UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter ended MARCH 30,1996 Commission file No. 0-11201
MERRIMAC INDUSTRIES, INC.
- -------------------------------------------------------------------------------
(Exact name of the registrant as specified in its charter.)
New Jersey 22-1642321
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
41 Fairfield Place
West Caldwell, New Jersey 07007-0986
------------------------------ --------------
(Address of principle (Zip code)
executive offices)
Registrant's telephone number, including area code (201) 575-1300
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed be Section S 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 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 _____.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practible date.
Class Outstanding at April 26, 1996
----------------------------- -----------------------------
Common Stock ($.50 par value) 1,584,505
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
March 30, 1996
--------------
ASSETS
------
Current assets:
Cash and cash equivalents ..................... $ 2,841,401
Available-for-sale securities (D) ............. 1,272,690
Accounts receivable ........................... 2,143,630
Inventories:
Finished goods .............................. 1,111,191
Work in process ............................. 1,880,231
Parts and raw materials ..................... 1,405,910
-----------
Total inventories ........................ 4,397,332
Prepaid expenses ............................. 186,113
Deferred income taxes ........................ 700,056
-----------
Total current assets ...................... 11,541,222
Property, plant and equipment ................... 12,045,517
Less accumulated depreciation ................ 9,052,411
-----------
Net property, plant and equipment ......... 2,993,106
Intangible assets, less accumulated
amortization of $612,936...................... 180,990
Other assets .................................... 162,979
-----------
$14,878,297
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable ............................. $ 377,943
Accrued liabilities .......................... 996,693
Income tax payable ........................... 415,049
-----------
Total current liabilities ................. 1,789,685
Deferred tax liabilities......................... 154,500
Stockholders' equity:
Common stock, par value $.50 per share:
Authorized: 5,000,000 shares
Issued: 2,560,679 shares............... 1,280,340
Additional paid-in capital ................... 8,798,733
Retained earnings ............................ 11,059,400
Unrealized holding loss on available-for-
sale securities, less deferred tax benefit (D) (11,434)
-----------
21,127,039
Less treasury stock ; at cost:
Purchased: 976,939 shares................ 8,192,927
Total stockholders' equity ............... 12,934,112
-----------
$14,878,297
===========
See accompanying notes to consolidated financial statements.
<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Weeks Ended
-----------------------------
Thirteen Twelve
----------- -----------
Mar 30, Mar 25,
1996 1995
----------- ----------
Net sales .................................... $ 3,187,345 $3,452,193
----------- ----------
Cost and expenses:
Cost of sales ............................. 1,677,817 1,641,120
Selling, general and
administrative ......................... 1,168,339 1,154,970
----------- ----------
2,846,156 2,796,090
----------- ----------
Operating income ............................. 341,189 656,103
Interest and other income, net................ 40,114 49,658
----------- ----------
Income before income taxes ................... 381,303 705,761
Provision for income taxes ................... 129,000 256,000
----------- ----------
Net Income ................................... $ 252,303 $ 449,761
=========== ==========
Net income per common share................... $.15 $.26
==== ====
Cash dividend per share of
common stock .............................. $.10 $.10
==== ====
Weighted average number of
shares outstanding ........................ 1,634,248 1,722,932
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Weeks Ended
-------------------------
Thirteen Twelve
---------- ----------
Mar 30, Mar 25,
1996 1995
---------- ----------
Cash flows from operating activities:
Net income ..................................... $ 252,303 $ 449,761
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 219,716 207,943
Accounts receivable......................... 229,551 (261,478)
Inventories................................. (477,322) (22,493)
Prepaid expenses............................ (73,898) (44,972)
Other assets................................ (11,382) 9,615
Accounts payable............................ (8,360) 146,190
Accrued liabilities......................... 41,323 44,550
Income taxes payable........................ 91,500 256,147
---------- ----------
Total adjustments 11,128 335,502
---------- ----------
Net cash provided by operating activities. 263,431 785,263
Cash flows from investing activities:
Purchase of capital assets ..................... (48,640) (114,782)
Proceeds from sales of capital assets .......... 400 617
Proceeds from sales of available-for-sale
securities.................................... 1,005,068 300,000
---------- ----------
Net cash provided by investing activities.... 956,528 185,835
Cash flows from financing activities:
Repurchase of 56,200 shares of common stock (596,310) -
Proceeds from the issuance of 11,227 and 14,549
shares of common stock ........................ 81,223 90,942
Payment of dividends............................. (158,657) (170,495)
---------- ----------
Net cash used in financing activities ...... (673,744) (79,553)
---------- ----------
Net increase in cash and cash equivalents 546,215 891,545
Cash and cash equivalents at beginning of year..... 2,295,186 789,152
---------- ----------
Cash and cash equivalents at end of period......... $2,841,401 $1,680,697
========== ==========
Supplemental disclosures of cash flows information:
Cash paid during the quarter for:
Income taxes ................................. $ 37,500 $ -
========== ==========
See accompanying notes to consolidated financial statements.
