U S SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 QSB
(X) Quarterly Report Under Section 13
or 15 (d) of the Securities
Exchange Act of 1934
for the Quarter Ended August 28 , 1999
( ) Transition Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
MICROPAC INDUSTRIES, INC.
Delaware 75-1225149
(State of Incorporation) (IRS Employer Identification No.)
905 E. Walnut, Garland, Texas 75040
(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, 1998 and August 28, 1999, there were 3,627,151 shares of
registrant's common stock outstanding. On these dates, 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.
<PAGE>
MICROPAC INDUSTRIES, INC.
FORM 10-QSB
AUGUST 28, 1999
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Statements of Income for the three
months and nine months ended August 28, 1999
and August 29, 1998
Condensed Balance Sheets
Condensed Statements of Cash Flows
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
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<TABLE>
<CAPTION>
MICROPAC INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
(unaudited)
PART I - FINANCIAL INFORMATION
ITEM 1 - Financial Statement
Statement of Income Statement of Income
for three months ended Year-to-date
8/28/99 8/29/98 8/28/99 8/29/98
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales, Net of Returns & Allowances $ 2,678,201 $ 2,874,529 $ 8,179,876 $ 8,978,433
Cost of Goods Sold (2,118,155) (2,187,333) (6,219,055) (6,762,542)
----------- ----------- ----------- -----------
Gross Margin 560,046 687,196 1,960,821 2,215,891
Selling, General & Administrative Expense (486,833) (551,802) (1,587,683) (1,717,783)
----------- ----------- ----------- -----------
Pre-Tax Income 73,213 135,394 373,138 498,108
Provision for Income Taxes (29,285) (47,400) (149,255) (174,349)
----------- ----------- ----------- -----------
Net Income $ 43,928 $ 87,994 $ 223,883 $ 323,759
=========== =========== =========== ===========
Net Income Per Share $ .01 $ .02 $ .06 $ .09
Dividends per Share -- -- -- --
Weighted Average Number of Shares 3,627,151 3,627,151 3,627,151 3,627,151
</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.
BALANCE SHEET
(Unaudited)
ASSETS
CURRENT ASSETS 8/28/99 11/30/98 8/29/98 11/30/97
------- -------- ------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 2,290,718 $ 419,920 $ 492,802 $ 106,200
Short term investments longer than 90 days 650,238 1,934,456 1,576,782 1,542,919
Receivables, net of allowance for doubtful accounts of 1,606,545 1,521,703 1,586,432 2,412,443
$102,820 on August 28, 1999 and $103,911 on
November 30, 1998
Inventories:
Raw materials 1,228,430 1,794,081 1,858,774 1,559,788
Work-in process 1,090,339 1,122,147 1,147,572 1,091,414
Prepaid expenses and other current assets 71,529 75,258 90,802 63,371
Deferred income tax 300,951 300,951 301,951 301,951
----------- ----------- ----------- -----------
Total current assets 7,239,825 7,136,708 7,029,690 7,134,244
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land 80,000 80,000 80,000 80,000
Buildings 497,924 497,924 497,924 497,924
Facility improvements 690,628 690,628 692,487 694,705
Machinery and equipment 4,481,772 4,434,214 4,463,839 4,335,348
Furniture and fixtures 407,924 349,276 392,994 379,667
----------- ----------- ----------- -----------
Total property, plant, and equipment 6,158,248 6,052,042 6,127,244 5,987,644
Less accumulated depreciation (4,988,640) (4,812,400) (4,851,282) (4,663,958)
----------- ----------- ----------- -----------
Net property, plant and equipment 1,169,608 1,239,642 1,275,962 1,323,686
----------- ----------- ----------- -----------
Total assets $ 8,409,433 $ 8,376,350 $ 8,305,652 $ 8,457,930
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 395,785 $ 340,118 $ 391,719 $ 806,795
Accrued payroll 174,955 332,088 372,667 343,500
Accrued professional fees 66,962 54,205 71,330 64,552
Other accrued liabilities 197,213 160,094 82,060 226,166
Income taxes payable 46,372 185,582 157,337 110,137
----------- ----------- ----------- -----------
Total current liabilities 881,287 1,072,087 1,075,113 1,551,150
DEFERRED INCOME TAXES 41,948 41,948 89,948
89,948
SHAREHOLDERS' EQUITY
Common stock ($.10 par value) 10,000,000 362,715 362,715 362,715 362,715
authorized, 3,627,151 outstanding)
Paid-in capital 885,540 885,540 885,540 885,540
Retained earnings 6,237,943 6,014,060 5,892,336 5,568,577
----------- ----------- ----------- -----------
Total shareholders' equity 7,486,198 7,262,316 7,140,591 6,816,832
----------- ----------- ----------- -----------
Total liabilities and shareholders' equity $ 8,409,433 $ 8,376,350 $ 8,305,652 $ 8,457,930
=========== =========== =========== ===========
</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: 8/28/99 8/29/98
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<S> <C> <C>
Net Income $ 223,883 $ 323,759
Adjustments to reconcile net income to
cash from operating activities:
Depreciation and amortization 176,240 187,324
Changes in current assets and liabilities:
Accounts receivable (84,842) 826,011
Inventories 564,576 (273,561)
Prepaid expenses & other current assets 3,729 (27,431)
Income taxes (139,210) 47,200
Accounts payable 55,667 (415,076)
Accrued Payroll (157,133) 29,167
Accrued liabilities 49,876 (137,328)
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Net cash from operating activities 692,786 560,065
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (106,206) (139,600)
Proceeds - Maturity of short term investments 1,284,218 (33,863)
----------- -----------
Net cash from investing activities 1,178,012 (173,463)
----------- -----------
Net increase (decrease) in cash 1,870,798 386,602
Cash at beginning of period 419,920 106,200
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Cash at end of period $ 2,290,718 $ 492,802
</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 third quarter and year to date 1999 totaled $2,678,000 and
$8,180,000 respectively. Sales for the third quarter decreased (6.8%) or
($196,000) below sales for the same period of 1998. The decrease for the
comparable quarters was due to lack of orders with current period delivery
requirements. Sales for the first nine months in 1999 are down (8.9%) or
($799,000) compared to the same nine month period in 1998. Although sales
improved for some of the Company's products due to the improved
semiconductor market, sales year to date, are down due to decreased orders
for some of the Company's standard high-temperature and military products
as well as new custom design products.
