SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported ) August 1, 1996
CINCINNATI MICROWAVE, INC.
(Exact name of registrant as specified in its charter)
Ohio 0-13136 31-0903863
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
One Microwave Plaza, Cincinnati, Ohio 45249-9502
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code
(513) 489-5400
(Former name, former address and former fiscal year, if changed
since last report)
Item 5. Other Events
Cincinnati, August 1, 1996 -- Cincinnati Microwave, Inc.
(Nasdaq:CNMW) today announced that it has secured a three-year,
$15 million credit facility from Foothill Capital Corporation, a
Norwest Company. The company also reported that net sales for
its second quarter ended June 30, 1996, were $15.5 million
compared with $19.0 million in last year's second quarter. The
net loss was $3.8 million, or 24 cents per share, compared with
a loss of $783,000, or 6 cents, last year.
"Everyone at Cincinnati Microwave is focused on returning the
company to profitability. We are all working very hard on the
internal and external steps necessary to accomplish this goal,"
said Erika Williams, president and chief executive officer. "We
are continuing to work to reduce inventory, increase revenue,
bring down payables and control expenses. In addition, we are
exploring potential strategic alliances that would strengthen
the company's position in the market place."
Credit Facility
The new credit facility with Foothill is comprised of a $5
million term loan and a revolving credit facility of up to $15
million with a maximum combined availability of $15 million.
The available borrowings under the revolving credit facility are
based on the level of the company's accounts receivable and
finished goods inventory. The new facility is secured by
substantially all of the company's assets and is subject to the
maintenance of certain financial covenants. The initial
borrowing under the new facility of approximately $5 million was
used to pay off the existing facility and to fund working
capital requirements.
Net Sales
Net sales for the second quarter were down 19 percent from the
comparable prior period primarily because of a 48 percent
decline in sales of radar detectors. Detector unit sales, which
were weak in both the retail and OEM/reseller channels, declined
42 percent, reflecting reduced demand in the market. The 9
percent decline in the average unit price reflected the growing
significance of major customers, which generally receive volume
discounts.
Sales of the company's cordless telephones with SureLink
technology rose 119 percent for the quarter with unit volume up
213 percent. Market acceptance of the product line remains
strong, however, the average unit price declined 30 percent
compared with last year due to a significantly greater
percentage of OEM/reseller sales and reductions in selling
prices that were made by the company during the second quarter
to improve inventory turnover, generate cash flow and improve
liquidity.
Other sales rose 223 percent to $487,000 due to an almost
six-fold rise in the number of cellular digital packet data
(CDPD) modems sold. The market for CDPD appears to be growing,
albeit more slowly than market analysts had projected, as the
cellular carriers continue deployment of digital capabilities in
their networks, and new applications reach the market.
The company is on schedule to introduce a series of new
cordless telephone, detector and modem product models during the
remainder of the year. In keeping with normal product
introduction schedules in the consumer electronics industry, the
company introduces products with new features in time for the
holiday buying season.
Gross Margin
The company's gross profit margin was 10 percent for the second
quarter compared with 27 percent a year ago. In addition to the
sales price reductions previously discussed, margins were
impacted by inventory liquidation efforts; lower production
volume, which impacts factory utilization and efficiency; and,
continued high material costs due to the company's inability to
make volume purchases because of the lower production volume and
on hand inventory.
Operating Expenses
Operating expenses for the second quarter declined 7 percent to
$5.2 million although they increased to 34 percent of net sales
from 29 percent last year. Net interest expense for the quarter
declined because of lower average outstanding balances on the
company's credit facility.
A 33 percent decline in research and development expense
reflected the use of an engineering development credit from a
customer as well as tight cost controls. Selling expenses were
relatively unchanged from last year even though the company
increased its level of normal advertising and direct mail
efforts to stimulate retail sales. Administrative expenses rose
28 percent for the quarter because of an increase in legal and
professional expenses, due in part to the company's need to
defend itself against shareholder lawsuits filed in 1995.
Overall, the company is making progress toward reducing its cost
structure. Since December 1995, the company has reduced the
number of full time employees by 17 percent and has reduced the
number of temporary and contract workers to 7 from 455. The
staffing reductions should result in substantial annualized
savings.
