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FORM 10-K
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000 Commission File Number 0-13433
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 of incorporation (I.R.S. Employer
or organization) Identification No.)
500 Richardson Road South, Hope Hull, Alabama 36043
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (334) 284-8665
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Shares, par value $.01 each
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(Title of class)
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 by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock of the registrant
held by non-affiliates (which excludes voting shares held by officers
and directors of the registrant) was $2,207,045 as of February 9, 2001.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock: Common Shares with a par value
of $.01 each: 5,871,523 as of February 9, 2001.
Documents Incorporated by Reference:
The definitive Proxy Statement for the Annual Meeting of Stockholders
to be held April 19, 2001, to be filed with the Commission not later
than 120 days after the close of the Registrant's fiscal year, has been
incorporated by reference for Part III, Items 10, 11, 12 and 13, to
this annual report on Form 10-K.
ITEM 1. BUSINESS
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General
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Miltope Group Inc. (the "Company"), a Delaware corporation
incorporated in March 1984, is the parent company of Miltope
Corporation, an Alabama corporation ("Miltope"), IV Phoenix Group, Inc.,
a New York corporation ("PGI") and Miltope Business Products, Inc., a
New York corporation ("MBP"). Miltope was originally incorporated as
a New York corporation in 1975 to acquire the assets and business of
the Military Equipment Division of Potter Instrument Company, Inc.
and until June 1984 was a wholly owned subsidiary of Stonebrook Group
Inc. (formerly Stenbeck Reassurance Co. Inc.) ("SGI"). In June 1984,
all of the outstanding stock of the Company was issued to SGI in
exchange for all of the outstanding stock of Miltope. SGI is a
privately held corporation which, since 1975, has supported the
formation and funding of companies engaged in the development and
manufacture of electronic hardware for defense and communications
applications and in communications services. In January 1985,
shareholders of the Company (including SGI) sold 700,000 shares of the
Company's Common Stock in an initial public offering. In November
1985, the Company sold an additional 1,000,000 shares of its Common
Stock to the public. As of December 30, 1994, Miltope merged with and
into a newly formed Alabama corporation, which succeeded to all of the
New York corporation's assets and liabilities. On January 1, 1995,
XSource Corporation (formerly Innova International Corporation), a
Delaware corporation ("XSource"), acquired 62.8% of the outstanding
shares of Common Stock of the Company pursuant to certain share
exchange transactions with SGI, which at such time was a holder of
55.6% of the outstanding shares of common stock of the Company, and
Stuvik AB, a Swedish corporation and, at such time, a holder of
approximately 7.2% of the outstanding shares of Company common stock.
Prior to June of 1999, XSource Corporation was a subsidiary of Great
Universal Incorporated, a Delaware corporation ("GUI"), and a wholly-
owned subsidiary of MIC-USA Inc., ("MIC-USA"), a Delaware corporation
and a wholly-owned subsidiary of Millicom International Cellular S.A.
("MIC"). In connection with the reorganization of GUI in June 1999,
the Company became a subsidiary of GUI, which became a wholly owned
subsidiary of Great Universal LLC, a Delaware limited liability company
("GU-LLC"), whose sole member from the date of reorganization until
December 31, 1999 was MIC-USA. On December 31, 1999 MIC-USA formed the
1999 Great Universal LLC Trust (the "Trust") and assigned all ownership
interest of GU-LLC to the Trust. GU-LLC provides, through its operating
subsidiaries, integrated network products and services, consulting
engineering, billing systems applications, teleservices, television and
media and specialized electronics products and services.
Miltope designs, develops, and manufacturers computers and
computer peripheral equipment for military, industrial and commercial
applications where reliable operation of the equipment in challenging
environments is imperative. The systems provided are qualified for use
in airborne, shipboard, and ground based applications. Miltope's
product lines include a broad range of computers, computer
workstations, servers, printers, disk cartridges, and mass storage
systems. Miltope continues to increase its presence in the military
arena including United States Air Force avionics and ground based
systems as well as United States Army system diagnostics. Miltope's
equipment is designed and qualified for use as part of in-flight
entertainment, cabin management, and communication systems and is
certified for use aboard virtually all commercial and business jet
platforms.
In September 1994, the Company relocated its headquarters from
Melville, New York to Montgomery, Alabama.
On January 12, 1995, the Company completed a $6,100,000 industrial
revenue bond offering by the Alabama State Industrial Development
Authority ("SIDA"), the proceeds of which were used to improve, equip
and furnish the new Montgomery facility and to pay the $3,375,000
principal amount of bank indebtedness that was used in part in the
acquisition of such facility.
PGI was founded in 1994 and is engaged in engineering design and
development of small, rugged hand-held computers utilizing commercial
off the shelf ("COTS") technology to provide application solutions for
environments where extremes in temperature, shock and vibration are
commonplace.
On April 1, 2000, the Company entered into an agreement with GUI,
to acquire GUI's ownership of 90% of the outstanding stock of IV
Phoenix Group, Inc. ("PGI") to the Company. Since GUI, through its
controlling interest in the Company, continues to own a controlling
interest in PGI after the acquisition, the acquisition has been recorded
on the Company's books at GUI's historical cost and accounted for on an
"as if pooled basis". Accordingly, the accompanying financial
statements have been restated on this basis to reflect the inclusion of
PGI in prior years.
Segment Information
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The Company's business is divided into two industry segments,
consisting of the manufacture of militarized and rugged equipment
primarily for military applications conducted by the "Military/Rugged"
segment, which includes the activities of PGI, and the manufacture and
distribution of commercial products conducted by the "Commercial"
segment. Financial information regarding the Company's industry
segments is included in Note 10 to the Notes to Consolidated Financial
Statements located in Item 8 of this Form 10-K.
Description of Business
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Military/Rugged - General
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The military/rugged segment is engaged in the design, development,
manufacture and testing of computer and computer peripheral equipment
for military, rugged and other specialized applications requiring
reliable operations in severe land, sea and airborne environments for
military customers. Military/rugged product lines include a broad
range of computers, computer workstations, servers, printers, disk
cartridges, and mass storage. In 1988, Miltope introduced a complete
line of rugged Hewlett Packard Company computers and related
peripherals specifically designed for use in the United States Army's
Tactical Command and Control System/Common Hardware Software Program
("ATCCS/CHS") under a contract awarded to Miltope in August 1988, as
well as to other customers for related applications. Miltope's focus
on the military markets is on rugged and militarized versions of
computing systems used in ensuring that tactical mission requirements
are met. Expert engineering skills and techniques are utilized to
augment the use of commercial off the shelf ("COTS") modules to meet
extended temperature, shock, vibration, altitude, and humidity
conditions that are encountered during military missions.
During 1995, Miltope introduced a new family of rugged computer
products consisting of hand held Intel based computers and related
peripherals. These new products are re-configurable and scaleable for
specific applications and employ COTS technology. The hand held Intel
based computers are being used for the United States Army's Soldiers'
Portable On-system Repair Tools ("SPORT") under an ongoing contract
awarded to the Company in June 1996, as well as by other customers for
related applications. Under this contract, Miltope is providing a
rugged handheld computing and diagnostic system used on every US Army
weapon system such as the Abrams Main Battle Tank, the Bradley Fighting
Vehicle, and the Apache Longbow attack helicopter.
Several long-term contracts are in place with the United States
Government supporting the Department of Defense ("DOD") digitization
and communication plan. The United States Air Force procures a
militarized portable computer and printer suite used for processing and
recording data collected through the Military Satellite and Communications
("MILSATCOM") equipment. Both the SPORT and MILSATCOM equipment have been
continually improved to include leading edge technology through product
enhancements and technical refreshment.
Substantially all of the military/rugged segment sales consist
of militarized and rugged products. Militarized equipment is designed
and built, with respect to each component and the whole, to conform to
stringent DOD specifications developed for severe land, sea and
airborne operating environments. These specifications define equipment
operating parameters including atmosphere, temperature and humidity
conditions, permitted levels of shock and vibration, susceptibility to
electro-magnetic interference ("EMI"), EMI emission levels, and
detection and hardening for nuclear survivability. Rugged equipment is
designed and manufactured to less demanding specifications and may
include commercially available devices which are suitably modified for
these applications.
Production of equipment conforming to these DOD specifications has
required the development over the years by Miltope of proprietary
electronic and electro-mechanical designs and engineering techniques
and specialized manufacturing and testing methods. By these means,
Miltope has developed a broad range of proprietary components that meet
these specifications and are otherwise unavailable in the commercial
market. To support its engineering, manufacturing and testing
activities, Miltope has extensive manufacturing equipment, clean rooms
and reliability and environmental testing facilities as well as a multi-
function computer aided design ("CAD") system and an EMI test lab.
One of Miltope's latest product designs is a Militarized Mass
Storage system providing 144 Giga-Bytes of memory in a tactical,
airborne, compact, military enclosure. This system's interface is
based on high throughput fiber channel technology typically found on
the most complex computing systems. This equipment is utilized to
record mission data on United States Air Force reconnaissance aircraft.
Military/rugged products are sold for use in a broad range of
military programs for the United States Air Force, Army, Navy and
Marine Corps, for NATO, for the Australian, British, Canadian, French,
German, Israeli, Italian, Spanish and Norwegian armed forces and for
the armed forces of other countries. Miltope's militarized and rugged
computers and peripheral products are compatible with most standard
military computers and are sold to the DOD and many prime DOD systems
contractors and integrators, including Bath Iron Works, Boeing
Aerospace, EDS, Raytheon E-Systems Inc., Northrop Grumman Corporation,
GTE Corp., General Dynamics, Hughes Defense Communications, Lockheed
Martin, Marconi Control Systems Limited, McDonnell Douglas Corp.,
Motorola Inc., Teledyne Controls, CAE Inc., and ITT Defense Systems.
Miltope believes that it has captured a major portion of the
market for militarized printers and disk memory products. In addition,
Miltope is recognized as a leading supplier of rugged computers and
related equipment. A key element of Miltope's strategy has been to
develop and deliver a broad range of high reliability peripheral
components and systems on a cost effective and timely basis. The
breadth of Miltope's product offerings enables system integrators to
avoid the risks normally encountered when procuring peripherals from
multiple suppliers and to also achieve significant price advantages.
Miltope's ability to meet the diverse requirements of its customers has
resulted in substantial recurring business. Also, as defense budgets
have been reduced, an emphasis on commercially adaptable electronics
and the requirement for smaller, less expensive and more portable
systems has occurred. Miltope believes its new product family of
rugged, re-configurable portable and handheld computing devices will
serve this growing market niche well as evidenced by the DOD's award to
Miltope of the SPORT Program in June 1996, and the award of the Hanscom
Air Force Base MILSATCOM program in November 1998.
In June 1996, Miltope was awarded a five-year DOD contract for
SPORT. SPORT will enhance the U.S. Army's capability to diagnose and
repair weapon systems and electronically display technical manuals.
Production deliveries under this contract began in September 1997. The
contract has an estimated value of approximately $81,000,000 over a
five-year period. There can be no assurances this estimate of purchase
requirements will be achieved. As of February 9, 2001, Miltope has
been issued firm orders valued at approximately $68,000,000 under this
contract. In addition, Miltope has received orders for SPORT equipment
from other defense contractors.
In November 1998, Miltope was selected to deliver its TIC-2000
computer and other peripherals to the Electronic Systems Center at
Hanscom Air Force Base. The TIC-2000 is a newly developed rugged,
portable Intel based workstation that will be integrated into the
United States Air Force's MILSATCOM network. The estimated value of
the contract is $3,000,000 over a two year period. There can be no
assurances this estimate of purchase requirements will be achieved. As
of February 9, 2001, Miltope has received firm orders of approximately
$2,500,000.
