<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 the quarterly period ended April 3, 1999 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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Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
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Common Stock American Stock Exchange
Common Stock Purchase Rights American Stock Exchange
Securities registered pursuant to Section 12(g) of the Exchange Act: None
----
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 past 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
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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 10, 1999
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Common Stock ($.50 par value) 1,739,676
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
---------------------------
(Unaudited)
-----------
April 3, January 2,
1999 1999
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ASSETS
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Current assets:
Cash and cash equivalents ....................... $ 1,651,741 $ 1,852,666
Accounts receivable ............................. 4,123,385 3,755,131
Inventories ..................................... 3,323,369 3,101,256
Income tax refund receivable..................... 423,021 413,018
Other current assets ............................ 351,131 357,906
Deferred tax assets ............................. 899,600 899,600
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Total current assets ........................ 10,772,247 10,379,577
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Property, plant and equipment ..................... 19,516,811 16,539,251
Less accumulated depreciation ................... 12,335,185 10,322,958
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Net property, plant and equipment ............. 7,181,626 6,216,293
Other assets ...................................... 268,927 319,512
Goodwill .......................................... 2,867,319 -
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Total Assets ................................ $21,090,119 $16,915,382
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- -------------------------------------
Current liabilities:
Current portion of long-term debt ............... $ 632,308 -
Accounts payable ................................ 1,281,232 $ 1,479,284
Accrued liabilities ............................. 1,298,595 1,499,917
Income taxes payable ............................ 96,622 -
----------- -----------
Total current liabilities ................... 3,308,757 2,979,201
Long-term debt, net of current portion ............ 4,181,773 -
Deferred compensation ............................. 264,419 459,322
Deferred tax liabilities .......................... 54,600 54,600
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Total liabilities ........................... 7,809,549 3,493,123
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Shareholders' equity:
Common stock, par value $.50 per share:
Authorized: 5,000,000 shares
Issued: 2,692,454 and 2,690,405 shares ....... 1,346,227 1,345,203
Additional paid-in capital ...................... 11,229,616 11,220,873
Retained earnings ............................... 9,163,021 8,950,055
Translation adjustments ......................... (35,524) -
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21,703,340 21,516,131
Less treasury stock, at cost:
955,904 and 902,549 shares .................... (8,062,770) (7,733,872)
Less loan to officer-shareholder ................ (360,000) (360,000)
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Total shareholders' equity ................... 13,280,570 13,422,259
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Total Liabilities and Shareholders' Equity ... $21,090,119 $16,915,382
=========== ===========
See accompanying notes to consolidated financial statements.
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MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(Unaudited)
-----------
Thirteen Weeks Ended
-----------------------
April 3, April 4,
1999 1998
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Net sales ................................... $4,738,531 $5,792,607
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Cost and expenses:
Cost of sales ............................. 2,426,740 3,217,852
Selling, general and administrative ....... 1,560,990 1,696,695
Research and development .................. 394,260 211,256
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4,381,990 5,125,803
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Operating income ............................ 356,541 666,804
Interest and other expense (income), net .... 23,575 (12,742)
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Income before income taxes .................. 332,966 679,546
Provision for income taxes .................. 120,000 252,000
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Net income .................................. $ 212,966 $ 427,546
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Net income per common share - basic ......... $.12 $.25
Net income per common share - diluted ....... $.12 $.24
==== ====
Weighted average number of
shares outstanding:
Basic ..................................... 1,768,532 1,734,692
Diluted ................................... 1,768,793 1,779,982
Note: The basic and diluted weighted average number of shares outstanding
and net income per share information for all prior reporting periods have been
restated to reflect the effects of the 10% stock dividend which became effective
June 5, 1998.
See accompanying notes to consolidated financial statements.
