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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 September 30, 1996.
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ___________________ to ___________________.
Commission File Number: 0-8574
MICROWAVE POWER DEVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3622306
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
49 Wireless Boulevard
Hauppauge, New York 11788-3935
(Address of principal executive offices, including zip code)
(516) 231-1400
(Registrant's telephone number, including area code)
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 November 12, 1996, there were 10,375,000 shares outstanding of the
registrant's Common Stock, $.01 par value.
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<PAGE>
MICROWAVE POWER DEVICES, INC.
INDEX
PART I -- FINANCIAL INFORMATION Page No.
- ------------------------------- --------
ITEM 1. Consolidated Financial Statements
Consolidated Balance Sheets --
September 30, 1996 and December 31, 1995 ................... 3
Consolidated Statements of Operations --
Three and nine months ended September 30, 1996 and 1995 .... 4
Consolidated Statements of Cash Flows --
Nine months ended September 30, 1996 and 1995 .............. 5
Notes to Consolidated Financial Statements ................. 6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .................................. 7
PART II -- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K ........................... 12
SIGNATURES ........................................................... 13
Page 2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS.
<TABLE>
MICROWAVE POWER DEVICES, INC. and SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<CAPTION>
September 30, December 31,
1996 1995
---------- -------------
(unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents ................................................................. $ 385 $ 388
Accounts receivable, net of allowance for doubtful accounts of $67 ........................ 6,576 9,426
Inventories, net .......................................................................... 17,474 18,912
Prepaid expenses and other current assets ................................................. 603 480
Deferred income taxes ..................................................................... 926 2,515
-------- --------
Total current assets ................................................................. 25,964 31,721
PROPERTY, PLANT AND EQUIPMENT, net ............................................................. 8,132 8,364
INTANGIBLE ASSETS, net ......................................................................... 346 382
DEFERRED INCOME TAXES - LONG-TERM .............................................................. 5,377 --
INVESTMENT IN MARKETABLE SECURITIES AND OTHER LONG
TERM ASSETS ................................................................................. 902 760
-------- --------
$ 40,721 $ 41,227
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt ......................................................... $ 45 $ 40
Accounts payable .......................................................................... 6,004 4,883
Accrued liabilities ....................................................................... 3,198 2,269
-------- --------
Total current liabilities ............................................................ 9,247 7,192
-------- --------
DEFERRED INCOME TAXES .......................................................................... 416 416
-------- --------
LONG-TERM DEBT ................................................................................. 12,758 9,678
-------- --------
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares
issued or outstanding .................................................................. -- --
Common stock, $.01 par value; 25,000,000 shares authorized; 10,375,000
shares issued and outstanding .......................................................... 104 104
Additional paid-in capital ................................................................ 23,276 23,276
Notes receivable from shareholders ........................................................ (225) (225)
Retained earnings (accumulated deficit) ................................................... (4,855) 786
-------- --------
Total shareholders' equity ........................................................... 18,300 23,941
-------- --------
$ 40,721 $ 41,227
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
Page 3
<PAGE>
<TABLE>
MICROWAVE POWER DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<CAPTION>
For the Three Months Ended For the Nine Months Ended
-------------------------- --------------------------
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES .............................................. $ 11,449 $ 7,010 $ 33,727 $ 14,742
COST OF SALES .......................................... 13,882 5,142 31,251 10,955
-------- -------- -------- --------
Gross profit (deficit) ....................... (2,433) 1,868 2,476 3,787
-------- -------- -------- --------
OPERATING EXPENSES:
General and administrative ........................ 720 736 2,488 2,306
Selling ........................................... 885 762 2,923 2,554
Research and development .......................... 1,832 1,317 5,795 2,621
-------- -------- -------- --------
3,437 2,815 11,206 7,481
-------- -------- -------- --------
Loss from operations ......................... (5,870) (947) (8,730) (3,694)
INTEREST EXPENSE, net .................................. 291 425 670 947
OTHER EXPENSE, net ..................................... 4 12 3 52
-------- -------- -------- --------
Loss before income taxes ..................... (6,165) (1,384) (9,403) (4,693)
BENEFIT FOR INCOME TAXES ............................... (2,466) (553) (3,761) (1,877)
-------- -------- -------- --------
Net loss ..................................... $ (3,699) $ (831) $ (5,642) $ (2,816)
======== ======== ======== ========
PER SHARE INFORMATION:
Net loss per common share ......................... $ (0.36) $ (0.11) $ (0.54) $ (0.38)
======== ======== ======== ========
Weighted average common shares
outstanding ............................... 10,375 7,500 10,375 7,500
