<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended July 2, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For transition period from to
----------- ----------
Commission file number 0-13136
CINCINNATI MICROWAVE, INC.
(Exact name of registrant as specified in its charter)
Ohio 31-0903863
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Microwave Plaza, Cincinnati, Ohio 45249-8236
(Address of principal executive offices) (Zip Code)
(513) 489-5400
(Registrant's telephone number)
Indicate by check mark whether the 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 such 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
------- -------
The only class of the registrant's common stock is its common shares, without
par value. As of July 2, 1995, there were 14,119,945 common shares outstanding.
<PAGE> 2
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
CINCINNATI MICROWAVE, INC.
BALANCE SHEET
(Amounts in thousands except share data)
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 421 $ 40
Accounts receivable, net 7,729 5,137
Inventories, net 12,576 9,159
Other current assets 382 602
------- -------
TOTAL CURRENT ASSETS $21,108 $14,938
Restricted cash 862 505
Property, plant and equipment, net 13,587 14,543
Intangibles, net 2,444 2,853
------- -------
TOTAL ASSETS $38,001 $32,839
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 6,029 $ 8,627
Current portion of long-term debt 9,663 600
Accrued taxes 83 1,468
Unearned revenue 726 709
Current lease obligations 1,058 1,164
Other 3,521 4,071
------- -------
TOTAL CURRENT LIABILITIES $21,080 $16,639
Unearned revenue - noncurrent 400 457
Lease obligations 962 1,422
Long-term debt 0 7,419
Common shares, without par value
($.20 stated value); 20,000,000 shares authorized;
17,053,120 shares issued in 1995 and 1994 3,411 3,411
Paid-in capital 6,278 17,578
Retained earnings 25,556 26,921
Treasury stock at cost, 2,933,175 shares-1995;
6,110,658 shares-1994 (19,686) (41,008)
------- -------
TOTAL SHAREHOLDERS' EQUITY 15,559 6,902
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $38,001 $32,839
======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 3
<TABLE>
CINCINNATI MICROWAVE, INC.
STATEMENT OF OPERATIONS
(Amounts in thousands except per share data)
(Unaudited)
<CAPTION>
Three months ended Six months ended
---------------------------- -----------------------------
Jul. 2, 1995 Jun. 26, 1994 Jul. 2, 1995 Jun. 26, 1994
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales $19,017 $13,692 $32,665 $26,042
Cost of sales 13,869 9,183 23,426 17,508
------- ------- ------- -------
Gross profit 5,148 4,509 9,239 8,534
Operating expenses:
Research and development 1,770 2,241 3,602 4,227
Selling expenses 2,692 3,048 5,515 5,705
Administrative expenses 1,142 858 2,282 1,267
------- ------- ------- -------
5,604 6,147 11,399 11,199
------- ------- ------- -------
Operating loss (456) (1,638) (2,160) (2,665)
------- ------- ------- -------
Interest expense (283) (112) (559) (225)
Other income (expense), net (44) (7) (84) 566
------- ------- ------- -------
Loss before income taxes (783) (1,757) (2,803) (2,324)
Income tax benefit 0 0 (1,438) 0
------- ------- ------- -------
Net loss ($783) ($1,757) ($1,365) ($2,324)
======= ======= ======= =======
Loss per share ($0.06) ($0.16) ($0.10) ($0.21)
Weighted average shares
outstanding 14,010 10,862 13,936 10,852
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 4
<TABLE>
CINCINNATI MICROWAVE, INC.
STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<CAPTION>
Six months ended
----------------------------
Jul. 2, 1995 Jun. 26, 1994
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,365) $ (2,324)
-------- --------
Adjustments to reconcile net loss to net cash
provided by (used in) operations:
Depreciation 1,959 1,678
Amortization 409 409
Gain on disposition of property, plant & equipment (1) (658)
Other non-cash 17 (32)
Changes in operating assets and liabilities:
Accounts receivable (2,592) (1,377)
Inventories (3,417) (3,481)
Other current assets 220 (697)
Accounts payable (2,598) 3,449
Accrued taxes (1,385) (36)
Unearned revenue (40) 208
Other current liabilities (550) (218)
Other non-current operating assets and liabilities (17) (16)
-------- --------
Total adjustments/changes (7,995) (771)
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (9,360) (3,095)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (1,003) (2,797)
Proceeds from sale of property, plant & equipment 1 820
Increase in restricted cash (357) (199)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (1,359) (2,176)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 10,501 7,064
Payments on notes payable (8,857) (5,804)
Proceeds from lease obligations 0 1,555
Payment of lease obligations (566) (219)
Issuance of warrants 413 0
Issuance of treasury stock 326 114
Stock offering 9,283 0
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 11,100 2,710
-------- --------
NET INCREASE (DECREASE) IN CASH AND INVESTMENTS $ 381 $ (2,561)
CASH AND INVESTMENTS AT BEGINNING OF PERIOD 40 2,842
-------- --------
CASH AND INVESTMENTS AT END OF PERIOD $ 421 $ 281
======== ========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 5
CINCINNATI MICROWAVE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Summary of Significant Accounting Policies
The Company's fiscal year is comprised of 52 or 53 weeks, ending
on the last Sunday in the calendar year. The six months ended
July 2, 1995, included 27 weeks and the six months ended June
26, 1994, included 26 weeks.
The accompanying unaudited condensed financial statements of
Cincinnati Microwave, Inc. (the "Company") have been prepared in
accordance with Article 10-01 of Regulation S-X of the
Securities and Exchange Commission and do not include all
information required by generally accepted accounting
principles. However, in the opinion of the Company, these
financial statements contain all adjustments necessary to
present fairly the financial position as of July 2, 1995 and
December 25, 1994, the results of operations for the three and
six months ended July 2, 1995 and June 26, 1994 and the cash
flows for the six months ended July 2, 1995 and June 26, 1994.
For further information regarding the accounting policies of the
Company, refer to the Financial Statements and Notes thereto,
included in the Company's Annual Report on Form 10-K for the
year ended December 25, 1994.
Note 2 - Rights Offering
On December 27, 1994 and January 12, 1995, the Company completed
a Rights Offering (the Offering) of 1,482,435 units for $7 per
unit; each unit consists of two Common Shares and one warrant
entitling the holder to purchase one additional Common Share for
$4. The Offering generated net proceeds of $9.3 million.
Immediately following the Offering, the Company had 13.9 million
common shares outstanding.
The proceeds from the Offering were used to reduce debt and to
increase working capital. Offering costs of $175 included as a
prepaid asset at December 25, 1994 reduced Paid-in capital upon
completion of the Offering. 2,964,870 shares of Treasury stock
were reissued as part of the Offering. Paid-in capital was
reduced by the excess cost of the Treasury stock over the net
proceeds of the Offering.
Note 3 - Inventories
Inventories consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
Jul. 2, Dec. 25,
1995 1994
<S> <C> <C>
Materials and supplies 5,383 5,125
Work in process 1,472 1,203
Finished goods 5,721 2,848
------ ------
$12,576 $9,176
======= =======
</TABLE>
Note 4 - Notes Payable
As of August 1, 1995 the Company had borrowed $12.6 million against its $14.0
million credit facility. The credit facility consists of (i) a $7.0 million
revolving credit due June 30, 1996, (ii) a $4.0 million supplemental
revolving credit due September 30, 1995, (iii) a $3.0 million term loan due
June 30, 1996 and (iv) a standby letter of credit facililty not to exceed $1.0
million which expires June 30, 1996; however, the sum of the outstanding
principal balance of the revolving credit and the supplemental revolving
credit plus the aggregate stated value of the Company's outstanding leters of
credit shall not exceed $11.0 million at any time. The credit facility is
secured by a first lien on the Company's inventory, receivables, equipment and
a mortgage on the real estate of the Company. At period end, shareholders'
equity was $15.6 million and the ratio of debt-to-equity was 1.71 times versus
$14.6 million and 1.90 times a year ago. The Company believes, based on its
outlook for the balance of the year, that it will have sufficient resources to
fund its operations through 1995.
<PAGE> 6
Note 5 - Income taxes
In March 1995, as a result of the closure of the Company's 1991
Federal tax return, the Company released certain tax reserves to
income. This adjustment increased net income for the first
quarter by $1.4 million.
