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 December 31, 1999
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 December
31, 1999.
<PAGE>
PART I. - FINANCIAL INFORMATION
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
DECEMBER 31, 1999 SEPTEMBER 30, 1999
[S] [C] [C]
Assets
Current Assets:
Cash and cash equivalents $ 365 $ 264
Investments 775 775
Accounts receivable-trade,net 753 696
Inventories 1,336 1,192
Deferred tax asset - current 163 163
Prepaid expenses and other
current assets 125 66
-------- --------
Total current assets 3,517 3,156
Property,plant and equipment,net 1,490 1,547
-------- --------
Total assets $ 5,007 $ 4,703
======== ========
Liabilities And Stockholders' Equity
Current liabilities:
Accounts payable $ 269 $ 215
Customer deposits 465 271
Accrued federal and state
income taxes 110 76
Accrued payroll and related
expenses 99 70
Accrued compensated absences 247 240
Other current liabilities 54 71
-------- --------
Total current liabilities 1,244 943
Deferred tax liability -
noncurrent 6 6
Deferred compensation and
other liabilities 3 5
-------- --------
Total liabilities 1,253 954
-------- --------
Stockholders' Equity:
Common stock,$.10 par value 431 431
Additional paid-in capital 3,240 3,240
Retained earnings 1,207 1,142
-------- --------
4,878 4,813
Common stock in treasury,
at cost (1,124) (1,064)
-------- --------
Total stockholders' equity 3,754 3,749
-------- --------
Total liabilities and
stockholders' equity $ 5,007 $ 4,703
======== ========
[FN]
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS
ENDED DECEMBER 31, 1999 AND 1998
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended
Dec. 31
1999 1998
[S] [C] [C]
Net sales $1,570 $1,633
Cost of goods sold 934 988
------- -------
Gross profit 636 645
Selling, general and
administrative expenses 552 641
------- -------
Income from operations 84 4
Other income (expense) 15 17
------- -------
Income before income
taxes 99 21
Provision for income
taxes 34 7
------- -------
NET INCOME $65 $14
======= =======
Earnings per share $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 ENDED
DECEMBER 31, 1999 AND 1998
(Unaudited)
(Amounts in thousands)
Three months ended
December 31
1999 1998
[S] [C] [C]
Cash flows from operating
activities:
Net income $ 65 $ 14
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 76 73
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable (57) 117
Inventories (144) (8)
Prepaid expenses & other
assets (59) (53)
Increase (decrease) in:
Accounts payable & accrued
expenses 301 (204)
Deferred compensation &
other liabilities (2) (1)
------- -------
Net cash provided by (used in)
operating activities 180 (62)
Cash flows from investing activities:
Capital expenditures (19) (42)
------- -------
Net cash used in
investing activities (19) (42)
Cash flows from financing activities:
Principal payments on
long-term debt 0 (15)
Purchase of treasury stock (60) (234)
------- -------
Net cash used in
investing activities (60) (249)
Increase (decrease) in cash
and cash equivalents 101 (353)
Cash and cash equivalents
at beginning of period 264 1,221
------- -------
Cash and cash equivalents
at end of period $ 365 $ 868
======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MICROWAVE FILTER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
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 three-month period
ended December 31, 1999 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 electronic 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: (thousands of dollars)
2000 1999
Net Sales (Unaffiliated):
MFC $1,504 $1,525
NSI 66 108
------- -------
$1,570 $1,633
======= =======
Operating profit (loss): (a)
MFC $95 $111
NSI (11) (107)
------- -------
84 4
======= =======
Identifiable assets: (b)
MFC 4,004 3,445
NSI 638 305
------- -------
Subtotal 4,642 3,750
Corporate Assets - Cash and
Cash Equivalents 365 868
------- -------
Total $5,007 $4,618
======= =======
(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 Company's operations in each industry.
<PAGE>
MICROWAVE FILTER COMPANY, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
DECEMBER 31, 1999
Net sales for the three months ended December 31, 1999 equalled $1,569,449,
a decrease of $63,607 or 3.9% when compared to net sales of $1,633,056 for
the three months ended December 31, 1998.
Microwave Filter Company, Inc. (MFC) net sales for the three months ended
December 31, 1999 equalled $1,503,078, a decrease of $22,157 or 1.5% when
compared to net sales of $1,525,235 for the three months ended December 31,
1998.
Niagara Scientific, Inc. (NSI), a wholly owned subsidiary, net sales for the
three months ended December 31, 1999 equalled $66,371, a decrease of $41,450
or 38.4% when compared to net sales of $107,821 for the three months ended
December 31, 1998.
Net income for the three months ended December 31, 1999 equalled $64,509, an
increase of $50,784 or 370% when compared to net income of $13,725 for the
three months ended December 31, 1998. The increase in net income can primarily
be attributed to planned reductions in advertising and promotional expenses.
Gross profit decreased $9,624 or 1.5% to $635,342 during the three months
ended December 31, 1999 when compared to gross profit of $644,966 during the
three months ended December 31, 1998. The decrease in gross profit during the
three months ended December 31, 1999 can primarily be attributed to the
decrease in sales. As a percentage of sales, gross profit equalled 40.5% for
the three months ended December 31, 1999 compared to 39.5% for the three
months ended December 31, 1998. The improvement in gross profit as a
percentage of sales for the three months ended December 31, 1999 when compared
to the same period last year can primarily be attributed to gains in
productivity.
Selling, general and administrative (SG&A) expenses decreased $88,543 to
$552,035 during the three months ended December 31, 1999 when compared to SG&A
expenses of $640,578 during the three months ended December 31, 1998. The
decrease is primarily due to planned reductions in advertising and promotional
expenses.
The Company's total backlog of orders increased $453,063 to $1,570,919 at
December 31, 1999 when compared to $1,117,856 at September 30, 1999. MFC's
backlog of orders increased $3,961 to $524,537 at December 31, 1999 when
compared to $520,576 at September 30, 1999. NSI's backlog of orders increased
$449,102 to $1,046,382 at December 31, 1999 when compared to $597,280 at
September 30, 1999. The total Company backlog of orders at December 31, 1999 is
scheduled to ship during fiscal 2000.
Cash and cash equivalents increased $101,137 to $365,284 at December 31,
1999 when compared to cash and cash equivalents of $264,147 at September 30,
1999. The increase was a result of $180,177 in net cash provided by operating
activities, $18,599 in net cash used for capital expenditures and $60,441
in net cash used in financing activities.
Cash used in financing activities during the three months ended December
31, 1999 consisted of 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 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 1998, 423,246 shares of the
Company's common stock have been repurchased. 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 reflects its
commitment to enhancing shareholder value.
At December 31, 1999, the Company had available 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 forseeable
future will be met by its existing cash balances, future cash flows 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, 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.
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.
February 14, 2000 Carl F. Fahrenkrug
(Date) --------------------------
Carl F. Fahrenkrug
Chief Executive Officer
February 14, 2000 Richard L. Jones
(Date) --------------------------
Richard L. Jones
Chief Financial Officer
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