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 DecemberMarch 31, 19961997
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) 437-3953438-4700
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 - 3,552,8383,560,491 shares as of DecemberMarch
31, 1996.1997.
PART I. - FINANCIAL INFORMATION
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS
ENDED DECEMBERMARCH 31, 19961997 AND 19951996
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended Dec.Six months ended
March 31 March 31
1997 1996 19951997 1996
[S] [C] [C] [C] [C]
Net sales $1,722 $2,091$1,207 $1,861 $2,929 $3,952
Cost of goods sold 1,095 1,253730 1,167 1,825 2,420
------- ------- ------- -------
Gross profit 627 838477 694 1,104 1,532
Selling, general and
administrative expenses 586 646554 625 1,141 1,271
------- ------- ------- -------
Income (loss) from
operations 41 192(77) 69 (37) 261
Other income (expense) 16 126 3 43 4
------- ------- ------- -------
Income (loss) before
income taxes 57 193(51) 72 6 265
Provision (benefit)
for income taxes 20 67(18) 25 2 91
------- ------- ------- -------
NET INCOME 37 126(LOSS) ($34) $47 $4 $174
======= ======= ======= =======
Earnings (loss) per share ($0.01) $0.01 $0.04$0.00 $0.05
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER(Unaudited)
(Amounts in thousands)
MARCH 31, 19961997 SEPTEMBER 30, 1996
(Unaudited)
[S] [C] [C]
Assets
Current Assets:
Cash and cash equivalents $ 1,187956 $ 1,281
Accounts receivable-trade,net 619406 724
Federal and state income tax
receivable 12 -
Inventories 1,3011,342 1,499
Prepaid expenses and other
current assets 348395 323
-------- --------
Total current assets 3,4553,111 3,827
Property,plant and equipment,net 1,5771,615 1,583
-------- --------
Total assets $ 5,0324,726 $ 5,410
======== ========
Liabilities And Stockholders' Equity
Current liabilities:
Current portion of long term
debt $ 5354 $ 53
Accounts payable 241245 300
Customer deposits 113124 199
Accrued federal and state
income taxes 71- 289
Accrued payroll and related
expenses 107103 127
Accrued compensated absences 196173 198
Other current liabilities 5254 81
-------- --------
Total current liabilities 833752 1,247
-------- --------
Long term debt, less current
portion 8975 103
Deferred compensation and
other liabilities 8679 82
-------- --------
Total liabilities 1,008907 1,432
-------- --------
Stockholders' Equity:
Common stock,$.10 par value 427428 426
Additional paid-in capital 3,1993,206 3,193
Retained earnings 1,035823 997
-------- --------
4,6614,457 4,616
Common stock in treasury,
at cost (637)(638) (638)
-------- --------
Total stockholders' equity 4,0243,819 3,978
-------- --------
Total liabilities and
stockholders' equity $ 5,0324,726 $ 5,410
======== ========
[FN]
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND SIX MONTHS ENDED
DECEMBERMARCH 31, 1997 AND 1996
AND 1995
(Unaudited)
(Amounts in thousands)
Three months ended DecemberSix months ended
March 31 March 31
1997 1996 19951997 1996
[S] [C] [C] [C] [C]
Cash flows from operating
activities:
Net income $ 37(34) $ 12647 $ 4 $ 174
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 78 8577 82 156 166
Stock compensation 8 4Compensation 7 42 15 46
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 105 108201 65 306 174
Inventories 198 129(41) 295 157 423
Prepaid expenses & other
assets (25) (3)(48) (58) (72) (61)
Increase (decrease) in:
Accounts payable & accrued
expenses (414) 50(82) (183) (496) (133)
Deferred compensation &
other liabilities 4(6) (1) (3) (2)
------- ------- -------- -------
Net cash provided by
(used in)
operating activities (9) 49874 290 67 788
------- ------- -------- -------
Cash flows from investing activities:
Capital expenditures (72) (21)(116) (31) (188) (52)
Cash flows from financing activities:
Principal payments on
long-term debt (13) (36)(37) (27) (72)
Purchase of treasury
stock (1) (1)
Cash dividend paid (178) (168) (178) (168)
------- ------- ------- -------
Net cash used in
financing activities (191) (205) (204) (241)
Increase (decrease) in cash
and cash equivalents (94) 441(233) 53 (325) 494
Cash and cash equivalents
at beginning of period 1,187 962 1,281 521
------- ------- ------- -------
Cash and cash equivalents
at end of period $1,187 $ 962956 $1,015 $ 956 $1,015
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBERMARCH 31, 19961997
Note 1. Summary of Significant Accounting Policies
The accompanying financial statements, which should be read in conjunction
with the financial statements of Microwave Filter Company, Inc. ("the
Company") included in the 1996 Annual Report filed on Form 10-K, are
unaudited but have been prepared in the ordinary course of business for
the purpose of providing information with respect to the interim period.
The Company believes that all adjustments (none of which were other than
normal recurring accruals) necessary for a fair presentation for such
periods have been included.
Note 2. Earnings (loss) per share
Earnings (loss) per common share are calculated based upon the weighted
average number of shares of common stock outstanding during the periods
including, when significant, any common stock equivalents and after
restatement of any stock dividends. The weighted average number of shares
of common stock outstanding used for the computations were 3,547,3983,551,394 for
the six months and 3,492,3073,555,390 for the three months ending DecemberMarch 31, 19961997
and December3,512,398 for the six months and 3,532,489 for the three months ending
March 31, 1995, respectively.1996.
