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 September 30, 2001 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.)
3800 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
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Former name, former address and former fiscal year, if changed since
last report 500 Richardson Rd. South
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 November 9, 2001: 5,871,523 shares of Common
Stock, $.01 par value.
PART I - FINANCIAL INFORMATION
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
September 30, December 31,
ASSETS 2001 2000
------------- -------------
CURRENT ASSETS:
Cash $ 893,000 $ 2,711,000
Accounts receivable 7,782,000 7,933,000
Inventories 10,955,000 12,877,000
Deferred income taxes 1,095,000 952,000
Other current assets 474,000 382,000
----------- -----------
Total current assets 21,199,000 24,855,000
----------- -----------
PROPERTY AND EQUIPMENT - at cost:
Machinery and equipment 7,347,000 8,911,000
Furniture and fixtures 1,588,000 1,628,000
Land, building and improvements 6,702,000 6,732,000
----------- -----------
Total property and equipment 15,637,000 17,271,000
Less accumulated depreciation 9,830,000 10,679,000
----------- -----------
Property and equipment - net 5,807,000 6,592,000
----------- -----------
DEFERRED INCOME TAXES 3,069,000 3,212,000
OTHER ASSETS 907,000 956,000
----------- -----------
TOTAL $30,982,000 $35,615,000
=========== ===========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Short-term debt $ 640,000 $ 800,000
Accounts payable 5,302,000 5,533,000
Accrued expenses 3,978,000 4,534,000
Current maturities of long-term debt 3,778,000 4,129,000
----------- -----------
Total current liabilities 13,698,000 14,996,000
LONG-TERM DEBT 7,529,000 9,654,000
OTHER LIABILITIES 26,000 49,000
----------- -----------
Total liabilities 21,253,000 24,699,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value;
20,000,000 shares authorized;
6,811,112 shares outstanding 68,000 68,000
Capital in excess of par value 24,519,000 24,519,000
Retained earnings (accumulated deficit) (612,000) 575,000
----------- -----------
23,975,000 25,162,000
Less treasury stock at cost 14,246,000 14,246,000
----------- -----------
Total stockholders' equity 9,729,000 10,916,000
----------- -----------
TOTAL $30,982,000 $35,615,000
=========== ===========
See Notes To Condensed Consolidated Financial Statements
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Thirteen Weeks Ended
----------------------------
September 30, September 24,
2001 2000
------------ ------------
NET SALES $12,551,000 $ 9,385,000
----------- -----------
COSTS AND EXPENSES:
Cost of sales 11,111,000 7,767,000
Selling, general and administrative 1,458,000 1,863,000
Engineering, research and development 239,000 90,000
----------- -----------
Total 12,808,000 9,720,000
----------- -----------
LOSS FROM OPERATIONS (257,000) (335,000)
INTEREST EXPENSE - net 186,000 284,000
----------- -----------
LOSS BEFORE INCOME TAXES (443,000) (619,000)
INCOME TAX BENEFIT - -
----------- -----------
NET LOSS $ (443,000) $ (619,000)
=========== ===========
BASIC AND DILUTED
NET LOSS PER SHARE $ (0.08) $ (0.10)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,871,523 5,871,523
=========== ===========
See Notes To Condensed Consolidated Financial Statements
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Thirty-Nine Weeks Ended
-----------------------------
September 30, September 24,
2001 2000
------------- -------------
NET SALES $33,931,000 $27,837,000
----------- -----------
COSTS AND EXPENSES:
Cost of sales 29,287,000 21,996,000
Selling, general and administrative 4,489,000 5,509,000
Engineering, research and development 754,000 542,000
----------- -----------
Total 34,530,000 28,047,000
----------- -----------
LOSS FROM OPERATIONS (599,000) (210,000)
INTEREST EXPENSE - net 588,000 875,000
----------- -----------
LOSS BEFORE INCOME TAXES
$(1,187,000) $(1,085,000)
INCOME TAX BENEFIT - -
----------- -----------
NET LOSS $(1,187,000) $(1,085,000)
=========== ===========
BASIC AND DILUTED
NET LOSS PER SHARE $ (0.20) $ (0.18)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 5,871,523 5,871,523
=========== ===========
See Notes To Condensed Consolidated Financial Statements
MILTOPE GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 24, 2000
(unaudited)
September 30, September 24,
2001 2000
OPERATING ACTIVITIES: ------------- -------------
Net loss $(1,187,000) $(1,085,000)
Adjustments to reconcile net loss tonet cash
provided by operating activities:
