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 September 29, 1996 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
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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 November 6, 1996:
5,867,148 shares of Common Stock, $.01 par value.
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 29,
ASSETS 1995 1996
(audited) (unaudited)
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CURRENT ASSETS:
<S> <C> <C>
Cash $ 301,000 $ 692,000
Accounts receivable 10,417,000 11,272,000
Inventories 16,432,000 14,786,000
Advances and other 256,000 308,000
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Total current assets 27,406,000 27,058,000
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PROPERTY AND EQUIPMENT - at cost:
Machinery and equipment 7,467,000 7,342,000
Furniture and fixtures 1,467,000 1,466,000
Land, building and improvements 7,108,000 7,236,000
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Total property and equipment 16,042,000 16,044,000
Less accumulated depreciation 5,313,000 6,415,000
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Property and equipment - net 10,729,000 9,629,000
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OTHER ASSETS 3,305,000 2,322,000
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TOTAL $41,440,000 $39,009,000
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LIABILITIES AND STOCKHOLDERS'EQUITY
- -----------------------------------
CURRENT LIABILITIES:
Accounts payable $ 5,956,000 $ 4,544,000
Accrued expenses 1,958,000 1,724,000
Current maturities of long-term
debt 528,000 200,000
Deferred income taxes 68,000 -
----------- -----------
Total current liabilities 8,510,000 6,468,000
LONG-TERM DEBT 16,953,000 15,667,000
DEFERRED INCOME TAXES 64,000 -
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TOTAL LIABILITIES 25,527,000 22,135,000
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STOCKHOLDERS' EQUITY:
Common stock - $.01 par value;
20,000,000 shares authorized;
5,867,148 shares outstanding 68,000 68,000
Capital in excess of par value 20,253,000 20,253,000
Retained earnings 9,613,000 10,799,000
Net unrealized appreciation on
investment available for sale,net
of deferred income tax liability
of $132,000 at December 31,1995 225,000 -
----------- -----------
30,159,000 31,120,000
Less treasury stock 14,246,000 14,246,000
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Total stockholders'equity 15,913,000 16,874,000
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TOTAL $41,440,000 $39,009,000
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<FN>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Thirty-Nine Weeks Ended
------------------------------
October 1, September 29,
1995 1996
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<S> <C> <C>
NET SALES $55,488,000 $33,145,000
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COSTS AND EXPENSES:
Cost of sales 44,668,000 25,028,000
Selling, general and
administrative 7,215,000 4,839,000
Engineering, research and
development 3,073,000 1,204,000
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Total 54,956,000 31,071,000
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INCOME FROM OPERATIONS 532,000 2,074,000
INTEREST EXPENSE - net 1,053,000 888,000
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INCOME(LOSS)BEFORE INCOME
TAXES (521,000) 1,186,000
INCOME TAXES - -
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NET INCOME (LOSS) $ (521,000) $ 1,186,000
NET INCOME (LOSS) PER SHARE $ (.09) $ .20
=========== ===========
Weighted average number of
shares: 5,841,000 5,867,000
=========== ===========
<FN>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Thirteen Weeks Ended
----------------------------
October 1, September 29,
1995 1996
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<S> <C> <C>
NET SALES $18,226,000 $12,059,000
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COSTS AND EXPENSES:
Cost of sales 14,615,000 9,047,000
Selling, general and
administrative 1,906,000 1,878,000
Engineering, research and
development 780,000 294,000
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Total 17,301,000 11,219,000
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INCOME FROM OPERATIONS 925,000 840,000
INTEREST EXPENSE - net 307,000 297,000
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INCOME BEFORE INCOME TAXES 618,000 543,000
INCOME TAXES - -
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NET INCOME $ 618,000 $ 543,000
=========== ===========
NET INCOME PER SHARE $ .11 $ .09
=========== ===========
Weighted average number of
shares: 5,840,000 5,867,000
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<FN>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<PAGE>
<TABLE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED
OCTOBER 1, 1995 AND SEPTEMBER 29, 1996
(unaudited)
October 1, September 29,
1995 1996
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OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (521,000) $ 1,186,000
