Exhibit Index on Page 14
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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 August 31, 1996
----------------------------------
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 September 27, 1996, there were 1,205,659 shares of common stock
outstanding.
Page 1 of 15
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements.
---------------------
Page 2
<PAGE>
GENERAL MICROWAVE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
AUGUST 31, 1996
Page 3
<PAGE>
<TABLE>BALANCE SHEET ASSETS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
August 31, 1996 February 29, 1996
(Unaudited)
--------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,463,165 $ 1,139,731
Restricted cash 500,000 -
Accounts receivable, net of allowance for
doubtful accounts 3,672,319 5,150,561
Inventories 7,109,124 6,744,203
Prepaid expenses and other current assets 302,729 278,785
Income taxes receivable - 155,733
Deferred income taxes, net 560,073 560,073
---------- ----------
Total current assets 13,607,410 14,029,086
---------- ----------
Property, plant and equipment, net 6,214,250 6,356,052
Debt issuance costs, net 65,192 75,626
Other intangible assets, net 159,770 178,015
Costs in excess of fair market value of
net assets acquired, net 825,931 872,731
Other assets - 70,098
---------- ----------
$ 20,872,553 $ 21,581,608
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
<TABLE>BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
August 31, 1996 February 29, 1996
(Unaudited)
--------------- -----------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 709,666 $ 709,670
Short-term borrowing 546,028 323,463
Accounts payable 889,141 1,201,775
Accrued payroll and other employee benefits 751,427 767,126
Accrued expenses and other current liabilities 894,720 803,038
Accrued commissions 246,407 274,192
--------- ---------
Total current liabilities 4,037,389 4,079,264
--------- ---------
Long term debt, less current installments 2,231,976 2,325,589
Deferred income taxes 584,068 584,068
Minority interest 22,530 18,171
Stockholders' equity:
Preferred stock, $.01 par value;
1,000,000 shares authorized and unissued - -
Common stock, $.01 par value; 5,000,000
shares authorized; issued 1,672,761 at
August 31, 1996 and 1,664,492 at February
29, 1996. 16,728 16,645
Additional paid-in capital 9,605,548 9,549,402
Retained earnings 7,562,963 8,197,118
---------- ----------
17,185,239 17,763,165
Less: Treasury stock, at cost 3,188,649 3,188,649
---------- ----------
13,996,590 14,574,516
---------- ----------
$ 20,872,553 $ 21,581,608
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5
<PAGE>
<TABLE>STATEMENT OF OPERATIONS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED SIX MONTHS ENDED
<S> <C> <C> <C> <C>
August 31, 1996 September 2, 1995 August 31, 1996 September 2, 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------- ----------------- --------------- -----------------
Net sales $ 5,995,890 $ 5,390,599 $ 11,498,322 $ 9,795,595
Cost of sales 4,807,243 3,934,290 8,480,804 7,263,226
----------- ----------- ------------ -----------
Gross earnings 1,188,647 1,456,309 3,017,518 2,532,369
Operating expenses:
Selling 760,321 780,299 1,472,613 1,568,810
General and administrative 869,006 785,695 1,676,224 1,567,946
Research and development 209,567 208,980 391,319 616,103
----------- ----------- ----------- -----------
1,838,894 1,774,974 3,540,156 3,752,859
----------- ----------- ----------- -----------
Operating loss (650,247) (318,665) (522,638) (1,220,490)
Other expenses (income):
Interest expense 56,486 50,968 105,369 102,289
Dividend and interest income (11,322) (23,325) (20,438) (67,555)
Minority interest in earnings
(loss) of consolidated subsidiary 3,373 ( 4,982) 4,359 (48,666)
Other 5,873 16,984 22,235 32,852
----------- ----------- ------------ -----------
54,410 39,645 111,525 18,920
----------- ----------- ------------ -----------
Loss before recovery
of income taxes (704,657) (358,310) (634,163) (1,239,410)
Recovery of income taxes (15,000) (259,000) - (259,000)
----------- ----------- ------------ -----------
Net loss $ (689,657) $ ( 99,310) $ (634,163) $ (980,410)
