SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 1994
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 No. 1-4236
M/A-COM, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Massachusetts 04-2090644
- - ------------------------------- ---------------------------------------
(State or other jurisdiction or (I.R.S. Employer Identification Number)
incorporation or organization)
100 Chelmsford Street, Lowell, MA 01853-3294
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(508) 442-5000
--------------
(Registrant's telephone number, including area code)
401 Edgewater Place, Wakefield, MA 01880
-----------------------------------------------
(Former address of principal executive offices)
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. Yes (X) No ( )
As of August 5, 1994, M/A-COM, Inc. had outstanding 25,848,585 shares of
Common Stock, $1.00 par value (exclusive of 18,157,124 shares held in its
treasury).
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
M/A-COM, INC.
AND SUBSIDIARIES
The accompanying condensed consolidated financial statements include, in the
opinion of management, all adjustments which are normal and recurring (with
the exception of the cumulative effect of a promulgated change in accounting
for income taxes) and necessary to a fair statement of the results for the
interim periods presented. Neither the results for the current period nor
comparison with the corresponding period of the preceding fiscal year should
be considered indicative of the results which may be expected for the fiscal
year ending October 1, 1994. These condensed consolidated financial
statements should be read in conjunction with the financial statements and
notes thereto contained in the Company's Annual Report on Form 10-K for the
fiscal year ended October 2, 1993.
We have engaged our independent accountants, Price Waterhouse LLP, to conduct
a limited review of the condensed consolidated financial information included
in this report for the quarter ended July 2, 1994. They have reported to us
that such review, which does not constitute an audit, has been completed in
accordance with standards established for such reviews by the American
Institute of Certified Public Accountants. They proposed no adjustments or
additional disclosure which they believed should be reflected in the
financial information accompanying this report. Price Waterhouse LLP's report
on their review is enclosed on page 17 of this report.
-2-
<PAGE>
<TABLE>
M/A-COM, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share amounts)
UNAUDITED
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Net sales $ 85,212 $ 84,520 $248,183 $250,766
-------- -------- -------- --------
Costs and expenses:
Cost of sales 53,892 53,393 160,258 169,036
Company sponsored research
and development 5,996 5,346 16,665 14,021
Selling, general and
administrative expenses 21,558 22,095 61,116 62,761
Interest expense 2,345 1,824 6,934 6,063
Interest income (157) (148) (422) (3,723)
-------- -------- -------- --------
83,634 82,510 244,551 248,158
-------- -------- -------- --------
Income from continuing operations
before income taxes 1,578 2,010 3,632 2,608
Income tax (benefit) provision - 300 812 (2,206)
-------- -------- -------- --------
Income from continuing operations 1,578 1,710 2,820 4,814
Discontinued operations, net of
applicable income taxes - - - 1,000
Cumulative effect of a change in
accounting for income taxes - - 3,300 -
-------- -------- -------- --------
Net income $ 1,578 $ 1,710 $ 6,120 $ 5,814
======== ======== ======== ========
Income per share:
Continuing operations $ .06 $ .07 $ .11 $ .20
Discontinued operations - - - .04
Cumulative effect of
accounting change - - .13 -
----- ----- ----- -----
Net income per share $ .06 $ .07 $ .24 $ .24
===== ===== ===== =====
Shares used in income per share
calculation 25,867 25,395 25,874 24,478
====== ====== ====== ======
See accompanying notes.