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,133,000 1,288,000
Provision for slow-moving and
obsolete inventories 667,000 580,000
Provision for doubtful accounts receivable (4,000) 45,000
Gain on sale of investment available for sale (321,000) (522,000)
Loss on sale of fixed assets 395,000 22,000
Deferred income taxes (58,000) (132,000)
Change in operating assets and liabilities:
Accounts receivable 67,000 (530,000)
Inventories 4,151,000 693,000
Advances and other 216,000 (52,000)
Other assets (571,000) 389,000
Accounts payable and accrued expenses (9,923,000) (1,647,000)
Income taxes receivable 2,524,000 -
Asset available for sale (238,000) -
----------- -----------
Net cash provided by (used in)
operating activities (2,483,000) 1,320,000
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INVESTING ACTIVITIES:
Purchase of property and equipment (838,000) (268,000)
Investment restricted for capital expenditures 375,000 -
Proceeds from sale of investment
available for sale 322,000 524,000
Proceeds from sale of property and equipment 11,000 4,000
----------- ----------
Net cash provided by (used in) investing
activities (130,000) 260,000
----------- ----------
FINANCING ACTIVITIES:
Proceeds from long-term debt 6,100,000 -
Payments of revolving credit loan- net (812,000) (538,000)
Payments of other long-term debt (3,375,000) (651,000)
Exercise of stock options 99,000 -
----------- ----------
Net cash provided by (used in) financing
activities 2,012,000 (1,189,000)
----------- ----------
NET INCREASE (DECREASE) IN CASH (601,000) 391,000
CASH, BEGINNING OF PERIOD 811,000 301,000
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CASH, END OF PERIOD $ 210,000 $ 692,000
=========== ==========
SUPPLEMENTAL DISCLOSURE:
Payments made (refunds received):
Income taxes $(2,533,000) $ -
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Interest $ 946,607 $ 1,043,000
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SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Reduction of liability associated with
acquisition $ - $ 425,000
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<FN>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
</TABLE>
<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 September 29,
1996 and the results of operations and cash flows for the thirty-
nine and thirteen weeks ended October 1, 1995 and September 29,
1996.
The results for the thirty-nine weeks ended October 1,1995 and
September 29, 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 fiscal year ended December 31,
1995.
3. Inventories - Net
Inventories consist of the following:
<TABLE>
December 31, 1995 September 29, 1996
----------------- ------------------
<S> <C> <C>
Purchased parts and
subassemblies $ 2,766,000 $ 9,120,000
Work-in-process 13,581,000 5,450,000
Inventoried costs
related to long-term
contracts and programs,
net of amounts attributed
to revenues recognized
to date 85,000 216,000
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Total $ 16,432,000 $14,786,000
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</TABLE>
4. Other Assets - The Company has an investment in M-Systems
Flash Disk Pioneers, Ltd. ("M-Systems"), a company based in
Israel. The Company currently owns 153,242 restricted shares of
M-Systems stock with an original cost of $231,000. The original
cost is included in other assets.
5. Income Taxes - The income tax provision in the third
quarter and first nine months of 1996 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. Reclassifications - Certain prior year amounts have been
reclassified to conform with the current year classification.
<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
thirteen weeks and thirty-nine weeks ended September 29, 1996, as
compared to thirteen weeks and thirty-nine weeks ended October 1,
1995.
RESULTS OF OPERATIONS
- ---------------------
Thirteen weeks ended September 29, 1996 compared to thirteen
weeks ended October 1, 1995.
- --------------------------------------------------------------
Net sales for the thirteen weeks ended September 29, 1996
(third quarter of 1996) were $12,059,000 compared to net sales
for the thirteen weeks ended October 1, 1995 (third quarter of
1995)of $18,226,000. The decrease in sales was the result of
lower military product sales.
The gross margin percentage for the third quarter of 1996
was 25.0% as compared with 19.8% for the same period in 1995.
The increase in gross margin percentage was the result of a more
favorable product mix.
Selling, general and administrative expenses for the third
quarter of 1996 decreased 1.5% from the third quarter of 1995, to
$1,878,000. These expenses as a percent of sales were 15.6% in
the third quarter of 1996 compared to 10.5% for the similar
period in 1995. The increase in selling, general and
administrative expenses as a percent of net sales was due to
lower net sales for the third quarter of 1996 as compared to the
same period in 1995 and a gain on the sale of M-Systems shares
in the third quarter of 1995.
