<PAGE>
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 February 28, 1998
Commission File No. 0-24414
RF MONOLITHICS, INC.
(Exact name of registrant as specified in its charter)
---------------------------
DELAWARE 75-1638027
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification)
4441 SIGMA ROAD, DALLAS, TEXAS 75244
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (972) 233-2903
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.
[X] YES [ ] NO
AS OF MARCH 31, 1998, 5,624,402 SHARES OF THE REGISTRANT'S COMMON STOCK, $.001
PAR VALUE, WERE OUTSTANDING.
<PAGE>
RF MONOLITHICS, INC.
FORM 10-Q
QUARTER ENDED FEBRUARY 28, 1998
TABLE OF CONTENTS
ITEM
NUMBER PAGE
------ ----
PART I. CONDENSED FINANCIAL INFORMATION
1. Condensed Financial Statements:
Condensed Balance Sheets
February 28, 1998 (Unaudited), and August 31, 1997 1
Condensed Statements of Income - Unaudited
Three Months Ended February 28, 1998 and 1997,
and Six Months Ended February 28, 1998 and 1997 2
Condensed Statements of Cash Flows - Unaudited
Six Months Ended February 28, 1998 and 1997 3
Notes to Condensed Financial Statements 4
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II. OTHER INFORMATION
1. Legal Proceedings 11
2. Changes in Securities 11
3. Defaults Upon Senior Securities 11
4. Submission of Matters to a Vote of Security Holders 11
5. Other Information 12
6. Exhibits and Reports on Form 8-K 12
SIGNATURES
<PAGE>
PART I. CONDENSED FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
RF MONOLITHICS, INC.
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS
(In Thousands)
- -----------------------------------------------------------------------------------------------------------------------------
FEBRUARY 28, AUGUST 31,
ASSETS 1998 1997
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 264 $ 482
Short-term investments 5,663 5,487
Trade receivables - net 9,957 9,517
Inventories 6,569 4,934
Prepaid expenses and other 1,131 961
Deferred income tax benefits 743 747
---------- ----------
Total current assets 24,327 22,128
PROPERTY AND EQUIPMENT - Net 14,510 13,694
DEFERRED INCOME TAX BENEFITS 546 890
OTHER ASSETS - Net 565 648
---------- ----------
TOTAL $39,948 $ 37,360
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and line of credit $ 1,675 $ 1,165
Accounts payable - trade 2,877 2,135
Accounts payable - construction and equipment 213 604
Accrued expenses and other liabilities 3,171 2,965
Income taxes payable 212 585
---------- ----------
Total current liabilities 8,148 7,454
LONG-TERM DEBT 1,378 1,911
STOCKHOLDERS' EQUITY:
Common stock: 5,616 and 5,514 shares issued and outstanding 6 6
Additional paid-in capital 26,162 25,535
Retained earnings 4,363 2,593
Unearned compensation (119) (142)
Unrealized gain on short-term investments 10 3
---------- ----------
Total stockholders' equity 30,422 27,995
---------- ----------
TOTAL $39,948 $ 37,360
========== ==========
</TABLE>
See notes to condensed financial statements.
- 1 -
<PAGE>
RF MONOLITHICS, INC.
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF INCOME - UNAUDITED
(In Thousands, Except Per-Share Amounts)
- ------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
---------------------------- ------------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
SALES $13,214 $10,695 $26,096 $20,772
COST OF SALES 7,889 6,422 15,523 12,512
------- ------- ------- -------
GROSS PROFIT 5,325 4,273 10,573 8,260
OPERATING EXPENSES:
Research and development 1,313 969 2,780 1,883
Sales and marketing 1,476 1,431 2,870 2,788
General and administrative 819 778 1,486 1,478
Litigation 580 -- 641 --
------- ------- ------- -------
Total operating expenses 4,188 3,178 7,777 6,149
------- ------- ------- -------
INCOME FROM OPERATIONS 1,137 1,095 2,796 2,111
OTHER INCOME (EXPENSE):
Interest income 73 82 151 147
Interest expense (69) (84) (138) (178)
Other expense 11 10 9 (9)
------- ------- ------- -------
Total 15 8 22 (40)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 1,152 1,103 2,818 2,071
INCOME TAX EXPENSE 412 419 1,045 787
------- ------- ------- -------
NET INCOME $ 740 $ 684 $ 1,773 $ 1,284
======= ======= ======= =======
EARNINGS PER SHARE:
Basic $ 0.13 $ 0.13 $ 0.32 $ 0.24
======= ======= ======= =======
Diluted $ 0.12 $0.12 $0.30 $0.23
======= ======= ======= =======
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:
Basic 5,586 5,380 5,553 5,356
======= ======= ======= =======
Diluted 5,968 5,687 6,001 5,644
======= ======= ======= =======
</TABLE>
See notes to condensed financial statements.
