Exhibit Index on Page 15
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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 30, 1998
---------------------------------------------
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 26, 1998, there were 1,210,903 shares of common stock
outstanding.
Page 1 of 16
<PAGE>
PART I - FINANCIAL INFORMATION
Item l. Financial Statements.
- ------- ---------------------
Page 2
<PAGE>
GENERAL MICROWAVE CORPORATION
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
MAY 30, 1998
Page 3
<PAGE>
<TABLE>BALANCE SHEET ASSETS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S S E T S
May 30, 1998 February 28, 1998
(Unaudited)
-------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,325,670 $ 3,275,497
Restricted cash 320,000 200,000
Accounts receivable, net of allowance for
doubtful accounts 3,996,865 4,440,355
Current assets of discontinued operations 9,789 13,942
Inventories 4,678,743 4,440,889
Prepaid expenses and other current assets 319,778 287,437
Deferred income taxes, net 794,083 794,083
------------- -------------
Total current assets 13,444,928 13,452,203
Property, plant and equipment, net 5,698,559 5,714,943
Debt issuance costs, net 30,412 35,629
Costs in excess of fair value of net
assets acquired, net 585,273 604,173
Other intangible assets, net 134,186 137,686
Other assets 73,069 92,518
------------- -------------
$ 19,966,427 $ 20,037,152
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4
<PAGE>
<TABLE>BALANCE SHEET LIABILITIES AND STOCKHODERS' EQUITY
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
May 30, 1998 February 28, 1998
(Unaudited)
-------------- -----------------
Current liabilities:
Current installments of long-term debt $ 637,500 $ 675,000
Short-term borrowing - 230,319
Accounts payable 808,002 656,387
Customer advance payments - 314,474
Current liabilities of discontinued
operations 165,225 205,363
Accrued payroll and other employee benefits 805,284 816,487
Accrued expenses and other current
liabilities 1,167,038 1,072,426
Accrued commissions 174,671 189,595
------------- -------------
Total current liabilities 3,757,720 4,160,051
------------- -------------
Long term debt, less current installments 693,680 806,250
Deferred income taxes 589,995 589,995
Minority interest 43,249 40,645
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 1,678,011 at
May 30, 1998 and 1,677,761 at
February 28, 1998 16,780 16,778
Additional paid-in capital 9,631,746 9,630,499
Retained earnings 8,421,906 7,981,583
------------- -------------
18,070,432 17,628,860
Less: treasury stock, at cost 3,188,649 3,188,649
------------- -------------
14,881,783 14,440,211
------------- -------------
$ 19,966,427 $ 20,037,152
============= =============
</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 30, 1998 May 31, 1997
------------ ------------
(Unaudited)
<S> <C> <C>
Net sales $ 5,926,692 $ 4,987,128
------------ ------------
Costs and expenses:
Cost of sales 3,759,110 3,219,545
Selling 536,670 623,599
General and administrative 923,208 811,373
Research and development 93,281 113,401
------------ ------------
5,312,269 4,767,918
------------ ------------
Operating earnings 614,423 219,210
------------ ------------
Other expenses (income):
Interest expense 17,023 43,322
Dividend and interest income (49,569) (22,238)
Other 16,646 12,339
------------ ------------
(15,900) 33,423
------------ ------------
Earnings before provision for
income taxes 630,323 185,787
Provision for income taxes 190,000 18,000
------------ ------------
Net earnings $ 440,323 $ 167,787
============ ============
Basic net earnings per share $ 0.36 $ 0.14
============ ============
Diluted net earnings per share $ 0.36 $ 0.14
============ ============
Weighted average number of
common shares outstanding-Basic 1,210,670 1,205,659
Weighted average number of
common shares outstanding-Diluted 1,236,298 1,205,659
</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>
May 30, 1998 May 31, 1997
------------ ------------
(Unaudited)
Cash flows from operating activities:
Net earnings from continuing operations $ 440,323 $ 167,787
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 197,719 201,877
Minority interest in earnings of
consolidated subsidiary 2,604 645
Changes in assets and liabilities:
Accounts receivable, net 443,490 345,443
Inventories (237,854) 155,451
Prepaid expenses and other current assets (32,341) (151,028)
Accounts payable and accrued liabilities 220,100 (249,067)
Customer advance payments (314,474) -
Other,net 19,449 27,761
------------ ------------
Net cash provided by operating activities 739,016 498,869
------------ ------------
Net cash provided by (used in) discontinued operations (35,985) 3,497
------------ ------------
Cash flows from investing activities:
Purchase of property, plant & equipment (153,719) (98,098)
------------ ------------
Net cash used in investing activities (153,719) (98,098)
------------ ------------
Cash flows from financing activities:
Principal payments on long-term debt (150,070) (52,806)
Net proceeds from (payments on) short-term borrowings (230,319) (324,944)
Proceeds from exercise of stock options 1,250 -
------------ ------------
Net cash used in financing activities (379,139) (377,750)
------------ ------------
Net increase in cash 170,173 26,518
Cash at beginning of the period 3,475,497 1,945,362
------------ ------------
Cash at end of the period $ 3,645,670 $ 1,971,880
============ ============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest 16,953 43,646
Income Taxes 66,016 9,399
</TABLE>
See accompanying notes to consolidated financial statements.
