08/13/97/BLM/14853/001/FORMS/88161.1
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 June 29, 1997 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 August 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
(unaudited)
<TABLE>
JUNE 29, DECEMBER 31,
1997 1996
--------- ------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 107,000 $ 128,000
Accounts receivable 10,104,000 10,890,000
Inventories 14,108,000 13,836,000
Other current assets 1,366,000 279,000
------------ ------------
Total current assets 25,685,000 25,133,000
------------ -----------
PROPERTY AND EQUIPMENT - at cost:
Machinery and equipment 7,770,000 7,322,000
Furniture and fixtures 1,538,000 1,475,000
Land, building and improvements 8,012,000 7,537,000
----------- -----------
Total property and equipment 17,320,000 16,334,000
Less accumulated depreciation 7,480,000 6,765,000
----------- -----------
Property and equipment - net 9,840,000 9,569,000
----------- -----------
OTHER ASSETS 999,000 1,630,000
----------- -----------
TOTAL $36,524,000 $36,332,000
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,760,000 $ 5,426,000
Accrued expenses 1,093,000 1,468,000
Current maturities of long-term debt 315,000 240,000
----------- -----------
Total current liabilities 7,168,000 7,134,000
----------- -----------
LONG-TERM DEBT 10,280,000 11,340,000
----------- -----------
TOTAL LIABILITIES 17,448,000 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
June 29, 1997 and December 31, 1996,
respectively 68,000 68,000
Capital in excess of par value 20,264,000 20,253,000
Retained earnings 12,599,000 11,783,000
Net unrealized appreciation on
investment available for sale, net of
deferred income tax liability of
$230,000 at June 29, 1997 391,000 -
----------- -----------
33,322,000 32,104,000
Less treasury stock 14,246,000 14,246,000
----------- -----------
Total stockholders' equity 19,076,000 17,858,000
----------- -----------
TOTAL $36,524,000 $36,332,000
=========== ===========
</TABLE>
<PAGE>
<TABLE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Twenty-Six Weeks Ended
-----------------------------
June,29 June 30,
1997 1996
<S> <C> <C>
NET SALES $21,034,000 $21,086,000
----------- -----------
COSTS AND EXPENSES:
Cost of sales 16,193,000 15,981,000
Selling, general and administrative 3,208,000 2,889,000
Engineering, research and development 428,000 982,000
----------- -----------
Total 19,829,000 19,852,000
----------- -----------
INCOME FROM OPERATIONS 1,205,000 1,234,000
INTEREST EXPENSE - net 388,000 591,000
----------- -----------
INCOME BEFORE INCOME TAXES 817,000 643,000
INCOME TAXES - -
----------- -----------
NET INCOME $ 817,000 $ 643,000
NET INCOME PER SHARE $ .14 $ .11
=========== ===========
Weighted average number of shares 5,869,000 5,867,000
=========== ===========
</TABLE>
<PAGE>
<TABLE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Thirteen Weeks Ended
---------------------------
June 29, June 30,
1997 1996
----------- -----------
<S> <C> <C>
NET SALES $11,992,000 $11,137,000
----------- -----------
COSTS AND EXPENSES:
Cost of sales 9,334,000 8,692,000
Selling, general and administrative 1,613,000 1,233,000
Engineering, research and development 202,000 416,000
----------- -----------
Total 11,149,000 10,341,000
----------- -----------
INCOME FROM OPERATIONS 843,000 796,000
INTEREST EXPENSE - net 201,000 270,000
----------- -----------
INCOME BEFORE INCOME TAXES 642,000 526,000
INCOME TAXES - -
----------- -----------
NET INCOME $ 642,000 $ 526,000
=========== ===========
NET INCOME PER SHARE $ .11 $ .09
=========== ===========
Weighted average number of shares: 5,869,000 5,867,000
=========== ===========
</TABLE>
<PAGE>
<TABLE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 29, 1997 AND JUNE 30, 1996
(unaudited)
June 29, June 30,
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 817,000 $ 643,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 808,000 858,000
Provision for slow-moving and obsolete inventories 476,000 450,000
Provision for doubtful accounts receivable 50,000 (265,000)