- 2 -
<PAGE>
RF MONOLITHICS, INC.
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS - UNAUDITED
(In Thousands)
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
----------------------------
FEBRUARY FEBRUARY
28, 1998 28, 1997
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,773 $ 1,284
Noncash items included in net income:
Deferred taxes 348 545
Depreciation and amortization 1,792 1,412
Provision for doubtful accounts 60 75
Other 24 40
Cash from (used in) operating working capital:
Trade receivables (500) (1,733)
Inventories (1,635) (88)
Prepaid expenses and other (170) (109)
Accounts payable - trade 742 1,037
Accrued expenses and other liabilities 206 16
Income taxes payable (373) 33
--------- ---------
Net cash from operations 2,267 2,512
INVESTING ACTIVITIES:
Increase in short-term investments (2,719) (2,148)
Decrease in short-term investments 2,550 2,026
Acquisition of property and equipment (2,537) (2,246)
Proceeds from sale of assets - 24
Decrease in other assets 49 28
--------- ---------
Net cash used in investing activities (2,657) (2,316)
FINANCING ACTIVITIES:
Borrowings on notes payable 500 -
Repayments of notes payable and line of credit (250) (1,051)
Repayments of capital leases (310) (152)
Borrowings (repayments) of accounts payable - construction and equipment (391) 321
Common stock issued for options exercised 123 272
Common stock issued under the Purchase Plan 500 167
--------- ---------
Net cash from (used in) financing activities 172 (443)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (218) (247)
CASH AND CASH EQUIVALENTS:
Beginning of period 482 1,029
--------- ---------
End of period $ 264 $ 782
========= =========
SUPPLEMENTAL INFORMATION:
Interest paid $ 106 $ 179
========= =========
Income taxes paid $ 995 $ 11
========= =========
Property and equipment acquisitions by debt $ 37 $ 695
========= =========
</TABLE>
- 3 -
<PAGE>
RF MONOLITHICS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed financial statements include all adjustments,
consisting only of normal recurring adjustments and accruals, that in the
opinion of the management of RF Monolithics, Inc. (the "Company" or "RFM") are
necessary for a fair presentation of the Company's financial position as of
February 28, 1998, the results of operations for the three and six months ended
February 28, 1998 and 1997, and cash flows for the six months ended February 28,
1998 and 1997. These unaudited interim condensed financial statements should be
read in conjunction with the audited financial statements of the Company and the
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended August 31, 1997, filed with the Securities and Exchange Commission.
Operating results for the six months ended February 28, 1998, are not
necessarily indicative of the results to be achieved for the full fiscal year
ending August 31, 1998.
2. INVENTORIES
Inventories consist of the following (in thousands):
FEBRUARY AUGUST
28, 1998 31, 1997
Raw materials and supplies $ 4,127 $ 2,569
Work in process 1,684 1,239
Finished goods 758 1,126
--------- ---------
Total $ 6,569 $ 4,934
========= =========
3. PROPERTY AND EQUIPMENT
Property and equipment includes construction in progress of $2,223,000 at
February 28, 1998, and $3,021,000 at August 31, 1997, which is composed of
equipment and other assets not yet placed in service primarily related to
increasing the capacity of the Company's manufacturing facilities.
