SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Preliminary Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by a Party other than the Registrant [ ]
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[] Preliminary Proxy Statement
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[ ] Definitive Proxy Statement
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Section 240.14a-12
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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This supplemental information should be read in conjunction with the Definitive Proxy Statement on Schedule 14A filed with the Securities and Exchange Commission (the “SEC”) by the Company on February 9, 2012, which should be read in its entirety.
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![MFC - Microwave Filter Company, Inc.](https://capedge.com/proxy/DEFA14A/0000716688-12-000016/masthead.jpg)
Please vote ONLY the enclosed “White” proxy and …
DO NOT sign (& return) ANY “blue” proxy you receive from Furlong!
Dear Shareholders:
By now, you may have received proxy material from a Mr. Daniel Rudewicz (or Furlong Financial, LLC) in connection with our upcoming Annual Meeting. The mailing of his material was not authorized by our Board of Directors and is being done in direct opposition to our Board.
All Boards of publicly held companies have the fiduciary responsibility to act (at all times) in the best interests of the company’s shareholders; the Board of Directors of Microwave Filter Company, Inc. (hereinafter “MFCO”) is no different.
Microwave Filter Company Board Nominees vs. Dissident (Rudewicz Nominees)
The responsibility of the nominating committee of the Board is to select qualified candidates to serve as Directors on the Company’s Board; our nominating committee continues to provide that service to our Board … as it has in the past.
Let’s look at the facts:
MFCO Board nominees:
An experienced business law attorney and retired partner of a prominent law firm in Central New York (Robert Essig, Esq.) and a senior partner (and former GM Manufacturing Executive) of an Upstate New York management consulting firm (John Kennedy, MBA).
Rudewicz (Furlong Financial, LLC) nominees:
Daniel Rudewicz (Furlong Financial LLC) and Ryan Morris appear to be “professional dissident shareholders” who utilize “proxy access” proposals and engage in proxy contests to obtain board seats and eventually, gain control of a target company’s board or gain other “remuneration.”
Currently (or in the recent past) Rudewicz and/or Morris have made such hostile and aggressive attacks on the following companies: (1) Paragon Technologies (PGNT.PK), Easton, PA; (2) KSW, Inc., Long Island City, NY; (3) Pinnacle Airlines Corp (PNCL), Memphis, TN and (4) Infusystem Holdings Inc. (NYSE-AMEX:1NFU), Madison Heights, MI.
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Page 2 | Shareholder Letter 2 |
Rudewicz (and Morris) are expected to wage a second proxy contest at next years (2013) shareholders’ meeting to install an additional group of three dissident directors and complete their “take over” of your Board using their proposed proxy access proposal (Proposal 2). They expect you to cede control of your Board to a group of stockholders owning as little as 15% of the company shares for as little as 30 days without paying any customary control premiums.
Creating Shareholder Value
Mr. Rudewicz (Furlong Financial LLC) claims that his nominees are primarily concerned about shareholder value whereas he contends the current Board is not. He suggests the repurchase of shares and the payment of dividends, among other things.
Let’s look at the facts:
Fact No. 1: Return on Shareholder’s Equity has been consistently improving over the last five years to the current level of 17% (annualized) for the 1st quarter of FY12 as shown in Figure 1.
![Chart Return on Equity](https://capedge.com/proxy/DEFA14A/0000716688-12-000016/roe-fig2.jpg)
Fact No. 2: Return on Sales (a measure of profitability per unit sales) has also been improving to almost 8% for the 1st quarter of FY12 as shown in Figure 2.
![Chart - Return on Sales](https://capedge.com/proxy/DEFA14A/0000716688-12-000016/res-fig1.jpg)
Page 3 | Shareholder Letter 2 |
Fact No. 3: The Board of Directors has authorized the payment of $678,850 in cash dividends to our shareholders over the last six years ($0.10 in 2006 and $0.15 in 2011).
Fact No. 4: The Board of Directors has authorized and executed the repurchase of 323,073 shares which represent an 11.1% buy back of the Company shares since FY2006.
Rudewicz (Furlong Financial, LLC) Proposal No. 2
The second proposal that has been put forward by Mr. Rudewicz (Furlong Financial, LLC) (Proposal No. 2) would amend the MFC bylaws to provide mandatory access to your Company’s proxy material to a group of not more than 5 shareholders who own 15% of your Company’s stock for a period of as little as one month.
This would effectively bypass the Board of Directors nominating committee and provide leverage to a minority group of shareholders who have owned shares in your Company for a very brief period. Your Company’s Directors have a fiduciary duty to represent all the shareholders interest. This proposal would empower a small minority who may use the extremely brief holding period for short term advantage by threatening the expense and disruption of a dissident slate of directors running against Board nominees with your Company paying the total cost of the proxy contest!