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
--------------------------------------------------
OPERATIONS AND FINANCIAL CONDITION
----------------------------------
RESULTS OF OPERATIONS
The following table shows net revenues by product line for
Cincinnati Microwave, Inc., for the second quarter and first six
months of 1995 and 1994 (000 omitted):
<TABLE>
<CAPTION>
Second Quarter 1995 Second Quarter 1994
------------------------ --------------------
$$ % $$ %
-------- ------ ------- -------
<S> <C> <C> <C> <C>
Product Line
------------
Radar Detectors $15,778 83 $11,982 88
Cordless Telephones 3,087 16 1,171 8
Other 152 1 539 4
------- -------
Total $19,017 $13,692
======= =======
</TABLE>
<TABLE>
<CAPTION>
Six Months 1995 Six Months 1994
------------------------------ ---------------------
$$ % $$ %
----------- --------- ----------- -------
<S> <C> <C> <C> <C>
Product Line
Radar Detectors $26,089 80 $ 22,012 85
Cordless Telephones 5,877 18 2,556 10
Other 699 2 1,474 5
-------- -------
Total $ 32,665 $26,042
======== =======
</TABLE>
Cincinnati Microwave's net sales for the second quarter of $19.0
million were 39% higher than the comparable period of 1994. Net
sales for the six months (27-week period) ended July 2, 1995,
increased 25% to $32.7 million as compared to $26.0 in the 26-week
period of 1994. An increase in unit volume in both periods
continues to reflect the growing market acceptance of the
Company's Digital Spread Spectrum Cordless Telephone, which
resulted in sales increases of 164% and 130%, respectively. In
addition, continued market acceptance of the new detector
products introduced in the third quarter of 1994 resulted in
sales increases of 32% and 19%, respectively, resulting
primarily from a unit volume increase. The Company's Cellular
Digital Packet Data (CDPD) modem sales are not significant.
The Company's gross profit margin was 27% for the second quarter
compared with 33% for the comparable period of 1994 and 28% for
the six months ended July 2, 1995 versus 33% for 1994. The
primary reasons for the reduction were startup costs associated
with the Company's new telephone production lines and the
continued shift in the sales mix from direct retail business to
OEM and reseller business. OEMs and resellers accounted for 52%
of total sales in the second quarter from 40% for the comparable
period in 1994.
Operating expenses were reduced by 9% from the comparable
quarter of 1994. The operating expense decline reflects lower
selling and research and development expenses, offset in part by
higher administrative expenses caused by a 1995 change in the
method of classifying such expenses between administrative,
selling expenses and research and development expenses.
Operating expenses in total were relatively unchanged for the
six months period ended July 2, 1995 as compared with the
corresponding period in 1994.
Primarily, as a result of the sales increase, the operating loss
for the second quarter was reduced to $456,000 from $1.6 million
for the comparable period of 1994. Interest expense for the
second quarter was $283,000 versus $112,000 in 1994 due to
higher debt and higher interest rates, resulting in a net loss
of $783,000 versus a net loss of $1.8 million in 1994. The net
loss for the first six months declined to $1.4 million from $2.3
million in 1994. In March 1995, as a result of the closure of
the Company's 1991
<PAGE> 8
Federal tax return, the Company released certain tax reserves
to income. This adjustment increased net income for the first
quarter by $1.4 million. 1994 six month results included a
gain of $657,000 from a land sale.
LIQUIDITY AND CAPITAL RESOURCES
During the quarter, the Company utilized its line of credit to finance
increased finished goods inventory to meet, in part, the ramp-up in production
to prepare for the fall selling season. As of August 1, 1995 the Company had
borrowed $12.6 million against its $14.0 million credit facility. The credit
facility consists of (i) a $7.0 million revolving credit due June 30, 1996,
(ii) a $4.0 million supplemental revolving credit due September 30, 1995, (iii)
a $3.0 million term loan due June 30, 1996 and (iv) a standby letter of credit
facility not to exceed $1.0 million which expires June 30, 1996; however, the
sum of the outstanding principal balance of the revolving credit and the
supplemental revolving credit plus the aggregate stated value of the Company's
outstanding letters of credit shall not exceed $11.0 million at any time. The
credit facility is secured by a first lien on the Company's inventory,
receivables, equipment and a mortgage on the real estate of the Company. At
period end, shareholders' equity was $15.6 million and the ratio of
debt-to-equity was 1.71 times versus $14.6 million and 1.90 times a year ago.
