<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 June 29, 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 July 22, 1996
- ----------------------------- ----------------------------
Common Stock ($.50 par value) 1,542,590
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
---------------------------
(Unaudited)
June 29
1996
-----------
ASSETS
- ------
Current Assets:
Cash and cash equivalents ....................... $ 1,971,374
Available-for-sale securities (D) ............... 1,259,384
Accounts receivable ............................. 2,290,997
Inventories:
Finished goods ................................ 1,131,620
Work in process ............................... 2,043,569
Parts and raw materials ....................... 1,482,758
-----------
Total inventories ........................... 4,657,947
Prepaid expenses ............................... 264,769
Deferred income taxes .......................... 705,074
-----------
Total current assets ........................ 11,149,545
Property, plant and equipment ..................... 12,235,451
Less accumulated depreciation ................... 9,211,120
-----------
Net property, plant and equipment ........... 3,024,331
Intangible assets, less accumulated
amortization of $651,719 ........................ 142,206
Other assets ...................................... 168,794
-----------
Total Assets $14,484,876
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------
Current Liabilities:
Accounts payable ................................ $ 561,226
Accrued liabilities ............................. 850,456
Income tax payable .............................. 235,049
-----------
Total current liabilities ................... 1,646,731
Deferred Tax liabilities........................... 154,500
-----------
Total liabilities 1,801,231
-----------
Stockholders' equity:
Common stock, par value $.50 per share:
Authorized: 5,000,000 shares
Issued: 2,563,839 shares 1,281,920
Additional paid-in capital ...................... 8,820,609
Retained earnings ............................... 11,217,529
Unrealized holding loss on available-for-sale
securities, less deferred tax benefit (D) ...... (18,981)
-----------
21,301,077
Less treasury stock at cost:
Purchased: 1,017,439 shares 8,617,432
-----------
Total stockholders' equity ................... 12,683,645
-----------
$14,484,876
===========
See accompanying notes to consolidated financial statements.
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<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Quarter Ended Year-to-Date
--------------------- -----------------------
Number of Weeks Number of Weeks
--------------------- -----------------------
Thirteen Twelve Twenty-six Twenty-four
---------- --------- ---------- -----------
June 29 June 17 June 29 June 17
1996 1995 1996 1995
---------- --------- ---------- ----------
Net sales ..................... $3,925,528 $3,076,952 $7,112,873 $6,529,145
---------- ---------- ---------- ----------
Cost and expenses:
Cost of sales ............... 2,197,024 1,649,584 3,874,841 3,290,704
Selling, general and
administrative ............ 1,284,927 1,032,789 2,453,266 2,187,759
---------- ---------- ---------- ----------
3,481,951 2,682,373 6,328,107 5,478,463
---------- ---------- ---------- ----------
Operating income .............. 443,577 394,579 784,766 1,050,682
Other income .................. 34,372 45,229 74,486 94,887
---------- ---------- ---------- ----------
Income before income taxes .... 477,949 439,808 859,252 1,145,569
Provision for income taxes (D). 165,000 160,000 294,000 416,000
---------- ---------- ---------- ----------
Net income .................... $ 312,949 $ 279,808 $ 565,252 $ 729,569
========== ========== ========== ==========
Net income per common share
and common equivalent
share ....................... $.20 $.16 $.35 $.42
==== ==== ==== ====
Cash dividend per share of
common stock ................ $.10 $.10 $.20 $.20
==== ==== ==== ====
Common and common equivalent
shares outstanding .......... 1,587,133 1,744,781 1,610,551 1,740,024
========= ========= ========= =========
See accompanying notes to consolidated financial statements.