We feel strongly that this proposed amendment to our Company’s Bylaws is simply unnecessary since shareholders already have the ability to contact our Board and let us know of superior candidates to serve as outside Directors. Should a vacancy come up and if the best candidate (for that vacancy) happened to be the one recommended by a shareholder, our Board (like any other) would naturally embrace that superior candidate.
Essentially, Mr. Rudewicz is trying to “fix” a problem … that doesn’t exist.
Once again, we have enclosed our most recent quarterly earnings report. Read for yourself once more how well our present Board & Management Team have performed for you … our shareholders.
Our fundamental and all-consuming goal is “still” to increase long term shareholder value for all shareholders, particularly in these difficult and volatile economic times. We believe we are on the right track and appreciate the loyalty and confidence of our shareholders.
Thank you for taking the time to read this letter. Enclosed you will find another “WHITE” proxy. We again ask you to please sign, date and return the “WHITE” proxy today, or cast your vote via the internet or telephone. You are also urged to discard any blue proxy that you receive.
![]() | ![]() | |
Robert R. Andrews | Carl F. Fahrenkrug, P.E. | |
Chairman | President and CEO |
![MFC Logo](https://capedge.com/proxy/DEFA14A/0000716688-12-000016/mfcsteel.gif)
MICROWAVE FILTER COMPANY, INC.
I am pleased to report net income for the quarter ending December 31, 2011 increased to $102,817 (4 cents per share) as compared to net income of $47,593 (2 cents per share) for the same period last year (quarter ending December 31, 2010).
While sales increased modestly (1.7%), higher profit margins were achieved through manufacturing and engineering cost improvements (overhead and materials), as well as, product sales mix.
Figure 1 is a bar graph of Return on Sales (including the unaudited first quarter of FY 2012 results) indicating the progress Management has made in increasing the profitability per unit of sales.
![Chart - Return on Sales](https://capedge.com/proxy/DEFA14A/0000716688-12-000016/res-fig1.jpg)
Figure 2 depicts the improvement in the Return on Equity over the last five years (with the first quarter of FY 2012 annualized).
![Chart - Return on Equity](https://capedge.com/proxy/DEFA14A/0000716688-12-000016/roe-fig2.jpg)
Management remains focused upon increasing shareholder value through the current volatile business climate.
You are encouraged to review Microwave Filter Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2011 and other Securities and Exchange Commission filings.
Sincerely,
![]() | ![]() | |
Carl F. Fahrenkrug, P.E. | Robert R. Andrews | |
President and CEO | Chairman |
For the Three Months Ended December 31, 2011 and 2010
Three months ended | ||||||||
December 31, | ||||||||
2011 | 2010 | |||||||
Net sales | $ | 1,317,207 | $ | 1,294,567 | ||||
Cost of goods sold | 813,995 | 827,308 | ||||||
| | |||||||
Gross profit | 503,212 | 467,259 | ||||||
Selling, general and administrative expenses | 421,970 | 421,214 | ||||||
| | |||||||
Income from operations | 81,242 | 46,045 | ||||||
Other income (net) | 21,575 | 1,548 | ||||||
Income before income taxes | 102,817 | 47,593 | ||||||
Provision (benefit) for income taxes | 0 | 0 | ||||||
NET INCOME | $ | 102,817 | $ | 47,593 | ||||
| ||||||||
Per share data: | ||||||||
Basic and diluted earnings per share | $ | 0.04 | $ | 0.02 | ||||
Shares used in computing net | ||||||||
earnings per share: | 2,586,227 | 2,589,885 |
Microwave Filter Company and Subsidiaries
Three months ended | |||||||||
December 31 | |||||||||
| 2011 | 2010 | |||||||
Cash flows from operating activities: | |||||||||
Net income | $ | 102,817 | $ | 47,593 | |||||
Adjustments to reconcile net income | |||||||||
to net cash provided by (used in) | |||||||||
operating activities: | |||||||||
Depreciation | 37,583 | 22,759 | |||||||
Gain on sale of fixed assets | ( | 20,000 | ) | 0 | |||||
Change in assets and liabilities: | |||||||||
Accounts receivable | 130,368 | 67,268 | | ||||||
Federal and state income tax recoverable | 25,402 | 0 | |||||||
Inventories | | 49,870 | ( | 17,252 | ) | ||||
Prepaid expenses and other assets | 12,247 | 20,292 | |||||||
Accounts payable and customer deposits | ( | 37,811 | ) | 91,436 | |||||
Accrued payroll, compensated absences | |||||||||