4. EARNINGS PER SHARE
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE, is
effective for the Company for the quarter ended February 28, 1998. It requires
a reconciliation of both the numerator and denominator of the earnings per share
calculations and restatement of previous periods. There are no adjustments to
net earnings to arrive at income for either per share calculation. The
restatement of basic earnings per share for both the three and six months ended
February 28, 1997, resulted in an increase of $.01 per share. Reconciliation of
share amounts is as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
--------------------------------------------------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Shares outstanding for basic
earnings per share 5,586 5,380 5,553 5,356
Effect of dilutive stock options 382 307 448 288
----------- ------------ ------------ ------------
Shares outstanding for dilutive 5,968 5,687 6,001 5,644
earnings per share =========== ============ ============ ============
</TABLE>
5. LITIGATION EXPENSE
Litigation expense, which amounted to $580,000 in the current quarter and
$641,000 in the current year to date period, consists of expenses related to the
resolution of the legal matter with TimeKeeping Systems, Inc. Expenses include
legal expenses, settlement costs and related travel. The matter was resolved
after the end of the second quarter, and in accordance with generally accepted
accounting principles an additional $500,000 accrual to cover settlement and
related legal fees was recorded as of February 28, 1998. There were much smaller
legal expenses related to this matter in the prior year.
- 4 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion may be understood more fully by reference to the
financial statements, notes to the financial statements, and management's
discussion and analysis of financial condition and results of operations
contained in the Company's Annual Report on Form 10-K for the year ended August
31, 1997, filed with the Securities and Exchange Commission.
GENERAL
RFM offers products in four product areas: Low-power components, low-
power Virtual Wirea radio systems, frequency control modules and filters. The
Company sells to original equipment manufacturers in automotive, computer,
consumer, industrial and telecommunications market segments world wide.
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section, as well as in
the section entitled "Legal Proceedings" and those discussed in the Company's
Form 10-K for the year ended August 31, 1997.
The Company is still evaluating the year 2000 issues to determine whether
such issues are expected to be material to the Company's business, financial
condition and results of operations. It will address any changes needed within
its systems to ensure it can be fully compliant with year 2000 requirements. The
year 2000 issues may create risk for the Company from unforeseen problems in its
own computer systems and from that of the systems of other companies on which
the Company's operations may rely upon. The Company is currently not aware that
it will incur significant expenditures to effect these changes.
RESULTS OF OPERATIONS
The following discussion relates to the financial statements of the
Company for the three and six months ended February 28, 1998 (current quarter
and current year-to-date period), of the fiscal year ending August 31, 1998, in
comparison to the three and six months ended February 28, 1997 (comparable
quarter of the prior year and comparable year-to-date period). In addition,
certain comparisons with the three months ended November 30, 1997 (previous
quarter), are provided where management believes it is useful to the
understanding of trends.
The selected financial data for the periods presented may not be
indicative of the Company's future financial condition or results of operations.
- 5 -
<PAGE>
The following table sets forth, for the three and six months ended
February 28, 1998 and 1997, (i) the percentage relationship of certain items
from the Company's statements of income to sales and (ii) the percentage change
in these items between the current periods and the comparable periods of the
prior year:
<TABLE>
<CAPTION>
Percentage of Total Sales Percentage Change From
--------------------------------------------------- --------------------------------------
Three Months Six Months Three Months Six Months
Ended February 28, Ended February 28, Ended Feb. 28, Ended Feb. 28,
--------------------- --------------------------
1998 1997 1998 1997 1997 to 1998 1997 to 1998
--------- -------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Sales 100 % 100 % 100 % 100 % 24 % 26 %
Cost of sales 60 60 59 60 23 24
---- ---- ---- ---- --- ----
Gross profit 40 40 41 40 25 28
---- ---- ---- ---- --- ----
Research and development 10 9 11 9 36 48
Sales and marketing 11 14 11 14 3 3
General and administrative 6 7 6 7 5 1
Litigation 4 - 2 - - -
---- ---- ---- ---- --- ----
Total operating expenses 31 30 30 30 32 27
---- ---- ---- ---- --- ----
Income from operations 9 10 11 10 3 32
Other income (expense), net - - - - 88 (155)
---- ---- ---- ---- --- ----
Income before income taxes 9 10 11 10 4 36
Income tax expense 3 4 4 4 (2) 32
---- ---- ---- ---- --- ----
Net income 6 % 6 % 7 % 6 % 8 % 38 %
