News Release
Merrimac Reports Third Quarter and Nine
Months 2006 Results
WEST CALDWELL, N.J., November 14, 2006:
Merrimac Industries, Inc. (AMEX: MRM), a leader in the design
and manufacture of RF Microwave components, assemblies and
micro-multifunction modules (MMFM®), today announced results
for the third quarter and first nine months of 2006.
Sales for the third quarter of 2006 were $6,748,000,
a decrease of $1,142,000 or 14.5 percent compared to the third
quarter of 2005 sales of $7,890,000. The sales decrease was
due to the loss of certain anticipated orders as well as from
delays in space and defense program orders for both of the
Company’s operating segments. Gross profit for the third
quarter of 2006 was $2,498,000, a decrease of $752,000 or
23.1 percent, and was 37.0 percent of sales as compared to
gross profit of $3,250,000 or 41.2 percent of sales for the
third quarter of 2005. Gross profit percent in the third quarter
of 2006 decreased from the third quarter of 2005 due to the
decrease in sales and the further impact of the lower level
of sales having to absorb fixed manufacturing costs.
Operating loss for the third quarter of 2006
was $(604,000) compared to operating income of $291,000 for
the third quarter of 2005. Operating loss for the third quarter
of 2006 was due to the lower gross profit from the decrease
in sales and higher research and development costs related
to the Company’s Multi-Mix® products and included
a non-cash charge of $50,000 for share-based compensation
expense resulting from the adoption of SFAS No. 123R in the
first quarter of 2006. Net loss for the third quarter of 2006
was $(599,000) or $(.19) per share compared to net income
of $228,000 or $.07 per share for the third quarter of 2005.
For the first nine months of 2006 sales of
$21,229,000 decreased $1,488,000 or 6.6 percent compared to
sales of $22,717,000 for the first nine months of 2005. Sales
for the first nine months of 2006 were lower than the first
nine months of 2005 primarily due to the lower bookings levels
received during the second half of 2005 and the first quarter
of 2006 as compared to comparable prior periods was due to
the loss of certain anticipated orders as well as from delays
in space and defense programs. Nine month 2006 sales included
$1,200,000 of revenue recognized in connection with the early
close out of a fixed price customer contract during the second
quarter and a year-to-date sales reduction in the microwave
micro-circuitry segment of $1,358,000 due to declines in the
segment’s defense orders. Gross profit for the first
nine months of 2006 was $8,610,000, a decrease of $943,000
or 9.9 percent and was 40.6 percent of sales as compared to
gross profit of $9,553,000 or 42.1 percent of sales for the
first nine months of 2005. Gross profit percentage in the
first nine months of 2006 decreased 1.5 percentage points
compared to the first nine months of 2005 due to the decrease
in sales and the further impact of the lower level of sales
having to absorb fixed manufacturing costs.
Operating loss for the first nine months of
2006 was $(512,000) compared to operating income of $890,000
for the first nine months of 2005. The reduction in operating
income for the first nine months of 2006 as compared to the
first nine months of 2005 was due to the lower gross profit
from the decrease in sales and due to higher selling, general
and administrative expenses compared to the first nine months
of 2005. Operating loss for the first nine months of 2006
included a non-cash charge of $129,000 for share-based compensation
expense resulting from the adoption of SFAS No. 123R. Net
loss for the first nine months of 2006 was $(510,000) or $(.16)
per share compared to net income of $644,000 or $.20 per diluted
share for the first nine months of 2005. Net loss for the
first nine months of 2006 also included a tax benefit of $61,000
or $.02 per share representing refundable Canadian provincial
technology tax credits for which the Company has qualified.
Orders of $6,216,000 were received during the
third quarter of 2006, an increase of $1,040,000 or 20.1 percent
compared to $5,176,000 in orders received during the third
quarter of 2005. Orders of $19,080,000 were received for the
first nine months of 2006, a decrease of $2,431,000 or 11.3
percent compared to $21,511,000 in orders received for the
first nine months of 2005. The decrease in orders for the
first nine months of 2006 as compared to the first nine months
of 2005 was due to the loss of certain orders anticipated
as well as from delays in expected satellite and defense programs
for all product lines, including our Multi-Mix® products.
Backlog decreased by $2,148,000 or 16.4 percent to $10,990,000
at the end of the third quarter of 2006 compared to $13,138,000
at year-end 2005. The backlog at the end of the third quarter
of 2006 decreased by $749,000 or 6.4% when compared to the
backlog of $11,739,000 at the end of the third quarter of
2005. The book-to-bill ratio for the third quarter of 2006
was 0.92 to 1 and for the third quarter of 2005 was 0.66 to
1. The book-to-bill ratio for the first nine months of 2006
was 0.90 to 1 and for the first nine months of 2005 was 0.95
to 1.