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MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
-----------
Thirteen Weeks Ended
-------------------------
April 3, April 4,
1999 1998
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Cash flows from operating activities:
Net income ........................................ $ 212,966 $427,546
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................. 329,003 207,086
Amortization of goodwill ...................... 14,522 -
Deferred compensation ......................... 4,097 58,340
Stock-based compensation expense .............. - 15,300
Changes in operating assets and liabilities:
Accounts and income taxes receivable......... 373,736 (912,653)
Inventories.................................. 27,893 568,366
Other current assets......................... 21,908 2,986
Deferred tax assets.......................... (1,972) 6,200
Other assets................................. 110,435 22,568
Accounts payable............................. (354,614) 9,789
Accrued liabilities.......................... (266,783) 88,580
Income taxes payable......................... 86,847 217,580
Deferred compensation........................ (199,000) (16,547)
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Net cash provided by operating activities............ 359,038 695,141
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Cash flows from investing activities:
Purchase of capital assets......................... (594,831) (666,890)
Proceeds from sales of capital assets.............. - 8,515
Acquisition of business, net of cash acquired ....... (4,009,057) -
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Net cash used in investing activities................ (4,603,888) (658,375)
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Cash flows from financing activities:
Borrowings under term loan facilities ............. 2,500,000 -
Borrowings under revolving credit facilities ...... 2,000,000 -
Repayment of borrowings under credit and
lease facilities ................................ (137,046) -
Proceeds from the issuance of common stock......... 9,869 27,403
Repurchase of common stock for the treasury ....... (328,898) -
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Net cash provided by financing activities ........... 4,043,925 27,403
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Net increase (decrease) in cash and cash equivalents (200,925) 64,169
Cash and cash equivalents at beginning of year....... 1,852,666 2,414,725
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Cash and cash equivalents at end of period........... $1,651,741 $2,478,894
=========== ==========
Supplemental disclosures of cash flows information:
Cash paid during the period for:
Income taxes..................................... $ 10,000 $ 30,000
========== ==========
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 3, 1999 and its results of
operations and cash flows for the periods presented.
B. Inventories
Inventories consist of the following:
April 3, January 2,
1999 1999
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Finished goods $664,080 $607,738
Work in process 1,676,756 1,597,215
Raw materials and purchased parts 982,533 896,303
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Total $3,323,369 $3,101,256
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C. 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.
D. Comprehensive Income
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). SFAS 130 defines comprehensive income, which includes items in addition
to those reported in the statement of operations, and requires disclosures about
the components of comprehensive income. Comprehensive income includes all
changes in shareholders' equity during a period except those resulting from
investments by or distributions to shareholders. For the Company,
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MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
comprehensive income for all periods presented consists solely of net
income and foreign currency translation adjustments pursuant to Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation," as
follows:
Thirteen Weeks Ended
---------------------
April 3, April 4,
1999 1998
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Net income $212,966 $427,546
Other comprehensive income (loss):
Foreign currency translation adjustments (35,524) -
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Total comprehensive income $177,442 $427,546
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E. 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.
F. Dividends
The Board of Directors (the "Board") announced on May 5, 1998, the
declaration of a 10% stock dividend payable on June 5, 1998 to shareholders of
record on May 15, 1998. Fractional shares were cashed-out and payments were made
to shareholders in lieu of fractional shares on June 5, 1998. The basic and
diluted weighted average number of shares outstanding and net income per share
information for all prior reporting periods have been restated to reflect the
effects of the stock dividend.
During the first three quarters of fiscal 1997, the Company paid a $.091
per share dividend (previously $.10 per share, adjusted for the 10% stock
dividend in June 1998). The cash dividend was eliminated by a decision of the
Board on August 28, 1997.
G. Transactions with management and loan to officer-shareholder
On May 4, 1998, the Company sold 20,000 (22,000 after giving effect to the
Company's 10% stock dividend) shares of Common Stock from its treasury to Mason
N. Carter, Chairman, President and Chief Executive Officer of the Company, at a
price of $12.75 per share (the approximate average closing price of the
Company's Common Stock during the first quarter of 1998). The Company extended
Mr. Carter a loan of $255,000 in connection with the purchase of these shares
and amended a prior loan to Mr. Carter of $105,000. A new promissory note for a
total of $360,000, due May 4, 2003, was executed by Mr. Carter in favor of the
Company. Payment of the loan is secured by the pledge of the 33,000 shares
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MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of Common Stock that were purchased by Mr. Carter with the proceeds of the
loans. The Company has recorded compensation expense of $52,000, which is being
charged to operations over the one-year period commencing on the date of the
transaction, as Mr. Carter is expected to perform services throughout this time
period. The sale of these shares of Common Stock was exempt from registration
under the Securities Act of 1933, as amended, as a transaction not involving a
public offering under Section 4 (2) of the Act.