==== ==== ==== ==== === ====
</TABLE>
SALES
The following table sets forth the components of the Company's sales and
the percentage relationship of the components to sales by product area for the
periods ended as indicated (in thousands, except percentage data):
<TABLE>
<CAPTION>
Amounts % of Total
--------------------------------------------------- --------------------------------------------
Three Months Six Months Three Months Six Months
Ended February 28, Ended February 28, Ended February 28, Ended February 28,
--------------------------------------------------- ----------------------- --------------------
1998 1997 1998 1997 1998 1997 1998 1997
--------------------------------------------------- ----------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Low-power components $ 9,234 $ 8,260 $18,462 $16,468 70 % 77 % 71 % 79 %
Low-power Virtual Wire/(R)/
radio systems 696 554 1,378 1,236 5 5 5 6
Frequency control modules 911 848 1,713 1,422 7 8 6 7
Filters 2,232 940 4,347 1,452 17 9 17 7
Technology development
sales 141 93 194 194 1 1 1 1
------- ------- ------- ------- ----- ----- ----- -----
Sales $13,214 $10,695 $26,096 $20,772 100 % 100 % 100 % 100 %
======= ======= ======= ======= ===== ===== ===== =====
</TABLE>
Sales increased 24% in the current quarter over the comparable quarter of
the prior year and increased 3% from the previous quarter. Current year-to-date
period sales increased 26% over the comparable year-to-date period. The increase
in the current quarter and current year-to-date over the respective comparable
periods was primarily attributable to an increased number of units shipped in
three of the Company's four product areas. Low-power component sales in the
current quarter increased 12% over the comparable quarter of the prior year and
was approximately the same compared to the previous quarter. Current year-to-
date sales for these products increased 12% over the comparable year-to-date
period. This
- 6 -
<PAGE>
was primarily due to increasing demand for the Company's surface mount resonator
products, particularly for customers in the automotive markets.
The low-power component product line experienced a decline in the average
per unit selling price of approximately 10% in both fiscal 1996 and 1997. The
Company believes that the decline may be greater in fiscal 1998 and that lower
average selling prices may be significant enough in future periods to offset the
sale of an increased number of units potentially resulting in lower sales. There
can be no assurance that sales for low-power components will continue to
increase, or remain at the same level they have been in previous periods.
Sales increased more rapidly for the Company's various value added
products than for the low-power component products. As a result, the value added
products accounted for 29% of the total sales for the current year-to-date
period compared to 21% for the comparable year-to-date period. Low-power Virtual
Wirea radio systems sales in the current quarter increased 26% over the
comparable quarter of the prior year and filter sales increased 137% in the same
time period. Similar increases for these products occurred on a year-to-date
basis. Sales increases for low-power Virtual Wirea radio system and filter
products resulted from continued increase in demand for newer products. Sales of
frequency control module products increased 7% from the comparable quarter of
the prior year and 20% from the comparable year-to-date period. The increase in
the current quarter and current year-to-date period was primarily due to an
increase in the number of units shipped of high frequency oscillator products.
International sales (primarily in Europe and Asia) were approximately 55%
and 50% of the Company's sales during the current quarter and the comparable
quarter of the prior year, respectively. International sales were approximately
54% and 51% of sales during the current year-to-date period and the comparable
year-to-date period, respectively. Sales to customers in Asia was slightly less
than 10% of total sales in the current quarter, compared to 16% in the
comparable quarter of the prior year and 12% in the previous quarter. The
Company experienced some reduction in sales and new orders from customers in
Asia in the current quarter. There can be no assurance that economic conditions
in Asia will not result in additional reductions in sales either directly to
customers in Asia or to customers in North America or Europe who may have end
customers in Asia.
The Company considers all product sales with a billing address and a
delivery destination in North America to be domestic sales. All other sales are
considered international. These sales are denominated primarily in U.S.
currency. The Company currently anticipates that international sales will
continue to represent a significant portion of its business. However, there can
be no assurance that these sales will continue as there are inherent risks in
the Company's international business activities which include unexpected changes
in regulatory requirements, tariffs and other trade barriers, additional cost of
marketing and delivering products into foreign countries, the impact of
fluctuations in foreign exchange rates and longer accounts receivable cycles.
