FIRST QUARTER 2002 REPORT  

REPORT TO STOCKHOLDERS
  

Merrimac Industries, Inc. First Quarter 2002 Results of Operations
First quarter 2002 sales of $6,851,000 increased 12.5 % compared to first quarter 2001 sales of $6,090,000. Sales growth in the RF Microwave Products Group, derived from defense and satellite communications applications, was partly offset by softness in the Filtran Microcircuits Inc. microwave micro-circuitry business. Operating income was $275,000 compared to $198,000 before the effect of the charges associated with the reincorporation in Delaware of $330,000 in the first quarter of 2001.

Net income for the first quarter of 2002 was $143,000 compared to a net loss of $31,000 recorded for the first quarter of 2001, after the after-tax effects of the first quarter 2001 reincorporation charge of $198,000.

Net income per basic and diluted share of $.05 was recorded for the first quarter of 2002 compared to a net loss of $.01 per share reported for the first quarter of 2001, after the after-tax effects of the first quarter 2001 reincorporation charge of $.08 per share.

Operating income for the first quarter of 2002 increased $77,000 or 39 % compared to the first quarter of 2001 operating income, before the first quarter 2001 reincorporation charge. Higher operating income resulted from gross profit due to the increase in sales. Notable sales orders which were booked in the first quarter of 2002 included a high-frequency 77GHz circuit board order for automotive adaptive cruise control, wireless basestation circuit boards, critical components for use in homeland security detection devices, and a Multi-Mix® defense order for complex multilayer integrated assemblies.

It was with great pleasure that we announced that DuPont Electronic Technologies purchased from Merrimac a 16.6% equity interest for a purchase price of approximately $5.3 million.		 Furthermore, Merrimac and DuPont are working together to better understand the dynamics of the markets for high-frequency electronic components and modules. As the "Module Evolution" spreads across industry segments, increasing the outsourcing of multifunction modules, Merrimac anticipates being strongly-positioned to meet the needs of a broad range of signal processing requirements with a breadth of packaging solutions.

The weighted average number of shares outstanding increased by approximately 338,000 shares or 13 % for the first quarter of 2002 compared to the first quarter of 2001, resulting from the issuance of 528,000 new shares to DuPont Electronic Technologies during the first quarter of 2002.

The backlog at the end of the first quarter of 2002 was $10.8 million, a decrease of $1.0 million or 8.7 % compared to year-end 2001, and $1.3 million or 10.5 % when compared to the backlog of $12.1 million at the end of the first quarter of 2001. Orders received during the first quarter of 2002 totaling $5.8 million were exceeded by the first quarter of 2002 sales level by approximately 15.0 %, reflecting a temporary softness in certain communications markets that are served by the Company.

Thank you for your continued support and confidence,


Mason N. Carter, Chairman and CEO

May 14, 2002

 
Note: This report 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; the ability to protect proprietary information and technology; competitive products and pricing pressures; the risk that the Company will not be able to continue to raise sufficient capital to expand its operations as currently contemplated by its business strategy; risks relating to governmental regulatory actions in communications and defense programs; risks associated with demand for and market acceptance of existing and newly developed products; and inventory risks due to technological innovation and product obsolescence, 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.

 

SUMMARY QUARTERLY CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)
   March 30, 2002 March 31, 2001    
Net sales

$ 6,850,587

$ 6,090,367

    
Gross profit

3,194,280

3,145,911

    
Selling, general and administrative expenses

2,343,780

2,310,066

    
Research and development

575,547

637,916

    
Reincorporation charge

-

(a) 330,000

    
Interest and other expense (income), net

62,116

(36,375)

    
Income (loss) before income taxes

212,837

(95,696)

    
Provision (benefit) for income taxes

70,000

(65,000)

    
Net income (loss)

$ 142,837

(a) $ (30,696)

    
 
Net income (loss) per common share - basic and diluted $ .05 (a) $ (.01)    
Weighted average shares outstanding - diluted 2,943,428 2,604,743    

(a) The reincorporation charge of $330,000 reduced the after-tax results of operations by $198,000 or $.08 per share in the first quarter of 2001.

 

SUMMARY CONSOLIDATED BALANCE SHEETS (Unaudited)
March 30, 2002 and March 31, 2001

         2002

         2001

ASSETS
Current assets:
Cash and cash equivalents $ 2,414,121 $ 2,494,014
Income tax refunds receivable 186,487 33,224
Accounts receivable, net 4,549,381 4,820,563
Inventories

4,706,112

 3,869,333
Other current assets

366,297

 420,336
Deferred tax assets

548,000

 958,000
 
Total current assets 12,770,398 12,595,470
 
Property, plant and equipment, net 19,304,097 10,555,953
Other assets 716,044 643,991
Deferred tax assets, non-current 1,194,000 -
Goodwill, net 2,442,533 2,617,435
Total Assets $ 36,427,072 $ 26,412,849


LIABILITIES AND SHAREHOLDERS' EQUITY

    
Liabilities:    
Total current liabilities $ 3,984,343 $ 3,558,746
Long-term debt 3,798,716 357,600
Deferred Compensation 147,643 169,525
Deferred liabilities 197,331 77,330
Deferred tax liabilities 958,000 458,000
 
Total liabilities 9,086,033 4,621,201
 
Stockholders' equity:
Common stock 31,860 28,246
Common stock warrants 837,200 837,200
Additional paid-in capital 17,722,370 14,105,722
Retained earnings 9,674,282 9,476,670
Comprehensive loss (340,673) (256,059)
27,925,039 24,191,779
Less treasury stock, at cost - (1,760,131)
Less officer-shareholder loan (584,000) (640,000)
Total shareholders' equity 27,341,039 21,791,648
Total Liabilities and Shareholders' Equity $ 36,427,072 $ 26,412,849

Merrimac Industries, Inc.
41 Fairfield Place, West Caldwell, NJ 07006
Tel: 973.575.1300 / Fax: 973.575.0531
Internet: www.merrimacind.com