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, 1995 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) 437-3953 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 - 3,326,779 shares as of December 31, 1995. PART I. - FINANCIAL INFORMATION MICROWAVE FILTER COMPANY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994 (Unaudited) (Amounts in thousands, except per share data) Three months ended Dec. 31 1995 1994 [S] [C] [C] Net sales $2,091 $1,964 Cost of goods sold 1,253 1,293 ------- ------- Gross profit 838 671 Selling, general and administrative expenses 646 651 ------- ------- Income (loss) from operations 192 20 Other income (expense) 1 (4) ------- ------- Income (loss) before income taxes 193 16 Provision (benefit) for income taxes 67 5 ------- ------- NET INCOME (LOSS) 126 11 ======= ======= Earnings (loss) per share $0.04 $0.00 ======= ======= [FN] See Accompanying Notes to Consolidated Financial Statements MICROWAVE FILTER COMPANY, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1995 SEPTEMBER 30, 1995 (Unaudited) [S] [C] [C] Assets Current Assets: Cash and cash equivalents $ 962 $ 521 Accounts receivable-trade,net 771 879 Inventories 1,839 1,969 Prepaid expenses and other current assets 215 215 -------- -------- Total current assets 3,787 3,584 Property,plant and equipment,net 1,568 1,625 Other assets 61 65 -------- -------- Total assets $ 5,416 $ 5,274 ======== ======== Liabilities And Stockholders' Equity Current liabilities: Current portion of long term debt $ 148 $ 147 Accounts payable 354 362 Customer deposits 302 282 Accrued federal and state income taxes 98 43 Accrued payroll and related expenses 71 91 Accrued compensated absences 195 183 Other current liabilities 74 83 -------- -------- Total current liabilities 1,242 1,191 -------- -------- Long term debt, less current portion 403 440 Deferred compensation and other liabilities 58 59 -------- -------- Total liabilities 1,703 1,690 -------- -------- Stockholders' Equity: Common stock,$.10 par value 401 400 Additional paid-in capital 2,884 2,881 Retained earnings 1,065 940 -------- -------- 4,350 4,221 Common stock in treasury, at cost (637) (637) -------- -------- Total stockholders' equity 3,713 3,584 -------- -------- Total liabilities and stockholders' equity $ 5,416 $ 5,274 ======== ======== [FN] See Accompanying Notes to Consolidated Financial Statements MICROWAVE FILTER COMPANY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994 (Unaudited) Three months ended December 31 1995 1994 [S] [C] [C] Cash flows from operating activities: Net income $ 126 $ 11 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 85 98 Change in assets and liabilities: (Increase) decrease in: Accounts receivable 108 (78) Inventories 129 (282) Prepaid expenses & other assets (3) (21) Increase (decrease) in: Accounts payable & accrued expenses 50 99 Deferred compensation & other liabilities (1) (1) ------- ------- Net cash provided by operating activities 494 (174) ------- ------- Cash flows from investing activities: Capital expenditures (21) (23) Cash flows from financing activities: Principal payments on long-term debt (36) (32) Proceeds from sale of common stock 4 3 Purchase of treasury stock 0 (97) ------- ------- Increase (decrease) in cash and cash equivalents 441 (323) Cash and cash equivalents at beginning of period 521 657 ------- ------- Cash and cash equivalents at end of period $ 962 $ 334 ======= ======= [FN] See Accompanying Notes to Consolidated Financial Statements MICROWAVE FILTER COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1995 Note 1. Summary of Significant Accounting Policies The accompanying financial statements, which should be read in conjunction with the financial statements of Microwave Filter Company, Inc. ("the Company") included in the 1995 Annual Report filed on Form 10-K, are unaudited but have been prepared in the ordinary course of business for the purpose of providing information with respect to the interim period. The Company believes that all adjustments (none of which were other than normal recurring accruals) necessary for a fair presentation for such periods have been included. Note 2. Earnings (loss) per share Earnings (loss) per common share are calculated based upon the weighted average number of shares of common stock outstanding during the periods including, when significant, any common stock equivalents and after restatement of any stock dividends. The weighted average number of shares used for the computations were 3,324,564 and 3,302,491 for the three months ending December 31, 1995 and December 31, 1994, respectively. Note 3. Inventories Inventories are stated at the lower of cost determined on the first-in, first-out method or market. Inventories consisted of the following: December 31, September 30, 1995 1995 Raw materials and stock parts $ 957 $ 1,107 Work-in-process 386 394 Finished goods 496 468 ------- ------- $ 1,839 $ 1,969 ======= ======= MICROWAVE FILTER COMPANY, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DECEMBER 31, 1995 Micowave Filter Company, Inc. achieved record first quarter sales of $2,091,015 during the first quarter of fiscal 1996 which ended December 31, 1995. Net sales increased $127,298 or 6.5% to $2,091,015 during the three months ended December 31, 1995 when compared to sales of $1,963,717 during the same period last year. Net income increased $115,614 or 1,087% to $126,253 during the three months ended December 31, 1995 when compared to net income of $10,639 during the same period last year. As a percentage of sales, gross profit increased $166,892 to 40.1% during the three months ended December 31, 1995 when compared to 34.2% during the same period last year. As a percentage of sales, selling, general and administrative expenses decreased to 30.9% during the three months ended December 31, 1995 when compared to 33.2% during the same period last year. The increase in profits can be attributed to the increase in sales, improved margins and a decrease in operating expenses when compared to the same period last year. Your Company's primary objective continues to be new product development and an aggressive marketing plan to maximize performance and shareholder value. Cash and cash equivalents increased $441,379 to $962,055 at December 31, 1995 when compared to September 30, 1995. The increase was a result of $494,310 in net cash provided by operating activities, $20,630 in net cash used for capital expenditures and $32,301 in net cash used in financing activities. At December 31, 1995, the Company had available aggregate lines of credit totaling $600,000. In addition, the Company has a Letter of Credit facility available, for up to $500,000, which will be secured by specified inventory being purchased. At December 31, 1995, the Company had $60,319 in letters of credit outstanding. 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. 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. January 15, 1996 Carl F. Fahrenkrug (Date) -------------------------- Carl F. Fahrenkrug Chief Executive Officer January 15, 1996 Richard L. Jones (Date) -------------------------- Richard L. Jones Chief Financial Officer