-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WPuIfZJdWDPjoyE0LMyo/Dz5/6IBEhtTOCrBC8s3VJQsbq16MqlmiyB7awVo3NEc jkm4zpYlS8qDTGKTX3bVdQ== 0000716688-01-500006.txt : 20010815 0000716688-01-500006.hdr.sgml : 20010815 ACCESSION NUMBER: 0000716688-01-500006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROWAVE FILTER CO INC /NY/ CENTRAL INDEX KEY: 0000716688 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 160928443 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-10976 FILM NUMBER: 1711625 BUSINESS ADDRESS: STREET 1: 6743 KINNE ST CITY: E SYRACUSE STATE: NY ZIP: 13057 BUSINESS PHONE: 3154373953 MAIL ADDRESS: STREET 1: 6743 KINNE ST CITY: EAST SYRACUSE STATE: NY ZIP: 13057 10-Q 1 body-10q.txt 10Q BODY 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 June 30, 2001 Commission file number 0-10976 MICROWAVE FILTER COMPANY, INC. (Exact name of registrant as specified in its charter.) New York 16-0928443 (State of Incorporation) (I.R.S. Employer Identification Number) 6743 Kinne Street, East Syracuse, N.Y. 13057 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (315) 438-4700 Indicate by check mark whether 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 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 ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Common Stock, $.10 Par Value - 2,904,781 shares as of June 30, 2001. PART I. - FINANCIAL INFORMATION MICROWAVE FILTER COMPANY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Amounts in thousands) June 30, 2001 SEPTEMBER 30, 2000 (Unaudited) Assets Current Assets: Cash and cash equivalents $ 1,139 $ 625 Investments 0 925 Accounts receivable-trade, net 547 897 Inventories 986 1,104 Deferred tax asset - current 178 178 Prepaid expenses and other current assets 117 78 -------- -------- Total current assets 2,967 3,807 Property, plant and equipment, net 1,325 1,336 -------- -------- Total assets $ 4,292 $ 5,143 ======== ======== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 171 $ 392 Customer deposits 14 155 Accrued federal and state income taxes 92 189 Accrued payroll and related expenses 88 100 Accrued compensated absences 276 267 Other current liabilities 52 121 -------- -------- Total current liabilities 693 1,224 Deferred tax liability - noncurrent 48 48 -------- -------- Total liabilities 741 1,272 -------- -------- Stockholders' Equity: Common stock,$.10 par value 432 432 Additional paid-in capital 3,240 3,240 Retained earnings 1,385 1,323 -------- -------- 5,057 4,995 Common stock in treasury, at cost (1,506) (1,124) -------- -------- Total stockholders' equity 3,551 3,871 -------- -------- Total liabilities and stockholders' equity $ 4,292 $ 5,143 ======== ========
See Accompanying Notes to Condensed Consolidated Financial Statements MICROWAVE FILTER COMPANY, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 2001 AND 2000 (Unaudited) (Amounts in thousands, except per share data) Three months ended Nine months ended June 30 June 30 2001 2000 2001 2000 Net sales $1,782 $2,242 $5,391 $5,711 Cost of goods sold 1,286 1,499 3,654 3,708 ------- ------- ------- ------- Gross profit 496 743 1,737 2,003 Selling, general and administrative expenses 553 611 1,708 1,716 ------- ------- ------- ------- (Loss) income from operations (57) 132 29 287 Other income (net), principally interest 19 29 66 70 ------- ------- ------- ------- (Loss) income before income taxes (38) 161 95 357 (Benefit) provision for income taxes (13) 56 33 123 ------- ------- ------- ------- NET (LOSS) INCOME ($25) $105 $62 $234 ======= ======= ======= ======= Basic (loss) earnings per share ($0.01) $0.03 $0.02 $0.07 ======= ======= ======= ======= Weighted average number of common shares outstanding 2,905 3,164 2,960 3,171 ======= ======= ======= ======= See Accompanying Notes to Condensed Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS AND NINE MONTHS ENDED JUNE 30, 2001 AND 2000 (Unaudited) (Amounts in thousands) Three months ended Nine months ended June 30 June 30 2001 2000 2001 2000 Cash flows from operating activities: Net income $ (25) $ 105 $ 62 $ 234 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 77 77 224 230 Change in assets and liabilities: (Increase) decrease in: Accounts receivable 181 (5) 350 (13) Inventories 430 180 118 108 Prepaid expenses & other assets 21 38 (39) (20) Increase (decrease) in: Accounts payable & accrued expenses (409) (197) (531) 196 Deferred compensation & other liabilities 0 (2) 0 (5) ------- ------- -------- ------- Net cash provided by operating activities 275 196 184 730 ------- ------- -------- ------- Cash flows from investing activities: Investments 0 (900) 925 (125) Capital expenditures (21) (16) (213) (59) ------- ------- -------- ------- Net cash provided by (used in) investing activities (21) (916) 712 (184) Cash flows from financing activities: Purchase of treasury stock 0 0 (382) (60) Cash dividend paid 0 0 0 (158) ------- ------- ------- ------- Net cash (used in) financing activities 0 0 (382) (218) Increase (decrease) in cash and cash equivalents 254 (720) 514 328 Cash and cash equivalents at beginning of period 885 1,312 625 264 ------- ------- ------- ------- Cash and cash equivalents at end of period $1,139 $592 $1,139 $592 ======= ======= ======= ======= See Accompanying Notes to Condensed Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001 Note 1. Summary of Significant Accounting Policies The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The Operating results for the nine- month period ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ended September 30, 2001. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10K for the year ended September 30, 2000. Note 2. Industry Segment Data The Company's primary business segments involve (1) operations of Microwave Filter Company, Inc. (MFC) which manufactures filters used for preventing interference or signal processing in cable television, satellite, broadcast, aerospace and government markets; and (2) operations of Niagara Scientific, Inc. (NSI) which manufactures industrial automation equipment. Information by segment is as follows: Three months ended Nine months ended (thousands of dollars) June 30, June 30, 2001 2000 2001 2000 Net Sales (Unaffiliated): MFC $1,245 $1,626 $4,445 $4,611 NSI 537 616 946 1,100 ------ ------ ------ ------ Total $1,782 $2,242 $5,391 $5,711 ====== ====== ====== ====== Operating profit (loss): (a) MFC ($42) $149 $133 $333 NSI (15) (17) (104) (46) ------ ------ ------ ------ Total ($57) $132 $29 $287 ====== ====== ======= ======= Identifiable assets: (b) MFC $2,867 $3,742 $2,867 $3,742 NSI 286 578 286 578 ------ ------ ------ ------ Subtotal 3,153 4,320 3,153 4,320 Corporate Assets - Cash And Cash Equivalents 1,139 592 1,139 592 ------ ------ ------ ------ Total $4,292 $4,912 $4,292 $4,912 ====== ====== ====== ====== (a) Operating profit (loss) is total revenue less operating expenses. In computing operating profit, none of the following items have been added or deducted: interest expense, income taxes and miscellaneous income. Expenses incurred on behalf of both Companies are allocated based upon estimates of their relationship to each entity. (b) Identifiable assets by industry are those assets that are used in the Companies operations in each industry. Note 3. Inventories Inventories net of provision for obsolescence consisted of the following: June 30, 2001 September 30, 2000 Raw materials and stock parts $684,216 $675,120 Work-in-process 241,362 325,270 Finished goods 60,561 103,440 ---------- ---------- $986,139 $1,103,830 ========== ========== The Company's provision for obsolescence equaled $297,634 at June 30, 2001 and $323,101 AT September 30, 2000. Note 4. Subsequent Events On July 25, 2001, the Board of Directors of Microwave Filter Company, Inc. declared a three cents per share cash dividend. The dividend will be paid on September 19, 2001 to shareholders of record on August 22, 2001. Note 5. Recent Accounting Pronouncements In December 1999, the Securities and Exchange Commission issued Staff Bulletin No. 101 ("SAB 101"), which provides guidance in applying generally accepted accounting principles to revenue recognition in financial statements. SAB 101, as amended, will require implementation by the Company in the fourth quarter of fiscal 2001. The Company believes the Bulletin will not have a significant effect on its financial statements. In June 2001, the Financial Accounting Standards Board approved Statements of Financial Accounting Standards No. 141 "Business Combinations" ("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") which are effective July 1, 2001 and October 1, 2002, respectively, for the Corporation. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Under SFAS 142, amortization of goodwill, including goodwill recorded in past business combinations, will discontinue upon adoption of this standard. In addition, goodwill recorded as a result of business combinations completed during the six-month period ending December 31, 2001 will not be amortized. All goodwill and intangible assets will be tested for impairment in accordance with the provisions of the Statement. The Corporation is currently reviewing the provisions of SFAS 141 and SFAS 142 and assessing the impact of adoption. MICROWAVE FILTER COMPANY, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Microwave Filter Company, Inc. operates primarily in the United States and principally in two industries. The Company extends credit to business customers based upon ongoing credit evaluations. Microwave Filter Company, Inc. (MFC) designs, develops, manufactures and sells electronic filters, both for radio and microwave frequencies, to help process signal distribution and to prevent unwanted signals from disrupting transmit or receive operations. Markets served include cable television, television and radio broadcast, satellite broadcast, mobile radio, commercial and defense electronics. Niagara Scientific, Inc. (NSI), a wholly owned subsidiary, custom designs case packing machines to automatically pack products into shipping cases. Customers are typically processors of food and other commodity products with a need to reduce labor cost with a modest investment and quick payback. