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 May 31, 1997
----------------------------------------------
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 27, 1997, there were 1,205,909 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)
MAY 31, 1997
Page 3
<PAGE>
<TABLE>BALANCE SHEET ASSETS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
May 31, 1997 February 28, 1997
(Unaudited)
---------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,651,880 $ 1,745,362
Restricted cash 320,000 200,000
Accounts receivable, net of allowance for
doubtful accounts 3,776,366 4,121,809
Current assets of discontinued operations 840,896 1,012,050
Inventories 4,380,381 4,535,832
Prepaid expenses and other current assets 401,445 250,417
Deferred income taxes, net 523,676 523,676
-------------- --------------
Total current assets 11,894,644 12,389,146
Property, plant and equipment, net 5,907,812 5,990,992
Debt issuance costs and other assets, net 52,230 85,208
Costs in excess of fair market value of
net assets acquired, net 660,873 679,773
Other intangible assets, net 142,694 144,392
-------------- --------------
$ 18,658,253 $ 19,289,511
============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
<TABLE>BALANCE SHEET LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
May 31, 1997 February 28, 1997
(Unaudited)
------------- -----------------
Current liabilities:
Current installments of long-term debt $ 709,670 $ 709,670
Short-term borrowing 266,795 591,739
Accounts payable 775,616 945,145
Current liabilities of discontinued operations 1,022,320 1,195,193
Accrued payroll and other employee benefits 646,370 691,227
Accrued expenses and other current liabilities 1,131,279 1,117,973
Accrued commissions 246,413 294,400
------------- -------------
Total current liabilities 4,798,463 5,545,347
------------- -------------
Long term debt, less current installments 1,574,335 1,627,141
Deferred income taxes 547,303 547,303
Minority interest 25,355 24,710
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
May 31, 1997 and 1,672,761 at February
28, 1997. 16,728 16,728
Additional paid-in capital 9,605,549 9,605,549
Retained earnings 5,279,169 5,111,382
------------- -------------
14,901,446 14,733,659
Less: Treasury stock, at cost 3,188,649 3,188,649
------------- -------------
$ 11,712,797 $ 11,545,010
------------- -------------
$ 18,658,253 $ 19,289,511
============= =============
</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
May 31, 1997 June 1, 1996
(Unaudited) (Unaudited)
-------------- --------------
<S> <C> <C>
Net sales $ 4,987,128 $ 4,288,072
Cost of sales 3,219,545 2,735,285
------------- -------------
Gross earnings 1,767,583 1,552,787
Operating expenses:
Selling 623,599 536,913
General and administrative 811,373 729,976
Research and development 113,401 163,722
------------- -------------
1,548,373 1,430,611
------------- -------------
Operating earnings 219,210 122,176
Other expenses (income):
Interest expense 43,332 48,883
Dividend and interest income (22,238) (9,116)
Minority interest in earnings
of consolidated subsidiary 645 986
Other 11,694 16,407
------------- -------------
33,423 57,160
------------- -------------
Earnings from continuing operations
before provision for income taxes 185,787 65,016
Provision for income taxes 18,000 15,000
------------- -------------
Earnings from continuing operations $ 167,787 $ 50,016
Discontinued operations:
Earnings from operations of discontinued
Math Associates, Inc. $ - $ 5,478
------------- -------------
Net earnings $ 167,787 $ 55,494
============= =============
Net earnings per share:
From continuing operations $ 0.14 $ 0.04
From discontinued operations $ - $ 0.01
------------- -------------
Net earnings per share $ 0.14 $ 0.05
============= =============
Weighted average number of
common shares outstanding 1,205,659 1,205,506
</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 THREE MONTHS ENDED
<S> <C> <C>
May 31, 1997 June 1, 1996
(Unaudited) (Unaudited)
------------ ------------
Cash flows from operating activities:
Net earnings from continuing operations.....................$ 167,787 $ 50,016
Adjustments to reconcile net earnings to net cash
provided by continuing operations:
Depreciation and amortization............................. 201,877 220,612
Minority interest in earnings of
consolidated subsidiary................................. 645 986
Changes in assets and liabilities:
Accounts receivable....................................... 345,443 1,330,498
Inventories .............................................. 155,451 (152,086)
Income taxes payable and receivable....................... 25,034 514
