SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter
Ended July 1, 1995 Commission File Number 0-13433
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MILTOPE GROUP INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 11-2693062
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
500 Richardson Road South
Hope Hull, AL 36043
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (334) 284-8665
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Not Applicable
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Former name, former address and former fiscal year, if changed since
last report
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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report. Outstanding at August 10, 1995: 5,867,148 shares of Common Stock,
$.01 par value.
PART I - FINANCIAL INFORMATION
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, JULY 1,
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ASSETS 1994 1995
------ ---- ----
(unaudited)
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CURRENT ASSETS:
Cash $ 811,000 $ 397,000
Accounts receivable 14,623,000 13,396,000
Inventories 19,414,000 19,907,000
Income tax receivable 2,524,000 -
Advances and other 328,000 395,000
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Total current assets 37,700,000 34,095,000
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PROPERTY AND EQUIPMENT - at cost:
Machinery and equipment 7,847,000 7,328,000
Furniture and fixtures 1,438,000 1,488,000
Land, building and improvements 7,105,000 7,063,000
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Total property and equipment 16,390,000 15,879,000
Less accumulated depreciation 4,400,000 4,576,000
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Property and equipment - net 11,990,000 11,303,000
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OTHER ASSETS 3,472,000 4,666,000
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TOTAL $53,162,000 $50,064,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $13,950,000 $11,150,000
Current maturities of long-term debt 230,000 230,000
Accrued expenses 3,815,000 3,086,000
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Total current liabilities 17,995,000 14,466,000
LONG-TERM LIABILITIES 17,937,000 19,355,000
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Total liabilities 35,932,000 33,821,000
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STOCKHOLDERS' EQUITY:
Common stock 68,000 68,000
Capital in excess of par value 20,154,000 20,187,000
Retained earnings 10,597,000 9,458,000
Net unrealized appreciation on
investment available for sale,
net of deferred income tax
liability of $386,000 and
$456,000 respectively 657,000 776,000
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31,476,000 30,489,000
Less treasury stock 14,246,000 14,246,000
Total stockholders' equity 17,230,000 16,243,000
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TOTAL $53,162,000 $50,064,000
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MILTOPE GROUP INC. AND SUBSIDIARIES
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Six Months Ended
------------------------------
July 2, July 1,
1994 1995
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NET SALES $38,892,000 $37,262,000
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COSTS AND EXPENSES:
Cost of sales 28,933,000 30,054,000
Selling, general and administrative 4,676,000 5,308,000
Engineering, research and development 2,527,000 2,293,000
Relocation and restructuring charge 8,300,000 -
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Total 44,436,000 37,655,000
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LOSS FROM OPERATIONS (5,544,000) (393,000)
INTEREST EXPENSE - net 626,000 746,000
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LOSS BEFORE INCOME TAXES (6,170,000) (1,139,000)
INCOME TAX BENEFIT (1,851,000) -
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NET LOSS $(4,319,000) $(1,139,000)
LOSS PER COMMON SHARE $ (.74) $ (.20)
=========== ===========
Weighted average number of shares: 5,834,000 5,839,000
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
------------------------------
July 2, July 1,
1994 1995
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NET SALES $18,803,000 $21,063,000
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COSTS AND EXPENSES:
Cost of sales 13,890,000 16,401,000
Selling, general and administrative 2,098,000 2,884,000
Engineering, research and development 1,372,000 1,251,000
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Total 17,360,000 20,536,000
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INCOME FROM OPERATIONS 1,443,000 527,000
INTEREST EXPENSE - net 308,000 334,000
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INCOME BEFORE INCOME TAXES 1,135,000 193,000
INCOME TAX PROVISION 340,000 -
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NET INCOME $ 795,000 $ 193,000
=========== ===========
EARNINGS PER COMMON SHARE $ .14 $ .03
=========== ===========
Weighted average number of shares: 5,834,000 5,843,000
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 2, 1994 AND JULY 1, 1995
(unaudited)
July 2, July 1,
1994 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities: $ (4,319,000) $ (1,139,000)
Depreciation and amortization 594,000 815,000
Deferred income taxes (110,000) 70,000
Provision for slow-moving and obsolete
inventories 240,000 400,000
Provision for doubtful accounts
receivable (108,000) 32,000
Gain on sale of assets (382,000) -
Change in operating assets and
liabilities:
Accounts receivable 5,943,000 1,195,000
Inventories (1,148,000) (893,000)
Income taxes receivable (1,121,000) 2,524,000
Advances and other (495,000) (67,000)
Other assets 18,000 (351,000)
Accounts payable and accrued expenses 1,934,000 (3,093,000)
Asset available for sale (352,000) -
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Cash provided by (used in) operating
activities 694,000 (507,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Investment restricted for capital
expenditures - (857,000)
Proceeds from sale of property and
equipment 430,000 11,000
Purchases of property and equipment (567,000) (442,000)
Cash used in investing activities (137,000) (1,288,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) borrowings of revolving
credit loan-net 5,735,000 (1,377,000)
Payments of other long-term debt - (3,375,000)
Proceeds from long-term debt - 6,100,000
Exercise of stock options - 33,000
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Cash provided by financing activities 5,735,000 1,381,000
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NET INCREASE (DECREASE) IN CASH 6,292,000 (414,000)
CASH, BEGINNING OF PERIOD 434,000 811,000
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CASH, END OF PERIOD $ 6,726,000 $ 397,000
============ ============
SUPPLEMENTAL DISCLOSURE:
Payments made (refunds received): ============ ============
Income taxes $ (424,000) $ (2,533,000)
============ ============
Interest $ 636,000 $ 805,000
============ ============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MILTOPE GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. FINANCIAL STATEMENTS - In the opinion of the Company, the accompanying
unaudited condensed consolidated financial statements contain all
adjustments necessary (consisting of only normal and recurring accruals) to
present fairly the financial position of the Company and its subsidiaries
as of July 1, 1995 and December 31, 1994 and the results of operations
and cash flows for the six months and three months ended July 2, 1994 and
July 1,1995.
