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 December 31, 2000
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 - 2,938,186 shares as of December
31, 2000.
PART I. - FINANCIAL INFORMATION
MICROWAVE FILTER COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
DECEMBER 31, 2000 SEPTEMBER 30, 2000
(Unaudited) (Note)
Assets
Current Assets:
Cash and cash equivalents $ 325 $ 625
Investments 943 925
Accounts receivable-trade,net 768 897
Inventories 1,107 1,104
Deferred tax asset - current 178 178
Prepaid expenses and other
current assets 130 78
-------- --------
Total current assets 3,451 3,807
Property,plant and equipment,net 1,359 1,336
-------- --------
Total assets $ 4,810 $ 5,143
======== ========
Liabilities And Stockholders' Equity
Current liabilities:
Accounts payable $ 358 $ 392
Customer deposits 244 155
Accrued federal and state
income taxes 101 189
Accrued payroll and related
expenses 121 100
Accrued compensated absences 246 267
Other current liabilities 69 121
-------- --------
Total current liabilities 1,139 1,224
Deferred tax liability -
noncurrent 48 48
-------- --------
Total liabilities 1,187 1,272
-------- --------
Stockholders' Equity:
Common stock,$.10 par value 432 432
Additional paid-in capital 3,240 3,240
Retained earnings 1,402 1,323
-------- --------
5,074 4,995
Common stock in treasury,
at cost (1,451) (1,124)
-------- --------
Total stockholders' equity 3,623 3,871
-------- --------
Total liabilities and
stockholders' equity $ 4,810 $ 5,143
======== ========
Note: The balance sheet at September 30, 2000 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
[FN]
See Accompanying Notes to Condensed Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS
ENDED DECEMBER 31, 2000 AND 1999
(Unaudited)
(Amounts in thousands, except per share data)
Three months ended
Dec. 31
2000 1999
Net sales $1,929 $1,570
Cost of goods sold 1,251 934
------- -------
Gross profit 678 636
Selling, general and
administrative expenses 583 552
------- -------
Income from operations 95 84
Other income (expense) 25 15
------- -------
Income before income
taxes 120 99
Provision for income
taxes 41 34
------- -------
NET INCOME $79 $65
======= =======
Earnings per share $0.03 $0.02
======= =======
[FN]
See Accompanying Notes to Condensed Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 2000 AND 1999
(Unaudited)
(Amounts in thousands)
Three months ended
December 31
2000 1999
Cash flows from operating
activities:
Net income $ 79 $ 65
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 70 76
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 129 (57)
Inventories (3) (144)
Prepaid expenses & other
assets (52) (59)
Increase (decrease) in:
Accounts payable & accrued
expenses (85) 301
Deferred compensation &
other liabilities 0 (2)
------- -------
Net cash provided by
operating activities 138 180
Cash flows from investing activities:
Investments (18) 0
Capital expenditures (93) (19)
------- -------
Net cash used in
investing activities (111) (19)
Cash flows from financing activities:
Purchase of treasury stock (327) (60)
------- -------
Net cash used in
investing activities (327) (60)
------- -------
Increase (decrease) in cash
and cash equivalents (300) 101
Cash and cash equivalents
at beginning of period 625 264
------- -------
Cash and cash equivalents
at end of period $ 325 $ 365
======= =======
[FN]
See Accompanying Notes to Condensed Consolidated Financial Statements
MICROWAVE FILTER COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
Note 1. Basis of Presentation
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. Operating results for the three-month
period ended December 31, 2000 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 electronic 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: (thousands of dollars)
2001 2000
Net Sales (Unaffiliated):
MFC $1,653 $1,504
NSI 276 66
------- -------
Total $1,929 $1,570
======= =======
Operating profit (loss): (a)
MFC $147 $95
NSI (52) (11)
------- -------
Total $95 $84
======= =======
Identifiable assets: (b)
MFC $4,096 $4,004
NSI 389 638
------- -------
Subtotal 4,485 4,642
Corporate Assets - Cash and
Cash Equivalents 325 365
------- -------
Total $4,810 $5,007
======= =======
(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 Company's operations in each segment.
