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 April 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 April 2, 1995, there were
13,957,476 common shares outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CINCINNATI MICROWAVE, INC.
BALANCE SHEET
(Amounts in thousands except share data)
Apr. 2, Dec. 25,
1995 1994
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 253 $ 40
Accounts receivable, net 4,656 5,137
Inventories, net 12,481 9,159
Other current assets 438 602
TOTAL CURRENT ASSETS $17,828 $14,938
Restricted cash 1,000 505
Property, plant and equipment, net 13,839 14,543
Intangibles and other assets, net 2,649 2,853
TOTAL ASSETS $35,316 $32,839
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 3,518 $ 8,627
Current portion of long-term debt 600 600
Accrued taxes 33 1,468
Unearned revenue 722 709
Current lease obligations 1,129 1,164
Other 3,242 4,071
TOTAL CURRENT LIABILITIES $ 9,244 $16,639
Unearned revenue - noncurrent 422 457
Lease obligations 1,178 1,422
Long-term debt 8,729 7,419
Common shares, without par value ($.20 stated value);
20,000,000 shares authorized; 17,053,120 shares
issued in 1995 and 1994 3,411 3,411
Paid-in capital 6,685 17,578
Retained earnings 26,339 26,921
Treasury stock at cost, 3,095,644 shares-1995;
6,110,658 shares-1994 (20,692) (41,008)
TOTAL SHAREHOLDERS' EQUITY 15,743 6,902
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $35,316 $32,839
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINCINNATI MICROWAVE, INC.
STATEMENT OF OPERATIONS
(Amounts in thousands except per share data)
(Unaudited)
Three months ended
Apr. 2, 1995 Mar. 27, 1994
<S> <C> <C>
Net sales $13,648 $12,350
Cost of sales 9,557 8,325
Gross profit 4,091 4,025
Operating expenses:
Research and development 1,832 1,986
Selling expenses 2,823 2,657
Administrative expenses 1,140 409
5,795 5,052
Operating loss (1,704) (1,027)
Interest expense (276) (113)
Other income (expense), net (40) 573
Loss before income taxes (2,020) (567)
Income tax benefit (1,438) 0
Net loss ($582) ($567)
Loss per share ($0.04) (0.05)
Weighted average shares outstanding 13,868 10,842
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINCINNATI MICROWAVE, INC.
STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Three months ended
Apr. 2, Mar. 27,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (582) $ (567)
Adjustments to reconcile net loss to net
cash provided by (used in) operations:
Depreciation 1,012 807
Amortization 205 205
Gain on disposition of property, plant & equipment (1) (657)
Issuance of treasury stock 0 22
Other non-cash credits, net 0 (30)
Changes in operating assets and liabilities:
Accounts receivable 481 (1,123)
Inventories (3,322) (1,877)
Other current assets 163 (211)
Accounts payable (5,109) 2,060
Accrued taxes (1,435) (6)
Unearned revenue (23) 82
Other current liabilities (828) (213)
Other non-current operating assets and liabilities (8) (16)
Total adjustments/changes (8,865) (957)
NET CASH USED IN OPERATING ACTIVITIES (9,447) (1,524)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment (300) (423)
Proceeds from sale of property, plant & equipment 1 820
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (299) 397
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 9,228 0
Payments on notes payable (7,825) (589)
Payment of lease obligations (279) (83)
Issuance of treasury stock 136 72
Proceeds from stock offering 9,287 0
NET CASH PROVIDED BY FINANCING ACTIVITIES 10,547 (600)
NET DECREASE IN CASH AND INVESTMENTS $ 801 $(1,727)
CASH AND INVESTMENTS AT BEGINNING OF PERIOD 40 2,842
CASH AND INVESTMENTS AT END OF PERIOD $ 841 $1,115
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
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 fiscal quarter
ended April 2, 1995, included 14 weeks and the quarter ended
March 27, 1994, included 13 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 April 2, 1995 and
December 25, 1994, the results of operations for the three
months ended April 2, 1995 and March 27, 1994 and the cash flows
for the three months ended April 2, 1995 and March 27, 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 $9,290. 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>
Apr. 2, Dec. 25,
1995 1994
<S> <C> <C>
Materials and supplies 5,047 5,125
Work in process 1,546 1,203
Finished goods 5,888 2,848
$12,481 $9,176
</TABLE>
Note 4 - Notes Payable
The Company's original financing agreement with its Bank
included (i) a revolving line of credit for general working
capital and standby letters of credit maturing on June 30, 1996
in the amount of up to $6,000 based upon a receivables and
inventory formula, bearing interest at the Bank's prime rate
plus 3/4% per annum or 9 3/4% at December 25, 1994; and (ii) a term
loan from the Bank in the amount of up to $4,000 initially due
December 31, 1994, bearing interest at the Bank's prime rate
plus 1% per annum or 10% at December 25, 1994 (collectively, the
"Loans").
