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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 the quarterly period ended April 4, 1998 Commission file No. 0-11201
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MERRIMAC INDUSTRIES, INC.
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(Exact name of small business issuer as specified in its charter)
New Jersey 22-1642321
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
41 Fairfield Place West Caldwell, New Jersey 07006
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (973) 575-1300
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Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act 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
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at May 8, 1998
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Common Stock ($.50 par value) 1,603,269
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
---------------------------
(Unaudited)
April 4,
1998
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ASSETS
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Current assets:
Cash and cash equivalents ....................... $ 2,478,894
Accounts receivable ............................. 4,003,940
Inventories:
Finished goods ................................ 563,646
Work in process ............................... 2,558,352
Parts and raw materials ....................... 818,205
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Total inventories ........................... 3,940,203
Other current assets .......................... 145,217
Deferred tax assets ............................ 913,300
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Total current assets ........................ 11,481,554
Property, plant and equipment ..................... 14,451,339
Less accumulated depreciation ................... 9,806,306
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Net property, plant and equipment ........... 4,645,033
Deferred income taxes ............................. 65,000
Other assets ...................................... 91,208
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Total Assets ................................ $16,282,795
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Accounts payable ................................ $ 1,151,568
Accrued liabilities ............................. 1,288,449
Income taxes payable ............................ 263,405
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Total current liabilities ................... 2,703,422
Deferred compensation ............................. 417,493
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Total liabilities ........................... 3,120,915
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Stockholders' equity:
Common stock, par value $.50 per share:
Authorized: 5,000,000 shares
Issued: 2,654,348 shares ..................... 1,327,174
Additional paid-in capital ...................... 9,744,139
Retained earnings ............................... 11,422,632
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22,493,945
Less treasury stock, at cost: 1,074,839 shares .. (9,227,065)
Less loan to officer-stockholder ................ (105,000)
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Total stockholders' equity ................... 13,161,880
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Total Liabilities and Stockholders' Equity ... $16,282,795
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See accompanying notes to consolidated financial statements.
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MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
Thirteen Weeks
----------------------
April 4, March 29,
1998 1997
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Net sales ................................... $5,792,607 $4,275,155
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Cost and expenses:
Cost of sales ............................. 3,217,852 2,375,107
Selling, general and
administrative .......................... 1,696,695 1,431,678
Research and development .................. 211,256 57,328
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5,125,803 3,864,113
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Operating income ............................ 666,804 411,042
Interest and other
income, net................................ 12,742 26,704
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Income before income taxes .................. 679,546 437,746
Provision for income taxes .................. 252,000 160,000
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Net income .................................. $ 427,546 $ 277,746
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Net income per common share:
Basic ..................................... $.27 $.18
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Diluted ................................... $.26 $.18
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Cash dividend per share common stock ........ - $.10
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Weighted average number of
shares outstanding:
Basic ..................................... 1,576,993 1,513,341
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Diluted ................................... 1,618,165 1,547,276
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See accompanying notes to consolidated financial statements.
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MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
Thirteen Weeks Ended
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April 4, March 29,
1998 1997
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Cash flows from operating activities:
Net income ....................................... $427,546 $ 277,746
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................... 207,086 207,581
Deferred compensation .......................... 58,340 35,430
Stock-based compensation expense ............... 15,300 -
Changes in operating assets and liabilities:
Accounts receivable........................... (912,653) (663,056)
Inventories................................... 568,366 (311,622)
Other current assets.......................... 2,986 79,141
Deferred tax assets........................... 6,200 -
Other assets.................................. 22,568 4,191
Accounts payable.............................. 9,789 202,070
Accrued liabilities........................... 88,580 179,839
Income taxes payable.......................... 217,580 44,297
Deferred compenstion.......................... (16,547) (7,500)
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Net cash provided by operating activities........... 695,141 48,117
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Cash flows from investing activities:
Purchase of capital assets....................... (666,890) (381,839)
Proceeds from sales of capital assets............ 8,515 -
Purchase of available-for-sale securities........ - (12,490)
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Net cash used in investing activities.............. (658,375) (394,329)
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Cash flows from financing activities:
Proceeds from the issuance of common stock....... 27,403 37,640
Payment of dividends............................. - (151,426)
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Net cash provided by (used) in financing activities 27,403 (113,786)
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Net increase (decrease) in cash and cash equivalents 64,169 (459,998)
Cash and cash equivalents at beginning of year..... 2,414,725 1,265,581
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Cash and cash equivalents at end of period......... $2,478,894 $ 805,583
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Supplemental disclosures of cash flows information:
Cash paid during the period for:
Income taxes................................... $ 30,000 -
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See accompanying notes to consolidated financial statements.