Six Month Results
For the six months ended June 30, 1996, net sales were up 10
percent to $36.0 million from $32.7 million. The net loss was
$6.5 million, or 41 cents per share, compared with a net loss of
$1.4 million, or 10 cents, in the comparable period of 1995.
Results for 1995 include a nonoperating gain in the first
quarter of the year of $1.4 million, or 10 cents per share,
reflecting the release of certain tax reserves to income as a
result of the closure of the company's 1991 federal tax return.
Balance Sheet Review
During the first six months of 1996, the company generated cash
from operating activities of $5.2 million compared with the
utilization of $9.4 million in cash during the comparable prior
period. The primary source of cash was the $9.9 million
reduction in inventory and the $5.3 million decline in accounts
receivable during the period. Available cash was used to reduce
accounts payable by $5.1 million between year-end and June 30,
1996. Shareholders' equity was $18.3 million at June 30, 1996
compared with $24.4 million at year-end.
The $9.9 million reduction in inventory since year-end included
a $4.8 million decrease in raw materials and work in process and
a $5.7 million decrease in finished goods inventory. Accounts
receivable declined from year-end and the end of the first
quarter because of the lower sales in the second quarter and
aggressive management of accounts receivable.
The new credit facility provides the company with increased
credit availability and financial flexibility at significantly
lower interest rates than those incurred in the second quarter.
The information set forth above may include "forward-looking"
information, as defined in the recently enacted Private
Securities Litigation Reform Act of 1995. The Cautionary
Statements filed by the Company as part of their Form 10K for
the year ended December 31, 1995 on April 1, 1996, are
incorporated herein by reference, and investors are specifically
referred to such Cautionary Statements for a discussion of
factors which could affect the Company's operations and
"forward-looking" statements contained herein.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
99(i) - Press release of Cincinnati Microwave, Inc. dated
August 1,1996.
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 1, 1996
CINCINNATI MICROWAVE, INC.
/ss/ Elaine M. Bacon
Assistant Corporate Secretary
FOR FURTHER INFORMATION:
At the Company: At the Financial Relations Board:
Elaine Bacon Bill Schmidle, Analyst Inquiries
513-489-5400 312-640-6753
[email protected] Karl Plath, General Inquiries
312-640-6738
For Immediate Release
Cincinnati Microwave Secures New Credit Facility; Reports 1996
Second Quarter Results
Cincinnati, August 1, 1996 -- Cincinnati Microwave, Inc.
(Nasdaq:CNMW) today announced that it has secured a three-year,
$15 million credit facility from Foothill Capital Corporation, a
Norwest Company. The company also reported that net sales for
its second quarter ended June 30, 1996, were $15.5 million
compared with $19.0 million in last year's second quarter. The
net loss was $3.8 million, or 24 cents per share, compared with
a loss of $783,000, or 6 cents, last year.
"Everyone at Cincinnati Microwave is focused on returning the
company to profitability. We are all working very hard on the
internal and external steps necessary to accomplish this goal,"
said Erika Williams, president and chief executive officer. "We
are continuing to work to reduce inventory, increase revenue,
bring down payables and control expenses. In addition, we are
exploring potential strategic alliances that would strengthen
the company's position in the market place."
Credit Facility
The new credit facility with Foothill is comprised of a $5
million term loan and a revolving credit facility of up to $15
million with a maximum combined availability of $15 million.
The available borrowings under the revolving credit facility are
based on the level of the company's accounts receivable and
finished goods inventory. The new facility is secured by
substantially all of the company's assets and is subject to the
maintenance of certain financial covenants. The initial
borrowing under the new facility of approximately $5 million was
used to pay off the existing facility and to fund working
capital requirements.
Net Sales
Net sales for the second quarter were down 19 percent from the
comparable prior period primarily because of a 48 percent
decline in sales of radar detectors. Detector unit sales, which
were weak in both the retail and OEM/reseller channels, declined
42 percent, reflecting reduced demand in the market. The 9
percent decline in the average unit price reflected the growing
significance of major customers, which generally receive volume
discounts.