In August 1999, Miltope was selected by the United States Army's
Test Measurement and Diagnostic Equipment Program Office to perform the
integration of the Internal Combustion Engine ("ICE") hardware and
software with SPORT. Miltope currently serves as the prime contractor
for the SPORT computer. This integration program gives the United
States Army the ability to perform automatic test, diagnostics and
maintenance on diesel engines on all wheeled and tracked vehicle
platforms. This contract is a yearly award over an estimated period of
three years. Were Miltope to be selected for all three years of the
contract, the estimated value of this contract would be $12,000,000
over that period. There can be no assurances this estimate of purchase
requirements will be achieved nor that Miltope will be selected for any
follow on delivery orders. As of February 9, 2001, Miltope has received
firm orders of approximately $9,300,000.
In October 1999, Miltope was selected by the Federal Aviation
Administration ("FAA"), as a supplier of in-flight workstations to be
utilized in a variety of in-flight and ground based applications. The
estimated value of this contract is $800,000 over a two-year period.
There can be no assurances that these levels of estimated purchase
requirements will be achieved. As of February 9, 2001, Miltope has
received firm orders of approximately $1,000,000.
In December 1999, Miltope was selected by Raytheon Optical Systems
to supply several 144 Gigabyte Mass Storage Units with state of the art
Fiber Channel interface. These systems will be used in reconnaissance
systems aboard aircraft of the United States Air Force. The estimated
value of the contract is in excess of $1,500,000 over a three-year
period. There can be no assurances that these levels of estimated
purchase requirements will be achieved. As of February 9, 2001, Miltope
has received firm orders of approximately $1,800,000.
Commercial - General
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The commercial segment develops, manufactures and markets
commercial products primarily for transportation, telecommunications
and in-field maintenance markets. Miltope products comprising this
segment are airborne printers, airborne data servers, airborne
telephony servers, airborne in-flight workstations, airborne
maintenance access terminals, mass storage devices, and other
derivatives of rugged hand held Intel based computers originally
developed for military applications. This segment's business
represented approximately 32% of the Company's 2000 revenues,
approximately 39% of the Company's 1999 revenues and approximately 33%
of the Company's 1998 revenues.
Growth in the commercial sector has continued at Miltope through
partnerships with providers of avionics, in-flight entertainment,
communication, and the customization of commercial and private
aircraft. For over fifteen years, Miltope has been providing thermal
printers for use in flight deck and cabin installations. Miltope holds
a significant domestic market share for all airborne flight deck
printing requirements. Continual internal research and development
investment in the development of airborne products for the rapidly
expanding in-flight entertainment market has proven successful for
Miltope. Miltope equipment is currently being utilized as integral
components in multiple in-flight systems. Miltope's capabilities
include full system integration and application development that
provides customers with a complete system solution. Systems are
designed, qualified, and delivered utilizing operating systems such as
Windows98, Windows NT, Windows CE, Linux, Solaris, and HP-UX. Miltope
also continues to develop and improve various products such as
telephony and internet servers, redundant arrayed independent disks
("RAID") storage systems, controller terminals and workstations, and
sealed disk drives for a variety of applications related to in-flight
entertainment, communication, and avionics systems.
Miltope's airborne printer products are sold to a broad base of
airframe manufacturers and commercial airline companies worldwide for
use in flight deck and cabin workstation information systems. During
2000, customers for the airborne printer line of products included
Boeing, B/E Aerospace, British Airways, Continental Airlines, Delta
Airlines, KLM, Lufthansa, Matsushita Avionics Systems, Teledyne
Controls, American Airlines, Itochu, Embraer, Transavia, Qantas
Airways, Ltd.,United Airlines and AMR Eagle, Inc. As of February 9,
2001, Miltope received firm orders of approximately $4,100,000 for
airborne printer products.
In December 1996, Miltope was awarded an IDIQ (indefinite time,
indefinite quantity) contract for the manufacture of rugged hard drives
for use in Sony Trans Com Inc.'s Audio Video on Demand In-Flight
Entertainment System ("P@ssport TM") to be sold to airline customers
around the world. The estimated contract value is $10,200,000 over a
five year period. The contract value is based on the customer's best
estimate of purchase requirements during the contract period. There
can be no assurances this estimate of purchase requirements will be
achieved. As of February 9, 2001, Miltope has received firm orders of
approximately $3,000,000 under this contract.
In December 1997, Miltope entered into a strategic agreement with
Honeywell, Inc. Business and Commuter Aviation Systems, to provide
Portable Maintenance Access Terminals ("PMAT") for use in business jets
and commuter aircraft around the world as an option on Honeywell's
integrated avionics systems. As of February 9, 2001, Miltope has
received firm orders of approximately $4,300,000 under this agreement.
In March 2000, Miltope entered into an agreement with Tenzing,
Inc. to provide airborne telephony servers for Tenzing's FlightConnect
TM service for use on commercial passenger airlines throughout the
world. As of February 9, 2001, Miltope has received firm orders of
approximately $750,000 from this customer for this product. Other
customers for this product accounted for an additional $200,000 of firm
orders.
In April 2000, Miltope entered into a ten year contract with
Empresa Brasileira De Aeronautica (Embraer) to provide flight deck
printers for use on board their ERJ-170, ERJ-190-100 and ERJ-190-200
regional and commuter jet aircraft. The estimated contract value is in
excess of $15,000,000 over the ten year period of performance ending in
2010. The estimated contract value is based on the customer's best
estimate of purchase requirements during the contract period. There can
be no assurances this estimate of purchase requirements will be
achieved.
In September 2000, Miltope entered into a partnership with
EnGenius, Inc. to design and manufacture a ruggedized handheld test set
computer for the automotive industry. As of February 9, 2001, Miltope
has received firm orders of approximately $500,000 for this product.
Sales and Significant Customers
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Sales in 2000 attributable to the military/rugged industry segment
were approximately as follows: 71% from large DOD programs (each
accounting for 5% or more of annual sales), 2% from smaller programs
and sales of standard items in Miltope's catalogue, 25% from sales to
foreign governments and defense contractors and 2% from spare parts
sales. Sales to any one large DOD program have varied substantially
from year to year due to product cycles and DOD requirements.
In 2000, sales to the DOD accounted for 52% of net sales of the
Company. No other customer accounted for more than 10% of net sales.
The Company has experienced large fluctuations from year to year
in the percentage of sales represented by particular customers due to
product cycles and customer requirements. The Company believes its
customers and the industry are moving to shorter lead times due to
compressed technology cycles and changes in procurement strategies.
Sales in 2000 attributable to the commercial industry segment
amounted to approximately 32% of the Company's total net sales.
During 2000, 1999 and 1998, the Company recorded sales of $14,000,
$44,000 and $1,000,000, respectively to Get 2 Net, Inc. and 3C
Communications International, S.A., that are affiliates of the Company.
Government Contracts
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The Company's business is subject to various statutes, regulations
and provisions governing defense contracts including the Truth in
Negotiations Act, which provides for the examination by the U.S.
government of cost records to determine whether accurate pricing
information was disclosed in connection with government contracts.
Contracts with the U.S. government as well as with U.S. government
prime contractors are typically at a fixed price with a delivery cycle
of 4 to 12 months, with contracts under any particular program being
subject to further funding and negotiation. The Company's defense
contracts contain customary provisions permitting termination at any
time at the convenience of the customer and providing for payment for
work-in-progress should the contract be canceled.
Backlog
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Backlog for both the military and commercial industry segments at
December 31, 2000 was $29,000,000, an 81.3% increase from the
$16,000,000 backlog at December 31, 1999. Backlog includes only
customer signed delivery orders from current contracts and funded
portions of multi-year contracts. The Company believes that
substantially all of the backlog will be recognized as revenue by
December 31, 2001. The Company also believes that a substantial part
of new delivery orders and contract funding received in 2001 will be
recognized as revenue in the same year due to shorter lead times.
Backlog for the commercial industry segment was approximately 16%
of the total backlog at December 31, 2000 and approximately 45% of the
total backlog at December 31, 1999.
Backlog does not include un-funded portions of multi-year
contracts.
Competition
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Both of the Company's industry segments face intense competition
in markets for certain of their products. Competition comes from
independent producers as well as prime contractors. Some of these
competitors have greater resources than the Company. Competition is
based on such factors as price, technological capability, quality,
reliability and timely delivery.
The Company's competitive position in its industry segments has
been based upon the experience of its technical personnel in their
respective specialized fields of computer and peripheral product
design; its broad range of products; its ability to design and
manufacture its products to meet customers' specifications; its
specialized manufacturing and testing facilities; its long association
with many of its customers and its managerial and marketing expertise
in dealing with commercial customers, prime contractors and the DOD.
The Company believes that once a particular supplier's computer and/or
peripheral products have been selected for incorporation in a military
or commercial program, further competition by other vendors during the
life cycle of that program is limited.
Engineering, Research and Development
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The Company believes that success within the industry depends in
large part upon its ability to develop and apply new technology to
modify, enhance and expand its existing line of proprietary products.
The funding of these activities is primarily internal through Company
sponsored research and development. Product development activities
are generally the result of the need to respond to the anticipated
requirements of future programs, the introduction of new technology
that can be used to enhance product performance and direct requests by
customers and the DOD. In certain cases the Company has licensed
technology from commercial manufacturers for subsequent enhancements to
bring the technology up to military and rugged requirements.
Engineering design techniques and expertise are leveraged across
all product lines enabling rapid development and improved time to
market. Management believes approximately 1% to 5% of net sales for
engineering, research and development expenditures should adequately
support the Company's business.
Engineering, research and development expenditures in 2000, 1999,
and 1998 were approximately $659,000, $1,445,000 and $2,163,000,
respectively.
The Company's funded research and development efforts for its
military/rugged segment include projects to enhance its mass storage
devices, printers, computer workstations and portable/hand held
computers. The Company's funded research efforts for its commercial
segment include projects to enhance its airline in-flight cabin
management and entertainment products, airborne printers and mass
storage devices.
Employees
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At December 31, 2000, the Company employed 130 full-time personnel
at Miltope and 15 full time personnel at PGI. None of the Company's
employees are represented by a labor union and the Company has
experienced no work stoppages. The Company believes that relations
with its employees are excellent.
Export Sales
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The Company recorded foreign sales in its military/rugged industry
segment of approximately $2,600,000, $3,900,000 and $4,300,000 in
2000, 1999 and 1998, respectively. The Company recorded foreign sales
in its commercial industry segment of approximately $1,800,000,
$3,000,000 and $847,000 in 2000, 1999 and 1998, respectively.
Source of Supply
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The Company utilized multiple suppliers for most materials and
components. In order to minimize the risk of delay in delivering
finished systems, components are sometimes procured according to the
projected need for such components under annual purchasing agreements.
Miscellaneous
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Neither of the Company's two industry segments is subject to
seasonal business fluctuations.
ITEM 2. PROPERTIES
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The Company owns a 90,000 square foot manufacturing and
administrative facility located on 25 acres in Hope Hull (Montgomery),
Alabama ("Hope Hull").
In addition, the Company owns a 25,000 square foot clean room,
assembly and test facility in Springfield, Vermont.
The Company leases a 9,175 square foot engineering and
administrative facility in Boulder, Colorado.
The Company through IV Phoenix Group, Inc., its 90% owned
subsidiary, leases a 15,000 square foot manufacturing and
administrative facility in Hauppauge, New York.
