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 September 29, 2001 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)
Delaware 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)
Registrant's telephone number (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
---------------------------- -------------------------------------------
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
--- ---
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 November 12, 2001
----------------------------- --------------------------------
Common Stock ($.01 par value) 2,650,345
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
---------------------------
September 29, December 30,
2001 2000
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(Unaudited) (Audited)
------------- ------------
ASSETS
------
Current assets:
Cash and cash equivalents ....................... $ 930,688 $ 3,425,390
Accounts receivable, net......................... 4,716,762 5,617,085
Income tax refunds receivable.................... 138,492 42,924
Inventories...................................... 4,928,790 3,627,535
Other current assets ............................ 646,966 384,224
Deferred tax assets ............................. 931,000 871,000
----------- -----------
Total current assets ........................ 12,292,698 13,968,158
----------- -----------
Property, plant and equipment at cost.............. 31,771,586 22,789,788
Less accumulated depreciation and amortization... 14,440,494 12,770,791
----------- -----------
Property, plant and equipment, net............. 17,331,092 10,018,997
Other assets ...................................... 680,070 752,381
Goodwill, net of accumulated amortization
of $397,426 and $285,934......................... 2,506,030 2,774,248
----------- -----------
Total Assets ................................ $32,809,890 $27,513,784
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Current liabilities:
Current portion of long-term debt ............... $ 4,676,016 $ 119,932
Accounts payable ................................ 3,907,346 2,838,198
Accrued liabilities ............................. 1,121,283 1,432,128
Income taxes payable............................. - 173,000
----------- -----------
Total current liabilities ................... 9,704,645 4,563,258
Long-term debt, net of current portion ............ 612,430 402,828
Deferred compensation ............................. 163,182 185,406
Other liabilities.................................. 65,169 -
Deferred tax liabilities .......................... 458,000 458,000
----------- -----------
Total liabilities ........................... 11,003,426 5,609,492
----------- -----------
Stockholders' equity:
Preferred stock, par value $.01 per share
Authorized: 1,000,000 shares
No shares issued
Common stock, par value $.01 per share:
Authorized: 20,000,000 shares
Issued: 2,834,750 and 2,805,373 shares ....... 28,348 28,054
Common stock warrants............................ 837,200 837,200
Additional paid-in capital ...................... 14,181,006 13,982,778
Retained earnings ............................... 9,403,782 9,507,366
Accumulated comprehensive loss................... (299,741) (50,975)
----------- -----------
24,150,595 24,304,423
Less treasury stock, at cost:
208,904 shares................................. (1,760,131) (1,760,131)
Less loan to officer-stockholder ................ (584,000) (640,000)
----------- -----------
Total stockholders' equity ................... 21,806,464 21,904,292
----------- -----------
Total Liabilities and Stockholders' Equity ... $32,809,890 $27,513,784
=========== ===========
See accompanying notes.
- 1 -
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
-------------------------------------
(Unaudited)
-----------
Thirteen Weeks Ended Nine Months Ended
--------------------------- ---------------------------
September 29, September 30, September 29, September 30,
2001 2000 2001 2000
OPERATIONS --------------------------- ---------------------------
Net sales ................................... $5,812,301 $6,437,186 $18,668,833 $16,297,983
---------- ---------- ----------- -----------
Costs and expenses:
Cost of sales ............................. 2,889,186 3,302,496 8,994,440 8,343,319
Selling, general and administrative ....... 2,281,120 2,230,958 7,013,810 5,948,119
Research and development .................. 954,076 483,877 2,501,924 1,332,658
Amortization of goodwill................... 36,948 41,563 111,492 119,557
Reincorporation charge..................... - - 330,000 -
Restructuring charge....................... - - - 315,000
---------- ---------- ----------- -----------
6,161,330 6,058,894 18,951,666 16,058,653
---------- ---------- ----------- -----------
Operating income (loss)...................... (349,029) 378,292 (282,833) 239,330
Interest and other (income) expense, net .... (19,690) 9,148 (69,249) 114,868
---------- ---------- ----------- -----------
Income (loss) before income taxes............ (329,339) 369,144 (213,584) 124,462
Provision (benefit) for income taxes ........ (120,000) 150,000 (110,000) 30,000
---------- ---------- ----------- -----------
Net income (loss)............................ $ (209,339) $ 219,144 $ (103,584) $ 94,462
========== ========== =========== ===========
Net income (loss) per common share:
Basic...................................... $(.08) $ .10 $(.04) $ .05
===== ===== ===== =====
Diluted.................................... $(.08) $ .09 $(.04) $ .04
===== ===== ===== =====
Weighted average number of
shares outstanding:
Basic ..................................... 2,622,573 2,186,015 2,615,551 2,021,057
========= ========= ========= =========
Diluted.................................... 2,622,573 2,379,028 2,615,551 2,171,314
========= ========= ========= =========
COMPREHENSIVE INCOME (LOSS)
Net income (loss)............................ $ (209,339) $ 219,144 $ (103,584) $ 94,462
Comprehensive income (loss):
Foreign currency translation adjustment.... (194,504) (87,694) (248,766) (203,439)
---------- ---------- ----------- -----------
Comprehensive income (loss).................. $ (403,843) $ 131,450 $ (352,350) $ (108,977)
========== ========== =========== ===========
See accompanying notes.
