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 November 29, 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 December 31, 1997, there were 1,210,659 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)
NOVEMBER 29, 1997
Page 3
<PAGE>
<TABLE>BALANCE SHEET ASSETS
<CAPTION>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
A S E T S
November 29, 1997 February 28, 1997
(Unaudited)
----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,511,957 $ 1,745,362
Restricted cash 80,000 200,000
Accounts receivable, net of allowance for
doubtful accounts 3,320,313 4,121,809
Current assets of discontinued operations 172,118 1,012,050
Inventories 4,681,839 4,535,832
Prepaid expenses and other current assets 202,746 250,417
Deferred income taxes, net 523,676 523,676
---------------- --------------
Total current assets 12,492,649 12,389,146
Property, plant and equipment, net 5,784,611 5,990,992
Debt issuance costs and other assets, net 41,796 85,208
Costs in excess of fair market value of
net assets acquired, net 623,073 679,773
Other intangible assets, net 136,933 144,392
---------------- -------------
$ 19,079,062 $19,289,511
================ =============
</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
November 29, 1997 February 28, 1997
(Unaudited)
----------------- -----------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 675,000 $ 709,670
Short-term borrowing 164,124 591,739
Accounts payable 718,216 945,145
Customer advance payments 804,467 -
Current liabilities of discontinued
operations 221,825 1,195,193
Accrued payroll and other employee benefits 699,100 691,227
Accrued expenses and other current liabilities 1,022,011 1,117,973
Accrued commissions 140,752 294,400
--------------- ----------------
Total current liabilities 4,445,495 5,545,347
--------------- ----------------
Long term debt, less current installments 824,914 1,627,141
Deferred income taxes 547,303 547,303
Minority interest 35,616 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 1,677,761 at
November 29, 1997 and 1,672,761 at
February 28, 1997. 16,778 16,728
Additional paid-in capital 9,630,499 9,605,549
Retained earnings 6,767,106 5,111,382
--------------- ----------------
16,414,383 14,733,659
Less: Treasury stock, at cost 3,188,649 3,188,649
--------------- ----------------
13,225,734 11,545,010
--------------- ----------------
$19,079,062 $ 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 NINE MONTHS ENDED
November 29, 1997 November 30, 1996 November 29, 1997 November 30, 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------------- ------------------ ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 4,622,465 $ 4,867,850 $ 15,097,393 $ 14,031,290
Cost of sales 3,072,726 3,546,905 9,903,549 9,835,376
------------ ------------ ------------- -------------
Gross earnings 1,549,739 1,320,945 5,193,844 4,195,914
Operating expenses:
Selling 461,421 556,691 1,729,671 1,680,288
General and administrative 776,192 747,570 2,355,110 2,260,195
Research and development 70,516 109,044 284,347 440,241
------------ ------------ ------------- ------------
1,308,129 1,413,305 4,369,128 4,380,724
------------ ------------ ------------- ------------
Operating earnings (loss) 241,610 (92,360) 824,716 (184,810)
Other expenses (income):
Interest expense 21,880 57,736 93,646 163,105
Dividend and interest income (32,702) (12,779) (78,854) (33,217)
Minority interest in earnings
of consolidated subsidiary 4,042 691 10,906 5,050
Other 17,834 13,058 35,105 35,376
------------ ----------- ------------- -------------
11,054 58,706 60,803 170,314
------------ ----------- ------------- -------------
Earnings (loss) from continuing
operations before provision for
(recovery of) income taxes 230,556 (151,066) 763,913 (355,124)
Provision for income taxes 13,000 40,000 61,000 40,000
------------ ----------- ------------- -------------
Net earnings (loss) from
continuing operations 217,556 (191,066) 702,913 (395,124)
Discontinued operations:
Loss from operations of discontinued
Math Associates, Inc. - (196,404) - (626,509)
Gain on sale of assets of
Math Associates, Inc. - - 952,811 -
------------ ------------- ------------- -------------
Net earnings (loss) $ 217,556 $ (387,470) $ 1,655,724 $ (1,021,633)
============ ============= ============= =============
Net earnings (loss) per share:
From continuing operations $ 0.17 $ (0.16) $ 0.57 $ (0.33)
From discontinued operations $ - $ (0.16) $ 0.78 $ (0.52)
------------ ------------- ------------- -------------
Net earnings (loss) per share $ 0.17 $ (0.32) $ 1.35 $ (0.85)
============ ============= ============= =============
Weighted average number of
common shares outstanding 1,245,510 1,205,659 1,228,230 1,203,821
</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 NINE MONTHS ENDED
November 29, 1997 November 30, 1996
(Unaudited) (Unaudited)
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) from continuing operations $ 702,913 $ (395,124)
Adjustments to reconcile net earnings (loss)
to net cash provided by continuing operations:
Depreciation and amortization 607,850 648,204
Gain on disposal of equipment 1,394 -
Minority interest in earnings of
consolidated subsidiary 10,906 5,050
Changes in assets and liabilities:
Accounts receivable, net 801,496 568,118