H. Acquisition of Filtran Microcircuits Inc.
In February 1999, the Company completed the acquisition of all of the
outstanding stock of privately held Filtran Microcircuits Inc. ("FMI") of
Ottawa, Ontario, Canada. FMI, which had 1998 sales of approximately $3.2
million, is a manufacturer of microwave micro circuitry. The purchase price was
approximately $4.5 million, net of $203,000 cash acquired and including the
assumption of $451,000 existing indebtedness, and was financed by utilizing an
existing unused credit facility. The acquisition is being accounted for as a
purchase, and, accordingly, the purchase price has been allocated to the
underlying assets and liabilities based on their estimated fair values at the
date of the acquisition, with the excess cost of approximately $2.9 million
recorded as goodwill which is being amortized over 20 years.
The unaudited pro forma combined results for the comparative periods
presented for 1999 and 1998, as if FMI had been acquired at the beginning of
1998, are estimated to be: net sales of $5,369,000, net income of $152,000 and
diluted net income per share of $.09 for 1999, and net sales of $6,800,000, net
income of $391,000 and diluted net income per share of $.22 for 1998. The pro
forma results are based on various assumptions and are not necessarily
indicative of what would have actually occurred had the acquisition and related
financing transactions been completed at the beginning of last year, nor are
they necessarily indicative of future consolidated results.
I. Debt
Long-term debt consists of the following:
Revolving credit facility, interest 1/2% below prime $2,000,000
Term loan, interest 1/2% below prime, due 2004 2,375,000
Equipment loans, interest prime plus 1%, due July 1999
to May 2001 104,968
Capital leases, interest 6.9%, due November 2003 334,113
----------
4,814,081
Less current portion 632,308
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Long-term portion $4,181,773
==========
The term loan is secured by $2,500,000 of recently acquired tangible
personal property and the equipment loans are covered by a general security
agreement. The revolving credit facility is unsecured. Capital leases included
in property plant and equipment have a depreciated cost of approximately
$200,000.
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MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
J. Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133 ("Accounting for Derivative Instruments and Hedging
Activities"). This statement establishes accounting and reporting standards
requiring that all derivative instruments (including certain derivative
instruments embedded in other contracts) be recorded on the balance sheet as an
asset or liability and measured at its fair value. This statement is effective
for fiscal years beginning after June 15, 1999 but can be adopted earlier.
Management has not yet determined the timing of or method to be used in adopting
this statement. Management does not believe at this time that such adoption
would have a material impact on its consolidated financial statements.
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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
--------------------
April 3, April 4,
1999 1998
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Net sales.................................... 100.0% 100.0%
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Costs and expenses:
Cost of sales.............................. 51.2% 55.6%
Selling, general and administrative........ 33.0% 29.3%
Research and development................... 8.3% 3.6%
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92.5% 88.5%
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Operating income............................. 7.5% 11.5%
Interest and other expense (income), net..... .5% (.2%)
------ ------
Income before income taxes................... 7.0% 11.7%
Provision for income taxes................... 2.5% 4.3%
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Net income................................... 4.5% 7.4%
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Quarter ended April 3, 1999 compared to quarter ended April 4, 1998
Results of operations reflect decreases in: net sales of $1,054,000 or
18.2%; operating income of $310,000 or 46.5%; net income of $215,000 or 50.2%;
and diluted net income of $.12 per share or 50.0%.
The net sales decrease was partially attributable to delivering shipments
against a smaller firm order backlog with order release dates that coincided
with production and shipment schedules, partially offset by net sales of
recently acquired Filtran Microcircuits Inc. ("FMI").
Orders received for the first quarter 1999 of $5,164,000 decreased $897,000
or 14.8% compared to that of the first quarter of 1998, and the backlog of firm
unfilled orders decreased $2,367,000 or 23.8% to $7,576,000 for the same end of
quarter comparisons. Compared to year-end 1998, backlog increased $1,408,000 or
22.8%, including $800,000 backlog at recently acquired FMI.
Cost of sales decreased $791,000 or 24.6%, and decreased 4.4% as a
percentage of net sales. The primary reason for the decrease was the effect of
the decrease in sales revenue on cost of sales and a reduction in direct labor
and manufacturing overhead costs partly related to last year's fourth quarter
restructuring.
Selling, general and administrative expenses decreased $136,000 or 8.0%,
although as a percentage of net sales the expense increased 3.0% to 32.9% from
29.3%. Decreases in selling expenses were related to a reduction in sales
commissions due to the decrease in sales revenue. General and administrative
expenses decreased partly due to a reduction in compensation costs related to
last year's fourth quarter restructuring which was partially offset by
additional marketing and administrative costs, including the amortization of
goodwill attributable to the acquisition of FMI.