</TABLE>
-3-
<PAGE>
<TABLE>
M/A-COM, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands)
<CAPTION>
----------------------------
July 2, October 2,
1994 1993
(Unaudited)
----------------------------
<S> <C> <C>
ASSETS
- - ------
Current assets:
Cash and cash equivalents $ 4,201 $ 10,024
Marketable securities 1,250 1,250
Accounts receivable, net 63,000 72,730
Unbilled revenue under customer contracts 1,926 1,744
Inventories 69,620 58,629
Other current assets 12,982 7,157
--------- ---------
Total current assets 152,979 151,534
--------- ---------
Plant assets 258,470 251,942
Less - Accumulated depreciation (153,338) (145,235)
--------- ---------
105,132 106,707
--------- ---------
Other assets 55,493 56,462
--------- ---------
Total Assets $ 313,604 $ 314,703
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current liabilities:
Notes payable and current portion of
long-term debt $ 5,726 $ 6,737
Accounts payable-trade 18,152 21,255
Accrued liabilities and taxes 75,494 94,264
--------- ---------
Total current liabilities 99,372 122,256
--------- ---------
Long-term debt 67,754 68,352
--------- ---------
Other long-term liabilities 27,480 16,220
--------- ---------
Stockholders' equity:
Paid-in-capital 46,903 41,900
Retained earnings 72,095 65,975
--------- ---------
Total stockholders' equity 118,998 107,875
--------- ---------
Commitments and contingencies
Total Liabilities and Stockholders' Equity $ 313,604 $ 314,703
========= =========
See accompanying notes.
</TABLE>
-4-
<PAGE>
<TABLE>
M/A-COM, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
UNAUDITED
<CAPTION>
Nine Months Ended
-------------------------------
July 2, July 3,
1994 1993
-------------------------------
<S> <C> <C>
Cash provided by continuing operating
activities $ 7,351 $ 7,359
-------- --------
Cash flows from investing activities:
Additions to plant assets (11,351) (30,167)
Investment in IVHS Technologies, Inc. - (2,250)
-------- --------
Cash applied to investing activities (11,351) (32,417)
-------- --------
Cash flows from financing activities:
Net proceeds from (repayment of)
short-term borrowings (1,156) 3,119
Repayment of debt (582) (566)
Repurchase of common stock - (2,380)
Stock options exercised 1,192 1,052
-------- --------
Cash provided by (applied to) financing
activities (546) 1,225
-------- --------
Cash provided by (applied to)
discontinued operations (1,277) 2,109
-------- --------
Decrease in cash and cash equivalents (5,823) (21,724)
Cash and cash equivalents at
beginning of period 10,024 36,136
-------- --------
Cash and cash equivalents at
end of period $ 4,201 $ 14,412
======== ========
See accompanying notes.
</TABLE>
-5-
<PAGE>
M/A-COM, INC.
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
- - ----------------------------------------------------
(Unaudited except for October 2, 1993 amounts)
Note 1 - Changes in the Business
Sale of Product Line
In the first quarter of 1993, the Company sold its high power, narrow band
receiver protector product line. Sales and gross profits have been excluded
from the date of the sale. The sale was for cash of $5.1 million and
resulted in a gain of $2.3 million which was recorded as a reduction of
selling, general and administrative expenses in the accompanying consolidated
statement of income.
Investment in IVHS Technologies, Inc.
In the second quarter of 1993, the Company made an equity investment in IVHS
Technologies, Inc. ("IVHS") for $2.3 million. IVHS is in the business of
innovating, designing and manufacturing specialized electronic products that
enhance the safety and efficiency of vehicles, drivers and roadways.
Note 2 - Unusual Items
In the fourth quarter of 1993, the Company decided to refocus the direction
of its commercial business and reallocated certain resources associated with
that aspect of its operations. As a result of these actions, the Company
recorded a $5.3 million reserve for anticipated losses relating to its
manufacturing obligations on certain technically complex commercial
contracts.
Beginning in 1994, in connection with certain changes in operational
management, the Company embarked upon a new strategy of negotiating the
termination of these contracts in an effort to minimize the anticipated
losses and maximize the Company's resources.
