UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended March 31,June 30, 2000
Commission file number 0-10976
MICROWAVE FILTER COMPANY, INC.
(Exact name of registrant as specified in its charter.)
New York 16-0928443
(State of Incorporation) (I.R.S. Employer Identification Number)
6743 Kinne Street, East Syracuse, N.Y. 13057
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (315) 438-4700
Indicate by check mark whether 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 shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES ( x ) NO ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Stock, $.10 Par Value - 3,164,186 shares as of March
31,June
30, 2000.
PART I. - FINANCIAL INFORMATION
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
MARCH 31,JUNE 30, 2000 SEPTEMBER 30, 1999
[S] [C] [C]
Assets
Current Assets:
Cash and cash equivalents $ 1,312592 $ 264
Investments 0900 775
Accounts receivable-trade,net 705 696710 697
Inventories 1,2641,084 1,192
Deferred tax asset - current 163 163
Prepaid expenses and other
current assets 12486 66
-------- --------
Total current assets 3,568 3,1563,535 3,157
Property,plant and equipment,net 1,438 1,5471,377 1,548
-------- --------
Total assets $ 5,0064,912 $ 4,7034,705
======== ========
Liabilities And Stockholders' Equity
Current liabilities:
Accounts payable $ 301304 $ 215
Customer deposits 463149 271
Accrued federal and state
income taxes 144199 76
Accrued payroll and related
expenses 105102 70
Accrued compensated absences 265 240283 241
Other current liabilities 60103 71
-------- --------
Total current liabilities 1,338 9431,140 944
Deferred tax liability -
noncurrent 6 6
Deferred compensation and
other liabilities 20 5
-------- --------
Total liabilities 1,346 9541,146 955
-------- --------
Stockholders' Equity:
Common stock,$.10 par value 431 431432 432
Additional paid-in capital 3,240 3,240
Retained earnings 1,1131,218 1,142
-------- --------
4,784 4,8134,890 4,814
Common stock in treasury,
at cost (1,124) (1,064)
-------- --------
Total stockholders' equity 3,660 3,7493,766 3,750
-------- --------
Total liabilities and
stockholders' equity $ 5,0064,912 $ 4,7034,705
======== ========
[FN]
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIXNINE MONTHS
ENDED MARCH 31,JUNE 30, 2000 AND 1999
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended SixNine months ended
March 31 March 31June 30 June 30
2000 1999 2000 1999
[S] [C] [C] [C] [C]
Net sales $1,899 $1,759 $3,468 $3,392$2,242 $1,645 $5,711 $5,037
Cost of goods sold 1,274 1,090 2,208 2,0781,499 982 3,708 3,061
------- ------- ------- -------
Gross profit 625 669 1,260 1,313743 663 2,003 1,976
Selling, general and
administrative expenses 553 593 1,105 1,233611 618 1,716 1,852
------- ------- ------- -------
Income (loss) from operations 72 76 155 80132 45 287 124
Other income (expense) 26 10 41 26, net 29 9 70 36
------- ------- ------- -------
Income (loss) before income taxes 98 86 196 106161 54 357 160
Provision (benefit) for income taxes 34 30 68 3656 19 123 55
------- ------- ------- -------
NET INCOME (LOSS) $64 $56 $128 $70$105 $ 35 $234 $105
======= ======= ======= =======
Basic earnings (loss)Earnings per share $0.02 $0.02 $0.04 $0.02$0.03 $0.01 $0.07 $0.03
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND SIXNINE MONTHS ENDED
MARCH 31,JUNE 30, 2000 AND 1999
(Unaudited)
(Amounts in thousands)
Three months ended SixNine months ended
March 31 March 31June 30 June 30
2000 1999 2000 1999
[S] [C] [C] [C] [C]
Cash flows from operating
activities:
Net income $ 64105 $ 5635 $ 128234 $ 70105
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 77 76 153 14978 230 227
Stock Compensation 0 7 0 713
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 47 (271) (8) (154)(5) 279 (13) 125
Inventories 72 27 (72)180 0 108 19
Prepaid expenses & other
assets 1 27 (58) (25)38 144 (20) 119
Increase (decrease) in:
Accounts payable & accrued
expenses 95 198 395 (6)(197) (126) 196 (132)
Deferred compensation &
other liabilities (1) (1) (3) (3)(2) (2) (5) (5)
------- ------- -------- -------
Net cash provided by
operating activities 355 119 535 57196 415 730 471
------- ------- -------- -------
Cash flows from investing activities:
Investments 775(900) 0 775(125) 0
Capital expenditures (24) (21) (43) (63)(16) (45) (59) (108)
------- ------- --------------- -------
Net cash provided by (used in)
investingused in
Investing activities 751 (21) 732 (63)(916) (45) (184) (108)
Cash flows from financing activities:
Principal payments on
long-term debt 0 (15) 0 (30)(45)
Purchase of treasury stock 0 (30) (61) (264)(7) (60) (270)
Cash dividend paid (158) (165)0 0 (158) (165)
------- ------- ------- -------
Net cash used in
financing activities (158) (210) (219) (459)0 (22) (218) (480)
Increase (decrease) in cash
and cash equivalents 947 (112) 1,048 (465)(720) 348 328 (117)
Cash and cash equivalents
at beginning of period 365 8681,312 756 264 1,221
------- ------- ------- -------
Cash and cash equivalents
at end of period $1,312 $ 756 $1,312 $ 756$592 $1,104 $592 $1,104
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,JUNE 30, 2000
Note 1. Summary of Significant Accounting Policies
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the six-monthnine-month period ended March 31,June 30, 2000 are not necessarily indicative
of the results that may be expected for the year ended September 30, 2000.
