<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 November 30, 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 (214) 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 December 31, 1998, 5,746,923 shares of the Registrant's Common Stock,
$.001 par value, were outstanding.
<PAGE>
RF MONOLITHICS, INC.
FORM 10-Q
QUARTER ENDED NOVEMBER 30, 1998
TABLE OF CONTENTS
Item
Number Page
- ------ ----
PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION
1. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets
November 30, 1998 (Unaudited), and August 31, 1998 1
Condensed Consolidated Statements of Income - Unaudited
Three Months Ended November 30, 1998 and 1997 2
Condensed Consolidated Statements of Cash Flows - Unaudited
Three Months Ended November 30, 1998 and 1997 3
Notes to Condensed Consolidated Financial Statements 4
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION
1. Legal proceedings 13
2. Changes in Securities 13
3. Defaults Upon Senior Securities 13
4. Submission of Matters to a Vote of Security Holders 13
5. Other Information 13
6. Exhibits and Reports on Form 8-K 13
SIGNATURES
<PAGE>
PART I. CONDENSED CONSOLIDATED FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
RF MONOLITHICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 30, August 31,
ASSETS 1998 1998
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,079 $ 199
Short-term investments 5,190 5,414
Trade receivables - net 9,813 11,357
Inventories 10,857 8,514
Prepaid expenses and other 859 976
Deferred income tax benefits 378 635
------- -------
Total current assets 28,176 27,095
PROPERTY AND EQUIPMENT - Net 18,894 17,129
OTHER ASSETS - Net 544 566
------- -------
TOTAL $47,614 $44,790
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt and line of credit $ 2,696 $ 2,699
Accounts payable - trade 4,922 3,400
Accounts payable - construction and equipment 1,307 866
Accrued expenses and other liabilities 2,312 2,405
Income taxes payable 609 439
------- -------
Total current liabilities 11,846 9,809
LONG-TERM DEBT 540 815
STOCKHOLDERS' EQUITY:
Common stock: 5,714 and 5,696 shares issued and
outstanding 6 6
Additional paid-in capital 26,985 26,862
Retained earnings 8,276 7,353
Unearned compensation (62) (75)
Unrealized gain on short-term investments 23 20
------- -------
Total stockholders' equity 35,228 34,166
------- -------
TOTAL $47,614 $44,790
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
RF MONOLITHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In Thousands, Except Per-Share Amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months
Ended
November 30,
------------------------
1998 1997
<S> <C> <C>
SALES $12,880 $12,882
COST OF SALES 8,338 7,634
------- -------
GROSS PROFIT 4,542 5,248
OPERATING EXPENSES:
Research and development 1,144 1,467
Sales and marketing 1,296 1,394
General and administrative 655 667
Litigation - 61
------- -------
Total operating expenses 3,095 3,589
------- -------
INCOME FROM OPERATIONS 1,447 1,659
OTHER INCOME (EXPENSE):
Interest income 66 78
Interest expense (93) (69)
Other expense 10 (2)
------- -------
Total (17) 7
------- -------
INCOME BEFORE INCOME TAXES 1,430 1,666
INCOME TAX EXPENSE 507 633
------- -------
NET INCOME $ 923 $ 1,033
======= =======
EARNINGS PER SHARE
Basic $ 0.16 $ 0.19
======= =======
Diluted $ 0.16 $ 0.17
======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 5,708 5,520
======= =======
Diluted 5,890 5,992
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
RF MONOLITHICS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months
Ended
November 30,
----------------------
1998 1997
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 923 $ 1,033
Noncash items included in net income:
Deferred taxes 257 194
Depreciation and amortization 1,050 853
Provision for doubtful accounts 30 10
Other 13 15
Cash from (used in) operating working capital:
Trade receivables 1,514 1,438
Inventories (2,343) (895)
Prepaid expenses and other 117 (32)
Accounts payable - trade 1,522 428
Accrued expenses and other liabilities (93) 74
Income taxes payable 170 125
------- -------
Net cash from operations 3,160 3,243
INVESTING ACTIVITIES:
Increase in short-term investments (1,909) (1,419)
Decrease in short-term investments 2,136 1,397
Acquisition of property and equipment (2,792) (1,897)
