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, 2003
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 by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
YES ( ) NO ( x )
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 - 2,904,781 shares as of March
31,June
30, 2003.
PART I. - FINANCIAL INFORMATION
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
MARCH 31,JUNE 30, 2003 SEPTEMBER 30, 2002
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $ 341344 $ 649
Investments 986881 1,378
Accounts receivable-trade, net 311443 379
Federal and state income
tax recoverable, 110net 152 0
Inventories 938659 963
Deferred tax asset - current 180 180
Prepaid expenses and other
current assets 11187 120
-------- --------
Total current assets 2,9772,746 3,669
Property, plant and equipment, net 1,0871,016 1,197
-------- --------
Total assets $ 4,0643,762 $ 4,866
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 261130 $ 180
Customer deposits 18986 140
Accrued federal and state
income taxes 0 234
Accrued payroll and related
expenses 11799 126
Accrued compensated absences 216242 249
Other current liabilities 4546 146
-------- --------
Total current liabilities 828603 1,075
Deferred tax liability -
noncurrent 30 30
-------- --------
Total liabilities 858633 1,105
-------- --------
Stockholders' Equity:
Common stock,$.10 par value 432 432
Additional paid-in capital 3,240 3,240
Retained earnings 1,040963 1,595
-------- --------
4,7124,635 5,267
Common stock in treasury,
at cost (1,506) (1,506)
-------- --------
Total stockholders' equity 3,2063,129 3,761
-------- --------
Total liabilities and
stockholders' equity $ 4,0643,762 $ 4,866
======== ========
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 2003 AND 2002
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended SixNine months ended
March 31 March 31June 30 June 30
2003 2002 2003 2002
Net sales $1,014 $2,111 $2,503 $4,501$1,323 $1,517 $3,826 $6,019
Cost of goods sold 762 1,317 1,802 2,5371,012 1,104 2,814 3,642
------- ------- ------- -------
Gross profit 252 794 701 1,964311 413 1,012 2,377
Selling, general and
administrative expenses 530 562 1,119 1,172432 544 1,550 1,716
------- ------- ------- -------
(Loss) income from
operations (278) 232 (418) 792(121) (131) (538) 661
Other income (net),
Principally interest 5 11 13 244 9 16 32
------- ------- ------- -------
(Loss) Income before
income taxes (273) 243 (405) 816(117) (122) (522) 693
(Benefit) Provision for
income taxes (94) 84 (140) 282(40) (42) (180) 239
------- ------- ------- -------
NET (LOSS) INCOME ($179) $15977) ($265) $53480) ($342) $454
======= ======= ======= =======
Basic (loss) earnings
per share ($0.06) $0.050.03) ($0.09) $0.180.03) ($0.12) $0.16
======= ======= ======= =======
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND SIXNINE MONTHS ENDED
MARCH 31,JUNE 30, 2003 AND 2002
(Unaudited)
(Amounts in thousands)
Three months ended SixNine months ended
March 31 March 31June 30 June 30
2003 2002 2003 2002
Cash flows from operating
activities:
Net (loss) income ($ 179)77) ($ 80) ($ 342) $ 159 ($ 265) $ 534454
Adjustments to reconcile
net (loss) income to net
cash provided by (used in)
operating activities:
Depreciation and amortization 75 66 151 13176 74 227 205
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 234 124 68 (201)(132) 284 (65) 83
Inventories (132) 45 25 (125)279 122 304 (3)
Federal and state income
tax recoverable (94)(42) 0 (110)(152) 0
Prepaid expenses & other
assets (14) (21) 9 (57)24 20 34 (37)
Increase (decrease) in:
Accounts payable & accrued
expenses 116 18 (247) 695(225) (263) (472) 432
------- ------- -------- -------
Net cash (used in) provided
by (used
in) operating activities 6 391 (369) 977(97) 157 (466) 1,134
------- ------- -------- -------
Cash flows from investing
activities:
Investments 381 (1,040) 392 (530)105 47 497 (483)
Capital expenditures (26) (8) (41) (36)(5) (177) (46) (213)
------- ------- -------- -------
Net cash provided by (used
in) investing activities 355 (1,048) 351 (566)100 (130) 451 (696)
Cash flows from financing
activities:
Cash dividend paid (290) (203)0 0 (290) (203)
------- ------- ------- -------
Net cash used in
financing activities (290) (203)0 0 (290) (203)
Increase (decrease) in cash
and cash equivalents 71 (860) (308) 2083 27 (305) 235
Cash and cash equivalents
at beginning of period 270 1,441341 581 649 373
------- ------- ------- -------
Cash and cash equivalents
at end of period $ 341344 $ 581608 $ 341344 $ 581608
======= ======= ======= =======
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,JUNE 30, 2003
Note 1. Summary of Significant Accounting Policies
The accompanying unaudited condensed consolidated 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. The Operatingoperating results for the sixnine
month period ended March 31,June 30, 2003 are not necessarily indicative of the results
that may be expected for the year ended September 30, 2003. For further
information, refer to the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10K for the year ended
September 30, 2002.