MICROWAVE FILTER COMPANY, INC.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
DECEMBER 31, 2000
Net sales for the three months ended December 31, 2000 equaled $1,929,618,
an increase of $360,169 or 22.9% when compared to net sales of $1,569,449 for
the three months ended December 31, 1999.
Microwave Filter Company, Inc. (MFC) net sales for the three months ended
December 31, 2000 equaled $1,653,483, an increase of $150,405 or 10% when
compared to net sales of $1,503,078 for the three months ended December 31,
1999.
Niagara Scientific, Inc. (NSI), a wholly owned subsidiary, net sales for the
three months ended December 31, 2000 equaled $276,135, an increase of $209,764
or 316% when compared to net sales of $66,371 for the three months ended
December 31, 1999.
Net income for the three months ended December 31, 2000 equaled $78,575, an
increase of $14,066 or 21.8% when compared to net income of $64,509 for the
three months ended December 31, 1999. The increase in net income can primarily
be attributed to the increase in sales.
Gross profit increased $43,076 or 6.8% to $678,418 during the three months
ended December 31, 2000 when compared to gross profit of $635,342 during the
three months ended December 31, 1999. The increase in gross profit during the
three months ended December 31, 2000 can primarily be attributed to the
increase in sales. As a percentage of sales, gross profit equaled 35.2% for
the three months ended December 31, 2000 compared to 40.5% for the three
months ended December 31, 1999. 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. NSI's sales, whose targeted
gross profits are lower than MFC's, accounted for 14.3% of total sales for
the three months ended December 31, 2000 compared to 4.2% of total sales
for the three months ended December 31, 1999.
Selling, general and administrative (SG&A) expenses increased $31,216 to
$583,251 during the three months ended December 31, 2000 when compared to SG&A
expenses of $552,035 during the three months ended December 31, 1999. The
increase can primarily be attributed to planned increases in advertising and
promotional expenses. As a percentage of sales, SGA expenses equaled 30.2%
for the three months ended December 31, 2000 compared to 35.2% for the three
months ended December 31, 1999.
Cash and cash equivalents decreased $300,068 to $325,409 at December 31,
2000 when compared to cash and cash equivalents of $625,477 at September 30,
2000. The decrease was a result of $138,169 in net cash provided by operating
activities, $111,179 in net cash used in investing activities, of which
capital expenditures totaled $93,509, and $327,058 in net cash used to
purchase treasury stock.
The Company's Board of Directors had authorized the repurchase of up to
500,000 shares of the Company's outstanding stock. On January 26, 2000, the
Company's Board of Directors authorized the repurchase of an additional
500,000 shares of the Company's outstanding common stock. The repurchases will
be made from time to time on the open market at prevailing market prices or in
negotiated transactions off the market. During the quarter ended December 31,
2000, 226,000 shares were repurchased using existing cash balances. Management
believes the common stock repurchase program, given the Company's present cash
position as well as the market price of the stock, reflects its belief in the
fundamental strength of the business and also reflects its commitment to
enhancing shareholder value.
At December 31, 2000, the Company had available 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 and its
current credit arrangements.
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, 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.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company has limited exposure to market risk as the Company has no long
term debt as of December 31, 2000. The Company's available line of credit is
based on a factor of the prime rate; however, there are no outstanding
borrowings under the line of credit. The Company does not trade in
derivative financial instruments.
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 5. Other Information
None.
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.
February 14, 2001 Carl F. Fahrenkrug
(Date) --------------------------
Carl F. Fahrenkrug
Chief Executive Officer
February 14, 2001 Richard L. Jones
(Date) --------------------------
Richard L. Jones
Chief Financial Officer