Decrease in other assets 2 15
------- -------
Net cash used in investing activities (2,563) (1,904)
FINANCING ACTIVITIES:
Repayments of notes payable (125) (125)
Repayments of capital lease obligations (156) (120)
Borrowings of accounts payable - construction and equipment 441 203
Common stock issued for options exercised 123 73
------- -------
Net cash from financing activities 283 31
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS 880 1,370
CASH AND CASH EQUIVALENTS:
Beginning of period 199 482
------- -------
End of period $ 1,079 $ 1,852
======= =======
SUPPLEMENTAL INFORMATION:
Interest paid $ 93 $ 58
======= =======
Income taxes paid $ 73 $ 258
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE>
RF MONOLITHICS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. INTERIM FINANCIAL STATEMENTS
The accompanying condensed consolidated 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 November 30, 1998, and the results of operations and cash flows for the
three months ended November 30, 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, 1998, filed
with the Securities and Exchange Commission.
Operating results for the three months ended November 30, 1998, are not
necessarily indicative of the results to be achieved for the full fiscal year
ending August 31, 1999.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
Nov. 30, Aug. 31,
1998 1998
<S> <C> <C>
Raw materials and supplies $ 5,885 $4,677
Work in process 3,180 2,139
Finished goods 1,792 1,698
------- ------
Total $10,857 $8,514
======= ======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment includes construction in progress of $5,528,000 at
November 30, 1998, and $3,941,000 at August 31, 1998, 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. CREDIT FACILITIES
In December 1998, the Company utilized the remaining $1.8 million available
under a $3.5 million equipment-collateralized lease facility. This utilization
will be recorded as an operating lease. The Company still has a $4.0 equipment-
collateralized lease facility commercial bank, to be advanced in stages prior to
October 22, 1999.
<PAGE>
5. CAPITAL STOCK
In October 1998, the Company granted to employees Incentive Stock Options to
purchase 50,000 shares of the Company's Common Stock at an exercise price of
$8.25, which was the market value on the date of grant. The options were granted
in accordance with the Company's 1997 Equity Incentive Plan (the 1997 Plan) and
resulted in approximately 81,233 shares of Common Shares remaining available for
grant under the 1997 Plan at December 31, 1998.
In October 1998, the Company also granted to employees Non-qualified Stock
Options to purchase 10,000 shares of the Company's Common Stock at an exercise
price of $8.25, which was the market value on the date of grant. The options
were granted in accordance with the Company's 1986 Stock Option Plan (the 1986
Plan) and resulted in approximately 12,009 shares of Common Shares remaining
available for grant under the 1986 Plan at December 31, 1998.
6. 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.
Reconciliation of share amounts is as follows (in thousands):
<TABLE>
<CAPTION>
Three months
ended
November 30,
-----------------------------
1998 1997
<S> <C> <C>
Shares outstanding for basic
earnings per share 5,708 5,520
Effect of dilutive stock options 182 472
----- -----
Shares outstanding for dilutive
earnings per share 5,890 5,992
===== =====
</TABLE>
<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 contained in the Company's Annual Report on Form 10-K
for the year ended August 31, 1998, filed with the Securities and Exchange
Commission.
General
RFM offers products in four product areas: low-power components, Virtual
Wirea short-range radio device 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 and those
discussed in the Company's Form 10-K for the year ended August 31, 1998.
Results of Operations
The following discussion relates to the financial statements of the Company
for the three months ended November 30, 1998 (current quarter), of the fiscal
year ending August 31, 1999, in comparison to the three months ended November
30, 1997 (comparable quarter of the prior year). In addition, certain
comparisons with the three months ended August 31, 1998 (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.
