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 28, 1997
Commission File Number 0-13433
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
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 13, 1997: 5,871,523 shares of Common
Stock, $.01 par value.
<PAGE>
PART I - FINANCIAL INFORMATION
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
SEPTEMBER 28, DECEMBER 31,
ASSETS 1997 1996
(unaudited)
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<S> <C> <C>
CURRENT ASSETS:
Cash $ 100,000 $ 128,000
Accounts receivable 8,221,000 10,890,000
Inventories 14,945,000 13,836,000
Other current assets 1,021,000 279,000
----------- -----------
Total current assets 24,287,000 25,133,000
PROPERTY AND EQUIPMENT - at cost:
Machinery and equipment 7,923,000 7,322,000
Furniture and fixtures 1,542,000 1,475,000
Land, building and improvements 8,222,000 7,537,000
----------- -----------
Total property and equipment 17,687,000 16,334,000
Less accumulated depreciation 7,837,000 6,765,000
----------- -----------
Property and equipment - net 9,850,000 9,569,000
OTHER ASSETS 1,619,000 1,630,000
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TOTAL $35,756,000 $36,332,000
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,953,000 $ 5,426,000
Accrued expenses 904,000 1,468,000
Current maturities of long-term debt 263,000 240,000
----------- -----------
Total current liabilities 5,120,000 7,134,000
LONG-TERM DEBT 10,938,000 11,340,000
----------- -----------
TOTAL LIABILITIES 16,058,000 18,474,000
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value;
20,000,000 shares authorized;
6,811,112 and 6,806,737 shares
outstanding at September 28,
1997 and December 31, 1996,
respectively 68,000 68,000
Capital in excess of par value 20,264,000 20,253,000
Retained earnings 13,304,000 11,783,000
Net unrealized appreciation on
investment available for sale,
net of deferred income tax
liability of $181,000 at
September 28, 1997 308,000 -
----------- -----------
33,944,000 32,104,000
Less treasury stock 14,246,000 14,246,000
----------- -----------
Total stockholders' equity 19,698,000 17,858,000
----------- -----------
TOTAL $35,756,000 $36,332,000
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
Thirteen Weeks Ended
September 28, September 29,
1997 1996
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<S> <C> <C>
NET SALES $ 8,326,000 $12,059,000
COSTS AND EXPENSES:
Cost of sales 6,161,000 9,047,000
Selling, general and administrative 1,354,000 1,878,000
Engineering, research anddevelopment 516,000 294,000
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Total 8,031,000 11,219,000
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INCOME FROM OPERATIONS 295,000 840,000
INTEREST EXPENSE - net 190,000 297,000
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INCOME BEFORE INCOME TAXES 105,000 543,000
INCOME TAX BENEFIT 600,000 -
----------- -----------
NET INCOME $ 705,000 $ 543,000
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NET INCOME PER SHARE $ .12 $ .09
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Weighted average number of shares: 5,872,000 5,867,000
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</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
Thirty-Nine Weeks Ended
September 28, September 29,
1997 1996
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<S> <C> <C>
NET SALES $29,360,000 $33,145,000
COSTS AND EXPENSES:
Cost of sales 22,354,000 25,028,000
Selling, general and administrative 4,562,000 4,839,000
Engineering, research and development 944,000 1,204,000
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Total 27,860,000 31,071,000
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INCOME FROM OPERATIONS 1,500,000 2,074,000
INTEREST EXPENSE - net 578,000 888,000
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INCOME BEFORE INCOME TAXES 922,000 1,186,000
INCOME TAX BENEFIT 600,000 -
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NET INCOME $ 1,522,000 $ 1,186,000
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NET INCOME PER SHARE $ .26 $ .20
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Weighted average number of shares: 5,872,000 5,867,000
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</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 28, 1997 AND SEPTEMBER 29, 1996
(unaudited)
<TABLE>
September 28, September 29,
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,522,000 $ 1,186,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,212,000 1,288,000
Provision for slow-moving and
obsolete inventories 485,000 580,000
Provision for doubtful accounts receivable 85,000 45,000
Gain on sale of investment available for sale (313,000) (522,000)
Loss on sale of fixed assets - 22,000
Change in operating assets and liabilities:
Accounts receivable 2,585,000 (530,000)
Inventories (1,595,000) 693,000
Other current assets (416,000) (52,000)
Other assets (310,000) 257,000
Accounts payable and accrued expenses (1,970,000) (1,647,000)
Cash provided by operating activities 1,285,000 1,320,000
INVESTING ACTIVITIES:
Purchase of property and equipment (1,353,000) (268,000)
Proceeds from sale of investment available
for sale 410,000 524,000
Proceeds from sale of property and equipment - 4,000
Cash provided by (used in) investing
activities (943,000) 260,000
FINANCING ACTIVITIES:
Payments of revolving credit loan-net (201,000) (538,000)
Payments of other long-term debt (180,000) (651,000)
Proceeds from exercise of stock options 11,000 -
Cash used in financing activities (370,000) (1,189,000)
NET INCREASE (DECREASE) IN CASH (28,000) 391,000
CASH, BEGINNING OF PERIOD 128,000 301,000
CASH, END OF PERIOD $ 100,000 $ 692,000
SUPPLEMENTAL DISCLOSURE:
Payments made:
Income taxes $ 11,000 $ -
Interest $ 608,000 $1,043,000
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Reduction of liability associated
with acquisition $ - $ 425,000
Increase (decrease) in unrealized
appreciation on investment available
for sale $ 489,000 $ (357,000)
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Financial Statements - In the opinion of management, 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 28, 1997, the results of
operations for the thirteen and thirty-nine weeks ended September 28,
1997 and September 29, 1996, and cash flows for the thirty-nine weeks
ended September 28, 1997 and September 29, 1996.