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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 April 4, 1998 and its results of
operations and cash flows for the periods presented.
B. Net income per common share
Effective January 3, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 128, "Earnings per Share," which
establishes the new standard for computation and presentation of net income per
common share. Under the new requirements both basic and diluted net income per
common share are presented. All prior period net income per common share
information has been restated.
Basic net income per common share is calculated by dividing net income,
less dividends on preferred stock, if any, by the weighted average common shares
outstanding during the period.
The calculation of diluted net income per common share is similar to that
of basic net income per common share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if all potentially dilutive common shares, principally those
issuable under stock options, were issued during the reporting period.
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 calendar 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 year 1997 was the latest and fiscal year 2002 will
be the next) is added to the fourth quarter, making such quarter consist of 14
weeks.
D. Dividends
During fiscal 1997, the Company paid a $.10 per share dividend in each of
the first three quarters. The dividend was eliminated by a decision of the
Company's Board of Directors (the "Board") on August 28, 1997.
The Board announced on May 5, 1998, the declaration of a 10% stock dividend
to stockholders of record on May 15, 1998 to be distributed, and payments for
fractional shares made, on June 5, 1998. The weighted average number of shares
outstanding and net income per share information for all prior reporting periods
will be restated to reflect the effects of the stock dividend.
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MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. Purchase of common stock by Officer and Director
The Company sold 20,000 shares of common stock from its treasury to the
Company's Chairman, President and Chief Executive Officer Mason N. Carter, on
May 4, 1998, at a price of $12.75 per share, which approximated the average
closing price of the Company's common stock during the first quarter of 1998.
The Company extended a loan of $255,000 in connection with the purchase of these
shares and amended a prior loan of $105,000. Mr. Carter has agreed to
restrictions on the sale of these shares.
The new promissory note for $360,000 is due May 4, 2003 and interest
payments are due quarterly, calculated at a variable interest rate based on the
prime rate of the Company's lending bank. Payment of the loan is secured by the
pledge of the shares of Common Stock purchased by Mr. Carter with the proceeds
of the loan.
As a result of the amendment to the terms of principal amortization of the
prior loan, the amount of $105,000 is reflected as a reduction of stockholders'
equity in the balance sheet.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INCOME STATEMENT SUMMARY
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(Unaudited)
The following table displays line items in the Consolidated Statements of
Income as a percentage of net sales.
Percentage of Net Sales
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Quarter 1
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Thirteen Weeks Ended
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April 4, March 29,
1998 1997
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Net sales.................................... 100.0% 100.0%
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Costs and expenses:
Cost of sales.............................. 55.6% 55.6%
Selling, general and
administrative........................... 29.3% 33.5%
Research and development................... 3.6% 1.3%
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88.5% 90.4%
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Operating income............................. 11.5% 9.6%
Interest and other income, net............... .2% .6%
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Income before income taxes................... 11.7% 10.2%
Provision for income taxes................... 4.3% 3.7%
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Net income................................... 7.4% 6.5%
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Quarter ended April 4, 1998 compared to quarter ended March 29, 1997
Results of operations reflect increases in: net sales of $1,517,000 or
35.5%; operating income of $256,000 or 62.3%; net income of $150,000 or 54.0%;
and diluted net income of $.08 per share or 44.4%.
The net sales increase was partially attributable to delivering shipments
against a larger firm order backlog with order release dates that coincided with
production and shipment schedules.
Orders received for the first quarter 1998 of $6,061,000 increased $564,000
or 10.3% compared to that of the first quarter of 1997, and the backlog of firm
unfilled orders increased $489,000 or 5.2% to $9,943,000 for the same end of
quarter comparisons. Compared to year-end 1997, backlog increased $185,000 or
1.9%.
Cost of sales increased $843,000 or 35.5% and was unchanged as a percentage
of net sales. The primary reason for the increase was the effect of the increase
in sales revenue on cost of sales. Also, a compensation increase to the hourly
workforce became effective mid-year 1997, and additional manufacturing personnel
were hired for the Costa Rica manufacturing facility to concentrate on improving
delivery performance by reducing the number of late ship days in the backlog.
