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 29, 1998 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
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 May 13, 1998: 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>
December 31, March 29,
1997 1998
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ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 443,000 $ 117,000
Accounts receivable 9,977,000 5,779,000
Inventories 14,703,000 15,785,000
Deferred income taxes 345,000 345,000
Other current assets 242,000 558,000
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Total current assets 25,710,000 22,584,000
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PROPERTY AND EQUIPMENT - at cost:
Machinery and equipment 7,177,000 7,255,000
Furniture and fixtures 1,561,000 1,565,000
Land, building and improvements 8,021,000 8,086,000
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Total property and equipment 16,759,000 16,906,000
Less accumulated depreciation 7,101,000 7,463,000
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Property and equipment - net 9,658,000 9,443,000
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DEFERRED INCOME TAXES 2,240,000 2,266,000
OTHER ASSETS 841,000 597,000
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TOTAL $38,449,000 $34,890,000
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LIABILITIES AND STOCKHOLDERS'EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,437,000 $ 3,914,000
Accrued expenses 1,351,000 791,000
Current maturities of long-term debt 270,000 280,000
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Total current liabilities 6,058,000 4,985,000
LONG-TERM DEBT 11,251,000 8,810,000
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Total liabilities 17,309,000 13,795,000
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; 20,000,000
shares authorized; 6,811,112 shares
outstanding at December 31, 1997 and
March 29, 1998 68,000 68,000
Capital in excess of par value 20,264,000 20,264,000
Retained earnings 15,054,000 15,009,000
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35,386,000 35,341,000
Less treasury stock 14,246,000 14,246,000
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Total stockholders'equity 21,140,000 21,095,000
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TOTAL $38,449,000 $34,890,000
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</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
Thirteen Weeks Ended
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March 30, March 29,
1997 1998
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<S> <C> <C>
NET SALES $9,042,000 $7,444,000
COSTS AND EXPENSES: ---------- ----------
Cost of sales 6,860,000 5,506,000
Selling, general and administrative 1,595,000 1,376,000
Engineering, research and development 226,000 467,000
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Total 8,681,000 7,349,000
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INCOME FROM OPERATIONS 361,000 95,000
INTEREST EXPENSE - net 187,000 166,000
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INCOME (LOSS) BEFORE INCOME TAXES 174,000 (71,000)
INCOME TAX BENEFIT - 26,000
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NET INCOME (LOSS) $ 174,000 $ (45,000)
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BASIC AND DILUTED
NET INCOME (LOSS) PER SHARE $ .03 $ (.01)
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WEIGHTED AVERAGE SHARES OUTSTANDING 5,868,000 5,872,000
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED MARCH 30, 1997 AND MARCH 29, 1998
(unaudited)
<TABLE>
<S> <C> <C>
March 30, March 29,
1997 1998
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OPERATING ACTIVITIES:
Net income (loss) $ 174,000 $ (45,000)
Adjustments to reconcile net income
(loss) to net cash provided by operating activities:
Depreciation and amortization 413,000 367,000
Provision for slow-moving and obsolete inventories 238,000 6,000
Provision for doubtful accounts receivable 30,000 5,000
Deferred income taxes - (26,000)
Change in operating assets and liabilities:
Accounts receivable 3,429,000 4,193,000
Inventories (451,000) (1,088,000)
Other current assets (410,000) (26,000)
Other assets 302,000 (52,000)
Accounts payable and accrued expenses (3,638,000) (1,083,000)
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Cash provided by operating activities 87,000 2,251,000
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INVESTING ACTIVITIES:
Purchase of property and equipment (333,000) (146,000)
Purchase of deferred assets (8,000) -
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Cash used in investing (341,000) (146,000)
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FINANCING ACTIVITIES:
Proceeds (payments) from revolving credit loan - net 730,000 (2,363,000)
Payments of other long-term debt (60,000) (68,000)
Exercise of stock options 5,000 -
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Cash provided by (used in) financing activities 675,000 (2,431,000)
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NET INCREASE (DECREASE) IN CASH 421,000 (326,000)
CASH, BEGINNING OF PERIOD 128,000 443,000
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CASH, END OF PERIOD $ 549,000 $ 117,000
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SUPPLEMENTAL DISCLOSURE:
Cash payments made for:
Income taxes $ 65,000 $ 67,000
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Interest $ 233,000 $ 163,000
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SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES
Change in unrealized appreciation on investment
available for sale $ 573,000 $ -
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</TABLE>
See notes to condensed consolidated financial statements.
<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 December 31, 1997 and March 29,
1998, the results of operations and cash flows for the thirteen weeks
ended March 30, 1997 and March 29, 1998.
The results for the thirteen weeks ended March 30, 1997 and March 29,
1998 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, 1997.