and related expenses | ( | 39,691 | ) | ( | 36,128 | ) | |||
Other current liabilities | ( | 51,899 | ) | 5,375 | |||||
| | ||||||||
Net cash provided by (used in) | |||||||||
operating activities | 208,886 | 201,343 | | ||||||
| | ||||||||
Cash flows from investing activities: | |||||||||
Capital expenditures | ( | 189,078 | ) | ( | 4,470 | ) | |||
Proceeds from sale of fixed assets | | 20,000 | | 0 | |||||
Net cash (used in) provided by | |||||||||
investing activities | ( | 169,078 | ) | ( | 4,470 | ) | |||
| | ||||||||
Cash flows from financing activities: | |||||||||
Purchase of treasury stock | 0 | ( | 1,912 | ) | |||||
| | | |||||||
Net cash (used in) provided by | |||||||||
financing activities | 0 | ( | 1,912 | ) | |||||
| | ||||||||
Net increase (decrease) in cash | |||||||||
and cash equivalents | 39,808 | 194,961 | |||||||
Cash and cash equivalents | |||||||||
at beginning of period | 1,258,885 | 1,466,719 | |||||||
| | ||||||||
Cash and cash equivalents | |||||||||
at end of period | $ | 1,298,693 | $ | 1,661,680 | |||||
Supplemental Schedule of Cash Flow Information: | |||||||||
Income taxes paid | $ | 15,000 | $ | 0 |
Consolidated Balance Sheets
December 31, 2011 (unaudited) and September 30, 2011
December 31, 2011 | September 30, 2011 | ||||||||||
Assets | |||||||||||
Current Assets: | |||||||||||
Cash and cash equivalents | $ | 1,298,693 | $ | 1,258,885 | |||||||
Accounts receivable-trade, net of | | | |||||||||
allowance for doubtful accounts | |||||||||||
of $26,000 and $26,000 | 221,686 | 352,054 | |||||||||
Federal and state income tax recoverable | 0 | 24,828 | |||||||||
Inventories, net | 517,391 | 567,261 | |||||||||
Prepaid expenses and other current assets | 81,867 | 94,114 | |||||||||
| | ||||||||||
Total current assets | 2,119,637 | 2,297,142 | |||||||||
Property, plant and equipment, net | 769,313 | 617,818 | |||||||||
| | ||||||||||
Total assets | $ | 2,888,950 | $ | 2,914,960 | |||||||
| | ||||||||||
Liabilities and Stockholders' Equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | $ | 151,701 | $ | 195,535 | |||||||
Customer deposits | 57,909 | 51,886 | |||||||||
Accrued federal and state income taxes | 574 | 0 | |||||||||
Accrued payroll and related expenses | 39,421 | 57,514 | |||||||||
Accrued compensated absences | 228,845 | 250,443 | |||||||||
Other current liabilities | 31,755 | 83,654 | |||||||||
| | ||||||||||
Total current liabilities | 510,205 | 639,032 | |||||||||
| | ||||||||||
Total liabilities | 510,205 | 639,032 | |||||||||
| | ||||||||||
Stockholders' Equity: | |||||||||||
Common stock, $.10 par value | | | |||||||||
Authorized 5,000,000 shares, Issued | |||||||||||
4,324,140 shares in 2012 and 2011, | |||||||||||
Outstanding 2,586,227 shares in 2012 | |||||||||||
and 2011 | 432,414 | 432,414 | |||||||||
Additional paid-in capital | 3,248,706 | 3,248,706 | |||||||||
Retained earnings | 388,302 | 285,485 | |||||||||
| |||||||||||
Common stock in treasury, at cost | |||||||||||
1,737,913 shares in 2012 and 2011 | ( | 1,690,677 | ) | ( | 1,690,677 | ) | |||||
Total stockholders' equity | 2,378,745 | 2,275,928 | |||||||||
| | ||||||||||
Total liabilities and stockholders' equity | $ | 2,888,950 | $ | 2,914,960 | |||||||
The undersigned hereby appoints Robert R. Andrews and Carl F. Fahrenkrug proxies of the undersigned, with full power of substitution, to vote shares of common stock of the Company which the undersigned is entitled to vote at the 2012 Annual Meeting of the Shareholders to be held on Wednesday, March 28, 2012 at 10:00 a.m. and any adjournments thereof as follows:
(1) ELECTION OF DIRECTORS
1. [ ] For All Nominees
2. [ ] For All Nominees Except Those With A Line Through Their Name
(2) Proposal to ratify the appointment of EFP Rotenberg, LLP as the Company’s independent auditors for the fiscal year ending September 30, 2012.
(3) In their discretion, the proxies are authorized to vote upon other matters properly coming before the meeting or any adjournments thereof.
NOTE: Please date and sign exactly as your name or names appear below and return in the enclosed postage paid envelope.
When signing as an Attorney, Executor, Trustee, Guardian or Officer of a Corporation, please give title as such.
_______________________ | _________ | ||
Signature | Date | ||
_______________________ | _________ | ||
Signature if held jointly | Date |
I plan to attend the Annual Meeting _____ I do not plan to attend the Annual Meeting _____