<PAGE>
MERRIMAC INDUSTRIES, INC.
NOTES TO Consolidated FINANCIAL STATEMENTS
------------------------------------------
A. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and therefore, do
not include all information and footnote disclosures otherwise required by
Regulation S-X. The financial statements do, however, reflect all adjustments
which are, in the opinion of the management necessary for a fair statement of
the results of the interim periods presented.
B. Net Income Per Share
Net income per share is based upon the weighted average number of common
shares and common equivalent shares (based on stock options) outstanding during
the period.
C. Accounting Period
The Company's fiscal year is the 52-53 week period ending on the Saturday
closest to December 31. References to 1996, and 1995 are to the thirteen weeks
ended March 30, 1996 and twelve weeks ended March 25,1995. Effective in 1996,
the Company changed the number of weeks which comprise its fiscal quarter and
the quarter-end closing dates. Previously, the Company had utilized 13 four-week
accounting periods for closing its books and quarterly financial information was
reported on a 12-12-16-12 week basis in a 52 week fiscal year. The Company now
has quarterly dates that correspond with the Saturday closest to the last day of
each calender quarter and each quarter will now consist of 13 weeks in a 52 week
year. Every fifth year, the additional week to make a 53 week year (fiscal 1997
will be the next)is added to the fourth quarter making such quarter consist of
14 weeks.
D. Investments in Securities
The amortized cost and estimated fair market value of the Company's portfolio
of available-for-sale investments in marketable municipal debt securities at
March 30, 1996 are set forth below by contractual maturity.
------------------------------------------------------------------
Date Due Amortized Estimated Fair
(years) Cost Market Value
------------------------------------------------------------------
After 1 through 5 $ 199,926 $ 198,818
After 5 through 10 991,802 977,653
After 10 100,000 96,219
------------------------------------------------------------------
$1,291,728 $1,272,690
------------------------------------------------------------------
The gross unrealized holding loss on available-for-sale securities at March
30, 1996 was $19,038. The loss, net of Federal and State income taxes, is
included as a separate component in stockholders'equity. There were no
gross unrealized gains.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INCOME STATEMENT SUMMARY
(Unaudited)
The following table displays line items in the Consolidated Statements of Income
as a percentage of net sales.
Percentage of Net Sales
-----------------------
- Quarter 1 -
-----------------------
Weeks Ended
-----------------------
Thirteen Twelve
--------- ---------
March 30, March 25,
1996 1995
--------- ---------
Net sales .................. 100.0% 100.0%
----- -----
Costs and expenses:
Cost of sales ............ 52.6 47.5
Selling, general and
administrative ........... 36.7 33.5
----- -----
89.3 81.0
----- -----
Operating income............ 10.7 19.0
Other income, net........... 1.2 1.4
----- -----
Income before income taxes.. 11.9 20.4
Provision for imcome taxes.. 4.0 7.4
----- -----
Net income 7.9% 13.0%
===== =====
<PAGE>
Mananagement Discussion And Analysis of Financial
Condition And Results Of Operations
Thirteen weeks ended March 30, 1996 compared to twelve weeks ended March 25,
1995:
Results of operations reflect decreases in: net sales of $265,000 or 7.7%;
operating income of $315,000 or 48.0%; net income OF $197,000 or 43.9%; and net
income per share of $.11 or 42.3%
The net sales decrease was partly attributable to non production Company-
wide classroom time associated with extensive TQM (Total Quality Management) and
ISO-9001 quality standards training coupled with down-time associated with major
snowfalls which interrupted manufacturing and utimately product shipments. First
quarter orders decreased $58,000 or 1.4% and the backlog of firm unfilled orders
increased $750,000 or 13% to $6,500,000 compared the same time last year.
Compared to year-end, backlog is up $844,000 or 14.9% reflecting the lower sales
shipments during the first quarter 1996 and continuing demand for Company
products.
Cost of sales increased $37,000 or 2.2% and as a percentage of net sales
increased 5.1% to 52.6%. The primary reasons for the increase were increased
compensation rates impacting the current quarter from last year's merit pay
increases that became effective mid-year. Additional manufacturing personnel
were hired to reduce the number of backlog ship days. The doubling of the
matching contribution rate by the Company to the Company's 401(k) Plan , and
fixed overhead increases, due to the additional one week increase in this
current year's quarterly composition to thirteen weeks, also impacted cost of
sales. Non-productive labor from TQM training reduced overhead absorption and
was charged to operations as incurred.