<PAGE>
The following table sets forth, for the three months ended November 30, 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 period and the comparable period of the prior year:
<TABLE>
<CAPTION>
Percentage of
Total Sales
---------------- Percentage Change
Quarter Ended From Quarter Ended
November 30, November 30, 1997
---------------- to Quarter Ended
1998 1997 November 30, 1998
------ ------ -----------------
<S> <C> <C> <C>
Sales 100 % 100 % - %
Cost of sales 65 59 9
---- ---- -----
Gross profit 35 41 (13)
---- ---- -----
Research and development 9 11 (22)
Sales and marketing 10 11 (7)
General and administrative 5 5 (2)
Litigation 1 (100)
---- ---- -----
Total operating expenses 24 28 (14)
---- ---- -----
Income from operations 11 13 (13)
Other income (expense), net - - (343)
---- ---- -----
Income before income taxes 11 13 (14)
Income tax expense 4 5 (20)
---- ---- -----
Net income 7 % 8 % (11)%
==== ==== =====
</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>
Quarter Ended
-------------------------------------------------------------
November 30, November 30,
1998 1997
--------------------------- ---------------------------
Amounts % of Total Amounts % of Total
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Low-power components $ 9,211 72 % $ 9,228 72 %
Virtual Wire/(R)/ radio device systems 1,049 8 682 5
Frequency control modules 1,082 8 802 6
Filters 1,492 12 2,115 16
Technology development sales 46 0 55 1
------- ---- ------- ----
Sales $12,880 100 % $12,882 100 %
======= ==== ======= ====
</TABLE>
Total sales were unchanged in the current quarter, compared to the
comparable quarter of the prior year and decreased 11% compared to the previous
quarter. The decrease in the current quarter sales compared to the previous
quarter was primarily attributable to decreased low-power component sales. Low-
power component sales decreased 15% from the previous quarter, primarily due to
a decreased number of units sold of the Company's older style, leaded resonator
products. Sales for these products were particularly
<PAGE>
strong in the previous quarter as customers ordered in excess of their normal
order patterns to satisfy peak demand that they were experiencing. The Company
believes that low-power component sales are subject to seasonal factors in which
sales tend to be lower in the first half of the fiscal year than the second half
due to fluctuations in customer production schedules.
The low-power component product line experienced a decline in the average
per unit selling price of approximately 13% in the current quarter compared to
the comparable quarter of the prior year. The Company believes 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.
Sales for low-power components may not continue to increase, or remain at the
same level they have been in previous periods
Virtual Wire/(R)/ short-range radio device systems sales in the current
quarter increased 54% in comparison to the comparable quarter of the prior year.
This was primarily attributable to an increased number of units sold for those
products, offset by a decrease in average selling price. The Company has devoted
significant capital and technical, sales and marketing resources to the Virtual
Wirea short-range radio device systems products. The latest product offering in
this product family, is the transceiver module, which is a fully integrated
short-range radio device module. The transceiver module offers robust operation,
small size, low-power consumption and low costs for short range wireless data
applications. The transceiver will be introduced later in fiscal 1999. The
Company believes these types of products provide an opportunity to exploit its
proprietary technology and pursue its strategy of focusing on value-added
products. The Company is helping a number of customers incorporate these
products into a wide variety of new applications. The timing of when any sales
resulting from such new applications reach the production phase is dependent
upon the timing of both the customers' product development cycles and their
product introduction cycles. As a result, it is difficult to predict when, or
if, these new products will have a significant impact on the Company's sales.
Sales of filter products decreased 30% over the comparable quarter of the
prior year, but increased 23% over the previous quarter. The decrease in filter
sales in comparison to last year, results from the elimination of sales to a
single wireless LAN customer of approximately $800,000. The Company believes
this customer was impacted by economic conditions in Asia and ceased production
in the third quarter of the Company's 1998 fiscal year. The Company has devoted
significant resources to developing and supporting the growth of its filter
products. The product development and introduction cycle for filter products
takes between six to eighteen months to complete. As a result, it is difficult
to predict when, or if, this strategy to focus on filter products will have a
significant impact on the Company's sales.
