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, 1997
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 - 3,560,4913,545,108 shares as of March
31, 1997.June
30, 1997
PART I. - FINANCIAL INFORMATION
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS
ENDED MARCH 31, 1997 AND 1996
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended Six months ended
March 31 March 31
1997 1996 1997 1996
[S] [C] [C] [C] [C]
Net sales $1,207 $1,861 $2,929 $3,952
Cost of goods sold 730 1,167 1,825 2,420
------- ------- ------- -------
Gross profit 477 694 1,104 1,532
Selling, general and
administrative expenses 554 625 1,141 1,271
------- ------- ------- -------
Income (loss) from
operations (77) 69 (37) 261
Other income (expense) 26 3 43 4
------- ------- ------- -------
Income (loss) before
income taxes (51) 72 6 265
Provision (benefit)
for income taxes (18) 25 2 91
------- ------- ------- -------
NET INCOME (LOSS) ($34) $47 $4 $174
======= ======= ======= =======
Earnings (loss) per share ($0.01) $0.01 $0.00 $0.05
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
MARCH 31,JUNE 30, 1997 SEPTEMBER 30, 1996
[S] [C] [C]
Assets
Current Assets:
Cash and cash equivalents $ 956981 $ 1,281
Accounts receivable-trade,net 406542 724
Federal and state income tax
receivable 1211 -
Inventories 1,3421,289 1,499
Prepaid expenses and other
current assets 395345 323
-------- --------
Total current assets 3,1113,168 3,827
Property,plant and equipment,net 1,6151,566 1,583
-------- --------
Total assets $ 4,7264,734 $ 5,410
======== ========
Liabilities And Stockholders' Equity
Current liabilities:
Current portion of long term
debt $ 5455 $ 53
Accounts payable 245217 300
Customer deposits 12464 199
Accrued federal and state
income taxes - 289
Accrued payroll and related
expenses 103116 127
Accrued compensated absences 173189 198
Other current liabilities 5461 81
-------- --------
Total current liabilities 752702 1,247
-------- --------
Long term debt, less current
portion 7578 103
Deferred compensation and
other liabilities 7960 82
-------- --------
Total liabilities 907840 1,432
-------- --------
Stockholders' Equity:
Common stock,$.10 par value 428 426
Additional paid-in capital 3,206 3,193
Retained earnings 823897 997
-------- --------
4,4574,531 4,616
Common stock in treasury,
at cost (638) (638)
-------- --------
Total stockholders' equity 3,8193,894 3,978
-------- --------
Total liabilities and
stockholders' equity $ 4,7264,734 $ 5,410
======== ========
[FN]
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS
ENDED JUNE 30, 1997 AND 1996
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended Nine months ended
June 30 June 30
1997 1996 1997 1996
[S] [C] [C] [C] [C]
Net sales $1,669 $1,877 $4,598 $5,829
Cost of goods sold 911 1,171 2,736 3,591
------- ------- ------- -------
Gross profit 758 706 1,862 2,238
Selling, general and
administrative expenses 669 613 1,810 1,884
------- ------- ------- -------
Income from
operations 89 93 52 354
Other income 24 9 66 13
------- ------- ------- -------
Income before
income taxes 113 102 119 367
Provision for
income taxes 39 35 41 127
------- ------- ------- -------
NET INCOME $74 $67 $78 $240
======= ======= ======= =======
Earnings per share $0.02 $0.02 $0.02 $0.07
======= ======= ======= =======
[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, 1997 AND 1996
(Unaudited)
(Amounts in thousands)
Three months ended SixNine months ended
March 31 March 31June 30 June 30
1997 1996 1997 1996
[S] [C] [C] [C] [C]
Cash flows from operating
activities:
Net income $ (34)74 $ 4767 $ 478 $ 174240
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 77 82 156 16679 84 235 251
Stock Compensation 7 42compensation 0 6 15 4651
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 201 65 306 174(124) 59 182 233
Inventories (41) 295 157 42352 225 210 649
Prepaid expenses & other
assets (48) (58) (72) (61)51 62 (22) 1
Increase (decrease) in:
Accounts payable & accrued
expenses (82) (183) (496) (133)(63) 25 (559) (107)
Deferred compensation &
other liabilities (6) (1) (3) (2)(1) (4) (4)
------- ------- --------------- -------
Net cash provided by
operating activities 74 290 67 78868 527 135 1,314
------- ------- --------------- -------
Cash flows from investing activities:
Capital expenditures (116) (31) (188) (52)(29) (86) (217) (138)
Cash flows from financing activities:
Principal payments on
long-term debt (13) (37) (27) (72)(14) (248) (40) (320)
Purchase of treasury
stock (1)- - - (1)
Cash dividend paid (178) (168)- - (178) (168)
------- ------- ------- -------
Net cash used in
financing activities (191) (205) (204) (241)(14) (248) (218) (489)
Increase (decrease) in cash
and cash equivalents (233) 53 (325) 49425 193 (300) 687
Cash and cash equivalents
at beginning of period 1,187 962956 1,015 1,281 521
------- ------- ------- -------
Cash and cash equivalents
at end of period $ 956 $1,015981 $1,208 $ 956 $1,015981 $1,208
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31,JUNE 30, 1997
