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, 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 March
31, 2000.
<PAGE>
PART I. - FINANCIAL INFORMATION
MICROWAVE FILTER COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands)
MARCH 31, 2000 SEPTEMBER 30, 1999
[S] [C] [C]
Assets
Current Assets:
Cash and cash equivalents $ 1,312 $ 264
Investments 0 775
Accounts receivable-trade,net 705 696
Inventories 1,264 1,192
Deferred tax asset - current 163 163
Prepaid expenses and other
current assets 124 66
-------- --------
Total current assets 3,568 3,156
Property,plant and equipment,net 1,438 1,547
-------- --------
Total assets $ 5,006 $ 4,703
======== ========
Liabilities And Stockholders' Equity
Current liabilities:
Accounts payable $ 301 $ 215
Customer deposits 463 271
Accrued federal and state
income taxes 144 76
Accrued payroll and related
expenses 105 70
Accrued compensated absences 265 240
Other current liabilities 60 71
-------- --------
Total current liabilities 1,338 943
Deferred tax liability -
noncurrent 6 6
Deferred compensation and
other liabilities 2 5
-------- --------
Total liabilities 1,346 954
-------- --------
Stockholders' Equity:
Common stock,$.10 par value 431 431
Additional paid-in capital 3,240 3,240
Retained earnings 1,113 1,142
-------- --------
4,784 4,813
Common stock in treasury,
at cost (1,124) (1,064)
-------- --------
Total stockholders' equity 3,660 3,749
-------- --------
Total liabilities and
stockholders' equity $ 5,006 $ 4,703
======== ========
[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, 2000 AND 1999
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended Six months ended
March 31 March 31
2000 1999 2000 1999
[S] [C] [C] [C] [C]
Net sales $1,899 $1,759 $3,468 $3,392
Cost of goods sold 1,274 1,090 2,208 2,078
------- ------- ------- -------
Gross profit 625 669 1,260 1,313
Selling, general and
administrative expenses 553 593 1,105 1,233
------- ------- ------- -------
Income (loss) from
operations 72 76 155 80
Other income (expense) 26 10 41 26
------- ------- ------- -------
Income (loss) before
income taxes 98 86 196 106
Provision (benefit)
for income taxes 34 30 68 36
------- ------- ------- -------
NET INCOME (LOSS) $64 $56 $128 $70
======= ======= ======= =======
Basic earnings (loss)
per share $0.02 $0.02 $0.04 $0.02
======= ======= ======= =======
[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, 2000 AND 1999
(Unaudited)
(Amounts in thousands)
Three months ended Six months ended
March 31 March 31
2000 1999 2000 1999
[S] [C] [C] [C] [C]
Cash flows from operating
activities:
Net income $ 64 $ 56 $ 128 $ 70
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 77 76 153 149
Stock Compensation 0 7 0 7
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 47 (271) (8) (154)
Inventories 72 27 (72) 19
Prepaid expenses & other
assets 1 27 (58) (25)
Increase (decrease) in:
Accounts payable & accrued
expenses 95 198 395 (6)
Deferred compensation &
other liabilities (1) (1) (3) (3)
------- ------- -------- -------
Net cash provided by
operating activities 355 119 535 57
------- ------- -------- -------
Cash flows from investing activities:
Investments 775 0 775 0
Capital expenditures (24) (21) (43) (63)
------- ------- -------- -------
Net cash provided by (used in)
investing activities 751 (21) 732 (63)
Cash flows from financing activities:
Principal payments on
long-term debt 0 (15) 0 (30)
Purchase of treasury stock 0 (30) (61) (264)
Cash dividend paid (158) (165) (158) (165)
------- ------- ------- -------
Net cash used in
financing activities (158) (210) (219) (459)
Increase (decrease) in cash
and cash equivalents 947 (112) 1,048 (465)
Cash and cash equivalents
at beginning of period 365 868 264 1,221
------- ------- ------- -------
Cash and cash equivalents
at end of period $1,312 $ 756 $1,312 $ 756
======= ======= ======= =======
[FN]
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
MICROWAVE FILTER COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 six-month period ended March 31, 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 Six months ended
(thousands of dollars) March 31 March 31,
2000 1999 2000 1999
Net Sales (Unaffiliated):
MFC $1,481 $1,557 $2,984 $3,082
NSI 418 202 484 310
------ ------ ------ ------
Total $1,899 $1,759 $3,468 $3,392
====== ====== ====== ======
Operating profit (loss): (a)
MFC $89 $87 $184 $198
NSI (17) (11) (29) (118)
------ ------ ------ ------
Total $72 $76 $155 $ 80
====== ====== ======= =======
Identifiable assets: (b)
MFC $2,990 $3,624 $2,990 $3,624
NSI 704 288 704 288
------ ------ ------ ------
Subtotal 3,694 3,912 3,694 3,912
Corporate Assets - Cash
And Cash Equivalents 1,312 756 1,312 756
------ ------ ------ ------
Total $5,006 $4,668 $5,006 $4,668
====== ====== ====== ======
(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
MARCH 31, 2000
Net sales for the six months ended March 31, 2000 equaled $3,468,577, an
increase of $76,945 or 2.3% when compared to net sales of $3,391,632 for
the six months ended March 31, 1999. Net sales for the three months ended
March 31, 2000 equaled $1,899,128, an increase of $140,552 or 8.0% when
compared to net sales of $1,758,576 for the three months ended March 31,
1999. The sales increases can primarily be attributed to the increases
in sales of Niagara Scientific, Inc., a wholly owned subsidiary.
