05/13/97/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 March 30, 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
- --------------------------------- --------------------
(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
------- -------
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 May 13, 1997: 5,868,898 shares of Common Stock,
$.01 par value.
<PAGE>
PART I - FINANCIAL INFORMATION
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, MARCH 30,
ASSETS 1996 1997
(audited) (unaudited)
----------- -----------
CURRENT ASSETS:
Cash $ 128,000 $ 549,000
Accounts receivable 10,890,000 7,431,000
Inventories 13,863,000 14,049,000
Other current assets 279,000 1,197,000
Total current assets 25,133,000 23,226,000
PROPERTY AND EQUIPMENT - at cost:
Machinery and equipment 7,322,000 7,584,000
Furniture and fixtures 1,475,000 1,481,000
Land, building and improvements 7,537,000 7,602,000
Total property and equipment 16,334,000 16,667,000
equipment
Less accumulated depreciation 6,765,000 7,131,000
Property and equipment - net 9,569,000 9,536,000
OTHER ASSETS 1,630,000 1,077,000
TOTAL $36,332,000 $33,839,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,426,000 $2,334,000
Accrued expenses 1,468,000 856,000
Current maturities of long-term debt 240,000 248,000
Total current liabilities 7,134,000 3,438,000
LONG-TERM DEBT 11,340,000 12,004,000
TOTAL LIABILITIES 18,474,000 15,442,000
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; 20,000,000
shares authorized; 6,806,737 and
6,808,487 shares outstanding at
December 31, 1996 and March 30,
1997, respectively 68,000 68,000
Capital in excess of par value 20,253,000 20,258,000
Retained earnings 11,783,000 11,956,000
Net unrealized appreciation on
investment available for sale,
net of deferred income tax
liability of $212,000 at
March 30, 1997 - 361,000
32,104,000 32,643,000
Less treasury stock 14,246,000 14,246,000
Total stockholders equity 17,858,000 18,397,000
TOTAL $36,332,000 $33,839,000
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Thirteen Weeks Ended
March 31, March 30,
1996 1997
----------- ----------
NET SALES $ 9,950,000 $9,042,000
COSTS AND EXPENSES:
Cost of sales 7,290,000 6,860,000
Selling, general and administrative 1,656,000 1,595,000
Engineering, research and development 566,000 226,000
Total 9,512,000 8,681,000
INCOME FROM OPERATIONS 438,000 361,000
INTEREST EXPENSE - net 321,000 187,000
INCOME BEFORE INCOME TAXES 117,000 174,000
INCOME TAXES - -
NET INCOME $ 117,000 $ 174,000
NET INCOME PER SHARE $ .02 $ .03
Weighted average number of shares 5,867,000 5,868,000
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED MARCH 31, 1996 AND MARCH 30, 1997
(unaudited)
March 31, March 30,
1996 1997
---------- ---------
OPERATING ACTIVITIES:
Net income $ 117,000 $ 174,000
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities:
Depreciation and amortization 430,000 413,000
Provision for slow-moving and
obsolete inventories 225,000 238,000
Provision for doubtful accounts
receivable (23,000) 30,000
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 550,000 3,429,000
Inventories 619,000 (451,000)
Other current assets (276,000) (410,000)
Other assets 83,000 302,000
Accounts payable and accrued
expenses (1,616,000) (3,638,000)
Cash provided by
(used in) operating activities (229,000) 87,000
INVESTING ACTIVITIES:
Purchase of property and equipment (57,000) (333,000)
Purchase of deferred assets - (8,000)
Proceeds from sale of property
and equipment 4,000 -
Proceeds from sale of investment
available for sale 258,000 -
Cash provided by (used in)
investing activities 205,000 (341,000)
FINANCING ACTIVITIES:
Proceeds from revolving credit loan-net 535,000 730,000
Payments of other long-term debt - (60,000)
Exercise of stock options - 5,000
Cash provided by financing acvities 535,000 675,000
NET INCREASE IN CASH 511,000 421,000
CASH, BEGINNING OF PERIOD 301,000 128,000
CASH, END OF PERIOD $ 812,000 $ 549,000
SUPPLEMENTAL DISCLOSURE:
Payments made
Income taxes $ - $ 65,000
Interest $ 270,000 $ 233,000
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Change in unrealized appreciation on
investment available for sale $ 175,000 $ 573,000
<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 March 30, 1997 and the results of
operations and cash flows for the thirteen weeks ended March 31, 1996 and
March 30, 1997.
