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 October 1, 1995 Commission File Number 0-13433
- ---------------------
MILTOPE GROUP INC.
-----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 11-2693062
- -------------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
500 Richardson Road South
Hope Hull, AL 36043
-------------------------- ---------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (334) 284-8665
-------------
Not Applicable
- --------------------------------------------------------------------------------
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
----- -----
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 October 1, 1995: 5,867,148 shares of Common Stock, $.01 par
value.
<PAGE>
PART I - FINANCIAL INFORMATION
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS DECEMBER 31, OCTOBER 1,
- ------ ------------ ----------
1994 1995
---- ----
(Unaudited)
---------
CURRENT ASSETS:
Cash $ 811,000 $ 210,000
Accounts receivable 14,623,000 14,560,000
Inventories 19,414,000 14,597,000
Income tax receivable 2,524,000 82,000
Advances and other 328,000 351,000
--------------- ---------------
Total current assets 37,700,000 29,800,000
--------------- ---------------
PROPERTY AND EQUIPMENT - at cost:
Machinery and equipment 7,847,000 7,397,000
Furniture and fixtures 1,438,000 1,510,000
Land, building and improvements 7,105,000 7,030,000
--------------- ---------------
Total property and equipment 16,390,000 15,937,000
Less accumulated depreciation 4,400,000 4,970,000
--------------- ---------------
Property and equipment - net 11,990,000 10,967,000
--------------- ---------------
OTHER ASSETS 3,472,000 3,667,000
--------------- ---------------
TOTAL $ 53,162,000 $ 44,434,000
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 13,950,000 $ 5,072,000
Current maturities of
long-term debt 230,000 230,000
Accrued expenses 3,815,000 3,103,000
--------------- ---------------
Total current liabilities 17,995,000 8,405,000
LONG-TERM LIABILITIES 17,937,000 19,460,000
--------------- ---------------
Total liabilities 35,932,000 27,865,000
STOCKHOLDERS' EQUITY:
Common stock 68,000 68,000
Capital in excess of par value 20,154,000 20,253,000
Retained earnings 10,597,000 10,075,000
Net unrealized appreciation on
investment available
for sale, net of deferred
income tax liability of
$386,000 and $246,000
respectively 657,000 419,000
--------------- ---------------
31,476,000 30,815,000
Less treasury stock 14,246,000 14,246,000
--------------- ---------------
Total stockholder's
equity 17,230,000 16,569,000
--------------- ---------------
TOTAL $ 53,162,000 $ 44,434,000
=============== ===============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Nine Months Ended
----------------------------------------
October 2, October 1,
1994 1995
---------- -----------
NET SALES $59,978,000 $ 55,488,000
----------- ------------
COSTS AND EXPENSES:
Cost of sales 45,170,000 44,668,000
Selling, general and administrative 6,896,000 7,215,000
Engineering, research and development 3,450,000 3,073,000
Relocation and restructuring charge 8,300,000
--------- -----------
Total 63,816,000 54,956,000
---------- -----------
INCOME (LOSS) FROM OPERATIONS (3,838,000) 532,000
INTEREST EXPENSE - net 960,000 1,053,000
----------- -----------
LOSS BEFORE INCOME TAXES (4,798,000) (521,000)
INCOME TAX BENEFIT (1,439,000)
------------ ------------
NET LOSS $(3,359,000) $ (521,000)
LOSS PER COMMON SHARE (.58) $ (.09)
============ ============
Weighted average number of shares: 5,834,000 5,841,000
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
--------------------------------
October 2, October 1,
1994 1995
---------- ----------
NET SALES $ 21,085,000 $ 18,226,000
---------- -----------
COSTS AND EXPENSES:
Cost of sales 16,237,000 14,615,000
Selling, general and administrative 2,219,000 1,906,000
Engineering, research and development 923,000 780,000
------------- -----------
Total 19,379,000 17,301,000
---------- -----------
INCOME FROM OPERATIONS 1,706,000 925,000
INTEREST EXPENSE - net 334,000 307,000
------------- -----------
INCOME BEFORE INCOME TAXES 1,372,000 618,000
INCOME TAX PROVISION 412,000 0
------------- -----------
NET INCOME $ 960,000 $ 618,000
============= ===========
EARNINGS PER COMMON SHARE $ .16 $ .11
============ ===========
Weighted average number of shares: 5,834,000 5,840,000
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 2, 1994 AND OCTOBER 1, 1995
(unaudited)
October 2,
1994