-2-
MERRIMAC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
-----------
Nine Months Ended
----------------------------
September 29, September 30,
2001 2000
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Cash flows from operating activities:
Net income (loss).................................. $ (103,584) $ 94,462
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization.................. 1,673,277 1,365,693
Amortization of goodwill ...................... 111,492 119,557
Amortization of deferred rental income......... (65,474) -
Deferred and other compensation................ 63,925 9,904
Deferred income taxes.......................... (60,000) -
Changes in operating assets and liabilities:
Accounts receivable.......................... 900,323 (709,417)
Income tax refunds receivable................ (95,568) 128,889
Inventories.................................. (1,301,255) (885,720)
Other current assets......................... (262,743) (38,506)
Other assets................................. 72,311 5,694
Accounts payable............................. (604,443) 994,993
Accrued liabilities.......................... (300,869) 147,032
Income taxes payable......................... (173,000) 263,074
Deferred compensation........................ (40,126) (233,772)
Other liabilities............................ 130,643 -
Loan to officer-stockholder.................. - (280,000)
---------- ----------
Net cash provided by (used in) operating activities.. (55,091) 981,883
---------- ----------
Cash flows from investing activities:
Purchase of capital assets......................... (7,390,777) (2,321,781)
Sale of capital assets............................. - 17,909
---------- ----------
Net cash used in investing activities................ (7,390,777) (2,303,872)
---------- ----------
Cash flows from financing activities:
Borrowings under revolving credit facility......... 4,500,000 -
Borrowings under lease facility.................... 419,192 343,500
Repayment of borrowings............................ (110,216) (2,516,772)
Proceeds from the issuance of common stock, net.... - 3,277,548
Proceeds from the exercise of stock options........ 198,521 528,275
---------- ----------
Net cash provided by financing activities............ 5,007,497 1,632,551
---------- ----------
Effect of exchange rate changes...................... ( 56,331) (76,139)
---------- ----------
Net (decrease) increase in cash and cash equivalents. (2,494,702) 234,423
Cash and cash equivalents at beginning of year....... 3,425,390 1,108,141
---------- ----------
Cash and cash equivalents at end of period........... $ 930,688 $1,342,564
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes..................................... $ 302,253 $ 41,000
========== ==========
Loan interest.................................... $ 126,070 $ 209,441
========== ==========
Unpaid purchases of capital assets................. $1,673,592 $ -
========== ==========
See accompanying notes.
-3-
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 management, necessary for a fair presentation of
the financial position of the Company as of September 29, 2001 and its results
of operations and cash flows for the periods presented. Results of operations of
interim periods are not necessarily indicative of results for a full year. These
financial statements should be read in conjunction with the audited consolidated
financial statements in the Company's Annual Report on Form 10-KSB for December
30, 2000. Certain prior year amounts have been reclassified to conform to
current year presentation.
B. Contract revenues
Sales and related cost of sales on fixed-price contracts that require
customization of standard products to customer specifications are recorded as
title to these products transfers to the customer, which is generally on the
date of shipment. Prior to shipment, manufacturing costs incurred on such
contracts are recorded as work in process inventory. Anticipated losses on
contracts are charged to operations when identified. Revenue related to
non-recurring engineering charges is generally recognized upon shipment of the
initial units produced or based upon contractually established stages of
completion.
C. Delaware reincorporation
On February 22, 2001, the Company (previously incorporated in the State of
New Jersey) was reincorporated in the State of Delaware. In connection with the
reincorporation, each share of Common Stock, par value $.50 per share, of the
Company prior to the reincorporation was converted into one share of Common
Stock, par value $.01 per share, of the Company, as reincorporated in Delaware.
As a result of the reincorporation, the authorized capital stock of the Company
was increased to 20 million shares of common stock, par value $.01 per share
(from 5 million shares of Common Stock prior to the reincorporation), and one
million shares of preferred stock, par value $.01 per share.
Common Stock and additional paid in capital for December 30, 2000 in the
accompanying financial statements have been restated to give the effect to the
reincorporation. The Company incurred $330,000 of costs in connection with the
reincorporation in Delaware. Such expense is reflected as a reincorporation
charge in the accompanying statement of operations. The reincorporation charge
net of tax benefits was $198,000 or $.08 per share.
The Board of Directors has the authority to issue up to one million shares
of Preferred Stock and to fix the number of shares constituting any series and
the designation of such series, and to determine the preferences, rights and
qualifications or limitations of such series of Preferred Stock, without any
further vote or action by the Company's stockholders.
D. Inventories
Inventories consist of the following:
September 29, December 30,
2001 2000
------------ -----------
Finished goods ...................... $ 451,449 $ 363,387
Work in process ..................... 2,312,077 1,493,784
Raw materials and purchased parts ... 2,165,264 1,770,364
---------- ----------
Total $4,928,790 $3,627,535
========== ==========
Total inventories are net of valuation allowances for obsolescence of
$1,081,000 at September 29, 2001 and $1,018,000 at December 30, 2000.
-4-
MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
E. Net income (loss) per common share
Statement of Financial Accounting Standards No. 128, "Earnings per Share,"
establishes the computation and presentation of net income per common share.
Under the standard, both basic and diluted net income per common share are
presented.
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.
Stock options and warrants did not have an effect on the computation of
diluted loss per share in the three months and nine months ended September 29,
2001 since they were antidilutive.
F. Comprehensive income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", 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 stockholders' equity during a period except those
resulting from investments by or distributions to stockholders. The Company has
determined that the components of other comprehensive income impacting the
Company consists primarily of foreign currency translation adjustments.
G. 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 last and fiscal year 2002 will be
the next) is added to the fourth quarter, making such quarter consist of 14
weeks.
H. Transactions with management and loan to officer-stockholder
On May 4, 1998, the Company sold 22,000 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 Common Stock during the first quarter of 1998). The Company
extended to 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, with interest payments
due quarterly, calculated at a variable interest rate based on the prime rate of
the Company's lending bank, was executed by Mr. Carter in favor of the Company.