Research and development expenses for new products, primarily the recently
introduced Multi-Mix(TM) Microtechnology, were $394,000 for the first quarter of
1999 compared to $211,000 reported in the first quarter of 1998, an increase of
$183,000 or 86.6% compared to the prior year.
Net income of $213,000 was $215,000 lower than net income of $428,000
reported for the first quarter of 1998, a decrease of 50.2%. Diluted net income
per share was $.12, a decrease of 50.0% compared to diluted net income per share
of $.24 reported for the first quarter of last year.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company had liquid resources comprised of cash and cash equivalents
totaling approximately $1,700,000 at the end of the first quarter of 1999
compared to approximately $2,500,000 at the end of the first quarter of 1998.
The Company's working capital was approximately $7,500,000 and its current ratio
was 3.3 at the end of the first quarter of 1999 compared to $8,800,000 and 4.2,
respectively, at the end of the first quarter of 1998.
The Company's operating activities provided cash flows of $359,000 in the
first quarter of 1999 compared to $695,000 in the first quarter of 1998. The
primary reasons for the decrease in operating cash flows in the first quarter of
1999 are decreases in net income and payments made on accounts payable, accrued
liabilities and deferred compensation, which was partially offset by a decrease
in accounts receivable as a result of lower net sales and higher depreciation
and amortization charges. The Company made net investments in property, plant
and equipment of $595,000 in the first quarter of 1999 compared to $667,000 in
the first quarter of 1998. These capital expenditures are related to new
production and test equipment capabilities in connection with the introduction
of new products and enhancements to existing products.
The cost to the Company for its acquisition of FMI, net of $203,000 cash
acquired and excluding indebtedness assumed of $451,000, was $4,009,000, which
was financed by borrowings under a previously unused credit facility.
The Company has a $7,000,000 revolving credit and term loan agreement with
Summit Bank, at one-half percent below the bank's floating prime rate. The
Company borrowed $2,500,000 for capital expenditures under the term loan and
$2,000,000 under its revolving credit facility in connection with the
acquisition of FMI during the first quarter of 1999. The unused portion of the
revolving credit facility of $2,500,000 is available for working capital and
general corporate purposes.
Management believes that with the liquid resources and the remaining line
of credit available, along with cash flows expected to be provided by
operations, the Company will have sufficient resources for currently
contemplated operations in 1999.
The Company's capital expenditures for new projects and production
equipment are anticipated to exceed its depreciation and amortization expenses
in 1999. The Company has issued purchase order commitments to processing
equipment manufacturing vendors for approximately $300,000 of capital equipment
and building improvements. The Company anticipates that such equipment will be
purchased and become operational and building improvements will be completed
during 1999.
The Company was authorized by its Board of Directors to repurchase up to
110,000 shares (adjusted for the 10% stock dividend) of its common stock, from
time to time, depending
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
on market conditions, and has repurchased approximately 65,000 shares to
date under such authorization. There were 8,000 shares of common stock
repurchased during fiscal 1998 and there were no share repurchases during 1997.
During the first quarter of 1999, the Company repurchased 53,000 shares of
common stock at a cost of $329,000.
The Board of Directors approved the declaration of a 10% stock dividend to
shareholders of record on May 15, 1998, which was distributed on June 5, 1998
along with payments made for fractional shares.
Periodically, the Company explores the possibility of acquiring similar
manufacturers of electronic devices or companies in related fields. 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. In February 1999, the Company completed the acquisition of
Filtran Microcircuits Inc. for approximately $4,700,000.
Year 2000 Readiness Disclosure
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 complete Year 2000
compliance before the end of 1999. The Company's manufactured products do not
contain software of any kind and therefore are not subject to Year 2000
problems. All of the Company's existing mission-critical manufacturing software
and financial computer applications were made Year 2000 compliant as of December
31, 1998. Key suppliers have been contacted to obtain their Year 2000 compliance
status and the Company anticipates that these key suppliers will be Year 2000
compliant by December 31, 1999. Software revisions have been 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.
Information Technology Systems
Without remediation, certain of the Company's internally developed order
processing and manufacturing support applications would not have been capable of
processing dates beyond December 31, 1999 properly. The Company has corrected
the programs, and all business order processing and manufacturing support
operations applications should properly process dates beyond December 31, 1999.