Prepaid expenses and other current assets................. (151,028) (36,162)
Accounts payable and accrued liabilities.................. (274,101) (254,326)
Other assets.............................................. 27,761 52,524
----------- -----------
Net cash provided by continuing operations.............. 498,869 1,212,576
----------- -----------
Net cash provided by (used in) discontinued operations........ 3,497 (549,231)
----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment.................. (98,098) (90,168)
Purchases of intangible assets.............................. - (18,986)
----------- -----------
Net cash used in investing activities..................... (98,098) (109,154)
----------- -----------
Cash flows from financing activities:
Principal payments on long-term debt........................ (52,806) (52,515)
Net proceeds from (payments on) short-term borrowings....... (324,944) 178,113
Proceeds from issuance of common stock...................... - 56,230
----------- -----------
Net cash provided by (used in) financing activities....... (377,750) 181,828
----------- -----------
Net increase in cash and cash equivalents..................... 26,518 736,020
Cash and cash equivalents at beginning of the period.......... 1,945,362 700,876
----------- -----------
Cash and cash equivalents at end of the period................$ 1,971,880 $1,436,896
============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest.................................................. 43,646 41,807
Income Taxes.............................................. 9,399 17,539
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 31, 1997
(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.
NOTE 3: Pursuant to a Board of Directors resolution on February 25, 1997, the
Company adopted a plan to discontinue its Math Associates electronic
fiber-optic systems and components business. The plan anticipates that
the liquidation of Math will be completed by no later than February 28,
1998. At February 28, 1997, the provision for loss on disposal was
recorded in the consolidated financial statements principally relating
to the anticipated disposal of inventory and other assets, estimated
losses during the phase-out period and estimated costs of liquidation.
The consolidated financial statements of the Company have been
reclassified to reflect the effects of the Company's decision to
account for the disposal of its Math operations as discontinued
operations. Accordingly, the net sales, costs and expenses, assets
and liabilities, and cash flows associated with Math have been excluded
from the respective captions in the accompanying consolidated balance
sheets, statements of operations and statements of cash flows.
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<PAGE>
NOTE 4: Inventories on hand at:
May 31, 1997 February 28, 1997
------------ -----------------
Raw materials $ 2,367,070 $ 1,802,020
Work in process 2,047,916 2,371,040
Finished goods 469,545 568,132
----------- -----------
4,884,531 4,741,192
Less progress billings (504,150) (205,360)
----------- -----------
$ 4,380,381 $ 4,535,832
=========== ===========
Inventories are valued at the lower of cost or market on a first-in,
first-out basis.
NOTE 5: Accumulated depreciation and amortization of property, plant and
equipment was $8,066,447 at May 31, 1997 and $7,885,367 at February
28, 1997.
NOTE 6: 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 May 31, 1997 compared with the Quarter Ended June 1,
- --------------------------------------------------------------------------
1996.
- -----
In the first quarter of fiscal 1998 the Company had net earnings from
continuing operations of $167,787 or $.14 per share, with no net loss nor
earnings from discontinued operations. In the first quarter of fiscal 1997 the
Company had net earnings of $50,474 or $.04 per share from continuing
operations and net earnings after discontinued operations of $55,494 or $.05
per share. Sales from continuing operations of $4,987,128 increased by
$699,056 (16.3%) from the comparable quarter last year. Sales increased in all
of the Company's operations and the improvement in earnings was principally in
the Company's Israeli operations.
In February 1997, the Company decided to concentrate on its core businesses and
adopted a plan to exit the fiber optics business of its Math Associates
subsidiary. (See Note 3 to Consolidated Financial Statements). Accordingly,
unless otherwise indicated, all of the information herein has been reclassified
to present the assets, liabilities and results of operations of the
discontinued fiber-optics business as a discontinued operation.