However, payment of the interest accrued from November 1998 until November 1999
was deferred until the end of the term of the new promissory note. Payment of
the loan is secured by the pledge of the 33,000 shares of Common Stock that were
purchased by Mr. Carter with the proceeds of the loans.
In addition, on August 31, 2000, in connection with an amendment of Mr.
Carter's employment agreement, the Company loaned Mr. Carter $280,000 with
interest calculated at a variable interest rate based on the prime rate of the
Company's lending bank, payable annually. In addition, pursuant to Mr. Carter's
amended employment agreement, Mr. Carter will receive an annual special bonus on
the next five anniversaries of the agreement amendment's effective date, in the
form of forgiveness of one-fifth of the principal of and interest on the loan.
During 2001, the annual special bonus amount of $56,000 principal and $23,000
accrued interest was forgiven totaling $79,000, and the original promissory note
of $280,000 was reduced to $224,000 on August 31, 2001, the anniversary date of
the amended employment agreement.
-5-
MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
I. Current and long-term debt
The Company was obligated under the following debt instruments at September
29, 2001 and December 30, 2000:
September 29, December 30,
2001 2000
------------ -------------
Fleet Bank:
Revolving credit facility, interest 1/2% below prime........ $4,500,000 $ -
The Bank of Nova Scotia:
Capital leases, interest 7.0%, due October 2003............. 150,100 211,600
Capital leases, interest 8.7%, due May 2005................. 261,609 311,160
Capital leases, interest 7.3%, due April 2006............... 206,167 -
Capital leases, interest 7.9%, due June 2006................ 170,570 -
--------- --------
5,288,446 522,760
Less current portion........................................ 4,676,016 119,932
---------- --------
Long-term portion........................................... $ 612,430 $402,828
========== ========
In 2001 the Company borrowed $4,500,000, which includes $1,500,000 borrowed
during the third quarter, under its existing revolving credit facility with
Fleet Bank (formerly Summit Bank) which currently bears interest at 4.5%.
On October 3, 2001, the Company obtained an increase of $2,000,000 to the
revolving credit facility for working capital and general corporate purposes.
During October 2001, the Company has borrowed an additional $1,500,000 under its
increased revolving credit facility.
The Company has been approved conditionally, subject to the completion of
certain documentation, for an additional increase of $3,500,000 in the Company's
lines of credit with Fleet Bank. The Company's revolving credit facility expires
June 30, 2002.
At September 29, 2001 and December 30, 2000, the fair value of the
Company's debt approximates carrying value. The fair value of the Company's
long-term debt is estimated based on current interest rates.
Capital leases included in property, plant and equipment, net, have a
depreciated cost of approximately $639,000 at September 29, 2001 and $376,000 at
December 30, 2000.
J. Restructuring and related charges
As a result of accelerating the transfer of increased levels and complexity
of production to the Company's Costa Rica manufacturing facility, the Company
implemented a reduction of its workforce and provided severance benefits to
certain employees during the first quarter of 2000. The restructuring charge for
the first quarter of 2000 was $315,000, and charges net of tax benefits of
$189,000 or $.10 per diluted share and $.09 per diluted share for the nine
months, as a result of increases in common shares from private placements after
the first quarter 2000. The reduction in workforce affected fifteen persons,
primarily electronic components manufacturing labor, and the full amount of the
restructuring charge has been paid.
-6-
MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
K. Private placements of Common Stock and Warrants to purchase Common Stock
On April 7, 2000, the Company entered into a stock purchase and exclusivity
agreement with Ericsson Microelectronics, A.B. ("Ericsson") and Ericsson Holding
International, B.V. ("EHI") pursuant to which the Company sold to EHI 375,000
newly issued shares of Common Stock, representing approximately 17.5% of the
outstanding Common Stock after giving effect to the sale, for an aggregate
purchase cash price of $3,375,000. The stock purchase and exclusivity agreement
also provides that the Company will design, develop and produce exclusively for
Ericsson Multi-Mix(R) products that incorporate active RF power transistors for
use in wireless base station applications, television transmitters and certain
other applications that are intended for Bluetooth transceivers and that the
Company will generally be the priority supplier for such products. Accordingly,
Ericsson will receive first priority on all Multi-Mix(R) resources of the
Company and will have priority access to Filtran Microcircuits Inc. proprietary
technology and manufacturing capabilities.
On October 26, 2000, the Company entered into subscription agreements for
Common Stock and warrants with each of three groups of investors: (i) investors
led by Adam Smith Investment Partners, L.P. and certain of its affiliates (the
"Adam Smith Investors"), (ii) EHI, and (iii) three members of the board of
directors of the Company (the "Director Investors"). Pursuant to the
subscription agreements, the Company sold to the investors units at a price of
$12.80 per unit, each unit consisting of one share of common stock and one
three-year warrant to purchase one additional share of common stock with an
exercise price of $21.25 ("Units"). Pursuant to the subscription agreements, the
Adam Smith Investors purchased 240,000 Units, EHI purchased 100,000 Units and
the Director Investors purchased 20,000 Units for an aggregate cash purchase
price of $4,608,000. The Common Stock portion represented approximately 14% of
the outstanding stock of the Company after giving effect to the sales.
The warrants were valued using the Black-Scholes option valuation model
with a resulting allocation of the aggregate proceeds from the Units
attributable to the warrants of $837,200, net of issue costs. The following
assumptions were utilized to value the warrants: price per share of Common Stock
of $15.25; expected life of three years; expected volatility of 40%; a risk free
interest rate of 6%; an expected yield of 0.0%; and a liquidity discount of 33%.