Selling, general and administrative expenses increased $265,000 or 18.5%,
although as a percentage of net sales the expense decreased 4.2% to 29.3% from
33.5%. Increases in selling costs were related to additional sales commissions
due to the increase in sales revenue. The opening, support and staffing of a
European sales office also added to higher selling costs. General and
administrative expenses partially increased due to compensation costs related to
the hiring of additional administrative and marketing personnel and higher
compensation expense resulting from last year's mid-year merit increases to
certain employees.
Research and development expenses for new products were $211,000 for the
first quarter of 1998, an increase of $154,000 or 270.2% compared to $57,000
reported in 1997. Research and development expenses in the prior year have been
reclassified to conform to the current presentation.
Net income increased $150,000 or 54.0% to $428,000 for the first quarter of
1998 compared to $278,000 reported in 1997. Diluted net income per share was
$.26, an increase of 44.4% compared to diluted net income per share of $.18
reported for the first quarter of last year. The diluted weighted average number
of common shares outstanding for the first quarter 1998 increased by 71,000
compared to that of the first quarter of the prior year. This increase was
primarily due to common stock issued from the exercise of stock options during
1997 and the increase in dilutive securities arising from higher average stock
prices during the first quarter of this year compared to the first quarter of
the prior year.
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MANAGEMENT'S 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 1998. The Company had liquid resources comprised of cash and cash
equivalents (including investments in available-for-sale securities in 1997)
totaling approximately $2,500,000 compared to approximately $2,000,000 in 1997.
The Company's working capital was approximately $8,800,000 and its current ratio
was 4.2 at the end of the first quarter 1998 compared to $8,000,000 and 4.8,
respectively, in 1997.
The Company's operating activities generated cash flows of $695,000 in the
first quarter 1998 compared to $48,000 in 1997. Primary reasons for the increase
in operating cash flows in 1998 are higher first quarter net income and a
decrease in inventories of $568,000 which was partially offset by an increase in
accounts receivable of $913,000 as a result of higher first quarter 1998 sales.
The Company made net investments in property, plant and equipment of $658,000 in
the first quarter of 1998 compared to $382,000 in 1997.
The Company paid cash dividends of $151,000 in 1997 at the quarterly rate
of $.10 per share. The cash dividend was eliminated by a decision of the Board
of Directors (the "Board") on August 28, 1997. The Board announced on May 5,
1998, the declaration of a 10% stock dividend to stockholders of record on May
15, 1998 to be distributed, and payments for fractional shares made, on June 5,
1998.
The Company has entered into a $7,000,000 revolving credit and term loan
agreement with Summit Bank, at one-half percent below the bank's floating prime
rate. Up to $2,500,000 of borrowings may be used for capital expenditures under
the term loan. The full line is available for future borrowing needs of the
Company for working capital and general corporate purposes.
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 1998.
The Company's manufacturing subsidiary in Costa Rica began operations in
the second half of 1996. In January 1998, the subsidiary moved to a larger
17,000 square-foot facility and has recently obtained ISO 9002 certification.
The Company's capital expenditures for new projects and production
equipment are anticipated to exceed its depreciation and amortization expenses
in 1998. The Company has issued purchase order commitments to processing
equipment manufacturing vendors for approximately $700,000 of capital equipment
and building improvements. The Company anticipates that such equipment will be
purchased and become operational and building improvements completed during the
second half of 1998.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (continued)
The Company recognizes the need to assure that its operations will not be
adversely impacted by Year 2000 software failures. The impact on operations has
been evaluated and plans have been formulated to ensure Year 2000 compliance
before the end of 1998. Beginning in 1998, existing mission-critical software
will be revised to process dates for 1999 and beyond without any disruption to
the business. Software revisions will be performed by Company employees and the
total estimated cost for achieving Year 2000 compliance has not been, and is not
anticipated to be, material to the Company's financial position or results of
operations.
The Company was authorized on November 1, 1996 to purchase up to 100,000
shares of its common stock, depending on market conditions, and has purchased
4,100 shares to date under such authorization. There have been no repurchases of
common stock during 1997 or 1998.
Periodically, the Company explores the possibility of acquiring similar
manufacturers of electronic devices or companies in related fields, although it
currently has no definitive plans or agreements. Management believes that any
such acquisitions and business operation expansion could be financed through its
liquid and capital resources currently available as previously discussed and/or
through additional borrowing or issuance of equity or debt securities. The
additional debt from any acquisitions, if consummated, would increase the
Company's debt-to-equity ratio and such debt or equity securities might, at
least in the near term, have a dilutive effect on net income per share.