Niagara Scientific, Inc. (NSI) sales for the six months ended March 31, 2000
equaled $483,842, an increase of $173,602 or 56.0% when compared to sales of
$310,240 for the six months ended March 31, 1999. NSI's sales for the three
months ended March 31, 2000 equaled $417,471, an increase of $215,052 or 106%
when compared to sales of $202,419 for the three months ended March 31, 1999.
Microwave Filter Company, Inc. (MFC) sales for the six months ended March
31, 2000 equaled $2,984,735, a decrease of $96,657 or 3.1% when compared
to sales of $3,081,392 for the six months ended March 31, 1999. MFC sales
for the three months ended March 31, 2000 equaled $1,481,657, a decrease
of $74,500 or 4.8% when compared to sales of $1,556,157 for the three months
ended March 31, 1999. The decrease in sales can primarily be attributed to
the decrease in the sales of MFC's RF/Microwave products to original equipment
manufacturers.
Net income for the six months ended March 31, 2000 equaled $128,531, an
increase of $58,876 or 84.5% when compared to net income of $69,655 for the
six months ended March 31, 1999. The increase in net income can primarily be
attributed to planned reductions in selling, general and administrative (SG&A)
expenses when compared to same period last year. Net income for the three
months ended March 31, 2000 equaled $64,022, an increase of $8,092 or 14.5%
when compared to net income of $55,930 for the three months ended March 31,
1999.
Selling, general and administrative (SG&A) expenses for the six months ended
March 31, 2000 equaled $1,105,218, a decrease of $128,227 or 10.4% when
compared to SG&A expenses of $1,233,445 for the six months ended March 31,
1999. SG&A expenses for the three months ended March 31, 2000 equaled
$553,183, a decrease of $39,684 or 6.7% when compared to SG&A expenses of
$592,867 for the three months ended March 31, 1999. Advertising expenses,
professional fees and payroll expenses were all down when compared to the same
periods last year.
Gross profit for the six months ended March 31, 2000 equaled $1,260,429,
a decrease of $52,983 or 4.0% when compared to gross profit of $1,313,412
for the six months ended March 31, 1999. As a percentage of sales, gross
profit equaled 36.3% for the six months ended March 31, 2000 when compared
to 38.7% for the six months ended March 31, 1999. Gross profit for the three
months ended March 31, 2000 equaled $625,087, a decrease of $43,359 or 6.5%,
when compared to gross profit of $668,446 for the three months ended March 31,
1999. As a percentage of sales, gross profit equaled 32.9% for the three
months ended March 31, 2000 when compared to 38.0% for the three months ended
March 31, 1999. The higher cost of goods sold, 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 14% of total
sales for the six months ended March 31, 2000 and 22% of total sales for the
three months ended March 31, 2000 when compared to 9% of total sales for the
six months ended March 31, 1999 and 11% of total sales for the three months
ended March 31, 1999.
On an industry segment basis, MFC's income from operations for the six
months ended March 31, 2000 equaled $184,188, a decrease of $13,672 or 6.9%
when compared to income from operations of $197,790 for the six months ended
March 31, 1999. The decrease can primarily be attributed to the decrease in
MFC sales. NSI recorded a loss form operations of $28,907 for the six months
ended March 31, 2000 compared to a loss from operations of $117,823 for the
six months ended March 31, 1999. NSI's improvement can primarily be attributed
to the increase in sales, when compared to last year, and planned decreases in
advertising expenses and payroll expenses for the six months ended March 31,
2000 when compared to the same period last year.
<PAGE>
Cash and cash equivalents increased $1,048,241 to $1,312,388 at March 31,
2000 when compared to $264,147 at September 30, 1999. The increase was a
result of $534,922 in net cash provided by operating activities, $731,969
in net cash provided by investing activities and $218,650 in net cash used in
financing activities.
Cash provided by investing activities during the six months ended March 31,
2000 consisted of funds provided by the sale of investments and funds used for
capital expenditures.
Cash used in financing activities during the six months ended March 31, 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 1998, 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 reflects its commitment to enhancing
shareholder value.
At March 31, 2000, the Company had unused 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 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 17,
2000 at the Holidy 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 PricewaterhouseCoopers LLP as the
Company's independent auditors for the fiscal year ending
September 30, 2000.
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 B. Artini 1,713,123 26,736
Milo J. Peterson 1,714,287 25,572
David B. Robinson 1,713,123 26,736
c. The following proposition received the number of votes set opposite
its respective number:
VOTES FOR VOTES AGAINST ABSTENTIONS
Proposal 2 1,736,986 268 2,605
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 15, 2000 Carl F. Fahrenkrug
(Date) --------------------------
Carl F. Fahrenkrug
Chief Executive Officer
May 15, 2000 Richard L. Jones
(Date) --------------------------
Richard L. Jones
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 1,312
<SECURITIES> 0
<RECEIVABLES> 705
<ALLOWANCES> 46
<INVENTORY> 1,264
<CURRENT-ASSETS> 3,569
<PP&E> 6,068
<DEPRECIATION> 4,630
<TOTAL-ASSETS> 5,006
<CURRENT-LIABILITIES> 1,339
<BONDS> 0
<COMMON> 431
0
0
<OTHER-SE> 3,228
<TOTAL-LIABILITY-AND-EQUITY> 5,006
<SALES> 3,469
<TOTAL-REVENUES> 3,469
<CGS> 2,208
<TOTAL-COSTS> 3,313
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 196
<INCOME-TAX> 68
<INCOME-CONTINUING> 128
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<EXTRAORDINARY> 0
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<NET-INCOME> 128
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