In the first quarter of 1994, the Company reached an agreement in principle
to terminate one of the technically complex commercial contracts for which it
had previously established a reserve. In connection with this termination,
the Company reduced its orders and backlog to reflect the termination of this
contract. In addition, the Company reassessed the adequacy of the $2.6
million reserve initially established for this contract and determined that
$1.6 million of this reserve was necessary for the write-off of inventory and
other potential obligations related to this contract. Accordingly the
Company reversed $1.0 million of this reserve. During the second quarter of
1994, the Company formalized the termination of this contract without any
further obligations or contingencies. Accordingly, the Company charged
approximately $.7 million in unusable inventory relating to this contract
against the reserve, and reversed the remaining reserve balance of $.9
million. The first and second quarter reserve reversals were recorded as
reductions to cost of sales.
-6-
<PAGE>
In the third quarter of 1994, the Company successfully completed negotiations
for the termination of an additional technically complex commercial contract.
As a result of this termination, the Company had no further obligation with
respect to this contract and accordingly reversed $1.2 million of reserves
which it had established in the fourth quarter of 1993. This reserve
reversal was recorded as a reduction to cost of sales.
In the second quarter of 1993, the Company recorded a charge to selling,
general and administrative expenses ("SG&A") of $4.0 million as a refinement
of the estimated cost of the Company's consolidation and downsizing plans
which were initially established during 1992. Additionally, the Company
recorded an increase to its allowance for doubtful accounts of $1.0 million
during the second quarter of 1993. This increase was charged to SG&A and was
the result of cash flow problems being experienced by a specific customer.
During the second quarter of 1993, the Company also benefited from the
recovery of $2.2 million in insurance proceeds. The proceeds represent the
reimbursement of expenditures made for certain liabilities at a site
previously occupied by the Company and were recorded as a reduction of SG&A
in the second quarter of 1993. The expenditures had been charged to the
results of operations in previous periods.
In the first quarter of 1993, a production facility of a foreign subsidiary
was damaged by fire. The Company recorded a gain of approximately $1.0
million related to the excess of insurance recovery over the net book value
of the assets damaged by the fire. The gain was recorded as a reduction of
selling, general and administrative expenses in the accompanying consolidated
statement of income.
Note 3 - Income Taxes
In the third quarter of 1994, the Company recognized approximately $1.0
million in tax benefits associated with certain current and prior year
expenditures that were eligible for carryback under provisions of Federal tax
law. This benefit was recognized as the result of the issuance, during the
quarter, of a favorable revenue ruling as to the deductibility of such
expenditures by the Internal Revenue Service. Prior to the third quarter,
the Company had not recognized any tax benefit for such expenditures due to
the uncertainty as to their deductibility. This benefit offset the Company's
tax provision for the third quarter, which was primarily attributable to the
Company's foreign and Puerto Rico operations.
In the first quarter of 1994, the Company prospectively adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes ("SFAS
109"), effective as of October 3, 1993. SFAS 109 is an asset and liability
approach that requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized
in the Company's financial statements or tax returns. In estimating future
tax consequences, SFAS 109 generally considers all expected future events
other than enactments of changes in the tax law or rates. Previously the
Company used an asset and liability approach in accordance with SFAS 96.
-7-
<PAGE>
The cumulative effect of adopting SFAS 109 amounted to $3.3 million and is
reflected in the consolidated statement of income for the nine months ended
July 2, 1994 as the cumulative effect of a change in accounting principle.
It primarily represents the reversal of deferred tax assets and liabilities
established in connection with a previous acquisition which were initially
recorded as reductions of the respective assets and liabilities to which they
relate. SFAS 109 had no material impact on the provision for income taxes
for the first, second and third quarters of 1994.
The net current deferred tax asset of $8.9 million is included in other
current assets and the deferred tax liability of $14.0 million is included in
other long-term liabilities in the accompanying condensed consolidated
balance sheet at July 2, 1994.
During the second quarter of 1993, the Company reached initial resolution
with the Internal Revenue Service of certain prior years' tax returns. As a
result, the Company recorded $2.8 million of interest income on a tax refund
claim during the second quarter of 1993. Additionally, the Company recorded
a reversal, net of the second quarter of 1993 tax provision, of $3.6 million
of accrued tax liabilities ($1.0 million of which was applicable to
discontinued operations).