The Company also leases various sales offices in the United
States.
During 1999, the Company consolidated its Troy manufacturing
facility with its Hope Hull facility as a planned measure to reduce
cost redundancy and maximize production efficiency. On April 23,
2000, the Company sold its facility in Troy, Alabama to an unrelated
third party for a sales price of $900,000 with a $25,000 gain being
recognized in the quarter ended June 25, 2000. The proceeds of the
sale were used to reduce the Industrial Revenue Authority Bonds.
The Company owns substantially all of the machinery and equipment
used in these facilities. The Company believes that these facilities
are well maintained and are adequate to meet its needs in the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
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The Company, from time to time, is a party to pending or
threatened legal proceedings and arbitration in the ordinary course of
business. Based upon information currently 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 to the financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
During the fourth quarter of the fiscal year covered by this
Report, no matters were submitted to a vote of security holders through
the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
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Market Information
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The Company's Common Stock has been traded in the over-the-counter
market under the NASDAQ symbol "MILT" since its initial public offering
on January 23, 1985 and has been trading on the NASDAQ National Market
since June 4, 1985. On March 24, 1999, the Company began trading on
the NASDAQ Small Cap Market. The high and low closing sale prices for
the Common Stock in the over-the-counter market reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions. The quarterly high and low
selling prices (the last daily sale price) of the Common Stock since
January 1, 1999 have been:
Calendar Year 2000
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First Quarter $ 3/4 $ 5-7/8
Second Quarter 1-7/8 3-7/8
Third Quarter 1-3/8 2-3/8
Fourth Quarter 9/16 2-1/8
Calendar Year 1999
First Quarter $ 2 $ 1-3/16
Second Quarter 1-5/8 1-1/32
Third Quarter 1-1/2 13/16
Fourth Quarter 1-1/16 11/16
Holders of Common Stock
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As of February 9, 2001, there were approximately 2,182
shareholders of record and beneficial owners of the Company's Common
Stock.
Dividend Policy
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No dividends were declared or paid in 2000 or 1999. The Company
does not presently anticipate paying cash dividends on its Common
Stock. However, the Board of Directors of the Company will review this
policy from time to time in light of its earnings, capital requirements
and financial condition and other relevant factors, including
applicable debt agreement limitations. The Company's bank loan
agreement permits the Company to pay annual dividends of up to 50% of
the prior year's net income.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The following is a summary of selected consolidated financial data
of the Company for the five years ended December 31, 2000 that should
be read in conjunction with the consolidated financial statements of
the Company and the notes thereto:
(All amounts in thousands, except per share data)
Year ended December 31,
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2000 1999 1998 1997 1996
As Restated* As Restated* As Restated* As Restated *
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Income statement data:
- ----------------------
Net sales $40,730 $ 36,238 $ 35,509 $ 45,904 $ 52,973
Gross profit 8,023 4,744 6,962 10,251 12,330
Income (loss) before income taxes (1,431) (7,804) (4,284) (415) 1,626
Net income (loss) (1,431) (7,804) (3,008) 1,644 2,026
Basic and diluted net income
(loss) per share (.24) (1.33) (.51) .28 .35
Cash dividends declared per share - - - - -
Weighted average shares
outstanding 5,872 5,872 5,872 5,870 5,867
Balance sheet data:
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Working capital $ 9,859 $ 10,386 $ 18,828 $ 18,031 $ 18,292
Total assets 35,615 36,869 43,359 42,785 38,804
Long-term debt 9,654 13,986 15,123 11,374 11,340
Stockholders'equity 10,916 10,006 17,810 20,672 18,871
* - The selected financial data has been restated to reflect the
inclusion of PGI.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
-----------------------------------------------------------
The financial and business analysis below provides information
that the Company believes is relevant to an assessment and
understanding of the Company's consolidated financial condition,
changes in financial condition, and results of operations. This
financial and business analysis should be read in conjunction with the
consolidated financial statements and related notes.
The following discussion and other sections of this Report on Form
10-K contain statements reflecting the Company's views about its future
performance and constitute "forward-looking statements" under the
Private Securities Litigation Reform Act of 1995. These views involve
risks and uncertainties that are difficult to predict and may cause the
Company's actual results to differ materially from the results
discussed in such forward-looking statements. Readers should consider
that various factors including those discussed in the "Overview" and
"Outlook for the Company" sections below might affect the Company's
ability to attain the projected performance. The Company undertakes no
obligation to update publicly any forward-looking statements, whether
as a result of new information, future events or otherwise.
Overview
- --------
The Company's military/rugged business segment provides
specialized computers and related peripheral equipment to the United
States and foreign military defense departments. Equipment in this
segment takes two primary forms. The first of these is fully
militarized products, usually designed especially for a particular
mission area with demanding environmental and quality requirements.
The second of these is rugged products, usually based on a commercial
baseline product, but adapted by the Company to meet environmental and
quality specifications that exceed the requirements for commercial
products. This segment can be further differentiated between the
activities of Miltope Corporation and those of its 90% owned
subsidiary, IV Phoenix Group, Inc.
This entire segment has been impacted in recent years by reduced
government spending and defense appropriations. The militarized
product area has been especially subject to defense budget cuts. The
military continues to reduce funding for the development and limited
production quantities of highly customized systems and products. The
long design cycle for these programs creates an intangible cost in the
form of rapid technological obsolescence. Some military programs that
would have sought militarized equipment some years ago have modified
the requirements to reflect a need for rugged or commercial products.
This trend has tended to benefit sales of the Company's rugged product
line. Even in the rugged product area, however, defense cuts have
taken a toll. Competition in this area has become keen in recent
years, as many government contractors pursue fewer military programs.
Through its commercial segment, the Company develops, manufactures
and markets commercial products primarily for transportation,
telecommunications and in-field maintenance markets. Its products are
airborne printers, in-flight cabin management and entertainment
products, mass storage devices, and derivatives of rugged hand held
Intel based computers originally developed for military applications.
Results of Operations
- ---------------------
Consolidated
- ------------
The Company reported a consolidated net loss of approximately
$1,431,000 in 2000 compared to net losses of approximately $7,804,000
in 1999 and $3,008,000 in 1998. The basic and diluted net loss per
share was $.24 in 2000 compared to basic and diluted net losses per
share of $1.33 in 1999 and $.51 in 1998.
Sales for 2000 totaled approximately $40,730,000, an increase of
approximately $4,492,000, or 12.4%, from 1999. This change was
attributable to increases in SPORT units shipped and increases in other
airborne products which were partially offset by decreases in PGI's
total sales. Sales in 1999 totaled approximately $36,238,000, an
increase of approximately $729,000, or 2.1% from 1998. This change was
primarily attributable to an increase in sales of SPORT units and
increases in airborne printers and contract sales.
Gross profit, as a percent of sales, was 19.7% in 2000, 13.1% in
1999 and 19.6% in 1998. The increase in 2000 from 1999 is primarily
attributable to improvements in material costs and reductions in
overhead costs due to increased sales volume. The decrease in 1999 from
1998 was primarily attributable to increased competition in various
airborne printer products and contractually defined decreases in the
sales price of SPORT partially offset by improved margins in various
commercial airborne server applications.
Selling, general and administrative expenses, as a percentage of
sales, were 18.6% in 2000, 27.2% in 1999 and 23.1% in 1998. The
decrease in 2000 as a percentage of sales was attributable to increased
sales coupled with planned reductions in administrative and marketing
costs. The increase in 1999 as a percentage of sales was attributable
to decreased sales of PGI and increased management services fees from a
company affiliated by certain common ownership.
Engineering, research and development expenses, as a percentage of
sales, was 1.6% in 2000, 4.0% in 1999 and 6.1% in 1998. The continued
decrease in 2000 was attributable to an overall increase in customer
funded research programs. The decrease in 1999 as a percent of sales
was primarily attributable to increased sales volume and an emphasis on
shared development expenses between customers and the Company.
Interest expense-net decreased 3.6% in 2000 compared to 1999 due
to a $2,468,000 reduction in total debt partially offset by an increase
in interest rates. The 42.2% increase in 1999 interest expense
compared to 1998 was primarily attributable to a $763,000 increase in
total debt compounded by higher interest rates.
Miltope Corporation
- -------------------
Approximately 90% of the 2000 consolidated net sales are
attributable to Miltope Corporation. The following is a discussion of
Miltope's operating results net of any inter-company activity with IV
Phoenix Group, Inc.
Miltope (net of Eliminations)
(Amounts in thousands)
- -----------------------------------------------------------------------------------------
Percentage Change
-----------------
2000 1999 1998 2000 vs 1999 1999 vs 1998
-------- -------- -------- ------------ ------------
Net Sales $ 36,811 $ 27,515 $ 25,552 33.8% 7.7%
Cost of Sales 28,915 23,449 20,631 23.3% 13.7%
-------- -------- --------
Profit Margin 7,896 4,066 4,921 94.2% (17.4)%
-------- -------- --------
Selling, G&A 5,735 7,238 6,532 (20.8)% 10.8%
Engineering, R&D 541 1,245 1,884 (56.5)% (33.9)%
-------- -------- --------
Income (loss)from Operations 1,620 (4,417) (3,495) 136.7% (26.4)%
Interest Expense - net 1,146 1,184 802 (3.2)% 47.6%
-------- -------- --------
Net Income (Loss) before taxes 474 (5,601) (4,297) 108.5% (30.3)%
Income Tax Benefit - - (1,276) - (100.0)%
-------- -------- --------
Net Income (Loss) $ 474 $ (5,601) $ (3,021) 108.5% (85.4)%
======== ======== ========
Miltope reported net income of approximately $474,000 in 2000
compared to net losses of approximately $5,601,000 in 1999 and
$3,021,000 in 1998. The basic and diluted net income per share was
$.08 in 2000 compared to basic and diluted net losses per share of $.95
in 1999 and $.51 in 1998.
Sales for 2000 totaled approximately $36,811,000, an increase of
approximately $9,296,000, or 33.8%, from 1999. This change was
attributable to increases in SPORT related sales and airborne data
server products. Sales in 1999 totaled approximately $27,515,000, an
increase of approximately $1,963,000, or 7.7% from 1998. This change
was attributable to an increase in sales of SPORT units and increases
in airborne printers and contract sales.
Gross profit, as a percent of sales, was 21.5% in 2000, 14.8% in
1999 and 19.3% in 1998. The increase in 2000 from 1999 was primarily
attributable to a more favorable product mix and continued improvement
in material and overhead costs. The decrease in 1999 from 1998 was
primarily attributable to increased competition in various airborne
printer products and contractually defined decreases in the sales price
of SPORT partially offset by improved margins in various commercial
airborne server applications.
Selling, general and administrative expenses, as a percentage of
sales, were 15.6% in 2000, 26.3% in 1999 and 25.6% in 1998. The
decrease in 2000 as a percentage of sales was attributable to increased
sales coupled with planned reductions in administrative and marketing
costs. As a percentage of sales, selling, general and administrative
expenses in 1999 were basically flat with 1998.
Engineering, research and development expenses, as a percentage of
sales, was 1.5% in 2000, 4.5% in 1999 and 7.4% in 1998. The decrease
in 2000 was attributable to a year long emphasis by company management
on reducing cost in all areas of the company coupled with increased
levels of customer funded research programs. The decrease in 1999 as a
percent of sales was primarily attributable to increased sales volume
and an emphasis on shared development expenses between customers and
the Company.