The results for the six months ended July 2, 1994 and July 1,1995 are not
necessarily indicative of the results for an entire year. It is suggested
that these consolidated financial statements be read in conjunction with
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1994.
2. INVENTORIES - NET
Inventories consist of the following:
December 31, 1994 July 1, 1995
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Purchased parts and
subassemblies $ 3,268,000 $ 3,142,000
Work-in-process 13,769,000 16,307,000
Inventoried costs related to
long-term contracts and
programs, net of amounts
attributed to revenues
recognized to date 2,687,000 768,000
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Total 19,724,000 20,217,000
Less progress billings received 310,000 310,000
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Total $19,414,000 $19,907,000
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3. OTHER ASSETS - The Company has an investment available for sale, with
an original cost of $5,000, in M-Systems Flash Disk Pioneers, Ltd. ("M-
Systems"), a company based in Israel. The Company is a major customer of
M-Systems. The Company currently owns 252,864 shares of M-Systems stock.
The Company also has an option, which expires September 10, 1995, to
purchase an additional 153,242 shares of M-Systems stock at a price of
$325,000. No value has been ascribed to the option at July 1, 1995. The
fair market value of the Company s investment in M-Systems stock on July 1,
1995 is $1,233,000 and is included in other assets and as a separate
component of stockholders equity (net of deferred income taxes) on the
accompanying balance sheet.
4. RELOCATION AND RESTRUCTURING CHARGE - On March 4, 1994, the Company
decided to relocate and restructure substantially all of the manufacturing,
engineering and administrative functions located in Melville, New York to
Alabama and Vermont. A pre-tax charge of $8.3 million was recorded during
the first quarter of 1994 and an additional $.8 million was recorded in the
fourth quarter of 1994, to cover the costs associated with the relocation
and restructuring including severance and related human resource programs,
employee relocation, transfer of assets to Alabama and Vermont and
production inefficiencies. At July 1, 1995, $.2 million of these charges,
representing certain relocation related costs, is included in accrued
expenses on the accompanying balance sheet and is expected to be paid
during 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
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The following discussion and analysis presents certain factors
affecting the Company s results of operations for three months and six
months ended July 1, 1995, as compared to three months and six months ended
July 2, 1994. The Company has instituted a new interim reporting period
that encompasses a full 13-week quarter. The fiscal year end will remain
December 31. There is no material effect on financial results from the
prior year due to this change.
RESULTS OF OPERATIONS
---------------------
Three months ended July 1, 1995 compared to three months ended July 2,
----------------------------------------------------------------------
1994.
----
Net sales for the three months ended July 1, 1995 (second quarter)
were $21.1 million compared to 1994 second quarter net sales of $18.8
million. The increase in sales was the result of higher volume in the US
Army s ATCCS/CHS Program.
The gross margin percentage for the second quarter of 1995 was 22.1%
as compared with 26.1% for the same period in 1994. The lower gross margin
performance was attributable to the operational impact of the relocation
transition to Montgomery, Alabama.
Selling, general and administrative expenses for the second quarter of
1995 increased approximately $.8 million from the second quarter of 1994,
to approximately $2.9 million. The increase includes $.3 million of
certain costs associated with the planned relocation of the Business
Products segment to Alabama.
Net earnings for the second quarter of 1995 as compared with the same
period of 1994 decreased $.6 million to $.2 million. Earnings per share
were $.03 compared to $.14 for the prior period based on a weighted average
of 5.8 million shares of the Company s Common Stock outstanding.