The Company has not provided deferred taxes on the undistributed earnings of
its foreign subsidiaries as such earnings are expected to be reinvested for
an indefinite period of time.
Note 4 - Common Stock Transactions and Debt
In the second quarter of 1994, the Company negotiated a new, unsecured
revolving credit agreement (the "agreement") with maximum borrowings of $30.0
million expiring on August 30, 1995. The maximum borrowings may be limited
based on the amount of the Company's domestic accounts receivable, as
adjusted by the agreement. As of July 2, 1994, the Company's borrowing
availability under this agreement was $21.1 million. During the term of the
agreement, the Company can borrow at the bank's base rate (7.25% at July 2,
1994) or the bank's Eurodollar rate, as adjusted, plus one and one-half
percent. The agreement contains certain restrictive covenants including, but
not limited to, minimum levels of profitability and liquidity and
restrictions related to indebtedness, cash flow and capital expenditures.
The agreement also contains restrictions with respect to acquisitions and the
repurchase of the Company's public debt. As of July 2, 1994 the Company had
no outstanding borrowings under this agreement. Subsequent to the end of the
third quarter, the Company has borrowed $9.5 million under this agreement.
The Company's foreign subsidiaries have lines of credit available to fund
local working capital requirements. The lines of credit provide for
borrowings aggregating approximately $15.6 million. During the first nine
months of 1994, the Company decreased its borrowings by approximately $1.0
million under its foreign lines of credit. As of July 2, 1994, total
borrowings under the foreign lines of credit aggregated approximately $4.9
million.
In the first quarter of 1994, the Company repaid $2.6 million of an
Industrial Revenue Bond ("IRB") associated with a previously discontinued
operation. The IRB had been included in accrued liabilities in the Company's
consolidated balance sheet at October 2, 1993.
-8-
<PAGE>
In the three month and nine month periods ended July 2, 1994, the Company
contributed a total of 126,000 and 366,000 shares of common stock,
respectively, to match employee contributions to the Company's defined
contribution retirement plan.
Pursuant to its common stock repurchase program, the Company acquired 390,000
shares for approximately $2.4 million in the nine months ended July 3, 1993,
including 163,000 shares acquired for approximately $1.4 million during the
third quarter of 1993.
Note 5 - Inventories
Inventories are summarized as follows (in thousands):
<TABLE>
<CAPTION>
July 2, October 2,
1994 1993
----------------------------------
<S> <C> <C>
Raw materials $24,949 $22,829
Work in process 34,060 26,291
Finished goods 10,611 9,509
------- -------
$69,620 $58,629
======= =======
</TABLE>
Note 6 - Computation of Income per Share
The shares used in the computation of income per share were as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ------------------------------
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
------------------------------ ------------------------------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding during period 25,723 24,471 25,548 24,170
Add: Incremental shares to reflect
dilutive effect of stock option
and deferred compensation plans 144 924 326 308
------ ------ ------ ------
25,867 25,395 25,874 24,478
====== ====== ====== ======
</TABLE>
Fully diluted earnings per share have not been presented as the effect would
not be dilutive in any period presented.
-9-
<PAGE>
Note 7 - Litigation
On October 27, 1993, at the request of the Company's insurance carrier, the
Company entered into a Stipulation of Settlement in connection with the class
action entitled Rand, et al. v. M/A-COM, Inc., et al. On February 1, 1994,
the court approved the Stipulation of Settlement. Pursuant to the
Stipulation of Settlement the Company's insurance carrier has paid into a
settlement fund the amount of $3.9 million in full settlement of all claims
in the action. The Company is not required to make any payment to the
plaintiffs out of its own funds, and the Company's insurance carrier has paid
the Company $325,000 to compensate the Company for certain costs associated
with the litigation.
-10-
<PAGE>
M/A-COM, INC.
AND SUBSIDIARIES
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
The Company reported income from continuing operations of $1.6 million, or
$.06 per share in the third quarter of 1994 in comparison with $1.7 million,
or $.07 per share in the third quarter of 1993.
