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 May 29, 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
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At November 30, 1998 and May 29, 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
MAY 29, 1999
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Statements of Income for the three
months and six months ended May 29, 1999 and May 30, 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
5/29/99 5/30/98 5/29/99 5/30/98
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<S> <C> <C> <C> <C>
Sales, Net of Returns & Allowances $ 2,874,624 $ 2,836,104 $ 5,501,675 $ 6,103,904
Cost of Goods Sold (2,117,473) (2,193,830) (4,100,899) (4,575,209)
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Gross Margin 757,151 642,274 1,400,776 1,528,695
Selling, General & Administrative Expense (569,641) (543,217) (1,100,850) (1,165,981)
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Pre-Tax Income 187,510 99,057 299,926 362,714
Provision for Income Taxes (75,004) (35,554) (119,970) (126,949)
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Net Income $ 112,506 $ 63,503 $ 179,956 $ 235,765
=========== =========== =========== ===========
Net Income Per Share $ .03 $ .02 $ .05 $ .06
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.
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<TABLE>
<CAPTION>
MICROPAC INDUSTRIES, INC.
BALANCE SHEET
(Unaudited)
ASSETS
CURRENT ASSETS 5/29/99 11/30/98 5/30/98 11/30/97
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<S> <C> <C> <C> <C>
Cash $ 1,193,398 $ 419,920 $ 52,810 $ 106,200
Short term investments 1,449,573 1,934,456 1,565,258 1,542,919
Receivables, net of allowance for doubtful accounts 1,630,078 1,521,703 1,688,143 2,412,443
$109,911 on May 29, 1999 and $95,495 on May 30, 1998
Inventories:
Raw materials 1,504,972 1,794,081 1,961,953 1,559,788
Work-in process 964,378 1,090,339 1,249,526 1,147,572
Prepaid expenses and other current assets 51,347 75,258 65,404 63,371
Deferred income tax 300,951 300,951 301,951 301,951
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Total current assets 7,094,697 7,136,708 6,885,046 7,134,245
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 4,468,459 4,434,214 4,458,816 4,335,347
Furniture and fixtures 406,483 349,276 381,627 379,667
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Total property, plant, and equipment 6,143,494 6,052,042 6,110,854 5,987,643
Less accumulated depreciation (4,930,104) (4,812,400) (4,791,166) (4,663,958)
----------- ----------- ----------- -----------
Net property, plant and equipment 1,213,390 1,239,642 1,319,687 1,323,686
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Total assets $ 8,308,087 $ 8,376,350 $ 8,204,734 $ 8,457,930
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 363,327 $ 340,118 $ 480,919 $ 806,795
Accrued payroll 156,859 332,088 326,578 343,500
Accrued professional fees 39,203 54,205 62,053 64,552
Other accrued liabilities 170,574 160,094 82,701 226,166
Income taxes payable 93,905 185,582 109,949 110,137
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Total current liabilities 823,868 1,072,087 1,062,200 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 6,194,016 6,014,060 5,804,330 5,568,577
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Total shareholders' equity 7,442,271 7,262,316 7,052,585 6,816,832
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Total liabilities and $ 8,308,087 $ 8,376,350 $ 8,204,734 $ 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: 5/29/99 5/30/98
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<S> <C> <C>
Net Income $ 179,956 $ 235,765
Adjustments to reconcile net income to
cash from operating activities:
Depreciation and amortization 117,704 127,188
Changes in current assets and liabilities:
Accounts receivable (108,375) 724,300
Inventories 415,070 (504,119)
Prepaid expenses & other current assets 23,911 (2,033)
Income taxes (91,677) (188)
Accounts payable 23,209 (325,876)
Payroll & withholdings (175,229) (16,922)
Accrued liabilities (4,522) (145,964)
Cash flow from investing activities 484,883 (22,330)
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Net cash from operating activities 864,930 69,821
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (91,452) (123,211)
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Net cash from investing activities (91,452) (123,211)
Net increase (decrease) in cash 773,478 (53,390)
Cash at beginning of period 419,920 106,200
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Cash at end of period $ 1,193,398 $ 52,810
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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.
Certain prior year amounts have been reclassified to conform to current year
presentation.
<PAGE>
MICROPAC INDUSTRIES, INC.
ITEM 2 MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1. Sales for the second quarter and year to date 1999 totaled $2,875,000 and
$5,502,000 respectively. Sales for the second quarter of 1999 increased
1.4% or $39,000 above sales for the same period of 1998, due primarily to
increased orders from the semiconductor industry. Year to date sales in
1999 finished down (9.9%) or ($602,000) below the first six months of 1998.
Sales were down year to date for the comparable periods due to the downturn
in Asia's economy, which affected Micropac's sales for the second quarter
of 1998 through the first quarter of 1999. In addition, sales for some of
the Company's standard high-temperature products were affected by decreased
oil industry exploration.
2. Cost of sales for the second quarter 1999 totaled 73.7% of net sales versus
77.4% for the same quarter 1998. Reductions in direct labor and overhead
expenses were the primary reasons for reduced cost of sales for the
quarter. These reduction were achieved due to changes in product mix and
the introduction of cost cutting measures initiated between the second
quarter of 1998 and 1999. Cost of sales year-to-date 1999 totaled 74.5% of
net sales, versus 75% for the comparable period of 1998. Changes in product
mix to product more materials intensive was the primary reason for the
increased cost of sales percentage for the first six months of 1999 versus
1998.
