UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 3, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 1-8821
GENERAL MICROWAVE CORPORATION
(Exact name of registrant as specified in its charter)
New York 11-1956350
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5500 New Horizons Boulevard, Amityville, New York 11701
(Address of principal executive offices) (Zip Code)
(516) 226-8900
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
As of June 20, 1995, there were 1,194,890 shares of common stock outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements.
<PAGE>
GENERAL MICROWAVE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 3, 1995
<PAGE>
<TABLE>BALANCE SHEET ASSETS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
June 3, 1995 February 28, 1995
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $1,520,530 1,053,861
Investments 765,438 757,909
Accounts receivable less allowance for
doubtful accounts of $90,000 3,285,923 5,597,150
Inventories 8,274,492 7,594,526
Prepaid expenses and other current assets 197,403 208,152
Deferred income taxes, net 485,965 485,965
Total current assets 14,529,751 15,697,563
Property, plant and equipment, net 6,644,497 6,586,563
Costs in excess of fair market value of
net assets acquired, net 983,868 721,149
Debt issuance costs, net 91,277 96,494
Intangible assets, net 266,661 217,291
Other assets 136,343 122,768
Total assets 22,652,397 23,441,828
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
June 3, 1995 February 28, 1995
(Unaudited)
<S> <C> <C>
Current liabilities:
Current installments of long-term debt 575,000 575,000
Notes payable to bank 225,707 244,712
Accounts payable 789,515 847,816
Accrued expenses & other current liabilities 2,086,531 1,788,585
Income taxes payable 272,384 338,917
Total current liabilities 3,949,137 3,795,030
Long term debt, less current installments 2,612,496 2,631,250
Deferred income taxes 612,656 612,656
Minority interest 21,835 65,519
Stockholders' equity:
Preferred stock, $.01 par value:
1,000,000 shares authorized and unissued - -
Common stock, $.01 par value:
5,000,000 shares authorized, 1,662,992 and
1,661,292 issued 16,620 16,613
Additional paid-in capital 9,535,490 9,531,034
Retained earnings 9,092,809 9,973,909
18,644,919 19,521,556
Less: Treasury stock, at cost (467,102
and 466,464 shares) 3,188,646 3,184,183
15,456,273 16,337,373
Contingencies
Total liabilities & stockholders' equity $22,652,397 23,441,828
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>STATEMENT OF OPERATIONS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED
June 3, 1995 May 28, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Net sales 4,404,996 $5,033,502
Cost of sales 3,328,936 3,351,688
Gross profit 1,076,060 1,681,814
Operating expenses:
Selling 788,511 694,832
Research and development 407,123 162,783
General and administrative 782,251 700,698
1,977,885 1,558,313
Operating earnings (loss) (901,825) 123,501
Other expenses (income):
Interest expense 51,321 28,205
Investment income (28,362) (22,443)
Other 33,771
Change in minority interest (43,684)
(20,725) 39,533
Earnings (loss) before
provision for income taxes (881,100) 83,968
Provision for
income taxes - 29,600
Net earnings (loss) $ (881,100) $ 54,368
=========== ==========
Net earnings (loss) per share $ (0.74) $ .04
========== ==========
Weighted average number of
common shares outstanding 1,194,890 1,349,281
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>STATEMENT OF CASH FLOWS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
June 3, 1995 May 28, 1994
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (881,100) 54,368
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 206,247 240,240
Change in minority interest (43,684)
Changes in assets and liabilities:
Accounts receivable, net 2,311,227 985,354
Inventories (679,966) (509,285)
Prepaid expenses and other current assets 21,078 (116,903)
Income taxes payable (66,533) (88,370)
Other assets (26,216) (13,906)
Accounts payable (58,301) (253,501)
Accrued expenses and other current liabilities 18,946 (166,852)
Total adjustments $1,682,798 76,777
Net cash provided by
operating activities 801,698 131,145
Cash flows from investing activities:
Purchase of plant & equipment (247,900) (133,026)
Purchase of short-term investments (28,380)
Proceeds from sale of short term investments 1,010,220
Purchase of intangible assets (49,370) (5,475)
Net cash provided by (used in)
investing activities (297,270) 843,339
Cash flows from financing activities:
Principal payments on debt (37,759) (18,750)
Proceeds from exercise of stock options 4,463 2,688
Payments to acquire treasury stock (4,463) (1,425,600)
Net cash used in financing activities (37,759) (1,441,662)
Cash and Cash Equivalents:
Net (decrease) increase during the period 466,669 (467,178)
Balance, beginning of the period 1,053,861 1,823,613
Balance, end of the period $1,520,530 $ 1,356,435
========== =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest (excluding bank charges) $ 44,295 26,125
Income taxes $108,450 111,516
Non-cash transaction:
Liability due to purchase of additional
interest in subsidiary $279,000 84,600
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 3, 1995
(Unaudited)
NOTE 1: The consolidated financial statements include the accounts of General
Microwave Corporation, its wholly owned subsidiaries, General
Microwave Foreign Sales Corporation (FSC), Micro-El Patent Corporation
and Math Associates, Inc. (Math), its indirect wholly-owned
subsidiaries, General Microwave Israel Corporation (GMIC) and
General Microwave Israel (1987) Ltd.(GMIL), and its majority owned
subsidiary General Microcircuits Corporation (GMCC). All
intercompany accounts and transactions have been eliminated in
consolidation.
