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 28, 1998 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 12, 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>
June 28, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 436,000 $ 443,000
Accounts receivable 5,141,000 9,977,000
Inventories 17,164,000 14,703,000
Deferred income taxes 345,000 345,000
Other current assets 189,000 242,000
----------- -----------
Total current assets 23,275,000 25,710,000
PROPERTY AND EQUIPMENT - at cost: ----------- -----------
Machinery and equipment 7,305,000 7,177,000
Furniture and fixtures 1,581,000 1,561,000
Land, building and improvements 8,088,000 8,021,000
----------- -----------
Total property and equipment 16,974,000 16,759,000
Less accumulated depreciation 7,813,000 7,101,000
----------- -----------
Property and equipment - net 9,161,000 9,658,000
----------- -----------
DEFERRED INCOME TAXES 2,986,000 2,240,000
OTHER ASSETS 919,000 841,000
----------- -----------
TOTAL $36,341,000 $38,449,000
LIABILITIES AND STOCKHOLDERS' EQUITY ============ ===========
CURRENT LIABILITIES:
Accounts payable $ 3,433,000 $ 4,437,000
Accrued expenses 1,111,000 1,351,000
Current maturities of long-term debt 290,000 270,000
----------- -----------
Total current liabilities 4,834,000 6,058,000
LONG-TERM DEBT 11,663,000 11,251,000
----------- -----------
Total liabilities 16,497,000 17,309,000
----------- -----------
COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; 20,000,000 shares
authorized; 6,811,112 shares outstanding at 68,000 68,000
June 28, 1998 and December 31, 1997.
Capital in excess of par value 20,264,000 20,264,000
Retained earnings 13,758,000 15,054,000
----------- -----------
34,090,000 35,386,000
Less treasury stock 14,246,000 14,246,000
----------- -----------
Total stockholders' equity 19,844,000 21,140,000
----------- -----------
TOTAL $36,341,000 $38,449,000
=========== ===========
</TABLE>
See Notes To Condensed Consolidated Financial Statements
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
Twenty-Six Weeks Ended
---------------------------
June 28, June 29,
1998 1997
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<S> <C> <C>
NET SALES $13,383,000 $21,034,000
COSTS AND EXPENSES: ----------- -----------
Cost of sales 10,389,000 16,193,000
Selling, general and administrative 3,548,000 3,208,000
Engineering, research and development 1,143,000 428,000
----------- -----------
Total 15,080,000 19,829,000
----------- -----------
INCOME (LOSS) FROM OPERATIONS (1,697,000) 1,205,000
INTEREST EXPENSE - net 346,000 388,000
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (2,043,000) 817,000
INCOME TAX BENEFIT NET INCOME (LOSS) 747,000 -
----------- -----------
$(1,296,000) $ 817,000
=========== ===========
BASIC AND DILUTED
NET INCOME (LOSS) PER SHARE $ (.22) $ .14
WEIGHTED AVERAGE SHARES =========== ===========
OUTSTANDING 5,872,000 5,869,000
=========== ===========
</TABLE>
See Notes To Condensed Consolidated Financial Statements
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
Thirteen Weeks Ended
---------------------------
June 28, June 29,
1997 1998
----------- -----------
<S> <C> <C>
NET SALES $ 5,939,000 $11,992,000
COSTS AND EXPENSES: ----------- -----------
Cost of sales 4,883,000 9,334,000
Selling, general and administrative 2,172,000 1,613,000
Engineering, research and development 676,000 202,000
----------- -----------
Total 7,731,000 11,149,000
----------- -----------
INCOME (LOSS) FROM OPERATIONS (1,792,000) 843,000
INTEREST EXPENSE - net 180,000 201,000
----------- -----------
INCOME (LOSS ) BEFORE INCOME TAXES (1,972,000) 642,000
INCOME TAX BENEFIT 721,000 -
----------- -----------
NET INCOME (LOSS) $(1,251,000) $ 642,000
BASIC AND DILUTED =========== ===========
NET INCOME (LOSS) PER SHARE $ (0.21) $ .11
WEIGHTED AVERAGE SHARES =========== ===========
OUTSTANDING 5,872,000 5,869,000
=========== ===========
</TABLE>
See Notes To Condensed Consolidated Financial Statements
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED JUNE 28, 1998 AND JUNE 29, 1997
(unaudited)
<TABLE>
June 28, June 29,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $(1,296,000) $ 817,000
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 724,000 808,000
Provision for slow-moving and obsolete inventories 206,000 476,000
Provision for doubtful accounts receivable 5,000 50,000
Deferred income taxes (746,000) -
Change in operating assets and liabilities:
Accounts receivable 4,831,000 736,000
Inventories (2,668,000) (749,000)
Other current assets 53,000 (531,000)
Other assets (89,000) 308,000
Accounts payable and accrued expenses (1,244,000) 26,000
----------- ----------
