M-Wave Announces Third Quarter 2003 Financial Results
WEST CHICAGO, Ill., Nov. 17 /PRNewswire-FirstCall/ -- M-Wave, Inc. , a value
added service provider of high performance circuit boards used in a variety of
digital and high frequency applications, announced net sales of $3,518,000 for
the quarter ended September 30, 2003 and a net loss of $3,081,000 or $0.69 per
share compared to net sales of $3,788,000 and a net loss of $3,333,000 or $0.75
per share for the quarter ended September 30, 2002.
Net Sales were $10,864,000 with a net loss of $11,376,000 or $2.56 per share for
the nine months ended September 30, 2003 compared to net sales of $19,398,000
and net loss of $2,981,000 or $0.67 per share for the nine months ended
September 30, 2002.
The Company recorded an additional $2,275,000 impairment of building, plant and
equipment in the third quarter of 2003. The total impairment of building plant
and equipment was $7,452,000 for the first nine months of 2003.
Cash levels decreased from $1,514,000 at December 31, 2002 to $791,000 at
September 30, 2003. Accounts Receivable Increased $625,000, inventories
decreased $922,000, accounts payable increased $871,000 and the Company
collected approximately $4,510,000 of income tax refunds during the first nine
months of 2003. The Company purchased $54,000 of property, plant and equipment
during the first nine months of 2003.
On October 1, 2003, M-Wave entered into a new $2,413,533 loan with Bank One, NA
that will mature on December 31, 2003, and requires monthly payments of interest
at the bank's prime rate. This loan replaces the unpaid portion of the
Industrial Revenue Bonds (IRB) that were used to fund the acquisition of the
land and construction of the Company's manufacturing plant located in West
Chicago, Illinois, and a related forbearance agreement with the bank. Upon
signing the new loan, the Company is no longer in default of its obligations to
the bank arising pursuant to the IRB. However, the Company will need to repay or
renegotiate the loan, or seek alternative financing, prior to the loans'
maturity date. Concurrent with the new loan, M-Wave paid $350,000 toward
then-outstanding principal obligations, and Bank One released liens covering the
company's accounts receivable and inventory. Additional terms of the loan
include assigning Bank One a lien on the Company's real estate and improvements
located in Bensenville, IL, site of its former operations. Bank One is to
receive a payment of $650,000 upon sale of the Bensenville assets, to be applied
to the loan's principal. As of November 12, the Company has not sold the
Bensenville assets.
Joseph A. Turek, M-Wave's CEO, stated, "There is no doubt that we continue to
face a difficult environment so far this year, which has adversely affected our
performance. However, we remain optimistic, because of the initial achievements
in our financial and operational restructuring. Our new strategy foregoes
direct manufacturing, which has proven unprofitable in recent years, in favor of
Virtual Manufacturing, through which we contract production with third parties,
primarily Asian manufacturers, and provide sales and service to our customers.
"In line with our new business plan, we have made progress in reducing our
operating costs," continued Mr. Turek. "As a result of these cost reductions,
despite a 7% decline in sales, we decreased our net loss to $3.1 million in the
2003 third quarter from $3.3 million in the 2002 third quarter. These results
for the 2003 quarter would have been much better, if not for a $2.3 million
non-cash impairment charge. Based on these numbers, we believe the basis of our
restructuring plan is proving correct. Jim Mayer, who we hired as our Chief
Restructuring Advisor, has been instrumental to the creation and implementation
of this restructuring plan." Mr. Mayer commented, "M-Wave's new banking arrangement enables it to seek
working capital borrowings, and resolves disagreements with the bank. We are
mindful of the year-end maturity of these new bank obligations and are
attempting to sell fixed assets that are not needed in our new business
strategy, such as our facilities in Bensenville and West Chicago. We have also
made inroads in resolving our outstanding trade debt on favorable terms, and
continue to negotiate with our vendors. M-Wave needs to continue to focus on
its new business plan -- to offer supply chain management through our
partnership with 'best of breed' manufacturers in Asia and the U.S. to provide
our customers with the best mix of quality, response time and competitive
pricing." About M-Wave: Established in 1988 and headquartered in the Chicago suburb of West Chicago,
Ill., M-Wave is a value-added service provider of high performance circuit
boards. The Company's products are used in a variety of telecommunications and
industrial electronics applications. M-Wave services customers like Lucent
Technologies and Motorola, Inc. with its patented bonding technology, Flexlink
II(TM) and its supply chain management program called Virtual Manufacturing.
The Company trades on the Nasdaq National market under the symbol "MWAV". Visit
the Company on its web site at http://www.mwav.com/ .
This news release contains predictions, estimates and other forward- looking
statements that involve a number of risks and uncertainties. While this outlook
represents our current judgment on the future direction of the business, such
risks and uncertainties could cause actual results to differ materially from any
future performance suggested above. Factors that could cause actual results to
differ include the following: the risk that the Company may not be able to
repay or renegotiate the loan with Bank One or seek alternative financing prior
to the loans' maturity date; the failure of the Telecom market to improve;
dependence on major customers; dependence on suppliers and subcontractors for
circuit board components; successful award of contracts under bid; a highly
competitive environment; design and production delays; cancellation or
reductions of contract orders; effective utilization of existing and new
manufacturing resources; pricing pressures by key customers and other factors
detailed in the Company's Securities and Exchange Commission filings.