Because of the declining level of orders and
sales, the Company reduced its headcount and will record a
restructuring charge in the fourth quarter of approximately
$200,000. The restructuring charge and the write-off of approximately
$170,000 of loan costs related to the prior financing agreement,
combined with the lower order and sales levels will result
in an operating loss for the fourth quarter and for fiscal
year 2006. The Company anticipates an annualized rate of savings
of approximately $1,500,000 to begin in the first quarter
of 2007 from the restructuring and other cost reduction and
containment measures to be implemented.
Chairman and CEO Mason N. Carter commented,
“We have developed a new commercial banking relationship
with North Fork Bank and completed our refinancing in mid-October
2006. Continued investment in research and development efforts
are focused on our Integrated Multi-Mix® High Power Amplifier
Resource Platform Module. Recently we announced the receipt
of two military orders. One order for $708,000 is scheduled
to be shipped during 2007 and is part of a five-year Multi-Mix®
contract that could potentially reach a maximum value of $4.3
million. The second order of $740,000 was for a mission-critical
suite of products for use in military surveillance aircraft
with deliveries scheduled for 2007.”
Mr. Carter continued, “Our financial
information includes:
- Orders booked of $6.2 million for the third quarter.
- Cash of $3.6 million (includes $1.5 million of restricted cash at September 30, 2006, which has since been released and is available to the Company) exceeds the total of current and long-term debt of $2.5 million.
- Working capital increased $2.0 million to $11.8 million and the current ratio improved to 4.2 to 1."
Investors are invited to participate in the financial results conference call on Tuesday, November 14, 2006 at 4:15 p.m. (Eastern) by dialing 1-866-550-6338 (for International callers: 1-347-284-6930) ten minutes prior to the scheduled start time, and reference the Merrimac Industries third quarter 2006 conference call. For those unable to participate, a replay will be available for seven days by dialing 1-888-203-1112, or 1-719-457-0820 for international callers, passcode number 1914217.
This conference call will also be broadcast
live over the Internet by logging on to the web at this address:
http://www.videonewswire.com/event.asp?id=36685
If you are unable to participate during the
live webcast, the call will be archived on the Merrimac website:
http://www.merrimacind.com
About Merrimac
Merrimac Industries, Inc. is a leader in the
design and manufacture of RF Microwave signal processing components,
subsystem assemblies, and Multi-Mix® micro-multifunction
modules (MMFM®), for the worldwide Defense, Satellite
Communications (Satcom), Commercial Wireless and Homeland
Security market segments. Merrimac is focused on providing
Total Integrated Packaging Solutions® with Multi-Mix®
Microtechnology, a leading edge competency providing value
to our customers through miniaturization and integration.
Multi-Mix® MMFM® provides a patented and novel packaging
technology that employs a platform modular architecture strategy
that incorporates embedded semiconductor devices, MMICs, etched
resistors, passive circuit elements and plated-through via
holes to form a three-dimensional integrated module applicable
to High Power, High Frequency and High Performance mission-critical
applications. Merrimac Industries facilities are registered
under ISO 9001:2000, an internationally developed set of quality
criteria for manufacturing operations.
Merrimac Industries, Inc. and its subsidiary
Filtran Microcircuits Inc., are located in West Caldwell,
NJ, San Jose, Costa Rica and Ottawa, Ontario, Canada, and
have approximately 230 co-workers dedicated to the design
and manufacture of signal processing components, gold plating
of high-frequency microstrip, bonded stripline and thick metal-backed
Teflon (PTFE) micro-circuitry and subsystems providing Total
Integrated Packaging Solutions® for wireless applications.
Merrimac (MRM)
is listed on the American Stock Exchange. Multi-Mix®,
Multi-Mix PICO®, MMFM® and Total Integrated Packaging
Solutions® are trademarks of Merrimac Industries, Inc.
For more information about Merrimac Industries, Inc. and Filtran
Microcircuits Inc., please visit http://www.merrimacind.com
and http://www.filtranmicro.com.
This press release 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: risks associated
with demand for and market acceptance of existing and newly
developed products as to which the Company has made significant
investments, particularly its Multi-Mix® products; the
possibilities of impairment charges to the carrying value
of our Multi-Mix® assets, thereby resulting in charges
to our earnings; risks associated with adequate capacity to
obtain raw materials and reduced control over delivery schedules
and costs due to reliance on sole source or limited suppliers;
slower than anticipated penetration into the satellite communications,
defense and wireless markets; failure of our Original Equipment
Manufacturer or OEM customers to successfully incorporate
our products into their systems; changes in product mix resulting
in unexpected engineering and research and development costs;
delays and increased costs in product development, engineering
and production; reliance on a small number of significant
customers; the emergence of new or stronger competitors as
a result of consolidation movements in the market; the timing
and market acceptance of our or our OEM customers’ new
or enhanced products; general economic and industry conditions;
the risk that the benefits expected from the Company’s
acquisition of Filtran Microcircuits Inc. are not realized;
the ability to protect proprietary information and technology;
competitive products and pricing pressures; our ability and
the ability of our OEM customers to keep pace with the rapid
technological changes and short product life cycles in our
industry and gain market acceptance for new products and technologies;
foreign currency fluctuations between the U.S. and Canadian
dollars; risks relating to governmental regulatory actions
in communications and defense programs; and inventory risks
due to technological innovation and product obsolescence,
as well as other risks and uncertainties as are 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.