The Company's top five customers accounted for approximately 31%, 30% and
29% of the Company's sales in the current quarter, the comparable quarter of the
prior year and the previous quarter, respectively. No single customer accounted
for more than 10% of sales.
<PAGE>
International sales were approximately 54%, 53% and 56% of the Company's
sales during the current quarter, the comparable quarter of the prior year and
the previous quarter, respectively. The Company considers all product sales
with a delivery destination outside of North America to be international sales.
These sales are denominated primarily in U.S. currency. Sales to customers in
Asian markets ranged from 9% to 15% of total sales during the last three years.
The Company intends to continue its focus on international sales in the future
and expects that international sales will continue to represent a significant
portion of its business. This focus on international sales may not be achieved.
Even if achieved, the Company's international sales are highly sensitive to
fluctuations in such markets. For example, recent instability in Asian economies
may result in fluctuations in Asian sales and could have a material adverse
effect on the Company's business.
While the Company has achieved sales increases in prior periods, there can
be no assurance that this can be achieved in future periods. The Company's
success is highly dependent on achieving technological advances 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 regulatory conditions. Competition includes alternative
technologies and duplication of the Company's technologies and could adversely
affect the Company's selling prices and market share.
Gross Profit
The current quarter gross margin of 35.3% decreased from 40.7% in the
comparable quarter of the prior year, but was similar to the 35.7% gross margin
in the previous quarter. The decrease was primarily due to decreased gross
margins for the Company's low-power component products. Margins for these
products decreased because the per-unit selling prices decreased, amid
competitive pressures, more rapidly than per-unit manufacturing costs. Despite
significant overtime and other costs discussed below, per-unit manufacturing
costs continued to decrease due to improved production processes that increased
yields and productivity. However, the trend toward lower per-unit manufacturing
costs, which occurred in recent years, may not continue. If average selling
prices were to decrease faster than per-unit manufacturing costs decrease, then
the Company's gross profit margins would be adversely impacted. Gross margins
for the Company's other products were relatively stable in comparison to the
prior year.
The Company has experienced a requirement by its customers for shorter lead
times resulting in less accessibility to future customer order information.
These events put pressure on the Company's manufacturing facilities to improve
response time. Costs in the current quarter included a significant amount of
overtime and other costs needed to meet customer demand that occurred late in
the quarter. The Company is attempting to improve its planning systems with the
installation of a new software system in the current quarter. However, there can
be no assurance that in future periods the Company will be able to avoid
significant overtime and other costs related to responding to customer demand
with greatly reduced lead times.
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 the bulk
of its capital expenditures to increase capacity and improve its manufacturing
processes. The Company may not be able to 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.
<PAGE>
Research and Development
Research and development expenses in the current quarter decreased
approximately $323,000, or 22%, from the comparable quarter of the prior year.
The prior year's research and development costs included an unusually large
amount of material usage expense incurred on several development projects, as
well as outside testing costs incurred while developing a low cost sealing
process. The Company believes that the continued development of its technology
and new products is essential to its success and is committed to continue to
devote significant resources to research and development. The Company expects
that research and development expenses will increase in absolute dollars in
future periods.
Sales and Marketing
Current quarter sales and marketing expenses decreased approximately
$98,000. Decreased sales and marketing expenses related primarily to lower sales
commissions, which resulted from changes in product delivery destinations. The
Company expects to incur higher sales and marketing expenses in absolute dollars
in future periods as it continues to expand its sales and marketing efforts.
General and Administrative
General and administrative expenses for the current quarter decreased
approximately $12,000, or 2%, from the prior comparable period. The Company
expects general and administrative expenses will increase in absolute dollars in
future periods.
