,277 at fiscal 1999 year-end.
Net inventories have decreased slightly from $2,638,172 at May 31, 1999 to
$2,592,511. Cash accounts have decreased $173,715 from May 31, 1999. There
were nominal capital additions during this period. Current liabilities of the
Company decreased $775,196 from fiscal year end due to the reduction of the
revolving line of credit balance in the first quarter.
Management believes that cash flows from operations of the operating
subsidiary 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. The Company at August 31, 1999 had $1,495,000 remaining in loan
availability against its revolving credit lines. On September 30, 1999,
Antenna Products renewed its annual working credit line of $3.0 million with
loan advances subject to a borrowing base formula applied to inventory and
receivable balances.
Year 2000 Readiness
- -------------------
Antenna Products Corporation 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 management anticipates
there will be no difficulty with the hardware recognizing year 2000 dates.
The Company utilizes a number of computer programs internally. An assessment
of these programs has been completed and where problems were identified,
software upgrades have been purchased and installed. The computer numerical
controlled (CNC) machines in the manufacturing areas have been checked and the
controls for the machines will accurately recognize Year 2000 dates.
Assessment of all vendors continues, with good results. Approximately 95% of
the vendors surveyed have responded that they are working to resolve the
potential impact of the Year 2000 on their business.
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 plans to commit the resources required to resolve
any significant Year 2000 issues in a timely manner.
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: October 8, 1999 s/o/f: Clark D. Wraight
Vice President
and Principal Financial Officer
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 3-MOS
[FISCAL-YEAR-END] MAY-31-2000
[PERIOD-END] AUG-31-1999
[CASH] 96,460
[SECURITIES] 0
[RECEIVABLES] 766,081
[ALLOWANCES] 7,021
[INVENTORY] 2,592,511
[CURRENT-ASSETS] 3,765,750
[PP&E] 2,315,156
[DEPRECIATION] 71,761
[TOTAL-ASSETS] 6,080,906
[CURRENT-LIABILITIES] 1,144,235
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 18,630
[OTHER-SE] 1,995,951
[TOTAL-LIABILITY-AND-EQUITY] 6,080,906
[SALES] 1,485,387
[TOTAL-REVENUES] 1,485,387
[CGS] 1,037,621
[TOTAL-COSTS] 396,949
[OTHER-EXPENSES] 53,381
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 58,794
[INCOME-PRETAX] (2,564)
[INCOME-TAX] 0
[INCOME-CONTINUING] (2,564)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (2,564)
[EPS-BASIC] 0
[EPS-DILUTED] 0
</TABLE>