============ =========== ============= ============
Net loss per share $ (0.57) $ (0.08) $ (0.53) (0.82)
============ =========== ============= ============
Weighted average number of
common shares outstanding 1,205,659 1,197,057 1,202,903 1,195,974
</TABLE>
See accompanying notes to consolidated financial statements
Page 6
<PAGE>
<TABLE>STATEMENT OF CASH FLOWS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
<S> <C> <C>
August 31, 1996 September 2, 1995
(Unaudited) (Unaudited)
--------------- -----------------
Cash flows from operating activities:
Net loss $ (634,163) $ (980,410)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 452,294 464,303
Change in minority interest 4,359 (48,666)
Changes in assets and liabilities:
Accounts receivable, net 1,478,242 2,137,850
Inventories (364,921) (681,844)
Prepaid expenses and other current assets (23,944) (270,656)
Income taxes payable and receivable 319,291 (338,918)
Other assets 70,098 (50,801)
Accounts payable (312,634) 532,851
Accrued expenses and other current liabilities (115,360) (226,570)
----------- -----------
Net cash provided by operating activities 873,262 537,139
----------- -----------
Cash flows from investing activities:
Proceeds from sale of short-term investments - 757,909
Purchase of plant & equipment (222,747) (349,503)
Purchase of intangible assets (12,258) (7,139)
Purchase of additional interest in subsidiary - (279,000)
----------- -----------
Net cash provided by (used in) investing activities (235,005) 122,267
----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt (93,617) (84,043)
Proceeds from short-term borrowings 222,565 -
Proceeds from issuance of common stock
pursuant to employee stock purchase plan 56,229 -
Proceeds from exercise of stock options - 18,404
Payments to acquire treasury stock - (4,466)
----------- -----------
Net cash provided by (used in) financing activities 185,177 (70,105)
----------- -----------
Cash and cash equivalents:
Net increase during the period 823,434 589,301
Balance, beginning of the period 1,139,731 1,053,861
----------- -----------
Balance, end of the period (including restricted cash) $ 1,963,165 $ 1,643,162
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest 128,098 102,288
Income taxes 31,148 108,450
Liability due to purchase of additional interest
in subsidiary - 279,000
</TABLE>
See accompanying notes to consolidated financial statements.
Page 7
<PAGE>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 1996
(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:
August 31, 1996 February 29, 1996
--------------- -----------------
<S> <C> <C>
Raw materials $3,031,108 $2,962,588
Work in process 3,678,648 3,514,340
Finished goods 815,837 773,925
---------- ----------
$7,525,593 $7,250,853
Less progress billings (416,469) (506,650)
---------- ----------
$7,109,124 $6,744,203
</TABLE>
Inventories are valued at the lower of cost or market on a first-in,
first-out basis.
NOTE 4: Accumulated depreciation and amortization of property, plant and
equipment was $7,701,999 at August 31, 1996 and $7,337,449 at February
29, 1996.
NOTE 5: 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.
Page 8
<PAGE>
NOTE 6: 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 and
continuing profitable operations. After giving effect to the results
of operations for the quarter ended August 31, 1996, the Company
required and received a waiver of both covenants for the quarter.
This waiver modifies the tangible net worth covenant to require the
Company to maintain its tangible net worth, as defined, at the August
31, 1996 level, subject to increases dependent upon future operations.
The Company has a sinking fund requirement covering its October 1,
1996, $500,000 bond payment, which is reflected as restricted cash on
the balance sheet. The Company has also agreed to make equal monthly
sinking fund payments commencing October 1, 1996 towards its future
bond payments. Because management anticipates compliance with the
covenants now in effect, the Industrial Development Revenue Bonds
debt is classified as long-term debt.
NOTE 7: Reclassifications are made whenever necessary to conform with the
current year's presentation.