Inventories (146,007) (105,437)
Income taxes payable and receivable 42,176 386,224
Prepaid expenses and other current assets 47,671 16,074
Accounts payable and accrued liabilities (522,582) (6,976)
Customer advance payments 804,467 -
Other assets 27,761 19,959
------------- -------------
Net cash provided by continuing operations 2,378,045 1,136,092
------------- -------------
Net cash provided by (used in) discontinued operations 829,721 (732,263)
------------- -------------
Cash flows from investing activities:
Purchase of plant & equipment (317,119) (313,865)
Purchase of intangible assets (4,540) (16,698)
------------- -------------
Net cash used in investing activities (321,659) (330,563)
------------- -------------
Net cash used in investing activities of
discontinued operations - (1,675)
------------- -------------
Cash flows from financing activities:
Principal payments on long-term debt (836,897) (646,237)
Proceeds from short-term borrowing - 397,861
Principal payments on short-term debt (427,615) -
Proceeds from issuance of common stock
pursuant to employee stock purchase plan - 56,229
Proceeds from exercise of stock options 25,000 -
------------- -------------
Net cash used in financing activities (1,239,512) (192,147)
------------- -------------
Net increase (decrease) in cash and cash equivalents 1,646,595 (120,556)
Cash and cash equivalents at beginning of period 1,945,362 700,876
------------- -------------
Cash and cash equivalents at end of period $ 3,591,957 $ 580,320
============= =============
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest 97,468 154,870
Income Taxes 23,142 53,099
</TABLE>
See accompanying notes to consolidated financial statements.
Page 7
<PAGE>
GENERAL MICROWAVE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 29, 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
electronic fiber optic systems and components business
operated by Math. The plan anticipated 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. On
September 24, 1997, a sale of certain of the assets of Math
was completed which resulted in a gain from discontinued
operations as recorded in the consolidated financial
statements as of August 30, 1997. This gain relates
principally to the proceeds from the sale of assets and the
reversal of estimated costs of liquidation which will no
longer be incurred as a result of the sale. 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.
Page 8
<PAGE>
NOTE 4: Inventories on hand at:
November 29, 1997 February 28, 1997
----------------- -----------------
Raw materials $ 2,555,982 $ 1,802,020
Work in process 2,295,551 2,371,040
Finished goods 485,409 568,132
------------ ------------
5,336,942 4,741,192
Less progress billings
and customer advances ( 655,103) (205,360)
------------ ------------
$ 4,681,839 $ 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 $8,408,867 at November 29, 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 November 29, 1997 compared with the Quarter Ended
- -----------------------------------------------------------------------
November 30, 1997.
- -----------------
In the third quarter of fiscal 1998, net sales from continuing operations
were $4,622,465 compared to $4,867,850 during the comparable quarter last
year, representing a 5.0% decrease. In the third quarter of fiscal 1998
the Company had net earnings from continuing operations of $217,556 or
$.17 per share. In the third quarter of fiscal 1997, the Company had a net
loss of $191,066 or $.16 per share from continuing operations, a net loss
from discontinued operations of Math Associates, Inc. of $196,404 or $.16
per share, which amounted to a net loss of $387,470 or $.32 per share. In
the third quarter of fiscal 1998, all of the Company's continuing
operations were profitable, with the improvement in earnings principally
in the Company's Amityville and Microcircuits operations.
Cost of sales, as a percentage of sales, decreased during the current
quarter to 66.5% from 72.9% during the comparable quarter of last year as
the Company continued to improve processes and controls.
During the third quarter of fiscal 1998, sales orders booked were $2.8
million and the closing backlog was $13.3 million compared with $4.3
million and $10.3 million respectively for the third quarter of fiscal
1997.
For the Nine Months Ended November 29, 1997 compared with the Nine Months
- -------------------------------------------------------------------------
Ended November 30, 1996.
- ------------------------
During the first nine months of fiscal 1998, net sales were $15,097,393
compared with $14,031,290 for the first nine months of fiscal 1997,
representing a 7.6% increase. Net earnings were $702,913 or $.57 per share
from continuing operations for the current period as compared to a net loss
of $395,124 or $.33 per share from continuing operations for the prior
fiscal year. After net earnings from discontinued operations of $952,811
or $.78 per share, net earnings for the nine months ended November 29, 1997
were $1,655,724 or $1.35 per share, as compared to a net loss of $626,509
or $.52 per share from discontinued operations with a nine month net loss
of $1,021,633 or $.85 per share in the first nine months of fiscal 1997.