Certain statements in this quarterly report are forward-looking statements
based on current management expectations and are subject to risks and
uncertainties. Factors that could cause future results to differ from these
expectations include general economic and industry conditions, competitive
products and pricing pressures, risks relating to governmental regulatory
actions in communications and defense programs, and inventory risks due to
technological innovation. Additional factors to which the Company's performance
is subject are described in the Company's reports filed from time to time with
the Securities and Exchange Commission.
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PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
Exhibit No.
10 Consulting Agreement between the Company and Arthur A. Oliner
dated as of January 1, 1998.*
11 Statement re: Computation of earnings per common share
27 Financial Data Schedule for the First Quarter Ended April 4, 1998.
(b) Reports on Form 8-K.
A Current Report on Form 8-K was filed on February 26, 1998 reporting
the Company's results of operations for the fourth quarter and 1997
fiscal year.
A Current Report on Form 8-K was filed on April 20, 1998 reporting the
Company's Amendment to its By-laws.
A Current Report on Form 8-K was filed on May 5, 1998 reporting the
Company's results of operations for the first quarter 1998, and the
declaration of a 10% stock dividend.
* Indicates that exhibit is a management contract or compensatory
plan or arrangement.
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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.
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(Registrant)
Date: May 14, 1998 By: /s/ Mason N. Carter
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Mason N. Carter
Chairman, President and
Chief Executive Officer
Date: May 14, 1998 By: /s/ Robert V. Condon
-------------------------------------
Robert V. Condon
Vice President, Finance, Treasurer,
Secretary and Chief Financial Officer
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Exhibit 10
CONSULTING AGREEMENT
AGREEMENT made this 1st day of January, 1998 between MERRIMAC INDUSTRIES,
INC., a New Jersey corporation (the "Company"), and ARTHUR A. OLINER (the
"Consultant").
W I T N E S S E T H
WHEREAS, the Company desires to employ the Consultant to advise and assist
it in its business and the Consultant has agreed to provide and perform
consulting services on terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and covenants contained
herein, the parties agree as follows:
1. Appointment. The Company hereby retains Consultant, and Consultant
agrees to act, in an advisory and consulting capacity to the Company for a term
commencing on the date hereof and to continue in force thereafter for the Term
(as defined in Section 5).
2. Consulting Services. Consultant agrees during the Term to render
services of an advisory and consultative nature in order that the Company may
have the benefit of Consultant's expertise and knowledge of the affairs of the
Company. Consultant will perform services hereunder for 20 hours per month
(non-cumulative) as directed by the Chief Executive Officer of the Company
relating to high level contact with customers in the Pacific Rim region;
Multi-mix product development, including wave guiding structures, cross talk,
antennas and feeds and Butler matrices; instruction relating to advanced
microwave theory; new technology review process; advice to the Chief Executive
Officer on technology matters; and attending technical conferences on behalf of
the Company. It is contemplated that Consultant will provide
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the services hereunder in the Massachusetts, New Jersey and New York area
(except for normal business travel) or at the Company's request at such other
location as may be mutually agreed upon by the Company and Consultant.
3. Consulting Fee. The Company shall pay Consultant as a fee for the
services rendered pursuant to this Agreement a sum equal to Three Thousand
($3,000) Dollars per month. For services provided in excess of 20 hours in a
particular month the Company shall pay the Consultant at an hourly rate equal to
$150.00 per hour. Payments for the period January 1, 1998 through March 31, 1998
shall be made in arrears on April 1, 1998 and thereafter shall be paid monthly
in arrears the first day of each month commencing May 1, 1998.
4. Expenses. The Company shall reimburse Consultant for reasonable
out-of-pocket business expenses upon presentation of appropriate evidence
thereof.
5. Term. This Agreement shall be for a term commencing on the date hereof
and shall continue for a period of not less than twelve (12) months (the
"Initial Period"). At the expiration of the Initial Period, the Agreement shall
continue from year to year upon the conditions stated herein unless terminated
pursuant to Section 6. The Initial Period and each period thereafter during
which this Agreement continues in effect prior to its termination is referred to
herein as the "Term".