Note 2. Industry Segment Data
The Company's primary business segments involve (1) operations of Microwave
Filter Company, Inc. (MFC) which designs, develops, manufactures and sells
electronic filters, both for radio and microwave frequencies, to help process
signal distribution and to prevent unwanted signals from disrupting transmit
or receive operations. Markets served include cable television, television and
radio broadcast, satellite broadcast, mobile radio, commercial and defense
electronics; and (2) Niagara Scientific, Inc. (NSI), a wholly owned
subsidiary, which custom designs case packing machines to automatically pack
products into shipping cases. Customers are typically processors of food and
other commodity products with a need to reduce labor cost with a modest
investment and quick payback.
Information by segment is as follows:
Three months ended SixNine months ended
(thousands of dollars) March 31 March 31,June 30, June 30,
2003 2002 2003 2002
Net Sales (Unaffiliated):
MFC $ 967 $1,722 $2,268 $4,091862 $1,389 $3,130 $5,480
NSI 47 389 235 410461 128 696 539
------ ------ ------ ------
Total $1,014 $2,111 $2,503 $4,501$1,323 $1,517 $3,826 $6,019
====== ====== ====== ======
Operating (loss) profit: (a)
MFC ($205) $229170) ($216) $84332) ($385) $811
NSI (73) 3 (202) (51)49 (99) (153) (150)
------ ------ ------ ------
Total ($278) $232121) ($418) $792131) ($538) $661
====== ====== ======= =======
Identifiable assets: (b)
MFC $3,188 $4,162 $3,188 $4,162$2,987 $4,023 $2,987 $4,023
NSI 535 553 535 553431 322 431 322
------ ------ ------ ------
Subtotal 3,723 4,715 3,723 4,7153,418 4,345 3,418 4,345
Corporate Assets - Cash
And Cash Equivalents 341 581 341 581344 608 344 608
------ ------ ------ ------
Total $4,064 $5,296 $4,064 $5,296$3,762 $4,953 $3,762 $4,953
====== ====== ====== ======
(a) Operating profit (loss) is total revenue less cost of goods sold and
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.
Note 3. Inventories
Inventories net of provision for obsolescence consisted of the following:
(thousands of dollars) March 31,June 30, 2003 September 30, 2002
Raw materials and stock parts $468$421 $636
Work-in-process 419193 257
Finished goods 5145 70
------ ----
$938$659 $963
====== ====
The Company's provision for obsolescence equaled $345,161 at March 31,June 30,
2003 and September 30, 2002.
Note 4. Recent Accounting Pronouncements
SFAS No. 146,147, "Acquisitions of Certain Financial Institutions", SFAS No.
148, "Accounting for Costs Associated with Exit or Disposal
Activities," was issued June 2002Stock-Based Compensation - Transition and is effective for exit or disposal
activities initiated after December 31, 2002.Disclosure - an
amendment of FAS 123", SFAS No. 146 addresses
financial accounting149 " Amendment of Statement 133 on Derivative
Instruments and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) IssueHedging Activities", SFAS No. 94-3,
"Liability Recognition150, "Accounting for Certain
Employee Termination BenefitsFinancial Instruments with Characteristics of both Liabilities and Other
Costs to ExitEquity",
and FIN 46, "Consolidation of Variable Interest Entities - an Activity Including Certain Costs Incurred in a
Restructuring."interpretation
of ARB No. 51" have been issued. The adoption of this standard hasthese statements will have
no impact on the financial statements of the Company.
