Merrimac Reports Third Quarter 2008 Results

WEST CALDWELL, N.J., Nov. 18 /PRNewswire/ -- Income from Continuing Operations for Third Quarter and First Nine Months of 2008

New Orders, Backlog and Revenue Continue Strong

WEST CALDWELL, N.J., Nov. 18 /PRNewswire-FirstCall/ -- Merrimac Industries, Inc. (AMEX: MRM), a leader in the design and manufacture of RF Microwave components, subsystem assemblies and micro-multifunction modules (MMFM(R)), today announced the results for the third quarter and first nine months of 2008.

Previously reported results of operations of Filtran Microcircuits Inc. ("FMI") for the third quarter and first nine months of 2007 have been reclassified and reported as discontinued operations.

Net sales from continuing operations for the third quarter of 2008 were $8,328,000, an increase of $1,716,000 or 26.0 percent compared to the third quarter of 2007 net sales of $6,612,000. Net sales from continuing operations increased due to the higher level of orders received during the prior year, with its resultant larger backlog that continued during 2008, including higher sales of Core and Multi-Mix(R) products to the defense industry-related customers the Company serves, as well as a continuation of the favorable trend in orders received during the current year that positively impacted backlog during 2008.

Gross profit from continuing operations for the third quarter of 2008 was $2,749,000, a decrease of $67,000 or 2.4 percent, and was 33.0 percent of sales as compared to gross profit of $2,816,000 or 42.6 percent of sales for the third quarter of 2007. The decrease in gross profit from continuing operations for the third quarter of 2008 was due to an aggressive pricing strategy on new long-term programs that required significant engineering content in the development phase, which is now complete.

Operating income from continuing operations for the third quarter of 2008 was $220,000, compared to operating income from continuing operations of $317,000 for the third quarter of 2007. The decrease in operating income from continuing operations for the third quarter of 2008 as compared to the third quarter of 2007 was due to the lower gross profit margins and increased selling, general and administrative expenses. The increase in selling, general and administrative expenses was partially due to accounting and legal fees in preparation for the credit facility with Wells Fargo Bank.

Income from continuing operations for the third quarter of 2008 was $193,000 compared to income from continuing operations of $245,000 for the third quarter of 2007. Income per diluted share from continuing operations for the third quarter of 2008 was $.06 compared to income from continuing operations of $.08 per diluted share for the second quarter of 2007.

Loss from discontinued operations for the third quarter of 2008 was $(11,000) compared to a loss from discontinued operations of $(2,058,000) for the third quarter of 2007. Loss per share from discontinued operations for the third quarter of 2008 was nil compared to a loss from discontinued operations of $(.70) per basic share and $(.69) per diluted share for the third quarter of 2007.

Net income for the third quarter of 2008 was $182,000 compared to a net loss of $(1,813,000) for the third quarter of 2007. Net income per diluted share for the third quarter of 2008 was $.06 compared to a net loss of $(.61) per diluted share for the third quarter of 2007.

Net sales from continuing operations for the first nine months of 2008 were $21,576,000, an increase of $5,081,000 or 30.8 percent compared to net sales of $16,495,000 for the first nine months of 2007.

Gross profit for the first nine months of 2008 was $8,448,000, an increase of $1,568,000 or 22.8 percent, and was 39.2 percent of net sales as compared to gross profit of $6,880,000 or 41.7 percent of net sales for the first nine months of 2007. The increase in gross profit for the first nine months of 2008 was due to the higher sales level and the positive impact that this had on the Company from a higher level of absorption of its fixed manufacturing costs.

Operating income from continuing operations for the first nine months of 2008 was $574,000 compared to an operating loss from continuing operations for the first nine months of 2007 of $(632,000). The increase in operating income from continuing operations for the first nine months of 2008 as compared to the first nine months of 2007 was due to the increase in sales, and the decrease in research and development spending, partially offset by higher sales commissions and increased selling, general and administrative expenses.

Income from continuing operations for the first nine months of 2008 was $447,000 compared to a loss from continuing operations of $(688,000) for the first nine months of 2007. Income from continuing operations per diluted share for the first nine months of 2008 was $.15 compared to a loss from continuing operations of $(.23) per share for the first nine months of 2007.

Loss from discontinued operations for the first nine months of 2008 was $(66,000) compared to a loss from discontinued operations of $(5,858,000) for the first nine months of 2007. Loss from discontinued operations per diluted share for the first nine months of 2008 was $(.02) compared to a loss from discontinued operations of $(1.97) per share for the first nine months of 2007.

Net income for the first nine months of 2008 was $371,000 compared to a net loss of $(6,546,000) for the first nine months of 2007. Net income per diluted share for the first nine months of 2008 was $.13 compared to a net loss of $(2.20) per share for the first nine months of 2007.

Orders of $9,295,000 were received during the third quarter of 2008, an increase of $2,266,000 or 32.2 percent compared to $7,029,000 in orders received during the third quarter of 2007. Orders of $24,688,000 were received during the first nine months of 2008, an increase of $2,921,000 or 13.4 percent compared to $21,767,000 in orders received during the first nine months of 2007. Backlog increased by $3,112,000 or 17.3 percent to $21,103,000 at the end of the third quarter of 2008 compared to $17,991,000 at year-end 2007, due to the increased orders received during the first nine months of 2008, including orders from defense industry-related customers that are scheduled for shipment later in 2008 and 2009. The book-to-bill ratio for the third quarter of 2008 was 1.12 to 1 and for the third quarter of 2007 was 1.06 to 1. The book-to-bill ratio for the first nine months of 2008 was 1.14 to 1 and for the first nine months of 2007 was 1.32 to 1. The orders, backlog and book-to-bill data exclude FMI information for 2007.

Also, today, the Company reported that the Audit Committee of Merrimac Industries, Inc. determined that reissuing the previously filed financial statements for the fiscal 2008 second quarter was appropriate to correct accounting errors discovered by management. Please refer to the Company's Form 10-Q/A for fiscal 2008 second quarter filed today.

Chairman and CEO Mason N. Carter commented, "It is not pleasant to report that the Company's accounting controls and procedures were not effective. However, we plan to implement effective remediation with two core components: 1) hiring key accounting personnel, and 2) optimizing the manufacturing and accounting potential of our new operating system. Combining the lessons learned from these events with our management team's commitment provides a platform to manage the growth potential of our business." "On a very positive note, we are pleased to report the quarterly record of $9.3 million of orders received in the third quarter. Especially positive was that over $2 million of the new orders were for products that utilize Multi-Mix(R) Microtechnology solutions. This Multi-Mix(R) business is incremental to our strong Core bookings and not a replacement for Core technology. It is encouraging that this record level represents a very good product mix enhancing our record backlog level.

"Our refinancing of a new asset based loan with Wells Fargo Business Credit, an operating division of Wells Fargo Bank, N.A. is working well for us as our Team has a strong asset management orientation. We look forward to a long, prosperous relationship with our new banking partner.

"Our financial highlights include:


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