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, 1998
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 - 3,549,566 shares as of March
31, 1998.
<PAGE>
PART I. - FINANCIAL INFORMATION
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
MARCH 31, 1998 SEPTEMBER 30, 1997
[S] [C] [C]
Assets
Current Assets:
Cash and cash equivalents $ 994 $ 1,434
Accounts receivable-trade,net 721 545
Inventories 1,409 1,262
Deferred tax asset - current 259 259
Prepaid expenses and other
current assets 129 104
-------- --------
Total current assets 3,512 3,604
Property,plant and equipment,net 1,565 1,561
Deferred tax asset - noncurrent 8 8
-------- --------
Total assets $ 5,085 $ 5,173
======== ========
Liabilities And Stockholders' Equity
Current liabilities:
Current portion of long term
debt $ 57 $ 56
Accounts payable 337 320
Customer deposits 50 50
Accrued federal and state
income taxes 43 30
Accrued payroll and related
expenses 91 103
Accrued compensated absences 249 222
Other current liabilities 65 78
-------- --------
Total current liabilities 892 859
Long term debt, less current
portion 17 46
Deferred compensation and
other liabilities 15 18
-------- --------
Total liabilities 924 923
-------- --------
Stockholders' Equity:
Common stock,$.10 par value 428 428
Additional paid-in capital 3,210 3,206
Retained earnings 1,161 1,255
-------- --------
4,799 4,889
Common stock in treasury,
at cost (638) (638)
-------- --------
Total stockholders' equity 4,161 4,251
-------- --------
Total liabilities and
stockholders' equity $ 5,085 $ 5,173
======== ========
[FN]
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS
ENDED MARCH 31, 1998 AND 1997
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended Six months ended
March 31 March 31
1998 1997 1998 1997
[S] [C] [C] [C] [C]
Net sales $1,735 $1,207 $3,575 $2,929
Cost of goods sold 1,093 730 2,219 1,825
------- ------- ------- -------
Gross profit 642 477 1,356 1,104
Selling, general and
administrative expenses 598 554 1,257 1,141
------- ------- ------- -------
Income (loss) from
operations 44 (77) 99 (37)
Other income (expense) 13 26 29 43
------- ------- ------- -------
Income (loss) before
income taxes 57 (51) 128 6
Provision (benefit)
for income taxes 20 (18) 44 2
------- ------- ------- -------
NET INCOME (LOSS) $37 ($34) $84 $4
======= ======= ======= =======
Earnings (loss) per share $0.01 ($0.01) $0.02 $0.00
======= ======= ======= =======
[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, 1998 AND 1997
(Unaudited)
(Amounts in thousands)
Three months ended Six months ended
March 31 March 31
1998 1997 1998 1997
[S] [C] [C] [C] [C]
Cash flows from operating
activities:
Net income $ 37 $ (34) $ 84 $ 4
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 79 77 157 156
Stock Compensation 4 7 4 15
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 40 201 (176) 306
Inventories (87) (41) (147) 157
Prepaid expenses & other
assets (30) (48) (25) (72)
Increase (decrease) in:
Accounts payable & accrued
expenses 18 (82) 31 (496)
Deferred compensation &
other liabilities (1) (6) (3) (3)
------- ------- -------- -------
Net cash provided by
operating activities 60 74 (75) 67
------- ------- -------- -------
Cash flows from investing activities:
Capital expenditures (33) (116) (160) (188)
Cash flows from financing activities:
Principal payments on
long-term debt (14) (13) (28) (27)
Cash dividend paid (177) (178) (177) (178)
------- ------- ------- -------
Net cash used in
financing activities (191) (191) (205) (204)
Increase (decrease) in cash
and cash equivalents (164) (232) (440) (325)
Cash and cash equivalents
at beginning of period 1,158 1,187 1,434 1,281
------- ------- ------- -------
Cash and cash equivalents
at end of period $ 994 $ 956 $ 994 $ 956
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MICROWAVE FILTER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
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 1997 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 3,547,312 for
the six months and 3,549,566 for the three months ending March 31, 1998
and 3,551,394 for the six months and 3,555,390 for the three months ending
March 31, 1997.
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,
1998 1997
Raw materials and stock parts $ 930 $ 832
Work-in-process 211 185
Finished goods 268 245
------- -------
$ 1,409 $ 1,262
======= =======
Note 4. Stock Options
On April 9, 1998, the Board of Directors and Shareholders of Microwave
Filter Company, Inc. approved the 1998 Microwave Filter Company, Inc.