Company sponsored engineering, research and development
expenses for the third quarter of 1996 decreased 62.3% from the
third quarter of 1995 to $294,000. These expenses as a
percentage of sales were 2.4% in the third quarter of 1996
compared to 4.3% for the similar period in 1995. The decrease
is attributable to an increased amount of research and
development funded by contracts and greater efficiencies in
research and development processes.
Interest expense net of interest income was $297,000 in the
third quarter of 1996 compared to $307,000 for the similar period
in 1995.
Net earnings for the third quarter of 1996 as compared
with the same period of 1995 decreased $75,000. Earnings per
share were $.09 for the third quarter of 1996 compared to $.11
for the similar period a year ago based on a weighted average of
5,867,000 shares and 5,840,000 shares of the Company's common
stock outstanding for the respective periods.
The income tax provision in the third quarter of 1996 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.
Thirty-nine weeks ended September 29, 1996 compared to
Thirty-nine weeks ended October 1, 1995.
- ---------------------------------------------------------------
Net sales for the thirty-nine weeks ended September 29,
1996 (first nine months of 1996) were $33,145,000 compared to net
sales for the thirty-nine weeks ended October 1, 1995 (first nine
months of 1995) of $55,488,000. The decrease in sales was the
result of lower military product sales.
The gross margin percentage for the first nine months of
1996 was 24.5% as compared with 19.5% for the same period in
1995. The increase in gross margin was the result of a more
favorable product mix.
Selling, general and administrative expenses for the first
nine months of 1996 decreased 32.9% from the first nine months of
1995, to $4,839,000. These expenses as a percent of sales were
14.6% in the first nine months of 1996 compared to 13.0% for
the similar period in 1995. The increase in selling, general and
administrative expenses as a percent of net sales was primarily
attributable to lower net sales for the third quarter of 1996 as
compared to the same period in 1995.
Company sponsored engineering research and development
expenses for the first nine months of 1996 decreased 60.8% from
the first nine months of 1995 to $1,204,000. These expenses as
a percentage of sales were 3.6% in the first nine months of 1996
compared to 5.5% for the similar period in 1995. The decrease is
attributable to an increased amount of research and development
funded by contracts and greater efficiencies in research and
development processes.
Interest expense net of interest income was $888,000 in the
first nine months of 1996 compared to $1,053,000 for the similar
period in 1995. The decrease reflects decreased debt compared to
the prior year.
Net earnings for the first nine months of 1996 were
$1,186,000 compared to a net loss of $521,000 for the similar
period in 1995. Earnings per share for the first nine months of
1996 were $0.20 compared to a loss per share of $0.09 for the
similar period a year ago based on a weighted average of
5,867,000 shares and 5,841,000 shares of the Company's common
stock outstanding for the respective periods.
The income tax provision in the first nine months of
1996 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 $20,590,000 at September 29,
1996 compared to $18,896,000 at December 31, 1995.
A $15,000,000 revolving credit agreement bears interest
at the bank's reference rate, however, the interest rate
increases to the bank's reference rate plus .25% if the
principle balance of the revolving credit facility exceeds
$10,000,000. As of September 29, 1996, the Company had
approximately $5,233,000 available under such facility. The
revolving credit facility balance was $9,767,000 at September
29, 1996 compared to $10,304,000 at December 31, 1995. The
revolving credit facility is scheduled to mature on May 31,1998
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 re 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:
------------------------------
James E. Matthews,
Vice President Finance and
Chief Financial Officer
(Principle Accounting and
Financial Officer)
Dated: November 8, 1996
<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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-29-1996
<CASH> 692,000
<SECURITIES> 0
<RECEIVABLES> 11,272,000
<ALLOWANCES> 0
<INVENTORY> 14,786,000
<CURRENT-ASSETS> 27,058,000
<PP&E> 16,044,000
<DEPRECIATION> 6,415,000
<TOTAL-ASSETS> 39,009,000
<CURRENT-LIABILITIES> 6,468,000
<BONDS> 0
0
0
<COMMON> 68,000
<OTHER-SE> 16,806,000
<TOTAL-LIABILITY-AND-EQUITY> 39,009,000
<SALES> 33,145,000
<TOTAL-REVENUES> 33,145,000
<CGS> 25,028,000
<TOTAL-COSTS> 31,071,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 888,000
<INCOME-PRETAX> 1,186,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,186,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,186,000
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