In November 2002, the FASB issued FASB Interpretation (FIN) 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, which clarifies disclosure and
recognition/measurement requirements related to certain guarantees. The
disclosure requirements are effective for financial statements issued after
December 15, 2002 and the recognition/measurement requirements are effective
on a prospective basis for guarantees issued or modified after December 31,
2002. We adopted the disclosure provisions of FIN 45 effective December 31,
2002, and the recognition/measurement requirements of FIN 45 did not have an
impact on our financial position or results of operations for the three months
ended March 31, 2003. See further discussion regarding indemnifications in
Footnote 5.
Note 5. Commitments and Contingencies
Legal matters:
The Company is unaware of any material threatened or pending litigation
against the Company.
Indemnifications:
The Certificate of Incorporation provides for indemnification of all
officers and directors for certain events or occurrences while the officer or
director is, or was serving, at the Company's request in such capacity. The
term of the indemnification period is for the officer's or director's
lifetime. There have been no modifications to the Certificate of Incorporation
since December 31, 2002, nevertheless, management believes the estimated fair
value of these indemnifications is minimal.
MICROWAVE FILTER COMPANY, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Microwave Filter Company, Inc. operates primarily in the United States and
principally in two industries. The Company extends credit to business
customers based upon ongoing credit evaluations. Microwave Filter Company,
Inc. (MFC) designs, develops, manufactures and sells electronic filters, both
for radio and microwave frequencies, to help process signal distribution and
to prevent unwanted signals from disrupting transmit or receive operations.
Markets served include cable television, television and radio broadcast,
satellite broadcast, mobile radio, commercial and defense electronics. Niagara
Scientific, Inc. (NSI), a wholly owned subsidiary, custom designs case packing
machines to automatically pack products into shipping cases. Customers are
typically processors of food and other commodity products with a need to
reduce labor cost with a modest investment and quick payback.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,JUNE 30, 2003 vs. THREE MONTHS ENDED MARCH 31,JUNE 30, 2002
Net sales for the three months ended March 31,June 30, 2003 equaled $1,013,892,$1,322,546, a
decrease of $1,097,059$194,766 or 52%12.8% when compared to net sales of $2,110,951$1,517,312 for the
three months ended March 31,June 30, 2002.
MFC sales for the three months ended June 30, 2003 equaled $861,743, a
decrease of $527,267 or 38.0% when compared to sales of $1,389,010 for the
three months ended June 30, 2002. The decrease in MFC sales for the quarter
can primarily be attributed to a general decline in customer demand for the Company's
products. MFC salesExcept for the three months ended March 31, 2003 equaled $966,522, a
decrease of $755,070 or 43.9% when compared to sales of $1,721,592 for the
three months ended March 31, 2002. The decrease in MFC sales can primarily be
attributed to a decrease in the sales of the company's standard
cable/satellite TV products. Last year, the Company saw an increase in demand over the last 21 months for the
company'sCompany's filters which suppress strong out-of-band interference caused by
military and civilian radar systems, MFC has experienced declines in sales in
most product groups primarily due to economic conditions. The increase in
demand for MFC's radar interference filters over the last two fiscal years can
primarily be attributed to the increased security measures that were taken as
a result of the September 11th terrorist attacks.
That demand has subsided resulting in the lower sales and due to the
current economic climate, MFC has not seen an increase in sales in other
product areas.
MFC's sales order backlog equaled $189,781$314,036 at March 31,June 30, 2003, a decreasean increase of
$108,536,$124,255, when compared to sales order backlog of $298,317$189,781 at DecemberMarch 31, 2002.2003.
However, backlog is not necessarily indicative of future sales. Accordingly,
the Company does not believe that its backlog as of any particular date is
representative of actual sales for any succeeding period. Approximately 98% of
MFC's sales order backlog at March 31,June 30, 2003 is scheduled to ship by September
30, 2003.
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 concentrating its technical resources and
product development efforts toward potential high volume customers as part of
a concentrated effort to provide substantial long-term growth.