L. Lease modification and resource sharing agreement
The Company entered into an agreement effective January 2001, with a
customer to relinquish approximately half of the Company's 17,000 square-foot
leased manufacturing facility in Costa Rica. Associated with the transaction,
the Company entered into a new four-year lease agreement with a five-year
renewal option with its Costa Rica landlord for the reduced space. In addition,
the Company transferred certain employees to its customer, agreed to share
certain personnel resources and common costs, and committed to provide certain
management, administrative and other services to its customer.
In connection with the transaction, the Company received $200,000 from its
customer and will receive further payments of $250,000 over a two-year period.
The Company will reduce its rent expense by approximately $87,000 during each of
the next four years to an aggregate amount of approximately $348,000.
The Company deferred approximately $102,000 of costs at December 30, 2000
incurred in connection with entering into this agreement and other incremental
costs, for the purpose of providing this customer with trained personnel and
certain other services required for their dedicated manufacturing capability.
Such costs are classified in the balance sheet as other assets at December 30,
2000, and were recovered through the $200,000 payment received in January 2001
as described above. The deferred rental income of $34,000 is included in other
liabilities.
-7-
MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
M. Pro forma weighted average number of common shares outstanding
Had the sales of 375,000 shares of Common Stock on April 7, 2000 and
360,000 Units on October 26, 2000 referred to in Note K occurred at the
beginning of the prior year, the pro forma basic and diluted weighted average
number of Common Shares outstanding would have been:
Quarter Nine Months
------------------------
Ended September 30, 2000
------------------------
Basic:
Actual 2,186,015 2,021,057
Adjustments for sales of:
Common Stock, April 7, 2000 - 131,868
Units, October 26, 2000 (a) 360,000 360,000
--------- ---------
Basic - pro forma 2,546,015 2,512,925
Effect of dilutive securities-
Stock options 193,013 150,257
--------- ---------
Diluted - pro forma 2,739,028 2,663,182
========= =========
(a) There is no pro forma dilutive impact from the warrants included in the
Units, as the warrant exercise price of $21.25 exceeds the per share market
value of the Common Stock.
N. Recent Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which established new accounting and reporting
standards and requires that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded as assets or
liabilities in the balance sheet measured at fair value. SFAS No. 133 requires
that changes in the fair value of derivatives be recognized currently in
earnings unless specific hedge accounting criteria are met. The Company has
adopted the provisions of the Statement in 2001. The Company does not currently
hold derivative instruments or engage in hedging activities and therefore the
adoption of SFAS No. 133 has not had a material impact on the Company's
financial position, results of operations or cash flows.
On June 30, 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 141 requires all
business combinations initiated after June
30, 2001 to be accounted for using the purchase method of accounting and
eliminates the pooling method of accounting. SFAS No. 141 will not have an
impact on the Company's business since the Company has historically accounted
for business combinations using the purchase method of accounting.
With the adoption of SFAS No.142, which will be adopted by the Company on
December 30, 2001, goodwill will no longer be subject to amortization over its
estimated useful life. However, goodwill will be subject to at least an annual
assessment for impairment and more frequently if circumstances indicate a
possible impairment. The Company is required to perform a fair-value-based
goodwill impairment test. In addition, under SFAS No. 142, an acquired
intangible asset should be separately recognized if the benefit of the
intangible is obtained through contractual or other legal rights, or if the
intangible asset can be sold, transferred, licensed, rented, or exchanged.
Intangible assets will be amortized over their estimated useful lives. Early
adoption of SFAS No. 142 is not permitted. Any write-down of goodwill would be
charged to results of operations in the periods in which the recorded value of
goodwill and certain intangibles is more than its fair value. On an annualized
basis, the Company expects that the adoption of these accounting standards will
reduce the amortization of goodwill and intangibles by approximately $150,000
commencing in 2002, unless future impairment reviews result in periodic
write-downs of goodwill.
-8-
MERRIMAC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
O. Business segment data
The Company's operations are conducted primarily through two business
segments: (1) electronic components and (2) microwave micro-circuitry. These
segments, and the principal operations of each, are as follows:
Electronic components: Design, manufacture and sale of electronic component
devices offering extremely broad frequency coverage and high performance
characteristics for communications, defense and aerospace applications. Of the
identifiable assets, 90% are located in the United States and 10% are located in
Costa Rica.
Microwave micro-circuitry: Design, manufacture and sale of microstrip,
bonded stripline and thick metal-backed Teflon(R) (PTFE) and mixed dielectric
multilayer circuits for communications, defense and aerospace applications. Of
the identifiable assets all are located in Canada.
Information about the Company's operations in different industries follows.
Operating income is net sales less operating expenses. Operating expenses
exclude interest expense, other income and income taxes. Assets are identified
with the appropriate operating segment and are substantially all located in the
North America geographic area. Corporate assets consist principally of cash.
Corporate expenses and inter-segment sales are immaterial.