Interest expense - net decreased 3.2% in 2000 compared to 1999 due
to a $2,018,000 decrease in total debt partially offset by an increase
in interest rates. The 47.6% increase in 1999 interest expense - net
of interest income was attributable to a $397,000 increase in total
debt compounded by increased interest rates.
Liquidity and Capital Resources
- -------------------------------
The following is a breakdown of significant balance sheet
categories between Miltope and PGI:
Miltope PGI
(Amounts in thousands) (Amounts in thousands)
---------------------- ---------------------
2000 1999 2000 1999
-------- -------- ------- -------
Cash and equivalents $ 2,181 $ 1,874 $ 530 $ 563
Receivables, net 7,457 3,540 476 937
Inventories & other current assets 12,233 14,761 1,978 1,546
-------- -------- ------- -------
Total current assets 21,871 20,175 2,984 3,046
======== ======== ======= =======
Payables and other current liabilities 5,581 4,469 4,486 5,302
Short-term debt - - 800 800
Current portion of long-term debt 4,096 2,220 33 44
-------- -------- ------- -------
Total current liabilities $ 9,677 $ 6,689 $ 5,319 $ 6,146
======== ======== ======= =======
Consolidated working capital at December 31, 2000 totaled
approximately $9,859,000, a decrease of approximately $527,000 from
December 31, 1999. Accounts receivable increased approximately
$3,456,000 as a result of higher sales in the fourth quarter of 2000
when compared to the fourth quarter sales of 1999. Inventories
decreased approximately $2,483,000 as a result of continued management
focus on increasing inventory turns by closely monitoring sales levels
and the associative inventory levels required to meet those sales
levels. Current maturities of long-term debt increased by approximately
$1,865,000 primarily as a result of increased debt payment
requirements.
The Company entered into a revolving credit facility in July
1994 for an amount not to exceed $15,000,000. The Company's $15,000,000
revolving credit agreement with its primary lender matured on May 31,
1999 with an outstanding balance of approximately $12,000,000. This
balance was converted into a term loan payable in twelve equal
quarterly installments beginning August 31, 1999.
Cash provided by (used in) operating activities was
approximately $3,101,000 in 2000, $2,512,000 in 1999 and ($3,182,000)
in 1998. The increase in cash provided by operating activities in 2000
and 1999 as compared to 1998 is primarily the result of management
focus on working capital management in the areas of accounts
receivables and inventories.
In April 1994, the Company purchased a new headquarters
facility and related capital equipment located in Montgomery, Alabama.
The purchase was financed through a bank term loan and the proceeds
from the offering of taxable revenue bonds (the "Bonds") by the Alabama
State Industrial Development Authority which was completed on January
12, 1995 (the "SIDA Offering"). Repayment of the Bonds is secured by an
irrevocable letter of credit issued by Regions Bank in an amount up to
$5,700,000 that in turn is secured by a mortgage on the Montgomery,
Alabama facility and a security interest in the equipment located at
such facility.
The Company has net operating loss carryforwards for federal
income tax purposes of approximately $12,900,000 that expire as
follows: $5,650,000 in 2009, $1,290,000 in 2010, $2,460,000 in 2018 and
$3,500,000 in 2019. At December 31, 2000, the Company has a valuation
allowance of $2,904,000 against the deferred tax assets. Although
realization is not assured, management believes it is more likely than
not that the recorded deferred tax asset, net of valuation allowance
provided, will be realized. The valuation allowance can be adjusted in
future periods as the probability of realization of the deferred tax
asset changes.
Capital expenditures totaled $175,000 in 2000 compared to
$750,000 and $906,000 in 1999 and 1998, respectively. The decrease in
2000 expenditures from 1999 was due to a reduction in business
development demonstration equipment needs. The Company expects capital
expenditures for 2001 to approximate the 2000 level. Depreciation and
amortization expense for 2000 totaled $1,360,000 compared with
$1,613,000 and $1,836,000 for 1999 and 1998, respectively. For 2001,
depreciation and amortization expense is expected to be approximately
$800,000.
The Company believes that its working capital and capital
requirement needs for its current lines of business and new product
development will be met by its cash flow from operations and the
proceeds from any future lines of credit that the Company may
negotiate.
Effects of Inflation
- --------------------
Inflation has not had a significant impact on the Company's
results of operations.
Outlook for the Company
- -----------------------
Assuming that the U.S. economy maintains its present rate of
moderate growth and interest rates remain relatively stable, the
Company expects further increases in both sales and earnings for 2001.
The Company believes that its results will be favorably affected in the
future with its efforts to: continue to invest in new manufacturing
technologies and productivity improvement initiatives in order to
contain costs and increase efficiency; maintain a lower level of
selling, general and administrative expenses, as a percent of sales;
and continue to monitor product mix to further enhance profit margins.
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 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 (from 9.5% to 10.5%) would
affect the Company's variable debt obligations and could potentially
reduce future earnings by approximately $100,000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
See Table of Contents to Consolidated Financial Statements on Page
F-1.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
----------------------------------------------------
During the twenty-four months prior to the date of the financial
statements contained herein, no Form 8-K reporting a change of
accountants has been filed which included a reported disagreement on
any matter of accounting principles or practices or financial statement
disclosure.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
--------------------------------------------------
The information called for by this item is incorporated by
reference from the Company's definitive Proxy Statement for its 2001
annual meeting under the captions "Proposal No.1 - Election of
Directors", "Board of Directors and Committees" and "Section 16(a)
Beneficial Ownership Reporting Compliance" which definitive Proxy
Statement will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the Company's fiscal year ended
December 31, 2000.
Item 11. Executive Compensation.
-----------------------
The information called for by this item is incorporated by
reference from the Company's definitive Proxy Statement for its 2001
annual meeting under the captions "Compensation of Executive Officers
and Directors" and "Compensation of Directors" which definitive Proxy
Statement will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the Company's fiscal year ended
December 31, 2000.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
----------------------------------------------------
The information called for by this item is incorporated by
reference from the Company's definitive Proxy Statement for its 2001
annual meeting under the captions "Security Ownership of Certain
Beneficial Owners" and "Ownership of Common Stock by Directors,
Nominees and Officers" which definitive Proxy Statement will be filed
with the Securities and Exchange Commission not later than 120 days
after the end of the Company's fiscal year ended December 31, 2000.
Item 13. Certain Relationships and Related Transactions.
-----------------------------------------------
The information called for by this item is incorporated by
reference from the Company's definitive Proxy Statement for its 2001
annual meeting under the captions "Certain Relationships and Related
Transactions" which definitive Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the
end of the Company's fiscal year ended December 31, 2000.
PART IV
- -------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
----------------------------------------------------
(a) The following documents are filed as part of this Report Page
-----
1. Consolidated Financial Statements:
Table of Contents to Consolidated Financial Statements F-1
Independent Auditors' Report F-2
Independent Auditors' Report of Others Auditors F-3
Consolidated Balance Sheets as of December 31,
2000 and 1999 F-4
Consolidated Statements of Operations for the Years
Ended December 31, 2000, 1999 and 1998 F-5
Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 2000, 1999 and 1998 F-6
Consolidated Statements of Cash Flows for the Years
Ended December 31, 2000, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-8
2. Financial Statement Schedules
The following financial statement schedule
for the years ended December 31, 2000, 1999, and
1998 is included in Part IV of this report on the
indicated page:
Schedule II Valuation and Qualifying Accounts and
Reserves F-20
All other Schedules are omitted because of
the absence of conditions under which they are
required or because the required information is
provided in the financial statements or notes
hereto.
Independent Auditors' Consent F-21
Independent Auditors' Consent of Other Auditors F-22
3. Exhibits 23
(b) There have been no reports on Form 8-K filed during the last
quarter of the period ended December 31, 2000
Intentionally Left Blank
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ------
3(a) Certificate of Incorporation of the Registrant, as
amended to date [Incorporated by reference to
Exhibit 3(a) to the Registrant's Registration
Statement on Form S-1 filed with the Commission on
September 6, 1984 (Registration No. 2-93134)]
3(b) By-laws of the Registrant, as currently in effect
[Incorporated by reference to Exhibit 3(b) to the
Registrant's Form 10-K filed with the Commission
on March 31, 1987 (File No. 0-13433)].
3(c) Specimen share certificate for the Common Stock of
the Registrant [Incorporated by reference to Exhibit
4(b) to Amendment No. 1 to the Registrant's
Registration Statement on Form S-1 filed with the
Commission on January 8, 1985 (Registration No.
2-93134)].
10(a)(A) 1985 Key Employee Stock Option Plan adopted by
the Board of Directors of the Registrant on July 1,
1985 [Incorporated by reference to Exhibit 10(a) to
the Registrant's Registration Statement on Form S-1
filed with the Commission on October 22, 1985
(Registration No.33-1042)].
10(a)(B) Form of 1985 Key Employee Stock Option
Agreement, dated as of July 1, 1985, between the
Registrant and certain key employees of the
Registrant [Incorporated by reference to Exhibit
10(b) to the Registrant's Registration Statement on
Form S-1 filed with the Commission on October 22,
1985 (Registration No. 33-1042)].
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ------
10(b)(A) Incentive Stock Option Plan adopted by the Board of
Directors of the Registrant on June 1, 1984 and
approved by Stonebrook Group Inc. (formerly
Stenbeck Reassurance Co. Inc.) on June 1, 1984, as
amended by the Board of Directors of the Registrant
on May 6, 1985 [Incorporated by reference to
Exhibit 10(c) to the Registrant's Registration
Statement on form S-1 filed with the Commission on
October 22, 1985 (Registration No. 33-1042)].
10(b)(B) Form of Incentive Stock Option Agreement, dated as
of June 1, 1984, between the Registrant and certain
key employees of the Registrant [Incorporated by
reference to Exhibit 10(e) to the Registrant's
Registration Statement on Form S-1 filed with the
Commission on October 22, 1985 (Registration No.
33-1042)].
10(c)(A) Management Stock Option Plan adopted by the Board
of Directors of the Registrant on June 1, 1984 and
approved by Stonebrook Group Inc. on June 1, 1984,
as amended by the Board of Directors of the
Registrant on May 6, 1985 [Incorporated by reference
to Exhibit 10(f) to the Registrant's Registration
Statement on Form S-1 filed with the Commission on
October 22, 1985 (Registration No. 33-1042)].
10(c)(B) Form of Management Stock Option Agreement, dated
as of June 1, 1984, between the Registrant and
certain management employees of the Registrant
[Incorporated by reference to Exhibit 10(d) to the
Registrant's Registration Statement on Form S-1 filed
with the Commission on September 6, 1984
(Registration No. 2-93134)].
10(d) Miltope Corporation Cash Bonus Plan, as amended,
effective January 1, 1984 [Incorporated by reference
to Exhibit 10(e) to the Registrant's Registration
Statement on Form S-1 filed with the Commission on
September 6 , 1984 (Registration No. 2-93134)].
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ------
10(f)(A) 1995 Stock Option and Performance Award Plan
adopted by the Board of Directors of the Registrant
on April 11, 1995 and approved by the stockholders
of the Registrant on June 5, 1995 Incorporated
by reference to Exhibit 4(a)(1) to the Registrant's
Registration Statement on Form S-8 filed with the
Commission on December 21, 1995 (File No. 33-65233)].
10(f)(B) Form of Non-Qualified Stock Option Agreement under
the 1995 Stock Option and Performance Award Plan
[Incorporated by reference to Exhibit 4(a)(2) to the
Registrant's Registration Statement on Form S-8 filed
with the Commission on December 21, 1995
(File No. 33-65233)].