Cost of sales, as a percentage of sales, increased slightly during the current
quarter to 64.6% from 63.8% during the comparable quarter of last year.
General and administrative expenses decreased as a percentage of sales in the
current fiscal quarter, to 16.3% from 17.0% in the comparable quarter of last
year. Research and development costs decreased due to the Company's increased
utilization of its engineering resources for current production efforts.
During the first quarter of fiscal 1998, sales orders booked were $4.6 million
and the closing backlog was $16.6 million compared with $5.3 million and $11.9
million respectively for the first quarter of fiscal 1997. The closing backlog
of $16.6 million at May 31, 1997 compares closely to the $16.9 million at the
fiscal year-end February 28, 1997.
Liquidity and Capital Resources
- -------------------------------
May 31, 1997 compared with February 28, 1997
- --------------------------------------------
At May 31, 1997, the Company's ratio of current assets to current liabilities
was 2.5 to 1 compared to 2.2 at February 28, 1997.
During the first quarter of fiscal 1998, cash flows provided by continuing
operations amounted to approximately $499,000 as compared to approximately
$1,212,000 during the comparable period last year. The lower comparable amount
of cash flows relates primarily to the payment from one customer of significant
accounts receivable which were received in June 1997. Cash flows were used to
Page 10
<PAGE>
purchase capital equipment for $98,000. In addition, cash flows used in
financing activities of $378,000 were primarily related to repayments of
short-term debt of the Israeli subsidiaries through cash flows generated by
such subsidiaries. Accounts receivable declined $345,000 due to reduced first
quarter 1998 sales as compared to a high level of fourth quarter fiscal 1997
sales. The resulting receivables were substantially collected in the first
quarter of fiscal 1998. Inventories decreased by approximately $155,000
because of reductions of work in process and finished goods as well as
increases in customer advances, partially offset by raw material increases.
Accounts payable and accrued liabilities decreased primarily due to normal
timing cycles. The Company expects to spend up to $450,000 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 Company must, among
other things, maintain profitable operations, a minimum ratio of current assets
to current liabilities, a minimum level of tangible net worth, as defined, and
must not exceed a specified debt to equity ratio. In addition, commencing
April 1, 1996, the Company is required to make monthly sinking fund payments
towards its annual $500,000 bond payment. Such amount is reflected as
restricted cash on the accompanying consolidated balance sheets. In December
1995, the Company and two of its subsidiaries, Math and GMCC, 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. The total of such accounts receivable is $4,040,722 at May 31,
1997. As a result of the impact on the financial statements as of and for the
year ended February 28, 1997, due to the discontinued Math operations, the
Company required and received a waiver dated May 20, 1997 of three covenants.
The waiver also modified the tangible net worth covenant, as defined, to
approximately the February 28, 1997 level, subject to increases dependent upon
future operations. The tangible net worth covenant limits the ability of the
Company to pay cash dividends. As a result of such covenant as amended, there
is approximately $280,000 of unrestricted funds available for the payment of
cash dividends as of May 31, 1997. 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.
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<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
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<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 10, 1997 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>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-START> MAR-1-1997
<PERIOD-END> MAY-31-1997
<CASH> 1972
<SECURITIES> 0
<RECEIVABLES> 3803
<ALLOWANCES> 27
<INVENTORY> 4380
<CURRENT-ASSETS> 11895
<PP&E> 13974
<DEPRECIATION> 8066
<TOTAL-ASSETS> 18658
<CURRENT-LIABILITIES> 4798
<BONDS> 0
<COMMON> 17
0
0
<OTHER-SE> 11696
<TOTAL-LIABILITY-AND-EQUITY> 18658
<SALES> 4987
<TOTAL-REVENUES> 4987
<CGS> 3219
<TOTAL-COSTS> 1548
<OTHER-EXPENSES> (10)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 186
<INCOME-TAX> 18
<INCOME-CONTINUING> 168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 168
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