NSI sales for the three months ended March 31,June 30, 2003 equaled $47,370, a
decrease$460,803, an
increase of $341,989$332,501 or 87.8%259.0% when compared to sales of $389,359$128,302 for the
three months ended March 31,June 30, 2002. Sales of NSI related equipment, on a quarter
to quarter basis, can be impacted by the timing of the shipment of the custom
designed equipment and the customer's scheduled delivery dates. At March 31,June 30,
2003, NSI's backlog of orders equaled $549,631, an increase$123,980, a decrease of $155,031$425,651 when
compared to backlog of $394,600$549,631 at DecemberMarch 31, 2002.2003. Despite the increase in
sales, order backlog, NSI continues to feel the effects of the sluggish economy and reduced
capital spending. Approximately 75% of NSI's total backlog of orders is scheduled to ship by
September 30, 2003.
Net income decreased $337,856 in the second quarter of fiscal 2003 toThe Company recorded a net loss of $179,076 when compared to net income of $158,781$76,552 for the three months ended March 31,June
30, 2003 compared to a net loss of $80,194 for the three months ended June 30,
2002. The decrease in net incomeimprovement, despite the lower sales volume, can primarily be
attributed to thea decrease in sales.operating expenses. The Company is emphasizing
cost controls and cost cutting measures in these uncertain economic times.
Gross profit for the three months ended March 31,June 30, 2003 equaled $251,687,$310,565, a
decrease of $541,919$102,454 or 68.3%24.8% when compared to gross profit of $793,606$413,019 for
the three months ended March 31,June 30, 2002. As a percentage of sales, gross profit
equaled 24.8%23.5% for the three months ended March 31,June 30, 2003 compared to 37.6%27.2% for
the three months ended March 31,June 30, 2002. The decreases in gross profit can primarily be
attributed to both the lower sales volume.volume and the product sales mix.
Selling, general and administrative (SGA) expenses for the three months
ended March 31,June 30, 2003 equaled $529,772,$431,358, a decrease of $32,217$113,082 or 5.7%20.8% when
compared to SG&A expenses of $561,989$544,440 for the three months ended March 31,June 30,
2002. As a percentage of sales, SGA expenses increaseddecreased to 52.3%32.6% of sales for
the three months ended March 31,June 30, 2003 when compared to 26.6%35.9% of sales for the
three months ended March 31,June 30, 2002 primarily due to the dollar decrease in
sales this year when compared
to the same period last year.expenses. Due to the uncertain economic climate, the Company ishas been
emphasizing cost controls and cost cutting measures to minimize operating
expenses. However, despite the downturn in sales, the Company does not expect
to significantly reduce its current marketing efforts or research and
development efforts.
On an industry segment basis, MFC recorded a loss from operations of
$169,790 for the three months ended March 31,June 30, 2003 of $204,811 compared to incomea loss from
operations of $228,973$32,397 for the three months ended March 31, 2002. MFC's lossJune 30, 2002 primarily due
to the decrease in sales this year when compared to the same period last year.
NSI recorded income from operations can primarily be attributedof $48,997 for the three months ended June
30, 2003 compared to the lower sales volume. NSI
recorded a loss from operations of $73,274$99,024 for the three months
ended March
31, 2003 comparedJune 30, 2002. NSI's improvement can be attributed to the higher sales
volume.
The Company recognized an income from operationstax benefit of $2,644$40,321 for the three months
ended March 31, 2002. NSI'sJune 30, 2003. The net operating loss from operations can alsomay be attributedcarried back to the
low sales volume.
SIXprior years
to recover taxes previously paid.
NINE MONTHS ENDED MARCH 31,JUNE 30, 2003 vs. SIXNINE MONTHS ENDED MARCH 31,JUNE 30, 2002
Net sales for the sixnine months ended March 31,June 30, 2003 equaled $2,503,049,$3,825,595, a
decrease of $1,998,362$2,193,128 or 44.4%36.4% when compared to net sales of $4,501,411$6,018,723 for
the sixnine months ended March 31,June 30, 2002.
MFC sales for the sixnine months ended March 31,June 30, 2003 equaled $2,267,685,$3,129,428, a
decrease of $1,823,635$2,350,902 or 44.6%42.9% when compared to sales of $4,091,320$5,480,330 for the
sixnine months ended March 31,June 30, 2002. The decrease in MFC sales can primarily be
attributed to a decrease in the sales of the company's standard
cable/satellite TV products. Last year, the Company saw an increase in demand
for the company's filters which suppress strong out-of-band interference
caused by military and civilian radar systems, primarily due to the increased
security measures that were taken as a result of the September 11th terrorist
attacks. That demand has subsided resulting in the lower sales and due to the
current economic climate, MFC has not seen an increase in sales in other
product areas.