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
Page 4
<PAGE>
<TABLE>
MICROWAVE POWER DEVICES, INC. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<CAPTION>
For the Nine Months Ended
------------------------------
September 30, September 30,
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ............................................................................ $(5,642) $(2,816)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization .................................................. 893 702
Deferred income taxes .......................................................... (3,788) (1,902)
Loss on sale of property, plant and equipment .................................. 3 23
Loss on sale of investment in marketable securities ............................ 0 28
Changes in operating assets and liabilities:
Accounts receivable ............................................................ 2,849 745
Inventories .................................................................... 1,439 (9,765)
Prepaid expenses and other assets .............................................. (271) (1,176)
Accounts payable and accrued liabilities ....................................... 2,110 5,537
------- -------
Net cash used in operating activities ..................................... (2,407) (8,624)
------- -------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment ..................................... (702) (1,230)
Proceeds from sale of property, plant and equipment ............................ 15 8
Investment in marketable securities ............................................ 5 7
------- -------
Net cash used in investing activities ..................................... (682) (1,215)
------- -------
FINANCING ACTIVITIES:
Proceeds from long-term debt ................................................... 0 804
Principal payments of long-term debt ........................................... (40) (40)
Net proceeds from revolving line of credit ..................................... 3,126 4,873
Deferred financing costs ....................................................... 0 (26)
Advances from affiliates, net .................................................. 0 4,335
------- -------
Net cash provided by financing activities ................................. 3,086 9,946
------- -------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......................................... (3) 107
CASH AND CASH EQUIVALENTS, beginning of year ............................................. 388 410
------- -------
CASH AND CASH EQUIVALENTS, end of period ................................................. $ 385 $ 517
======= =======
SUPPLEMENTAL DATA:
Cash paid for interest .............................................................. $ 748 $ 839
======= =======
Cash paid for income taxes .......................................................... $ 17 $ 22
======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
Page 5
<PAGE>
MICROWAVE POWER DEVICES, INC. and SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1996
(in thousands, except share and per share data)
(unaudited)
1. Reference is made to the Notes to Consolidated Financial Statements
contained in the Company's December 31, 1995 audited consolidated financial
statements included in the Company's 1995 Annual Report and the Company's 1995
Annual Report on Form 10-K filed with the SEC on April 1, 1996. In the opinion
of Management, the interim unaudited financial statements included herein
reflect all adjustments necessary, consisting of normal recurring adjustments,
for a fair presentation of such data on a basis consistent with that of the
audited data presented therein. The consolidated results of operations for
interim periods are not necessarily indicative of the results to be expected for
a full year.
2. Earnings per share for the three and nine months ended September 30,
1996 do not include the impact of outstanding options as the effect of their
inclusion would be anti-dilutive.
3. The following stock options were granted, canceled or exercised during
the third quarter of 1996 under either the 1995 or 1996 Stock Option Plans:
Granted Canceled Exercised
------- -------- ---------
None 4,875 @ $ 8.00 None
2,500 @ $10.75
Page 6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Overview
Microwave Power Devices, Inc. ("Microwave Power Devices" or the "Company")
commenced operations in 1967. During the past 29 years, the Company has
designed, manufactured and marketed high power, solid-state, radio frequency
("RF") and microwave power amplifiers and related subsystems for military,
medical, satellite and, most recently, wireless telecommunications applications.
The Company has historically been dependent upon the military market as its
principal source of revenue. In 1992, as the military market was declining, the
Company increased the scope of its business and entered commercial markets,
thereby broadening its product offerings. The Company now develops precision
high-power amplifiers for a variety of commercial uses.
The Company is devoting significant resources to increase its commercial
product offerings, particularly for the wireless telecommunications market. As a
result, the Company's research and development expenses have increased because
customer-funding of product developments costs, which is typical in the military
market, is less prevalent in commercial markets.
Forward-Looking Statements
Certain information contained in this Quarterly Report on Form 10-Q,
including, without limitation, information appearing under Part I, Item 2,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," are forward-looking statements (within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934). Factors set forth in the Company's Annual Report on Form 10-K, filed
April 1, 1996, under Item 1, "Business - Risk Factors," together with other
factors that appear with the forward-looking statements, or in the Company's
other Securities and Exchange Commission filings, including its Registration
Statement on Form S-1 dated September 29, 1995, could affect the Company's
actual results and could cause the Company's actual results to differ materially
from those expressed in any forward-looking statements made by, or on behalf of,
the Company in this Quarterly Report on Form 10-Q.