Cash provided by (used in) operating activities (224,000) 1,941,000
----------- ----------
INVESTING ACTIVITIES:
Purchase of property and equipment (215,000) (985,000)
----------- ----------
Cash used in investing activities (215,000) (985,000)
FINANCING ACTIVITIES:
Proceeds (payments) from revolving credit loan - net 567,000 (928,000)
Payments of other long-term debt (135,000) (60,000)
Exercise of stock options - 11,000
----------- -----------
Cash provided by (used in) financing activities 432,000 (977,000)
----------- -----------
NET DECREASE IN CASH (7,000) (21,000)
CASH, BEGINNING OF PERIOD 443,000 128,000
----------- -----------
CASH, END OF PERIOD $ 436,000 $ 107,000
=========== ===========
SUPPLEMENTAL DISCLOSURE:
Cash payments made for:
Income taxes $ 66,835 $ 65,000
=========== ===========
Interest $ 324,000 $ 414,000
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Change in unrealized appreciation on investment available
for sale $ - $ 621,000
=========== ===========
</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 June 28, 1998 and December 31, 1997
and the results of operations and cash flows for the twenty-six and
thirteen weeks ended June 28, 1998 and June 29, 1997.
The results for the twenty-six weeks ended June 28, 1998 and June 29,
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, 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 June 28, 1998 and June 29, 1997 were:
<TABLE>
June 28, 1998 June 29, 1997
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<S> <C> <C>
Net income (loss) $ (1,296,000) $ 817,000
Other comprehensive income - 391,000
------------ ------------
Total comprehensive income (loss) $ (1,296,000) $ 1,208,000
============ ============
</TABLE>
2. Inventories - Net
Inventories consist of the following:
<TABLE>
June 28, 1998 December 31, 1997
------------- -----------------
<S> <C> <C>
Purchased parts and
Subassemblies $ 9,827,000 $ 10,019,000
Work-in-process 7,337,000 4,684,000
------------ ------------
Total $ 17,164,000 $ 14,703,000
============ ============
</TABLE)
3. Income Taxes - The income tax benefit in 1998 is calculated using
the estimated year end effective tax rate for 1998. The income tax
provision in the second 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
- -------
The following discussion and analysis presents certain factors
affecting the Company's results of operations for the thirteen weeks
and twenty-six weeks ended June 28, 1998, as compared to the thirteen
weeks and twenty-six weeks ended June 29, 1997.
RESULTS OF OPERATIONS
- --------------------
Thirteen weeks ended June 28, 1998 compared to thirteen weeks ended
June 29, 1997
- -----------------------------------------------------------------------
Net sales for the thirteen weeks ended June 28, 1998 (second
quarter of 1998) were $5,939,000 compared to net sales for the thirteen
weeks ended June 29, 1997 (second quarter of 1997) of $11,992,000. The
decrease in sales was primarily attributable to the Company not
receiving expected U.S. Government funding for the SPORT program and
decreased Internet terminal sales. Management anticipates receiving
additional funding for the SPORT program by the end of 1998 and during
the remainder of the contract period through the year 2001. Management
of the Company continues to pursue new business opportunities for
Internet terminals and anticipates receiving additional orders in the
future.
The gross margin percentage for the second quarter of 1998 was
17.8% compared to 22.2% for the same period in 1997. The decrease is
primarily attributable to lower sales volume and a less favorable
product mix.
Selling, general and administrative expenses for the second
quarter of 1998 increased 34.7% from the second quarter of 1997, to
$2,172,000. These expenses as a percent of sales were 36.6% in the
second quarter of 1998 compared to 13.5% for the similar period in
1997. The increase as a percent of sales is primarily attributable to
lower sales volume and increased expenses related to employee severance
and restructure costs incurred as a result of streamlining actions
taken to improve the Company's long term competitiveness.
Company sponsored engineering, research and development expenses
for the second quarter of 1998 increased 234.7% from the second quarter
of 1997, to $676,000. These expenses as a percent of sales were 11.4%
in the second quarter of 1998 compared to 1.7% for the similar period
in 1997. The increase as a percent of sales is primarily attributable
to lower sales volume, increased expenses related to employee severance
and restructure costs and increased amounts of research and development
for in-flight entertainment and cabin workstation products.