-FINANCIAL TABLES FOLLOW-
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements M~WAVE, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited) December 31 September 30
2002 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $1,514,509 $790,719
Accounts receivable, net of
allowance for doubtful
accounts,
2002- $100,000: 2003- $100,000 1,901,999 2,527,191
Inventories 1,756,641 834,956
Refundable income taxes 4,446,010 822,619
Deferred income taxes 748,457 616,785
Prepaid expenses and other 31,582 17,311
Restricted cash 348,731 0
Total current assets 10,747,929 5,609,581
PROPERTY, PLANT AND EQUIPMENT:
Land, buildings and
improvements 5,522,765 2,177,238
Machinery and equipment 9,248,688 1,928,600
Total property, plant and
equipment 14,771,453 4,105,838
Less accumulated depreciation (2,760,441) 0
Property, plant and
equipment-net 12,011,012 4,105,838
ASSETS TO BE DISPOSED OF, NET 568,701 568,701
TOTAL $23,327,642 $10,284,120 LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $3,707,327 $4,578,653
Accrued expenses 1,316,579 1,012,861
Current portion of long-term
debt 5,017,629 2,782,198
Total current liabilities 10,041,535 8,373,712 DEFERRED INCOME TAXES 616,785 616,785
LONG-TERM DEBT 0 0
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par
value; authorized, 1,000,000
shares; no shares issued 0 0
Common stock, $.01 par value;
authorized, 10,000,000 shares
6,179,112 shares issued and
4,443,294 shares outstanding
at December 31, 2002,
6,179,112 shares issued and
4,443,294 shares outstanding at
September 30, 2003 30,895 30,895
Additional paid-in capital 8,439,072 8,439,072
Retained earnings 6,484,525 (4,891,174)
Treasury stock, at cost,
1,735,815 shares, at December 31,
2002 and 1,735,815 shares at
September 30, 2003 (2,285,170) (2,285,170)
Total stockholders' equity 12,669,322 1,293,623
TOTAL $23,327,642 $10,284,120
M~WAVE, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended September 30,
2002 2003 Net sales $3,787,531 $3,518,178
Cost of goods sold 6,537,287 3,614,003
Gross loss (2,749,756) (95,825) Operating expenses:
General and administrative 545,830 513,975
Selling and marketing 394,618 283,730
Impairment of building and
equipment 0 2,274,500
Restructuring expense 1,752,108 0
Total operating expenses 2,692,556 3,072,205 Operating loss (5,442,312) (3,168,030) Other income (expense):
Interest income 45,817 48,396
Interest expense (50,518) (52,840)
Other income 0 206,089
Gain (loss) on disposal of assets 0 16,682
Total other income (expense) (4,701) 218,327 Loss before income taxes (5,447,013) (2,949,703) Provision (credit) for income taxes (2,114,422) 131,672 Net loss ($3,332,591) ($3,081,375) Weighted average shares outstanding 4,443,294 4,443,294 Basic loss per share ($0.75) ($0.69) Diluted shares outstanding 4,443,294 4,443,294 Diluted loss per share ($0.75) ($0.69)
M~WAVE, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) Nine months ended September 30,
2002 2003 Net sales $19,397,654 $10,864,273
Cost of goods sold 19,611,629 12,885,354
Gross loss (213,975) (2,021,081) Operating expenses:
General and administrative 1,678,651 1,856,848
Selling and marketing 1,227,920 1,027,542
Impairment of building and equipment 0 7,452,235
Restructuring expense 1,752,108 0
Total operating expenses 4,658,679 10,336,625 Operating loss (4,872,654) (12,357,706) Other income (expense):
Interest income 152,591 134,053
Interest expense (151,542) (148,478)
Other income 0 206,089
Gain (loss) on disposal of assets 0 33,682
Total other income 1,049 225,346 Loss before income taxes (4,871,605) (12,132,360) Credit for income taxes 1,891,060 756,661 Net loss ($2,980,545) ($11,375,699) Weighted average shares outstanding 4,449,397 4,443,294 Basic loss per share ($0.67) ($2.56) Diluted shares outstanding 4,449,397 4,443,294 Diluted loss per share ($0.67) ($2.56)
M~WAVE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) Nine months ended September 30,
2002 2003
OPERATING ACTIVITIES:
Net loss ($2,980,545) ($11,375,699)
Adjustments to reconcile net loss
to net cash flows from operating
activities:
(Gain) loss on disposal of
property, plant and equipment 986,108 (33,682)
Depreciation and amortization 1,134,000 506,600
Impairment of buildings and
equipment 0 7,452,235
Deferred income taxes 0 131,672
Changes in assets and liabilities:
Accounts receivable-trade 6,040,942 (625,192)
Inventories (609,241) 921,685
Income taxes (3,121,060) 3,623,391
Prepaid expenses and other
assets 44,720 14,271
Restricted cash 257,610 348,731
Accounts payable 685,964 871,326
Accrued expenses (562,610) (303,718)
Net cash flows provided by
operating activities 1,875,888 1,531,620 INVESTING ACTIVITIES:
Purchase of property, plant and
equipment (2,902,083) (53,661)
Proceeds from sale of property,
plant and equipment 0 33,682
Net cash flows used in
investing activities (2,902,083) (19,979) FINANCING ACTIVITIES:
Long term debt 2,302,623 0
Payments on short and long term
debt (1,381,314) (2,235,431)
Purchase treasury stock (57,891) 0
Net cash flows provided by
(used in) financing
activities 863,418 (2,235,431) NET DECREASE IN CASH AND CASH
EQUIVALENTS (162,777) (723,790) CASH AND CASH EQUIVALENTS - Beginning
of period 2,102,784 1,514,509
CASH AND CASH EQUIVALENTS - End of
period $1,940,007 $790,719
DATASOURCE: M-Wave, Inc.
CONTACT: Paul Schmitt, Chief Financial Officer of M-Wave, +1-630-562-4720, or Jim Mayer, Managing Member of Credit Support International, +1-201-725-9026 Web site: http://www.mwav.com/
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