Selling, general and administrative expenses increased $13,000 or 1.0% and
as a percentage of net sales increased 3.2% to 36.7%. While increases in selling
costs were offset by lower sales commissions from reduced sales revenues,
selling, general and administrative expenses increased from TQM and ISO-9001
training and instruction costs, and higher compensation expenses resulting from
last year's mid-year merit increases to all employees.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The company's liquidity and financial condition remained strong throughout
the first quarter of 1996. The cash and investments in available-for-sale
securities accounts reflect a total balance of approximately $4.1 million.
Working capital stood at $9.7 million at the end of the first of 1996. The
current ratio stands at 6.4.
The Company's operating activities generated cash flows of $263,000 in the
first quarter 1996 compared to $785,000 in the first quarter 1995.The Company
invested $49,000 in plant improvements and equipment during the first quarter
1996 compared to $114,00 during the first quarter of 1995. In addition the
Company paid cash dividends of $159,000 in 1996 compared to $171,000 in 1995 at
the quarterly rate of $.10 per share, and made open market purchases of 56,000
shares of its common stock at a cost of $596,000 in the first quarter 1996.
The company has a $2,500,000 unsecured line of credit agreement with
Chemical Bank New Jersey, at the bank's floating prime rate and the full line
is available for future borrowing.
Management believes that with the liquid resourses, the unused line of
credit, along with cash flows expected to be generated by operations, the
Company will have sufficient resourses for currently contemplated operatons in
1996. The company is in the process of establishing a low cost manufacturing
facility in Costa Rica and anticipates it will be operational in the second
half of 1996. The Company is also exploring the possibility of acquiring similar
manufacturers of electronic devices, although it currently has no definitive
plans or agreements. Management believes that such acquisitions and business
operations expansion could be financed through liquid and capital resources
currently available as previously discussed and/or through additional borrowing
or issuance of equity or debt securities.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibit No.
(11) - Statement re Computation of Earnings Per Share
The Company did not file any reports on Form 8-K during the
quarter for which this report is filed.
<PAGE>
Exhibit (11)
MERRIMAC INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Weeks Ended
----------------------------
Thirteen Twelve
-------- --------
Mar 30, Mar 25,
1996 1995
-------- --------
Net income............................. $252,303 $449,761
======== ========
PRIMARY EARNINGS PER SHARE
--------------------------
Average number of shares outstanding
Common stock ........................ 1,604,133 1,708,737
Stock options (1) ................... 30,115 14,195
---------- ---------
Shares outstanding as adjusted ........ 1,634,248 1,722,932
========== =========
Net income per common share and common
equivalent share .................... $.15 $.26
==== ====
FULLY DILUTED EARNINGS PER SHARE
--------------------------------
Average number of shares outstanding
Common stock ........................ 1,604,133 1,708,737
Stock options (1) ................... 30,115 14,195
--------- ---------
Shares outstanding as adjusted ........ 1,634,248 1,722,932
========= =========
Net income per common share assuming
full dilution ....................... $.15 $.26
==== ====
(1) Represents additional shares resulting from assumed conversion of
stock options less shares purchased with the proceeds thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements od section 13 or 15 (d) of the Securities
exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MERRIMAC INDUSTRIES, INC.
-------------------------
(Registrant)
Date: May 6, 1996 By /s/ Eugene W. Niemiec
---------------------------------
Eugene W. Niemiec
President, Chief Executive
Officer and Treasurer
Date: May 6, 1996 By /s/ Robert V. Condon
---------------------------------
Robert V. Condon
Vice President, Finance and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 2,841,401
<SECURITIES> 1,272,690
<RECEIVABLES> 2,143,630
<ALLOWANCES> 0
<INVENTORY> 4,397,332
<CURRENT-ASSETS> 11,541,222
<PP&E> 12,045,517
<DEPRECIATION> 9,052,411
<TOTAL-ASSETS> 14,878,297
<CURRENT-LIABILITIES> 1,789,685
<BONDS> 0
0
0
<COMMON> 1,280,340
<OTHER-SE> 11,653,772
<TOTAL-LIABILITY-AND-EQUITY> 14,878,297
<SALES> 3,187,345
<TOTAL-REVENUES> 3,187,345
<CGS> 1,677,817
<TOTAL-COSTS> 1,677,817
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 381,303
<INCOME-TAX> 129,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 252,303
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
