UNITED STATES
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 26, 2000 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 May 10, 2000: 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>
March 26, December 31,
ASSETS 2000 1999
- ------ ------------ ------------
<C> <S> <S>
CURRENT ASSETS:
Cash $ 1,763,000 $ 1,874,000
Accounts receivable 3,671,000 3,540,000
Inventories 13,443,000 13,949,000
Deferred income taxes 535,000 535,000
Other current assets 257,000 497,000
------------ -----------
Total current assets 19,669,000 20,395,000
------------ -----------
PROPERTY AND EQUIPMENT - at cost:
Machinery and equipment 8,038,000 8,016,000
Furniture and fixtures 1,588,000 1,575,000
Land, building and improvements 8,152,000 8,138,000
------------ -----------
Total property and equipment 17,778,000 17,729,000
Less accumulated depreciation 9,994,000 9,731,000
------------ -----------
Property and equipment - net 7,784,000 7,998,000
------------ -----------
DEFERRED INCOME TAXES 3,629,000 3,629,000
OTHER ASSETS 1,699,000 1,330,000
------------ -----------
TOTAL $ 32,781,000 $ 33,352,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 2,156,000 $ 2,595,000
Accrued expenses 1,864,000 1,483,000
Current maturities of long-term debt 2,354,000 2,220,000
------------ -----------
Total current liabilities 6,374,000 6,298,000
LONG-TERM DEBT 13,925,000 14,536,000
------------ -----------
Total liabilities 20,299,000 20,834,000
------------ -----------
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
March 26, 2000 and December 31, 1999
Capital in excess of par value 20,264,000 20,264,000
Retained earnings 6,396,000 6,432,000
------------ -----------
26,728,000 26,764,000
Less treasury stock at cost 14,246,000 14,246,000
------------ -----------
Total stockholders' equity 12,482,000 12,518,000
------------ -----------
TOTAL $ 32,781,000 $ 33,352,000
============ ============
</TABLE>
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
Thirteen Weeks Ended
--------------------------
March 26, March 28,
2000 1999
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<S> <C> <C>
NET SALES $ 6,526,000 $ 7,381,000
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COSTS AND EXPENSES:
Cost of sales 4,688,000 5,837,000
Selling, general and administrative 1,362,000 1,351,000
Engineering, research and development 226,000 181,000
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Total 6,276,000 7,369,000
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INCOME FROM OPERATIONS 250,000 12,000
INTEREST EXPENSE - net 286,000 306,000
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LOSS BEFORE INCOME TAXES (36,000) (294,000)
INCOME TAX BENEFIT - -
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NET LOSS $ (36,000) $ (294,000)
=========== ===========
BASIC AND DILUTED
NET LOSS PER SHARE $ (.01) $ (.05)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,871,523 5,871,523
=========== ===========
</TABLE>
<PAGE>
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTEEN WEEKS ENDED MARCH 26, 2000 AND MARCH 28, 1999
(unaudited)
<TABLE>
March 26, March 28,
2000 1999
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<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (36,000) $ (294,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 269,000 400,000
Provision for slow-moving and obsolete inventories 300,000 100,000
Provision for doubtful accounts receivable - 3,000
Loss on sale of fixed assets - 3,000
Change in operating assets and liabilities:
Accounts receivable (132,000) 253,000
Inventories 206,000 (1,138,000)
Other current assets 240,000 (12,000)
Other assets (375,000) (134,000)
Accounts payable and accrued expenses (58,000) (578,000)
----------- ------------
Cash provided by (used in) operating activities 414,000 (1,397,000)
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INVESTING ACTIVITIES:
Purchase of property and equipment (48,000) (36,000)
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Cash used in investing activities (48,000) (36,000)
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FINANCING ACTIVITIES:
Proceeds (payments ) from revolving credit loan - net (375,000) 1,703,000
Payments of other long-term debt (102,000) (78,000)
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Cash provided by (used in) financing activities (477,000) 1,625,000
----------- ------------
NET INCREASE (DECREASE) IN CASH (111,000) 192,000
CASH, BEGINNING OF PERIOD 1,874,000 57,000
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CASH, END OF PERIOD $ 1,763,000 $ 249,000
SUPPLEMENTAL DISCLOSURE: =========== ============
Cash payments made for:
Income taxes $ - $ -
=========== ============
Interest $ 309,000 $ 269,000
=========== ============
</TABLE>
<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 March 26, 2000 and December 31, 1999
and the results of operations and cash flows for the thirteen weeks
ended March 26, 2000 and March 28, 1999.
The results for the thirteen weeks ended March 26, 2000 and March 28,
1999 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, 1999.
Reclassifications - Certain prior year amounts have been
reclassified to conform with the 2000 presentation.