Net income for the three and nine months ended July 2, 1994 was $1.6 million
and $6.1 million, respectively. Net income for the nine months ended July 2,
1994 includes $3.3 million attributable to the cumulative effect of an
accounting change upon the adoption of Statement of Financial Accounting
Standard No. 109, Accounting for Income Taxes. Net income for the three and
nine months ended July 3, 1993 was $1.7 million and $5.8 million,
respectively. Net income for the first nine months of 1993 included $1.0
million of income from discontinued operations which was recorded in the
second quarter of 1993.
New orders for the third quarter of 1994 were $90.1 million compared with
$91.4 million in the same period of 1993. The decrease is attributable to a
$3.2 million decrease in commercial orders and a $1.1 million decrease in
United States defense-related orders partially offset by a $3.0 million
increase in orders from non-defense United States government and foreign
government markets. The increase in non-defense United States government
orders is attributable to the receipt of a specific order for communications-
related equipment. United States defense orders include a $2.4 million order
awarded to the Company under the government's Technology Reinvestment Project
for the development and application of microwave technologies for intelligent
vehicle highway systems.
New orders for the first nine months of 1994 were $235.7 million, a decrease
of $23.1 million in comparison with the first nine months of 1993. The
decrease is due to decreases of $11.3 million in orders from non-defense U.S.
government and foreign government markets, $6.6 million in commercial orders
and $5.2 million in United States defense-related orders. The decrease in
non-defense U.S. government and foreign government orders is mainly
attributed to spending reductions in the U.S. agencies which the Company
supplies. The decrease in commercial orders includes the termination of
three technically complex contracts totaling $10.8 million during 1994.
-11-
<PAGE>
In the fourth quarter of 1993, the Company formulated a plan for additional
consolidation and downsizing. During the second quarter of 1994, the Company
commenced the previously announced closing of a facility in southern New
Hampshire and, since the beginning of 1994, has reduced its workforce by 300
persons. It is anticipated that additional workforce reductions will occur
over the remainder of the current year. The facility closure and workforce
reductions are expected to produce overall cost reductions; however, these
cost reductions may be offset by reduced revenues and increased costs for
salaries and related benefits for personnel and other cost increases.
Results of Continuing Operations
Net sales for the third quarter of 1994 were $85.2 million, comparable with
the same period of 1993, as a $5.7 million increase in commercial sales was
offset by decreases of $2.6 million in U.S. defense-related sales and $2.4
million in non-defense U.S. government and foreign government sales.
Net sales for the first nine months of 1994 decreased by $2.6 million in
comparison with the first nine months of 1993. A $22.7 million decrease in
U.S. defense-related sales was partially offset by a $19.6 million increase
in commercial sales.
The changing sales mix reflects the Company's focus on developing products
for the commercial market to replace the anticipated decline in demand by the
U.S. defense market. Sales of commercial products have increased by 16% and
19% in the three and nine month periods ended July 2, 1994, respectively, in
comparison with the same periods of 1993.
The Company's gross margin of 36.8% in the third quarter of 1994 was
comparable to the 36.8% achieved in the third quarter of 1993. Increases in
the gross margin percentage from increased sales of circulator products of
1.0% and the reversal of previously established reserves relative to certain
contracts (see Note 2 to the condensed consolidated financial statements) of
.7% were offset by volume declines for power hybrid products of 2.2%. Gross
margin percentage for the first nine months of 1994 improved to 35.4% from
32.6% in the first nine months of 1993. The improvement in 1994 gross margin
is attributable to increased sales of connector and circulator products
resulting in margin growth of 2.7%, the reversal of previously established
reserves related to terminated contracts of .8% and productivity improvement
in the Company's Microelectronics Division of .4% partially offset by volume
declines in the sales of power hybrid and antenna products resulting in gross
margin deterioration of 1.2%. The improvement in margins at the
Microelectronics Division is primarily the result of the Company's
consolidation and downsizing which have resulted in reduced facility and
personnel costs.
