<PAGE>
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 September 28, 1996 Commission file No. 0-11201
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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 principal (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 by 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 practicable date.
Class Outstanding at November 8, 1996
- ----------------------------- --------------------------------
Common Stock ($.50 par value) 1,499,135
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
---------------------------
(Unaudited)
September 28,
1996
-------------
ASSETS
- ------
Current Assets:
Cash and cash equivalents ....................... $ 2,403,369
Accounts receivable ............................. 1,764,444
Inventories:
Finished goods ................................ 762,201
Work in process ............................... 2,154,844
Parts and raw materials ....................... 978,136
-----------
Total inventories ........................... 3,895,181
Prepaid expenses ............................... 228,507
Prepaid income taxes............................ 83,951
Deferred tax assets............................. 1,072,452
-----------
Total current assets ........................ 9,447,904
Property, plant and equipment ..................... 12,679,319
Less accumulated depreciation ................... 9,396,516
-----------
Net property, plant and equipment ........... 3,282,803
Other assets ...................................... 91,851
-----------
Total Assets $12,822,558
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
Current Liabilities:
Accounts payable ................................ $ 616,756
Accrued liabilities ............................. 875,550
-----------
Total current liabilities ................... 1,492,306
Other liabilities.................................. 223,000
Deferred Tax liabilities........................... 154,500
-----------
Total liabilities 1,869,806
-----------
Stockholders' equity:
Common stock, par value $.50 per share:
Authorized: 5,000,000 shares
Issued: 2,569,756 shares 1,284,878
Additional paid-in capital ...................... 8,860,261
Retained earnings ............................... 9,925,060
-----------
20,070,199
Less treasury stock at cost:
Purchased: 1,064,339 shares 9,117,447
-----------
Total Liabilities and Stockholders' Equity ... 10,952,752
-----------
$12,822,558
===========
See accompanying notes to consolidated financial statements.
- 1 -
<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Quarter Ended Year-to-Date
--------------------- -----------------------
Number of Weeks Number of Weeks
--------------------- -----------------------
Thirteen Sixteen Thirty-nine Forty
---------- --------- ----------- -----------
Sept 28 Oct 7 Sept 28 Oct 7
1996 1995 1996 1995
---------- --------- ---------- ----------
Net sales .................... $ 2,997,905 $4,355,200 $10,110,778 $10,884,345
----------- ---------- ----------- -----------
Cost and expenses:
Cost of sales ............... 1,929,416 2,300,286 5,804,257 5,590,990
Selling, general and
administrative ............ 1,095,883 1,399,129 3,549,149 3,586,888
Restructuring charge.....(A). 1,821,762 - 1,821,762 -
---------- ---------- ----------- -----------
4,847,061 3,699,415 11,175,168 9,177,878
---------- ---------- ---------- ----------
Operating income (loss)........ (1,849,156) 655,785 (1,064,390) 1,706,467
Interest and other
income, net.................. 5,899 68,235 80,385 163,122
---------- ---------- ---------- ----------
Income (loss) before
provision (credit) for
income taxes............... (1,843,257) 724,020 (984,005) 1,869,589
Provision (credit) for
income taxes................. (704,000) 255,000 (410,000) 671,000
---------- ---------- ---------- ----------
Net income (loss)..........(A).$(1,139,257) $ 469,020 $ (574,005) $1,198,589
=========== ========== ========== ==========
Net income (loss) per
common share.............(A). $(.73) $.26 $(.36) $.68
===== ==== ===== ====
Cash dividend per
common stock ................ $.10 $.10 $.30 $.30
==== ==== ==== ====
Weighted average number of
shares outstanding .......... 1,564,609 1,769,915 1,595,455 1,765,402
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
(A) The restructuring charge net of related tax benefits
was $1,093,000 or $.70 per share in 1996.