Results of Operations --
Third Quarters Ended September 30, 1996 and September 30, 1995
Net Sales. Net sales increased by 63% to $11.4 million in the third quarter
of 1996 from $7.0 million in the third quarter of 1995. This sales increase was
predominantly due to higher shipments to two wireless telecommunications
original equipment manufacturers ("OEMs") and shipments to a satellite
communications OEM. Sales of commercial products increased by 68% to $8.0
million in the third quarter of 1996 from $4.8 million in the third quarter of
1995, representing 70% and 69%, respectively, of net sales in such periods.
Sales of military products increased by 53% to $3.4 million in the third quarter
of 1996 from $2.2 million in the third quarter of 1995, representing 30% and
31%, respectively, of net sales in such periods.
International sales increased by 75% to $6.9 million in the third quarter
of 1996 from $3.9 million in the third quarter of 1995, totaling 61% of net
sales in the third quarter of 1996 compared to 56% in the third quarter of 1995.
The increase in international sales was predominantly due to higher foreign
military business for Republic's products and higher foreign wireless
telecommunications OEM business. In the third quarter of 1996, sales to a
foreign commercial OEM (Customer A) and a domestic commercial OEM (Customer B)
accounted for 40% and 16%, respectively, of the Company's net sales. In the
third quarter of 1995, sales to a foreign wireless telecommunications OEM
(Customer A) accounted for 50% of the Company's net sales.
Page 7
<PAGE>
Gross Profit (Deficit). Gross profit decreased by 230% to $(2.4) million in
the third quarter of 1996 from $1.9 million in the third quarter of 1995. The
Company's gross profit margin (gross profit as a percentage of sales) also
decreased to (21.3)% in the third quarter of 1996 from 26.6% in the third
quarter of 1995. This decrease was primarily due to a $4.9 million write-off of
wireless multi-channel work-in-process inventory caused by currently diminished
demand for these particular products and, to a lesser extent, a $0.7 million
write-off of wireless single channel work-in-process inventory caused by a
domestic commercial OEM's decision to internally manufacture amplifiers for the
production portion of the PCS-TDMA program. In addition, the third quarter of
1996 was also adversely affected by the overall low gross profit margin
obtainable on Cellular-CDMA multi-channel amplifiers, low gross profit margins
experienced on various military OEM contracts, higher commercial warranty
expenses (as a percentage of net sales) and low gross profit margins experienced
on various other commercial OEM contracts.
Certain of the Company's inventory costing techniques involve developing a
standard cost which estimates the average, or standard, cost per unit over the
extended life cycle of a product. Such costs include labor, material, other
direct costs and related overheads. If the extended life cycle of a product does
not materialize or if there can be no reasonable certainty that product
maturation will take place within the near future, further write-offs of
work-in-process inventory would be required as a re-evaluation of the standard
cost for that product would be necessary. Such write-offs could materially
adversely affect the Company's gross profit and results of operations.
There can be no assurances that gross profit will improve. If the Company
is not able to reduce its production costs to the extent anticipated, or to
introduce new products with higher margins, and if average selling prices
decline beyond current expectations, the Company's gross profit and results of
operations could be materially adversely affected. The Company's gross profit
may also be affected by a variety of other factors, including the mix of systems
and equipment sold; production, reliability or quality problems; and price
competition.
General and Administrative Expenses. General and administrative expenses
remained relatively stable at $0.7 million in both the third quarters of 1996
and 1995, representing 6.3% and 10.5%, respectively, of net sales. The decrease
in general and administrative expenses as a percentage of net sales was directly
attributable to the overall sales volume growth in the third quarter of 1996 as
compared to the third quarter of 1995.
Selling Expenses. Selling expenses increased by 16% to $0.9 million in the
third quarter of 1996 from $0.8 million in the third quarter of 1995,
representing 7.7% and 10.9%, respectively, of net sales. The increase in selling
expenses resulted primarily from higher accrued warranty expenses. The decrease
in selling expenses as a percentage of net sales was directly attributable to
the overall sales volume growth in the third quarter of 1996 as compared to the
third quarter of 1995.
Research and Development Expenses. Research and development expenses
increased by 39% to $1.8 million in the third quarter of 1996 from $1.3 million
in the third quarter of 1995, representing 16.0% and 18.7%, respectively, of net
sales. The increase in research and development expenses resulted primarily from
higher wireless telecommunications product development. The Company believes
that the continued introduction of new products is essential to its
competitiveness and is committed to continued investment in research and
development.