The Company believes, based on its outlook for the balance of the year, that it
will have sufficient resources to fund its operations through 1995.
<PAGE> 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
An annual meeting of shareholders was held July 24, 1995.
Directors elected at the meeting include:
Charles M. Fullgraf
James L. Jaeger
John W. Noland
Joseph M. O'Donnell
Jacques A. Robinson
Gilbert L. Wachsman
Erika Williams
The following matters were voted upon at the meeting:
1. Fixing number of directors for the ensuing year at seven.
For - 12,576,479
Against - 7,362
Abstentions - 37,372
2. Elections of above directors.
Charles M. Fullgraf For - 12,596,938
Against - 24,275
James L. Jaeger For - 12,603,654
Against - 17,559
John W. Noland For - 12,601,158
Against - 20,055
Joseph M. O'Donnell For - 12,603,601
Against - 17,612
Jacques A. Robinson For - 12,600,573
Against - 20,640
Gilbert L. Wachsman For - 12,603,387
Against - 17,826
Erika Williams For - 12,602,400
Against - 18,813
3. Ratification of the selection of Price Waterhouse as
independent accountants for 1995.
For - 12,594,004
Against - 10,412
Abstentions - 16,797
<PAGE> 10
ITEM 5. OTHER INFORMATION
-----------------
On May 16, 1995, the Service Agreement with The Scotcrest Group,
Inc. ("Scotcrest") for the employment of Jacques A. Robinson was
modified. All of the terms and conditions shall continue except
as provided: (i) Scotcrest is paid at a per diem rate of $1,800;
(ii) Scotcrest received an option to purchase 150,000 shares of
common stock of the Company at $12.25 per share. This option
shall vest at a rate of 37,500 shares per year (on May 15 of
1996, 1997, 1998, and 1999) and the option shall expire on May
15, 2005; and, (iii) the Company shall pay Scotcrest a cash
incentive bonus for 1995 results of the Company as follows: (a)
$100,000 for achievement of a reported net income amount for
1995 determined by the Compensation Committee ("the Goal") plus
(b) an amount equal to 4% of reported net income in excess of
the Goal. There will be no incentive bonus paid for any results
that fail to produce the Goal in 1995.
<PAGE> 11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
No reports on Form 8-K have been filed during the quarter ended
July 2, 1995. The Exhibits filed as part of this report are
listed below.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
(10)(i)* Copy of Amendment to Service Agreement with
The Scotcrest Group, Inc.
<FN>
* Management contract or compensatory plan or arrangement.
</TABLE>
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Cincinnati
Microwave, Inc. has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 9, 1995
CINCINNATI MICROWAVE, INC.
By: /s/ Walter P. Masavage
------------------------------
Walter P. Masavage
Vice President
Controller
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Cincinnati
Microwave, Inc. has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
August 9, 1995
CINCINNATI MICROWAVE, INC.
By:
------------------------------
Walter P. Masavage
Vice President
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND RELATED STATEMENT OF OPERATIONS OF CINCINNATI MICROWAVE, INC., FOR THE
PERIOD ENDED JULY 2, 1995 AND IS QUALIFIED IN ITS ENTIRETY OF REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> DEC-27-1994
<PERIOD-END> JUL-02-1995
<CASH> 1,283
<SECURITIES> 0
<RECEIVABLES> 7,842
<ALLOWANCES> 113
<INVENTORY> 12,576
<CURRENT-ASSETS> 21,108
<PP&E> 37,233
<DEPRECIATION> 23,647
<TOTAL-ASSETS> 38,001
<CURRENT-LIABILITIES> 21,080
<BONDS> 0
<COMMON> 3,411
0
0
<OTHER-SE> 12,148
<TOTAL-LIABILITY-AND-EQUITY> 38,001
<SALES> 32,665
<TOTAL-REVENUES> 32,665
<CGS> 23,426
<TOTAL-COSTS> 23,426
<OTHER-EXPENSES> 11,399
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 559
<INCOME-PRETAX> (2,803)
<INCOME-TAX> (1,438)
<INCOME-CONTINUING> (1,365)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,365)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