Gain on sale of investment available for sale - (522,000)
Loss on sale of fixed assets - 22,000
Change in operating assets and liabilities:
Accounts receivable 736,000 (1,284,000)
Inventories (749,000) 2,867,000
Other current assets (531,000) (17,000)
Other assets 308,000 563,000
Accounts payable and accrued expenses 26,000 (2,366,000)
---------- -----------
Cash provided by operating 1,941,000 949,000
---------- -----------
INVESTING ACTIVITIES:
Purchase of property and equipment (985,000) (139,000)
Proceeds from sale of investment available for sale - 524,000
Proceeds from sale of property and equipment - 4,000
Cash provided by (used in) investing activities (985,000) 389,000
---------- -----------
FINANCING ACTIVITIES:
Payments of revolving credit loan-net (928,000) (782,000)
Payments of other long-term debt (60,000) (151,000)
Proceeds from exercise of stock options 11,000 -
---------- -----------
Cash used in financing activities (977,000) (933,000)
---------- -----------
NET INCREASE (DECREASE) IN CASH (21,000) 405,000
CASH, BEGINNING OF PERIOD 128,000 301,000
---------- -----------
CASH, END OF PERIOD $107,000 $706,000
========== ===========
SUPPLEMENTAL DISCLOSURE:
Payments made:
Income taxes $ 65,000 $ -
========== ===========
Interest $414,000 $560,000
========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Increase (decrease) in unrealized appreciation
on investment available for sale $621,000 $(357,000)
========== ============
</TABLE>
<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 June 29, 1997 and the results of
operations and cash flows for the twenty-six and thirteen weeks ended
June 29, 1997 and June 30, 1996.
The results for the twenty-six weeks ended June 29, 1997 and June 30,
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 twenty-six
week periods ended June 29, 1997 and June 30, 1996, while the impact on
prior periods has not been determined.
2. Inventories - Net
Inventories consist of the following:
<TABLE>
June 29, 1997 December 31, 1996
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<S> <C> <C>
Purchased parts and
subassemblies $ 9,832,000 $ 10,002,000
Work-in-process 4,397,000 3,955,000
------------ ------------
Total 14,229,000 13,957,000
Less progress billings received 121,000 121,000
------------ ------------
Total $ 14,108,000 $ 13,836,000
============ ============
</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 153,242 shares of M-Systems stock with an
original cost of $231,000. The fair market value of the Company's
investment in M-Systems stock on June 29, 1997 is $852,000. 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 second quarter
of 1997 was completely offset by the utilization of the Company's net
operating loss carryforward. 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.
<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
twenty-six weeks ended June 29, 1997, as compared to thirteen weeks and
twenty-six weeks ended June 30, 1996.
RESULTS OF OPERATIONS
=====================
Thirteen weeks ended June 29, 1997 compared to thirteen weeks ended
June 30, 1996
- ------------------------------------------------------------------------
Net sales for the thirteen weeks ended June 29, 1997 (second
quarter of 1997) were $11,992,000 compared to net sales for the
thirteen weeks ended June 30, 1996 (second quarter of 1996) of
$11,137,000. The increase in sales was the result of higher commercial
product sales.
The gross margin percentage for the second quarter of 1997 was
22.2% as compared with 22.0% for the same period in 1996.
Selling, general and administrative expenses for the second
quarter of 1997 increased 30.8% from the second quarter of 1996, to
$1,613,000. These expenses as a percent of sales were 13.5% in the
second quarter of 1997 compared to 11.1% for the similar period in
1996. The increase in these expenses was primarily attributable to
increased marketing activities in the second quarter of 1997 and a gain
from the sale of M-Systems stock in the second quarter of 1996.