3. Selling, general and administrative expenses for the second quarter of 1999
totaled 19.8% of sales compared to 19.2% in 1998, due to increased selling
expenses. Year to date 1999, selling, general and administrative expenses
totaled 20.0% of revenues compared to 19.1% for the same six months in
1998, primarily attribured to decreased sales. Actual selling, general and
administrative expenses for 1999 decreased approximately ($65,000) compared
to the same time frame in 1998. Items contributing to the decrease in
selling, general and administrative expenses were decreased selling
expenses and corporate travel expenses.
4. Income per share for the second quarters 1999 and 1998 totaled $.03 and
$.02 respectively. Year to date, income per share totals $ .05 for 1999
compared to $ .06 per share for 1998.
5. New orders for the second quarter and year to date 1999 totaled $2,508,000
and $4,785,000 respectively compared to 1998's bookings of $5,025,000 and $
$6,954,000 for the same periods. New orders received in 1999 are largely
attributed to sales to foreign customers, distributors and reorders for
existing custom product. Reduced orders in the current year are
attributable to delays in expected add-ons to current contracts; decreased
oil industry exploration, affecting the Company's high-temperature product
sales; and the continued move of the military market place to commercial
off-the-shelf products.
6. Backlog totaled $4,478,000 on May 29, 1999 compared to $7,974,000 as of May
30, 1998 and $5,212,000 at November 30, 1998. The backlog reflects a good
mix of the Company's products, and shipments of a significant amount of the
backlog are estimated to be made in fiscal 1999. The backlog reduction is a
result of lack of new orders, and shipments against contracts obtained in
1998.
7. Assets, as of May 29, 1999, totaled $8,308,000, a decrease of ($68,000)
year to date; while assets for the same six months of 1998 totaled
$8,205,000, a decrease of ($253,000). The reduction of assets for 1999 was
related to decreased inventories; while the reduction in 1998 was related
to decreased accounts receivable due to reduced sales for the second
quarter of 1998. The Company, for the comparable periods, was able to
improve its liquidity by increasing cash and short term investments while
reducing inventories.
8. Accounts receivable increased $108,000 since November 30, 1998 compared to
a decrease of ($724,000) for the same six month period of the prior year.
The decrease in 1998 was related to decreased sales resulting from the slow
down in the Asian economy and decreased sales to the Company's
distributors. The increase in 1999 is related to improved sales in the
second quarter. Days sales totaled 53 days on May 29, 1999 compared to 56
days as of November 30, 1998 and 53 days as of May 30, 1998.
<PAGE>
9. Total inventories have decreased ($415,000) for the first six months of
1999 compared to an increase of $504,000 for the same six months of 1998.
Raw materials decreased ($289,000) in the first six months of 1999 compared
to an increase of $402,000 for the same six months of fiscal 1998. The
decrease in raw materials inventory for the first six months of 1999 is
attributed to resumption of shipments to a major customer whose orders were
rescheduled from 1998 to 1999. The materials for the customer had been
purchased in early 1998. Work in process inventories for the first half of
fiscal 1999 have decreased ($126,000) compared to an increase of $102,000
for the same period of fiscal 1998. Sales for the comparable six month
period of 1999 are down by (10%) and work in process has decreased (12%) to
reflect the decrease in sales.
10. Liabilities and Deferred Income Taxes for 1999 have decreased ($248,000)
since November 30, 1998 compared to a decrease of ($489,000) for the same
six months period in the prior year. The decreases in liabilities for 1999
are related to the reduction of reserves for product returns, accrued
payroll expense and accrued tax liabilities for the current year. The
reduction for 1998 was related to reduced accounts payable and other
accrued liabilities.
11. Shareholders' equity has increased $180,000 for the first six months of
1999 compared to $236,000 for the same six months of 1998. Shareholders'
equity for 1999 was affected by reduced sales and stable manufacturing
costs for the comparable periods.
12. Cash and short term investments increased $289,000 for the six months
period of 1999 compared to a decrease in cash of ($31,000) for the same
period in 1998. Changes in cash for 1999 are attributed to cash used for
operating activities, primarily the reduction of inventories. Changes in
cash usage for the same period in 1998 were due to operating activities in
which cash received from reduced accounts receivable was tied up in
increased inventories.
13. Year 2000 compliance for hardware changes has been completed and all new
software for Y2K updates needed have been purchased. The estimated cost for
Y2K compliance for the reprogramming of the Company's home generated
software, the purchase of hardware and associated software upgrades is
expected to be approximately $40,000. Reprogramming of internally generated
programs has been completed. The purchase and installation of the
commercial software has been completed and installed. It is in the process
of being checked for Y2K compliance with the latest downloads possible. The
conversion of the old payroll software to the new Y2K compliant software is
underway and should be completed by the first week of July 1999. Testing of
all stand-alone computers not attached to the network is in process and is
scheduled to be completed by mid July. Vendor analysis for Y2K compliance
is currently underway. Vendors are being analyzed to see if they are Y2K
compliant. If vendors are not compliant, additional vendors will be sought
to replace or backup vendors as needed for production.
<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. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
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None
ITEM 4. OTHER INFORMATION
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None
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
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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.
6-22-99 /s/ Nicholas Nadolsky
Date -------------------------
Nicholas Nadolsky
Chairman of the Board/CEO
6-22-99 /s/ Dave Hendon
Date -------------------------
Dave Hendon
Controller