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<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
Number of Weeks Ended
--------------------------
Twenty-six Twenty-four
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June 29 June 17
1996 1995
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Cash flows from operating activities:
Net Income ........................................ $ 565,252 $ 729,569
---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................... 444,769 418,761
Accounts receivable.............................. 82,184 (297,376)
Inventories...................................... (737,937) (188,100)
Prepaid expenses................................. (152,554) (51,562)
Other assets..................................... (17,197) 19,230
Accounts payable................................. 174,923 26,900
Other liabilities................................ (104,914) (42,151)
Income taxes payable............................. (88,500) (257,056)
---------- ----------
Total adjustments............................. (399,226) (371,354)
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Net cash provided by operating activities...... 166,026 358,215
---------- ----------
Cash flows from investing activities:
Purchase of capital assets....................... (265,708) (224,379)
Proceeds from sales of capital assets............ 415 617
Proceeds from sales and maturity of available-for
sale securities................................ 1,005,068 300,000
----------- ----------
Net cash provided by investing activities..... 739,775 76,238
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Cash flows from financing activities:
Repurchase of 96,700 shares of common stock...... (1,020,815) -
Proceeds from the issuance of 14,387 and 21,449
shares of common stock......................... 104,679 136,235
Payment of dividends............................. (313,477) (341,686)
----------- ----------
Net cash used in financing activities......... (1,229,613) (205,451)
----------- ----------
Net increase (decrease) in cash and cash equivalents (323,812) 229,002
Cash and cash equivalents at beginning of year..... 2,295,186 789,152
----------- ----------
Cash and cash equivalents at end of period......... $1,971,374 $1,018,154
========== ==========
Supplemental disclosures of cash flows information:
Cash paid during the period for:
Income taxes................................... $ 382,500 $ 673,203
========== ==========
See accompanying notes to consolidated financial statements.
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<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. 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 Saturday
closest to December 31. References to 1996 and 1995, are for: quarter- the
13 weeks ended June 29, 1996 and 12 weeks ended June 17, 1995 ;
year-to-date- the 26 weeks ended June 29, 1996 and the 24 weeks ended June
17, 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. 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 June 29, 1996 are set forth below by contractual maturity.
---------------------------------------------------------------------------
Date Due Amortized Estimated Fair
(years) Cost Market Value
---------------------------------------------------------------------------
After 1 through 5 $ 201,105 $ 199,449
After 5 through 10 989,882 966,372
After 10 100,000 93,563
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Totals $1,290,987 $1,259,384
========== ==========
The gross unrealized holding loss on available-for-sale securities at June
29, 1996 is $31,603. The loss, net of Federal and State income taxes, is
included as a separate component in stockholder's equity. There were no
gross unrealized gains.
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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
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Number of Weeks Number of Weeks
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-13- -12- -26- -24-
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June 29 June 17 June 29 June 17
1996 1995 1996 1995
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Net sales......................... 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
Costs and expenses:
Cost of sales................... 56.0 53.6 54.5 50.4
Selling, general and
administrative.................. 32.7 33.6 34.4 33.5
----- ----- ----- -----
88.7 87.2 88.9 83.9
----- ----- ----- -----
Operating income.................. 11.3 12.8 11.1 16.1
Interest and other income, net.... .9 1.5 1.0 1.5
----- ----- ----- -----
Income before income taxes........ 12.2 14.3 12.1 17.6
Provision for income taxes........ 4.2 5.2 4.2 6.4
----- ----- ----- -----
Net income........................ 8.0% 9.1% 7.9% 11.2%
===== ===== ===== =====
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Thirteen (quarter) and twenty-six (year-to-date) weeks ended June 29, 1996
compared to twelve (quarter) and twenty-four (year-to-date) weeks ended
June 17,1995.
Results of operations for the quarter reflect increases in: net sales of
$849,000 or 27.6%; operating income of $49,000 or 12.4%; net income of $33,000
or 11.8%; and net income per share of %.04 or 25.0%. Year-to-date results of
operations reflect an increase in net sales of $584,000 or 8.9% and decreases
in: operating income of $266,000 or 25.3%; net income of $164,000 or 22.5%; and
net income per share of $.07 or 16.7%.
The increases in net sales were partially attributable to increased
shipments of orders from a higher order backlog, and an additional one week of
operations for the quarter and an additional two weeks of operations for the
year-to-date period compared to last year.
Year-to-date orders for comparable time periods decreased $282,000 or 3.4%,
although the backlog of firm unfilled orders increased $285,000 or 4.5% to
$6,563,000 compared to the same time last year. Compared to year-end, backlog is
up $907,000 or 16.0%, notwithstanding higher shipments during 1996, and reflects
continuing demand for Company products.
