SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
for the Quarter Ended February 28, 1998
For the Transition Period from_________ to _________
Commission File Number 0-5109
MICROPAC INDUSTRIES, INC.
Delaware 75-1225149
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(State of Incorporation) (IRS Employer Identification No.)
905 E. Walnut, Garland, Texas 75040
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(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code (972) 272-3571
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
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
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At November 30, 1997, and February 28, 1998 there were 3,627,151 shares of
registrant's common stock outstanding. On that date, the aggregate market value
of Common Stock could not be determined since there is no established public
trading market for the Company's Common Stock.
Traditional Small Business Disclosure Format
Yes X No
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<PAGE>
MICROPAC INDUSTRIES, INC.
FORM 10-QSB
FEBRUARY 28, 1998
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Statements of Income for the three
months ended February 28, 1998 and March 1, 1997
Condensed Balance Sheets
Condensed Statements of Cash Flows
Notes to Condensed Financial Statements
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
ITEM 2 CHANGES IN SECURITIES
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5 OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
<PAGE>
MICROPAC INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(unaudited)
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statement
Statement of Income
for the quarters ended
2/28/98 3/01/97
Sales, Net of Returns & Allowances $ 3,267,800 $ 3,415,230
Cost of Goods Sold (2,381,379) (2,518,199)
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Gross Margin 886,421 897,030
Selling, General & Administrative Expense (622,764) (639,196)
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Pre-Tax Income 263,657 257,834
Provision for Income Taxes (91,395) (87,665)
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Net Income $ 172,262 $ 170,169
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Net Income Per Share $ .04 $ .04
Dividends per Share -- --
Weighted Average Number of Shares 3,627,151 3,627,151
These statements reflect all adjustments which, in the opinion of management,
are necessary for fair statement of the results for the interim period.
<PAGE>
<TABLE>
<CAPTION>
MICROPAC INDUSTRIES, INC.
BALANCE SHEET
(Unaudited)
ASSETS
CURRENT ASSETS 2/28/98 11/30/97
<S> <C> <C>
Cash $ 227,264 $ 106,200
Short term investments 1,608,519 1,542,919
Receivables, net of allowance for doubtful accounts
approximately $92,495 on February 28, 1998
and $94,264 on November 30, 1997 1,840,252 2,412,443
Inventories:
Raw materials 1,778,842 1,559,788
Work-in process 1,377,816 1,147,572
Prepaid expenses and other current assets 54,405 63,371
Deferred income tax 301,951 301,951
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Total current assets 7,189,048 7,134,245
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 80,000 80,000
Buildings 497,924 497,924
Facility improvements 692,487 694,705
Machinery and equipment 4,449,730 4,335,347
Furniture and fixtures 381,627 379,667
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Total property, plant, and equipment 6,101,768 5,987,643
Less accumulated depreciation (4,730,474) (4,663,958)
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Net property, plant and equipment 1,371,294 1,323,686
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Total assets $ 8,560,342 $ 8,457,930
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 765,509 806,795
Accrued payroll 345,457 343,500
Accrued professional fees 53,432 64,552
Other accrued liabilities 119,518 226,166
Income taxes payable 198,280 110,137
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Total current liabilities 1,482,195 1,551,150
DEFERRED INCOME TAXES 89,948 89,948
SHAREHOLDERS' EQUITY
Common stock ($.10 par value) 10,000,000 362,715 362,715
authorized, 3,627,151 outstanding)
Paid-in capital 885,540 885,540
Retained earnings 5,739,944 5,568,577
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Total shareholder's equity 6,988,199 6,816,832
Total liabilities and shareholders'equity $ 8,560,342 $ 8,457,930
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</TABLE>
These statements reflect all adjustments which, in the opinion of management,
are necessary for fair statement of the results for the interim period.
<PAGE>
<TABLE>
<CAPTION>
MICROPAC INDUSTRIES, INC.
STATEMENTS OF CASH FLOW
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES: 2/28/98 3/01/97
<S> <C>
Net Income $ 171,367 $ 170,167
Adjustments to reconcile net income to
cash from operating activities:
Depreciation and amortization 66,516 57,323
Changes in current assets and liabilities:
Accounts receivable 572,191 59,204
Inventories (449,297) 153,870
Prepaid expenses & other current assets 8,966 32,726
Income taxes 88,143 (47,335)
Accounts payable (41,286) (289,953)
Payroll & withholdings 1,956 19,037
Accrued liabilities (117,768) (130,985)
Deferred income taxes -- --
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Net cash from operating activities 300,788 24,055
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (114,124) (5,227)
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Net cash from investing activities (114,124) (5,227)
Net increase (decrease) in cash 186,663 18,829
Cash and short term investments at beginning of period 1,649,119 304,250
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Cash at end of period $ 1,835,783 $ 323,079
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</TABLE>
These statements reflect all adjustments which, in the opinion of management,
are necessary for fair statement of the results for the interim period.