Page 7
<PAGE>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
May 30, 1998
(Unaudited)
NOTE 1: The consolidated financial statements include the accounts
of General Microwave Corporation (GMC), its wholly-owned
subsidiaries, General Microwave Foreign Sales Corporation
(FSC), Micro-El Patent Corporation and GMC Associates, Inc.
(formerly known as 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 accompanying consolidated condensed financial
statements have not been audited, but in the opinion of
management, have been prepared in conformity with generally
accepted accounting principles applying certain judgements
and estimates which include all adjustments (consisting
only of normal recurring adjustments) considered necessary
to present fairly such information. Operating results for
any interim period are not necessarily indicative of the
results for an entire year.
NOTE 3: Inventories on hand at:
May 30, 1998 February 28, 1998
------------ -----------------
Raw materials $ 2,169,511 $ 2,106,835
Work in process 2,229,823 2,484,041
Finished goods 496,411 421,619
------------ ------------
4,895,745 5,012,495
Less progress billings
and customer advances (217,002) (571,606)
------------ ------------
$ 4,678,743 $ 4,440,889
============ ============
Inventories are valued at the lower of cost or market on a
first-in, first-out basis.
Page 8
<PAGE>
NOTE 4: Accumulated depreciation and amortization of property,
plant and equipment was $8,664,543 at May 30, 1998 and
$8,494,439 at February 28, 1998.
NOTE 5: Reclassifications are made whenever necessary to conform
with the current year's presentation.
NOTE 6: On June 23, 1998 the Shareholders approved an amendment to
the Company's 1990 Stock Option Plan increasing the number
of shares of the Company's common stock that may be issued
pursuant to the plan by 50,000 to 175,000 shares.
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 30, 1998 compared with the Quarter Ended May 31,
- --------------------------------------------------------------------------
1997.
- -----
In the first quarter of fiscal 1999, the Company had net earnings of
$440,323 or $.36 basic and diluted net earnings per share, compared to the
first quarter of fiscal 1998 which had net earnings of $167,787 or $.14
basic and diluted net earnings per share. Sales of $5,926,692 increased
by $939,564 (18.8%) from the comparable quarter last year primarily due to
improved industry conditions. The increase in sales and improvement in
earnings was principally at the Company's Amityville, New York operation.
Cost of sales, as a percentage of sales, decreased during the current
quarter to 63.4% from 64.6% during the comparable quarter of last year.
Management attributes this improvement to a better product mix and
production efficiencies. Selling expenses decreased as a percentage of
sales in the current fiscal quarter to 9.0% from 12.5% in the comparable
quarter of last year, principally due to lower commissions payable related
to the customer mix in the first quarter of fiscal 1999. General and
administrative expenses decreased as a percentage of sales in the current
fiscal quarter, to 15.6% from 16.3% in the comparable quarter of last year.
The provision for income taxes for the quarter ended May 30, 1998,
reflects an estimated annual effective tax rate of approximately 30.1%.
This rate is less than the federal statutory rate of 34% principally due
to a lower tax rate on the income generated by the Israeli operation offset
slightly by the provision for state income taxes.
During the first quarter of fiscal 1999, sales orders booked were $5.9
million and the closing backlog was $13.8 million compared with $4.6
million and $16.6 million, respectively, for the first quarter of fiscal
1998. The closing backlog at fiscal year-end February 28, 1998 was $13.9
million.
Liquidity and Capital Resources
- -------------------------------
May 30, 1998 compared with February 28, 1998
- --------------------------------------------
At May 30, 1998, the Company's ratio of current assets to current
liabilities was 3.6 to 1 compared to 3.2 at February 28, 1998.