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2001 vs. THREE MONTHS ENDED JUNE 30, 2000. Net sales for the three months ended June 30, 2001 equaled $1,782,032, a decrease of $460,343 or 20.5% when compared to net sales of $2,242,375 for the three months ended June 30, 2000. MFC sales for the three months ended June 30, 2001 equaled $1,245,195, a decrease of $380,897 or 23.4% when compared to sales of $1,626,092 for the three months ended June 30, 2000. The decrease in MFC sales can primarily be attributed to the decrease in the sales of MFC's standard cable TV and wireless cable TV products, which management attributes to the downturn in the telecommunications marketplace. NSI sales for the three months ended June 30, 2001 equaled $536,837, a decrease of $79,446 or 12.9% when compared to sales of $616,283 for the three months ended June 30, 2000. Sales of NSI related equipment, on a quarter to quarter basis, can be impacted by the timing of the shipment of the custom designed equipment and the customer's scheduled delivery dates. The Company's sales order backlog equaled $461,966 at June 30, 2001 compared to $831,388 at September 30, 2000. MFC's sales order backlog equaled $452,846 at June 30, 2001, a decrease of $177,588, when compared to sales order backlog of $630,434 at September 30, 2000. NSI's sales order backlog equaled $9,120 at June 30, 2001, a decrease of $191,834 when compared to sales order backlog of $200,954 at September 30, 2000. Both MFC and NSI have experienced reductions in sales orders due primarily to the unfavorable economic climate and reduced capital spending. If market conditions or demand does not improve, there can be no assurance that the Company's sales levels or growth will remain at, reach or exceed historical levels in any future period. For the three months ended June 30, 2001, the company recorded a net loss of $24,696 compared to net income of $105,486 for the three months ended June 30, 2000. The decrease in net income can primarily be attributed to the decrease in sales. Gross profit for the three months ended June 30, 2001 equaled $495,833, a decrease of $246,694 or 33.2% when compared to gross profit of $742,527 for the three months ended June 30, 2000. As a percentage of sales, gross profit equaled 27.8% for the three months ended June 30, 2001 compared to 33.1% for the three months ended June 30, 2000. The dollar decrease in gross profit can primarily be attributed to the decrease in sales. The decrease in gross profit as a percentage of sales, when compared to the same period last year, can primarily be attributed to product sales mix and the lower sales volume this year when compared to the same period last year. Selling, general and administrative (SGA) expenses for the three months ended June 30, 2001 equaled $552,396, a decrease of $58,510 or 9.6% when compared to SG&A expenses of $610,906 for the three months ended June 30, 2000. As a percentage of sales, SGA expenses increased to 31.0% for the three months ended June 30, 2001, when compared to 27.2% for the three months ended June 30, 2000, primarily due to the decrease in sales this year when compared to the same period last year. Sales commission expense was down this year due to the lower sales and planned reductions were realized in advertising and promotional expenses and profit sharing expense. NINE MONTHS ENDED JUNE 30, 2001 vs. NINE MONTHS ENDED JUNE 30, 2000. Net sales for the nine months ended June 30, 2001 equaled $5,391,104, a decrease of $319,848 or 5.6% when compared to net sales of $5,710,952 for the nine months ended June 30, 2000. MFC sales for the nine months ended June 30, 2001 equaled $4,445,298, a decrease of $165,529 or 3.6% when compared to sales of $4,610,827 for the nine months ended June 30, 2000. NSI sales for the nine months ended June 30, 2001 equaled $945,806, a decrease of $154,319 or 14.0% when compared to sales of $1,100,125 for the nine months ended June 30, 2000. Net income for the nine months ended June 30, 2001 equaled $61,970, a decrease of $172,047 or 73.5% when compared to net income of $234,017 for the nine months ended June 30, 2000. The decrease in net income can primarily be attributed to the decrease in sales. Gross profit for the nine months ended June 30, 2001 equaled $1,737,499, a decrease of $265,457 or 13.3% when compared to gross profit of $2,002,956 for the nine months ended June 30, 2000. As a percentage of sales, gross profit equaled 32.2% for the nine months ended June 30, 2001 compared to 35.1% for the nine months ended June 30, 2000. The dollar decrease in gross profit can be attributed to the decrease in sales and lower margins. The decrease in gross profit as a percentage of sales, when compared to the same period last year, can primarily be attributed to product sales mix. SG&A expenses for the nine months ended June 30, 2001 equaled $1,708,322, a decrease of $7,802 or 0.5% when compared to SG&A expenses of $1,716,124 for the nine months ended June 30, 2000. As a percentage of sales, SGA expenses increased to 31.7% for the nine months ended June 30, 2001 when compared to 30.0% for the nine months ended June 30, 2000, primarily due to the decrease in sales this year when compared to the same period last year. On an industry segment basis, MFC's income from operations for the nine months ended June 30, 2001 equaled $133,084, a decrease of $199,935 or 60.0% when compared to income from operations