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 29,1997 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
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(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 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 May 1, 1997
----------------------------- -----------------------------
Common Stock ($.50 par value) 1,531,725
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
---------------------------
(Unaudited)
March 29, 1997
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ASSETS
------
Current assets:
Cash and cash equivalents ..................... $ 805,583
Available-for-sale securities (D) ............. 1,164,222
Accounts receivable ........................... 2,513,098
Inventories:
Finished goods .............................. 936,592
Work in process ............................. 2,456,934
Parts and raw materials ..................... 1,083,914
-----------
Total inventories ........................ 4,477,440
Prepaid expenses ............................. 192,669
Prepaid income taxes ......................... -
Deferred income taxes ........................ 963,646
-----------
Total current assets ...................... 10,116,658
Property, plant and equipment ................... 12,991,485
Less accumulated depreciation ................ 9,474,989
-----------
Net property, plant and equipment ......... 3,516,496
Deferred income taxes ........................... 47,000
Other assets .................................... 26,249
-----------
$13,706,403
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable ............................. $ 952,833
Accrued liabilities .......................... 1,125,219
Income tax payable ........................... 44,297
-----------
Total current liabilities ................. 2,122,349
Other liabilities ............................... 284,530
-----------
Total liabilities ......................... 2,406,879
Stockholders' equity:
Common stock, par value $.50 per share:
Authorized: 5,000,000 shares
Issued: 2,589,902 shares............... 1,294,952
Additional paid-in capital ................... 9,040,890
Retained earnings ............................ 10,178,037
Unrealized holding gain on available-for-
sale securities, less deferred tax benefit (D) 12,710
-----------
20,526,589
Less treasury stock ; at cost:
Purchased: 1,074,839 shares ............. 9,227,065
-----------
Total stockholders' equity ............... 11,299,524
-----------
$13,706,403
===========
See accompanying notes to consolidated financial statements.
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<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Thirteen Weeks Ended
-----------------------------
March 29, Mar 30,
1997 1996
----------- ----------
Net sales .................................... $ 4,275,155 $ 3,187,345
----------- ----------
Cost and expenses:
Cost of sales ............................. 2,375,107 1,677,817
Selling, general and
administrative ......................... 1,489,006 1,168,339
----------- ----------
3,864,113 2,846,156
----------- ----------
Operating income ............................. 411,042 341,189
Interest and other income, net................ 26,704 40,114
----------- ----------
Income before income taxes ................... 437,746 381,303
Provision for income taxes ................... 160,000 129,000
----------- ----------
Net Income ................................... $ 277,746 $ 252,303
=========== ==========
Net income per common share................... $.18 $.15
==== ====
Cash dividend per share of
common stock .............................. $.10 $.10
==== ====
Weighted average number of
shares outstanding ........................ 1,547,276 1,634,248
========== ==========
See accompanying notes to consolidated financial statements.
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<PAGE>
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Thirteen Weeks Ended
-------------------------
Mar 29, Mar 30,
1997 1996
---------- ----------
Cash flows from operating activities:
Net income ..................................... $ 277,746 $ 252,303
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............... 207,581 219,716
Deferred compensation....................... 35,430 -
Changes in operating assets and liabilities:
Accounts receivable....................... (663,056) 229,551
Inventories............................... (311,622) (477,322)
Other current assets ..................... 79,141 (73,898)
Other assets.............................. 4,191 (11,382)
Accounts payable.......................... 202,070 (8,360)
Accrued liabilities....................... 172,339 41,323
Income taxes payable...................... 44,297 91,500
---------- ----------
Total adjustments (229,629) 11,128
---------- ----------
Net cash provided by operating activities. 48,117 263,431
---------- ----------
Cash flows from investing activities:
Purchase of capital assets ..................... (381,839) (48,640)
Proceeds from sales of capital assets .......... - 400
Proceeds from sales of available-for-sale
securities.................................... - 1,005,068
Purchase of investment securities............... (12,490) -
---------- ----------
Net cash provided by investing activities. (394,329) 956,528
---------- ----------
Cash flows from financing activities:
Repurchase of 56,200 shares of common stock - (596,310)
Proceeds from the issuance of 4,153 and 11,227
shares of common stock ........................ 37,640 81,223
Payment of dividends............................. (151,426) (158,657)
---------- ----------
Net cash used in financing activities ............. (113,786) (673,744)
---------- ----------
Net increase (decrease)in cash and cash equivalents (459,998) 546,215
Cash and cash equivalents at beginning of year..... 1,265,581 2,295,186
---------- ----------
Cash and cash equivalents at end of period......... $ 805,583 $2,841,401
========== ==========
Supplemental disclosures of cash flows information:
Cash paid during the quarter for:
Income taxes ................................. - $ 37,500
========== ==========
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-B. The financial statements do, however, reflect all adjustments
which are, in the opinion of the management, necessary for a fair presentation
of the financial position of the Company as of March 29, 1997 and its results of
operations and cash flows for the periods presented.