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<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Number of Weeks Ended
--------------------------
Thirty-nine Forty
----------- ----------
Sept 28 Oct 7
1996 1995
---------- ----------
Cash flows from operating activities:
Net income (loss).................................... $ (574,005) $1,198,589
---------- ----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................... 648,594 705,361
Effects of restructuring charge.................. 1,687,000 -
Loss on available-for-sale securities............ 19,000 -
Deferred income taxes............................ (381,252) -
Changes in operating assets and liabilities:
Accounts receivable............................ 608,737 215,923
Inventories.................................... (954,171) (236,480)
Prepaid income taxes........................... (83,951) -
Prepaid expenses............................... (116,292) (41,640)
Other assets................................... (88,254) 32,050
Accounts payable............................... 230,453 111,725
Accrued liabilities............................ (274,820) 22,116
Income taxes payable........................... (323,549) (125,556)
---------- ----------
Total adjustments............................... 971,495 683,499
---------- ----------
Net cash provided by operating activities....... 397,490 1,882,088
---------- ----------
Cash flows from investing activities:
Purchase of capital assets......................... (722,126) (341,723)
Proceeds from sales of capital assets.............. 980 617
Proceeds from sales and maturity of available-for
sale securities.................................. 2,272,071 499,503
---------- ----------
Net cash provided by investing activities....... 1,550,925 158,397
---------- ----------
Cash flows from financing activities:
Repurchase of 143,600 and 4 shares of common stock. (1,520,830) (46)
Proceeds from the issuance of 20,304 and 24,334
shares of common stock........................... 147,287 154,005
Payment of dividends............................... (466,689) (513,135)
---------- ----------
Net cash used in financing activities........... (1,840,232) (359,176)
---------- ----------
Net increase in cash and cash equivalents............ 108,183 1,681,309
Cash and cash equivalents at beginning of year....... 2,295,186 789,152
---------- ----------
Cash and cash equivalents at end of period........... $2,403,369 $2,470,461
========== ==========
Supplemental disclosures of cash flows information:
Cash paid during the period for:
Income taxes................................... $ 465,000 $ 796,703
========== ==========
See accompanying notes to consolidated financial statements.
-3
<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-B. The financial statements do,
however, reflect all adjustments which are, in the opinion of the
anagement necessary for a fair presentation of the financial position
of the Company as of September 28, 1996 and its results of operations
and cash flows for the period presented.
B. Net Income (loss) Per Share
Net income (loss) per share is based upon the weighted average number
of common shares and common equivalent shares outstanding during the
period. Common equivalent shares arise from the dilutive effects of
shares that may be purchased under stock option and purchase plans.
C. Accounting Period
The Company's fiscal year is the 52-53 week period ending on the Satur-
day closest to December 31. References to 1996 and 1995 are as follows:
quarter- the 13 weeks ended September 28, 1996 and 16 weeks ended
October 7, 1995 ; year-to-date - the 39 weeks ended September 28, 1996
and the 40 weeks ended October 7, 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 calendar 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. Restructuring
The restructuring of engineering responsibilities and its attendant
re-focus of product lines impacted the valuation of inventories. A
review of inventories, certain intangibiles arising from acquired
product designs, a non-compete agreement, and deferred compensation
for a retiring senior officer resulted in aggregate charges of
$1,822,000, and charges net of tax benefits of $1,093,000 or $.70 per
share, to operations in the third quarter of 1996.
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<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 Ended Year-to-Date
-------------- ---------------
Number of Weeks Number of Weeks
------------- ---------------
-13- -16- -39- -40-
------- ------- ------- -------
Sept 28 Oct 7 Sept 28 Oct 7
1996 1995 1996 1995
------- ------- ------- -------
Net sales......................... 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Costs and expenses:
Cost of sales................... 64.4 52.8 57.4 51.4
Selling, general and
administrative................ 36.5 32.1 35.1 32.9
Restructuring charge............ 60.8 - 18.0 -
----- ----- ----- -----
161.7 84.9 110.5 84.3
----- ----- ----- -----
Operating income (loss)........... (61.7) 15.1 (10.5) 15.7
Interest and other income, net.... .2 1.5 .8 1.5
----- ----- ----- -----
Income (loss) before provision
(credit) for income taxes....... (61.5) 16.6 (9.7) 17.2
Provision (credit) for
income taxes.................... (23.5) 5.8 (4.1) 6.2
----- ----- ----- -----
Net income (loss).............(A). (38.0)% 10.8% (5.6)% 11.0%
====== ===== ====== =====
(A) The effects on net income (loss) of the third quarter restructuring
charge, net of related tax benefits, were 36.5% for the quarter
and 10.8% year-to-date in 1996. Excluding the restructuring
charge net of related tax benefits, the 1996 quarter and
year-to-date percentages would have been (1.5%) and
5.2%, respectively.