Six months ended July 1, 1995 compared to six months ended July 2, 1994
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Net Sales for the six months ended July 1, 1995 were $37.3 million
compared to $38.9 million for the same period of 1994. The decrease in
sales was the result of a reduction in military products sales partially
offset by an increase in sales of rugged products.
Loss from operations for the first six months of 1995 totaled $.4
million as compared to $5.5 million in 1994 reflecting the first quarter of
1994 charge for relocation and restructuring expenses of $8.3 million.
The gross margin percentage for the first six months of 1995 was 19.3%
as compared with 25.6% for the same period of 1994. The lower gross margin
performance was attributable to the operational impact of the relocation
transition.
Selling, general and administrative expenses for the first six months
of 1995 increased 13% over the same period of 1994 to $5.3 million,
reflecting, in part, the decision in the second quarter of 1995 to
relocate the Business Products segment to Alabama.
Company sponsored engineering, research and development expenses for
the first six months of 1995 were $2.3 million compared to $2.5 million for
the same period in 1994. Management believes than an annual expenditure
level of between 5% and 7% of net sales for these expenses should
adequately support the growth of the Company s business, maintain its
competitiveness and allow for new product development.
Interest expense, net of interest income, was $.7 million for the six
months ended July 1, 1995 compared with $.6 million for the six months
ended July 2, 1994.
Net loss for the first six months of 1995 totaled $1.1 million,
compared to $4.3 million in 1994. Loss per share was $.20 as compared with
a loss of $.74 per share for the prior period based upon a weighted average
of 5.8 million shares of the Company s Common Stock outstanding.
No tax benefit has been recognized on the net operating losses in the
first half of 1995. A net deferred tax asset could be recognized in future
periods if the probability of realization increases.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Working capital approximated $19.7 million at both July 1, 1995 and
December 31, 1994.
In February 1995, the Company amended its bank revolving credit
facility to an amount not to exceed $19 million, subject to inventory and
accounts receivable collateral base limitations. At July 1, 1995, the
borrowing base under this arrangement totaled $15 million, of which
approximately $3.1 million was available for borrowing at such date.
Borrowings under the revolving credit facility totaled $11.9 million at
July 1, 1995 compared to $13.3 million at December 31, 1994.
The revolving credit facility is scheduled to mature on May 31, 1996
at which time the outstanding amount is convertible into a term loan,
payable in twelve (12) equal quarterly installments, starting in August,
1996. However, the bank may extend the revolving credit facility for
successive one (1) year periods based upon a review of the Company s
financial position. The Company s accounts receivable, contract rights and
inventories are pledged as collateral to the agreement.
PART II - OTHER INFORMATION
---------------------------
Item 4 - Submission of Matters to a Vote of Security Holders
The Company s Annual Meeting of Stockholders was held on June 5,
1995. At the Meeting, the stockholders of the Company elected directors
to serve until the next Annual Meeting of Stockholders or until their
successors are duly elected and qualified. The following table sets
forth the results of the votes cast for directors at the Meeting:
Director Votes For Votes Withheld
-------- --------- --------------
Alvin E. Nashman 5,256,718 42,396
Jan H. Stenbeck 5,256,218 42,896
William Mustard 5,253,818 45,296
Franklin Miller 5,253,818 45,296
Richard Pandolfi 5,253,818 45,296
J. Shelby Bryan 5,253,818 45,296
William L. Dickinson 5,256,618 42,496
In addition, the stockholders of the Company approved the 1995 Stock
Option and Performance Award Plan of the Company, and 4,435,803 votes
were cast in favor of the Plan and 266,671 votes were cast in
opposition thereto.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
--------
27. Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
SIGNATURES
----------
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.
MILTOPE GROUP INC.
/s/ George K. Webster
By:__________________________________
George K. Webster
Acting President and CEO
Dated: August 10, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MILTOPE
GROUP INC. FORM 10-Q FOR THE QUARTER ENDED JULY 01, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUL-01-1995
<CASH> 397,000
<SECURITIES> 0
<RECEIVABLES> 13,396,000
<ALLOWANCES> 0
<INVENTORY> 19,907,000
<CURRENT-ASSETS> 34,095,000
<PP&E> 15,879,000
<DEPRECIATION> 4,576,000
<TOTAL-ASSETS> 50,064,000
<CURRENT-LIABILITIES> 14,466,000
<BONDS> 0
<COMMON> 68,000
0
0
<OTHER-SE> 15,730,000
<TOTAL-LIABILITY-AND-EQUITY> 50,064,000
<SALES> 37,262,000
<TOTAL-REVENUES> 37,262,000
<CGS> 30,054,000
<TOTAL-COSTS> 37,655,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 746,000
<INCOME-PRETAX> (1,139,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,139,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,139,000)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
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