Company sponsored engineering, research and development expenses
for the second quarter of 1997 decreased 51.4% from the second quarter
of 1996, to $202,000. These expenses as a percentage of sales were
1.7% in the second quarter of 1997 compared to 3.7% 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 $201,000 in the
second quarter of 1997 compared to $270,000 for the similar period in
1996. The decrease reflects decreased debt compared to the prior year.
Net income for the second quarter of 1997 increased 22.1% from the
second quarter of 1996 to $642,000. Earnings per share were $0.11 for
the second quarter of 1997 as compared to $0.09 for the similar period
in 1996 based on a weighted average of 5,869,000 shares and 5,867,000
shares of the Company's common stock outstanding for the respective
periods.
The income tax provision in the second quarter of 1997 was
completely offset by the utilization of the Company's net operating
loss carryforward. Additional deferred tax assets could be recognized
in future periods if the probability of realization increases.
<PAGE>
Twenty-six weeks ended June 29, 1997 compared to twenty-six weeks
ended June 30, 1996
- ------------------------------------------------------------------------
Net sales for the twenty-six weeks ended June 29, 1997 (first half
of 1997) were $21,034,000 compared to net sales for the twenty-six
weeks ended June 30, 1996 (first half of 1996) of $21,086,000.
The gross margin percentage for the first half of 1997 was 23.0%
as compared with 24.2% for the same period in 1996. The decrease in
gross margin percentage was due to a more favorable product mix in the
first half of 1996.
Selling, general and administrative expenses for the first half of
1997 increased 11.0% from the first half of 1996, to $3,208,000. These
expenses as a percent of sales were 15.3% in the first half of 1997
compared to 13.7% for the similar period in 1996. The increase in
these expenses was principally the result of a gain from the sale of M-
Systems stock in the first half of 1996.
Company sponsored engineering research and development expenses
for the first half of 1997 decreased 56.4% from the first half of 1996
to $428,000. These expenses as a percentage of sales were 2.0% in the
first half of 1997 compared to 4.7% 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 $388,000 in the
first half of 1997 compared to $591,000 for the similar period in 1996.
The decrease reflects decreased debt compared to the prior year.
Net income for the first half of 1997 increased 27.1% from the
first half of 1996 to $817,000. Earnings per share for the first half
of 1997 were $0.14 as compared to earnings per share of $0.11 for the
similar period in 1996 based on a weighted average of 5,869,000 shares
and 5,867,000 shares of the Company's common stock outstanding for the
respective periods.
The income tax provision in the first half of 1997 was completely
offset by the utilization of the Company's net operating loss
carryforward. Additional deferred tax assets could be recognized in
future periods if the probability of realization increases.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
================================
Working capital approximated $18,517,000 at June 29, 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 June
29, 1997 and December 31, 1996, respectively), or at a rate equaling
the London Inter Bank Offered Rate (5.69% and 5.56% at June 29, 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, 1998, 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.
<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
<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
-------------------------
Vice President Finance and
Chief Financial Officer
(Principle Accounting and
Financial Officer)
Dated: August 13, 1997
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-29-1997
<CASH> 107,000
<SECURITIES> 0
<RECEIVABLES> 10,104,000
<ALLOWANCES> 0
<INVENTORY> 14,108,000
<CURRENT-ASSETS> 25,685,000
<PP&E> 17,320,000
<DEPRECIATION> 7,480,000
<TOTAL-ASSETS> 36,524,000
<CURRENT-LIABILITIES> 7,168,000
<BONDS> 0
0
0
<COMMON> 68,000
<OTHER-SE> 19,008,000
<TOTAL-LIABILITY-AND-EQUITY> 36,524,000
<SALES> 21,034,000
<TOTAL-REVENUES> 21,034,000
<CGS> 16,193,000
<TOTAL-COSTS> 19,829,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 388,000
<INCOME-PRETAX> 817,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 817,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 817,000
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
