UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 OR 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended March 31, 1997
Commission file number 0-10976
MICROWAVE FILTER COMPANY, INC.
(Exact name of registrant as specified in its charter.)
New York 16-0928443
(State of Incorporation) (I.R.S. Employer Identification Number)
6743 Kinne Street, East Syracuse, N.Y. 13057
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (315) 438-4700
Indicate by check mark whether 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 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 ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common Stock, $.10 Par Value - 3,560,491 shares as of March
31, 1997.
<PAGE>
PART I. - FINANCIAL INFORMATION
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS
ENDED MARCH 31, 1997 AND 1996
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended Six months ended
March 31 March 31
1997 1996 1997 1996
[S] [C] [C] [C] [C]
Net sales $1,207 $1,861 $2,929 $3,952
Cost of goods sold 730 1,167 1,825 2,420
------- ------- ------- -------
Gross profit 477 694 1,104 1,532
Selling, general and
administrative expenses 554 625 1,141 1,271
------- ------- ------- -------
Income (loss) from
operations (77) 69 (37) 261
Other income (expense) 26 3 43 4
------- ------- ------- -------
Income (loss) before
income taxes (51) 72 6 265
Provision (benefit)
for income taxes (18) 25 2 91
------- ------- ------- -------
NET INCOME (LOSS) ($34) $47 $4 $174
======= ======= ======= =======
Earnings (loss) per share ($0.01) $0.01 $0.00 $0.05
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
MARCH 31, 1997 SEPTEMBER 30, 1996
[S] [C] [C]
Assets
Current Assets:
Cash and cash equivalents $ 956 $ 1,281
Accounts receivable-trade,net 406 724
Federal and state income tax
receivable 12 -
Inventories 1,342 1,499
Prepaid expenses and other
current assets 395 323
-------- --------
Total current assets 3,111 3,827
Property,plant and equipment,net 1,615 1,583
-------- --------
Total assets $ 4,726 $ 5,410
======== ========
Liabilities And Stockholders' Equity
Current liabilities:
Current portion of long term
debt $ 54 $ 53
Accounts payable 245 300
Customer deposits 124 199
Accrued federal and state
income taxes - 289
Accrued payroll and related
expenses 103 127
Accrued compensated absences 173 198
Other current liabilities 54 81
-------- --------
Total current liabilities 752 1,247
Long term debt, less current
portion 75 103
Deferred compensation and
other liabilities 79 82
-------- --------
Total liabilities 907 1,432
-------- --------
Stockholders' Equity:
Common stock,$.10 par value 428 426
Additional paid-in capital 3,206 3,193
Retained earnings 823 997
-------- --------
4,457 4,616
Common stock in treasury,
at cost (638) (638)
-------- --------
Total stockholders' equity 3,819 3,978
-------- --------
Total liabilities and
stockholders' equity $ 4,726 $ 5,410
======== ========
[FN]
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND SIX MONTHS ENDED
MARCH 31, 1997 AND 1996
(Unaudited)
(Amounts in thousands)
Three months ended Six months ended
March 31 March 31
1997 1996 1997 1996
[S] [C] [C] [C] [C]
Cash flows from operating
activities:
Net income $ (34) $ 47 $ 4 $ 174
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 77 82 156 166
Stock Compensation 7 42 15 46
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 201 65 306 174
Inventories (41) 295 157 423
Prepaid expenses & other
assets (48) (58) (72) (61)
Increase (decrease) in:
Accounts payable & accrued
expenses (82) (183) (496) (133)
Deferred compensation &
other liabilities (6) (1) (3) (2)
------- ------- -------- -------
Net cash provided by
operating activities 74 290 67 788
------- ------- -------- -------
Cash flows from investing activities:
Capital expenditures (116) (31) (188) (52)
Cash flows from financing activities:
Principal payments on
long-term debt (13) (37) (27) (72)
Purchase of treasury
stock (1) (1)
Cash dividend paid (178) (168) (178) (168)
------- ------- ------- -------
Net cash used in
financing activities (191) (205) (204) (241)
Increase (decrease) in cash
and cash equivalents (233) 53 (325) 494
Cash and cash equivalents
at beginning of period 1,187 962 1,281 521
------- ------- ------- -------
Cash and cash equivalents
at end of period $ 956 $1,015 $ 956 $1,015
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MICROWAVE FILTER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
Note 1. Summary of Significant Accounting Policies
The accompanying financial statements, which should be read in conjunction
with the financial statements of Microwave Filter Company, Inc. ("the
Company") included in the 1996 Annual Report filed on Form 10-K, are
unaudited but have been prepared in the ordinary course of business for
the purpose of providing information with respect to the interim period.
The Company believes that all adjustments (none of which were other than
normal recurring accruals) necessary for a fair presentation for such
periods have been included.
Note 2. Earnings (loss) per share
Earnings (loss) per common share are calculated based upon the weighted
average number of shares of common stock outstanding during the periods
including, when significant, any common stock equivalents and after
restatement of any stock dividends. The weighted average number of shares
of common stock outstanding used for the computations were 3,551,394 for
the six months and 3,555,390 for the three months ending March 31, 1997
and 3,512,398 for the six months and 3,532,489 for the three months ending
March 31, 1996.