Litigation
Litigation expense, which amounted to $61,000 in the comparable quarter of
the prior year, consists of expenses related to the resolution of the legal
matter with TimeKeeping Systems, Inc. The Company does not expect to incur any
expenses with regard to this matter in future periods.
Income from Operations
Income from operations was $1,447,000, or 11% of total sales in the current
quarter, compared to $1,659,000 or 13% of sales in the comparable quarter of the
prior year. The decrease in income from operations as a percent of sales
reflects a decrease in gross profit margin partially offset by lower total
operating expenses.
Income Tax Expense
The Company's income tax expense was $507,000 in the current quarter,
compared to $633,000 in the comparable quarter of the prior year, reflecting the
comparable income before income taxes for the respective periods. The company's
effective tax rate was approximately 36% in the current quarter, compared to
approximately 38% in the prior year. The reduction in tax rate was primarily due
to the Company taking advantage of Foreign Sales Corporation benefits.
Net Income
Net income decreased to $923,000, or $.16 per diluted share, in the current
quarter, compared to $1,033,000, or $.17 per diluted share, for the comparable
quarter of the prior year.
<PAGE>
Liquidity and Capital Resources
The principal sources of liquidity at November 30, 1998, consisted of $6.3
million of cash and short-term investments and $7.5 million of unused credit
facilities. These credit facilities include $3.5 million unused under a line of
credit agreement with a commercial bank, available until December 31, 1999, and
$4.0 million in an equipment lease facility with a commercial bank, available
until October 22, 1999. The credit facilities contain restrictions and
financial covenants relating to various matters, including net worth, interest
coverage and levels of debt compared to tangible net worth. As of November 30,
1998, the Company was in compliance with such restrictions and covenants.
Net cash provided by operating activities was $3.2 million for both the
first quarter of fiscal 1999 and 1998. Cash generated from operations included
an increase in cash from non-cash items included in net income offset by an
increase in cash used for working capital items when compared to the comparable
quarter of the prior year. Additionally, the Company experienced an increase in
inventories of $2.3 million and trade accounts payable of $1.5 million,
reflecting increased stocking levels in response to shorter lead time
requirements from customers.
Cash used in investing activities was $2.6 million and $1.9 million for the
first quarter of fiscal 1999 and 1998, 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 1999,
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 $0.3 million and $31,000
for the first quarter of fiscal 1999 and 1998, respectively. These activities
primarily related to the borrowings in support of the capital equipment
acquisitions offset by payments on these borrowings and the proceeds from common
stock issued for options that were exercised.
The Company believes that cash generated from operations, if any, banking
facilities and the $6.3 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.
Year 2000 Readiness Disclosure
The Year 2000 issue involves potential inability of information or other
data dependent systems to properly distinguish year references as of the turn of
the century. The Company believes the Year 2000 issue represents a material risk
to the Company.
The Company itself is heavily dependent upon the proper functioning of its
own computer systems, including (1) computers and related software for its
financial and manufacturing information systems, (2) computers, programmable
logic controllers and other data dependent equipment in its manufacturing
processes, and (3) computers, scientific equipment and related software for its
engineering, research and development activities. Any failure or malfunctioning
on the part of these or other systems could cause disruptions of operations,
including a temporary inability to process financial transactions, manufacture
products or engage in ordinary business activities in ways that are not
currently known, discernible, quantifiable or otherwise anticipated by the
Company.
<PAGE>
The Company has formed a team to evaluate and deal with the impact of the
Year 2000 issue. It has developed a plan (the "Plan") for the Company to become
Year 2000 compliant in a timely manner. The Plan covers both systems such as
networked computers and software that are commonly called information technology
("IT") systems and those such as embedded technology in manufacturing equipment
("non-IT") systems.
The Company's Plan consists of several phases. The first is the inventory
and prioritization of potential Year 2000 items, and the assessment of Year 2000
compliance. The next phase is the remediation of any noted problems. The third
phase is the testing of material items. The last phase is the preparation of
contingency plans.