Note 2. Industry Segment Data
The Company's primary business segments involve (1) operations of Microwave
Filter Company, Inc. (MFC) which manufactures filters used for preventing
interference or signal processing in cable television, satellite, broadcast,
aerospace and government markets; and (2) operations of Niagara Scientific,
Inc. (NSI) which manufactures industrial automation equipment.
Information by segment is as follows:
Three months ended SixNine months ended
(thousands of dollars) March 31 March 31,June 30 June 30
2000 1999 2000 1999
Net Sales (Unaffiliated):
MFC $1,481 $1,557 $2,984 $3,082$1,626 $1,567 $4,611 $4,649
NSI 418 202 484 310616 78 1,100 388
------ ------ ------ ------
Total $1,899 $1,759 $3,468 $3,392$2,242 $1,645 $5,711 $5,037
====== ====== ====== ======
Operating profit (loss): (a)
MFC $89 $87 $184 $198$149 $64 $333 $262
NSI (17) (11) (29) (118)(19) (46) (138)
------ ------ ------ ------
Total $72 $76 $155 $ 80$132 $45 $287 $124
====== ====== ======= =======
Identifiable assets: (b)
MFC $2,990 $3,624 $2,990 $3,624$3,742 $3,140 $3,742 $3,140
NSI 704 288 704 288578 317 578 317
------ ------ ------ ------
Subtotal 3,694 3,912 3,694 3,9124,320 3,457 4,320 3,457
Corporate Assets - Cash
And Cash Equivalents 1,312 756 1,312 756592 1,104 592 1,104
------ ------ ------ ------
Total $5,006 $4,668 $5,006 $4,668$4,912 $4,561 $4,912 $4,561
====== ====== ====== ======
(a) Operating profit (loss) is total revenue less operating expenses.
In computing operating profit, none of the following items have been
added or deducted: interest expense, income taxes and miscellaneous income.
Expenses incurred on behalf of both Companies are allocated based upon
estimates of their relationship to each entity.
(b) Identifiable assets by industry are those assets that are used in the
Companies operations in each industry.
MICROWAVE FILTER COMPANY, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MARCH 31,JUNE 30, 2000
Net sales for the sixnine months ended March 31,June 30, 2000 equaled $3,468,577,$5,710,952, an
increase of $76,945$674,098 or 2.3%13.4% when compared to net sales of $3,391,632$5,036,854 for the
sixnine months ended March 31,June 30, 1999. Net sales for the three months ended March 31,June 30,
2000 equaled $1,899,128,$2,242,375, an increase of $140,552$597,153 or 8.0%36.3% when compared to net
sales of $1,758,576$1,645,222 for the three months ended March 31,June 30, 1999. The increases in
net sales increases canare primarily be attributeddue to the increases in sales of Niagara Scientific,
Inc., a wholly owned subsidiary.
Niagara Scientific, Inc. (NSI) sales for the sixnine months ended March 31,June 30, 2000
equaled $483,842,$1,100,125, an increase of $173,602$712,156 or 56.0%184% when compared to net sales
of $310,240$387,969 for the sixnine months ended March 31,June 30, 1999. NSI'sNSI sales for the three
months ended March 31,June 30, 2000 equaled $417,471,$616,283, an increase of $215,052$538,554 or 106%693%
when compared to net sales of $202,419$77,729 for the three months ended March 31,June 30,
1999.
Microwave Filter Company, Inc. (MFC) sales for the sixnine months ended March
31,June
30, 2000 equaled $2,984,735,$4,610,827, a decrease of $96,657$38,058 or 3.1%0.8% when compared to
net sales of $3,081,392$4,648,885 for the sixnine months ended March 31,June 30, 1999. MFC sales for
the three months ended March 31,June 30, 2000 equaled $1,481,657, a decrease
of $74,500 or 4.8% when compared to sales of $1,556,157$1,626,092 for the three months
ended March 31, 1999. The decrease in sales can primarily be attributed to
the decrease in the sales of MFC's RF/Microwave products to original equipment
manufacturers.