NOTE 2: The information furnished in this report reflects all adjustments
(which include only normal recurring adjustments) which are, in the
opinion of management, necessary for a fair statement of the results
for the interim period. The interim figures are not necessarily
indicative of the results for the year.
<TABLE>Inventories on hand
<CAPTION>
NOTE 3: Inventories on hand at:
June 3, 1995 February 28, 1995
<S> <C> <C>
Raw materials $3,823,513 3,638,119
Work in process 3,526,581 3,303,562
Finished goods 1,237,200 945,629
$8,587,294 7,887,310
Less Progress billings (312,802) (292,784)
8,274,492 7,594,526
=========== ==========
</TABLE>
Inventories are valued at the lower of cost or market on a first-in,
first-out basis.
NOTE 4: Investments consisting of municipal bond funds, are classified as
securities available for sale under the Statement of Financial
Accounting Standards No.115, "Accounting for Certain Investments
in Debt and Equity Securities" and are recorded at fair value.
However, unrealized gains and losses have not been reported as a
separate component of stockholders' equity as they were immaterial
as of June 3, 1995 and May 28, 1994.
NOTE 5: Accumulated depreciation and amortization of property, plant and
equipment was $6,757,003 at June 3, 1995 and $6,987,284 at February
28, 1995.
NOTE 6: On March 2, 1995, the minority stockholders of General
Microcircuits (GMCC) exercised their option to require the Company to
purchase, in fiscal 1996, 15,000 shares of GMCC common stock at a
cost of $ 279,000, thereby increasing the Company's ownership in
GMCC from 92% to 97%. This transaction was accounted for by the
purchase method of accounting with the cost of the additional
ownership recorded as costs in excess of fair value of net assets
acquired. As of June 3, 1995, $279,000 due to the minority
shareholders was included in liabilities on the balance sheet.
<PAGE>
NOTE 7: The agreements relating to the Company's 7-day Demand Industrial
Development Revenue Bonds contain several restrictive covenants.
The agreement with the letter of credit issuer requires the Company
to maintain a minimum level of tangible net worth as defined. After
giving effect to the results of operations for the quarter ended
June 3, 1995, the Company required and received a waiver that modified
this requirement to the Company's tangible net worth level as defined
in that agreement as of June 3, 1995 until February 28, 1996. Because
management anticipates compliance with the original tangible net worth
covenant as of February 29, 1996, the Industrial Development Revenue
Bonds debt is classified as long term debt. In connection with this
covenant the Company is required to provide cash collateral of
$500,000 for purposes of securing and meeting the next principal
payment on the bonds in October, 1995. Additionally the letter of
credit issuer added a covenant requiring the Company to not record
a net loss for the fiscal year ended February 29, 1996. The Company
is otherwise in compliance with the restrictive covenants contained in
the bond agreements.
NOTE 8: On May 27, 1994, the Company purchased 178,200 shares of its Common
Stock held by Joseph Falkenstein, a beneficial owner (as defined by
Securities and Exchange Commission regulations) of more than 5% of
the Company's common stock for $1,425,600, the then prevailing market
price on the American Stock Exchange.
NOTE 9: In May 1995, the Company was named as a defendant in a legal action
whereby the plaintiff is alleging ten causes of action in excess of
$2 million in damages on each of the first nine causes of action
and $250,000 on the tenth cause of action, arising out of the
normal course of its business. Based upon the facts and
circumstances known by management at this time, management believes
the ultimate outcome of this litigation will not have a material
impact on the financial position of the Company.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
For the Quarter Ended June 3, 1995 compared with the Quarter Ended May 28, 1994.
In the first quarter of fiscal 1996, net sales were $4,404,996 and the net loss
was $881,100 compared with net sales of $5,033,502 and earnings of $54,368 for
the first quarter of fiscal 1995. A decrease in sales of microwave components
and hybrid microcircuits products more than offset a slight increase in sales
of fiber optics products when comparing the sales for the first quarter of
this year with the comparable quarter of last year. The decline in operating
results is attributed to the lower sales and lower gross profit margins due to
competitive pricing in the declining military market, start-up costs on new
fiber optic products, technical problems on new product development, and
one-time expenses associated with cost reduction actions. Management
anticipates that the technical problems will diminish in the second quarter.