Thirteen Weeks Ended Nine Months Ended
---------------------------- ----------------------------
September 29, September 30, September 29, September 30,
2001 2000 2001 2000
---------------------------- ----------------------------
(In thousands of dollars) (In thousands of dollars)
Industry segments:
Sales to unaffiliated customers:
Electronic components $ 4,973 $ 4,855 $15,291 $12,020
Microwave micro-circuitry 839 1,582 3,378 4,278
------- ------- ------- ------
Consolidated $ 5,812 $ 6,437 $18,669 $16,298
======= ======= ======= =======
Income before provision for income taxes:
Operating income (loss):
Electronic components $ (264) $ (43) $ (360) $ (739)
Microwave micro-circuitry (85) 421 77 978
Interest and other income
(expense), net 20 (9) 69 (115)
------- ------- ------- -------
Consolidated $ (329) $ 369 $ (214) $ 124
======= ======= ======= =======
Identifiable assets:
Electronic components $27,185 $16,896
Microwave micro-circuitry 4,694 5,027
Corporate 931 1,343
------- -------
Consolidated $32,810 $23,266
======= =======
Depreciation and amortization:
Electronic components $ 509 $ 424 $ 1,432 $ 1,191
Microwave micro-circuitry 102 62 353 294
------- ------- ------- -------
Consolidated $ 611 $ 486 $ 1,785 $ 1,485
======= ======= ======= =======
Capital expenditures, net:
Electronic components $ 2,473 $ 764 $ 6,989 $ 1,937
Microwave micro-circuitry - 38 402 367
------- ------- ------- -------
Consolidated $ 2,473 $ 802 $ 7,391 $ 2,304
======= ======= ======= =======
-9-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STATEMENTS OF OPERATIONS SUMMARY
--------------------------------
(Unaudited)
-----------
The following table displays line items in the Consolidated Statements of
Operations as a percentage of net sales.
Percentage of Net Sales Percentage of Net Sales
------------------------- --------------------------
Third Quarter Year to Date
------------------------- --------------------------
Thirteen Weeks Ended Nine Months Ended
------------------------- --------------------------
September 29, September 30, September 29, September 30,
2001 2000 2001 2000
------------- ------------ ------------ ------------
Net sales.................................... 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Costs and expenses:
Cost of sales.............................. 49.7 51.3 48.2 51.2
Selling, general and administrative........ 39.2 34.7 37.5 36.5
Research and development................... 16.4 7.5 13.4 8.2
Amortization of goodwill................... .7 .6 .6 .7
Reincorporation charge..................... - - 1.8 -
Restructuring charge....................... - - - 1.9
------ ------ ------ ------
106.0 94.1 101.5 98.5
------ ------ ------ ------
Operating income (loss)...................... (6.0) 5.9 (1.5) 1.5
Interest and other (income) expense, net..... (.3) .2 (.4) .7
------ ------ ------ -----
Income (loss) before income taxes.......... (5.7) 5.7 (1.1) .8
Provision (benefit) for income taxes....... (2.1) 2.3 ( .6) .2
------ ------ ------ -------
Net income (loss).......................... (3.6)% 3.4% (.5)% .6%
====== ====== ====== ======
-10-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Third quarter and nine months 2001 compared to third quarter and nine
months 2000
Consolidated results of operations for the third quarter 2001 reflect a
decrease in net sales of $625,000 or 9.7% to $5,812,000. This decrease was
primarily attributable to a $743,000 decrease in sales of microwave
micro-circuitry products from the Company's subsidiary Filtran Microcircuits
Inc. ("FMI"), which was partially offset by a $118,000 increase in net sales of
electronic components.
Consolidated results of operations for nine months 2001 reflect an increase
in net sales of $2,371,000 or 14.5% to $18,669,000. This increase was primarily
attributable to an increase in net sales of electronic components of $3,271,000,
which was partially offset by a decrease in sales of microwave micro-circuitry
products of $900,000 from FMI.
Orders of $6,295,000 were received during third quarter 2001, a decrease of
$1,050,000 or 14.3% compared to $7,345,000 in orders received during third
quarter 2000. Backlog increased by $2,095,000 or 19.7% to $12,735,000 at the end
of the third quarter 2001 compared to $10,640,000 at year-end 2000, and
increased by $988,000 or 8.4% when compared to the end of third quarter 2000
backlog of $11,747,000. Orders received during the third quarter of 2001
exceeded the third quarter 2001 sales level by approximately 8.3%. Orders of
$20,764,000 were received during nine months 2001, a decrease of $1,160,000 or
5.3% compared to $21,927,000 in orders received during nine months 2000. Orders
received during the nine months of 2001 exceeded the nine months 2001 sales
level by approximately 11.2%.
The Company believes that the current economic downturn, resulting in
reduced spending by wireless service providers, has caused many wireless
companies to delay their purchases. However, the Company expects that its
satellite and defense customers will continue to increase their orders during
the fourth quarter 2001. The Company also anticipates receiving its initial
orders during the fourth quarter 2001 for its new Multi-Mix(R) Microtechnology
products, for which a significant capital investment has been made and
substantial research and development costs have been incurred. An extended delay
or reduction from planned levels in new orders for the new Multi-Mix(R)
Microtechnology products could have a material adverse impact on the Company.
The Company's subsidiary FMI has experienced a slowdown in orders for certain of
its wireless communication products, which has caused a significant financial
impact on the results of operations in third quarter and nine months 2001. The
Company further expects that softness in the telecommunications sector that FMI
serves, principally millimeter wave applications for wireless broadband
solutions, will continue during the remainder of fiscal 2001, and is likely to
cause a substantial reduction in the microwave micro-circuitry segment sales and
profitability for fiscal 2001 compared to prior year results. The Company
implemented a temporary reduction of 25% or 19 persons in the FMI workforce
during the second quarter of 2001 in response to the decline in orders for this
segment.
Cost of sales decreased $413,000 or 12.5%, and as a percentage of net sales
decreased 1.6% to 49.7% for third quarter 2001. Cost of sales increased $651,000
or 7.8%, and as a percentage of net sales decreased 3.0% to 48.2% for nine
months 2001. Percentage cost reductions for cost of sales were achieved from
manufacturing efficiencies attributable to a reduction in direct labor and
manufacturing overhead costs, related in part to the transfer of certain
additional production to the Company's Costa Rica manufacturing facility, and
other manufacturing cost reductions resulting from the personnel restructuring
in the first quarter of 2000.