-12-
<PAGE>
Company sponsored research and development expenditures have increased by $.7
million and $2.6 million in the three and nine month periods ended July 2,
1994, respectively, in comparison with the same periods of 1993. The Company
also incurred $1.6 million and $6.5 million of costs, included in cost of
sales, on customer sponsored research and development ($.9 million and $2.1
million of which was not recoverable under fixed price engineering contracts)
for the three and nine month periods ended July 2, 1994, respectively,
representing decreases of $1.7 million and $4.8 million from the comparable
periods of 1993. The increase in company sponsored research and development
is attributable to a reallocation of engineers from production to research
and development as the Company continues to invest in products with
significant potential in both commercial and defense applications. The
decrease in customer sponsored research and development expense reflects the
change to a commercial business environment where customer funding for
research and development is less prevalent than in government contracting and
a decrease in development costs for contracts which have moved from
development stages into production.
Selling, general and administrative expenses ("SG&A") decreased by $.5
million in the third quarter of 1994 in comparison with the third quarter of
1993. The decrease is mainly attributable to efficiencies realized from the
Company's consolidation and downsizing which have reduced facility and
personnel costs.
SG&A decreased by $1.6 million for the first nine months of 1994 in
comparison with the first nine months of 1993. In 1993, the Company recorded
charges of $4.0 million to refine estimates related to its 1992 restructuring
plan and $1.0 million to increase its allowance for doubtful accounts due to
cash flow problems experienced by one specific customer. These charges were
offset by gains of $2.3 million related to the sale of a product line, $1.0
million attributed to the excess insurance recovery over the book value of
assets damaged by a fire at a production facility, $2.2 million of insurance
proceeds from the reimbursement of expenditures made for certain liabilities
at a site previously occupied by the Company (see Note 2 to the Condensed
Consolidated Financial Statements) and to the factors noted above.
Net interest expense increased by $.5 million and $4.2 million in the three
and nine month periods ended July 2, 1994 in comparison with the same periods
of 1993. The increase is mainly attributable to the recording of $2.8
million of interest income on a tax refund claim during the second quarter of
1993 (see Note 3 to the Condensed Consolidated Financial Statements), higher
interest expense related to increased borrowings, and reduced interest income
on lower invested cash balances.
In the third quarter of 1994, the Company recognized approximately $1.0
million in tax benefits associated with certain current and prior year
expenditures that were eligible for carryback under provisions of Federal tax
law. This benefit was recognized as the result of the issuance, during the
quarter, of a favorable revenue ruling as to the deductibility of such
expenditures by the Internal Revenue Service. Prior to the third quarter,
the Company had not recognized any tax benefit for such expenditures due to
the uncertainty as to their deductibility. This benefit offset the Company's
tax provision for the third quarter, which was primarily attributable to the
Company's foreign and Puerto Rico operations.
-13-
<PAGE>
During the second quarter of 1993, the Company reached initial resolution
with the Internal Revenue Service of certain prior years' tax returns. As a
result, the Company recorded a reversal, net of the second quarter tax
provision, of $3.6 million of accrued tax liabilities ($1.0 million of which
was attributable to discontinued operations).
The variance between the statutory federal tax rate of 35% and the Company's
effective tax rate of 22% is due to the differential in tax rates applied to
the earnings of foreign subsidiaries and Puerto Rico operations, as well as
the previously discussed recognition of tax benefits of expenses eligible for
carryback refunds.
Liquidity and Capital Resources
The Company's cash and marketable securities position at July 2, 1994 was
$5.5 million in comparison with $11.3 million at October 2, 1993. The
Company's operating activities have generated $7.4 million of cash during the
first nine months of 1994. The Company also expended $11.4 million for
additions to plant assets. During the first nine months of 1994, the Company
borrowed and repaid $23.0 million under its revolving credit agreement and
decreased the net borrowings of its foreign subsidiaries by a net of $1.0
million. The Company has also repaid $.6 million of long-term debt.
