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 June 30, 2000
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 - 3,164,186 shares as of June
30, 2000.
<PAGE>
PART I. - FINANCIAL INFORMATION
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
JUNE 30, 2000 SEPTEMBER 30, 1999
[S] [C] [C]
Assets
Current Assets:
Cash and cash equivalents $ 592 $ 264
Investments 900 775
Accounts receivable-trade,net 710 697
Inventories 1,084 1,192
Deferred tax asset - current 163 163
Prepaid expenses and other
current assets 86 66
-------- --------
Total current assets 3,535 3,157
Property,plant and equipment,net 1,377 1,548
-------- --------
Total assets $ 4,912 $ 4,705
======== ========
Liabilities And Stockholders' Equity
Current liabilities:
Accounts payable $ 304 $ 215
Customer deposits 149 271
Accrued federal and state
income taxes 199 76
Accrued payroll and related
expenses 102 70
Accrued compensated absences 283 241
Other current liabilities 103 71
-------- --------
Total current liabilities 1,140 944
Deferred tax liability -
noncurrent 6 6
Deferred compensation and
other liabilities 0 5
-------- --------
Total liabilities 1,146 955
-------- --------
Stockholders' Equity:
Common stock,$.10 par value 432 432
Additional paid-in capital 3,240 3,240
Retained earnings 1,218 1,142
-------- --------
4,890 4,814
Common stock in treasury,
at cost (1,124) (1,064)
-------- --------
Total stockholders' equity 3,766 3,750
-------- --------
Total liabilities and
stockholders' equity $ 4,912 $ 4,705
======== ========
[FN]
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND NINE MONTHS
ENDED JUNE 30, 2000 AND 1999
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended Nine months ended
June 30 June 30
2000 1999 2000 1999
[S] [C] [C] [C] [C]
Net sales $2,242 $1,645 $5,711 $5,037
Cost of goods sold 1,499 982 3,708 3,061
------- ------- ------- -------
Gross profit 743 663 2,003 1,976
Selling, general and
administrative expenses 611 618 1,716 1,852
------- ------- ------- -------
Income from operations 132 45 287 124
Other income (expense), net 29 9 70 36
------- ------- ------- -------
Income before income taxes 161 54 357 160
Provision for income taxes 56 19 123 55
------- ------- ------- -------
NET INCOME $105 $ 35 $234 $105
======= ======= ======= =======
Earnings per share $0.03 $0.01 $0.07 $0.03
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS AND NINE MONTHS ENDED
JUNE 30, 2000 AND 1999
(Unaudited)
(Amounts in thousands)
Three months ended Nine months ended
June 30 June 30
2000 1999 2000 1999
[S] [C] [C] [C] [C]
Cash flows from operating
activities:
Net income $ 105 $ 35 $ 234 $ 105
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 77 78 230 227
Stock Compensation 0 7 0 13
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable (5) 279 (13) 125
Inventories 180 0 108 19
Prepaid expenses & other
assets 38 144 (20) 119
Increase (decrease) in:
Accounts payable & accrued
expenses (197) (126) 196 (132)
Deferred compensation &
other liabilities (2) (2) (5) (5)
------- ------- -------- -------
Net cash provided by
operating activities 196 415 730 471
------- ------- -------- -------
Cash flows from investing activities:
Investments (900) 0 (125) 0
Capital expenditures (16) (45) (59) (108)
------- ------- ------- -------
Net cash used in
Investing activities (916) (45) (184) (108)
Cash flows from financing activities:
Principal payments on
long-term debt 0 (15) 0 (45)
Purchase of treasury stock 0 (7) (60) (270)
Cash dividend paid 0 0 (158) (165)
------- ------- ------- -------
Net cash used in
financing activities 0 (22) (218) (480)
Increase (decrease) in cash
and cash equivalents (720) 348 328 (117)
Cash and cash equivalents
at beginning of period 1,312 756 264 1,221
------- ------- ------- -------
Cash and cash equivalents
at end of period $592 $1,104 $592 $1,104
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MICROWAVE FILTER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
Note 1. Summary of Significant Accounting Policies
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the nine-month period ended June 30, 2000 are not necessarily indicative
of the results that may be expected for the year ended September 30, 2000.