10(f)(C) Form of Incentive Stock Option Agreement under the
1995 Stock Option and Performance Award Plan
[Incorporated by reference to Exhibit 4(a)(3) to the
Registrant's Registration Statement on Form S-8 filed
with the Commission on December 21, 1995
(File No. 33-65233)].
10(g)(A) Real Estate Sales Contract, dated July 18, 1984,
between the City of Troy, Alabama and Miltope
Corporation [Incorporated by reference to Exhibit
10(o) to the Registrant's Registration Statement on
Form S-1 filed with the Commission on September 6,
1984 (Registration No. 2-93134)].
10(g)(B) Lease Agreement, dated November 1, 1985, between
the Industrial Development Board of the City of
Troy, Alabama and Miltope Corporation
[Incorporated by reference to Exhibit 10(s)(B) to the
Registrant's Form 10-K filed with the Commission
on March 31, 1986 (File No. 0-13433)].
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ------
10(j) Purchase and Sale Agreement, dated April 19, 1994,
between Collier Management Group, Inc. and
Miltope Corporation, with respect to 500 Richardson
Road South, Hope Hull, Alabama [Incorporated by
reference to Exhibit 10(n) to the Registrant's Form 10-K
filed with the Commission on March 31, 1995
(File No. 0-13433)].
10(k)(A)(1)Loan Agreement, dated July 27, 1994, among First
Alabama Bank, as lender, and Miltope Corporation
and Miltope Business Products, Inc., as borrowers
[Incorporated by reference to Exhibit 10(o)(A)(1)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1995 (File No. 0-13433)].
10(k)(A)(2)Amendment to Loan Agreement, dated as of October
3, 1994, among First Alabama Bank, Miltope
Corporation and Miltope Business Products, Inc.
[Incorporated by reference to Exhibit 10(o)(A)(2)
to the Registrant's Form 10-K filed with the
Commission on March 31, 1995 (File No. 0-13433)].
10(k)(A)(3)Amendment to Loan Agreement and Related
Documents, dated February 3, 1995, among First
Alabama Bank, Miltope Corporation and Miltope
Business Products, Inc. [Incorporated by reference
to Exhibit 10(o)(A)(3) to the Registrant's Form 10-K
filed with the Commission on March 31, 1995
(File No. 0-13433)].
10(k)(A)(4)Amendments to Loan Agreement and Related
Documents, dated February 6, 1997, among Regions
Bank (formerly First Alabama Bank), Miltope
Corporation and Miltope Business Products, Inc.
[Incorporated by reference to Exhibit 10(k)(A)(4) to
the Registrant's Form 10-K filed with the Commission
on March 26, 1997 (File No. 0-13433)].
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ------
10(k)(A)(5)Amendments to Loan Agreement and Related
Documents, dated December 1, 1997, among Regions
Bank (formerly First Alabama Bank), Miltope
Corporation and Miltope Business Products, Inc.
[Incorporated by reference to Exhibit 10(K)(A)(5) to
the Registrant's Form 10-K filed with the Commission
on March 23, 1998 (File No. 0-13433)].
10(k)(B) Guaranty Agreement, dated July 27, 1994, by the
Registrant to First Alabama Bank [Incorporated by
reference to Exhibit 10(o)(B) to the Registrant's
Form 10-K filed with the Commission on March 31, 1995
(File No. 0-13433)].
10(k)(C) Security Agreement, dated July 27, 1994, among
Miltope Corporation, Miltope Business Products, Inc.
and First Alabama Bank [Incorporated by
reference to Exhibit 10(o)(C) to the Registrant's
Form 10-K filed with the Commission on March 31, 1995
(File No. 0-13433)].
10(l)(A) Term Loan Agreement, dated October 13, 1994,
between First Alabama Bank, as lender, and Miltope
Corporation, as borrower [Incorporated by
reference to Exhibit 10(p)(A) to the Registrant's
Form 10-K filed with the Commission on March 31, 1995
(File No. 0-13433)].
10(l)(B) Real Estate Mortgage and Security Agreement, dated
October 13, 1994, by Miltope Corporation in favor
of First Alabama Bank [Incorporated by reference to
Exhibit 10(p)(B) to the Registrant's Form 10-K
filed with the Commission on March 31, 1995
(File No. 0-13433)].
10(m)(A) Loan Agreement, dated January 1, 1995, between the
State Industrial Development Authority and Miltope
Corporation [Incorporated by reference to Exhibit 10(q)(A)
to the Registrant's Form 10-K filed with the Commission
on March 31, 1995 (File No. 0-13433)].
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ------
10(m)(B) Credit Agreement, dated January 1, 1995, between
Miltope Corporation and First Alabama Bank
[Incorporated by reference to Exhibit 10(q)(B) to the
Registrant's Form 10-K filed with the Commission
on March 31, 1995 (File No. 0-13433)].
10(m)(C) Guaranty Agreement, dated January 1, 1995, by the
Registrant to First Alabama Bank [Incorporated by
reference to Exhibit 10(o)(C) to the Registrant's
Form 10-K filed with the Commission on
March 31, 1995 (File No. 0-13433)].
10(m)(D) Bond Purchase Agreement, dated January 11, 1995,
among Miltope Corporation, the State Industrial
Development Authority and Merchant Capital,
L.L.C. [Incorporated by reference to Exhibit 10(q)(D)
to the Registrant's Form 10-K filed with the Commission
on March 31, 1995 (File No. 0-13433)].
10(m)(E) Re-marketing Agreement, dated January 1, 1995,
among Miltope Corporation, the State Industrial
Development Authority and Merchant Capital,
L.L.C. [Incorporated by reference to Exhibit 10(q)(E)
to the Registrant's Form 10-K filed with the Commission
on March 31, 1995 (File No. 0-13433)].
10(m)(F) Real Estate Mortgage and Security Agreement, dated
as of January 1, 1995, from Miltope Corporation in
favor of First Alabama Bank [Incorporated by
reference to Exhibit 10(q)(F) to the Registrant's
Form 10-K filed with the Commission on
March 31, 1995 (File No. 0-13433)].
10(q)(A) Stock Option Agreement, dated as of June 25, 1993,
between the Registrant and William L. Dickinson.
[Incorporated by reference to Exhibit 10(q) to the
Registrant's Form 10-K filed with the Commission
on March 31, 1994 (File No. 0-13433)].
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ------
10(q)(B) Stock Option Agreement, dated as of June 3, 1994,
between the Registrant and William L. Dickinson
[Incorporated by reference to Exhibit 10(u)(B) to
the Registrant's Form 10-K filed with the Commission
on March 31, 1995 (File No. 0-13433)].
10(q)(C) Stock Option Agreement, dated as of June 5, 1995,
between the Registrant and William L. Dickinson.
[Incorporated by reference to Exhibit 10(r)(C) to the
Registrant's Form 10-K filed with the Commission
on March 29, 1996 (File No. 0-13433)].
10(q)(D) Stock Option Agreement, dated as of June 11, 1996,
between the Registrant and William L. Dickinson.
[Incorporated by reference to Exhibit 10(q)(D) to the
Registrant's Form 10-K filed with the Commission
on March 26,1997 (File No. 0-13433)].
10(q)(E) Stock Option Agreement, dated as of September 11,1997,
between the Registrant and William L. Dickinson.
[Incorporated by reference to Exhibit 10(q)(E) to the
Registrants Form 10-K filed with the Commission on
March 23, 1998 (File No. 0-13433)].
10(q)(F) Stock Option Agreement, dated September 17, 1998,
between the Registrant and William L.Dickinson.
[Incorporated by reference to Exhibit 10(q)(F) to the
Registrants Form 10-K filed with the Commission on
March 31, 1999 (File No. 0-13433)].
*10(q)(G) Stock Option Agreement, dated April 20, 2000,
between the Registrant and William L. Dickinson.
10(u) Stock Option Agreement, dated September 17, 1998,
between the Registrant and Jerry Tuttle.
[Incorporated by reference to Exhibit 10(u) to the
Registrant's Form 10-K filed with the Commission
on March 31, 1999 (File No. 0-13433)].
*10(u)(A) Stock Option Agreement, dated April 20, 2000,
between the Registrant and Jerry Tuttle.
- ---------------
*Filed herewith
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ------
10(v) Stock Option Agreement dated January 15, 1999
between the Registrant and Thomas R. Dickinson.
[Incorporated by reference to Exhibit 10(v) to the
Registrant's Form 10-K filed with the Commission
on March 31, 2000 (File No. 0-13433)].
*10(v)(A) Stock Option Agreement dated May 4, 2000, between
the Registrant and Thomas R. Dickinson.
*10(w) Stock Option Agreement, dated April 20, 2000,
between the Registrant and Lawrence P. Farrell.
10(x) Stock Option Agreement dated June 25, 1999,
between the Registrant and Tom B. Dake.
[Incorporated by reference to Exibit 10(x) to the
Registrant's Form 10-K filed with the Commission
on March 31, 2000 (File No. 0-13433)].
*10(x)(A) Stock Option Agreement dated May 4, 2000,
between the Registrant and Tom B. Dake.
*10(y) Stock Option Agreement dated September 5, 2000,
between the Registrant and Gerald Sanford.
*10(z) Stock Option Agreement dated January 14, 2000,
between the Registrant and Trevor Francis.
- ---------------
*Filed herewith
Exhibit Page
Number Description of Exhibit Number
- ------- ---------------------- ------
18 Letter regarding change in accounting principle,
dated May 13, 1994 [Incorporated by reference to
Exhibit 18 to the Registrant's Form 10-Q filed
with the Commission on May 16, 1994
(File No. 0-13433)].
*21 Subsidiaries of the Registrant.
*23 Independent Auditors' Consent, dated April 04, 2001,
to the incorporation by reference in Registration
Statements No. 2-97977, No. 33-8245,
No. 33-78744 and No. 33-65233 on Form S-8
of their report dated February 9, 2001
(April 03, 2001 as to the waiverletter described in
Note 5) appearing in this Annual Report on
Form 10-K for the year ended December 31, 2000.
27 Financial Data Schedule
- ---------------
*Filed herewith
THIS PAGE INTENTIONALLY LEFT BLANK
MILTOPE GROUP INC. AND SUBSIDIARIES
-----------------------------------
TABLE OF CONTENTS TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------
Page
Independent Auditors' Report F-2
Independent Auditors' Report of Other Auditors F-3
Consolidated Balance Sheets as of December 31, 2000
and 1999 F-4
Consolidated Statements of Operations for the
Years Ended December 31, 2000, 1999 and 1998 F-5
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 2000, 1999 and 1998 F-6
Consolidated Statements of Cash Flows for the
Years Ended December 31, 2000, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-8
The following financial statement schedule for the years ended
December 31, 2000, 1999, and 1998 is included in Part IV of this report
on the indicated page:
Schedule II Valuation and Qualifying
Accounts andReserves F-20
All other Schedules are omitted because of the absence of
conditions under which they are required or because the required
information is provided in the financial statements or notes hereto.