-5-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
For the thirteen (quarter) and thirty-nine (year-to-date) weeks ended
September 28, 1996 compared to sixteen (quarter) and forty (year-to-date) weeks
ended October 7, 1995:
Results of operations for the quarter reflect decreases in: net sales of
$1,357,000 or 31.2%; operating income before restructuring charge of $683,000 or
104.2%; operating income (after restructuring charge) of $2,505,000 or 382%; net
income of $1,608,000 or 343%, after a restructuring charge of $1,093,000 net of
related tax benefits; and net income per share of $.99 or 381%, after a
restructuring charge net of related tax benefits of $.70 per share.
Year-to-date results of operations reflect decreases in: net sales of
$773,000 or 7.1%; operating income before restructuring charge of $949,000 or
55.6%; operating income (after restructuring) of $2,771,000 or 162%; net income
of $1,773,000 or 148%, after a restructuring charge of $1,093,000 net of related
tax benefits; and net income per share of $1.04 or 153%, after a restructuring
charge net of related tax benefits of $.70 per share.
The decreases in net sales for the quarter were primarily attributable to
an accounting change in the quarterly composition from sixteen weeks in 1995 to
thirteen weeks in 1996, which exacerbated comparison between the third quarters
of 1996 and 1995. If the sixteen calendar weeks ended October 5, 1996 were
compared to the same sixteen calendar weeks ended October 7, 1995, net sales
would have been $4,175,000 versus $4,355,000, a decline of 4.1%.
Year-to-date orders for comparable time periods of thirty-nine weeks
decreased $467,000 or 4.0%, although the backlog of firm unfilled orders
increased $563,000 or 9.0% to $6,812,000 compared to the same time last year.
Compared to year-end 1995, backlog is up $1,156,000 or 20.4% partially due to
the shipment shortfall for the first nine months of 1996 and continuing
demand for Company products.
As a result of the decreases in the quarter and year-to-date net sales,
cost of sales decreased $371,000 or 16.1% for the quarter,but increased $213,000
3.8% year-to-date. Cost of sales as a percentage of net sales increased 11.6% to
64.4% for the quarter and 6.0% to 57.4% year-to-date. The primary reasons for
the increases were higher compensation rates impacting the current quarter and
year-to-date due to the merit pay increases that became effective last year at
mid-year 1995. 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, not fully
absorbed because the shipment shortfall impacted cost of sales. The loss of
production time from TQM and ISO-9001 training and implementation as well as the
set-up costs for the new manufacturing facility in Costa Rica, which in the
aggregate were $173,000 for the quarter and $353,000 year-to-date, were charged
to operations as incurred.
-6-
<PAGE>
Selling, general and administrative expenses increased as a percentage of
net sales 4.4% to 36.5% for the quarter and increased 2.2% to 35.1%
year-to-date. The increases are due to TQM and ISO-9001 training, instruction
and implementation costs, and a comprehensive marketing analysis which in the
aggregate were $184,000 for the quarter and $439,000 year-to-date, as well as
higher compensation expenses resulting from last year's mid-year merit increases
to all employees.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's liquidity and financial condition remained strong throughout
the third quarter of 1996. End of quarter cash balances are approximately $2.4
million and working capital of $8.0 million reflects a current ratio of 6.3 to 1
at the end of the quarter.