Effective January 1, 1998, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 130 Reporting
Comprehensive Income. The statement requires the addition of
comprehensive income and its components in the Company's annual
financial statements. Other comprehensive income (loss) includes
unrealized investment gains and losses, which are not included in
income under current accounting principles. Total comprehensive income
(loss) for the quarters ended March 30, 1997 and March 29, 1998 were:
<TABLE>
March 30, 1997 March 29, 1998
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<S> <C> <C>
Net income (loss) $174,000 $ (45,000)
Other comprehensive income 361,000 -
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Total comprehensive income (loss) $535,000 $ (45,000)
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</TABLE>
2. Inventories - Net
Inventories consist of the following:
December 31, 1997 March 29, 1998
----------------- --------------
<TABLE>
<S> <C> <C>
Purchased parts and subassemblies $10,019,000 $10,949,000
Work-in-process 4,684,000 4,836,000
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Total $14,703,000 $15,785,000
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</TABLE>
3. 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.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion includes certain forward looking statements
which are affected by important factors including, but not limited to,
actions of competitors, termination of contracts at the convenience of
the United States government, customer funding variations in connection
with multi-year contracts and follow-on options that could cause actual
results to differ materially from forward looking statements.
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 29, 1998, as compared to the thirteen weeks ended March 30,
1997.
RESULTS OF OPERATIONS
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Thirteen weeks ended March 29, 1998 compared to thirteen weeks ended
March 30, 1997
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Net sales for the thirteen weeks ended March 29, 1998 (first
quarter of 1998) were $7,444,000 compared to net sales for the thirteen
weeks ended March 30, 1997 (first quarter of 1997) of $9,042,000. The
decrease in sales was primarily attributable to the Company not
receiving expected U.S. Government funding for the SPORT program.
Management anticipates receiving additional funding for this program by
the second half of 1998.
The gross margin percentage for the first quarter of 1998 was
26.0% as compared with 24.1% for the same period in 1997. The increase
is attributable to a more favorable product mix in the first quarter of
1998.
Selling, general and administrative expenses for the first quarter
of 1998 decreased 13.7% from the first quarter of 1997, to $1,376,000.
These expenses as a percent of sales were 18.5% in the first quarter of
1998 compared to 17.6% for the similar period in 1997. The increase
as a percent of sales was attributable to the decrease in sales for the
quarter.
Company sponsored engineering, research and development expenses
for the first quarter of 1998 increased 106.6% from the first quarter
of 1997, to $467,000. These expenses as a percentage of sales were
6.3% in the first quarter of 1998 compared to 2.5% for the similar
period in 1997. 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 $166,000 in the
first quarter of 1998 compared to $187,000 for the similar period in
1997. The decrease reflects decreased debt compared to the prior year.
Net income for the first quarter of 1998 decreased from the first
quarter of 1997 to a net loss of $45,000. The basic and diluted net
loss per share was $0.01 for the first quarter of 1998 as compared to
the basic and diluted net income per share of $0.03 for the similar
period in 1997 based on a weighted average of 5,872,000 shares and
5,868,000 shares of the Company's common stock outstanding for the
respective periods.
LIQUIDITY AND CAPITAL RESOURCES
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Working capital approximated $17,599,000 at March 29, 1998
compared to $19,652,000 at December 31, 1997. Accounts receivable
decreased approximately $4,200,000 as a result of decreased sales.
Inventories increased approximately $1,100,000 as a result of the SPORT
contract. Accounts payable decreased approximately $500,000 as a result
of decreased sales. Accrued expenses decreased approximately $600,000
as a result of decreased accrued interest and decreased accrued
liabilities related to long term contracts.
A $15 million revolving credit agreement, at the Company's option,
bears interest at the bank's reference rate (8.50% at March 29, 1998
and December 31, 1997), or at a rate equaling the London Inter Bank
Offered Rate (5.59% and 5.81% at March 29, 1998 and December 31, 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, 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.
<PAGE>
PART II - OTHER INFORMATION
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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
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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:
----------------------------------
James E. Matthews,
President and Chief Executive
Officer
(Principle Executive Officer)
Dated: May 13, 1998
<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-31-1998
<PERIOD-END> MAR-29-1998
<CASH> 117,000
<SECURITIES> 0
<RECEIVABLES> 5,779,000
<ALLOWANCES> 0
<INVENTORY> 15,785,000
<CURRENT-ASSETS> 22,584,000
<PP&E> 16,906,000
<DEPRECIATION> 7,463,000
<TOTAL-ASSETS> 34,890,000
<CURRENT-LIABILITIES> 4,985,000
<BONDS> 0
0
0
<COMMON> 68,000
<OTHER-SE> 21,027,000
<TOTAL-LIABILITY-AND-EQUITY> 34,890,000
<SALES> 7,444,000
<TOTAL-REVENUES> 7,444,000
<CGS> 5,506,000
<TOTAL-COSTS> 7,349,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166,000
<INCOME-PRETAX> (71,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (45,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