Page 9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Results of Operations
- ---------------------
For the Quarter Ended August 31, 1996 compared with the Quarter Ended September
- -------------------------------------------------------------------------------
2, 1995.
- --------
During the second quarter of fiscal 1997, net sales were $5,995,890 compared to
$5,390,599 during the comparable quarter of fiscal 1996, an 11.2% increase.
This increase is primarily attributed to increased shipments of microwave
components and hybrid microcircuits products. The loss before recovery of
income taxes was $704,657 as compared with $358,310 for the same quarter last
year, primarily due to cost of sales, as a percentage of sales, increasing to
80.2% in the current quarter, from 73.0% during the comparable quarter of last
year. This increase is primarily attributed to cost overruns on a development
program in the fiber optic market, as well as technical problems and production
difficulties with some new products and certain production programs. After
giving effect to the anticipated recovery of income taxes, the net loss for the
quarter amounted to $689,657 compared with a net loss of $99,310 for the same
quarter last year.
Total operating expenses increased slightly in the current quarter compared to
the comparable quarter last year. A decrease in selling expenses was slightly
more than offset by an increase in general and administrative expenses.
Research and development expenses remained the same as in the comparable quarter
last year.
During the second quarter of fiscal 1997, sales orders booked were $5.1 million
and the closing backlog was $11.7 million compared with $5.3 million sales
orders booked and a closing backlog of $13.3 million for the second quarter of
fiscal 1996.
For the Six Months Ended August 31, 1996 compared with the Six Months Ended
- ---------------------------------------------------------------------------
September 2, 1995.
- ------------------
During the first half of fiscal 1997, net sales were $11,498,322 compared with
$9,795,595 for the first half of fiscal 1996, representing a 17.4% increase. A
net loss of $634,163 for the current period compares with a net loss of $980,410
for the comparable period last year. Sales increased during the six month
period, primarily due to significant increases in microwave components and
hybrid microcircuits sales as well as an increase in sales of fiber optic
products. Losses decreased due to higher sales at a similar cost of sales
percentage together with reduced research and development expenses.
Cost of sales, as a percentage of sales, decreased slightly to 73.8% in the
first half of fiscal 1997, compared to 74.1% in the first half of fiscal 1996,
as the Company continued to experience technical difficulties on some new
products and in certain production programs.
Page 10
<PAGE>
During the current half the Company slightly decreased its selling activities,
when compared to the prior year, offset by a slight increase in general and
administrative expenses. Research and development expenses decreased
significantly due to the Company applying its engineering resources to producing
the increased sales level. Interest expenses increased slightly due to
increased short term borrowings at the Israeli subsidiary. Investment income
decreased because of reduced funds available for investment.
The tax benefit for second quarter fiscal 1997 is the result of the reversal of
the first quarter's provision. A recovery of income taxes resulted from a loss
before income taxes for the first six months of fiscal 1996 at an effective
recovery rate of 20.8%. The tax benefit recorded in the second quarter of
fiscal 1996 was limited to the estimated tax benefit recorded for the fiscal
year ending February 29, 1996.
During the first half of fiscal 1997, sales orders booked were $11.5 million and
the backlog was $11.7 million compared with $13.3 million and $13.3 million
respectively, for the first half of fiscal 1996.
Liquidity and Capital Resources August 31, 1996 compared with February 29, 1996
- -------------------------------------------------------------------------------
At August 31, 1996, the Company's ratio of current assets to current liabilities
was 3.37 to 1 compared to 3.44 to 1 at February 29, 1996.