The Company's operating activities generated cash flows of $397,490 during
the first nine months of 1996 compared to $1,882,000 in the first nine months of
1995. The Company invested $721,000 in plant improvements and equipment during
the first nine months of 1996 compared to $341,000 during the first nine months
of 1995. In addition the Company paid cash dividends of $467,000 in 1996
compared to $513,000 in 1995, at the quarterly rate of $.10 per share and made
open market purchases of 143,600 of its common stock at a cost of $1,521,000 in
the first nine months of 1996.
The Company has a $3,000,000 unsecured line of credit agreement and
the full line is available for future borrowing.
Management believes that with the cash position and the unused line of
credit, along with cash flows expected to be generated by operations, the
Company will have sufficient resources for currently contemplated operations.
The Company has completed the establishment of a low cost manufacturing facility
in Costa Rica which became operational during the third quarter of 1996. As part
of a new open-market stock repurchase program , the Company has been authorized
to purchase up to 100,000 shares, from time to time depending on market
conditions in contemplation of establishing a stock bonus plan. The Company is
also exploring the possibility of acquiring similar manufactures of electronic
devices, although it currently has no definitive plans or agreements. Management
believes that such stock repurchases, acquisitions and business operations
expansion could be financed through the available cash and capital resources
currently available as previously discussed and/or through additional borrowing
or issuance of equity or debt securities.
-7-
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit NO.
-----------
(11) - Statement of re: Computation of Earnings Per Share
(b) A report on form 8-K dated November 04, 1996 was filed
reporting the Registrant's results of operation, restructuring
charge, and stock repurchase program for the third quarter
of 1996.
8
<PAGE>
Exhibit (11)
MERRIMAC INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(Unaudited)
Number of Weeks Ended
----------------------------
Thirteen Thirty-nine
----------- -----------
Sept 28 Sept 28
1996 1996
----------- -----------
Net income (loss)...................... $(1,139,257) $ (574,005)
=========== ==========
PRIMARY EARNINGS PER SHARE
--------------------------
Average number of shares outstanding
Common stock........................ 1,529,439 1,564,817
Stock options (1)................... 30,467 26,985
--------- ---------
Shares outstanding as adjusted......... 1,559,906 1,591,802
========= =========
Net income (loss) per common and common
equivalent share.................... $(.73) $(.36)
===== =====
FULLY DILUTED EARNINGS PER SHARE
--------------------------------
Average number of shares outstanding
Common stock........................ 1,529,439 1,564,817
Stock options (1)................... 35,170 30,638
--------- ---------
Shares outstanding as adjusted......... 1,564,609 1,595,455
========= =========
Net income (loss) per common share
assuming full dilution.............. $(.73) $(.36)
===== =====
(1) Represents additional shares resulting from assumed conversion of
stock options less shares purchased with the proceeds thereof.
-9-
<PAGE>
SIGNATURES
Pursuant to the requirements of 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: November 8, 1996 By /s/ Eugene W. Niemiec
-----------------------------------
Eugene W. Niemiec
President, Chief Executive
Officer and Treasurer
Date: November 8, 1996 By /s/ Robert V. Condon
-----------------------------------
Robert V. Condon
Vice President, Finance and
Chief Financial Officer
-10-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-28-1996
<CASH> 2,403,369
<SECURITIES> 0
<RECEIVABLES> 1,764,444
<ALLOWANCES> 0
<INVENTORY> 3,895,181
<CURRENT-ASSETS> 9,447,904
<PP&E> 12,679,319
<DEPRECIATION> 9,396,516
<TOTAL-ASSETS> 12,822,558
<CURRENT-LIABILITIES> 1,492,306
<BONDS> 0
0
0
<COMMON> 1,284,878
<OTHER-SE> 9,667,874
<TOTAL-LIABILITY-AND-EQUITY> 12,822,558
<SALES> 10,110,778
<TOTAL-REVENUES> 10,110,778
<CGS> 5,804,257
<TOTAL-COSTS> 5,804,257
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (984,005)
<INCOME-TAX> (410,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (574,005)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)
</TABLE>