B. Net Income Per Common Share
Net income per share is based upon the weighted average number of common
shares and common equivalent shares outstanding during the period. Common
equivlent 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. The Company has quarterly dates that correspond with the
Saturday closest to the last day of each calender quarter and each quarter
consists of 13 weeks in a 52 week year. Every fifth year, the additional week to
make a 53 week year (fiscal 1997 is the next)is added to the fourth quarter
making such quarter consist of 14 weeks.
D. Investments in available-for-sales securities
The cost of the Company's portfolio of available-for-sale investments in
marketable equity securities at March 29, 1997 is reconciled to the fair market
value, which was also the carrying value, of the portifolio as follows:
March 29, 1997
---------------
Cost $1,142,958
Gross unrealized gains 21,264
Gross unrealized losses -
---------------
Fair market value $1,164,222
---------------
The net unrealized gains of $21,264 at March 29, 1997 are included as a
seperate component of stockholders' equity, net of deferred tax effects.
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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 1 -
-----------------------
Thirteen Weeks Ended
--------- ---------
March 29, March 30,
1997 1996
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Net sales .................. 100.0% 100.0%
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Costs and expenses:
Cost of sales ............ 55.6 52.6
Selling, general and
administrative ........... 34.8 36.7
----- -----
90.4 89.3
----- -----
Operating income............ 9.6 10.7
Other income, net........... .6 1.2
----- -----
Income before income taxes.. 10.2 11.9
Provision for imcome taxes.. 3.7 4.0
----- -----
Net income 6.5% 7.9%
===== =====
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<PAGE>
Mananagement Discussion And Analysis of Financial
Condition And Results Of Operations
Quarter ended March 29, 1997 compared to quarter ended March 30, 1996.
Results of operations reflect increases in: net sales of $1,088,000 or
34.1%; operating income of $70,000 or 20.5%; net income of $26,000 or 10.1%; and
net income per share of $.03 or 20%.
The net sales increase was partially attributable to delivering shipments
against a firm order backlog with order release dates that coincided with
production and shipment schedules. The first quarter of 1996 had disruptions due
to manufacturing down-time resulting from major snowfalls which interrupted
manufacturing and delayed product shipments.
Incoming orders received for the first quarter increased $1,400,000 or 35%
and the backlog of firm unfilled orders increased $2,900,000 or 45% to
$9,400,000. Compared to year-end 1996, backlog is up $1,200,000 or 15% which
reflects increased demand for Company products.
Cost of sales increased $697,000 or 41.5% and as a percentage of net sales
increased 3.0% to 55.6%. The primary reason for the increase was increased
compensation; a merit pay increase became effective mid-year 1996 and additional
manufacturing personnel were hired to concentrate on improving delivery
performance by reducing the number of late ship days in backlog. In addition,
certain transitional manufacturing costs associated with further restructuring
impacted cost of sales negatively.
Selling, general and administrative expenses increased $321,000 or 27.5%,
although as a percentage of net sales decreased 1.9% to 34.8%. Increases in
selling costs were related to higher sales commissions due to increased sales
revenues. General and administrative expenses partially increased due to
compensation related to the hiring of additional administrative personnel and
higher compensation expenses resulting from last year's mid-year merit increases
to all employees. Certain transitional costs associated with further
restructuring also impacted selling, general and administrative expenses.
Net income was $278,000 compared to $252,000 and net income per share of
$.18 benefited by approximately $.01 per share resulting from an 87,000 common
share reduction primarily due to the Company's common stock repurchases during
1996.
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<PAGE>
Mananagement Discussion And Analysis of Financial
Condition And Results Of Operations
Liquidity and Capital Resources
The Company's financial condition remained strong throughout the first
quarter of 1997. The Company had liquid resources comprised of cash, cash
equivalents and investments in available-for-sale securities, totaling
approximately $2,000,000 compared to approximately $4,100,000 in 1996. The
Company's working capital stood at $8,000,000 and its current ratio was 4.8 at
the end of the first quarter compared to $9,700,000 and 6.4, respectively, in
1996.