Interest expense, net of interest income, was $180,000 in the
second quarter of 1998 compared to $201,000 for the similar period in
1997. The decrease reflects decreased debt compared to the prior year.
Net loss for the second quarter of 1998 was $1,251,000 compared to
net income of $642,000 in the second quarter of 1997. The basic and
diluted net loss per share was $0.21 for the second quarter of 1998
compared to the basic and diluted net income per share of $0.11 for the
similar period in 1997 based on a weighted average of 5,872,000 shares
and 5,869,000 shares of the Company's common stock outstanding for the
respective periods. The decrease in earnings was primarily attributable
to increased expenses and decreased sales.
Twenty-six weeks ended June 28, 1998 compared to twenty-six weeks
ended June 29, 1997
- -----------------------------------------------------------------------
Net sales for the twenty-six weeks ended June 28, 1998 (first half
of 1998) were $13,383,000 compared to net sales for the twenty-six
weeks ended June 29, 1997 (first half of 1997) of $21,034,000. The
decrease in sales was primarily attributable to the Company not
receiving expected U.S. Government funding for the SPORT program and
decreased Internet terminal sales. Management anticipates receiving
additional funding for the SPORT program by the end of 1998 and during
the remainder of the contract period through the year 2001. Management
of the Company continues to pursue new business opportunities for
Internet terminals and anticipates receiving additional orders in the
future.
The gross margin percent for the first half of 1998 was 22.4%
compared to 23.0% for the same period in 1997. The decrease in gross
margin percent was primarily attributable to lower sales volume and a
less favorable product mix.
Selling, general and administrative expenses for the first half of
1998 increased 10.6% from the first half of 1997, to $3,548,000. These
expenses as a percent of sales were 26.5% in the first half of 1998
compared to 15.3% for the similar period in 1997. The increase as a
percent of sales is primarily attributable to lower sales volume and
increased expenses related to employee severance and restructure costs
incurred as a result of streamlining actions taken to improve the
Company's long term competitiveness.
Company sponsored engineering, research and development expenses
for the first half of 1998 increased 167.1% from the first half of
1997, to $1,143,000. These expenses as a percent of sales were 8.5% in
the first half of 1998 compared to 2.0% for the similar period in 1997.
The increase as a percent of sales is primarily attributable to lower
sales volume, increased expenses related to employee severance and
restructure costs and increased amounts of research and development for
in-flight entertainment and cabin workstation products.
Interest expense, net of interest income, was $346,000 in the
first half of 1998 compared to $388,000 for the similar period in 1997.
The decrease reflects decreased debt during the first half of 1998
compared to the prior year.
Net loss for the first half of 1998 was $1,296,000 compared to net
income of $817,000 in the first half of 1997. The basic and diluted
net loss per share was $0.22 for the first half of 1998 as compared to
the basic and diluted net income per share of $0.14 for the similar
period in 1997 based on a weighted average of 5,872,000 shares and
5,869,000 shares of the Company's common stock outstanding for the
respective periods. The decrease in earnings was primarily attributable
to increased expenses and decreased sales.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital approximated $18,441,000 at June 28, 1998 compared
to $19,652,000 at December 31, 1997. Accounts receivable decreased
approximately $4,836,000 as a result of decreased sales. Inventories
increased approximately $2,461,000 as a result of the SPORT contract.
Accounts payable decreased approximately $1,004,000 reflecting normal
payment terms and the lower sales volume. Accrued expenses decreased
approximately $240,000 as a result of decreased employee related
accrued liabilities.
A $15 million revolving credit agreement, at the Company's option,
bears interest at the bank's reference rate (8.50 % at June 28, 1998
and December 31, 1997), or at a rate equaling the London Inter Bank
Offered Rate (5.70% and 5.81% at June 28, 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
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
------------------------------
James E. Matthews,
President and Chief Executive Officer
(Principal Executive Officer)
Dated: August 12 , 1998
</TABLE>
<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-31-1998
<PERIOD-END> JUN-28-1998
<CASH> 436,000
<SECURITIES> 0
<RECEIVABLES> 5,141,000
<ALLOWANCES> 0
<INVENTORY> 17,164,000
<CURRENT-ASSETS> 23,275,000
<PP&E> 16,974,000
<DEPRECIATION> 7,813,000
<TOTAL-ASSETS> 36,341,000
<CURRENT-LIABILITIES> 4,834,000
<BONDS> 0
0
0
<COMMON> 68,000
<OTHER-SE> 19,776,000
<TOTAL-LIABILITY-AND-EQUITY> 36,341,000
<SALES> 13,383,000
<TOTAL-REVENUES> 13,383,000
<CGS> 10,389,000
<TOTAL-COSTS> 15,080,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 346,000
<INCOME-PRETAX> (2,043,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,296,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,296,000)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