Net income for the six months ended March 31,June 30, 2000, equaled $128,531, an increase of $58,876$58,599 or 84.5%3.7% when compared to net incomesales
of $69,655 for the
six months ended March 31, 1999. The increase in net income can primarily be
attributed to planned reductions in selling, general and administrative (SG&A)
expenses when compared to same period last year. Net income$1,567,493 for the three months ended March 31,June 30, 1999. The Company continues
to invest in production engineering and infrastructure development to
penetrate OEM (Original Equipment Manufacturer) market segments as they become
popular. MFC is intentionally de-emphasizing custom product sales in order to
concentrate its' technical resources and product development efforts toward
potential high volume customers. This is part of a concentrated effort to
provide substantial long-term growth.
The Company's total backlog of orders decreased $188,469 to $929,387 at June
30, 2000 equaled $64,022, an increase of $8,092 or 14.5% when compared to net income$1,117,856 at September 30, 1999. MFC's backlog of
$55,930 for the three months ended March 31,
1999.
Selling, general and administrative (SG&A) expenses for the six months ended
March 31,orders increased $56,899 to $577,475 at June 30, 2000 equaled $1,105,218, a decrease of $128,227 or 10.4% when compared to
SG&A expenses$520,576 at September 30, 1999. NSI's backlog of $1,233,445 for the six months ended March 31,
1999. SG&A expenses for the three months ended March 31,orders decreased $245,368 to
$351,912 at June 30, 2000 equaled
$553,183, a decrease of $39,684 or 6.7% when compared to SG&A expenses$597,280 at September 30, 1999.
Approximately 80% of $592,867 for the three months ended March 31, 1999. Advertising expenses,
professional fees and payroll expenses were all down when comparedtotal Company backlog is scheduled to the same
periods last year.ship by
September 30, 2000.
Gross profit for the sixnine months ended March 31,June 30, 2000 equaled $1,260,429,
a decrease$2,002,956, an
increase of $52,983$26,885 or 4.0%1.4% when compared to gross profit of $1,313,412$1,976,071 for
the sixnine months ended March 31,June 30, 1999. Gross profit for the three months ended
June 30, 2000 equaled $742,527 an increase of $79,868 or 12.1% when compared
to gross profit of $662,659 for the three months ended June 30, 1999. As a
percentage of sales, gross profit equaled 36.3%35.1% for the sixnine months ended March 31,June
30, 2000 when compared
to 38.7% for the six months ended March 31, 1999. Gross profit for the three
months ended March 31, 2000 equaled $625,087, a decrease of $43,359 or 6.5%,
when compared to gross profit of $668,44639.2% for the threenine months ended March 31,June 30,
1999. As a percentage of sales, gross profit equaled 32.9%33.1% for the three
months ended March 31,June 30, 2000 when compared to 38.0%gross profit of 40.3% for the three
months ended March 31,June 30, 1999. The higher costdecreases in gross profit as a percentage of
goods sold,sales, when compared to the same periods last year, can primarily be
attributed to product sales mix. NSI's sales, whose targeted gross profits are
lower than MFC's, equaled 14%19.3% of total sales for the sixnine months ended March 31,June
30, 2000 and 22%27.5% of total sales for the three months ended March 31,June 30, 2000
when compared to 9%7.7% of total sales for the sixnine months ended March 31,June 30, 1999
and 11%4.7% of total sales for the three months ended March 31,June 30, 1999.
On an industry segment basis, MFC's income
Selling, general and administrative (SG&A) expenses for the nine months
ended June 30, 2000 equaled $1,716,124, a decrease of $135,532 or 7.3% when
compared to SG&A expenses of $1,851,656 for the nine months ended June 30,
1999. SG&A expenses for the three months ended June 30, 2000 equaled $610,906,
a decrease of $7,305 or 1.2.% when compared to SG&A expenses of $618,211 for
the three months ended June 30, 1999. The decreases can primarily be
attributed to planned decreases in media advertising, trade show expenses and
consulting fees when compared to the same periods last year. As a percentage
of sales, SGA expenses equaled 30% of sales for the nine months ended June 30,
2000 and 27.2% of sales for the three months ended June 30, 2000 compared to
36.8% of sales for the nine months ended June 30, 1999 and 37.6% of sales for
the three months ended June 30, 1999.