Depreciation and amortization 762,000 1,025,000
Provision for slow-moving and obsolete inventories 1,270,000 945,000
Provision for doubtful accounts receivable 51,000 50,000
Loss (gain) on sale of property and equipment 36,000 (22,000)
Change in operating assets and liabilities provided (used) cash:
Accounts receivable 100,000 (1,623,000)
Inventories 652,000 414,000
Other current assets (91,000) 92,000
Other assets 16,000 219,000
Accounts payable and accrued expenses (810,000) 2,177,000
----------- ----------
Cash provided by operating activities 799,000 2,192,000
----------- ----------
INVESTING ACTIVITIES:
Purchase of property and equipment (147,000) (155,000)
Sale of property and equipment 166,000 900,000
----------- ----------
Cash provided by investing activities 19,000 745,000
----------- ----------
FINANCING ACTIVITIES:
Payments of other long-term debt - net (2,636,000) (2,974,000)
----------- ----------
Cash used in financing activities (2,636,000) (2,974,000)
----------- ----------
NET DECREASE IN CASH (1,818,000) (37,000)
CASH, BEGINNING OF PERIOD 2,711,000 2,437,000
----------- ----------
CASH, END OF PERIOD $ 893,000 $ 2,400,000
=========== ===========
SUPPLEMENTAL DISCLOSURE:
Cash payments made for:
Income taxes $ 27,000 $ -
=========== ===========
Interest $ 699,000 $ 890,000
=========== ===========
See Notes To Condensed Consolidated Financial Statements
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 results of the reported
interim period.
The results for the thirteen and thirty-nine weeks ended September 30,
2001 and September 24, 2000 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, 2000.
Reclassifications - Certain prior years amounts have been
reclassified to conform to the 2001 presentation.
Net Loss Per Share - Basic and diluted earnings per share are
computed by dividing the net loss by the weighted average common shares
outstanding (basic EPS) or weighted average common shares outstanding
assuming dilution (diluted EPS). Based on this computation, there is
no difference between basic and diluted net loss per share. Options
that could potentially dilute basic net income per share in the future
were not included in the computation of diluted net loss per share
because to do so would have been anti-dilutive. Anti-dilutive options
were 395,795 and 342,012 at September 30, 2001 and September 24, 2000,
respectively.
Recent Accounting Pronouncements - In June 2001, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (effective
for Miltope on January 1, 2002). SFAS No. 142 specifies that goodwill
and certain intangible assets will no longer be amortized but instead
will be subject to periodic impairment testing. The Company is in the
process of evaluating the financial statement impact of adoption of
SFAS No. 142.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposition of Long-lived Assets," which is effective for
fiscal years beginning after December 15, 2001. The Company is
currently evaluating SFAS No. 144 and has not yet determined its impact
on the Company's consolidated financial statements.
Statement of Financial Account Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities, is effective for all
fiscal years beginning after June 15, 2000. SFAS 133, as amended,
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities. Under SFAS 133, certain
contracts that were not formerly considered derivatives may now meet
the definition of a derivative. The Company adopted SFAS 133 effective
January 1, 2001. The adoption of SFAS 133 did not have a material
impact on the financial position, results of operations, or cash flows
of the Company.
2. Inventories - Net
Inventories consist of the following:
September 30, December 31,
2001 2000
------------ -----------
Purchased parts and
subassemblies $ 8,902,000 $ 9,911,000
Work-in-process 2,053,000 2,966,000
----------- -----------
Total $10,955,000 $12,877,000
=========== ===========
3. Income Taxes - No income tax benefit has been recognized related
to the net operating losses for the thirteen and thirty-nine weeks
ended September 30, 2001 and September 24, 2000 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 allowance 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. IV Phoenix Group, Inc ("PGI") is an operating segment of
the Company which has been aggregated within the Military/Rugged segment
for financial reporting purposes. 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 in the Company's Annual Report on
Form 10-K. The Company's determination of segment operating profit or
loss does not reflect other income and expense or income taxes.