<PAGE>
MICROPAC INDUSTRIES, INC.
ITEM 2 MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1. Sales totaled $3,267,800 for the first quarter 1998 compared to
$3,415,230 for the same quarter in 1997. Sales were down due to
lack of new orders with first quarter due dates and orders
reschedules from a major customer. Profits for the first quarter
1998 increased slightly to $171,262 compared to $170,169 for the
first quarter in 1997.
2. Cost of sales for the first quarter totaled $2,381,379 compared to
$2,518,199 for the same period of 1997. As a percent of net sales,
cost of goods sold in the first quarter 1998 was 72.7% , compared
to 73.7% in the first quarter 1997. Lower materials and labor costs
accounted for the improvement in cost of sales. These cost
reductions are attributed to changes in product mix for the two
comparable periods of 1998 versus 1997.
3. Selling, general and administrative expenses totaled $622,764 for
the first quarter 1998 and represents a decrease of ($16,432)
compared to $639,196 in the first quarter 1997. The reduction of
general and administrative expenses is related to reduced travel
cost for the two comparable quarters. As a percent of revenues,
SG&A totaled 19.1% of revenues for the first quarter of 1998 versus
18.7% for the same quarter of 1997.
4. Net income per share for the first quarters 1998 and 1997 totaled
approximately $.04 per share. The Company has not offered stock
incentives to its executive officers or employees and does not have
this liability; therefore, the diluted value per share remains at
$0.04 per share for both comparable periods.
5. New orders for the first quarter 1998 totaled approximately
$1,944,000 compared to $2,410,000 for the same period in 1997.
6. Backlog ending February 28, 1998 totaled $5,813,000 compared to
$6,816,000 for the period ended March 1, 1997. The reduction in
backlog when comparing the two quarters is related to decreased
orders in the first quarter. The current backlog represents a good
mix of the Company's product and most of the backlog is scheduled
to ship in 1998
7. Raw material and work in process inventories increased
approximately $219,000 and $230,000 respectively since November 30,
1997. The inventory increases are attributable to order reschedules
from a major customer, and to technical problems on a new product
which delayed shipping.
8. Accounts receivable decreased approximately ($449,000) since
November 30, 1997. The majority of the decrease is related to
collection efforts generated by the Company. The Company was able
to decrease days of revenue outstanding from 58 days as of November
39, 1997 to 51 days as of February 28, 1998.
9. Capital expenditures for the first quarter totaled $114,000 and was
primarily for purchases and upgrade of production and test
equipment. The financing for these purchases of capital assets was
handled internally with company cash.
10. Total assets increased approximately $102,000 since fiscal year
ended November 30, 1997. The increase is attributed primarily to
increased cash and cash equivalents and to increased capital
assets.
11. Liabilities decreased for the quarter due to reductions of current
liabilities. Reduction in accounts payable and accrued liabilities
pertained primarily to annual payments for property taxes and out
of state franchise taxes. The reduction of payables and accrued
liabilities was partially offset by increased accrual for current
year first quarter tax liability.
12. Shareholders' equity increased approximately $171,000 for the first
quarter 1998, an average of approximately $.04 per share. The
increase was comparable to first quarter results in 1997.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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The Company is not involved in any material current or pending
legal proceedings, other than ordinary routine litigation
incidental to its business.
ITEM 2. CHANGES IN SECURITIES
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None
ITEM 3, DEFAULTS UPON SERIOR SECURTIES
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None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
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On February 26, 1998, the Company held its annual Shareholders
meeting at which time directors Nicholas Nadolsky, H. Kent
Hearn, Heinz-Werner Hempel and James K. Murphey were
re-elected to serve until the next annual meeting of
Shareholders to be held in February 1999.
ITEM 5. OTHER INFORMATION
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None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on
its behalf by the undersigned duly authorized.
MICROPAC INDUSTRIES, INC.
April 3, 1998 /s/ Nicholas Nadolsky
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Date Nicholas Nadolsky
Chairman of the Board/CEO
April 3, 1998 /s/ Dave Hendon
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Date Dave Hendon
Controller