Incentive Stock Plan (the "1998 Plan"). Under the 1998 Plan, The Company
may grant incentive stock options ("ISOs"), non-qualified stock options
("NQSOs") and stock appreciation rights. The 1998 Plan reserves 150,000
shares for issuance. Participation in the 1998 Plan is limited to directors,
officers and employees of the Company and its affiliates. The exercise price
of the ISOs and NQSOs granted under the 1998 Plan will be 100% of the fair
market value of the Common Stock on the date of grant of such ISOs and
NQSOs. The 1998 Plan will terminate on April 10, 2008.
<PAGE>
MICROWAVE FILTER COMPANY, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MARCH 31, 1998
Net sales for the six months ended March 31, 1998 equaled $3,575,299, an
increase of $645,846 or 22% when compared to net sales of $2,929,453 for
the six months ended March 31, 1997. Net sales for the three months ended
March 31, 1998 equaled $1,735,356, an increase of $528,325 or 43.8% when
compared to net sales of $1,207,031 for the three months ended March 31,
1997. The increases in sales can primarily be attributed to an increase in
the sales of the Company's RF/Microwave products to OEMs (Original Equipment
Manufacturers.) Part of the Company's long term growth strategy is to invest
in product and infrastructure development to exploit new markets such as LMDS
(Cellular TV), PCS and PCN; and, continue to develop OEM relationships.
Net income for the six months ended March 31, 1998 equalled $83,934, an
increase of $80,217 when compared to net income of $3,717 for the six
months ended March 31, 1997. Net income for the three months ended March 31,
1998 equalled $37,210, an increase of $70,904 when compared to a net loss
of $33,694 for the three months ended March 31, 1997. The increases in net
income can primarily be attributed to the increases in sales when compared
to the same periods last year.
Gross profit for the six months ended March 31, 1998 equaled $1,355,782,
an increase of $251,945 or 22.8% when compared to gross profit of $1,103,837
for the six months ended March 31, 1997. Gross profit for the three months
ended March 31, 1998 equaled $641,824, an increase of $164,724 or 34.5% when
compared to gross profit of $477,100 for the three months ended March 31,
1997. The dollar increases in gross profit can primarily be attributed to the
increases in sales when compared to the same periods last year. As a
percentage of sales, gross profit equalled 37.9% for the six months ended
March 31, 1998 when compared to 37.7% for the six months ended March 31, 1997.
Selling, general and administrative (SG&A) expenses for the six months
ended March 31, 1998 equaled $1,257,218, an increase of $116,584 or 10.2%
when compared to SG&A expenses of $1,140,634 for the six months ended
March 31, 1997. SG&A expenses for the three months ended March 31,
1998 equaled $598,015, an increase of $43,636 or 7.9% when compared to
SG&A expenses of $554,379 for the three months ended March 31, 1997. The
increases can primarily be attributed to increases in advertising and
promotional expenses, sales commissions and salary and salary related
expenses when compared to the same periods last year.
<PAGE>
Cash and cash equivalents decreased $439,943 to $994,530 at March 31,
1998 when compared to $1,434,473 at September 30, 1997. The decrease was
a result of $74,546 in net cash used in operating activities, $159,901
in net cash used for capital expenditures and $205,496 in net cash used in
financing activities.
At March 31, 1998, 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.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
Any statements contained in this report which are not historical facts are
forward looking statements; and, therefore, many important factors could
cause actual results to differ materially from those in the forward looking
statements. Such factors include, but are not limited to, changes
(legislative, regulatory and otherwise) in the MMDS, LPTV or Cable industry,
demand for the Company's products (both domestically and internationally),
the development of competitive products, competitive pricing, market
acceptance of new product introductions, technological changes, general
economic conditions, litigation and other factors, risks and uncertainties
which may be identified in the Company's Securities and Exchange Commission
filings.
<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 9,
1998 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. To approve the Microwave Filter Company, Inc. 1998
Incentive Stock Plan.
Proposal 3. The ratification of Coopers & Lybrand L.L.P. as the
Company's independent auditors for the fiscal year ending
September 30, 1998.
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
Robert R. Andrews 2,421,953 55,250
Sidney Chong 2,421,133 56,070
Louis S. Misenti 2,317,086 160,117
c. The following propositions received the number of votes set opposite
its respective number:
VOTES FOR VOTES AGAINST ABSTENTIONS
Proposal 2 2,303,516 154,844 18,843
Proposal 3 2,454,429 11,138 11,636
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, 1998 Carl F. Fahrenkrug
(Date) --------------------------
Carl F. Fahrenkrug
Chief Executive Officer
May 13, 1998 Richard L. Jones
(Date) --------------------------
Richard L. Jones
Chief Financial Officer
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