Interest Expense. Interest expense decreased by 32% to $0.3 million in the
third quarter of 1996 from $0.4 million in the third quarter of 1995, primarily
reflecting loan repayments, in the latter part of 1995, to the Company's largest
stockholder and its affiliates (through the utilization of a portion of the
proceeds from the Company's initial public offering).
Provision for Income Taxes. The Company's effective tax rate for both the
third quarters of 1996 and 1995 was 40.0%. This rate was due to the net loss
anticipated for the full year 1996 and incurred for the full year 1995, the
benefit of which the Company expects to utilize to offset future taxable income,
as prescribed by FAS 109. There can be no assurances that the Company will
experience taxable income in the future.
Page 8
<PAGE>
Nine Months Ended September 30, 1996 and September 30, 1995
Net Sales. Net sales increased by 129% to $33.7 million in the first nine
months of 1996 from $14.7 million in the first nine months of 1995. This sales
increase was predominantly due to higher shipments to two wireless
telecommunications OEMs and, to a lesser extent, shipments to a satellite
communications OEM. This is in line with the Company's transition from military
dependence to a dual supplier of commercial and military products. Sales of
commercial products increased by 174% to $24.9 million in the first nine months
of 1996 from $9.1 million in the first nine months of 1995, representing 74% and
62%, respectively, of net sales in such periods. Sales of military products
increased by 57% to $8.8 million in the first nine months of 1996 from $5.6
million in the first nine months of 1995, representing 26% and 38%,
respectively, of net sales in such periods.
International sales increased by 244% to $16.2 million in the first nine
months of 1996 from $4.7 million in the first nine months of 1995, totaling 48%
of net sales in the first nine months of 1996 compared to 32% in the first nine
months of 1995. The increase in international sales was predominantly due to
higher foreign wireless telecommunications OEM business and, to a lesser extent,
higher foreign military business for Republic's products. In the first nine
months of 1996, sales to a foreign commercial OEM (Customer A) and a domestic
commercial OEM (Customer B) accounted for 39% and 17%, respectively, of the
Company's net sales. In the first nine months of 1995, sales to a foreign
wireless telecommunications OEM (Customer A) and a domestic medical OEM
(Customer C) accounted for 27% and 15%, respectively, of the Company's net
sales.
Gross Profit. Gross profit decreased by 35% to $2.5 million in the first
nine months of 1996 from $3.8 million in the first nine months of 1995. The
Company's gross profit margin (gross profit as a percentage of sales) also
decreased to 7.3% in the first nine months of 1996 from 25.7% in the first nine
months of 1995. This decrease was primarily due to a $4.9 million write-off of
wireless multi-channel work-in-process inventory caused by currently diminished
demand for these particular products, a $1.0 million write-off of wireless
multi-channel work-in-process inventory related to the cancellation of the
remainder of the AirNet contract (caused by the Company's failure to meet
product specifications within a given time frame) and a $0.7 million write-off
of wireless single channel work-in-process inventory caused by a domestic
commercial OEM's decision to internally manufacture amplifiers for the
production portion of the PCS-TDMA program. In addition, the first nine months
of 1996 was also adversely affected by low gross profit margins experienced on
various military OEM contracts, the overall low gross profit margin obtainable
on Cellular-CDMA multi-channel amplifiers, higher commercial warranty expenses
(as a percentage of net sales) and low gross profit margins experienced on
various other commercial OEM contracts.
Certain of the Company's inventory costing techniques involve developing a
standard cost which estimates the average, or standard, cost per unit over the
extended life cycle of a product. Such costs include labor, material, other
direct costs and related overheads. If the extended life cycle of a product does
not materialize or if there can be no reasonable certainty that product
maturation will take place within the near future, further write-offs of
work-in-process inventory would be required as a re-evaluation of the standard
cost for that product would be necessary. Such write-offs could materially
adversely affect the Company's gross profit and results of operations.
Certain of the purchase orders or contracts comprising backlog at September
30, 1996 set forth product specifications not yet achieved by the Company that
would require the Company to complete additional product development. Failure to
develop products meeting such specifications could lead to the cancellation of
the related purchase orders or contracts. The reduction, delay or cancellation
of orders or contracts from one or more significant customer would materially
adversely affect the Company's business, financial condition and results of
operations.