The Company's top five customers accounted for approximately 34% of the
Company's sales in the current quarter, 27% in the comparable quarter of the
prior year and 30% in the previous quarter. The increase in the relative
portion of the revenues to the Company's top five customers from the comparable
quarter of the prior year to the current quarter was primarily a result of
increased sales to the Company's filter customers.
While the Company has achieved sales increases in prior periods, there
can be no assurance that such sales increases can be achieved in future periods.
The Company's success is highly dependent on achieving technological advantages
in its product design and manufacturing capabilities, as well as its ability to
sell its products in a competitive marketplace that can be influenced by outside
factors such as economic and
- 7 -
<PAGE>
regulatory conditions. The Company experiences increased competition from
companies that offer alternative technology solutions or aggressive product
pricing. There can be no assurance that competition from alternative
technologies or from competitors duplicating the Company's technologies will not
adversely affect selling prices and market share.
GROSS PROFIT
The current quarter gross margin and year-to-date gross margin of 40.3%
and 40.5% respectively, increased from 40.0% and 39.8% in the comparable periods
of the prior year, primarily reflecting improved gross margins for three of the
Company's four products lines. Current quarter gross margins improved in
comparison to the comparable quarter of the prior year for the Virtual Wirea
radio systems and filter product lines. For both product lines, reductions in
average selling prices resulting from increased price competition were more than
offset by reductions in per unit manufacturing costs. Current quarter gross
margins for low-power components, declined in comparison to the prior year,
however, because while per unit manufacturing costs continued to decrease, the
decline in average selling price due to competitive pressures was slightly
greater. Current quarter gross margins for frequency control modules increased
from the comparable quarter of the prior year due to an increase in average
selling prices resulting from increased sales of higher frequency oscillator
products. Most of the product line gross margin trends noted in the current
quarter were similar to the trends noted in the current year-to-date period in
comparison to the comparable year-to-date period.
The reduction in per unit manufacturing costs, noted previously, resulted
from continued improvements in yield and labor productivity, purchasing cost
reductions and an increase in the number of units produced, allowing for fixed
overhead expenses to be spread over a larger number of units. There can be no
assurance that lower average selling prices resulting from competitive pressures
will continue to be offset by reductions in per unit manufacturing cost. If
average selling prices decline more than per unit manufacturing costs, the
Company's gross profit margin would be adversely affected.
The Company has in the past experienced sudden increases in demand which
have put pressure on its manufacturing facilities to increase capacity to meet
this demand. In addition, new products sometimes require different manufacturing
processes than the Company currently possesses. The Company has devoted
substantial capital expenditures to increasing capacity and improving its
manufacturing processes. There can be no assurance that the Company can continue
to increase its manufacturing capacity and improve its manufacturing processes
in a timely manner so as to take advantage of increased market demand. Failure
to do this would result in a loss of potential sales in the periods impacted.
RESEARCH AND DEVELOPMENT
Research and development expenses in the current quarter increased
approximately $344,000, or 36%, over the comparable quarter of the prior year.
Current year-to-date research and development expenses increased 48% in
comparison to the comparable year-to-date period. These costs increased due to
the Company's increase in staffing for these activities and in other product
development costs and reflects the Company's plan to increase product
development for value added products. The Company expects that research and
development expenses will increase in absolute dollars in future periods. Since
research and development expenses increased faster than sales, such expenses
increased to 10% of sales in he current quarter, compared to 9% of sales in the
comparable quarter of the prior year.
- 8 -
<PAGE>
SALES AND MARKETING
Current quarter sales and marketing expenses increased approximately 3%,
from the prior comparable period and 3% on a year to date basis. Since sales
increased faster than sales and marketing expenses, such expenses decreased to
11% of sales in the current quarter, compared to 14% of sales in the comparable
quarter of the prior year. The Company expects to incur higher sales and
marketing expenses in absolute dollars in future periods as it continues to
increase its contacts with customers.
GENERAL AND ADMINISTRATIVE
General and administrative expenses for the current quarter increased
approximately $41,000, or 5%, from the prior comparable period. Such increase
was primarily attributable to increased support for the Company's expansion.