The Company does not have any third-party software applications that are date
dependent. The Company's desktop computers and internal local area network have
been checked for Year 2000 problems and none have been found. All programs
purchased from third parties are believed to be Year 2000 compliant based on
certification received from the vendors.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Non-Information Technology Systems
Internal systems used in the Company's manufacturing processes are not date
dependent. Other support systems, such as security and HVAC, have been checked
and will not be adversely affected by dates beyond December 31, 1999. All of the
Company's suppliers have been contacted concerning their Year 2000 readiness and
the Company will be evaluating their responses regarding their Year 2000
compliance.
Costs to Company to Address Year 2000 Issues
To date, the Company has expended approximately $60,000 (exclusive of
internal personnel compensation costs) to perform the program remediation to
non-compliant programs and for training and other consulting services. The
Company estimates remaining costs to project completion to be approximately
$50,000. No other information technology projects have been deferred as a result
of the Year 2000 project as it was scheduled as part of the Company's strategic
business plan.
Risks of the Company to Year 2000 Issues
The Company believes that the risks of the Year 2000 problem are moderately
low because its products are not date dependent and its internal software
applications are Year 2000 compliant as of December 31, 1998. The Company will
be evaluating the Year 2000 readiness of its key suppliers throughout 1999 and
will find alternate sources for those suppliers that are not Year 2000
compliant. The potential impact and related costs resulting from the Company's
failure to find alternate suppliers has not been determined. In addition, the
Company's customers are evaluating their own Year 2000 readiness and have
circulated questionnaires regarding the Company's level of compliance. The
Company will continue to update its customers with respect to Year 2000
readiness and will monitor the progress of its customers to assess the attendant
risks of inadequate Year 2000 compliance.
Contingency Plans
Currently, the Company does not have a contingency plan, since its products
are not date dependent. In addition, the Company's Year 2000 compliance program
is on schedule and near completion.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133 ("Accounting for Derivative Instruments and Hedging
Activities"). This statement establishes accounting and reporting standards
requiring that all derivative instruments (including certain derivative
instruments embedded in other contracts) be recorded on the balance sheet as an
asset or liability and measured at its fair value. This statement is effective
for fiscal years beginning after June 15, 1999 but can be adopted earlier.
Management has not yet determined the timing of or method to be used in adopting
this statement. Management does not believe at this time that such adoption
would have a material impact on its consolidated financial statements.
Forward-Looking Statements
This Form 10-QSB contains statements relating to future results of the
Company (including certain projections and business trends) that are
"forward-looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those projected as
a result of certain risks and uncertainties. These risks and uncertainties
include, but are not limited to: general economic and industry conditions;
slower than anticipated penetration into the satellite communications, defense
and wireless markets; the risk that the benefits expected from the acquisition
of Filtran Microcircuits Inc. are not realized; competitive products and pricing
pressures; risks relating to governmental regulatory actions in communications
and defense programs; and inventory risks due to technological innovation, as
well as other risks and uncertainties, including but not limited to those
detailed from time to time in the Company's Securities and Exchange Commission
filings. These forward-looking statements are made only as of the date hereof,
and the Company undertakes no obligation to update or revise the forward-looking
statements, whether as a result of new information, future events or otherwise.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit No.
- -----------
3(a)(1) By-laws of the Company, as amended, is hereby incorporated by
reference to Exhibit 3(a)(1) to the Company's Annual Report
on Form 10-KSB dated March 30, 1999.
3(a)(2) Amendment to By-laws of the Company adopted March 5, 1999 is
hereby incorporated by reference to Exhibit 3(a)(2) to the
Company's Annual Report on Form 10-KSB dated March 30, 1999.
3(b) Certificate of Incorporation of the Company is hereby
incorporated by reference to Exhibit B of the Company's Proxy
Statement dated March 18, 1994.
4(a) Shareholder Rights Agreement dated as of March 9, 1999 between
the Company and ChaseMellon Shareholder Services, L.L.C., as
rights agent, is hereby incorporated by reference to Exhibit 1
to the Company's Current Report on Form 8-K dated
March 9, 1999.
10 Amended Promissory Note dated as of May 4, 1998 executed by
Mason N. Carter in favor of the Company is hereby incorporated
by reference to Exhibit 10(l) to the Company's Annual Report
on Form 10-KSB dated March 30, 1999.*
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule for the First Quarter Ended
April 3, 1999.