Note 3. Inventories
Inventories are stated at the lower of cost determined on the first-in,
first-out method or market.
Inventories consisted of the following:
DecemberMarch 31, September 30,
19961997 1996
Raw materials and stock parts $ 833859 $ 958
Work-in-process 260268 299
Finished goods 208215 242
------- -------
$ 1,3011,342 $ 1,499
======= =======
MICROWAVE FILTER COMPANY, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
DECEMBERMARCH 31, 19961997
Net sales decreased $368,593 or 17.6%for the six months ended March 31, 1997 equaled $2,929,453, a
decrease of 25.9% when compared to $1,722,422 duringnet sales of $3,952,503 for the six
month period ended March 31, 1996. Net sales for the three months ended
DecemberMarch 31, 19961997 equaled $1,207,031, a decrease of 35.2% when compared to
net sales of $2,091,015 during$1,861,488 for the samethree month period last year. Management believes the decrease in sales can
be attributed primarily to market conditions.ended March 31, 1996.
The Company's two largest markets,market segments, Cable TVTelevision and Wireless
Cable, both
realizedcontinue to experience a decrease in the demand for hardware;
primarily due to competition from Direct Broadcast Satellite and the lack
of readily available competitively priced digital compression technology
in the Wireless Cable and Wireline Cable marketplace. It is anticipated
that it will take at least 12 months for digital technology to make
sufficient progress in the Wireless and Wireline Cable venue to shift
the advantage away from Direct Broadcast Satellite. During this hiatus,
the Company's primary objective will continue to be the development of
new products and the development of new market segments, such as LMDS
and PCS.
Gross profit for the six months ended March 31, 1997 equaled $1,103,837
or 37.7% of sales compared to $1,532,306 or 38.8% of sales for the six month
period ended March 31, 1996. Gross profit for the three months ended March
31, 1997 equaled $477,100 or 39.5% of sales compared to $694,466 or 37.3% of
sales for the three month period ended March 31, 1996. The decreases in gross
profit are primarily due to the decreases in sales. The increase in gross
profit as a percentage of sales during the first quarter of fiscalended March 31, 1997, when
compared to the same period last year. Management believes both increased
competition (i.e., Direct Broadcast Satellite)year, can be attributed to product sales
mix, improvements in productivity and planned reductions in manufacturing
costs.
Selling, general and administrative (SG&A) expenses for the delays insix months
ended March 31, 1997 equaled $1,140,634, a decrease of $130,622 or 10.3%
when compared to SG&A expenses of $1,271,256 during the implementation of digital technology have had a negative impact on the
Cable TV and Wireless Cable markets and; consequently, on first quarter
sales.
In an effort to mitigate these conditions, the Company is emphasizing
new product and new market development, such as the PCS market, and
converting the efficiencies and the cost reductions the Company's realized
over the last two years into more competitive pricing. Management believes
the Company's strong financial position will enable it to make the requisite
investments in new product development and promotion necessary to maximize
long term growth and shareholder value.
Net income decreased $88,842 to $37,411 duringsix month period
ended March 31, 1996. SG&A expenses for the three months ended DecemberMarch 31,
19961997 equaled $554,379, a decrease of $71,076 or 11.4% when compared to
net incomeSG&A expenses of $126,253$625,455 during the samethree month period last year.ended March 31,
1996. The decrease in net incomedecreases can primarily be attributed to the decreasereductions in sales.
As a percentage ofpayroll
and payroll related expenses, sales cost of goods sold increased to 63.6% during
the three months ended December 31, 1996commissions and legal costs when
compared to 59.9% during
the same periodperiods last year.
The increase can be attributed toOther income for the lower
sales volume and product sales mix.
Selling, general and administrative expenses decreased $59,546 to
$586,255 during the threesix months ended DecemberMarch 31, 19961997 totaled $42,472,
an increase of $38,547 when compared to selling, generalthe six month period ended March
31, 1996. The increase is primarily due to an increase in interest income
and administrative expenses of $645,801 duringa decrease in interest expense when compared to the samesix month period
last year.ended March 31, 1996.
Cash and cash equivalents decreased $93,527$325,267 to $1,187,472$955,732 at DecemberMarch 31,
19961997 when compared to $1,280,999 at September 30, 1996. The decrease was
a result of $8,363$66,799 in net cash used inprovided by operating activities, $71,996$187,906
in net cash used for capital expenditures and $13,168$204,160 in net cash used in
financing activities.
At DecemberMarch 31, 1996,1997, the Company had available 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. In
addition, the Company has a Letterletter of Creditcredit facility,
available, for up to $500,000,
which willis collateralized by specific inventory to be secured by specified inventory
being purchased.
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is unaware of any material threatened or pending
litigation against the company.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
None during this reporting period.a. The Annual meeting of the Shareholders was held on April 10,
1997 at the Holiday 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 Coopers & Lybrand L.L.P. as the
Company's independent auditors for the fiscal year ending
September 30, 1997.
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 Artini 2,745,813 116,337
Milo Peterson 2,741,737 100,413
David Robinson 2,723,332 118,818
c. The following proposition received the number of votes set opposite
its respective number:
VOTES FOR VOTES AGAINST ABSTENTIONS
Proposal 2 2,760,473 71,329 10,348
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.
February 14,May 13, 1997 Carl F. Fahrenkrug
(Date) --------------------------
Carl F. Fahrenkrug
Chief Executive Officer
February 14,May 13, 1997 Richard L. Jones
(Date) --------------------------
Richard L. Jones
Chief Financial Officer