During the first quarter of 1995, upon satisfactory completion
of the Offering, the term note was reduced to $3,000 and
extended to June 30, 1996 with the principal being reduced by
$50 per month during 1995, the revolver was increased by $1,000
to $7,000 and the interest rates on the term note and the
revolving line of credit were increased to prime plus 1 1/2% per
annum and prime plus 1 1/4% per annum, respectively. At April 2,
1995, the Company has borrowed $6,479 on the revolving line of
credit and $2,850 on the term loan.
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. This reserve was established in 1991 due to
uncertainty as to the amount of research and development tax
credit to be realized.
<PAGE>
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 first quarter 1995 and 1994
(000 omitted):
<TABLE>
<CAPTION>
First Quarter 1995 First Quarter 1994
$$ % $$ %
Product Line
<S> <C> <C> <C> <C>
Radar Detectors $10,311 76 $10,030 81
Cordless Telephones 2,794 20 1,385 11
Other 543 4 935 8
Total $13,648 $12,350
</TABLE>
Cincinnati Microwave's net sales for the first quarter of $13.6
million were 11% higher than the comparable period of 1994. The
increase was due primarily to Spread Spectrum Cordless Telephone
sales with Detector sales approximately the same as 1993.
Market acceptance of 900 MHz cordless telephones continues to
grow and an international market is developing with sales being
realized during the quarter. The Company's CDPD modem sales
continue to be insignificant.
The Company's gross profit was 30% compared with 33% in the
first quarter of 1994. This decrease is due predominantly to
increased costs associated with ramping-up production capacity
in anticipation of the growing contribution to sales of the
Spread Spectrum Cordless Telephones. Operating expenses as a
percent of net sales increased slightly in 1995.
As a result of the lower gross profit, the operating loss for
the first quarter was $1.7 million, up from $1.0 million
reported in the first quarter of 1994. Interest expense was
$0.3 million versus $0.1 million last year due to higher debt
and higher interest rates. During the quarter, the Company
recorded a nonoperating gain of $1.4 million reflecting the
reversal of a 1991 federal tax credit provision relating to
research and development tax credits. First quarter 1994
results included a nonoperating gain of $563,000 from the sale
of land.
LIQUIDITY AND CAPITAL RESOURCES
On January 12, 1995, the Company completed an equity rights
offering, receiving net proceeds of $9.3 million. The funds
were utilized to reduce debt and trade payables to vendors and
for working capital requirements. During the quarter, the
Company utilized its line of credit to finance the production of
increased finished goods inventory to meet expected demands
during the latter half of 1995. As of April 2, 1995, the
Company had borrowed $9.3 million against its existing credit
facility. 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 $15.7 million and the ratio of debt-to-equity was
1.49 versus $16.3 and 1.31 a year ago, respectively. The
Company believes it has sufficient funds for its current
operations.
OUTLOOK
The Company continues to anticipate both a rise in sales for the
full year of 1995 and a change in the mix of sales to reflect
the growing contribution of the Spread Spectrum Cordless
Telephone and the leveling of detector sales due to market
conditions. The third component of sales, Cellular Digital
Packet Data (CDPD) modems and other contract sales, is expected
to increase but remain insignificant.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter ended
April 2, 1995.
<PAGE>
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.
May 16, 1995
CINCINNATI MICROWAVE, INC.
By:
Walter P. Masavage
Vice President
Controller
<PAGE>
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.
May 16, 1995
CINCINNATI MICROWAVE, INC.
By: /s/ Walter P. Masavage
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 April 2, 1995 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000729583
<NAME> CINCINNATI MICROWAVE, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> DEC-26-1994
<PERIOD-END> APR-02-1995
<CASH> 1,253
<SECURITIES> 0
<RECEIVABLES> 4,719
<ALLOWANCES> 63
<INVENTORY> 12,481
<CURRENT-ASSETS> 17,828
<PP&E> 36,573
<DEPRECIATION> 22,734
<TOTAL-ASSETS> 35,316
<CURRENT-LIABILITIES> 9,244
<BONDS> 0
<COMMON> 3,411
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 35,316
<SALES> 13,648
<TOTAL-REVENUES> 13,648
<CGS> 9,557
<TOTAL-COSTS> 9,557
<OTHER-EXPENSES> 5,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 276
<INCOME-PRETAX> (2,020)
<INCOME-TAX> (1,438)
<INCOME-CONTINUING> (582)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (582)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