Merrimac Industries,
Inc.
Summary of Consolidated Statements of Operations
(Unaudited)
| |
Quarter
Ended |
| |
Sept.
30,
2006
|
Oct.
1,
2005
|
Net sales |
$6,748,000 |
$7,890,000 |
| Gross profit |
2,498,000 |
3,250,000 |
| Selling, general and
administrative expenses |
2,494,000 |
2,470,000 |
| Research and development |
608,000 |
489,000 |
| Operating income (loss) |
(604,000) |
291,000 |
| Interest and other expense,
net |
(8,000) |
(61,000) |
| Loss on disposition of
assets |
- |
(7,000) |
| Income (loss) before
income taxes |
(612,000) |
223,000 |
| Provision (benefit) for
income taxes |
(13,000) |
(5,000) |
| Net income (loss) |
(599,000) |
228,000 |
| |
|
|
| Net income (loss) per
common share - basic and diluted |
$(.19) |
$.07 |
| |
|
|
| Weighted average number
of shares outstanding - basic |
3,137,000
|
3,145,000
|
| Weighted average number
of shares outstanding - diluted |
3,137,000
|
3,179,000
|
| |
Nine
Months Ended |
| |
Sept.
30,
2006
|
Oct. 1,
2005
|
Net sales |
$21,229,000 |
$22,717,000 |
| Gross profit |
8,610,000 |
9,553,000 |
| Selling, general and
administrative expenses |
7,625,000 |
7,125,000 |
| Research and development |
1,497,000 |
1,538,000 |
| Operating income (loss) |
(512,000) |
890,000 |
| Interest and other expense,
net |
(59,000) |
(178,000) |
| Loss on disposition of
assets |
- |
(43,000) |
| Income (loss) before
income taxes |
(571,000) |
669,000 |
| Provision (benefit) for
income taxes |
(61,000) |
25,000 |
| Net income (loss) |
(510,000) |
644,000 |
| |
|
|
| Net income (loss) per
common share - basic |
$(.16) |
$.21 |
| Net income (loss) per
common share - diluted |
$(.16) |
$.20 |
| |
|
|
| Weighted average number
of shares outstanding - basic |
3,143,000
|
3,141,000
|
| Weighted average number
of shares outstanding - diluted |
3,143,000
|
3,175,000
|
Merrimac Industries,
Inc.
Condensed Consolidated Balance Sheets
| |
|
| |
Sept.
30,
2006
(Unaudited)
|
Dec. 31,
2005
|
ASSETS |
| Current Assets: |
| Cash and
cash equivalents |
$2,115,000 |
$4,081,000 |
| Restricted cash |
1,500,000 |
- |
| Accounts
receivable, net |
6,342,000 |
5,310,000 |
| Income tax
refunds receivable |
317,000 |
418,000 |
| Inventories,
net |
4,240,000 |
3,710,000 |
| Other current
assets |
785,000 |
693,000 |
| Deferred
tax assets |
144,000
|
140,000
|
| Total current
assets |
15,443,000 |
14,352,000
|
| Property, plant &
equipment, net |
13,248,000 |
13,973,000 |
| Restricted cash |
- |
1,500,000 |
| Other assets |
612,000 |
614,000 |
| Deferred tax assets |
498,000 |
482,000 |
| Goodwill |
3,680,000 |
3,501,000 |
| Total Assets |
$33,481,000
|
$34,422,000
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
| Liabilities: |
| Current portion of long-term
debt |
$680,000 |
$908,000 |
| Other current liabilities |
2,986,000 |
3,590,000 |
| Total current liabilities |
3,666,000 |
4,498,000 |
| Long-term debt, net of
current portion |
1,801,000 |
2,071,000 |
| Deferred liabilities |
38,000 |
23,000 |
| Deferred tax liabilities |
140,000 |
140,000 |
| Total liabilities |
5,645,000 |
6,732,000 |
| Stockholders' equity |
27,836,000
|
27,690,000
|
| Total Liabilities &
Stockholders' Equity |
$33,481,000
|
$34,422,000
|
|
|
|
