SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 QSB
OMB Approval
OMB Number XXXX-XXXX
Expires Approval Pending
Estimated Average Burden Hours Per Response 1.0
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
for the Quarter Ended February 27, 1999
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
At November 30, 1998, and February 27, 1999 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
<PAGE>
MICROPAC INDUSTRIES, INC.
FORM 10-QSB
FEBRUARY 27, 1999
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Statements of Income for the three
months ended February 27, 1999 and February
28, 1998
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
2/27/99 2/28/98
Sales, Net of Returns & Allowances $ 2,627,051 $ 3,267,800
Cost of Goods Sold (1,983,426) (2,381,379)
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Gross Margin 643,625 886,421
Selling, General & Administrative Expense (531,209) (622,764)
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Pre-Tax Income 112,416 263,657
Provision for Income Taxes (44,966) (91,395)
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Net Income $ 67,450 $ 172,262
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Net Income Per Share $ .02 $ .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 2/27/99 11/30/98
<S> <C> <C>
Cash $ 475,578 $ 419,920
Short term investments 2,143,504 1,934,456
Receivables, net of allowance for doubtful accounts 1,412,742 1,521,703
approximately $106,911 on February 27, 1999
and $92,495 on February 28, 1998
Inventories:
Raw materials 1,559,089 1,794,081
Work-in process 1,084,537 1,090,339
Prepaid expenses and other current assets 69,721 75,258
Deferred income tax 300,951 300,951
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Total current assets 7,046,122 7,136,708
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 80,000 80,000
Buildings 497,924 497,924
Facility improvements 690,627 690,627
Machinery and equipment 4,443,312 4,434,213
Furniture and fixtures 351,704 349,278
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Total property, plant, and equipment 6,063,567 6,052,042
Less accumulated depreciation (4,871,368) (4,812,400)
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Net property, plant and equipment 1,192,199 1,239,642
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Total assets $ 8,238,321 $ 8,376,350
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable 268,385 340,118
Accrued payroll 303,857 332,088
Accrued professional fees 40,112 54,205
Other accrued liabilities 124,526 160,094
Income taxes payable 129,728 185,581
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Total current liabilities 866,608 1,072,086
DEFERRED INCOME TAXES 41,948 41,948
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 6,081,510 6,014,060
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Total shareholders' equity 7,329,765 7,262,315
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Total liabilities and shareholders' equity $ 8,238,321 $ 8,376,350
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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: 2/27/99 2/28/98
<S> <C> <C>
Net Income $ 67,450 $ 171,367
Adjustments to reconcile net income to
cash from operating activities:
Depreciation and amortization 58,968 66,516
Changes in current assets and liabilities:
Accounts receivable 108,961 572,191
Inventories 240,794 (449,297)
Prepaid expenses & other current assets 5,537 8,966
Income taxes (55,853) 88,143
Accounts payable (71,733) (41,286)
Payroll & withholdings (28,231) 1,956
Accrued liabilities (49,662) (117,768)
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Net cash from operating activities 276,231 300,788
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (11,525) (114,124)
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Net cash from investing activities (11,525) (114,124)
Net increase (decrease) in cash 264,706 186,664
Cash and short term investments at beginning of period 2,354,376 1,649,119
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Cash at end of period $ 2,619,082 $ 1,835,783
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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 for the first quarter of 1999 totaled $2,627,051 compared to
$3,267,800 for the same period of 1998. Lower sales in the current
year are attributable to lack of new orders for certain standard
military products and the down turn in the Asian economy and its
effects on a major customer. Profits after taxes for the first
quarter 1999 totaled $67,450 compared to $172,262 for the first
quarter in 1998. Net earnings were impacted by the lower total
sales combined with the mix of products shipped in the first
quarter.
2. Cost of sales for the comparable quarters of 1999 and 1998 totaled
$1,983,426 and $2,381,379 respectively. Cost of goods sold in the
first quarter 1999 totaled 75.5% of related revenues compared to
72.9% in the same quarter 1998. The increase in total cost of sales
for the comparable periods is related to increased cost for
material and manufacturing overheads. Materials cost increased due
to changes in product mix while manufacturing overheads increased
due to certain fixed cost that could not be lowered to match the
reduction of revenues. Research and development expenses for the
comparable periods were relatively stable when viewed as a
percentage of net sales.
3. Selling, general and administrative expenses totaled $531,209 for
the first quarter 1999 compared to $622,764 in the first quarter
1998. SG&A expenses were lower due to lower commission expense
related to reduced sales, lower inside sales expense due to a
temporary reduction in sales staff, and to decreased general and
administrative expenses. The reduced cost for general and
administrative expenses is related to reduced travel cost, reduced
wages, elimination of executive officer life insurance and
reduction of cost associated with employee relations. As a percent
of net revenues, SG&A totaled 20.2% of sales for the first quarter
in 1999 versus 19.1% for the same quarter in 1998.
4. Net income per share for the first quarter 1999 versus 1998 totaled
$0.02 and $0.04 respectively. 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
$0.02 and $0.04 per share for the respective quarters.
5. New orders for the first quarter 1999 totaled approximately
$2,277,000 compared to $1,944,000 for the same quarter in 1998.
6. Backlog for the current quarter 1999 totals $4,863,000 compared to
$5,813,000 for the first quarter of 1998. The reduction in backlog
is largely related to order cancellations in the fourth quarter of
1998, from one of the Company's major customers, whose business was
adversely affected by the down turn in the semiconductor business.
The current backlog represents a good mix of the Company's product
and most of the backlog is scheduled to ship in 1999
7. Raw material and work in process inventories decreased
approximately ($235,000) and ($6,000) respectively since November
30, 1998. The inventory decreases are attributable to increased
shipments of orders which were placed on hold during 1998; and
shipments against contracts received in 1998 with long lead times.
8. Accounts receivable decreased approximately ($109,000) since
November 30, 1998. The decrease is related to lower sales in the
first quarter and good collections. Days of revenue outstanding
totaled 48 days for the quarter ended February 27, 1999.
9. Total assets have decreased ($138,029) since fiscal year ended
November 30, 1998. The increase in cash retained by the company was
offset by reduced inventories and receivables.
10. Liabilities decreased ($205,000) for the quarter due primarily to
reductions of income taxes payable and accounts payable.
<PAGE>
11. The estimated cost for Y2K compliance for the reprograming of
Company software, the purchase of new computers, file server and
the associated software is expected to be approximately $35,000
to $40,000. Reprograming of the internally generated software for
accounting has been completed and tested. The fileserver and
software for financial and production inventory control will be
installed and tested in the second quarter of 1999. Most of the
stand alone computers have been updated with the necessary
components or replaced entirely. Y2 compliant software has also
been installed. Production equipment and software is currently
not a problem. Vendors have been contacted to enable the Company
to evaluate their Y2K readiness. A summary of non-compliant
vendors will be forwarded to the purchasing agents in the third
quarter. As of the first quarter 1999, the company is
approximately 90% complete in its Y2k compliance issues. The
Company intends to be fully Y2K compliant with items under its
control by June 30, 1999.
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 - None
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ITEM 3. DEFAULTS UPON SERIOR SECURTIES - None
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ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
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On February 25, 1999, 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 2000.
ITEM 5. OTHER INFORMATION - None
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - None
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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.
March 30, 1999 /s/ Nicholas Nadolsky
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Date Nicholas Nadolsky
Chairman of the Board/CEO
March 30, 1999 /s/ Dave Hendon
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Date Dave Hendon
Controller
