Exhibit Index on Page 14
------
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 1, 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 June 28, 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)
June 1, 1996
Page 3
<PAGE>
<TABLE>BALANCE SHEET ASSETS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
June 1, 1996 February 29, 1996
(Unaudited)
--------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,146,486 $ 1,139,731
Restricted cash 100,000 -
Accounts receivable, net of allowance for
doubtful accounts 3,681,220 5,150,561
Inventories 7,167,128 6,744,203
Prepaid expenses and other current assets 300,328 278,785
Income taxes receivable 155,219 155,733
Deferred income taxes, net 560,073 560,073
---------- ----------
Total current assets 14,110,454 14,029,086
---------- ----------
Property, plant and equipment, net 6,263,449 6,356,052
Debt issuance costs, net 70,409 75,626
Other intangible assets, net 174,128 178,015
Costs in excess of fair market value of
net assets acquired, net 849,331 872,731
Other assets 17,574 70,098
---------- ----------
$ 21,485,345 $ 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
<S> <C> <C>
June 1, 1996 February 29, 1996
(Unaudited)
------------- -----------------
Current liabilities:
Current installments of long-term debt $ 709,667 $ 709,670
Short-term borrowing 501,576 323,463
Accounts payable 1,055,027 1,201,775
Accrued payroll and other employee benefits 627,168 767,126
Accrued expenses and other current liabilities 809,515 803,038
Accrued commissions 219,846 274,192
---------- ----------
Total current liabilities 3,922,799 4,079,264
---------- ----------
Long term debt, less current installments 2,273,074 2,325,589
Deferred income taxes 584,068 584,068
Minority interest 19,157 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
June 1, 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 8,252,620 8,197,118
---------- ----------
17,874,896 17,763,165
---------- ----------
Less: Treasury stock, at cost 3,188,649 3,188,649
---------- ----------
14,686,247 14,574,516
---------- ----------
$ 21,485,345 $ 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
June 1, 1996 June 3, 1995
(Unaudited) (Unaudited)
------------ ------------
<S> <C> <C>
Net sales $ 5,502,432 $ 4,404,996
Cost of sales 3,673,561 3,328,936
---------- ----------
Gross earnings 1,828,871 1,076,060
Operating expenses:
Selling 712,292 788,511
General and administrative 807,218 782,251
Research and development 181,752 407,123
---------- ----------
1,701,262 1,977,885
---------- ----------
Operating earnings (loss) 127,609 (901,825)
Other expenses (income):
Interest expense 48,883 51,321
Dividend and interest income (9,116) (44,230)
Minority interest in earnings
(loss) of consolidated subsidiary 986 (43,684)
Other 16,362 15,868
---------- ----------
57,115 (20,725)
---------- ----------
Earnings (loss) before
provision for income taxes 70,494 (881,100)
Provision for income taxes 15,000 -
---------- ----------
Net earnings (loss) $ 55,494 $ (881,100)
=========== ===========
Net earnings (loss) per share $ 0.05 $ (0.74)
=========== ===========
Weighted average number of
common shares outstanding 1,205,506 1,194,890
</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 QUARTER ENDED
<S> <C> <C>
June 1, 1996 June 3, 1995
(Unaudited) (Unaudited)
------------ ------------
Cash flows from operating activities:
Net earnings (loss) $ 55,494 $ (881,100)
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization 226,637 206,247
Change in minority interest 986 (43,684)
Changes in assets and liabilities:
Accounts receivable, net 1,469,341 2,311,227
Inventories (422,925) (679,966)
Prepaid expenses and other current assets (21,543) 21,078
Income taxes payable and receivable 514 (66,533)
Other assets 52,524 (26,216)
Accounts payable (146,748) (58,301)
Accrued expenses and other current liabilities (187,827) 18,946
---------- ----------
Net cash provided by operating activities 1,026,453 801,698
---------- ----------
Cash flows from investing activities:
Purchase of plant & equipment (90,168) (247,900)
Purchase of intangible assets (11,364) (49,370)
---------- ----------
Net cash used in investing activities (101,532) (297,270)
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt (52,508) (37,759)
Proceeds from long-term debt 178,113 -
Proceeds from issuance of common stock
pursuant to employee stock purchase plan 56,229 -
Proceeds from exercise of stock options - 4,463
Payments to acquire treasury stock - (4,463)
---------- ----------
Net cash provided by (used in) financing activities 181,834 (37,759)
---------- ----------
Cash and cash equivalents:
Net increase during the period 1,106,755 466,669
Balance, beginning of the period 1,139,731 1,053,861
---------- ----------
Balance, end of the period $ 2,246,486 $ 1,520,530
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest 41,807 44,295
Income taxes 17,539 108,450
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
June 1, 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:
June 1, 1996 February 29, 1996
------------ -----------------
<S> <C> <C>
Raw materials $3,065,796 $2,962,588
Work in process 4,011,987 3,514,340
Finished goods 1,053,200 773,925
---------- ----------
$8,130,983 $7,250,853
Less progress billings (963,856) (506,650)
---------- ----------
$7,167,127 $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 $7,520,221 at June 1, 1996 and $7,337,449 at February
29, 1996.