Income from operations for the sixnine months ended March 31,June 30, 2000 equaled
$184,188, a decrease$286,832, an increase of $13,672 or 6.9%$162,417 when compared to income from operations of
$197,790$124,415 for the sixnine months ended March 31,June 30, 1999. The decreaseOn an industry segment
basis, MFC reported income from operations of $333,019 for the nine months
ended June 30, 2000 compared to $261,919 for the nine months ended June 30,
1999 and NSI reported an operating loss of $46,187 for the nine months ended
June 30, 2000 compared to an operating loss of $137,504 for the nine months
ended June 30, 1999. MFC's improvement can primarily be attributed to the decrease in
MFC sales. NSI recorded a loss form operations of $28,907 for the six months
ended March 31, 2000 compared to a loss from operations of $117,823 for the
six months ended March 31, 1999.lower
SGA expenses and NSI's improvement can primarily be attributed to the increase inhigher sales
when compared to last year,volume and planned decreases in
advertisinglower SGA expenses, and payroll expenses for the six months ended March 31,
2000 when compared to the same periodperiods last year.
Cash and cash equivalents increased $1,048,241$328,088 to $1,312,388$592,235 at March 31,June 30, 2000
when compared to $264,147 at September 30, 1999. The increase was a result of
$534,922$731,438 in net cash provided by operating activities, $731,969$184,700 in net cash
provided byused in investing activities and $218,650 in net cash used in financing
activities.
Cash provided byused in investing activities during the sixnine months ended March 31,June 30, 2000
consisted of funds provided by the sale ofused to purchase short-term investments and funds used for
capital expenditures.
Cash used in financing activities during the sixnine months ended March 31,June 30, 2000
consisted of funds used to pay a cash dividend and funds used to repurchase
common stock of the Company.
The Company's Board of Directors had authorized the repurchase of up to
500,000 shares of the Company's outstanding common stock. On January 26, 2000
the Company's Board of Directors authorized the repurchase of an additional
500,000 shares of the Company's outstanding common stock. The repurchases will
be made from time to time on the open market at prevailing market prices or in
negotiated transactions off the market. Since July 1998,1988, 423,246 shares of the
Company's outstanding common stock have been repurchased using existing cash
balances. Management believes the common stock repurchase program, given the
Company's present cash position, reflects its belief in the fundamental
strength of the business and also reflects its commitment to enhancing shareholder
value.
At March 31,June 30, 2000, the Company had unused aggregate lines of credit totaling
$600,000. Of these lines, $100,000 is for the purchase of equipment and is
collateralized by equipment and $500,000 is for working capital and is
collateralized by accounts receivable, inventories and equipment.
Management believes that its working capital requirements for the
forseeableforeseeable future will be met by its existing cash balances, future cash
flows from operations and its current credit arrangements.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
Any statements contained in this report which are not historical facts are
forward looking statements; and, therefore, many important factors could
cause actual results to differ materially from those in the forward looking
statements. Such factors include, but are not limited to, changes
(legislative, regulatory and otherwise) in the MMDS, LPTV or Cable industry,
demand for the Company's products (both domestically and internationally),
the development of competitive products, competitive pricing, market
acceptance of new product introductions, technological changes, general
economic conditions, litigation and other factors, risks and uncertainties
which may be identified in the Company's Securities and Exchange Commission
filings.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is unaware of any material threatened or pending
litigation against the Company.
Item 2. Changes in Securities
None during this reporting period.
Item 3. Defaults Upon Senior Securities
The Company has no senior securities.
Item 4. Submission of Matters to a Vote of Security Holders
a. The Annual meeting of the Shareholders was held on April 17,
2000 at the Holidy Inn, Carrier Circle, East Syracuse, New York
13057 at 10:00 A.M. pursuant to notice to the shareholders.
The following matters were submitted to the vote of shareholders:
Proposal 1. The election of three directors to hold office until
the Annual Meeting of the Shareholders at which their term expires
or until their successors have been duly elected.
Proposal 2. The ratification of PricewaterhouseCoopers LLP as the
Company's independent auditors for the fiscal year ending
September 30, 2000.
b. The following named persons received the number of votes set opposite
their respective names for election to the Board of Directors:
DIRECTORS VOTES FOR AUTHORITY
WITHHELD
Trudi B. Artini 1,713,123 26,736
Milo J. Peterson 1,714,287 25,572
David B. Robinson 1,713,123 26,736
c. The following proposition received the number of votes set opposite
its respective number:
VOTES FOR VOTES AGAINST ABSTENTIONS
Proposal 2 1,736,986 268 2,605None during this reporting period.
Item 6. Exhibits and Reports on Form 8-K
None.
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MICROWAVE FILTER COMPANY, INC.
May 15,August 11, 2000 Carl F. Fahrenkrug
(Date) --------------------------
Carl F. Fahrenkrug
Chief Executive Officer
May 15,August 11, 2000 Richard L. Jones
(Date) --------------------------
Richard L. Jones
Chief Financial Officer