-11-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Depreciation expense included in cost of sales was $463,000, of which
$192,000 was associated with Multi-Mix(R) Microtechnology capital assets, an
increase of $113,000 in third quarter 2001 compared to third quarter 2000. For
nine months 2001 compared to nine months 2000, depreciation expense included in
cost of sales was $1,352,000, an increase of $157,000. For nine months 2001,
$539,000 of depreciation expense was associated with Multi-Mix(R)
Microtechnology capital assets. The increase in depreciation expense was a
result of higher capital equipment purchases in the current and prior years.
Gross profit in third quarter 2001 for the electronic components segment
was $2,588,000 or 52.0% of segment net sales of $4,973,000, compared to gross
profit of $2,316,000 or 47.7% of segment net sales of $4,855,000 in third
quarter 2000. Gross profit for the microwave micro-circuitry segment was
$336,000 or 40.0% of segment net sales of $839,000, compared to $819,000 or
51.8% of third quarter 2000 segment net sales of $1,582,000.
Gross profit in nine months 2001 for the electronic components segment was
$8,271,000 or 54.1% of segment net sales of $15,291,000, compared to gross
profit of $5,873,000 or 48.9% of segment net sales of $12,020,000 in nine months
2000. Nine months 2001 gross profit for the microwave micro-circuitry segment
was $1,404,000 or 41.5% of segment net sales of $3,378,000, compared to
$2,082,000 or 48.7% of nine months 2000 segment net sales of $4,278,000.
Selling, general and administrative expenses of $2,281,000 for third
quarter 2001 increased by $50,000 or 2.2%, and when expressed as a percentage of
net sales, increased by 4.5% to 39.2%. Increases resulted from employment
termination costs for senior level personnel of approximately $112,000, which
was partially offset by reduced sales commission expenses.
Selling, general and administrative expenses of $7,014,000 for nine months
2001 increased by $1,066,000 or 17.9%, and when expressed as a percentage of net
sales, increased by 1.0% to 37.5%. Increases resulted from employment
termination costs for senior level personnel of approximately $198,000, higher
sales commission expenses, increased selling and marketing expenses in
connection with the Company's Multi-Mix(R) Microtechnology product line, and
higher engineering and technology personnel compensation, recruitment and
training costs, and patent-associated and other professional fees.
Amortization expense of $37,000 for the third quarter and $111,000 for nine
months 2001 is attributable to goodwill of approximately $3,000,000 arising from
the acquisition of FMI, which is being amortized on a straight-line basis over a
life of twenty years, compared to amortization expense of $42,000 for the third
quarter and $120,000 for nine months 2000.
Research and development expenses for new products were $954,000 in third
quarter 2001, an increase of $470,000 or 97.2% compared to third quarter 2000.
Except for $75,000 of expenses at FMI, a decrease of $3,000 from third quarter
2000, substantially all of the research and development expenses in third
quarter 2001 were related to Multi-Mix(R) Microtechnology products. Research and
development expenses for new products were $2,502,000 in nine months 2001, an
increase of $1,169,000 or 87.7% compared to nine months 2000. Except for
$226,000 of expenses at FMI, a decrease of $12,000 from nine months 2000,
substantially all of the research and development expenses in nine months 2001
were related to Multi-Mix(R) Microtechnology products, which resulted in the
third quarter 2001 product launches of Multi-Mix PICO(TM) technology products
that reduce certain microwave components size by more than 84%.
The consolidated operating loss for third quarter 2001 was $349,000, which
compared to consolidated operating income of $378,000 for the third quarter
2000. The consolidated operating loss for nine months 2001, after the
reincorporation charge of $330,000, was $283,000, which compared to consolidated
operating income of $239,000 for nine months 2000 after the personnel
restructuring charge of $315,000. Nine month 2001 consolidated operating income
was $48,000, before the effect of charges associated with the reincorporation in
Delaware of $330,000 in first quarter 2001, compared to $554,000 of consolidated
operating income for nine months 2000 before the personnel restructuring charge
of $315,000 in first quarter 2000.
-12-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The operating loss for the electronic components segment was $264,000 in
third quarter 2001, compared to a $43,000 operating loss in third quarter 2000.
The operating loss for the microwave micro-circuitry segment was $85,000 in
third quarter 2001 compared to operating income of $421,000 or 26.6% of segment
net sales in third quarter 2000.
Operating loss for the electronic components segment was $360,000 in nine
months 2001, after the $330,000 reincorporation charge in first quarter 2001,
compared to a $739,000 operating loss in nine months 2000 after the
restructuring charge of $296,000 in first quarter 2000. Operating income for the
microwave micro-circuitry segment was $77,000 or 2.3% of segment net sales in
nine months 2001 compared to operating income of $998,000 or 23.3% in nine
months 2000 after this segment's restructuring charge of $19,000 in first
quarter 2000. Before the first quarter 2001 reincorporation charge of $330,000,
operating loss for the electronic components segment would have been $30,000 in
nine months 2001 compared to an operating loss of $443,000 in nine months 2000
before this segment's restructuring charge in first quarter 2000 of $296,000.
Interest income, net was $20,000 for third quarter 2001 compared to net
interest expense of $9,000 for third quarter 2000. Interest expense of $58,000
was capitalized to in-process construction property, plant and equipment in
third quarter 2001. Interest income, net was $69,000 for nine months 2001
compared to net interest expense of $115,000 for nine months 2000. Interest
expense of $81,000 was capitalized to in-process construction property, plant
and equipment in nine months 2001. Interest income was primarily due to the
proceeds received from the issuance of common stock in private placements in
2000 that offset interest expense. Interest expense was principally incurred on
borrowings under a term loan and revolving credit facility in connection with
the acquisition of FMI in 1999.