The results for the thirty-nine weeks ended September 28, 1997 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, 1996.
During February 1997, the Financial Accounting Standards Board issued
SFAS No. 128 Earnings per Share, which will become effective for all
financial statements issued for periods ending after December 15, 1997,
including interim periods. SFAS No. 128 provides for the presentation
of basic and diluted earnings per share on the face of the financial
statements and supersedes Accounting Principles Board (APB) Opinion No.
15, Earnings per Share. SFAS No. 128 requires the restatement of
earnings per share for prior periods presented after its effective
date. SFAS No. 128 does not have a material effect upon the thirty-
nine week periods ended September 28, 1997 and September 29, 1996,
while the impact on prior periods has not been determined.
2. Inventories - Net
Inventories consist of the following:
<TABLE>
September 28, December 31,
1997 1996
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<S> <C> <C>
Purchased parts and
subassemblies $10,454,000 $10,002,000
Work-in-process 4,491,000 3,955,000
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Total 14,945,000 13,957,000
Less progress billings received - 121,000
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Total $14,945,000 $13,836,000
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</TABLE>
3. Other Current Assets - The Company has an investment in M-Systems
Flash Disk Pioneers, Ltd. ("M-Systems"), a company based in Israel.
The Company currently owns 88,950 shares of M-Systems stock with an
original cost of $134,000. The fair market value of the Company's
investment in M-Systems stock on September 28, 1997 is $623,000. The
unrealized appreciation on the investment is included as a separate
component of stockholders' equity (net of deferred income taxes) on the
accompanying balance sheet.
4. Income Taxes - The income tax provision in the third quarter
of 1997 was completely offset by the utilization of the Company's net
operating loss carryforward. In addition, a deferred tax asset of
$600,000 relating to a portion of the Company's net operating loss
carryforward was recognized in the third quarter of 1997 as management
estimates that it is more likely than not, that the deferred tax asset
will be realized in future periods. Additional deferred tax assets
could be recognized in future periods if the probability of realization
increases.
5. Reclassifications - Certain prior year amounts have been
reclassified to conform with the current year classification.
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<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 thirteen weeks and
thirty-nine weeks ended September 28, 1997, as compared to thirteen
weeks and thirty-nine weeks ended September 29, 1996.
RESULTS OF OPERATIONS
Thirteen weeks ended September 28, 1997 compared to thirteen weeks
ended September 29, 1996
Net sales for the thirteen weeks ended September 28, 1997 (third
quarter of 1997) were $8,326,000 compared to net sales for the thirteen
weeks ended September 29, 1996 (third quarter of 1996) of $12,059,000.
The decrease in sales was the result of temporary delays in production
and receipt of components for new products.
The gross margin percentage for the third quarter of 1997 was
26.0% as compared with 25.0% for the same period in 1996. The increase
is attributable to a more favorable product mix in the third quarter of
1997.
Selling, general and administrative expenses for the third quarter
of 1997 decreased 27.9% from the third quarter of 1996, to $1,354,000.
These expenses as a percent of sales were 16.3% in the third quarter of
1997 compared to 15.6% for the similar period in 1996. The increase
as a percent of sales was attributable to the decrease in sales
partially offset by a gain on the sale of M-Systems shares in the third
quarter of 1997.
Company sponsored engineering, research and development expenses
for the third quarter of 1997 increased 75.5% from the third quarter of
1996, to $516,000. These expenses as a percentage of sales were 6.2%
in the third quarter of 1997 compared to 2.4% for the similar period in
1996. The increase is attributable to an increased amount of research
and development for in-flight entertainment and cabin management
products.
Interest expense, net of interest income, was $190,000 in the
third quarter of 1997 compared to $297,000 for the similar period in
1996. The decrease reflects decreased debt compared to the prior year.
The income tax provision in the third quarter of 1997 was
completely offset by the utilization of the Company's net operating
loss carryforward. In addition, a deferred tax asset of $600,000
relating to a portion of the Company's net operating loss carryforward
was recognized in the third quarter of 1997 as management estimates
that it is more likely than not, that the deferred tax asset will be
realized in future periods. Additional deferred tax assets could be
recognized in future periods if the probability of realization
increases.