F-1
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Stockholders and Board of Directors
of Miltope Group Inc.:
We have audited the accompanying consolidated balance sheets of Miltope
Group Inc. and subsidiaries (a majority-owned subsidiary of Great
Universal Incorporated) as of December 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity,
and cash flows for each of the three years in the period ended December
31, 2000. Our audits also included the consolidated financial
statement schedule listed in the index at Item 8. These financial
statements and the financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial statement
schedule based on our audits. The consolidated financial statements
give retroactive effect to the transfer of IV Phoenix Group, Inc. (PGI)
from Great Universal Incorporated, which has been accounted for on an
"as if pooled" basis as described in Note 2 to the consolidated
financial statements. We did not audit the balance sheet of PGI as of
December 31, 1999, or the related statements of operations,
stockholders' equity, and cash flows of PGI for the year then ended,
which statements reflect total assets of $798,000 as of December 31,
1999, and total revenues of $9,045,000 for the year ended December 31,
1999. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to the
amounts included for PGI for 1999, is based solely on the report of
such other auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the
report of the other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Miltope Group Inc. and subsidiaries at December 31, 2000 and 1999, and
the results of their operations and their cash flows for each of the
three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ Deloitte & Touche LLP
- -------------------------
Birmingham, Alabama
February 9, 2001 (April 03, 2001 as to the waiver
letter described in Note 5)
F-2
INDEPENDENT AUDITORS' REPORT OF OTHER AUDITORS
To IV Phoenix Group, Inc.:
We have audited the accompanying balance sheet of IV Phoenix Group, Inc.
(a New York Corporation) as of December 31, 1999, and the related statements
of operations and accumulated deficit and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of IV Phoenix Group, Inc.
as of December 31, 1999, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles
generally accepted in the United States.
ARTHUR ANDERSEN LLP
New York, New York
March 30, 2001
F-3
MILTOPE GROUP INC. AND SUBSIDIARIES
- -----------------------------------
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
- -----------------------------------
As Restated
ASSETS 2000 1999
CURRENT ASSETS: ----------- -----------
Cash and cash equivalents $ 2,711,000 $ 2,437,000
Accounts receivable 7,933,000 4,477,000
Inventories 12,877,000 15,360,000
Deferred income taxes 952,000 535,000
Other current assets 382,000 412,000
----------- -----------
Total current assets 24,855,000 23,221,000
----------- -----------
PROPERTY AND EQUIPMENT - at cost:
Machinery and equipment 8,911,000 8,786,000
Furniture and fixtures 1,628,000 1,615,000
Land, buildings and improvements 6,732,000 8,449,000
----------- -----------
Total property and equipment 17,271,000 18,850,000
Less accumulated depreciation and amortization 10,679,000 10,374,000
----------- -----------
Property and equipment - net 6,592,000 8,476,000
----------- -----------
DEFERRED INCOME TAXES 3,212,000 3,629,000
OTHER ASSETS 956,000 1,543,000
----------- -----------
TOTAL $35,615,000 $36,869,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,533,000 $ 4,089,000
Accrued expenses 4,534,000 5,682,000
Short-term debt 800,000 800,000
Current maturities of long-term debt 4,129,000 2,264,000
----------- -----------
Total current liabilities 14,996,000 12,835,000
LONG-TERM DEBT 9,654,000 13,986,000
OTHER LIABILITIES 49,000 42,000
----------- -----------
Total liabilities 24,699,000 26,863,000
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Common stock - $.01 par value; 20,000,000 shares
authorized; 6,811,112 shares outstanding
at December 31, 2000 and 1999 68,000 68,000
Capital-in-excess of par value 24,519,000 22,178,000
Retained earnings 575,000 2,006,000
----------- -----------
25,162,000 24,252,000
Less treasury stock, at cost 14,246,000 14,246,000
----------- -----------
Total stockholders' equity 10,916,000 10,006,000
----------- -----------
TOTAL $35,615,000 $36,869,000
=========== ===========
See notes to consolidated financial statements.
F-4
MILTOPE GROUP INC. AND SUBSIDIARIES
- -----------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
- ----------------------------------------------------
As Restated As Restated
2000 1999 1998
----------- ----------- -----------
NET SALES $40,730,000 $36,238,000 $35,509,000
COSTS AND EXPENSES:
Cost of sales 32,707,000 31,494,000 28,547,000
Selling, general and administrative 7,578,000 9,840,000 8,195,000
Engineering, research and
development 659,000 1,445,000 2,163,000
----------- ----------- -----------
Total 40,944,000 42,779,000 38,905,000
----------- ----------- -----------
LOSS FROM OPERATIONS (214,000) (6,541,000) (3,396,000)
INTEREST EXPENSE - net 1,217,000 1,263,000 888,000
----------- ----------- -----------
LOSS BEFORE INCOME
TAXES (1,431,000) (7,804,000) (4,284,000)
INCOME TAX BENEFIT - - (1,276,000)
----------- ----------- -----------
NET LOSS $(1,431,000) $(7,804,000) $(3,008,000)
=========== =========== ===========
BASIC AND DILUTED NET
LOSS PER SHARE $ (.24) $ (1.33) $ (.51)
=========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 5,871,523 5,871,523 5,871,523
=========== =========== ===========
See notes to consolidated financial statements.
F-5
MILTOPE GROUP INC. AND SUBSIDIARIES
- -----------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
- ----------------------------------------------------
Common Stock Capital-in-
Par Excess of Retained Treasury Stock
Shares Value Par Value Earnings Shares Cost
--------- -------- ----------- ----------- ------- -----------
Balance, January 1, 1998 6,811,112 $ 68,000 $22,178,000 $12,818,000 939,589 $14,246,000
(As Restated)
Net loss - - - (3,008,000) - -
--------- -------- ----------- ----------- ------- -----------
Balance, December 31, 1998 6,811,112 68,000 22,178,000 9,810,000 939,589 14,246,000
(As Restated)
Net loss - - - (7,804,000) - -
--------- -------- ----------- ----------- ------- -----------
Balance, December 31, 1999 6,811,112 68,000 22,178,000 2,006,000 939,589 14,246,000
(As Restated)
Pre-acquisition conversion of
PGI related-party debt to equity 2,341,000
Net loss - - - (1,431,000) - -
--------- -------- ----------- ----------- ------- -----------
Balance, December 31, 2000 6,811,112 $ 68,000 $24,519,000 $ 575,000 939,589 $14,246,000
========= ======== =========== =========== ======== ===========
See notes to consolidated financial statements.
F-6
MILTOPE GROUP INC. AND SUBSIDIARIES
- -----------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
- --------------------------------------------------------------------------------------
As Restated As Restated
2000 1999 1998
OPERATING ACTIVITIES: ----------- ----------- -----------
Net loss $(1,431,000) $(7,804,000) $(3,008,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,360,000 1,613,000 1,836,000
Provision for slow-moving and obsolete inventories 1,319,000 1,289,000 1,243,000
Provision for doubtful accounts receivable 182,000 551,000 24,000
Provision for asset impairment - 281,000 -
Gain on sale of fixed assets (22,000) - (4,000)
Deferred income taxes - - (1,579,000)
Change in assets and liabilities provided (used) cash:
Accounts receivable (3,638,000) 3,179,000 3,226,000
Inventories 1,164,000 3,505,000 (4,891,000)
Other current assets 30,000 (344,000) (30,000)
Other assets 409,000 (386,000) (148,000)
Accounts payable and accrued expenses 3,728,000 223,000 149,000
Other liabilities - 405,000 -
----------- ---------- ----------
Net cash provided by (used in) operating activities 3,101,000 2,512,000 (3,182,000)
----------- ---------- ----------
INVESTING ACTIVITIES:
Purchases of property and equipment (175,000) (750,000) (906,000)
Proceeds from sale of property and equipment 900,000 - 48,000
----------- ---------- ----------
Net cash provided by (used in) investing activities 725,000 (750,000) (858,000)
----------- ---------- ----------
FINANCING ACTIVITIES:
Net borrowings on revolving credit loan - - 4,090,000
Net borrowings (payments) on long-term debt (3,552,000) 377,000 (297,000)
----------- ---------- ----------
Net cash provided by (used in) financing activities (3,552,000) 377,000 3,793,000
----------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 274,000 2,139,000 (247,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,437,000 298,000 545,000
----------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,711,000 $ 2,437,000 $ 298,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments made for:
Income taxes $ - $ 2,000 $ 67,000
=========== =========== ===========
Interest $ 980,000 $ 1,227,000 $ 875,000
=========== =========== ===========
See notes to consolidated financial statements.
F-7
MILTOPE GROUP INC. AND SUBSIDIARIES
- -----------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING
AND FINANCIAL REPORTING POLICIES
---------------------------------
Principles of Consolidation - The consolidated financial statements
include the accounts of Miltope Group Inc. and its wholly owned
subsidiaries, Miltope Corporation ("Miltope"), IV Phoenix Group,
Inc. ("PGI"), Miltope Business Products, Inc. ("MBP") and Miltope's
wholly owned subsidiary, International Miltope, Ltd., a Foreign
Sales Corporation ("FSC"). These companies are collectively
referred to as the "Company". All material inter-company
transactions have been eliminated. The Company is a majority owned
subsidiary of Great Universal Incorporated ("GUI"). All amounts
presented have been rounded to the nearest thousand.
Nature of Operations - The Company through its two industry
segments, military/rugged and commercial, is engaged in the
development of computers and peripheral equipment for rugged and
other specialized applications for military and commercial
customers, domestic and international.
Accounting Estimates - The Company's consolidated financial
statements are prepared in conformity with accounting principles
generally accepted in the United States of America which requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
Fair Value of Financial Instruments - The carrying value of the
Company's accounts receivable, accounts payable and accrued
expenses approximates fair value because of the short-term maturity
of those instruments. Additional information regarding the fair
value of other financial instruments is disclosed in Note 5.
Cash Equivalents -The Company considers all highly-liquid
investments with original maturities of three months or less to be
cash equivalents.
Depreciation and Amortization - Depreciation of machinery,
equipment, furniture and fixtures is computed on the straight-line
method over the estimated useful lives of the related assets
ranging from 3 to 10 years. Depreciation of buildings and
improvements is computed on the straight-line method over an
estimated useful life of 30 years. Amortization of leasehold
improvements is computed on the straight-line method over the
lesser of the estimated useful life of the improvement or the
remaining term of the lease.
Revenue Recognition - The Company recognizes revenue from product
sales when title, ownership and risk of loss passes, which occurs
at the time of delivery. Revenue for certain pre-production
services pursuant to sales contracts is recognized when the service
is performed.
F-8
Engineering, Research and Development - Engineering, research and
development expenditures not made in connection with sales
contracts are charged to expense as incurred.
Income Taxes - The Company recognizes deferred tax assets and
liabilities for the expected future tax consequences of events that
have been included in the Company's consolidated financial
statements or tax returns. Deferred tax assets and liabilities are
determined based on the differences between the financial
accounting and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are
expected to reverse.
Net Loss Per Share - Basic and diluted net loss per share are
computed by dividing 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 333,512, 312,858 and 297,245
for 2000, 1999 and 1998, respectively.
Recent Accounting Pronouncement - 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.
Reclassifications - Certain prior years amounts have been
reclassified to conform with the 2000 presentation.
2. ACQUISITION OF PGI BY MILTOPE GROUP, INC.
-----------------------------------------
On April 1, 2000, the Company entered into an agreement with GUI to
acquire GUI's ownership of 90% of the outstanding stock of IV
Phoenix Group, Inc. ("PGI") by the Company. Since GUI, through its
controlling interest in the Company, continues to own a controlling
interest in PGI after the acquisition, the acquisition has been
recorded on the Company's books at GUI's historical cost and
accounted for on an "as if pooled basis". Accordingly, the
accompanying 1999 and 1998 financial statements have been restated
on this basis. All material transactions between the Company and
PGI have been eliminated.