------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,359,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 943,000
Deferred income taxes (215,000)
Provision for slow-moving and obsolete
inventories 360,000
Provision for doubtful accounts receivable (74,000)
(Gain) Loss on sale of assets (482,000)
Change in operating assets and liabilities:
Accounts receivable 3,518,000
Inventories (2,085,000)
Income taxes receivable (575,000)
Advances and other (412,000)
Other assets (796,000)
Accounts payable and accrued expenses 1,359,000
Asset available for sale 5,332,000
---------
Cash provided by (used in) operating activities 3,514,000
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment restricted for capital expenditures
Proceeds from sale of property and equipment 430,000
Proceeds from sale of securities
Purchases of property and equipment (4,243,000)
-----------
Cash used in investing activities (3,813,000)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) Borrowings of revolving credit loan-net
Payments of other long term debt
Proceeds from long term debt
Exercise of stock options 123,000
----------
Cash provided by financing activities 123,000
----------
NET DECREASE IN CASH (176,000)
CASH, BEGINNING OF PERIOD 434,000
----------
CASH, END OF PERIOD $ 258,000
=========
SUPPLEMENTAL DISCLOSURE:
Payments made (refunds received):
Income taxes $ (653,343)
===========
Interest $ 723,000
===========
October 1,
1995
------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (521,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,133,000
Deferred income taxes (58,000)
Provision for slow-moving and obsolete
inventories 667,000
Provision for doubtful accounts receivable (4,000)
(Gain) Loss on sale of assets 395,000
Change in operating assets and liabilities:
Accounts receivable 67,000
Inventories 4,151,000
Income taxes receivable 2,524,000
Advances and other (105,000)
Other assets (571,000)
Accounts payable and accrued expenses (9,923,000)
Asset available for sale (238,000)
-----------
Cash provided by (used in) operating activities (2,483,000)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment restricted for capital expenditures 375,000
Proceeds from sale of property and equipment 11,000
Proceeds from sale of securities 322,000
Purchases of property and equipment (838,000)
-----------
Cash used in investing activities (130,000)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) Borrowings of revolving credit loan-net (812,000)
Payments of other long term debt (3,375,000)
Proceeds from long term debt 6,100,000
Exercise of stock options 99,000
-------------
Cash provided by financing activities 2,012,000
-------------
NET DECREASE IN CASH (601,000)
CASH, BEGINNING OF PERIOD 811,000
-----------
CASH, END OF PERIOD $ 210,000
===========
SUPPLEMENTAL DISCLOSURE:
Payments made (refunds received):
Income taxes $ (2,533,000)
=============
Interest $ 946,607
=============
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
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 October 1, 1995
and December 31, 1994 and the results of operations and cash flows for the nine
months ended October 1, 1995 and October 2, 1994 and also results of operations
for the three months ended October 1, 1995 and October 2, 1994.
The results for the nine months ended October 1, 1995 and October 2, 1994 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 OCTOBER 1, 1995
----------------- ---------------
Purchased parts and
subassemblies $ 3,268,000 $ 3,141,000
Work-in-process 13,769,000 11,766,000
Inventoried costs related to
long-term contracts and
programs, net of amounts
attributed to revenues
recognized to date 2,687,000 0
------------ ------------
Total 19,724,000 14,907,000
Less progress billings received 310,000 310,000
------------ -----------
Total $19,414,000 $14,597,000
============ ===========
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 189,864 shares of M-Systems stock. The fair market value
of the Company's investment in M-Systems stock on October 1, 1995 is $665,000
and is included in other assets and as a separate component of stockholders'
equity (net of deferred income taxes) on the accompanying balance sheet. The
Company also has an option to purchase an additional 153,242 shares of M-Systems
stock at a price of $325,000. The Company has advised M-Systems of its
intention to exercise this option.
<PAGE>
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
October 1, 1995, $.1 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.