Sales increased in all of the Company's continuing operations, with
significant earnings improvement in each of the Company's operations.
Cost of sales, as a percentage of sales, decreased to 65.6% in the first
nine months of fiscal 1998, compared to 70.1% in the first nine months of
fiscal 1997, as the Company continued to improve processes and controls.
Page 10
<PAGE>
During the current nine months the Company decreased total operating
expenses as a percentage of sales to 28.9% from 31.2% in the prior year as
the Company benefited from increased sales that were not offset by
comparable expense increases. Interest expense decreased due to reduced
borrowings at the Israeli subsidiary. Investment income increased because
of increased funds available for investment.
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 fiber optics business as a discontinued operation. On
September 24, 1997, a sale of certain of the assets of Math was completed,
which resulted in a gain from discontinued operations as recorded in the
consolidated financial statements as of August 30, 1997. This gain relates
principally to the proceeds from the sale of assets and the reversal of
estimated costs of liquidation which will no longer be incurred as a result
of the sale.
During the first nine months of fiscal 1998, sales orders booked were $11.5
million and the closing backlog was $13.3 million compared with $13.6
million and $10.3 million respectively, for the first nine months of fiscal
1997.
Liquidity and Capital Resources
- -------------------------------
November 29, 1997 compared with February 28, 1997
- -------------------------------------------------
At November 29, 1997, the Company's ratio of current assets to current
liabilities was 2.8 to 1 compared to 2.2 to 1 at February 28, 1997.
During the first nine months of fiscal 1998, cash flows provided by
continuing operations amounted to approximately $2,378,000 as compared to
approximately $1,136,000 during the comparable period last year. The cash
flows during the first nine months of fiscal 1998 were utilized to purchase
equipment for approximately $317,000, repay long and short term borrowings
totalling approximately $1,265,000 related to the borrowings of the Israeli
subsidiaries and the annual payment of the Company's 7-Day Demand
Industrial Development Revenue Bond and increase cash balances. Accounts
receivable declined approximately $801,000, while inventories increased by
approximately $146,000 primarily due to increased work in process at the
Company's Amityville operations. Accounts payable and accrued liabilities
decreased approximately $523,000, due to timing differences and reduced
expenditures. The Company received approximately $804,000 in customer
advance payments, for which the expenses will be incurred within the next
six months. In addition, cash flows of approximately $830,000 were
provided by discontinued operations, whereas for the comparable period last
year, discontinued operations used approximately $732,000. The Company
expects to spend up to $150,000 during the remainder of the year for
capital equipment.
Page 11
<PAGE>
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 bond payments of
$500,000 in fiscal 1998 and $600,000 in fiscal 1999. 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 $2,574,416 at November 29, 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
$1,848,932 of unrestricted funds available for the payment of cash
dividends as of November 29, 1997. Management anticipates using such funds
to enhance future operations and does not anticipate cash dividends in the
immediately foreseeable future.
The Company believes that its present resources, including available
credit, are sufficient to meet its needs for the foreseeable future.
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: January 12, 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> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> FEB-28-1998 FEB-28-1998
<PERIOD-START> MAR-1-1997 AUG-31-1997
<PERIOD-END> NOV-29-1997 NOV-29-1997
<CASH> 3592 3592
<SECURITIES> 0 0
<RECEIVABLES> 3347 3347
<ALLOWANCES> 27 27
<INVENTORY> 4682 4682
<CURRENT-ASSETS> 12493 12493
<PP&E> 14194 14194
<DEPRECIATION> 8409 8409
<TOTAL-ASSETS> 19079 19079
<CURRENT-LIABILITIES> 4445 4445
<BONDS> 0 0
<COMMON> 17 17
0 0
0 0
<OTHER-SE> 13209 13209
<TOTAL-LIABILITY-AND-EQUITY> 19079 19079
<SALES> 15097 4622
<TOTAL-REVENUES> 15097 4622
<CGS> 9903 3072
<TOTAL-COSTS> 4369 1308
<OTHER-EXPENSES> (33) (11)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 94 22
<INCOME-PRETAX> 764 231
<INCOME-TAX> 61 13
<INCOME-CONTINUING> 703 218
<DISCONTINUED> 953 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1656 218
<EPS-PRIMARY> 1.35 0.17
<EPS-DILUTED> 1.35 0.17