Current year-to-date general and administrative expenses increased slightly in
comparison with the comparable year-to-date period. The Company expects general
and administrative expenses will increase in absolute dollars in future periods.
LITIGATION
Litigation expense, which amounted to $580,000 in the current quarter and
$641,000 in the current year to date period, consists of expenses related to the
resolution of the legal matter with TimeKeeping Systems, Inc. Expenses include
legal expenses, settlement costs and related travel. The matter was resolved
after the end of the second quarter, and in accordance with generally accepted
accounting principles an additional $500,000 accrual to cover settlement and
related legal fees was recorded as of February 28, 1998. There were much smaller
legal expenses related to this matter in the prior year. The Company does not
expect significant expenses with regard to this matter in future periods.
INCOME FROM OPERATIONS
Income from operations was approximately $1,137,000, or 9% of sales in the
current quarter, compared to approximately $1,095,000 or 10% of sales in the
comparable quarter of the prior year. The decrease in income from operations as
a percent of sales is due to the recording of significant litigation expense in
the current quarter. On a year-to-date basis, current year income from
operations was 11% of sales, compared to 10% of sales for the comparable
year-to-date period. The increase in income from operations as a percent of
sales reflects the increase in gross margin.
INCOME TAX EXPENSE
The Company's income tax expense in the current quarter decreased slightly
compared to the comparable periods of the prior year, reflecting a decrease in
income tax rates. On a year to date basis, the expense increased when compared
to the prior year due to an increase in income before income taxes which was
mitigated slightly by a decrease in tax rates.
NET INCOME
Net income increased 8% to approximately $740,000 ($.12 per diluted common
share) in the current quarter, compared to approximately $684,000 ($.12 per
diluted common share) for the comparable quarter of the prior year. In the
current quarter litigation expense reduced earnings per diluted share by $.06.
On a year-to-date basis, net income increased 38% over the comparable year-to-
date period.
LIQUIDITY AND CAPITAL RESOURCES
The principal sources of liquidity at February 28, 1998, consisted of $5.9
million of cash and short-term investments and $7.2 million of unused credit
facilities. These credit facilities include $4.5 million unused under a line of
credit agreement with a commercial bank which expires December 31, 1999, and
$2.7 million in an equipment-collateralized term lease facility with a
commercial bank, available until December 31, 1998. The credit facilities
contain restrictions and financial covenants relating to various financial
ratios, including net worth, interest coverage and levels of debt compared to
tangible net worth. As of February 28, 1998, the Company was in compliance with
such restrictions and covenants.
Net cash provided by operating activities was approximately $2.3 million
and $2.5 million for the year-to-date periods of fiscal 1998 and 1997,
respectively. The decrease in cash generated from operations was primarily due
to an increase in cash used in operating working capital, partially mitigated by
an increase in cash from net income and non-cash items included in net income
for the comparable periods.
- 9 -
<PAGE>
Cash used in investing activities was approximately $2.7 million and $2.3
million for the year-to-date periods of fiscal 1998 and 1997, respectively,
primarily as a result of capital expenditures. The Company expects to acquire a
total of approximately $7 million to $10 million of capital equipment by the end
of fiscal 1998, consisting primarily of equipment needed for its manufacturing
facilities. Some of this equipment may be acquired under the equipment-
collateralized operating lease facility.
Net cash generated from financing activities was $200,000 for the current
year-to-date period, primarily related to cash from common stock option
exercises and purchases from the stock Purchase Plan offset by payments on
borrowings for capital equipment acquisitions. Net cash used in financing
activities was $400,000 for the prior year-to-date period, primarily related to
payments on the line of credit and other notes payable offset by the impact of
common stock option exercises and purchases from the stock Purchase Plan.
The Company believes that cash generated from operations, if any, banking
facilities and the $5.9 million balance in cash and short-term investments will
be sufficient to meet the Company's operating cash requirements through the rest
of the fiscal year. To the extent that these sources of funds are insufficient
to meet the Company's capital requirements, the Company may be required to raise
additional funds. No assurance can be given that additional financing will be
available or, if available, that it will be available on acceptable terms.
