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 March 31, 1996 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 March 31, 1996:
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 MARCH 31
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1995 1996
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(audited) (unaudited)
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CURRENT ASSETS:
Cash $ 301,000 $ 812,000
Accounts receivable 10,417,000 9,890,000
Inventories 16,432,000 15,588,000
Advances and other 256,000 532,000
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Total current assets 27,406,000 26,822,000
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PROPERTY AND EQUIPMENT - at cost:
Machinery and equipment 7,467,000 7,476,000
Furniture and fixtures 1,467,000 1,467,000
Land, building and improvements 7,108,000 7,126,000
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Total property and equipment 16,042,000 16,069,000
Less accumulated depreciation 5,313,000 5,671,000
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Property and equipment - net 10,729,000 10,398,000
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OTHER ASSETS 3,305,000 2,979,000
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TOTAL $41,440,000 $40,199,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 5,956,000 $ 4,455,000
Accrued expenses 1,958,000 1,846,000
Current maturities of
long-term debt 528,000 528,000
Deferred income taxes 68,000 -
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Total current liabilities 8,510,000 6,829,000
LONG-TERM DEBT 16,953,000 17,488,000
DEFERRED INCOME TAXES 64,000 29,000
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TOTAL LIABILITIES 25,527,000 24,346,000
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STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; 68,000 68,000
20,000,000 shares authorized;
authorized; 5,867,148 shares
outstanding
Capital in excess of par value 20,253,000 20,253,000
Retained earnings 9,613,000 9,729,000
Net unrealized appreciation on
investment available for
sale, net of deferred income
tax liability of $132,000
at December 31, 1995 and
$29,000 at March 31, 1996,
respectively 225,000 49,000
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30,159,000 30,099,000
Less treasury stock 14,246,000 14,246,000
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Total stockholders' equity 15,913,000 15,853,000
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TOTAL $ 41,440,000 $ 40,199,000
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Thirteen Weeks Ended March 31,
---------------------------------
1995 1996
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NET SALES $ 16,199,000 $ 9,950,000
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COSTS AND EXPENSES:
Cost of sales 13,653,000 7,290,000
Selling, general and
administrative 2,424,000 1,656,000
Engineering, research and
development 1,042,000 566,000
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Total 17,119,000 9,512,000
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INCOME (LOSS) FROM OPERATIONS (920,000) 438,000
INTEREST EXPENSE - net 412,000 321,000
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INCOME (LOSS) BEFORE INCOME
TAXES (1,332,000) 117,000
INCOME TAXES - -
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NET INCOME (LOSS) $ (1,332,000) $ 117,000
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NET INCOME (LOSS) PER SHARE $ (0.23) $ .02
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Weighted average number of
shares 5,834,000 5,867,000
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED MARCH 31, 1995 AND 1996
(unaudited)
1995 1996
---- ----
OPERATING ACTIVITIES:
Net income (loss) $ (1,332,000) $ 117,000
Adjustments to reconcile net
income (loss) to net cash used
in operating activities:
Depreciation and amortization 408,000 430,000
Provision for slow-moving and
obsolete inventories 200,000 225,000
Provision for doubtful accounts
receivable 19,000 (23,000)
Gain on sale of investment
available for sale - (257,000)
Loss on sale of fixed assets - 22,000
Deferred income taxes - (103,000)
Change in operating assets and
liabilities:
Accounts receivable 1,866,000 550,000
Inventories 1,016,000 619,000
Advances and other 45,000 (276,000)
Other assets (264,000) 83,000
Accounts payable and
accrued expenses (3,095,000) (1,616,000)
Income taxes receivable (9,000) -
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Net cash used in
operating activities (1,146,000) (229,000)
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INVESTING ACTIVITIES:
Purchase of property and
equipment (126,000) (57,000)
Investment restricted for
capital expenditures (1,091,000) -
Proceeds from sale of
investment available
for sale - 258,000
Proceeds from sale of
property and equipment 11,000 4,000
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Net cash provided by
(used in) investing
activities (1,206,000) 205,000
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FINANCING ACTIVITIES:
Proceeds from long-term debt 6,100,000 -
Proceeds from (payments of)
revolving credit loan-net (650,000) 535,000
Payments of other long-term
debt (3,375,000) -
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Net cash provided by
financing activities 2,075,000 535,000
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NET INCREASE (DECREASE) IN CASH (277,000) 511,000
CASH, BEGINNING OF PERIOD 811,000 301,000
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CASH, END OF PERIOD $ 534,000 $ 812,000
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SUPPLEMENTAL DISCLOSURE:
Payments made for:
Income taxes $ 9,000 $ -
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Interest $ 491,000 $ 270,000
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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. NATURE OF OPERATIONS - On January 1, 1996, the Company
consolidated the operations of Miltope Corporation and Miltope
Business Products.
2. 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 March 31,
1996 and the results of operations and cash flows for the
thirteen weeks ended March 31, 1995 and 1996.
The results for the thirteen weeks ended March 31, 1995 and 1996
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 year ended December 31, 1995.