Sales of the company's cordless telephones with SureLink
technology rose 119 percent for the quarter with unit volume up
213 percent. Market acceptance of the product line remains
strong, however, the average unit price declined 30 percent
compared with last year due to a significantly greater
percentage of OEM/reseller sales and reductions in selling
prices that were made by the company during the second quarter
to improve inventory turnover, generate cash flow and improve
liquidity.
Other sales rose 223 percent to $487,000 due to an almost
six-fold rise in the number of cellular digital packet data
(CDPD) modems sold. The market for CDPD appears to be growing,
albeit more slowly than market analysts had projected, as the
cellular carriers continue deployment of digital capabilities in
their networks, and new applications reach the market.
The company is on schedule to introduce a series of new
cordless telephone, detector and modem product models during the
remainder of the year. In keeping with normal product
introduction schedules in the consumer electronics industry, the
company introduces products with new features in time for the
holiday buying season.
Gross Margin
The company's gross profit margin was 10 percent for the second
quarter compared with 27 percent a year ago. In addition to the
sales price reductions previously discussed, margins were
impacted by inventory liquidation efforts; lower production
volume, which impacts factory utilization and efficiency; and,
continued high material costs due to the company's inability to
make volume purchases because of the lower production volume and
on hand inventory.
Operating Expenses
Operating expenses for the second quarter declined 7 percent to
$5.2 million although they increased to 34 percent of net sales
from 29 percent last year. Net interest expense for the quarter
declined because of lower average outstanding balances on the
company's credit facility.
A 33 percent decline in research and development expense
reflected the use of an engineering development credit from a
customer as well as tight cost controls. Selling expenses were
relatively unchanged from last year even though the company
increased its level of normal advertising and direct mail
efforts to stimulate retail sales. Administrative expenses rose
28 percent for the quarter because of an increase in legal and
professional expenses, due in part to the company's need to
defend itself against shareholder lawsuits filed in 1995.
Overall, the company is making progress toward reducing its cost
structure. Since December 1995, the company has reduced the
number of full time employees by 17 percent and has reduced the
number of temporary and contract workers to 7 from 455. The
staffing reductions should result in substantial annualized
savings.
Six Month Results
For the six months ended June 30, 1996, net sales were up 10
percent to $36.0 million from $32.7 million. The net loss was
$6.5 million, or 41 cents per share, compared with a net loss of
$1.4 million, or 10 cents, in the comparable period of 1995.
Results for 1995 include a nonoperating gain in the first
quarter of the year of $1.4 million, or 10 cents per share,
reflecting the release of certain tax reserves to income as a
result of the closure of the company's 1991 federal tax return.
Balance Sheet Review
During the first six months of 1996, the company generated cash
from operating activities of $5.2 million compared with the
utilization of $9.4 million in cash during the comparable prior
period. The primary source of cash was the $9.9 million
reduction in inventory and the $5.3 million decline in accounts
receivable during the period. Available cash was used to reduce
accounts payable by $5.1 million between year-end and June 30,
1996. Shareholders' equity was $18.3 million at June 30, 1996
compared with $24.4 million at year-end.
The $9.9 million reduction in inventory since year-end included
a $4.8 million decrease in raw materials and work in process and
a $5.7 million decrease in finished goods inventory. Accounts
receivable declined from year-end and the end of the first
quarter because of the lower sales in the second quarter and
aggressive management of accounts receivable.
The new credit facility provides the company with increased
credit availability and financial flexibility at significantly
lower interest rates than those incurred in the second quarter.
The information set forth above may include "forward-looking"
information, as defined in the recently enacted Private
Securities Litigation Reform Act of 1995. The Cautionary
Statements filed by the Company as part of their Form 10K for
the year ended December 31, 1995 on April 1, 1996, are
incorporated herein by reference, and investors are specifically
referred to such Cautionary Statements for a discussion of
factors which could affect the Company's operations and
"forward-looking" statements contained herein.
Cincinnati Microwave designs, manufactures and markets ultrahigh
frequency and microwave wireless communications products. The
company's product lines include radar warning devices, digital
spread spectrum cordless telephones and wireless data modems for
use on the Cellular Digital Packet Data (CDPD) network. The
company's products combine its experience in ultrahigh frequency
and microwave wireless technology, including digital signal
processing, with its high volume manufacturing capabilities.