Page 10
<PAGE>
During the first quarter of fiscal 1999, cash flows provided by continuing
operations amounted to approximately $739,000 as compared to approximately
$499,000 during the comparable period last year. Cash flows were used
primarily to purchase capital equipment for $154,000 and repay short-term
and long-term debt of the Israeli subsidiaries through cash flows generated
by such subsidiaries of $379,000. Accounts receivable declined $443,000
due to high February 1998 sales compared to more level monthly first
quarter fiscal 1999 sales. Inventories increased by approximately $238,000
due to a reduction in progress billing of $354,000 (see Note 3 to
Consolidated Financial Statements). Customer advances were reduced by
approximately $314,000. Accounts payable and accrued liabilities increased
primarily due to tax accruals. The Company expects to spend up to $650,000
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. The tangible net worth covenant limits the ability of the Company
to pay cash dividends. As a result of such covenant, there is
approximately $2,121,811 of unrestricted funds available for the payment
of cash dividends as of May 30, 1998. Management anticipates using such
funds to enhance future operations and does not anticipate cash dividends
in the immediately foreseeable future. In addition, commencing April 1,
1996, the Company is required to make monthly sinking fund payments of
$40,000 towards its annual bond payment. Such amount is reflected as
restricted cash on the accompanying consolidated balance sheets.
The Company believes that its present resources, including available
credit, are sufficient to meet its needs for the foreseeable future.
Year 2000 Conversion
- --------------------
The Company is evaluating the risks and costs associated with the year 2000
conversion. Based on the Company's ongoing evaluation, management
currently believes that the costs to achieve year 2000 compliance will not
result in costs significantly in excess of historical and/or planned levels
of capital expenditures. The Company intends to communicate with its
customers, suppliers, financial institutions and others with which it does
business to ensure that year 2000 issues will be resolved in a timely
manner. If necessary modifications and conversions by those with which the
Company does business are not completed timely, the year 2000 conversion
issue may have a material adverse financial impact on the Company.
Recent Accounting Pronouncements
- --------------------------------
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 131, "Disclosures about Segments of an Enterprise
Page 11
<PAGE>
and Related Information" (SFAS No. 131), SFAS No. 131 established standards
to report information about operating segments and related discussions
about products and services, geographic areas and major customers. SFAS
No. 131 is effective for financial statements for the reporting periods
beginning after December 15, 1997. This statement permits early
application and requires restatement for all prior periods. The Company
is currently evaluating the requirements of SFAS No. 131 and has not yet
determined what impact this statement will have on information reported
regarding industry segments.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits" (SFAS No. 132). SFAS No. 132 revises
disclosures about pension and other postretirement benefit plans.
Management of the Company does not believe that the implementation of SFAS
No. 132 will have a significant impact on previously reported information
regarding its employee pension plan.
Forward-Looking Information
- ---------------------------
Certain statements made in this report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from
any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic conditions; the level of domestic and
worldwide spending on military defense products; timing and volume of
incoming orders; shipment volumes; competitive factors such as rival
component manufacturers' competing technologies; acceptance of new Company
products; price pressures; the Company's ability to invest in new product
development and new processes and its ability to integrate these processes
in its manufacturing operations; manufacturing capacity and the ability to
"ramp" to meet anticipated demand; engineering development costs;
availability of third party supplier parts at reasonable prices;
obsolescence of inventory due to changes in customer demand; efficiencies
of manufacturing processes; and availability of financial resources to fund
anticipated growth.
Page 12
<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 13
<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 7, 1998 By:S/Arnold H. Levine
-----------------------------
Arnold H. Levine, Vice
President-Finance, Treasurer,
Chief Financial Officer
(Principal Financial and
Chief Accounting Officer)
Page 14
<PAGE>
Exhibit Index
-------------
Page Number
in Sequential
Exhibit No. Numbering
- ----------- ---------
27 Financial Data Schedule (Filed with 16
electronically filed copy only)
Page 15
<PAGE>
GENERAL MICROWAVE CORPORATION
AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
Page 16 of 16
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> MAY-30-1998
<CASH> 3646
<SECURITIES> 0
<RECEIVABLES> 4043
<ALLOWANCES> 46
<INVENTORY> 4679
<CURRENT-ASSETS> 13445
<PP&E> 14363
<DEPRECIATION> 8664
<TOTAL-ASSETS> 19966
<CURRENT-LIABILITIES> 3758
<BONDS> 0
<COMMON> 17
0
0
<OTHER-SE> 14865
<TOTAL-LIABILITY-AND-EQUITY> 19966
<SALES> 5926
<TOTAL-REVENUES> 5926
<CGS> 3759
<TOTAL-COSTS> 1553
<OTHER-EXPENSES> (33)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17
<INCOME-PRETAX> 630
<INCOME-TAX> 190
<INCOME-CONTINUING> 440
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 440
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.36