3. INVENTORIES
Inventories consist of the following:
December 31, 1995 March 31, 1996
----------------- --------------
Purchased parts and $ 2,766,000 $ 4,115,000
subassemblies
Work-in-process 13,581,000 11,353,000
Inventoried costs related to
long-term contracts and
programs, net of amounts
attributed to revenues
recognized to date 85,000 120,000
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Total $ 16,432,000 $ 15,588,000
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4. OTHER ASSETS - The Company has an investment available for
sale 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 20,529 shares of M-Systems
stock. The fair market value of the Company s investment in M-
Systems stock on March 31, 1996 is $78,000 and is included in
other assets and as a separate component of stockholders equity
(net of deferred income taxes) on the accompanying condensed
consolidated balance sheet. The Company has provided notice to
M-Systems of its intent to exercise its option to purchase an
additional 153,242 shares of M-Systems stock at a price of
$231,000. No value has been ascribed to the option at March 31,
1996.
5. INCOME TAXES - The income tax provision in the first quarter
was completely offset by the utilization of the Company s net
operating loss carryforward. A net deferred tax asset could be
recognized in future periods if the probability of realization
increases.
6. CONTINGENCY - In relation to a significant contract which
was terminated in October 1992, the Company has an equitable
adjustment claim of $2.4 million, which is part of its prime
contractor s claim against its customer, and has submitted a
termination settlement proposal which is presently in
negotiation. In 1994, $800,000 of the equitable adjustment claim
was recognized as revenue.
<PAGE>
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 the
thirteen weeks ended March 31, 1996 and March 31, 1995.
RESULTS OF OPERATIONS
---------------------
Net sales for the thirteen week period ended March 31, 1996
(first quarter) were $10.0 million compared to net sales of $16.2
million for the same period in 1995. The decrease in sales was
the result of lower military product sales.
The gross margin percentage for the first quarter of 1996
was 26.7% compared to 15.7% for the same period in 1995. The
improved gross margin performance was partially attributable to a
more favorable product mix. The lower gross margin for the first
quarter of 1995 reflects the impact of the relocation
difficulties originally encountered in 1994.
Selling, general and administrative expenses for the first
quarter 1996 decreased 31.7% from the first quarter of 1995, to
approximately $1.7 million. Selling, general and administrative
expenses as a percent of sales were 16.6% in the first quarter of
1996 compared to 15% in 1995. The increase in 1996 as a percent
of sales principally reflects the lower sales volume.
Engineering, research and development expenses for the first
quarter 1996 decreased 45.7% from the first quarter of 1995 to
$566 thousand. Engineering, research and development expenses as
a percent to sales were 5.7% in the first quarter of 1996
compared to 6.4% for the same period in 1995. Management
believes that an annual expenditure level of between 5% and 7% of
net sales should adequately maintain the Company s
competitiveness and allow for new product development.
Interest expense, net of interest income, was $321 thousand
in the first quarter of 1996 compared to $412 thousand for the
same period in 1995. The decrease reflects decreased debt
compared to the prior year.
Net earnings for the first quarter of 1996 as compared to
the same period in 1995 increased $1.4 million to $117 thousand.
Earnings per share were $0.02 compared to a loss per share of
$0.23 for the same period a year ago based on a weighted average
of 5.9 million shares and 5.8 million shares of the Company s
common stock outstanding for the respective periods.
The income tax provision in the first quarter was completely
offset by the utilization of the Company s net operating loss
carryforward. A net deferred tax asset could be recognized in
future periods if the probability of realization increases.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Working capital approximated $20 million at March 31, 1996
compared to $18.9 million at December 31, 1995.
A $15 million revolving credit agreement bears interest at
the bank's reference rate plus .25%. As of March 31, 1996, the
Company had approximately $4.2 million available under such
facility. The revolving credit facility balance was $10.8
million at March 31, 1996 compared to $10.3 million at December
31, 1995. The revolving credit facility is scheduled to mature
on May 31, 1997 at which time the outstanding amount would be
converted into a term loan, payable in twelve (12) equal
quarterly installments. 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
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Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
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27. Financial Data Schedule
(b) Reports on Form 8-K
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None
<PAGE>
SIGNATURES
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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/ James E. Matthews
-------------------------
James E. Matthews,
Vice President Finance and
Chief Financial Officer
(Principal Accounting and
Financial Officer)
Dated: May 10, 1996
<PAGE>
EXHIBIT INDEX
Exhibit Description
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS, STATEMENTS OF OPERATIONS AND STATEMENTS
OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 812,000
<SECURITIES> 0
<RECEIVABLES> 9,890,000
<ALLOWANCES> 0
<INVENTORY> 15,588,000
<CURRENT-ASSETS> 26,822,000
<PP&E> 16,069,000
<DEPRECIATION> 5,671,000
<TOTAL-ASSETS> 40,199,000
<CURRENT-LIABILITIES> 6,829,000
<BONDS> 0
0
0
<COMMON> 68,000
<OTHER-SE> 15,785,000
<TOTAL-LIABILITY-AND-EQUITY> 40,199,000
<SALES> 9,950,000
<TOTAL-REVENUES> 9,950,000
<CGS> 7,290,000
<TOTAL-COSTS> 9,512,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 321,000
<INCOME-PRETAX> 117,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 117,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 117,000
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