Thirteen Weeks Ended September 30, 2001 and September 24, 2000
- --------------------------------------------------------------
General
September 30, 2001 Military/Rugged Commercial Eliminations Corporate Consolidated
------------------ --------------- ----------- ------------ --------- ------------
Net sales from external customers $ 9,981,000 $ 2,691,000 $ (121,000) $12,551,000
=========== =========== =========== ===========
Segment operating income (loss) $(1,015,000) $ 785,000 $ - $ (257,000)
=========== =========== =========== ===========
Identifiable assets $17,574,000 $ 6,970,000 $ - $ 6,438,000 $30,982,000
=========== =========== =========== =========== ===========
Capital expenditures $ 55,000 $ 16,000 $ - $ 71,000
=========== =========== =========== ===========
Depreciation and amortization $ 235,000 $ 1,000 $ - $ 236,000
=========== =========== =========== ===========
General
September 24, 2000 Military/Rugged Commercial Eliminations Corporate Consolidated
------------------ --------------- ----------- ------------ --------- ------------
Net sales from external customers $ 6,912,000 $ 2,509,000 $ (36,000) $ 9,385,000
=========== =========== =========== ===========
Segment operating income (loss) $ (545,000) $ 247,000 $ (37,000) $ (335,000)
=========== =========== =========== ===========
Identifiable assets $21,651,000 $ 5,922,000 $ 43,000 $ 7,429,000 $35,045,000
=========== =========== =========== =========== ===========
Capital expenditures $ 54,000 $ 22,000 $ - $ 76,000
=========== =========== =========== ===========
Depreciation and amortization $ 225,000 $ 68,000 $ 37,000 $ 330,000
=========== =========== =========== ===========
Thirty-Nine Weeks Ended September 30, 2001 and September 24, 2000
- -----------------------------------------------------------------
General
September 30, 2001 Military/Rugged Commercial Eliminations Corporate Consolidated
------------------ --------------- ----------- ------------ --------- ------------
Net sales from external customers $26,041,000 $ 8,107,000 $ (217,000) $33,931,000
=========== =========== =========== ===========
Segment operating income (loss) (1,652,000) $ 1,060,000 $ (7,000) $ (599,000)
=========== =========== =========== ===========
Identifiable assets $17,574,000 $ 6,970,000 $ - $ 6,438,000 $30,982,000
=========== =========== =========== =========== ===========
Capital expenditures $ 111,000 $ 36,000 $ - $ 147,000
=========== =========== =========== ===========
Depreciation and amortization $ 752,000 $ 3,000 $ 7,000 $ 762,000
=========== =========== =========== ===========
General
September 24, 2000 Military/Rugged Commercial Eliminations Corporate Consolidated
------------------ --------------- ----------- ------------ --------- ------------
Net sales from external customers $18,586,000 $ 9,494,000 $ (243,000) $27,837,000
=========== =========== =========== ===========
Segment operating income (loss) $(1,078,000) $ 978,000 $ (110,000) $ (210,000)
=========== =========== =========== ===========
Identifiable assets $21,651,000 $ 5,922,000 $ 43,000 $ 7,429,000 $35,045,000
=========== =========== =========== =========== ===========
Capital expenditures $ 98,000 $ 57,000 $ - $ 155,000
=========== =========== =========== ===========
Depreciation and amortization $ 669,000 $ 246,000 $ 110,000 $ 1,025,000
=========== =========== =========== ===========
General
December 31, 2000 Military/Rugged Commercial Eliminations Corporate Consolidated
------------------ --------------- ----------- ------------ --------- ------------
Identifiable assets $18,675,000 $ 8,727,000 $ 7,000 $ 8,206,000 $35,615,000
=========== =========== =========== =========== ===========
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 thirty-nine weeks ended September 30, 2001, as compared to the
thirteen weeks and thirty-nine weeks ended September 24, 2000.
RESULTS OF OPERATIONS
- ---------------------
CONSOLIDATED
- ------------
Thirteen weeks ended September 30, 2001 compared to thirteen weeks
ended September 24, 2000
- -----------------------------------------------------------------------
Net sales for the thirteen weeks ended September 30, 2001 (third
quarter of 2001) were $12,551,000 compared to net sales for the
thirteen weeks ended September 24, 2000 (third quarter of 2000) of
$9,385,000. The increase in sales was primarily attributable to
increased sales to the government of SPORT units.