Net income for the third quarter of 1997 increased 29.8% from the
third quarter of 1996 to $705,000. Earnings per share were $0.12 for
the third quarter of 1997 as compared to $0.09 for the similar period
in 1996 based on a weighted average of 5,872,000 shares and 5,867,000
shares of the Company's common stock outstanding for the respective
periods.
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<PAGE>
Thirty-nine weeks ended September 28, 1997 compared to thirty-nine
weeks ended September 29, 1996
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Net sales for the thirty-nine weeks ended September 28, 1997
(first nine months of 1997) were $29,360,000 compared to net sales for
the thirty-nine weeks ended September 29, 1996 (first nine months of
1996) of $33,145,000. The decrease in sales was the result of
temporary delays in production and receipt of components for new
products.
The gross margin percentage for the first nine months of 1997 was
23.9% as compared with 24.5% for the same period in 1996. The decrease
in gross margin percentage was due to a more favorable product mix in
the first nine months of 1996.
Selling, general and administrative expenses for the first nine
months of 1997 decreased 5.7% from the first nine months of 1996, to
$4,562,000. These expenses as a percent of sales were 15.5% in the
first nine months of 1997 compared to 14.6% for the similar period in
1996. The increase as a percent of sales was primarily attributable to
decreased sales in the first nine months of 1997.
Company sponsored engineering research and development expenses
for the first nine months of 1997 decreased 21.6% from the first nine
months of 1996 to $944,000. These expenses as a percentage of sales
were 3.2% in the first nine months of 1997 compared to 3.6% for the
similar period in 1996. 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 $578,000 for the
first nine months of 1997 compared to $888,000 for the similar period
in 1996. The decrease reflects decreased debt compared to the prior
year.
The income tax provision in the first nine months of 1997 was
completely offset by the utilization of the Company's net operating
loss carryforward. An additional deferred tax asset of $600,000 was
recognized in the first nine months of 1997 as management estimates
that it is more likely than not that the deferred tax asset will be
realized in future periods. Additional deferred tax assets could be
recognized in future periods if the probability of realization
increases.
Net income for the first nine months of 1997 increased 28.3% from
the first nine months of 1996 to $1,522,000. Earnings per share for the
first nine months of 1997 were $0.26 as compared to earnings per share
of $0.20 for the similar period in 1996 based on a weighted average of
5,872,000 shares and 5,867,000 shares of the Company's common stock
outstanding for the respective periods.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital approximated $19,167,000 at September 28, 1997
compared to $17,999,000 at December 31, 1996.
A $15 million revolving credit agreement, at the Company's option,
bears interest at the bank's reference rate (8.50% and 8.25% at
September 28, 1997 and December 31, 1996, respectively), or at a rate
equaling the London Inter Bank Offered Rate (5.65% and 5.56% at
September 28, 1997 and December 31, 1996, respectively) plus 2.0%. If
for any day the total amount advanced, regardless of the interest rate
option, exceeds $10 million, an additional .25% is added to the
interest rate. The revolving credit facility is scheduled to mature on
May 31, 1999, at which time the outstanding amount would be converted
into a term loan payable in twelve equal quarterly installments.
However, at the request of the Company, the bank may extend the
revolving credit agreement for successive one year periods based upon a
review of the previous year-end audited consolidated financial
statements. The Company's accounts receivable, contract rights and
inventories are pledged as collateral to the agreement.
-9-
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
The Company, from time to time, is a party to pending or
threatened legal proceedings and arbitrations. Based upon
information presently available, and in light of legal and other
defenses available to the Company, management does not consider
liability from any threatened or pending litigation to be
material.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None
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<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/ James E. Matthews
-------------------------------
James E. Matthews,
Vice President Finance and
Chief Financial Officer
(Principle Accounting and
Financial Officer)
Dated: November 13, 1997
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<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-31-1997
<PERIOD-END> SEP-28-1997
<CASH> 100,000
<SECURITIES> 0
<RECEIVABLES> 8,221,000
<ALLOWANCES> 0
<INVENTORY> 14,945,000
<CURRENT-ASSETS> 24,287,000
<PP&E> 17,687,000
<DEPRECIATION> 7,837,000
<TOTAL-ASSETS> 35,756,000
<CURRENT-LIABILITIES> 5,120,000
<BONDS> 0
0
0
<COMMON> 68,000
<OTHER-SE> 19,630,000
<TOTAL-LIABILITY-AND-EQUITY> 35,756,000
<SALES> 29,360,000
<TOTAL-REVENUES> 29,360,000
<CGS> 22,354,000
<TOTAL-COSTS> 27,860,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 578,000
<INCOME-PRETAX> 922,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,522,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,522,000
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