2. Cost of sales for the comparable third quarters of 1999 and 1998 totaled
79.1% and 76.1% respectively, primarily attributable to raw materials due
to changes in product mix. Cost of sales year-to-date 1999 totaled 76.0% of
net sales, versus 75.3% for the comparable period of 1998. Changes in
product mix and ramp up for short-term shipments were the primary reasons
for increased cost of sales percentage for the comparable nine month
periods of 1999 versus 1998.
3. Selling, general and administrative expenses for the comparable third
quarters of 1999 versus 1998 were 18.2% and 19.2% of net sales
respectively. Year to date, selling, general and administrative expenses
totaled 19.4% and 19.1% of net sales. Selling, general and administrative
expenses in the third quarter and year to date 1999 were below 1998 SG&A
expenses by ($65,000) and ($130,000) respectively. Items contributing to
the decrease in selling, general and administrative expenses were decreased
selling expenses and corporate travel expenses.
4. Net income for the comparable third quarters of 1999 versus 1998 totaled
$44,000 and $88,000 respectively while year to date net income totaled
$224,000 and $324,000 respectively for the nine month comparable periods.
Income per share for the third quarters of 1999 and 1998 totaled $.01 and
$.02 respectively. Year to date, income per share totals $ .06 for 1999
compared to $ .09 per share for 1998.
5. New orders for the third quarter and year to date 1999 totaled $3,374,000
and $8,159,000 respectively compared to 1998's bookings of $1,450,000 and $
$8,404,000 for the same periods. New orders received in 1999 are attributed
primarily to sales to distributors and reorders for certain custom
products. Outside factors continuing to affect bookings are delays in
expected add-ons to current military, space and aircraft related contracts;
decreased oil industry exploration and the continued move of the military
market place to commercial off-the-shelf products.
6. Backlog of shippable orders totaled $5,164,000 on August 28, 1999 compared
to $6,486,000 at the end of the third quarter 1998 and $5,212,000 at
November 30, 1998. The backlog reflects a good mix of the Company's
products with firm deliveries scheduled over the next twelve (12) months.
7. Assets for the first nine months of 1999 increased moderately by $33,000 to
$8,409,000. The increase in assets for 1999 is related to changes in
current assets plus capital expenditures on machinery and equipment, net of
depreciation. The Company has reduced raw material inventories ($566,000)
by building and shipping product in 1999 from a buildup of raw materials
inventory purchased in 1998. The increase in raw materials was largely due
to shipments rescheduled by customers until 1999. The resulting receivables
have been collected and allowed the Company to increase cash and cash
equivalents and short term investments by $587,000 since November 30, 1998.
8. Accounts receivable remained relatively stable for the comparable quarters
totaling $1,607,000 for the third quarter of 1999 compared to $1,586,000
for the third quarter of 1998. Days sales totaled 54 days on August 28,
1999 compared to 46 days on August 29, 1998.
<PAGE>
9. Liabilities and Deferred Income Taxes for the first nine months of 1999
decreased ($191,000) compared to a decrease of ($476,000) for the same nine
month period in 1998. The decreases in liabilities for 1999 are related
primarily to the reduction of accrued payroll expense and accrued tax
liabilities for the current year.
10. Shareholders' equity increased $224,000 for the first nine months of 1999
compared to $323,000 for the same period of 1998.
11. Cash, cash equivalents and short term investments increased $587,000 since
November 30, 1998 compared to an increase in cash of $420,000 for the same
period in 1998. Changes in cash and investments for 1999 are attributed to
cash used for operating activities, primarily the reduction of inventories
while changes in cash and investments for 1998 were attributed to the
reduction of accounts receivables.
12. In management's opinion, to the best of their knowledge, year 2000
compliance including all Y2K updates have been completed. The overall cost
for hardware, software, reprogramming, vendor notification and continued
follow-up is estimated to be less than $40,000.
<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
---------------------
None
ITEM 3. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
-------------------------------------------------
None
ITEM 4. OTHER INFORMATION
-----------------
None
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned duly authorized.
MICROPAC INDUSTRIES, INC.
9-27-99 /s/ Nicholas Nadolsky
- ------- --------------------------
Date Nicholas Nadolsky
Chairman of the Board/CEO
9-27-99 /s/ Dave Hendon
- ------- --------------------------
Date Dave Hendon
Controller