There can be no assurances that gross profit will improve. If the Company
is not able to reduce its production costs to the extent anticipated, or to
introduce new products with higher margins, and if average selling prices
decline beyond current expectations, the Company's gross profit and results of
operations could be materially adversely affected. The Company's gross profit
may also be affected by a variety of other factors, including the mix of systems
and equipment sold; production, reliability or quality problems; and price
competition.
Page 9
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General and Administrative Expenses. General and administrative expenses
increased by 8% to $2.5 million in the first nine months of 1996 from $2.3
million in the first nine months of 1995, representing 7.4% and 15.6%,
respectively, of net sales. The increase in general and administrative expenses
was primarily the result of higher costs associated with being a public company.
The decrease in general and administrative expenses as a percentage of net sales
was directly attributable to the overall sales volume growth in the first nine
months of 1996 as compared to the first nine months of 1995.
Selling Expenses. Selling expenses increased by 14% to $2.9 million in the
first nine months of 1996 from $2.6 million in the first nine months of 1995,
representing 8.6% and 17.3%, respectively, of net sales. The increase in selling
expenses resulted primarily from higher sales representative commissions and
higher accrued warranty expenses partially offset by lower bid & proposal
expenses and lower advertising expenses. The decrease in selling expenses as a
percentage of net sales was directly attributable to the overall sales volume
growth in the first nine months of 1996 as compared to the first nine months of
1995.
Research and Development Expenses. Research and development expenses
increased by 121% to $5.8 million in the first nine months of 1996 from $2.6
million in the first nine months of 1995, representing 17.2% and 17.8%,
respectively, of net sales. This increase resulted primarily from higher
wireless telecommunications product development and, to a lesser extent, higher
military product development. The Company believes that the continued
introduction of new products is essential to its competitiveness and is
committed to continued investment in research and development.
Interest Expense. Interest expense decreased by 29% to $0.7 million in the
first nine months of 1996 from $0.9 million in the first nine months of 1995,
primarily reflecting a loan repayment, in the latter part of 1995, to the
Company's largest stockholder (through the utilization of a portion of the
proceeds from the Company's initial public offering) and, in addition, lower
borrowings against the Company's credit facility.
Provision for Income Taxes. The Company's effective tax rate for both the
first nine months of 1996 and 1995 was 40%. This rate was due to the net loss
anticipated for the full year 1996 and incurred for the full year 1995, the
benefit of which the Company expects to utilize to offset future taxable income,
as prescribed by FAS 109. There can be no assurances that the Company will
experience taxable income in the future.
Liquidity and Capital Resources
In the fourth quarter of 1995, the Company successfully completed its
initial public offering ("IPO") raising net proceeds to the Company of
approximately $20.4 million from the Company's sale of 2,875,000 shares of
Common Stock, including the underwriters' over-allotment option. Since the IPO,
the Company has financed its operations and met its capital requirements through
the following two sources: (i) cash provided by operating activities; and (ii) a
credit facility with Fleet Capital Corporation.
The Fleet Capital credit facility consists of a revolving line of credit
and an equipment lease line of credit. These components of the credit facility
bear interest at annual rates equal to the prime rate plus 1.0% and the prime
rate plus 1.25%, respectively, and mature in April 1999. Aggregate borrowings
under the revolving line of credit are limited by a borrowing base, which is
calculated as the sum of 85% of eligible accounts receivable, 35% to 50% of raw
materials and work-in-process inventories and 65% of eligible finished goods
inventory (with borrowings based on aggregate eligible inventory limited to $6.0
million). The credit facility is subject to customary covenants, including,
among other things, limitations with respect to incurring indebtedness, payment
of dividends and affiliate advances, and provisions for maintaining certain
financial ratios. On November 8, 1996, the Company and Fleet Capital amended the
loan agreement to provide for a waiver of all financial covenants for the
quarter ended September 30, 1996. In addition, this amendment included revisions
to the following terms of the Fleet Capital credit facility: (i) the credit
facility was reduced from $12.0 million to $8.4 million, (ii) the 50%
calculation used for wireless work-in-process inventory, when determining the
borrowing base, will be reduced by 1% per week for the next fifteen consecutive
weeks until 35% is reached, (iii) the aggregate eligible inventory limit
Page 10
<PAGE>
of $6.0 million, used when determining the borrowing base, will be reduced by
$0.04 million per week for the next eight consecutive weeks until $5.68 million
is reached.