- 10 -
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The lawsuit filed against the Company by TimeKeeping Systems, Inc. (TimeKeeping)
was settled on April 14, 1998. As previously disclosed, a lawsuit was filed
against the Company in June 1996 by TimeKeeping alleging a claim of breach of
contract and asserting damages in excess of several million dollars. The case
was scheduled to go to trial in April 1998 in the United States District Court
for the Northern District of Ohio. On April 14, 1998 the Company executed a
Settlement Agreement and Mutual Release, which includes a mutual
nondisparagement provision. An order dismissing the case has been entered. In
connection with the settlement, the Company, without admitting liability, has
agreed to pay TimeKeeping a lump sum payment.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
Pursuant to the Annual Meeting of Stockholders held on January 14, 1998, of the
stockholders of RF Monolithics, Inc. as of December 4, 1997, the following
actions were taken:
1. The stockholders approved the election of directors for the ensuing year
and until their successors are duly elected and have qualified. The action
was approved by the following vote totals and percentages for each nominee
of the Company's then outstanding stock:
Sam L. Densmore:
For 4,303,542 78%
Against 35,879 1%
Michael R. Bernique
For 4,302,542 78%
Against 36,879 1%
Cornelius C. Bond, Jr.
For 4,303,442 78%
Against 35,979 1%
Dean C. Campbell
For 4,302,542 78%
Against 36,879 1%
Matthew J. Desch
For 4,302,542 78%
Against 36,879 1%
Francis J. Hughes, Jr.
For 4,303,542 78%
Against 35,879 1%
- 11 -
<PAGE>
2. The stockholders approved the amendment and restatement of the Company's
Amended and Restated 1982 Stock Option Plan as the 1997 Equity Incentive
Plan and to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 325,000 shares. In accordance
with Delaware law and the Company's by-laws, the action was approved by the
following vote totals and percentages of the Company's then outstanding
stock:
For 1,492,125 27%
Against 502,433 9%
Abstain 32,575 1%
Broker Non-vote 2,312,288 42%
3. The stockholders approved the Company's 1994 Employee Stock Purchase Plan,
as amended, to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 175,000 shares. In accordance
with Delaware law and the Company's by-laws, the action was approved by the
following vote totals and percentages of the Company's then outstanding
stock:
For 1,701,475 31%
Against 341,202 6%
Abstain 26,519 1%
Broker Non-vote 2,701,255 41%
4. The stockholders ratified the selection of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending August 31,
1998. The action was approved by the following vote totals and percentages
of the Company's then outstanding stock:
For 4,298,223 78%
Against 12,090 0%
Abstain 29,108 1%
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The Company hereby incorporates by reference all exhibits filed
in connection with Form 10-K for the year ended August 31, 1997 and the
Form 10-Q for the quarter ended November 30, 1997.
(b) The Company did not file any reports on Form 8-K during the quarter ended
February 28, 1998.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
- 12 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RF MONOLITHICS, INC.
Dated: April 14, 1998 By:/s/ SAM L. DENSMORE
-------------------------------------
Sam L. Densmore
CEO, President and Director
/s/ JAMES P. FARLEY
-------------------------------------
James P. Farley
VP and Controller
- 13 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 264
<SECURITIES> 5,663
<RECEIVABLES> 9,957
<ALLOWANCES> 507
<INVENTORY> 6,569
<CURRENT-ASSETS> 24,327
<PP&E> 28,335
<DEPRECIATION> 13,825
<TOTAL-ASSETS> 39,948
<CURRENT-LIABILITIES> 8,148
<BONDS> 1,378
0
0
<COMMON> 26,168
<OTHER-SE> 4,254
<TOTAL-LIABILITY-AND-EQUITY> 39,948
<SALES> 26,096
<TOTAL-REVENUES> 26,096
<CGS> 15,523
<TOTAL-COSTS> 15,523
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 60
<INTEREST-EXPENSE> 138
<INCOME-PRETAX> 2,818
<INCOME-TAX> 1,045
<INCOME-CONTINUING> 1,773
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,773
<EPS-PRIMARY> .32
<EPS-DILUTED> .30
</TABLE>