Note 3. Inventories
Inventories are stated at the lower of cost determined on the first-in,
first-out method or market.
Inventories consisted of the following:
March 31, September 30,
1997 1996
Raw materials and stock parts $ 859 $ 958
Work-in-process 268 299
Finished goods 215 242
------- -------
$ 1,342 $ 1,499
======= =======
<PAGE>
MICROWAVE FILTER COMPANY, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MARCH 31, 1997
Net sales for the six months ended March 31, 1997 equaled $2,929,453, a
decrease of 25.9% when compared to net sales of $3,952,503 for the six
month period ended March 31, 1996. Net sales for the three months ended
March 31, 1997 equaled $1,207,031, a decrease of 35.2% when compared to
net sales of $1,861,488 for the three month period ended March 31, 1996.
The Company's two largest market segments, Cable Television and Wireless
Cable, continue to experience a decrease in the demand for hardware;
primarily due to competition from Direct Broadcast Satellite and the lack
of readily available competitively priced digital compression technology
in the Wireless Cable and Wireline Cable marketplace. It is anticipated
that it will take at least 12 months for digital technology to make
sufficient progress in the Wireless and Wireline Cable venue to shift
the advantage away from Direct Broadcast Satellite. During this hiatus,
the Company's primary objective will continue to be the development of
new products and the development of new market segments, such as LMDS
and PCS.
Gross profit for the six months ended March 31, 1997 equaled $1,103,837
or 37.7% of sales compared to $1,532,306 or 38.8% of sales for the six month
period ended March 31, 1996. Gross profit for the three months ended March
31, 1997 equaled $477,100 or 39.5% of sales compared to $694,466 or 37.3% of
sales for the three month period ended March 31, 1996. The decreases in gross
profit are primarily due to the decreases in sales. The increase in gross
profit as a percentage of sales during the quarter ended March 31, 1997, when
compared to the same period last year, can be attributed to product sales
mix, improvements in productivity and planned reductions in manufacturing
costs.
Selling, general and administrative (SG&A) expenses for the six months
ended March 31, 1997 equaled $1,140,634, a decrease of $130,622 or 10.3%
when compared to SG&A expenses of $1,271,256 during the six month period
ended March 31, 1996. SG&A expenses for the three months ended March 31,
1997 equaled $554,379, a decrease of $71,076 or 11.4% when compared to
SG&A expenses of $625,455 during the three month period ended March 31,
1996. The decreases can primarily be attributed to reductions in payroll
and payroll related expenses, sales commissions and legal costs when
compared to the same periods last year.
Other income for the six months ended March 31, 1997 totaled $42,472,
an increase of $38,547 when compared to the six month period ended March
31, 1996. The increase is primarily due to an increase in interest income
and a decrease in interest expense when compared to the six month period
ended March 31, 1996.
<PAGE>
Cash and cash equivalents decreased $325,267 to $955,732 at March 31,
1997 when compared to $1,280,999 at September 30, 1996. The decrease was
a result of $66,799 in net cash provided by operating activities, $187,906
in net cash used for capital expenditures and $204,160 in net cash used in
financing activities.
At March 31, 1997, the Company had aggregate lines of credit totaling
$600,000. Of these lines, $100,000 is for the purchase of equipment and is
collateralized by equipment and $500,000 is for working capital and is
collateralized by accounts receivable, inventories and equipment. In
addition, the Company has a letter of credit facility, for up to $500,000,
which is collateralized by specific inventory to be purchased.
Management believes that its working capital requirements for the
forseeable future will be met by its existing cash balances, future cash
flows from operations and its current credit arrangements.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is unaware of any material threatened or pending
litigation against the Company.
Item 2. Changes in Securities
None during this reporting period.
Item 3. Defaults Upon Senior Securities
The Company has no senior securities.
Item 4. Submission of Matters to a Vote of Security Holders
a. The Annual meeting of the Shareholders was held on April 10,
1997 at the Holiday Inn, Carrier Circle, East Syracuse, New
York 13057 at 10:00 A.M. pursuant to notice to the shareholders.
The following matters were submitted to the vote of shareholders:
Proposal 1. The election of three directors to hold office until
the Annual Meeting of the Shareholders at which their term expires
or until their successors have been duly elected.
Proposal 2. The ratification of Coopers & Lybrand L.L.P. as the
Company's independent auditors for the fiscal year ending
September 30, 1997.
b. The following named persons received the number of votes set opposite
their respective names for election to the Board of Directors:
DIRECTORS VOTES FOR AUTHORITY
WITHHELD
Trudi Artini 2,745,813 116,337
Milo Peterson 2,741,737 100,413
David Robinson 2,723,332 118,818
c. The following proposition received the number of votes set opposite
its respective number:
VOTES FOR VOTES AGAINST ABSTENTIONS
Proposal 2 2,760,473 71,329 10,348
Item 6. Exhibits and Reports on Form 8-K
None.
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MICROWAVE FILTER COMPANY, INC.
May 13, 1997 Carl F. Fahrenkrug
(Date) --------------------------
Carl F. Fahrenkrug
Chief Executive Officer
May 13, 1997 Richard L. Jones
(Date) --------------------------
Richard L. Jones
Chief Financial Officer
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