6. Termination. The Company's obligation under this Agreement may be
terminated by the Company upon written notice to Consultant at least thirty (30)
days prior to the end of the then-current Term, in which case Consultant's
employment will terminate at the end of such Term. Consultant's obligation to
provide consulting services hereunder may be terminated by Consultant at any
time after the Initial Period upon ninety (90) days written notice to the
Company. This Agreement shall also terminate on Consultant's death or, at the
Company's
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option, the Consultant's inability to perform his required services for a
period of sixty (60) days because of illness or disability. Notwithstanding any
of the foregoing provisions of this Agreement, the Company may, at any time
during the Term without prior notice, discharge the Consultant for "Cause" (as
hereinafter defined). In the event that Consultant ceases to provide consulting
services hereunder for any reason other than discharge by the Company without
Cause, the Company shall pay to Consultant all consulting fees accrued but
unpaid through the date of termination, and the Company shall not have any
further obligations under this Agreement, except as may otherwise be required by
law. For the purposes of this Agreement, the Company shall be deemed to have
Cause to terminate the Consultant's employment hereunder for: (a) willful
failure to perform normal and customary duties for an extended period for any
reason other than death or total disability; (b) gross negligence or willful
misconduct, including but not limited to, fraud, embezzlement or intentional
misrepresentation; (c) commission of, or indictment or conviction for, a felony;
(d) willfully engaging in competitive activities against the Company or
purposely aiding a competitor of the Company; (e) misappropriation of a material
opportunity of the Company; (f) oral or written publication of information
relating to the Company not in the public domain; or (g) violation of any
material term of this Agreement and failure to cure within ten days after
receipt of notice of such violation. If the Consultant is dismissed for Cause,
the Company shall pay to Consultant all salary accrued but unpaid through the
date of termination, and the Company shall not have any further obligations
under this Agreement, except as may otherwise be required by law.
7. Non-Competition; Confidential Information and Indemnification. During
the Term and for the three (3) year period thereafter, Consultant shall not,
without the express prior written consent of the Company, directly or
indirectly:
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(i) engage in any activity, business or service, either on his own
account or as an employee, officer, director, partner, trustee, principal,
consultant, joint venturer, investor, or investor with or in any person or
entity, that in whole or in part is competitive with the business activities of
the Company; (ii) solicit, interfere with or endeavor to entice away from the
Company any of its customers or suppliers; or (iii) solicit, entice or initiate
contact for purposes of offering employment with any current employee of the
Company or any person who was an employee of the Company within a period of one
year after that person leaves the employ thereof, and will notify the Company
before employing any such person;
provided, however, that nothing in this Section 7 shall be construed to
prevent Consultant from owning, as an investment, up to 1% of a class of equity
securities issued by any competitor of the Company or its affiliates that is
publicly traded and registered under Section 12 of the Exchange Act.
Without limiting the generality of this Section 7, and although the
restrictions contained in this Section 7 are considered by the parties hereto to
be fair and reasonable in the circumstances, it is recognized that restrictions
may fail for technical reasons, and accordingly it is hereby agreed that if any
such restrictions shall be adjudged by a court to be void or unenforceable for
whatever reason, but would be valid if part of the wording thereof were deleted,
or the period thereof reduced or the area dealt with thereby reduced in scope,
the restrictions contained in this Section 7 shall apply, at the election of the
Board of Directors of the Company, with such reductions in geographic or
temporal scope as may be necessary to make them valid, effective and enforceable
in the particular jurisdiction in which the restrictions are adjudged to be void
or unenforceable.
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(b) Confidential Information. Consultant shall not disclose any
confidential information of the Company or its affiliates which is now known to
him or which hereafter may become known to him as a result of his consulting
services hereunder, and shall not at any time directly or indirectly disclose
any such information to any person, firm, corporation or other entity, or use
the same in any way other than in connection with the business of the Company or
its affiliates, during and at all times after the expiration of the Term;
provided, however, that nothing in this Section 7 shall prohibit Consultant from
communicating, disclosing or using information that has become known generally
by the public or otherwise has come into the public domain (other than by
disclosure by Consultant in breach of this Agreement). Consultant's contractual
obligation under this paragraph, however, shall not extend beyond one year after
the end of the Term.
(c) Company's Remedies for Breach. It is recognized that damages in the
event of breach of this Section 7 by Consultant would be difficult, if not
impossible, to ascertain, and it is therefore agreed that the Company, in
addition to and without limiting any other remedy or right it may have, shall
have the right to an injunction or other equitable relief in any court of
competent jurisdiction enjoining any such breach, and Consultant hereby waives
any and all defenses he may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude the Company from pursuing any
other rights and remedies at law or in equity which the Company may have.