Operating activities used net cash of $2.4 million and $8.6 million in the
first nine months of 1996 and 1995, respectively. From December 31, 1995 to
September 30, 1996, accounts receivable and inventory decreased by $2.8 million
and $1.4 million, respectively, while accounts payable and accrued liabilities
increased by $2.1 million. The decrease in accounts receivable was primarily due
to a more linear level of monthly shipments in the third quarter of 1996 as
compared to the significant increase in shipments that occurred late in the
fourth quarter of 1995, as well as the normal collection of receivables. The
decrease in inventory was predominantly due to a reduction in wireless
work-in-process inventory primarily related to the above referenced wireless
multi-channel write-offs partially offset by an increase in wireless raw
material/component inventory. The increase in accounts payable and accrued
liabilities was primarily due to a temporary slowing of vendor payments as the
Company balanced cash disbursements against its credit facility availability.
Investing activities, which consisted primarily of equipment acquisitions, used
net cash of $0.7 million and $1.2 million in the first nine months of 1996 and
1995, respectively. Financing activities, which consisted primarily of net
proceeds from the revolving line of credit and net advances from affiliates,
provided net cash of $3.1 million and $9.9 million in the first nine months of
1996 and 1995, respectively.
Capital expenditures were $0.7 million and $1.2 million in the first nine
months of 1996 and 1995, respectively. These expenditures were funded primarily
through cash provided by the Company's credit facility. Principal expenditures
for the first nine months of 1996 included engineering and manufacturing test
equipment, the expansion of the Company's parking area, construction
work-in-progress for the proposed facility expansion (currently on hold),
personal computer upgrades, sales demonstration equipment and a new wireless
telecommunications trade show booth. The Company anticipates making additional
capital expenditures of $0.3 million during the remainder of 1996, including the
purchase of additional engineering and manufacturing test equipment as well as
continued upgrades to its CAE/CAD systems.
As of September 30, 1996, the Company had working capital of approximately
$16.7 million, compared to approximately $24.5 million as of December 31, 1995.
Working capital as of September 30, 1996 included approximately $6.6 million and
$17.5 million in accounts receivable and inventory, respectively. The Company's
current ratio (ratio of current assets to current liabilities) as of September
30, 1996 was 2.8:1, compared with a current ratio of 4.4:1 as of December 31,
1995. As of September 30, 1996, the Company's debt to equity ratio was 0.7:1,
compared with a debt to equity ratio of 0.4:1 as of December 31, 1995.
The Company believes that cash generated from operations, amounts available
under its credit facility, and/or third party financing will be sufficient to
fund necessary capital expenditures and to provide adequate working capital for
at least the next 12 months. There can be no assurance, however, that the
Company will not require additional financing prior to such date to fund its
operations, and, if required, that such financing will be available on
commercially reasonable terms. In addition, the Company may require additional
financing after such date to fund its operations.
Page 11
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PART II -- OTHER INFORMATION
- ----------------------------
ITEM 6. Exhibits and Reports on Form 8-K.
(a)Exhibit 27.1 Financial Data Schedule.
(b)No reports on Form 8-K have been filed during the quarter for which
this report is filed.
Page 12
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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.
MICROWAVE POWER DEVICES, INC.
(Registrant)
Dated: November 12, 1996 /s/ Edward J. Shubel
--------------------- --------------------
By: Edward J. Shubel
President and CEO
Dated: November 12, 1996 /s/ Paul E. Donofrio
--------------------- --------------------
By: Paul E. Donofrio
Vice President Finance/CFO
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
consolideatd financial statements found on the Quarterly Report on Form 10-Q,
September 30, 1996, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 385
<SECURITIES> 0
<RECEIVABLES> 6,643
<ALLOWANCES> 67
<INVENTORY> 17,474
<CURRENT-ASSETS> 25,964
<PP&E> 11,825
<DEPRECIATION> 3,693
<TOTAL-ASSETS> 40,721
<CURRENT-LIABILITIES> 9,247
<BONDS> 12,758
0
0
<COMMON> 104
<OTHER-SE> 18,196
<TOTAL-LIABILITY-AND-EQUITY> 40,721
<SALES> 33,727
<TOTAL-REVENUES> 33,727
<CGS> 31,251
<TOTAL-COSTS> 31,251
<OTHER-EXPENSES> 3
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 670
<INCOME-PRETAX> (9,403)
<INCOME-TAX> (3,761)
<INCOME-CONTINUING> (5,642)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,642)
<EPS-PRIMARY> (0.54)
<EPS-DILUTED> (0.54)
</TABLE>
