First Quarter Report 1999

REPORT TO STOCKHOLDERS
Merrimac Reports Profitable First Quarter 1999 Results; Backlog Reflects Improvement
First quarter 1999 sales of $4,739,000 declined compared to first quarter sales of the prior year of $5,793,000. 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% compared to diluted net income per share of $.24 reported for the first quarter of last year. The backlog at the end of the first quarter of 1999 was $7.6 million, which includes $800,000 at recently acquired Filtran Microcircuits Inc., an increase of $1.4 million over year-end 1998. Orders received during the first quarter of 1999 were $5.2 million and were 9% above the first quarter sales level. For the month of April 1999 orders received were $2.5 million, and backlog at month-end has increased to $8.6 million. We achieved our order and shipment goals while exceeding our profit plan for the quarter. Beyond these key performance measurements, we also had the strongest operating performance to date in terms of on-time delivery, reduction of late backlog and management of inventory. Our core manufacturing operations have been optimized as a result of last year’s fourth quarter restructuring. We continue to make progress qualifying Multi-Mix® Microtechnology at focused key accounts in satcom, defense and commercial market segments. Internally we have expanded our Multi-Mix® process and on-going automation.	We completed the acquisition of Filtran Microcircuits in the first quarter and are pleased with current customer demand and growth prospects. Filtran made a positive contribution to first quarter earnings. Recently, the Editors of Microwaves & RF Magazine presented Merrimac with their prestigious ‘Top Products of 1998 Award’ for Multi-Mix® three-dimensional circuit technology. The award cited this technology for its significance to the high-frequency industry. Our proprietary Multi-Mix® filter line was also featured on the cover of Microwaves & RF Magazine in January. These honors, plus over a dozen feature articles, have helped to alert both existing and prospective customers across the RF/ Microwave industry to the enormous potential of Multi-Mix® Microtechnology in wireless applications. Thank you for your continued support and confidence. Mason N. Carter Chairman and CEO May 14, 1999
Note: Certain statements in this 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.

SUMMARY CONSOLIDATED BALANCE SHEETS (Unaudited)
April 3, 1999 and April 4, 1998	1999	1998
ASSETS
Current assets
Cash and cash equivalents	$1,651,741	$2,478,894
Income tax refund receivable	423,021	-
Accounts receivable	4,123,385	4,003,940
Inventories	3,323,369	3,940,203
Other current assets	1,250,731	1,058,517
Total current assets	10,772,247	11,481,554
Property, plant and equipment, net	7,181,626	4,645,033
Other assets	268,927	156,208
Goodwill	2,867,319	-
Total Assets	$21,090,119	$16,282,795

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Total current liabilities	$3,308,757	$2,703,422
Long-term debt	4,181,773	-
Deferred liabilities	319,019	417,493
Total liabilities	7,809,549	3,120,915
Shareholders' equity:
Common stock	1,346,227	1,327,174
Additional paid-in capital	11,229,616	9,744,139
Retained earnings	9,163,021	11,422,632
Translation adjustments	(35,524)	-
	21,703,340	22,493,945
Less treasury stock, at cost	(8,062,770)	(9,227,065)
Less officer-shareholder loan	(360,000)	(105,000)
Total shareholders' equity	13,280,570	13,161,880
Total Liabilities and Shareholders' Equity	$21,090,119	$16,282,795

SUMMARY QUARTERLY CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
*1998 share and per share data restated to reflect 10% stock dividend effective June 1998	April 3 1999	April 4 1998
Net sales	$4,738,531	$5,792,607
Gross profit	2,311,791	2,574,755
Selling, general and administrative	1,560,990	1,696,695
Research and development	349,260	211,256
Income before income taxes	332,966	679,546
Provision for income taxes	120,000	252,000
Net income	212,966	427,546
Net income per common share - diluted	$.12	*$.24
Weighted average number of shares outstanding - diluted	1,768,793	*1,779,982