During the first half of fiscal 1997, cash flows provided from operations
amounting to approximately $873,000 were utilized to purchase equipment for
$223,000, and increase cash balances. Cash flows from financing activities of
$185,000 were from net proceeds of $129,000 of long-term debt and short-term
borrowings associated with the Israeli subsidiaries which were utilized in those
subsidiarys' operations, as well as proceeds of $56,000 from issuance of common
stock pursuant to the employee stock purchase plan. Accounts receivable
declined $1,478,000 due to reduced first half sales as compared to a high level
of fourth quarter fiscal 1996 sales, which receivables have been substantially
collected. Inventories increased by $365,000 primarily because of increased
work in process. The Company expects to spend up to $250,000 during the
remainder of the year for capital equipment. See Note 6 to the Consolidated
Financial Statements for information concerning the Company's 7-Day Demand
Industrial Development Revenue Bonds and its sinking fund obligations with
respect to them.
The Company believes that its present resources, including available credit, are
sufficient to meet its needs for the foreseeable future.
Page 11
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
----------------------------------------------------
General Microwave Corporation held its Annual Meeting of Stockholders
on June 25, 1996.
At that meeting, the persons listed below who were the nominees of the
Board of Directors listed in the Corporation's proxy statement for the meeting
were elected as the entire Board of Directors of General Microwave Corporation,
and the votes of the number of shares of Common Stock set forth below were cast
as set forth below with respect to each of them. There were no other nominees
for director of General Microwave Corporation at that meeting. There were 3,300
broker non-votes with respect to the election of directors and 32,717 shares
abstained.
Authority to
For Vote Withheld
------- -------------
Frederick Zissu 958,883 2,312
Sherman A. Rinkel 958,883 2,312
Moe Wind 958,883 2,312
Stanley Simon 958,883 2,312
Mitchell Tuckman 958,883 2,312
Edmond D. Franco 957,273 3,922
Michael I. Stolzar 958,883 2,312
At that meeting, the stockholders also adopted and approved an amendment to
the Employee Stock Purchase Plan of General Microwave Corporation to increase
the number of shares of Common Stock of the corporation that may be issued
pursuant to that Plan by 59,201 to 140,000 shares. The votes of 898,724 shares
of Common Stock were cast in favor of adoption and approval of the amendment,
the votes of 57,458 shares were cast against adoption and approval of the
amendment, the votes of 27,150 shares abstained, and there were 13,880 broker
non-votes with respect to adoption and approval of the amendment to the Employee
Stock Purchase Plan.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
---------
The following exhibits are filed with this Quarterly
Report on Form 10-Q.
27 Financial Data Schedule (filed with electronically
filed copy only)
(b) Reports on Form 8-K:
--------------------
None
Page 12
<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: October 11, 1996 By:S/Arnold H. Levine
---------------------
Arnold H. Levine, Vice
President-Finance, Treasurer,
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Page 13
<PAGE>
Exhibit Index
Page Number in
Sequential
Exhibit No. Numbering
27 Financial Data Schedule (Filed with 15
electronically filed copy only)
Page 14
<PAGE>
GENERAL MICROWAVE CORPORATION
AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
Page 15 of 15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> FEB-28-1997 FEB-28-1997
<PERIOD-START> MAR-1-1996 JUN-2-1996
<PERIOD-END> AUG-31-1996 AUG-31-1996
<CASH> 1963 1963
<SECURITIES> 0 0
<RECEIVABLES> 3723 3723
<ALLOWANCES> 51 51
<INVENTORY> 7109 7109
<CURRENT-ASSETS> 863 863
<PP&E> 13916 13916
<DEPRECIATION> 7702 7702
<TOTAL-ASSETS> 20873 20873
<CURRENT-LIABILITIES> 4037 4037
<BONDS> 0 0
<COMMON> 17 17
0 0
0 0
<OTHER-SE> 13980 13980
<TOTAL-LIABILITY-AND-EQUITY> 20873 20873
<SALES> 11498 5996
<TOTAL-REVENUES> 11498 5996
<CGS> 8480 4807
<TOTAL-COSTS> 3540 1839
<OTHER-EXPENSES> 6 (2)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 105 56
<INCOME-PRETAX> (634) (704)
<INCOME-TAX> 0 (15)
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (634) (689)
<EPS-PRIMARY> (0.53) (0.57)
<EPS-DILUTED> (0.53) (0.57)