Additionally, the Company received $1.2 million from the exercise of stock
options. The Company had net cash outflows of $1.3 million relating to
discontinued operations, mainly attributable to the $2.6 million repayment of
an Industrial Revenue Bond partially offset by the receipt of deferred
payments from the sales of two businesses, royalty income and asset sales
associated with previously discontinued operations.
As of July 2, 1994, the Company's accounts receivable, as measured by the
number of days sales outstanding, decreased to 64 days in comparison with 70
days at October 2, 1993. The decrease is attributable to a change in the
distribution of sales volume in the third quarter of 1994 compared with the
fourth quarter of 1993 and increased focus on collections.
The Company's inventory balance at July 2, 1994 increased by $11.0 million in
comparison with the inventory balance at October 2, 1993. The increase is
mainly the result of building inventory of $8.3 million to support
anticipated increases in sales of semiconductor and connector products.
Inventory also increased in the Company's antenna products operation by $2.0
million due to a long-term contract expected to be shipped in the fourth
quarter.
During the second quarter of 1994, the Company completed negotiations for a
new unsecured revolving line of credit. The new line of credit, which
permits maximum borrowings of $30.0 million, expires on August 30, 1995. The
maximum borrowings may be limited depending on the amount of the Company's
domestic accounts receivable and also contains certain other restrictions
(see Note 4 to the Condensed Consolidated Financial Statements).
The Company believes that its existing cash balances, funds to be generated
by future operating activities and available borrowing capacity are
sufficient to finance operating requirements, the previously described
restructuring action, to provide for ongoing capital and research and
development requirements and to take advantage of investment opportunities.
-14-
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
The information set forth in Note 7 to the condensed consolidated financial
statements contained in this Quarterly Report on Form 10-Q is incorporated
herein by reference.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits: Method of Filing
----------------
Exhibit 11 Statement Re: Computation of Per Incorporated from
Share Earnings. Note 6 to Condensed
Consolidated
Financial Statements.
Exhibit 15 Letter Re: Unaudited Interim Filed herewith.
Financial Information.
(b) Reports on Form 8-K
No report on Form 8-K has been filed during the quarter ended July 2, 1994.
-15-
<PAGE>
SIGNATURE
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, on August 12, 1994.
M/A-COM, Inc.
By: PETER J. RICE
---------------------------
Peter J. Rice
Vice President,
Chief Accounting Officer
and Controller
-16-
<PAGE>
July 25, 1994
To the Board of Directors and
Shareholders of M/A-COM, Inc.
We have reviewed the condensed consolidated balance sheet of M/A-COM, Inc.
and its subsidiaries as of July 2, 1994 and July 3, 1993 (not presented
herein), the related consolidated statement of income for the three-month and
nine-month periods then ended and the related condensed consolidated
statement of cash flows for the nine month periods then ended. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with the standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statement taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principles.
We previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of October 2, 1993, and the
related consolidated statements of income and cash flows for the year then
ended (not presented herein), and in our report dated November 2, 1993 we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of October 2, 1993, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
PRICE WATERHOUSE LLP
-17-
Exhibit 15
May 12, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Dear Sirs:
We are aware that M/A-COM, Inc. has included our report dated July 25, 1994
(issued pursuant to the provisions of Statements on Auditing Standards Nos.
42 and 71) in the Prospectuses constituting part of its Registration
Statements on Form S-3 (No. 2-99637) and Form S-8 (Nos. 2-17757; 2-25410; 2-
31632; 2-47195; 2-53255; 2-53257; 2-68734; 2-68809; 2-69195; 2-69202; 2-
69259; 2-70247; 2-71043; 2-72234; 2-72235; 2-76292; 2-81497; 2-81907; 2-
92614; 2-92616; 2-92617; 33-10913; 33-10916; 33-33372; 33-35845; 33-36846; 33-
44212). We are also aware of our responsibilities under the Securities Act
of 1933.
Yours very truly,
PRICE WATERHOUSE L.L.P.