Note 2. Industry Segment Data
The Company's primary business segments involve (1) operations of Microwave
Filter Company, Inc. (MFC) which manufactures filters used for preventing
interference or signal processing in cable television, satellite, broadcast,
aerospace and government markets; and (2) operations of Niagara Scientific,
Inc. (NSI) which manufactures industrial automation equipment.
Information by segment is as follows:
Three months ended Nine months ended
(thousands of dollars) June 30 June 30
2000 1999 2000 1999
Net Sales (Unaffiliated):
MFC $1,626 $1,567 $4,611 $4,649
NSI 616 78 1,100 388
------ ------ ------ ------
Total $2,242 $1,645 $5,711 $5,037
====== ====== ====== ======
Operating profit (loss): (a)
MFC $149 $64 $333 $262
NSI (17) (19) (46) (138)
------ ------ ------ ------
Total $132 $45 $287 $124
====== ====== ======= =======
Identifiable assets: (b)
MFC $3,742 $3,140 $3,742 $3,140
NSI 578 317 578 317
------ ------ ------ ------
Subtotal 4,320 3,457 4,320 3,457
Corporate Assets - Cash
And Cash Equivalents 592 1,104 592 1,104
------ ------ ------ ------
Total $4,912 $4,561 $4,912 $4,561
====== ====== ====== ======
(a) Operating profit (loss) is total revenue less operating expenses.
In computing operating profit, none of the following items have been
added or deducted: interest expense, income taxes and miscellaneous income.
Expenses incurred on behalf of both Companies are allocated based upon
estimates of their relationship to each entity.
(b) Identifiable assets by industry are those assets that are used in the
Companies operations in each industry.
<PAGE>
MICROWAVE FILTER COMPANY, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
JUNE 30, 2000
Net sales for the nine months ended June 30, 2000 equaled $5,710,952, an
increase of $674,098 or 13.4% when compared to net sales of $5,036,854 for the
nine months ended June 30, 1999. Net sales for the three months ended June 30,
2000 equaled $2,242,375, an increase of $597,153 or 36.3% when compared to net
sales of $1,645,222 for the three months ended June 30, 1999. The increases in
net sales are primarily due to the increases in sales of Niagara Scientific,
Inc., a wholly owned subsidiary.
Niagara Scientific, Inc. (NSI) sales for the nine months ended June 30, 2000
equaled $1,100,125, an increase of $712,156 or 184% when compared to net sales
of $387,969 for the nine months ended June 30, 1999. NSI sales for the three
months ended June 30, 2000 equaled $616,283, an increase of $538,554 or 693%
when compared to net sales of $77,729 for the three months ended June 30,
1999.
Microwave Filter Company, Inc. (MFC) sales for the nine months ended June
30, 2000 equaled $4,610,827, a decrease of $38,058 or 0.8% when compared to
net sales of $4,648,885 for the nine months ended June 30, 1999. MFC sales for
the three months ended June 30, 2000 equaled $1,626,092 for the three months
ended June 30, 2000, an increase of $58,599 or 3.7% when compared to net sales
of $1,567,493 for the three months ended June 30, 1999. The Company continues
to invest in production engineering and infrastructure development to
penetrate OEM (Original Equipment Manufacturer) market segments as they become
popular. MFC is intentionally de-emphasizing custom product sales in order to
concentrate its' technical resources and product development efforts toward
potential high volume customers. This is part of a concentrated effort to
provide substantial long-term growth.
The Company's total backlog of orders decreased $188,469 to $929,387 at June
30, 2000 when compared to $1,117,856 at September 30, 1999. MFC's backlog of
orders increased $56,899 to $577,475 at June 30, 2000 when compared to
$520,576 at September 30, 1999. NSI's backlog of orders decreased $245,368 to
$351,912 at June 30, 2000 when compared to $597,280 at September 30, 1999.
Approximately 80% of the total Company backlog is scheduled to ship by
September 30, 2000.