An income tax benefit of $120,000 was recorded for third quarter 2001 with
an effective tax benefit rate of 36.4% compared to a tax provision of $150,000
for third quarter 2000 with an effective tax rate of 40.6%. The principal
adjustments to the statutory Federal income tax rate of 34% for third quarter
2001 relates to $20,000 in tax credits associated with research and development
expenditures and foreign sales corporation tax benefits, partially offset by a
$12,000 cost due to non-deductible amortization of goodwill.
An income tax benefit of $110,000 was recorded for nine months 2001 with an
effective tax benefit rate of 51.5% compared to a tax provision of $30,000 for
nine months 2000 with an effective tax rate of 24.2%. The principal adjustments
to the statutory Federal income tax rate of 34% for nine months 2001 relates to
$60,000 in tax credits associated with research and development expenditures and
foreign sales corporation tax benefits of $15,000, partially offset by a $38,000
cost due to non-deductible amortization of goodwill.
Net loss for the third quarter of 2001 was $209,000 compared to net income
of $219,000 for the third quarter 2000. Net loss per share for the third quarter
2001 was $.08 compared to net income per diluted share of $.09 reported for the
third quarter of 2000.
Net loss for the first nine months of 2001 was $104,000, after the net
effects of the first quarter 2001 reincorporation charge of $198,000. For the
first nine months of 2000, net income of $94,000 was reported, after the net
effects of the first quarter 2000 restructuring charge of $189,000. Net loss per
share for the first nine months 2001 was $.04, after the net effects of the $.08
per share reincorporation charge reported in the first quarter of 2001. For the
first nine months of 2000, net income per diluted share of $.04 was reported,
after the net effects of the $.09 per share restructuring charge reported in the
first quarter of 2000.
The weighted average number of diluted shares outstanding increased by
approximately 244,000 shares or 10% during the third quarter 2001 and
approximately 445,000 shares or 20% during the first nine months 2001 compared
to the same periods of the prior year, resulting from the issuance in private
placements of 375,000 shares in the second quarter 2000 and 360,000 shares in
the fourth quarter 2000, as well as stock option exercises during the prior
year.
-13-
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 $900,000 at the end of third quarter 2001 compared to
approximately $3,400,000 at the end of 2000. The Company's working capital was
approximately $2,600,000 and its current ratio was 1.3 at the end of third
quarter 2001 compared to $9,400,000 and 3.0, respectively, at the end of 2000.
The Company's operating activities provided negative cash flows of $55,000
in nine months 2001 compared to $982,000 of positive cash flows in nine months
2000. The primary positive operating cash flows resulted from a decrease in
accounts receivable, an increase in other liabilities, and higher depreciation
and amortization charges. These positive cash flows were offset by an increase
in inventories of $1,301,000 to $4,929,000, which includes $965,000 associated
with Multi-Mix(R) Microtechnology products, reductions of accounts payable and
deferred compensation payments, and the net loss of $104,000.
The Company has made net investments in property, plant and equipment of
$7,391,000 during nine months 2001, which excludes unpaid invoices of $1,674,000
at September 29, 2001, compared to net investments made in property, plant and
equipment of $2,304,000 during the nine months of 2000. These capital
expenditures, which includes capitalized construction period rent and interest
of $274,000, are related to new production and test equipment capabilities in
connection with the introduction of new products and enhancements to existing
products. The depreciated cost of capital equipment associated with Multi-Mix(R)
Microtechnology was $9,153,000 at the end of nine months 2001, an increase of
$5,149,000 compared to $4,004,000 at the end of 2000.
During the first nine months of 2001, the Company borrowed $4,500,000,
which includes borrowings of $1,500,000 during the third quarter, under its
existing revolving credit facility with Fleet Bank (formerly Summit Bank) at an
interest rate of one-half percent below the bank's floating prime rate. On
October 3, 2001, the Company obtained an increase of $2,000,000 to the revolving
credit facility for working capital and general corporate purposes. During
October 2001, the Company has borrowed an additional $1,500,000 under its
increased revolving credit facility and the current interest rate is 4.5%.
The Company has been approved conditionally, subject to the completion of
certain documentation, for an additional increase of $3,500,000 in the Company's
lines of credit with Fleet Bank. The Company is contemplating raising capital by
a private placement of debt or equity during the fourth quarter of 2001, subject
to economic and market conditions. There can be no assurances that capital from
either debt or equity will be available to the Company and, if so, on terms
favorable to the Company. Management believes that the remaining available
$500,000 revolving credit facility supplemented by the conditionally approved
$3,500,000 increase to its lines of credit, together with its present liquid
resources and cash flows that are expected to be provided by operations, should
provide sufficient resources for currently contemplated operations in fiscal
year 2001.
The Company's capital expenditures for new projects and production
equipment have exceeded its depreciation and amortization expenses in the first
nine months of 2001 by approximately $7,400,000. The Company has made $5,600,000
in payments on purchase order commitments to processing equipment vendors
aggregating $8,600,000 for capital equipment and has a remaining balance on a
purchase order for $700,000 issued to a general contractor for the completion of
the 19,200 square-foot building addition to its West Caldwell, New Jersey
manufacturing facility. The Company anticipates that such equipment will be
purchased and become operational and the building expansion will be completed
during the fourth quarter of 2001. The Company has temporarily deferred certain
improvements and purchases of additional equipment for the existing 52,000
square-foot facility that are projected to cost approximately $1,300,000.
Effective January 2001, the Company modified its existing lease, and
entered into a resource sharing arrangement with a previous customer, for its
Costa Rica manufacturing facility, reducing the size to approximately 8,200
square-feet and extending the lease to December 2004. The Company received an
initial payment of $200,000 in January 2001 under the resource sharing agreement
and recovered approximately $102,000 of costs that were deferred at December 30,
2000 in connection with such agreement.