The Company's operating activities generated cash flows of $48,000 in the
first quarter of 1997 compared to $263,000 in 1996. A primary reason for the
decrease in cash flows in 1997 are the higher first quarter sales which
translated into an increase in accounts receivable of $663,000. The Company made
net investments in property, plant and equipment of $382,000 in the first
quarter of 1997 compared to $49,000 in 1996. The Company paid cash dividends of
$151,000 in 1997 compared to $159,000 in 1996 at the quarterly rate of $.10 per
share. During the first quarter of 1996 the Company made open market purchases
of 56,200 shares of its common stock at a cost of $596,000. No shares were
purchased in 1997. Lacking clear cut growth opportunities, the Company in the
past has returned a substantial portion of its net income to the stockholders.
Achievement of growth anticipated by the Company will inevitably cause a review
of the dividend policy.
The Company has a $3,000,000 unsecured line of credit with the Bank of New
York, at the bank's floating prime rate, and the full line is available for
future borrowing.
Management believes that with the liquid resources and the unused line of
credit available, along with cash flows expected to be generated from
operations, the Company will have sufficient resources for currently
contemplated operations in 1997. Expansion plans for the Company's manufacturing
facility in Costa Rica which became operational during the second half of 1996
are being contemplated for the current year. The Company's projected capital
expenditures for new projects and production equipment is anticipated to exceed
its depreciation and amortization expenses in 1997.
The Company was authorized on November 1, 1996 to purchase up to 100,000
shares of common stock from time-to-time depending on market conditions, and has
purchased 4,100 shares to date under such authorization.
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.
- 7 -
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibit No.
(11) - Statement re: Computation of Earnings Per Share
(b) A report on form 8-K dated April 16, 1997 was filed, reporting the
Registrant's dismissal of the accounting firm of J.H. Cohn LLP on April 11,
1997. J.H. Cohn was previously engaged as the principal accountant to audit the
Registrant's financial statements.
- 8 -
<PAGE>
Exhibit (11)
MERRIMAC INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
Thiteeen Weeks Ended
----------------------------
Mar 29, Mar 30,
1997 1996
-------- --------
Net income............................. $277,746 252,303
======== ========
PRIMARY EARNINGS PER SHARE
--------------------------
Average number of shares outstanding
Common stock ........................ 1,513,341 1,604,133
Stock options (1) ................... 33,935 30,115
---------- ---------
Shares outstanding as adjusted ........ 1,547,276 1,634,248
========== =========
Net income per common share and common
equivalent share .................... $.18 $.15
==== ====
FULLY DILUTED EARNINGS PER SHARE
--------------------------------
Average number of shares outstanding
Common stock ........................ 1,513,341 1,604,133
Stock options (1) ................... 33,935 30,115
--------- ---------
Shares outstanding as adjusted ........ 1,547,276 1,634,248
========= =========
Net income per common share assuming
full dilution ....................... $.18 $.15
==== ====
(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 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 8, 1997 By /s/ Mason N. Carter
---------------------------------
Mason N. Carter
President, and
Chief Executive Officer
Date: May 8, 1997 By /s/ Robert V. Condon
---------------------------------
Robert V. Condon
Vice President, Finance, Treasurer,
Secretary and Chief Financial Officer
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-3-1998
<PERIOD-END> MAR-29-1997
<CASH> 805,583
<SECURITIES> 1,164,222
<RECEIVABLES> 2,513,098
<ALLOWANCES> 0
<INVENTORY> 4,477,440
<CURRENT-ASSETS> 10,116,658
<PP&E> 12,991,485
<DEPRECIATION> 9,474,989
<TOTAL-ASSETS> 13,706,403
<CURRENT-LIABILITIES> 2,122,349
<BONDS> 0
0
0
<COMMON> 1,294,952
<OTHER-SE> 10,004,572
<TOTAL-LIABILITY-AND-EQUITY> 13,706,403
<SALES> 4,275,155
<TOTAL-REVENUES> 4,275,155
<CGS> 2,375,107
<TOTAL-COSTS> 2,375,107
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 437,746
<INCOME-TAX> 160,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 277,746
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