Gross profit for the nine months ended June 30, 2000 equaled $2,002,956, an
increase of $26,885 or 1.4% when compared to gross profit of $1,976,071 for
the nine months ended June 30, 1999. Gross profit for the three months ended
June 30, 2000 equaled $742,527 an increase of $79,868 or 12.1% when compared
to gross profit of $662,659 for the three months ended June 30, 1999. As a
percentage of sales, gross profit equaled 35.1% for the nine months ended June
30, 2000 compared to gross profit of 39.2% for the nine months ended June 30,
1999. As a percentage of sales, gross profit equaled 33.1% for the three
months ended June 30, 2000 compared to gross profit of 40.3% for the three
months ended June 30, 1999. The decreases in gross profit as a percentage of
sales, when compared to the same periods last year, can primarily be
attributed to product sales mix. NSI's sales, whose targeted gross profits are
lower than MFC's, equaled 19.3% of total sales for the nine months ended June
30, 2000 and 27.5% of total sales for the three months ended June 30, 2000
when compared to 7.7% of total sales for the nine months ended June 30, 1999
and 4.7% of total sales for the three months ended June 30, 1999.
<PAGE>
Selling, general and administrative (SG&A) expenses for the nine months
ended June 30, 2000 equaled $1,716,124, a decrease of $135,532 or 7.3% when
compared to SG&A expenses of $1,851,656 for the nine months ended June 30,
1999. SG&A expenses for the three months ended June 30, 2000 equaled $610,906,
a decrease of $7,305 or 1.2.% when compared to SG&A expenses of $618,211 for
the three months ended June 30, 1999. The decreases can primarily be
attributed to planned decreases in media advertising, trade show expenses and
consulting fees when compared to the same periods last year. As a percentage
of sales, SGA expenses equaled 30% of sales for the nine months ended June 30,
2000 and 27.2% of sales for the three months ended June 30, 2000 compared to
36.8% of sales for the nine months ended June 30, 1999 and 37.6% of sales for
the three months ended June 30, 1999.
Income from operations for the nine months ended June 30, 2000 equaled
$286,832, an increase of $162,417 when compared to income from operations of
$124,415 for the nine months ended June 30, 1999. On an industry segment
basis, MFC reported income from operations of $333,019 for the nine months
ended June 30, 2000 compared to $261,919 for the nine months ended June 30,
1999 and NSI reported an operating loss of $46,187 for the nine months ended
June 30, 2000 compared to an operating loss of $137,504 for the nine months
ended June 30, 1999. MFC's improvement can primarily be attributed to lower
SGA expenses and NSI's improvement can primarily be attributed to higher sales
volume and lower SGA expenses, when compared to the same periods last year.
Cash and cash equivalents increased $328,088 to $592,235 at June 30, 2000
when compared to $264,147 at September 30, 1999. The increase was a result of
$731,438 in net cash provided by operating activities, $184,700 in net cash
used in investing activities and $218,650 in net cash used in financing
activities.
Cash used in investing activities during the nine months ended June 30, 2000
consisted of funds used to purchase short-term investments and funds used for
capital expenditures.
Cash used in financing activities during the nine months ended June 30, 2000
consisted of funds used to pay a cash dividend and funds used to repurchase
common stock of the Company.
The Company's Board of Directors had authorized the repurchase of up to
500,000 shares of the Company's outstanding common stock. On January 26, 2000
the Company's Board of Directors authorized the repurchase of an additional
500,000 shares of the Company's outstanding common stock. The repurchases will
be made from time to time on the open market at prevailing market prices or in
negotiated transactions off the market. Since July 1988, 423,246 shares of the
Company's outstanding common stock have been repurchased using existing cash
balances. Management believes the common stock repurchase program, given the
Company's present cash position, reflects its belief in the fundamental
strength of the business and also its commitment to enhancing shareholder
value.
At June 30, 2000, 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.
Management believes that its working capital requirements for the
foreseeable future will be met by its existing cash balances, future cash
flows from operations and its current credit arrangements.
<PAGE>
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
None during this reporting period.
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.
August 11, 2000 Carl F. Fahrenkrug
(Date) --------------------------
Carl F. Fahrenkrug
Chief Executive Officer
August 11, 2000 Richard L. Jones
(Date) --------------------------
Richard L. Jones
Chief Financial Officer