In February 2001, the Company entered into a new five-year lease in Costa
Rica for approximately 36,200 square-feet for a new Multi-Mix(R) Microtechnology
manufacturing facility. It is anticipated that the leasehold improvements and
capital equipment for this manufacturing facility, which is expected to cost
approximately $4,500,000, should become operational during the fourth quarter
2001.
-14-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Recent Accounting Pronouncements
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which established new accounting and reporting
standards and requires that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded as assets or
liabilities in the balance sheet measured at fair value. SFAS No. 133 requires
that changes in the fair value of derivatives be recognized currently in
earnings unless specific hedge accounting criteria are met. The Company has
adopted the provisions of the Statement in 2001. The Company does not currently
hold derivative instruments or engage in hedging activities and therefore the
adoption of SFAS No. 133 has not had a material impact on the Company's
financial position, results of operations or cash flows.
On June 30, 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets". SFAS No. 141 requires all business combinations initiated after June
30, 2001 to be accounted for using the purchase method of accounting and
eliminates the pooling method of accounting. SFAS No. 141 will not have an
impact on the Company's business since the Company has historically accounted
for business combinations using the purchase method of accounting.
With the adoption of SFAS No.142, which will be adopted by the Company on
December 30, 2001, goodwill will no longer be subject to amortization over its
estimated useful life. However, goodwill will be subject to at least an annual
assessment for impairment and more frequently if circumstances indicate a
possible impairment. The Company is required to perform a fair-value-based
goodwill impairment test. In addition, under SFAS No. 142, an acquired
intangible asset should be separately recognized if the benefit of the
intangible is obtained through contractual or other legal rights, or if the
intangible asset can be sold, transferred, licensed, rented, or exchanged.
Intangible assets will be amortized over their estimated useful lives. Early
adoption of SFAS No. 142 is not permitted. Any write-down of goodwill would be
charged to results of operations in the periods in which the recorded value of
goodwill and certain intangibles is more than its fair value. On an annualized
basis, the Company expects that the adoption of these accounting standards will
reduce the amortization of goodwill and intangibles by approximately $150,000
commencing in 2002, unless future impairment reviews result in periodic
write-downs of goodwill.
Forward-Looking Statements
This Quarterly Report on 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; 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.
-15-
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit No.
-----------
3(a) By-laws of Merrimac are hereby incorporated by reference to
Exhibit 3(ii)(b) to Post-Effective Amendment No.2 to the
Registration Statement on Form S-8 (No.33-68862) of Merrimac dated
February 23, 2001.
3(b) Certificate of Incorporation of Merrimac is hereby incorporated
by reference to Exhibit 3(i)(b) to Post-Effective Amendment
No.2 to the Registration Statement on Form S-8 (No.33-68862)
of Merrimac dated February 23, 2001.
4(a) Shareholder Rights Agreement dated as of March 9, 1999 between
Merrimac and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent, is hereby incorporated by reference to Exhibit 1 to
Merrimac's Current report on Form 8-K dated March 9, 1999.
4(b) Amendment No.1 dated as of June 9, 1999 to the Shareholder Rights
Agreement dated as of March 9, 1999, between Merrimac and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent, is
hereby incorporated by reference to Exhibit 1 to Merrimac's
Current report on Form 8-K dated June 9, 1999.
4(c) Amendment No. 2 dated as of April 7, 2000, to the Shareholder
Rights Agreement dated as of March 9, 1999, between Merrimac and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent, is
hereby incorporated by reference to Exhibit 2 to Merrimac's
Current report on Form 8-K dated April 10, 2000.
4(d) Amendment No. 3 dated as of October 26, 2000, to the Shareholder
Rights Agreement dated as of March 9, 1999, between Merrimac and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent, is
hereby incorporated by reference to Exhibit 2 to Merrimac's
Current report on Form 8-K dated October 27, 2000.
4(e) Amendment No. 4 dated as of February 21, 2001, to the Shareholder
Rights Agreement dated as of March 9, 1999, between Merrimac and
Mellon Investor Services, L.L.C., (formerly known as ChaseMellon
Shareholder Services, L.L.C.) as Rights Agent, is hereby
incorporated by reference to Exhibit 1(d) to Merrimac's
Current report on Form 8-K dated February 21, 2001.
4(f) 2001 Stock Option Plan, is hereby incorporated by reference to
Exhibit 4.1 to Merrimac's Registration Statement on Form S-8
(File No. 333-63436) dated June 20, 2001.
4(g) 2001 Stock Purchase Plan, is hereby incorporated by reference to
Exhibit 4.1 to Merrimac's Registration Statement on Form S-8
(File No. 333-63438) dated June 20, 2001.
4(h) 2001 Key Employee Incentive Plan, is hereby incorporated by
reference to Exhibit 4.1 to Merrimac's Registration Statement
on Form S-8 (File No. 333-63434) dated June 20, 2001.
4(i) 2001 Amended and Restated Stock Option Plan, is hereby
incorporated by reference to Exhibit 4(i) to Merrimac's
Quarterly Report on Form 10-QSB, filed on August 14, 2001.
11 Statement re: Computation of earnings per share.
(b) Reports on Form 8-K:
None
-16-
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: November 12, 2001 By: /s/ Mason N. Carter
-------------------------------------
Mason N. Carter
Chairman, President and
Chief Executive Officer
Date: November 12, 2001 By: /s/ Robert V. Condon
-------------------------------------
Robert V. Condon
Vice President, Finance, Treasurer,
Secretary and Chief Financial Officer
-17-