The results for the thirteen weeks ended March 31, 1996 and March 30,
1997 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 thirteen week
periods ended March 30, 1997 and March 31, 1996, while the impact on
prior periods has not been determined.
2. Inventories - Net
Inventories consist of the following:
December 31, 1996 March 30, 1997
----------------- --------------
Purchased parts and subassemblies $10,002,000 $11,146,000
Work-in-process 3,955,000 3,024,000
13,957,000 14,170,000
Less progress billings received 121,000 121,000
Total $13,836,000 $14,049,000
3. 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 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 March 30, 1997 is $805,000 and is included in other
current assets and 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 first 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 ended
March 30, 1997, as compared to thirteen weeks ended March 31, 1996.
RESULTS OF OPERATIONS
Thirteen weeks ended March 30, 1997 compared to thirteen weeks ended
March 31, 1996.
Net sales for the thirteen weeks ended March 30, 1997 (first quarter
of 1997) were $9,042,000 compared to net sales for the thirteen weeks
ended March 31, 1996 (first quarter of 1996) of $9,950,000 The decrease
in sales was the result of the timing of shipping schedules between the
first and second quarters of 1997.
The gross margin percentage for the first quarter of 1997 was 24.1%
as compared with 26.7% for the same period in 1996. The decrease in
gross margin percentage was due to a more favorable product mix in the
first quarter of 1996.
Selling, general and administrative expenses for the first quarter
of 1997 decreased 3.7% from the first quarter of 1996, to $1,595,000.
These expenses as a percent of sales were 17.6% in the first quarter of
1997 compared to 16.6% for the similar period in 1996. The increase in
selling, general and administrative expenses as a percent of net sales
was due to lower net sales for the first quarter of 1997 as compared to
the same period in 1996.
Company sponsored engineering, research and development expenses for
the first quarter of 1997 decreased 60.1% from the first quarter of 1996
to $226,000. These expenses, as a percentage of sales, were 2.5% in the
first quarter of 1997 compared to 5.7% 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 $187,000 for the first
quarter of 1997 compared to $321,000 for the similar period in 1996. The
decrease is attributable to lower long-term debt.
Net income for the first quarter of 1997 as compared to the same
period of 1996 increased $57,000. Earnings per share were $.03 for the
first quarter of 1997 as compared to $.02 for the similar period a year
ago based on a weighted average of 5,868,000 shares and 5,867,000 shares
of the Company's common stock outstanding for the respective periods.
The income tax provision in the first 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.
LIQUIDITY AND CAPITAL RESOURCES
Working capital approximated $19,788,000 at March 30, 1997 compared
to $17,999,000 at December 31, 1996. The increase is primarily
attributable to the Company recording the fair market value of its
investment in M-Systems stock due to the elimination of certain
restrictions (Note 3) and the payment of accounts payable using proceeds
from the Company's revolving credit facility.
A $15 million revolving credit agreement, at the Company's option,
bears interest at the bank's reference rate (8.25% and 8.50% at December
31, 1996 and March 30, 1997, respectively), or at a rate equaling the
London Inter Bank Offered Rate (5.56% and 5.50% at December 31, 1996 and
March 30, 1997, 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 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
-----------------------------
James E. Matthews,
Vice President Finance and
Chief Financial Officer
(Principle Accounting and
Financial Officer)
Dated: May 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-30-1997
<CASH> 549,000
<SECURITIES> 0
<RECEIVABLES> 7,431,000
<ALLOWANCES> 0
<INVENTORY> 14,049,000
<CURRENT-ASSETS> 23,226,000
<PP&E> 16,667,000
<DEPRECIATION> 7,131,000
<TOTAL-ASSETS> 33,839,000
<CURRENT-LIABILITIES> 3,438,000
<BONDS> 0
0
0
<COMMON> 68,000
<OTHER-SE> 18,329,000
<TOTAL-LIABILITY-AND-EQUITY> 33,839,000
<SALES> 9,042,000
<TOTAL-REVENUES> 9,042,000
<CGS> 6,860,000
<TOTAL-COSTS> 8,681,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 187,000
<INCOME-PRETAX> 174,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 174,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174,000
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