NSI sales for the sixnine months ended March 31,June 30, 2003 equaled $235,364, a
decrease$696,167, an
increase of $174,727$157,774 or 42.6%29.3% when compared to sales of $410,091$538,393 for the sixnine
months ended March 31,June 30, 2002. Sales of NSI related equipment, on a quarter to
quarter basis, can be impacted by the timing of the shipment of the custom
designed equipment and the customer's scheduled delivery dates. At March 31,
2003, NSI's backlog of orders equaled $549,631, an increase of $243,693 when
compared to backlog of $305,938 at September 30, 2002. Despite the
increase in sales, order backlog, NSI continues to feel the effects of the sluggish economy
and reduced capital spending.
Approximately 75% of NSI's total backlog of
orders is scheduled to ship by September 30, 2003.
Net income for the sixnine months ended March 31,June 30, 2003 decreased $799,517$795,873 to a
loss of $265,244$341,795 when compared to net income of $534,273$454,078 for the sixnine months
ended March 31,June 30, 2002. The decrease in net income can primarily be attributed to
the lower sales volume.
Gross profit for the sixnine months ended March 31,June 30, 2003 equaled $701,373$1,011,938 or
28.0%26.5% of sales, a decrease of $1,262,324$1,364,778 or 64.3%57.4%, when compared to gross
profit of $1,963,697$2,376,716 or 43.6%39.5% of sales for the sixnine months ended March 31,June 30,
2002. The decreases in gross profit can primarily be attributed to the lower
sales volume.
SG&A expenses for the sixnine months ended March 31,June 30, 2003 equaled $1,118,969,$1,550,327, a
decrease of $52,693$165,775 or 4.5%9.7% when compared to SG&A expenses of $1,171,662$1,716,102 for
the sixnine months ended March 31,June 30, 2002. Due to the uncertain economic climate,
the Company is emphasizing cost controls and cost cutting measures to minimize
operating expenses. However, despite the downturn in sales, the Company does
not expect to significantly reduce its current marketing efforts or research
and development efforts.
The Company recognized an income tax benefit of $180,029 for the nine months
ended June 30, 2003. The net operating loss may be carried back to prior years
to recover taxes previously paid.
Critical Accounting Policies
The Company's consolidated financial statements are based on the application
of generally accepted accounting principles (GAAP). GAAP requires the use of
estimates, assumptions, judgments and subjective interpretations of accounting
principles that have an impact on the assets, liabilities, revenue and expense
amounts reported. The Company believes its use of estimates and underlying
accounting assumptions adhere to GAAP and are consistently applied. Valuations
based on estimates are reviewed for reasonableness and adequacy on a
consistent basis throughout the Company. Primary areas where financial
information of the Company is subject to the use of estimates, assumptions and
the application of judgment include revenues, receivables, inventories, and
taxes.
Revenues from product sales are recorded as the products are shipped and
title and risk of loss have passed to the customer, provided that no
significant vendor or post-contract support obligations remain and the
collection of the related receivable is probable. Collections in advance of
the Company's performance of such work are reflected as customer deposits in
the accompanying consolidated balance sheet.
Allowances for doubtful accounts are based on estimates of losses related to
customer receivable balances. The establishment of reserves requires the use
of judgment and assumptions regarding the potential for losses on receivable
balances.
The Company's inventories are valued at the lower of cost or market. The
Company uses certain estimates and judgments and considers several factors
including product demand and changes in technology to provide for excess and
obsolescence reserves to properly value inventory.
The Company has deferred tax assets that are reviewed for recoverability and
valued accordingly. These assets are evaluated by using the ability to carry
back losses to profitable years or by using estimates of future taxable income
streams.streams, as applicable. Valuations related to tax accruals and assets can be
impacted by changes to tax codes, changes in statutory tax rates and the
Company's future taxable income levels.
LIQUIDITY and CAPITAL RESOURCES
Cash and cash equivalents decreased $307,998$304,923 to $341,198$344,273 at March 31,June 30, 2003
when compared to $649,196 at September 30, 2002. The decrease was a result of
$368,426$465,590 in net cash used in operating activities, $350,906$451,145 in net cash
provided by investing activities and $290,478 in net cash used in financing
activities.