of $333,019 for the nine months ended June 30, 2000. The decrease in MFC's income from operations can primarily be attributed to the decrease in sales volume and lower profit margins primarily due to product sales mix. NSI recorded a loss from operations of $103,907 for the nine months ended June 30, 2001 compared to a loss from operations of $46,187 for the nine months ended June 30, 2000. LIQUIDITY and CAPITAL RESOURCES Cash and cash equivalents increased $513,980 to $1,139,457 at June 30, 2001 when compared to $625,477 at September 30, 2000. The increase was a result of $183,375 in net cash provided by operating activities, $712,139 in net cash provided by investing activities and $381,534 in net cash used in financing activities. The decrease of $350,287 in accounts receivable at June 30, 2001 when compared to September 30, 2000 is attributable to decreased shipments during the quarter ended June 30, 2001 when compared to the quarter ended September 30, 2000. In addition, accounts receivable were offset by the application of customer deposits associated with the orders which were shipped during the quarter ended June 30, 2001. The decrease of $117,691 in inventories at June 30, 2001 when compared to September 30, 2000 can primarily be attributable to the decrease in sales order backlog. The decrease in accounts payable of $220,958 at June 30, 2001 when compared to September 30, 2000 can primarily be attributed to the decrease in purchases as a result of the decrease in sales orders. Cash provided by investing activities during the nine months ended June 30, 2001 consisted of funds provided by the sale of investments ($925,067) and funds used for capital expenditures ($212,928). Cash used in financing activities during the nine months ended June 30, 2001 consisted of funds used to repurchase common stock of the Company ($381,534). At June 30, 2001, the Company had unused aggregate lines of credit totaling $600,000. Of these lines, $100,000 is for the purchase of equipment and is collateralized by equipment and $500,000 is for working capital and is collateralized by accounts receivable, inventories and equipment. Management believes that its working capital requirements for the forseeable future will be met by its existing cash balances, future cash flows from operations and its current credit arrangements. RECENT ACCOUNTING PRONOUNCEMENTS In December 1999,the Securities and Exchange Commission issued Staff Bulletin No. 101 ("SAB 101"), which provides guidance in applying generally accepted accounting principles to revenue recognition in financial statements. SAB 101, as amended, will require implementation by the Company in the fourth quarter of fiscal 2001. The Company believes the Bulletin will not have a significant effect on its financial statements. In June 2001, the Financial Accounting Standards Board approved Statements of Financial Accounting Standards No. 141 "Business Combinations" ("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142") which are effective July 1, 2001 and October 1, 2002, respectively, for the Corporation. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. Under SFAS 142, amortization of goodwill, including goodwill recorded in past business combinations, will discontinue upon adoption of this standard. In addition, goodwill recorded as a result of business combinations completed during the six-month period ending December 31, 2001 will not be amortized. All goodwill and intangible assets will be tested for impairment in accordance with the provisions of the Statement. The Corporation is currently reviewing the provisions of SFAS 141 and SFAS 142 and assessing the impact of adoption. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Any statements contained in this report which are not historical facts are forward looking statements; and, therefore, many important factors could cause actual results to differ materially from those in the forward looking statements. Such factors include, but are not limited to, changes (legislative, regulatory and otherwise) in the MMDS, LPTV or Cable industry, demand for the Company's products (both domestically and internationally), the development of competitive products, competitive pricing, market acceptance of new product introductions, technological changes, general economic conditions, litigation and other factors, risks and uncertainties which may be identified in the Company's Securities and Exchange Commission filings. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is unaware of any material threatened or pending litigation against the Company. Item 2. Changes in Securities None during this reporting period. Item 3. Defaults Upon Senior Securities The Company has no senior securities. Item 4. Submission of Matters to a Vote of Security Holders None during this reporting period. Item 6. Exhibits and Reports on Form 8-K None. Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MICROWAVE FILTER COMPANY, INC. August 14, 2001 Carl F. Fahrenkrug (Date) -------------------------- Carl F. Fahrenkrug Chief Executive Officer August 14, 2001 Richard L. Jones (Date) -------------------------- Richard L. Jones Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----