For the Company's most significant IT systems, the inventory and remediation
phases have been completed. Most of the Company's business information systems
have been recently replaced by Glovia/(TM)/ and Oracle/(R)/ software, which are
represented by providers to be Year 2000 compliant. The inventory of non-IT
systems is nearing completion. The remediation of remaining systems and testing
for all systems is scheduled for completion by June 30, 1999.
The Company currently has a limited number of contingency plans to deal with
the most likely worst case scenarios. The Company currently anticipates that it
will complete contingency planning by June 30, 1999.
The Company's suppliers (particularly sole-source and long lead time
suppliers) and key customers may be adversely affected by their respective
failures to address the Year 2000 issue. If the Company's suppliers are unable
to provide goods or services, the Company's operations could be materially
adversely effected. Key customers which encounter Year 2000 difficulties could
fail to order or take delivery of the Company's products, or could fail to make
or delay payments to the Company. Such failure or delay could have a material
adverse effect on the Company's business and results of operations. While some
of these risks are outside the control of the Company, the Company's Plan
includes communications with suppliers and customers to ascertain the state of
their Year 2000 compliance program. The questionnaire phase of this activity is
nearing completion. Remediation activities and preparation of contingency plans
related to suppliers and customers is scheduled for completion by June 30, 1999.
The total cost of the purchase and implementation of the business
information systems recently implemented is expected to be approximately $2
million, most of which has already been incurred. The remediation costs for the
other IT and non-IT systems is expected to be less than $500,000. Such costs
will be funded either from operating cash flows or by utilizing existing Company
credit facilities. Time spent by implementation team members is not included in
the above estimates but are included in the Company's normal operating budget.
The Year 2000 implementation program is not expected to cause material delays in
non-Year 2000 related IT projects.
The Company has determined that its products are not effected by calendar
dating. Therefore, there is no known or anticipated Year 2000 impact on its
product offering.
The Company believes its Year 2000 Plan will significantly reduce the
probability of significant interruptions of normal operations resulting from
Year 2000 issues. However, the Company may not properly identify and assess all
Year 2000 issues, or it may not remediate and test all its IT and non-IT systems
in a timely or adequate manner. In addition, its key suppliers or customers
could experience Year 2000 problems. If any of these potential situations
occur, the Company's contingency plans may not be adequate to protect the
Company from the adverse effects of such problems. The worst case scenario
resulting from Year 2000 issues would be a material adverse impact on the
Company's results of operations, an interruption in normal business operations,
or an adverse impact on the Company's relationships with customers, suppliers or
others.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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, 1998.
(b) The Company did not file any reports on Form 8-K during the quarter ended
November 30, 1998.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 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 Securities Act
of 1933 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.
<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: January 14, 1999 By: /s/ Sam L. Densmore
-----------------------------
Sam L. Densmore
CEO, President and Director
By: /s/ James P. Farley
-----------------------------
James P. Farley
VP Finance, Controller
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1999
<PERIOD-START> SEP-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 1,079
<SECURITIES> 5,190
<RECEIVABLES> 9,813
<ALLOWANCES> 574
<INVENTORY> 10,857
<CURRENT-ASSETS> 28,176
<PP&E> 35,672
<DEPRECIATION> 16,778
<TOTAL-ASSETS> 47,614
<CURRENT-LIABILITIES> 11,846
<BONDS> 540
0
0
<COMMON> 26,992
<OTHER-SE> 8,236
<TOTAL-LIABILITY-AND-EQUITY> 47,614
<SALES> 12,880
<TOTAL-REVENUES> 12,880
<CGS> 8,338
<TOTAL-COSTS> 8,338
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30
<INTEREST-EXPENSE> 93
<INCOME-PRETAX> 1,430
<INCOME-TAX> 507
<INCOME-CONTINUING> 923
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 923
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