The decreaseincrease in accounts receivable of $67,946$64,669 at March 31,June 30, 2003, when
compared to September 30, 2002, can primarily be attributed to the increase in
sales during the month ended June 30, 2003 when compared to the month ended
September 30, 2002.
The decrease in inventories of $304,427 at June 30, 2003, when compared to
September 30, 2002, can primarily be attributed to the decrease in the sales
during the month ended March 31,order backlog at June 30, 2003 when compared to the month ended
September 30, 2002. The
increaseCompany's sales order backlog equaled $438,016 at June 30, 2003 compared to
$705,578 at September 30, 2002.
The decrease in accounts payable of $81,424$49,978 at March 31,June 30, 2003, when compared
to September 30, 2002, can primarily be attributed to the increasedecrease in
purchases as a result ofdue to the increase in the NSIlower sales order backlog at March
31, 2003orders this year when compared to September 30, 2002.the same
period last year.
The increasedecrease of $49,020$53,734 in customer deposits at March 31,June 30, 2003, when compared
to September 30, 2002, can primarily be attributable to the increasedecrease in the
NSI sales order backlog.
The decrease in other current liabilities of $101,438$100,106 at March 31,June 30, 2003, when
compared to September 30, 2002, can primarily be attributed to the payment of
the fiscal year 2002 discretionary profit sharing contribution.
Cash used inprovided by investing activities during the sixnine months ended March 31,June 30,
2003 consisted of funds provided by the sale of investments ($391,878)497,184) and
funds used for capital expenditures ($40,972)46,039).
Cash used in financing activities during the sixnine months ended March 31,June 30, 2003
consisted of funds used to pay a cash dividend ($290,478) on January 31, 2003.
At March 31,June 30, 2003, 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.$750,000.
Management believes that its working capital requirements for the forseeable
future will be met by its existing cash balances, future cash flows from
operations and its current credit arrangements.
RECENT ACCOUNTING PRONOUNCEMENTS
SFAS No. 146,147, "Acquisitions of Certain Financial Institutions", SFAS No.
148, "Accounting for Costs Associated with Exit or Disposal
Activities," was issued June 2002Stock-Based Compensation - Transition and is effective for exit or disposal
activities initiated after December 31, 2002.Disclosure - an
amendment of FAS 123", SFAS No. 146 addresses
financial accounting149 " Amendment of Statement 133 on Derivative
Instruments and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) IssueHedging Activities", SFAS No. 94-3,
"Liability Recognition150, "Accounting for Certain
Employee Termination BenefitsFinancial Instruments with Characteristics of both Liabilities and Other
Costs to ExitEquity",
and FIN 46, "Consolidation of Variable Interest Entities - an Activity Including Certain Costs Incurred in a
Restructuring."interpretation
of ARB No. 51" have been issued. The adoption of this standard hasthese statements will have
no impact on the financial statements of the Company.
In November 2002, the FASB issued FASB Interpretation (FIN) 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others, which clarifies disclosure and
recognition/measurement requirements related to certain guarantees. The
disclosure requirements are effective for financial statements issued after
December 15, 2002 and the recognition/measurement requirements are effective
on a prospective basis for guarantees issued or modified after December 31,
2002. We adopted the disclosure provisions of FIN 45 effective December 31,
2002, and the recognition/measurement requirements of FIN 45 did not have an
impact on our financial position or results of operations for the three months
ended March 31, 2003.
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. Controls and Procedures
During(a.) Evaluation of Disclosure Controls and Procedures
As of June 30, 2003, the 90-day period prior toprincipal executive officer and principal financial
officer of the filing date of this report,
management, including the Company's Chief Executive Officer and Chief
Financial Officer,Company have evaluated the effectiveness of the design and
operation of the Company's disclosure controls and procedures.procedures (as defined in
Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as
amended (Exchange Act)). Based upon and as of the date of that evaluation, the Chief Executive
Officerprincipal executive
officer and Chief Financial Officerprincipal financial officer of the Company have concluded that
thesuch disclosure controls and procedures wereare effective in alltimely alerting them
to any material respects,information relating to ensure that informationthe Company and its consolidated
subsidiaries required to be disclosedincluded in the Company's reports filed or
submitted with the Company filesSecurities and submitsExchange Commission under the Exchange Act is recorded,
processed, summarized and reported as and when required.Act.