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 3,551,3943,549,301 for
the sixnine months and 3,555,3903,545,115 for the three months ending March 31,June 30, 1997
and 3,512,3983,520,194 for the sixnine months and 3,532,4893,535,786 for the three months ending
March 31,June 30, 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:
March 31,June 30, September 30,
1997 1996
Raw materials and stock parts $ 859825 $ 958
Work-in-process 268258 299
Finished goods 215206 242
------- -------
$ 1,3421,289 $ 1,499
======= =======
MICROWAVE FILTER COMPANY, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MARCH 31,JUNE 30, 1997
Net sales for the sixnine months ended March 31,June 30, 1997 equaled $2,929,453,equalled $4,598,447, a
decrease of 25.9%$1,230,862 or 21.1% when compared to net sales of $3,952,503$5,829,309
for the six
month periodnine months ended March 31,June 30, 1996. Net sales for the three months ended
March 31,June 30, 1997 equaled $1,207,031,equalled $1,668,994, a decrease of 35.2%$207,812 or 11.1% when
compared to net sales of $1,861,488$1,876,806 for the three month periodmonths ended March 31,June 30, 1996.
The decreases in net sales can be attributed to a slowdown in sales in the
Company's two largest market segments, Cable Television and Wireless Cable, continueCable.
The Company continues to experience a decreaseslowdown in the demand for hardware;hardware
in both the Cable Television and Wireless Cable markets 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 sixnine months ended March 31,June 30, 1997 equaled $1,103,837equalled $1,862,058
or 37.7%40.5% of sales compared to $1,532,306$2,238,166 or 38.8%38.4% of sales for the six month
periodnine
months ended March 31,June 30, 1996. Gross profit for the three months ended March
31,June
30, 1997 equaled $477,100equalled $758,221 or 39.5%45.4% of sales compared to $694,466$705,860 or 37.3%37.6%
of sales forduring the three month periodmonths ended March 31,June 30, 1996. The dollar decreases
in gross profit arecan primarily duebe attributed to the decreases in sales. The
increaseincreases in gross profit as a percentage of sales, during the quarter ended March 31, 1997, when compared to the
same periodperiods last year, can primarily be attributed to product sales mix,
improvements in productivity and planned reductions in manufacturing costs.
Selling, general and administrative (SG&A) expenses for the sixnine months
ended March 31,June 30, 1997 equaled $1,140,634,equalled $1,809,918, a decrease of $130,622$74,152 or 10.3%3.9% when
compared to SG&A expenses of $1,271,256 during$1,884,070 for the six month periodnine months ended March 31,June 30,
1996. SG&A expenses for the three months ended March 31,June 30, 1997 equaled $554,379, a decreaseequalled
$669,284, an increase of $71,076$56,470 or 11.4%9.2% when compared to SG&A expenses of
$625,455$612,814 for the three months ended June 30, 1996. The increase in SG&A
expenses during the three month periodmonths ended March 31,
1996. The decreases can primarily be attributed to reductions in payroll
and payroll related expenses, sales commissions and legal costsJune 30, 1997 when compared to the
same periodsperiod last year.year is due primarily to an increase in advertising and
promotional expenses. The Company's primary objective continues to be
the development of new products and the development of new markets, such
as LMDS and PCS.
Other income for the sixnine months ended March 31,June 30, 1997 totaled $42,472,equalled $66,461,
an increase of $38,547$53,594 when compared to other income of $12,867 for the
six month periodnine months ended March
31,June 30, 1996. The increase iscan primarily duebe attributed
to an increase in interest income and a decrease in interest expense when
compared to the six monthsame period ended March 31, 1996.
last year.
Cash and cash equivalents decreased $325,267$299,669 to $955,732$981,330 at March 31,June 30, 1997
when compared to $1,280,999 at September 30, 1996. The decrease was a result
of $66,799$135,176 in net cash provided by operating activities, $187,906$217,172 in net
cash used for capital expenditures and $204,160$217,673 in net cash used in financing
activities.
At March 31,June 30, 1997, the Company had 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 letter of credit facility, for up to $500,000,
which is collateralized by specific inventory to be 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.
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 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 10,348None during this reporting period.
Item 6. Exhibits and Reports on Form 8-K
None.None during this reporting period.
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 13, 1997 Carl F. Fahrenkrug
(Date) --------------------------
Carl F. Fahrenkrug
Chief Executive Officer
MayAugust 13, 1997 Richard L. Jones
(Date) --------------------------
Richard L. Jones
Chief Financial Officer