The company markets its products both under the ESCORT brand
name through direct advertising and as an Original Equipment
Manufacturer (OEM) supplier. The company's strategy for
entering new markets is to align with companies that have
established sales leadership and market positions. This
strategy is designed to provide broader access to the end user.
The company produces digital spread spectrum telephones for
several leading marketers of consumer telephones. The company's
common stock is traded on the Nasdaq National Market System
under the symbol CNMW.
Additional information on the company, its products and markets
can be obtained from the Company's world wide web site:
http://www.cnmw.com/welcome.htm. Information about Cincinnati
Microwave also is available, free of charge via fax, by dialing
1-800-PRO-INFO and using ticker symbol CNMW.
<TABLE>
<CAPTION>
CINCINNATI MICROWAVE, INC.
STATEMENT OF OPERATIONS
(AMOUNTS IN THOUSANDS EXCEPT SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
Jun 30, Jul 2, PERCENT Jun 30, Jul 2, PERCENT
1996 1995 CHANGE 1996 1995 CHANGE
<S> <C> <C> <C> <C> <C> <C>
RADAR DETECTORS 8,222 15,778 (48)% 19,930 26,089 (24)%
CORDLESS TELEPHONES 6,751 3,088 119% 15,395 5,878 162%
OTHER 487 151 223% 688 698 (1)%
NET SALES $15,460 $19,017 (19)% $36,013 $32,665 10%
COST OF SALES 13,871 13,869 0% 30,501 23,426 30%
------ ------ ---- ------ ------ ----
GROSS PROFIT 1,589 5,148 (69)% 5,512 9,239 (40)%
OPERATING EXPENSES:
RESEARCH & DEVELOPMENT 1,180 1,770 (33)% 2,760 3,602 (23)%
SELLING EXPENSES 2,595 2,692 (4)% 5,765 5,515 5%
ADMINISTRATIVE EXPENSES 1,457 1,142 28% 3,036 2,282 33%
----- ----- ---- ------ ------ ----
5,232 5,604 (7)% 11,561 11,399 1%
OPERATING LOSS (3,643) (456) (6,049) (2,160)
OTHER EXPENSE, NET (184) (327) (409) (643)
------- ------ ------- -------
LOSS BEFORE INCOME TAXES (3,827) (783) (6,458) (2,803)
INCOME TAX BENEFIT 0 0 0 (1,438)
------- ------- -------- --------
NET LOSS ($3,827) ($783) ($6,458) ($1,365)
======== ======= ======== ========
LOSS PER SHARE ($0.24) ($0.06) ($0.41) ($0.10)
WEIGHTED AVERAGE SHARES 15,749 14,010 12% 15,722 13,936 13%
</TABLE>
<TABLE>
<CAPTION>
CINCINNATI MICROWAVE, INC.
BALANCE SHEET
(AMOUNTS IN THOUSANDS)
AS OF:
Jun 30, Dec 31,
1996 1995
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CASH & INVESTMENTS 11 11
ACCOUNTS RECEIVABLE, NET 5,638 10,923
INVENTORIES, NET 15,509 25,370
OTHER CURRENT ASSETS 1,131 779
------ ------
TOTAL CURRENT ASSETS 22,289 37,083
RESTRICTED CASH 903 429
PROPERTY, PLANT & EQUIPMENT 13,266 14,649
INTANGIBLES 1,626 2,035
------ ------
TOTAL ASSETS 38,084 54,196
====== ======
LIABILITIES & SHAREHOLDERS' EQUITY
ACCOUNTS PAYABLE 10,613 15,729
NOTES PAYABLE 3,024 6,934
ACCRUED TAXES 25 81
UNEARNED REVENUE 555 684
CURRENT LEASE OBLIGATIONS 1,168 1,075
OTHER 3,685 4,212
------ ------
TOTAL CURRENT LIABILITIES 19,070 28,715
LONG-TERM CAPITAL LEASE OBLIGATION 497 753
UNEARNED REVENUE-NONCURRENT 260 350
SHAREHOLDERS' EQUITY 18,257 24,378
------ ------
TOTAL LIABILITES AND SHAREHOLDER'S
EQUITY 38,084 54,196
====== ======
</TABLE>