(b.) Changes in Internal Control Over Financial Reporting
There havehas been no significant changeschange in the Company's internal controlscontrol over
financial reporting that occurred during the Company's most recent fiscal
quarter that has materially affected, or in other factors that could significantlyis reasonable likely to materially
affect, the Company's internal controls subsequent to the date the Company carried out its
evaluation. There were no significant deficiencies or material
weaknesses identified in the evaluation and, therefore, no corrective
actions were taken.control over financial reporting.
Item 5. Submission of Matters to a Vote of Security Holders
a. The Annual meeting of the Shareholders was held on April 7,
2003 at the Holiday Inn, Carrier Circle, East Syracuse, New York
13057 at 10:00 A.M. pursuant to notice to the shareholders.
The following matter was 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.
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 2,568,607 25,775
Milo Peterson 2,571,487 22,895
David B. Robinson 2,575,608 18,774None during this reporting period.
Item 6. Exhibits and Reports on Form 8-K
a.(a.) Exhibits
Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
b.(b.) 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.
MayAugust 14, 2003 Carl F. Fahrenkrug
(Date) --------------------------
Carl F. Fahrenkrug
Chief Executive Officer
MayAugust 14, 2003 Richard L. Jones
(Date) --------------------------
Richard L. Jones
Chief Financial Officer
CERTIFICATION
I, Carl F. Fahrenkrug, Chief Executive Officer of Microwave Filter Company,
Inc. ("Company"), certify that:
1. I have reviewed this Form 10-Q of the Company;Microwave Filter Company, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Companyregistrant as of, and for, the periods presented in this
quarterly report;
4. The Company'sregistrant's other certifying officersofficer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-1413a-15(e) and 15d-14)15d-15(e)) for the Companyregistrant and we
have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the Company,registrant,
including it'sits consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures, based on our
evaluation as of the evaluation Date;end
of the period covered by this report based on such evaluation; and
c) disclosed in this quarterly report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The Company'sregistrant's other certifying officersofficer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the Company'sregistrant's auditors and the audit committee of Company'sthe registrant's board
of directors ( or(or persons performing the equivalent function)functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal controlscontrol over financial reporting which couldare
reasonably likely to adversely affect the Company'sregistrant's ability to
record, process, summarize and report financial data and have identified for the
Company's auditors any material weakness in internal controls,information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls;
and
6. The Company's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.control
over financial reporting.
Date: MayAugust 14, 2003 /s/ Carl F. Fahrenkrug
Carl F. Fahrenkrug
CERTIFICATION
I, Richard L. Jones, Chief Financial Officer of Microwave Filter Company, Inc.
("Company"), certify that:
1. I have reviewed this Form 10-Q of the Company;Microwave Filter Company, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Companyregistrant as of, and for, the periods presented in this
quarterly report;
4. The Company'sregistrant's other certifying officersofficer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-1413a-15(e) and 15d-14)15d-15(e)) for the Companyregistrant and we
have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the Company,registrant,
including it'sits consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the Company'sregistrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure of the disclosure controls and procedures, based on our evaluation as of the Evaluation Date:end
of the period covered by this report based on such evaluation; and
c) disclosed in this quarterly report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the
case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The Company'sregistrant's other certifying officersofficer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of Company'sthe registrant's board
of directors ( or(or persons performing the equivalent function)functions):
a) All significant deficiencies and material weaknesses in the design or
operation of internal controlscontrol over financial reporting which couldare
reasonably likely to adversely affect the Company'sregistrant's ability to
record, process, summarize and report financial data and have identified for the
Company's auditors any material weakness in internal controls,information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls; and
6. The Company's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.control
over financial reporting.
Date: MayAugust 14, 2003 /s/ Richard L. Jones
Richard L. Jones
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C SECTION1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Microwave Filter Company, Inc. (the
Company) on Form 10-Q for the period ending March 31,June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Carl F.
Fahrenkrug, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/Carl F. Fahrenkrug
Carl F. Fahrenkrug
Chief Executive Officer
MayAugust 14, 2003
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C SECTION1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Microwave Filter Company, Inc. (the
Company) on Form 10-Q for the period ending March 31,June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the Report), I, Richard
L. Jones, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
/s/Richard L. Jones
Richard L. Jones
Chief Financial Officer
MayAugust 14, 2003