The gross margin percentage for the third quarter of 2001 was
11.5% compared to 17.2% for the same period in 2000. The decrease is
largely due to unforeseen expenditures required to complete several PGI
initial-award contracts.
Selling, general and administrative expenses for the third quarter
of 2001 decreased 21.7% from the third quarter of 2000, to $1,458,000.
These expenses as a percent of sales were 11.6% in the third quarter of
2001 compared to 19.9% for the similar period in 2000. The decrease as
a percent of sales is primarily attributable to the effect of planned
reductions in administrative and marketing costs at both Miltope and
PGI.
Company sponsored engineering, research and development expenses
for the third quarter of 2001 increased 165.5% from the third quarter
of 2000, to $239,000. These expenses as a percent of sales were 1.9%
in the third quarter of 2001 compared to 1.0% for the similar period in
2000. The increase as a percent of sales is primarily attributable to
efforts expended in relation to the new five-year rugged laptop
computer contract awarded to Miltope in May of 2001.
Interest expense, net of interest income, was $186,000 in the
third quarter of 2001 compared to $284,000 for the similar period in
2000. The decrease reflects decreased debt compared to the prior year
along with reductions in interest rates.
The consolidated net loss for the third quarter of 2001 was
$443,000 compared to a net loss of $619,000 in the third quarter of
2000. The basic and diluted net loss per share was $0.08 for the third
quarter of 2001 compared to the basic and diluted net loss per share of
$0.10 for the similar period in 2000 based on a weighted average of
5,871,523 shares of the Company's common stock outstanding for the
third quarter of 2001 and 2000.
Thirty-Nine weeks ended September 30, 2001 compared to Thirty-Nine
weeks ended September 24, 2000
- -----------------------------------------------------------------------
Net sales for the thirty-nine weeks ended September 30, 2001 were
$33,931,000 compared to net sales for the thirty-nine weeks ended
September 24, 2000 of $27,837,000. The increase in sales was
attributable to increased sales to the government of SPORT units.
The gross margin percent for the first three quarters of 2001 was
13.7% compared to 21.0% for the same period in 2000. The decrease is
largely due to unforeseen expenditures required to complete several PGI
initial-award contracts.
Selling, general and administrative expenses for the first three
quarters of 2001 decreased 18.5% from the same period in 2000, to
$4,489,000. These expenses as a percent of sales were 13.2% in the
first three quarters of 2001 compared to 19.8% for the similar period
in 2000. The decrease as a percent of sales is primarily attributable
to a year long emphasis by Company management on reducing cost in all
areas of the Company.
Company sponsored engineering, research and development expenses
for the first three quarters of 2001 increased 39.1% from the same
period of 2000, to $754,000. These expenses as a percent of sales were
2.2% in the first three quarters of 2001 compared to 1.9% for the
similar period in 2000. The increase as a percent of sales is primarily
attributable to efforts expended in relation to the new five-year
rugged laptop computer contract awarded to Miltope in May of 2001.
Interest expense, net of interest income, was $588,000 in the
first three quarters of 2001 compared to $875,000 for the similar
period in 2000. The decrease reflects decreased debt compared to the
prior year along with reductions in interest rates.
The consolidated net loss for the first three quarters of 2001 was
$1,187,000 compared to a net loss of $1,085,000 in the similar period
in 2000. The basic and diluted net loss per share was $0.20 for the
first three quarters of 2001 as compared to the basic and diluted net
loss per share of $0.18 for the similar period in 2000 based on a
weighted average of 5,871,523 shares of the Company's common stock
outstanding in the third quarter of 2001 and 2000.
MILTOPE CORPORATION
- -------------------
Effective August 2001, all manufacturing operations of PGI, an
operating division that is part of the Military/Rugged segment, were
shut down. Miltope has contracted with PGI to continue production of a
few select PGI products in Miltope's facilities on a license fee basis.
All significant costs to close these manufacturing operatings have been
included in the financial results of the thirteen and thirty-nine week
periods ended September 30, 2001. The Company believes any future costs
associated with this shut-down of PGI operations will not be significant.
The following is a discussion of Miltope's (excluding PGI)
operating results net of any inter-company activity with PGI.