5. SUBSEQUENT EVENT - In November 1995, the Company extended its revolving
credit agreement. The agreement extends the maturity of the loan to May 31,
1997, and reduces the total loan commitment from $19 million to $15 million.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
- -------
The following discussion and analysis presents certain factors
affecting the Company's results of operations for the three months and nine
months ended October 1, 1995, as compared to the three months and nine months
ended October 2, 1994. The Company has implemented an 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 OCTOBER 1, 1995 COMPARED TO THREE MONTHS ENDED OCTOBER 2,
- --------------------------------------------------------------------------------
1994.
- ----
Net sales for the three months ended October 1, 1995 (third quarter)
were $18.2 million compared to 1994 third quarter net sales of $21 million. The
decrease in sales was the result of lower military product sales partially
offset by an increase in sales of commercial products.
The gross margin percentage for the third quarter of 1995 was 20% as
compared with 23% for the same period in 1994. The lower gross margin
performance was attributable to a less favorable product mix.
Selling, general and administrative expenses for the third quarter of
1995 decreased approximately $.3 million from the third quarter of 1994, to
approximately $1.9 million.
Net earnings for the third quarter of 1995 as compared with the same
period of 1994 decreased $.3 million to $.6 million. Earnings per share were
$.11 compared to $.16 for the prior period based on a weighted average of 5.8
million shares of the Company's Common Stock outstanding.
NINE MONTHS ENDED OCTOBER 1, 1995 COMPARED TO NINE MONTHS ENDED OCTOBER 2, 1994
- -------------------------------------------------------------------------------
Net sales for the nine months ended October 1, 1995 were $55.5 million
compared to $60 million for the same period of 1994. The decrease in sales was
the result of a reduction in military product sales partially offset by an
increase in sales of commercial products.
Loss from operations for the first nine months of 1995 totaled $.5
million as compared to $3.8 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 nine months of 1995 was 19.5%
as compared with 24.6% for the same period of 1994. The lower gross margin
performance was attributable to a less favorable product mix.
<PAGE>
Selling, general and administrative expenses for the first nine months
of 1995 increased 4.6% over the same period of 1994 to $7.2 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 nine months of 1995 were $3 million compared to $3.5 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 $1 million for the nine
months ended October 1, 1995 and the nine months ended October 2, 1994.
Net loss for the first nine months of 1995 totaled $.5 million,
compared to $3.4 million in 1994. Loss per share was $.09 as compared with a
loss of $.58 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 $21.4 million at October 1, 1995 and
$19.7 million at December 31, 1994.
In November 1995, the Company amended its bank revolving credit
facility to provide for total indebtedness not to exceed $15 million, subject
to inventory and accounts receivable collateral base limitations. Borrowings
under the revolving credit facility totaled $12.5 million at October 1, 1995
compared to $13.3 million at December 31, 1994.
The revolving credit facility is scheduled to mature on May 31, 1997 at
which time the outstanding amount is convertible into a term loan, payable in
twelve (12) equal quarterly installments, starting in August, 1997. 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.
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
--------
27. Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
<PAGE>
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.
By: /s/ George K. Webster
---------------------
George K. Webster
President and CEO
(Principal Accounting and
Financial Officer)
Dated: November 13, 1995
<PAGE>
EXHIBIT INDEX
Exhibits
--------
27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MILTOPE
GROUP INC. FORM 10-Q FOR THE QUARTER ENDED OCTOBER 1, 1995 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> OCT-01-1995
<CASH> 210,000
<SECURITIES> 0
<RECEIVABLES> 14,560,000
<ALLOWANCES> 0
<INVENTORY> 14,597,000
<CURRENT-ASSETS> 29,800,000
<PP&E> 15,937,000
<DEPRECIATION> 4,970,000
<TOTAL-ASSETS> 44,434,000
<CURRENT-LIABILITIES> 8,405,000
<BONDS> 0
<COMMON> 68,000
0
0
<OTHER-SE> 16,255,000
<TOTAL-LIABILITY-AND-EQUITY> 44,434,000
<SALES> 55,488,000
<TOTAL-REVENUES> 55,488,000
<CGS> 44,668,000
<TOTAL-COSTS> 54,956,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,053,000
<INCOME-PRETAX> (521,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (521,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (521,000)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