Cost of sales, as a percentage of sales, increased during the current quarter to
75.6% from 66.6% during the comparable quarter of last year due primarily to
competitive pricing, technical problems on new products, and a decline in sales
without a corresponding decrease in fixed overhead costs. Management's efforts
to reduce costs, principally at the Amityville location, resulted in a
reduction of personnel levels in engineering and manufacturing during May 1995.
One-time expenses of approximately $60,000 in connection with this staff
reduction were recorded in the quarter. The full benefit of these reductions
in staff implemented at the end of the first quarter will be realized through
the remainder of this fiscal year at an estimated savings of approximately
$325,000. Selling and general and administrative expenses increased in the
current quarter compared with the comparable quarter last year primarily due
to the increased selling expenses in promoting new and existing products.
Research and development costs increased significantly due to a decrease in
customer funded programs and approximately $60,000 of Israeli costs for which
the corresponding grant applications have not yet been approved.
During the first quarter of fiscal 1996, sales orders booked were $8.0 million
and the closing backlog was $13.4 million compared with $6.2 million and $9.7
million respectively, for the first quarter of fiscal 1995. With significant
first quarter orders, closing backlog of $13.4 million was strong compared to
fiscal year-end February 1995 of $9.9 million.
As management anticipates a return to profitability during the balance of
fiscal 1996, no tax benefit was recognized against a net loss during the current
fiscal quarter. The effective corporate income tax rate for the first quarter
of fiscal 1995 was 35%.
Liquidity and Capital Resources
June 3, 1995 compared with February 28, 1995
At June 3, 1995, the Company's ratio of current assets to current liabilities
was 3.7 to 1 compared to 4.1 at February 28, 1995.
During the first quarter of fiscal 1996, cash flows provided from operations
amounting to approximately $802,000 were utilized principally to purchase
capital equipment for $248,000. Accounts receivable declined $2,311,000 due
to reduced first quarter 1996 sales as compared to a high level of fourth
quarter fiscal 1995 sales, which receivables were substantially collected in
the first quarter of fiscal 1996. Inventories increased by $680,000 because
of lower sales and work in process on increased orders. During the quarter the
Company incurred a liability of $279,000 for the purchase of General
Microcircuits' stock from minority stockholders. The Company expects to spend
up to $500,000 during the remainder of the year for capital equipment.
The agreements relating to the Company's 7-day Demand Industrial Development
Revenue Bonds contain several restrictive covenants. The agreement with the
letter of credit issuer requires the Company to maintain a minimum level of
tangible net worth as defined. After giving effect to the results of operations
for the quarter ended June 3, 1995, the Company required and received a waiver
of this requirement through February 28, 1996, that modified this requirement
to the Company's tangible net worth level as defined in that agreement as of
June 3, 1995 until February 28, 1996. Because management anticipates compliance
with the original tangible net worth covenant as of February 29, 1996, the
Industrial Development Revenue Bonds debt is classified as long term debt. In
connection with this covenant, the Company is required to provide cash
collateral of $500,000 for purposes of securing and
meeting the next principal payment on the bonds in October 1995. Additionally,
the letter of credit issuer added a covenant requiring the Company to not record
a net loss for the fiscal year ended February 29, 1996. Assuming the tangible
net worth covenants were in effect, the Company would have had no unrestricted
funds available for the payment of cash dividends at June 3, 1995. Management
anticipates that the Company will be in compliance with this covenant at the
1996 fiscal year-end. The Company is otherwise in compliance with the
restrictive covenants contained in the bond agreements.
The Company believes that its present resources, including available credit, are
sufficient to meet its needs for the foreseeable future.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule (filed
with electronically filed copy
only)
(b) Reports on Form 8-K:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
GENERAL MICROWAVE CORPORATION
(Registrant)
Date: July 17, 1995 By:s/ ARNOLD H. LEVINE
Arnold H. Levine, Vice
President-Finance, Treasurer,
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
<PAGE>
Exhibit Index
Exhibit No.
27 Financial Data Schedule _____
(Filed with electronically
filed copy only)
<PAGE>
<TABLE> <S> <C>
<ARTICLE>5
<MULTIPLIER>1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-29-1996
<PERIOD-START> MAR-1-1995
<PERIOD-END> JUN-3-1995
<CASH> 1521
<SECURITIES> 765
<RECEIVABLES> 3376
<ALLOWANCES> 90
<INVENTORY> 8274
<CURRENT-ASSETS> 14530
<PP&E> 13401
<DEPRECIATION> 6757
<TOTAL-ASSETS> 22652
<CURRENT-LIABILITIES> 3949
<BONDS> 0
<COMMON> 17
0
0
<OTHER-SE> 6347
<TOTAL-LIABILITY-AND-EQUITY> 22652
<SALES> 4405
<TOTAL-REVENUES> 4405
<CGS> 3329
<TOTAL-COSTS> 1978
<OTHER-EXPENSES> (72)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51
<INCOME-PRETAX> (881)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (881)
<EPS-PRIMARY> (0.74)
<EPS-DILUTED> 0