F-9
Revenues and net income (loss) for the separate companies and the
combined amounts presented in the consolidated financial statements
are as follows:
1999 1998
----------- -----------
Revenues (net of eliminations):
Miltope $27,517,000 $25,552,000
PGI 8,721,000 9,957,000
----------- -----------
Combined 36,238,000 35,509,000
=========== ===========
Net income (loss):
Miltope (5,601,000) (3,021,000)
PGI (2,203,000) 13,000
----------- -----------
Combined $(7,804,000) $(3,008,000)
=========== ===========
3. ACCOUNTS RECEIVABLE
-------------------
Accounts receivable consist of the following:
As Restated
2000 1999
----------- -----------
Amounts receivable from the
United States Government $ 1,727,000 $ 641,000
Amounts receivable from other customers 6,776,000 4,382,000
Allowance for doubtful accounts (570,000) (546,000)
----------- -----------
Total $ 7,933,000 $ 4,477,000
=========== ===========
4. INVENTORIES
-----------
Inventories consist of the following: As Restated
2000 1999
----------- -----------
Purchased parts and subassemblies $ 9,911,000 $10,302,000
Work-in-process 2,966,000 5,058,000
----------- -----------
Total $12,877,000 $15,360,000
=========== ===========
Inventories are stated at the lower of cost (first-in, first-
out) or market. Inventoried costs include engineering and
manufacturing overhead, contract specific tooling, and other
related non-recurring costs. Inventories include amounts relating
to contracts and programs having production cycles longer than one
year and a portion thereof will not be realized within one year.
Inventories include a reserve for slow-moving and obsolete items of
$1,913,000, and $710,000 at December 31, 2000, and 1999,
respectively.
F-10
5. LONG-TERM DEBT
--------------
Long-term debt consists of the following:
As Restated
2000 1999
----------- -----------
Term loan $ 8,975,000 $10,975,000
Industrial Development Authority
Revenue Bonds 3,515,000 4,767,000
Other debt 1,293,000 508,000
----------- -----------
Total 13,783,000 16,250,000
Less current maturities 4,129,000 2,264,000
----------- -----------
Total $ 9,654,000 $13,986,000
=========== ===========
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 31, 1999. The balance remaining on the revolving agreement
at May 31,1999 that was subsequently converted into a term loan was
approximately $12,000,000. The $12,000,000 term loan, at the
Company's option, bears interest at the bank's reference rate
(effective rate was 9.50% and 8.75% at December 31, 2000 and 1999,
respectively), or at a rate equaling the London Inter Bank Offered
Rate plus 2.0%. The Company's accounts receivable, contract rights
and inventories are pledged as collateral to the agreement.
Principal payments for the Industrial Development Authority Revenue
Bonds (the "Bonds") range between $380,000 and $670,000 from
December 2001 through December 2009. Repayment of the Bonds is
secured by an irrevocable letter of credit in an amount up to
$5,700,000 that in turn is secured by a mortgage on the Montgomery,
Alabama facility and a security interest in the equipment located
at such facility. Property and equipment with a carrying value of
$4,991,000 and $6,584,000 at December 31, 2000 and 1999,
respectively, are pledged as collateral. Letter of credit
commitment fees paid during 2000 and 1999 were $45,000 and $60,000,
respectively. The agreement with the Industrial Development
Authority bears interest at a variable market rate that ranged from
6.15% to 7.01% during 2000, and was 6.64% and 6.25% at December 31,
2000 and 1999, respectively.
The credit agreements referenced above include 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. The Company's bank loan
agreement permits the Company to pay annual dividends of up to 50%
of the prior year's net income. At December 31, 2000, 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 and current assets and current
liabilities measured quarterly. The Company obtained a letter dated
April 02, 2001, from the primary lender waiving all violations as
of December 31, 2000; revising the ratio requirement for total
liabilities to tangible net worth and the ratio requirement for
current assets to current liabilities for the measurement dates in
2001.
F-11
Other notes are due in aggregate monthly installments of $35,000
including variable interest based on the U.S. Treasury Rate (7.25%
and 6.75% at December 31, 2000 and 1999, respectively).
Interest expense of $1,217,000, $1,263,000, and $888,000 for 2000,
1999, and 1998, respectively is presented net of interest income of
$150,000, $40,000 and $18,000 for 2000, 1999, and 1998,
respectively.
The aggregate maturities of current and long-term debt subsequent
to December 31, 2000, reflecting the revision by the primary lender
are presented below.
Year Ending December 31,
------------------------
2001 $ 4,129,000
2002 4,811,000
2003 2,359,000
2004 714,000
2005 525,000
Thereafter 1,245,000
-----------
Total $13,783,000
===========
The fair value of long-term debt approximated the carrying value as
of December 31, 2000 and 1999, as all instruments are at variable
interest rates.
6. INCOME TAXES
------------
The benefit for income taxes consists of the following:
As Restated As Restated
2000 1999 1998
-------- ----------- -----------
Current:
Federal $ - $ - 303,000
State - - -
Deferred - - (1,579,000)
-------- ----------- -----------
Total $ - $ - $(1,276,000)
======== =========== ===========
F-12
The Company's benefit for income taxes differs from the amount
computed using the federal statutory tax rate as a result of the
following items:
As Restated As Restated
2000 1999 1998
--------- ----------- -----------
Amount at federal statutory rate $(487,000) $(2,603,000) $(1,407,000)
Increases (reductions) due to:
State taxes - net of federal
income tax benefit (78,000) (261,000) (119,000)
Change in valuation allowance 490,000 2,861,000 (54,000)
Adjustment to estimated income
tax accruals - - 207,000
Goodwill 50,000 - -
Other 25,000 3,000 97,000
--------- ----------- -----------
Total $ - $ - $(1,276,000)
========= =========== ===========
The deferred tax assets and liabilities at December 31, 2000 and
1999 are comprised of the following:
2000
-------------------------------------------
Deferred
Deferred Tax
Tax Assets Liabilities Total
----------- ----------- -----------
Current :
Inventories $ 1,202,000 $ - $ 1,202,000
Non-deductible accrual 506,000 - 506,000
Deferred revenue 538,000 - 538,000
Prepaid expenses - (37,000) (37,000)
----------- ---------- -----------
Total current 2,246,000 (37,000) 2,209,000
Valuation allowance (1,257,000) - (1,257,000)
----------- ---------- -----------
Net current 989,000 (37,000) 952,000
----------- ---------- -----------
Long-term:
Intangible assets 2,000 - 2,000
Net operating loss
carryforward 4,698,000 - 4,698,000
Alternative minimum tax
credit carryforward 240,000 - 240,000
Accelerated depreciation - (81,000) (81,000)
----------- ---------- -----------
Total long-term 4,940,000 (81,000) 4,859,000
Valuation allowance (1,647,000) - (1,647,000)
----------- ---------- -----------
Net long-term 3,293,000 (81,000) 3,212,000
----------- ---------- -----------
Net $ 4,282,000 $ (118,000) $ 4,164,000
=========== =========== ===========
F-13
1999
As Restated
-------------------------------------------
Deferred
Deferred Tax
Tax Assets Liabilities Total
---------- ----------- -----------
Current :
Inventories $ 746,000 $ - $ 746,000
Non-deductible accrual 318,000 - 318,000
Prepaid expenses - (19,000) (19,000)
---------- ----------- -----------
Total current 1,064,000 (19,000) 1,045,000
Valuation allowance (510,000) - (510,000)
---------- ----------- -----------
Net current 554,000 (19,000) 535,000
---------- ----------- -----------
Long-term:
Intangible assets 2,000 - 2,000
Net operating loss
carryforward 4,754,000 - 4,754,000
Government obligations 611,000 - 611,000
Alternative minimum tax
credit carryforward 240,000 - 240,000
Accelerated depreciation - (74,000) (74,000)
---------- ----------- -----------
Total long-term 5,607,000 (74,000) 5,533,000
Valuation allowance (1,904,000) - (1,904,000)
---------- ----------- -----------
Net long-term 3,703,000 (74,000) 3,629,000
---------- ----------- -----------
Net $ 4,257,000 $ (93,000) $ 4,164,000
=========== =========== ===========
At December 31, 2000, the Company has established a valuation
allowance of $2,904,000 against the net deferred income tax assets.
Although realization is not assured, management believes it is more
likely than not that the recorded deferred tax asset, net of the
valuation allowance, will be realized. The valuation allowance can
be adjusted in future periods as the probability of realization of
the net operating loss carryforward asset changes.
The Company has net operating loss carryforwards for federal income
tax purposes at December 31, 2000 of approximately $12,900,000
that expire as follows: $5,650,000 in 2009, $1,290,000 in 2010,
$2,460,000 in 2018 and $3,500,000 in 2019. The Company also has
approximately $240,000 of alternative minimum tax credit
carryforwards available to offset future federal income taxes.
7. EMPLOYEE BENEFIT PLANS
----------------------
Savings Plan - The Company has a profit-sharing/401(k) retirement
plan (the "Plan") which covers substantially all employees.
Company contributions are discretionary and are determined annually
based on profits. The Plan allows for an employee pay conversion
feature whereby each eligible employee may contribute up to 15% of
their total pay. The Company's provision pursuant to the Plan
amounted to $81,000 in 2000. The Company made no contributions for
1999 or 1998.
F-14
Performance Based Bonus Plan - The Company has a bonus plan that
provides for additional compensation to certain executive officers.
The bonus is payable upon the attainment of certain
financial targets that are approved by the Board of Directors, and
is calculated as a specified percentage of the officer's current
base salary. The Company recorded a bonus provision of $300,000
for 2000, and none for 1999 or 1998.
8. STOCK OPTIONS
-------------
The Company has a Stock Option and Performance Award Plan ("SOPA")
under which 500,000 shares of common stock are reserved for
issuance under options to be granted for periods not to exceed ten
years at an exercise price not less than the fair market value of
the shares at the date of grant. They are exercisable at a
cumulative rate of 25% in each of the first four years subsequent
to the applicable grant.
Under separate plans, certain of the Company's outside directors
have been granted options to purchase shares of common stock at
exercise prices of 85% of the fair market value of such shares at
date of grant. Such options are exercisable at any time during the
term of ten years as long as the recipient is a director or within
one year after termination of service.
A summary of the Company's stock options as of December 31, 2000,
1999 and 1998 and changes during the year ended on those dates is
presented below:
As Restated As Restated
2000 1999 1998
----------------------------- --------------------------------- ----------------------------------
Weighted Weighted Weighted
Weighted Average Weighted Average Weighted Average
Options Average Fair Value Options Average Fair Value Options Average Fair Value
for Exercise at Grant for Exercise at Grant for Exercise at Grant
Shares Price Date Shares Price Date Shares Price Date
----------------------------- --------------------------------- ----------------------------------
Outstanding at
beginning of year 312,858 $2.20 297,245 $3.14 285,717 $3.56
Granted
Price = fair value 37,000 $1.53 $1.45 161,500 $1.41 $0.99 83,000 $2.93 $1.99
Price less than
fair value 19,254 $2.34 $2.77 23,528 $1.28 $1.05
Exercised -- -- --
Canceled (35,600) $1.89 (145,887) $3.24 (95,000) $3.73
------- -------- --------
Outstanding at end
of year 333,512 $2.17 312,858 $2.20 297,245 $3.14
======= ======== ========
Options exercisable
at December 31:
Director options 66,012 $2.27 46,758 $2.25 97,645 $2.92
Employee options 107,500 $2.86 64,050 $3.61 77,150 $3.61
------- ------- -------
Total 173,512 $2.64 110,808 $3.04 174,795 $3.22
======= ======= ========
F-15
The following table summarizes information about stock options
outstanding at December 31, 2000:
Options Outstanding Options Exercisable
--------------------------------------------- -----------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Outstanding Contractual Life Exercise Price Outstanding Exercise Price
---------------------------------------------- -----------------------------
Range of Exercise Prices
$1.25 -- $4.46 316,512 7.66 $1.99 156,512 $2.33
$5.50 -- $5.50 17,000 2.72 $5.50 17,000 $5.50
------- -------
333,512 7.41 $2.17 173,512 $2.64
======= =======
The Company applied Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related
interpretations in accounting for its employee and director plans.