*Indicates that exhibit is a management contract or compensatory plan or
arrangement.
(b) Reports on Form 8-K.
A Current Report on Form 8-K was filed on March 1, 1999 announcing that
the Company had completed its acquisition of Filtran Microcircuits Inc.
A Current Report on Form 8-K was filed on March 9, 1999 announcing that
the Company's Board of Directors had adopted a Shareholder Rights Plan.
-14-
<PAGE>
A Current Report on Form 8-K was filed on March 18, 1999 reporting the
Company's results of operations for the fourth quarter and 1998 fiscal
year.
A Current Report on Form 8-K was filed on May 6, 1999 reporting the
Company's results of operations for the first quarter 1999.
-15-
<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: May 14, 1998 By: /s/ Mason N. Carter
-------------------------------------
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 Office
-16-
<PAGE>
EXHIBIT INDEX Sequentially
Exhibit Numbered Page
3(a)(1) By-laws of the Company, as amended, is hereby incorporated by
reference to Exhibit 3(a)(1) to the Company's Annual Report on
Form 10-KSB dated March 30, 1999.
3(a)(2) Amendment to By-laws of the Company adopted March 5, 1999 is
hereby incorporated by reference to Exhibit 3(a)(2) to the
Company's Annual Report on Form 10-KSB dated March 30, 1999.
3(b) Certificate of Incorporation of the Company is hereby
incorporated by reference to Exhibit B of the Company's Proxy
Statement dated March 18, 1994.
4(a) Shareholder Rights Agreement dated as of March 9, 1999 between
the Company and ChaseMellon Shareholder Services, L.L.C., as
rights agent, is hereby incorporated by reference to Exhibit 1
to the Company's Current Report on Form 8-K dated
March 9, 1999.
10 Amended Promissory Note dated as of May 4, 1998 executed by
Mason N. Carter in favor of the Company is hereby incorporated
by reference to Exhibit 10(l) to the Company's Annual Report
on Form 10-KSB dated March 30, 1999.*
11 Statement re: Computation of earnings per share.
27 Financial Data Schedule for the First Quarter Ended
April 3, 1999.
*Indicates that exhibit is a management contract or compensatory plan or
arrangement.
-17-
Exhibit 11
MERRIMAC INDUSTRIES, INC.
COMPUTATION OF EARNINGS PER SHARE
---------------------------------
(Unaudited)
-----------
Thirteen Weeks Ended
-----------------------
April 3, April 4,
1999 1998
--------- ---------
Numerator:
Net income available to common shareholders........... $212,966 $427,546
========= =========
Basic earnings per share
- ------------------------
Weighted average number of shares outstanding for
basic net income per share
Common stock.......................................... 1,768,532 1,734,692
========= =========
Net income per common share - basic................... $.12 $.25
==== ====
Diluted earnings per share
- --------------------------
Weighted average number of shares outstanding for
diluted net income per share
Common stock ......................................... 1,768,532 1,734,692
Effect of dilutive securities - stock options (1) .... 261 45,290
--------- ---------
Weighted average number of shares outstanding for
diluted net income per share.......................... 1,768,793 1,779,982
========= =========
Net income per common share - diluted.................. $.12 $.24
==== ====
(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-1-2000
<PERIOD-END> Apr-3-1999
<CASH> 1,651,741
<SECURITIES> 0
<RECEIVABLES> 4,123,385
<ALLOWANCES> 0
<INVENTORY> 3,323,369
<CURRENT-ASSETS> 10,772,247
<PP&E> 19,516,811
<DEPRECIATION> 12,335,185
<TOTAL-ASSETS> 21,090,119
<CURRENT-LIABILITIES> 3,308,757
<BONDS> 0
0
0
<COMMON> 1,346,227
<OTHER-SE> 11,934,343
<TOTAL-LIABILITY-AND-EQUITY> 21,090,119
<SALES> 4,738,531
<TOTAL-REVENUES> 4,738,531
<CGS> 2,426,740
<TOTAL-COSTS> 2,426,740
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 332,966
<INCOME-TAX> 120,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 212,966
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
<FN>
(1) Adjusted to give retroactive effect to a 10% stock dividend payable
in June 1998. Prior Financial Data Schedules have not been restated for
this stock dividend.
</FN>
</TABLE>