2. Inventories - Net
Inventories consist of the following:
<TABLE>
March 26, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Purchased parts and
subassemblies $ 9,078,000 $ 9,659,000
Work-in-process 4,365,000 4,290,000
------------ ------------
Total $ 13,443,000 $ 13,949,000
============ ============
</TABLE>
3. Income Taxes -No income tax benefit has been recognized
related to the net operating losses for the thirteen weeks ended March
26, 2000 and March 28,1999 as they have been fully reserved with a
valuation allowance. Although realization is not assured, management
believes it is more likely than not that the recorded deferred tax
assets, net of valuation allowances provided, will be realized. The
valuation allowances can be adjusted in future periods as the
probability of realization of the deferred tax assets change.
4. Segment Information - The Company's reportable segments are
organized around its two main products and services segments,
Military/Rugged and Commercial. Through its military/rugged segment,
the Company is engaged in the design, manufacture and testing of
computer and computer peripheral equipment for military and other
specialized applications requiring reliable operations in severe land,
sea and airborne environments. These products are generally sold by the
Company's business development group through the federal government bid
process. The Company's commercial segment designs, develops,
manufactures and markets commercial computer related products primarily
for transportation, telecommunications and in-field maintenance
markets. These products are sold through an established network of
marketing representatives and Company employed sales people to a broad
base of customers both international and domestic. The accounting
policies of the segments are the same as those described in the summary
of significant accounting policies. The Company's determination of
segment operating profit (loss) does not reflect other income (expense)
or income taxes.
<PAGE>
Thirteen Weeks Ended March 26, 2000 and March 28, 1999
- ------------------------------------------------------
<TABLE>
General
March 28, 1999 Military/Rugged Commercial Eliminations Corporate Consolidated
-------------- --------------- ----------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C>
Net sales from external customers $ 4,401,000 $ 2,980,000 $ - $ 7,381,000
============ =========== ============ ============
Segment operating profit (loss) $ (178,000) $ 190,000$ - $ 12,000
============ =========== ============ ============
Identifiable assets $ 25,210,000 $ 8,705,000 $ - $ 5,776,000 $ 39,691,000
============ =========== ============ =========== ============
Capital expenditures $ 21,000 $ 15,000 $ 36,000
============ =========== ============
Depreciation and amortization $ 256,000 $ 144,000 $ 400,000
============ =========== ============
</TABLE>
<TABLE>
General
March 26, 2000 Military/Rugged Commercial Eliminations Corporate Consolidated
-------------- --------------- ---------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C>
Net sales from external customers $ 3,066,000 $ 3,460,000 $ - $ 6,526,000
============ =========== ============ ============
Segment operating profit (loss) $ (231,000) $ 481,000 $ - $ 250,000
============ =========== ============ ============
Identifiable assets $ 17,614,000 $ 7,285,000 $ - $ 7,882,000 $ 32,781,000
============ =========== ============ =========== ============
Capital expenditures $ 23,000 $ 25,000 $ 48,000
============ =========== ============
Depreciation and amortization $ 175,000 $ 94,000 $ 269,000
============ =========== ============
</TABLE>
<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 thirteen weeks ended
March 26, 2000, as compared to thirteen weeks ended March 28, 1999.
RESULTS OF OPERATIONS
- ---------------------
Thirteen weeks ended March 26, 2000 compared to thirteen weeks ended
March 28, 1999
- -----------------------------------------------------------------------
Net sales for the thirteen weeks ended March 26, 2000 (first
quarter of 2000) were $6,526,000 compared to net sales for the thirteen
weeks ended March 28, 1999 (first quarter of 1999) of $7,381,000. The
decrease in sales was primarily the result of a delay in receiving the
SPORT delivery order for the 2000 time frame. The delay in the delivery
order received in January, 2000, has resulted in SPORT units being
built and shipped over three quarters rather than four.
The gross margin percentage for the first quarter of 2000 was
28.2% compared with 20.9% for the same period in 1999. The increase is
attributable to a more favorable product mix in the first quarter of
2000.
Selling, general and administrative expenses for the first quarter
of 2000 increased .8% from the first quarter of 1999, to $1,362,000.
These expenses as a percent of sales were 20.9% in the first quarter of
2000 compared to18.3% for the similar period in 1999. The increase as a
percent of sales was primarily attributable to increased bid and
proposal expenses and lower sales.
Company sponsored engineering, research and development expenses
for the first quarter of 2000 increased 24.9% from the first quarter of
1999, to $226,000. These expenses as a percentage of sales were 3.5%
in the first quarter of 2000 compared to 2.5% for the similar period in
1999. The increase is attributable to increases in certain research and
development projects and lower sales.