Compensation expense related to these plans under this methodology
is insignificant. Had compensation cost been determined based on
the fair value at the grant date for awards under these plans
consistent with the methodology prescribed under SFAS No. 123,
Accounting for Stock-Based Compensation (SFAS 123), the Company's
net loss and basic and diluted net loss per share would approximate
the pro forma amounts below.
As Restated As Restated
2000 1999 1998
----------- ----------- ------------
Net loss:
As reported $(1,431,000) $(7,804,000) $(3,008,000)
Pro forma $(1,556,000) $(7,869,000) $(3,089,000)
Basic and diluted net
loss per share:
As reported $ (0.24) $ (1.33) $ (0.51)
Pro forma $ (0.26) $ (1.34) $ (0.53)
Because the SFAS 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected
in future years.
For purposes of SFAS 123, the weighted average fair value of the
options granted during 2000, 1999 and 1998 is estimated on the date
of grant using the Black-Scholes option-pricing model with the
following assumptions:
As Restated As Restated
2000 1999 1998
------- ----------- -----------
Expected life (years) 10.0 10.0 10.0
Risk-free interest rate 5.71% 5.62% 5.87%
Dividend rate 0% 0% 0%
Expected volatility 106.63% 57.18% 49.96%
F-16
9. COMMITMENTS AND CONTINGENCIES
-----------------------------
Leasing Arrangements - The Company is obligated under several non-
cancelable operating leases covering land, office facilities and
equipment. The corporate headquarters resides upon land under a
lease which provides for minimum rentals through 2086. Minimum
rentals are subject to increases based on the annual consumer price
index. Future minimum lease payments under all operating leases
with an initial or remaining non-cancelable lease term of more than
one year at December 31, 2000 are as follows:
Year Ending December 31,
------------------------
2001 $ 281,000
2002 200,000
2003 163,000
2004 57,000
2005 33,000
Thereafter 2,643,000
-----------
Total $ 3,377,000
===========
Aggregate rental expense under operating leases amounted to
$428,000, $483,000, and $399,000 in 2000, 1999 and 1998,
respectively.
The Company leases office space at its Hope Hull facility to
tenants on a year-to-year basis, as well as under a multi-year
lease with entities affiliated through certain common ownership,
where future minimum lease receipts at December 31, 2000 are as
follows:
Year Ending December 31,
------------------------
2001 $ 100,000
2002 100,000
---------
Total $ 200,000
=========
Aggregate rental income under operating leases amounted to
$187,000, $143,000, and $162,000 in 2000, 1999 and 1998,
respectively. Rental income from related parties was $96,000,
$143,000 and $148,000 in 2000, 1999, and 1998, respectively.
Litigation - The Company, from time to time, is a party to pending
or threatened legal proceedings and arbitration in the ordinary
course of business. Based upon information currently 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 to the financial statements.
Claims - From time to time the Company has certain of its
contracts that may be subject to final negotiation or modification
with the customer in the ordinary course of business. Although the
ultimate outcome of these negotiations or modifications is unknown
at December 31, 2000, the Company believes that additional costs
evolving from these negotiations will not be material to the financial
statements.
F-17
10. 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.
General
2000 Military/Rugged Commercial Eliminations Corporate Consolidated
---- --------------- ----------- ------------ ----------- ------------
Net sales from external customers $28,011,000 $12,972,000 $ (253,000) $40,730,000
=========== =========== =========== ===========
Segment operating income (loss) $(1,379,000) $ 1,311,000 $ (146,000) $ (214,000)
=========== =========== =========== ===========
Identifiable assets $18,675,000 $ 8,727,000 $ 7,000 $ 8,206,000 $35,615,000
=========== =========== =========== =========== ===========
Capital expenditures $ 112,000 $ 63,000 $ 175,000
=========== =========== ===========
Depreciation and amortization $ 883,000 $ 330,000 $ 147,000 $ 1,360,000
=========== =========== =========== ===========
General
1999 (As Restated) Military/Rugged Commercial Eliminations Corporate Consolidated
----------------- --------------- ----------- ------------ ----------- ------------
Net sales from external customers $25,230,000 $14,048,000 $(3,040,000) $36,238,000
=========== =========== =========== ===========
Segment operating loss $(5,566,000) $ (828,000) $ (147,000) $(6,541,000)
=========== =========== =========== ===========
Identifiable assets $21,755,000 $ 6,558,000 $ 154,000 $8,402,000 $36,869,000
=========== =========== =========== =========== ===========
Capital expenditures $ 434,000 $ 316,000 $ 750,000
=========== =========== ===========
Depreciation and amortization $ 1,027,000 $ 440,000 $ 146,000 $ 1,613,000
=========== =========== =========== ===========
General
1998 (As Restated) Military/Rugged Commercial Eliminations Corporate Consolidated
----------------- --------------- ----------- ------------ ----------- ------------
Net sales from external customers $24,979,000 $11,676,000 $(1,146,000) $35,509,000
=========== =========== =========== ===========
Segment operating loss $(3,034,000) $ (216,000) $ (146,000) $(3,396,000)
=========== =========== =========== ===========
Identifiable assets $28,977,000 $ 8,311,000 $ 300,000 $5,771,000 $43,359,000
=========== =========== =========== =========== ===========
Capital expenditures $ 591,000 $ 315,000 $ 906,000
=========== =========== ===========
Depreciation and amortization $ 1,142,000 $ 548,000 $ 146,000 $ 1,836,000
=========== =========== =========== ===========
In 2000, 1999 and 1998, foreign sales accounted for 9%, 2% and 2%
respectively, of the military/rugged segment net sales and 14%, 21%
and 7%, respectively, of the commercial segment net sales.
F-18
During 2000, 1999 and 1998, the United States Government accounted
for 52%, 42% and 38% of consolidated net sales of the Company,
respectively.
11. UNAUDITED QUARTERLY FINANCIAL DATA
----------------------------------
Summarized unaudited quarterly financial data for the years ended
December 31, 2000 and 1999 is as follows:
Thirteen Weeks Ended
-------------------------------------------------------
March 26, June 25, September 24, December 31,
2000 2000 2000 2000
----------- ----------- ----------- -----------
Net sales $ 7,727,000 $10,725,000 $ 9,385,000 $12,893,000
=========== =========== =========== ===========
Gross profit $ 2,136,000 $ 2,088,000 $ 1,617,000 $ 2,182,000
=========== =========== =========== ===========
Net loss $ (227,000) $ (238,000) $( 619,000) $ (347,000)
=========== =========== =========== ===========
Basic and diluted net loss
per share $(.04) $(.04) $(.10) $(.06)
===== ===== ===== =====
Thirteen Weeks Ended
------------------------------------------------------
As Restated
March 28, June 27, September 26, December 31,
1999 1999 1999 1999
----------- ----------- ----------- -----------
Net sales $ 8,941,000 $ 7,609,000 $11,220,000 $ 8,468,000
=========== =========== =========== ===========
Gross profit $ 1,803,000 $ 607,000 $ 2,105,000 $ 229,000
=========== =========== =========== ===========
Net loss $ (703,000) $(2,693,000) $(1,092,000) $(3,316,000)
=========== =========== =========== ===========
Basic and diluted net loss
per share $(.12) $(.46) $(.19) $(.56)
===== ===== ===== =====
12. RELATED PARTY TRANSACTIONS
--------------------------
During 2000, 1999, and 1998, the Company recorded sales of
$14,000, $44,000 and $1,000,000, respectively, to entities which
are affiliated through certain common ownership. At December 31,
2000 and 1999, accounts receivable on such sales were $0 and
$71,000, respectively. During 2000, the Company received
consulting and management services from a company affiliated
through common ownership. Fees for such services in the amount of
$72,000 are included in selling, general and administrative
expenses and $951,000 of the cumulative amounts expensed for such
fees is included in accrued expenses at December 31, 2000.
F-19
Schedule II
Miltope Group, Inc. and Subsidiaries
Valuation and Qualifying Accounts and Reserves
For the Years Ended December 31, 2000, 1999, and 1998
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------
Additions
Balance at Charged to
Beginning of Costs and Balance at
Description Period Expenses Deductions End of Period
- ------------------------------------------------------------------------------
2000
----
Accrued Warranty Costs $ 125,000 $ 697,000 $ 592,000 $ 230,000
Accrued Obsolescence 710,000 1,319,000 116,000 1,913,000
Doubtful Receivables 546,000 182,000 158,000 570,000
1999
----
Accrued Warranty Costs $ 151,000 $ 807,000 $ 833,000 $ 125,000
Accrued Obsolescence 1,602,000 1,289,000 2,181,000 710,000
Doubtful Receivables 38,000 551,000 43,000 546,000
1998
----
Accrued Warranty Costs $ 61,000 $1,040,000 $ 950,000 $ 151,000
Accrued Obsolescence 1,268,000 1,243,000 909,000 1,602,000
Doubtful Receivables 78,000 24,000 64,000 38,000
F-20
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements
No. 2-97977, No. 33-8245, No. 33-78744 and No. 33-65233 of Miltope
Group Inc. on Forms S-8 of our report dated February 9, 2001 (April 03,
2001 as to the waiver letter described in Note 5) appearing in this
Annual Report on Form 10-K of Miltope Group Inc. for the year ended
December 31, 2000.
/s/Deloitte & Touche LLP
- ------------------------
Birmingham, Alabama
April 04, 2001
F-21
INDEPENDENT AUDITORS' CONSENT OF OTHER AUDITORS
As independent public accountants, we hereby consent to the incorporation
of our report dated March 30, 2001 included in Miltope Group Inc's.
Form 10-K for the year ended December 31, 2000 into the Company's previously
filed Registration Statements File No. 2-97977, No. 33-8245, No. 33-78744
and No. 33-65233. It should be noted that we have not audited any financial
statements of IV Phoenix Group, Inc. subsequent to December 31, 1999, or
performed any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
New York, New York
March 30, 2001
F-22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
April 4, 2001 /s/ Thomas R. Dickinson
Thomas R. Dickinson
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
April 4, 2001 /s/ Thomas R. Dickinson
----------------------------
Thomas R. Dickinson
President and Chief Executive
Officer (Principal Executive
Officer)
April 4, 2001 /s/ Tom B. Dake
----------------------------
Tom B. Dake
Vice President and Chief
Financial Officer
(Principal Accounting Officer)
April 4, 2001 /s/ Teddy G. Allen
----------------------------
Teddy G. Allen
Chairman of the Board of
Directors
April 4, 2001 /s/ William L. Dickinson
----------------------------
William L. Dickinson
Director
April 4, 2001 /s/ Lawrence P. Farrell, Jr.
----------------------------
Lawrence P. Farrell, Jr.
Director
April 4, 2001 /s/ William Mustard
----------------------------
William Mustard
Director
April 4, 2001 /s/ Teri Spencer
----------------------------
Teri Spencer
Director
April 4, 2001
----------------------------
Jan H. Stenbeck
Director
April 4, 2001 /s/ Jerry O. Tuttle
----------------------------
Jerry O. Tuttle
Director