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(d) Indemnification. To the extent permitted by law, Consultant will be
indemnified under the articles of incorporation and by-laws, as applicable, of
the Company or any subsidiary thereof for which Consultant is performing
services and, to the extent permitted under currently applicable insurance
policies, to be covered by directors and officers liability insurance policies
covering directors and officers of the Company that are the same as or provide
coverage at least equivalent to those carried by the Company on August 1, 1997.
8. Assignment. The duties of the Company and Consultant may not be
assigned, provided that the obligations of the Company shall be binding upon any
successor to all or substantially all of the Company's business by purchase,
merger, consolidation or otherwise.
9. Independent Contractor. Consultant is an independent contractor and has
and shall have no power, nor will Consultant represent that Consultant has any
power, to bind the Company or to assume or create any obligation or
responsibility on behalf of the Company. Consultant shall not be entitled to
participate in any retirement, disability, life insurance, saving or other plans
maintained for employees of the Company or to receive any benefits or
compensation not explicitly provided in this Agreement.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New Jersey without regard to
its principles of conflicts of laws.
11. Entire Agreement. This Agreement constitutes the entire understanding
of the parties relating to the subject matter hereof and supersedes all prior
and contemporaneous agreements and understandings, whether oral or written,
relating to the subject matter hereof. The terms of this Agreement may be
modified only by a written instrument executed by the parties hereto.
-6-
<PAGE>
12. Notice. Any notice, request, consent, waiver, demand or other
communication required or permitted under this Agreement shall be effective only
if it is in writing and delivered personally or sent by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Company:
Merrimac Industries, Inc.
41 Fairfield Place
West Caldwell, New Jersey 07006
Facsimile: (973) 575-0531
Attention: President and Chief Executive Officer
If to the Consultant:
Dr. Arthur A. Oliner
11 Dawes Road
Lexington, Massachusetts 02173
or to such other person or address as either party may designate by notice
to the other and shall be deemed to have been given as of the date so personally
delivered or mailed.
13. Severability. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this instrument as of
the day and year first written above.
MERRIMAC INDUSTRIES, INC.
By: /s/ Mason N. Carter
-----------------------
Name: Mason N. Carter
Title: Chairman and
Chief Executive Officer
/s/ Arthur A. Oliner
-----------------------
Arthur A. Oliner
-7-
Exhibit 11
MERRIMAC INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(Unaudited)
Thirteen Weeks Ended
April 4, March 29,
1998 1997
Numerator:
Net income available to common stockholders....... $427,546 $277,746
======== ========
Basic earnings per share
Weighted average number of shares outstanding for
basic net income per share
Common stock...................................... 1,576,993 1,513,341
========= =========
Net income per common share - basic............... $.27 $.18
==== ====
Diluted earnings per share
Weighted average number of shares outstanding for
diluted net ncome per share
Common stock ..................................... 1,576,993 1,513,341
Effect of dilutive securities - stock options (1). 41,172 33,935
------ ------
Weighted average number of shares outstanding for
diluted net income per share...................... 1,618,165 1,547,276
========= =========
Net income per common share - diluted............. $.26 $.18
==== ====
(1) Represents additional shares resulting from assumed conversion of
stock options less shares purchased with the proceeds therefrom.
-1-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-2-1999
<PERIOD-END> Apr-4-1998
<CASH> 2,478,894
<SECURITIES> 0
<RECEIVABLES> 4,003,940
<ALLOWANCES> 0
<INVENTORY> 3,940,203
<CURRENT-ASSETS> 11,481,554
<PP&E> 14,451,339
<DEPRECIATION> 9,806,306
<TOTAL-ASSETS> 16,282,795
<CURRENT-LIABILITIES> 2,703,422
<BONDS> 0
0
0
<COMMON> 1,327,174
<OTHER-SE> 11,834,706
<TOTAL-LIABILITY-AND-EQUITY> 16,282,795
<SALES> 5,792,607
<TOTAL-REVENUES> 5,792,607
<CGS> 3,217,852
<TOTAL-COSTS> 3,217,852
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 679,546
<INCOME-TAX> 252,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 427,546
<EPS-PRIMARY> .27
<EPS-DILUTED> .26
</TABLE>