Page 8
<PAGE>
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.
NOTE 6: The agreements relating to the Company's 7-day Demand Industrial
Development Revenue Bonds contain certain restrictive covenants. The
agreement with the letter of credit issuer, as amended, requires the
Company to make monthly sinking fund payments commencing April 1,
1996, towards its October 1, 1996, $500,000 bond payment; such
payments are reflected as restricted cash on the accompanying balance
sheet.
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 June 1, 1996 compared with the Quarter Ended June 3,
- --------------------------------------------------------------------------
1995.
- -----
In the first quarter of fiscal 1997, net sales were $5,502,432 and net earnings
were $55,494 compared with net sales of $4,404,996 and a net loss of $881,100
for the first quarter of fiscal 1996. Sales increased for microwave
components, hybrid microcircuits products and fiber optics products (all of the
Company's divisions) when comparing the sales for the first quarter of this
year with the comparable quarter of last year. The improvement in operating
results is attributed to increased sales, higher gross profit margins in all
operating divisions, and lower operating expenses.
Cost of sales, as a percentage of sales, decreased during the current quarter
to 66.8% from 75.6% during the comparable quarter of last year due primarily to
resolution of technical problems on new products, and a decrease in overhead
costs. Management's efforts to reduce costs, principally at the Amityville
location, have resulted in reduced overhead costs in the current first quarter.
Research and development costs decreased significantly due to the Company
applying its engineering resources to production efforts.
During the first quarter of fiscal 1997, sales orders booked were $6.4 million
and the closing backlog was $12.7 million compared with $8.0 million and $13.4
million respectively, for the first quarter of fiscal 1996. Closing backlog of
$12.7 million at June 1, 1996 exceeded the $11.8 million at fiscal year-end
February 1996.
As management anticipates profitability during fiscal 1997, the effective
corporate income tax rate, after utilizing net operating loss carryforwards,
was 21% for the first quarter of fiscal 1997.
Liquidity and Capital Resources
- -------------------------------
June 1, 1996 compared with February 29, 1996
- --------------------------------------------
At June 1, 1996, the Company's ratio of current assets to current liabilities
was 3.6 to 1 compared to 3.4 at February 29, 1996.
Page 10
<PAGE>
During the first quarter of fiscal 1997, cash flows provided from operations
amounting to approximately $1,026,000 were used to purchase capital equipment
for $90,000, and the balance was applied to increased cash balances. The
Company expects to spend up to $450,000 during the remainder of the year for
capital equipment. Cash flows from financing activities of $178,000 from
proceeds of long-term debt associated with the Israeli subsidiaries were
utilized in those subsidiary's operations. Accounts receivable declined
$1,470,000 due to reduced first quarter 1997 sales as compared to a high level
of fourth quarter fiscal 1996 sales, which receivables were substantially
collected in the first quarter of fiscal 1997. Inventories increased by
approximately $423,000 because of work in process and finished goods related
to increased backlog.
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 December 2, 1995, the Company required and received a
waiver that modified this requirement to the Company's tangible net worth level
as defined as of December 2, 1995, and agreed to a covenant to maintain
profitable operations in future quarters. In connection with the foregoing,
the Company also agreed to make monthly sinking fund payments commencing April
1, 1996, towards its October 1, 1996, $500,000 bond payment. Subsequent to the
first quarter, the Company received a tax refund which was utilized to satisfy
the sinking fund obligations. In addition, in connection with obtaining the
waiver of the tangible net worth covenant contained in one of the agreements
relating to the Industrial Development Revenue Bonds, the Company and two of
its subsidiaries, Math Associates and General Microcircuits guaranteed and
granted a security interest in their accounts receivable to the bondholders and
the letter of credit issuer as additional security for the Company's bond
related debt. Because management anticipates compliance with the covenants now
in effect, the Industrial Development Revenue Bonds debt is classified as
long-term debt.
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 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: July 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
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-START> MAR-1-1996
<PERIOD-END> JUN-1-1996
<CASH> 2246
<SECURITIES> 0
<RECEIVABLES> 3733
<ALLOWANCES> 52
<INVENTORY> 7167
<CURRENT-ASSETS> 1016
<PP&E> 13783
<DEPRECIATION> 7520
<TOTAL-ASSETS> 21485
<CURRENT-LIABILITIES> 3923
<BONDS> 0
<COMMON> 17
0
0
<OTHER-SE> 14670
<TOTAL-LIABILITY-AND-EQUITY> 21485
<SALES> 5502
<TOTAL-REVENUES> 5502
<CGS> 3674
<TOTAL-COSTS> 1701
<OTHER-EXPENSES> 8
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49
<INCOME-PRETAX> 70
<INCOME-TAX> 15
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