Miltope (net of eliminations)
(Amounts in thousands)
- -------------------------------------------------------------------------------
39 weeks ended 39 weeks ended
September 30, September 24, %
2001 2000 change
--------------- -------------- ------
Net Sales $ 31,803 $ 24,586 29.4%
Cost of Sales 25,673 19,305 33.6%
----------------------------------------------
Gross Profit 6,130 5,281 16.1%
----------------------------------------------
Selling, G&A 3,493 4,120 (15.2)%
Engineering,R&D 715 444 (61.0)%
----------------------------------------------
Income from Operations 1,922 717 168.1%
Interest Expense - net 514 819 (37.2)%
----------------------------------------------
Net Income (Loss) before taxes $ 1,408 $ (102) 1,480.4%
Income Tax Benefit - - -
Net Income (Loss) $ 1,408 $ (102) 1,480.4%
==============================================
Miltope reported net income of approximately $1,408,000 for the
first thirty-nine weeks of 2001 compared to a net loss of approximately
$102,000 for the comparable period in 2000. The basic and diluted net
income per share was $0.24 for the first thirty-nine weeks of 2001
compared to basic and diluted net loss per share of $0.02 for the first
thirty-nine weeks of 2000.
Sales for the thirty-nine week period of 2001 totaled
approximately $31,803,000, an increase of approximately $7,217,000, or
29.4%, from the first three quarters of 2000. This change was
attributable to increases in SPORT related sales and increased military
printer sales.
Gross profit, as a percent of sales, was 19.3% for the first
thirty-nine weeks of 2001 and 21.5% for the same period in 2000. The
decrease in 2001 from 2000 was primarily attributable to the increase
in sales of SPORT units which provide a lower profit margin than other
products.
Selling, general and administrative expenses, as a percentage of
sales, were 11.0% in the first thirty-nine weeks of 2001 and 16.8% in
the same period of 2000. The decrease in 2001 as a percentage of sales
was attributable to increased sales coupled with the effect of planned
reductions in administrative and marketing costs.
Engineering, research and development expenses, as a percentage of
sales, were 2.2% in the first thirty-nine weeks of 2001 and 1.8% in the
same period of 2000. The increase in expenditures is primarily
attributable to efforts expended in relation to the new five-year
rugged laptop computer contract awarded to Miltope in May of 2001.
Interest expense, net of interest income, decreased 37.2% in the
first thirty-nine weeks of 2001 compared to the first thirty-nine weeks
of 2000 due to a decrease in total debt, decreased interest rates, and
increased interest income.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Working capital approximated $7,501,000 at September 30, 2001
compared to $9,859,000 at December 31, 2000. Accounts receivable
decreased approximately $151,000 as a result of a higher volume of
sales in the last quarter of 2000. Inventories decreased approximately
$1,922,000 primarily as a result of continued improvements in vendor
delivery terms and continued improvement in managing project dynamics.
Accounts payable decreased approximately $231,000 reflecting
satisfaction of invoices relating to inventory purchases in support of
increase production in February and March of 2001. Accrued expenses
decreased approximately $556,000 as a result of the settlement of
certain PGI liabilities. Current maturities of long-term debt decreased
approximately $351,000 reflecting more favorable repayment terms on
certain of the Company's debt instruments.
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 September 30, 2001, 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.
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.
RECENT ACCOUNTING PRONOUNCEMENTS
- --------------------------------
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" (effective for Miltope on January 1, 2002).
SFAS No. 142 specifies that goodwill and certain intangible assets will
no longer be amortized but instead will be subject to periodic
impairment testing. The Company is in the process of evaluating the
financial statement impact of adoption of SFAS No. 142.
In August 2001, the FASB issued SFAS No. 144, "Accounting for
the Impairment or Disposition of Long-lived Assets," which is effective
for fiscal years beginning after December 15, 2001. The Company is
currently evaluating SFAS No. 144 and has not yet determined its impact
on the Company's consolidated financial statements.
Statement of Financial Account Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities, is
effective for all fiscal years beginning after June 15, 2000. SFAS
133, as amended, establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. Under SFAS
133, certain contracts that were not formerly considered derivatives may
now meet the definition of a derivative. The Company adopted SFAS 133
effective January 1, 2001. The adoption of SFAS 133 did not have a
material impact on the financial position, results of operations, or
cash flows of the Company.
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
--------
None
(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 term 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 $81,100.
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/ Tom B. Dake
----------------------------------
Tom B. Dake,
Vice President Finance and Chief
Financial Officer
(Principal Accounting Officer)
Dated: November 14, 2001