Interest expense, net of interest income, was $286,000 in the
first quarter of 2000 compared to $306,000 for the similar period in
1999. The decrease reflects decreased debt compared to the prior year.
Net loss for the first quarter of 2000 decreased from the first
quarter of 1999 to a loss of $36,000. The basic and diluted loss per
share was $0.01 for the first quarter of 2000 as compared to the basic
and diluted loss per share of $0.05 for the similar period in 1999
based on a weighted average of 5,871,523 shares of the Company's common
stock outstanding for the first quarter of 2000 and 1999.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital approximated $13,295,000 at March 26, 2000
compared to $14,097,000 at December 31, 1999. Accounts receivable
increased approximately $132,000 as a result of slower foreign
receivables collections partially offset by decreased sales for the
quarter. Inventories decreased approximately $506,000 as a result of
continued improvement in planning and procurement processes partially
offset by increases in inventories as a result of anticipated increased
sales in the second quarter. Other current assets decreased
approximately $240,000 as a result of a reclassification of a net inter-
company payable to accrued expenses. Accounts payable decreased
approximately $438,000 reflecting normal payment terms and lower
inventory levels. Accrued expenses increased approximately $381,000 as
a result of a reclassification of a net inter-company payable to
accrued expenses. Current maturities of long-term debt increased due to
the reclassification of certain contract related liabilities partially
off set by repayments made against the outstanding bank debt.
The Company's $15,000,000 revolving credit agreement with its
primary lender matured on May 31, 1999 and was converted into a term
loan payable in twelve equal quarterly installments commencing August,
1999. As of May 10, 2000 the Company was in compliance with all
requirements under the term loan. The Company has committed to continue
its search for a lender to replace the existing term loan. In the near
term the Company anticipates its cash position as being adequate to
sustain the Company's ongoing financial commitments. The Company's
accounts receivable, contract rights and inventories are pledged as
collateral to the agreement.
The credit agreement referenced above includes various provisions
requiring the maintenance of certain financial ratios and limitations
on (i) transactions with affiliates, (ii) other debt and guarantees,
(iii) investment in, and advances to, other entities, and (iv) payment
of dividends. At December 31, 1999, the Company was in default of
certain financial ratio requirements related to minimum net worth and
cash flows measured annually and to total liabilities and tangible net
worth measured quarterly. The Company obtained a letter dated March 28,
2000, from the primary lender waiving all violations as of December 31,
1999; revising the ratio requirement for total liabilities to tangible
net worth for the measurement dates in 2000; and revising the principal
payment requirements for 2000 to a total of $1,875,000.
YEAR 2000 ISSUES
- ----------------
Year 2000 Compliance
In 1998, the Company developed and began implementing a plan to
review its overall Year 2000 exposure and other issues surrounding Year
2000 compliance. The plan encompassed the Company's mission critical
information technology systems, its vendors, its customers and its
products.
As of May 10, 2000, the Company has experienced no computer
related problems as a result of the Year 2000 issue in any of the areas
referred to above. In addition, the Company is not currently aware of
any circumstances that would indicate a likely Year 2000 related
problem in the future. However, the Company will continue to monitor
its Year 2000 compliance.
The Company has spent less than $250,000 in conjunction with its
Year 2000 remediation and no significant additional expenditures are
anticipated.
SUBSEQUENT EVENTS
- -----------------
Subsequent to March 26, 2000, the Company sold its facility in
Troy, Alabama to an unrelated third party for a sales price of
$900,000. The Company will record a gain of approximately $27,000 in
the quarter ended June 25, 2000. The proceeds of the sale will be used
to reduce the Industrial Revenue Authority Bonds.
<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
Item 7a - Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss arising from adverse changes in
market prices and interest rates. The Company is exposed to interest
risk inherent in its financial instruments. The Company is not
currently subject to foreign currency or commodity price risk. The
Company manages its exposure to these market risks through its regular
operating and financing activities.
The Company has a revolving credit loan and an Industrial
Development Authority Bond Issue that are exposed to changes in
interest rates during the course of their maturity. Both debt
instruments bear interest at current market rates and thus approximate
fair market value. The Company manages its interest rate risk by (a)
periodically retiring and issuing debt and (b) periodically fixing the
interest rate on the London Inter Bank Offered Rate (LIBOR) portion of
its revolving credit loan for 30 to 60 days in order to minimize
interest rate swings. A 10% increase in interest rates would affect
the Company's variable debt obligations and could potentially reduce
future earnings by a maximum of approximately $94,000.
<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/ Thomas R. Dickinson
---------------------------------
Thomas R. Dickinson,
President and Chief Executive Officer
(Principle Executive Officer)
Dated: May 10, 2000
<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-31-2000
<PERIOD-END> MAR-26-2000
<CASH> 1,763,000
<SECURITIES> 0
<RECEIVABLES> 3,695,000
<ALLOWANCES> 24,000
<INVENTORY> 13,443,000
<CURRENT-ASSETS> 19,669,000
<PP&E> 17,778,000
<DEPRECIATION> 9,994,000
<TOTAL-ASSETS> 32,781,000
<CURRENT-LIABILITIES> 6,374,000
<BONDS> 0
0
0
<COMMON> 68,000
<OTHER-SE> 12,414,000
<TOTAL-LIABILITY-AND-EQUITY> 33,352,000
<SALES> 6,526,000
<TOTAL-REVENUES> 6,526,000
<CGS> 4,688,000
<TOTAL-COSTS> 6,276,000
<OTHER-EXPENSES> 1,588,000
<LOSS-PROVISION> 250,000
<INTEREST-EXPENSE> 286,000
<INCOME-PRETAX> (36,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (36,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36,000)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