As a result of the increases in the quarter and year-to-date net sales,
cost of sales increased $547,000 or 33.2% for the quarter and $584,000 or 17.8%
year-to-date. Cost of sales as a percentage of net sales increased 2.4% to 56.0%
for the quarter and 4.1% to 54.5% year-to-date. The primary reasons for the
increases were higher compensation rates impacting the current quarter and
year-to-date from last year's merit pay increases that became effective last
year at 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 of operations in this current year's quarterly
composition to thirteen weeks, which also impacted cost of sales. Non productive
labor from TQM and ISO-9001 training, instruction and implementation costs as
well as the set-up costs for the new manufacturing facility in Costa Rica which
in the aggregate were $180,000 year-to-date, were charged to operations as
incurred.
Selling, general and administrative expenses increased $252,000 or 24.4%
for the quarter and $266,000 or 12.1% year-to-date, and as a percentage of net
sales decreased .9% to 32.7% for the quarter and increased .9% to 34.4%
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 $255,000 year-to-date, and higher compensation expenses resulting
from last year's mid-year merit increases to all employees.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Company's liquidity and financial condition remained strong throughout
the second quarter of 1996. At the end of the second quarter cash and
investments in available-for-sale securities accounts reflect a total balance
of approximately $3.2 million. Working capital stands at $9.5 million at the
end of the second quarter 1996. The current ratio stands at 6.8 to 1.
The Company's operating activities generated cash flows of $166,000 during
the first half of 1996 compared to $358,000 in the first half of 1995. The
Company invested $ 266,000 in plant improvements and equipment during the first
half of 1996 compared to $224,000 during the first half of 1995. In addition the
Company paid cash dividends of $313,000 in 1996 compared to $342,000 in 1995 at
the quarterly rate of $.10 per share and made open market purchases of 96,700
shares of its common stock at a cost of $1,021,000 in the first half 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 liquid resources, and the unused line of
credit, along with cash flows expected to generated by operations, the Company
will have sufficient resources for currently contemplated operations 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 the liquid 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 4. Submission of Matters to a Vote of Security Holders
(a) Date of the Meeting: April 25, 1996
Annual Stockholders Meeting.
(b) Election of (5) Directors
Elected
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Nominated: Yes No
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Charles F. Huber II X
Eugene W. Niemiec X
Arthur A. Oliner X
Mason N. Carter X
Reynold K. Green X
For Against Abstain
--------- --------- ---------
(c) Approve appointment of
independent auditors 1,444,292 6,207 4,776
Proposition was approved
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.
8
<PAGE>
Exhibit (11)
MERRIMAC INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(Unaudited)
Number of Weeks Ended
----------------------------
Thirteen Twenty-six
----------- -----------
June 29 June 29
1996 1996
---------- -----------
Net income ............................ $ 312,949 $ 565,252
========== ===========
PRIMARY EARNINGS PER SHARE
--------------------------
Average number of shares outstanding
Common stock........................ 1,560,902 1,582,518
Stock options (1)................... 25,907 28,033
--------- ---------
Shares outstanding as adjusted......... 1,586,809 1,610,551
========= =========
Net income per common share and common
equivalent share.................... $.20 $.35
==== ====
FULLY DILUTED EARNINGS PER SHARE
--------------------------------
Average number of shares outstanding
Common stock........................ 1,560,902 1,582,518
Stock options (1)................... 26,231 28,033
--------- ---------
Shares outstanding as adjusted......... 1,587,133 1,610,551
========= =========
Net income per common share assuming
full dilution....................... $.20 $.35
==== ====
(1) Represents additional shares resulting from assumed conversion of stock
options less shares purchased with the proceeds thereof.
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<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: July 26, 1996 By /s/ Eugene W. Niemiec
-----------------------------------
Eugene W. Niemiec
President, Chief Executive
Officer and Treasurer
Date: July 26, 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> Jun-29-1996
<CASH> 1,971,374
<SECURITIES> 1,259,384
<RECEIVABLES> 2,290,997
<ALLOWANCES> 0
<INVENTORY> 4,657,947
<CURRENT-ASSETS> 11,149,545
<PP&E> 12,235,451
<DEPRECIATION> 9,211,120
<TOTAL-ASSETS> 14,484,876
<CURRENT-LIABILITIES> 1,646,731
<BONDS> 0
0
0
<COMMON> 1,281,920
<OTHER-SE> 11,401,725
<TOTAL-LIABILITY-AND-EQUITY> 14,484,876
<SALES> 7,112,873
<TOTAL-REVENUES> 7,112,873
<CGS> 3,874,841
<TOTAL-COSTS> 3,874,841
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 859,252
<INCOME-TAX> 294,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 565,252
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
