Micropac Industries (MPAD) 10-Q 12 Apr 16 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Feb. 27, 2016	Apr. 11, 2016
Document and Entity Information
Entity Registrant Name	MICROPAC INDUSTRIES INC
Entity Trading Symbol	mpac
Document Type	10-Q
Document Period End Date	Feb. 27, 2016
Amendment Flag	false
Entity Central Index Key	65,759
Current Fiscal Year End Date	--11-30
Entity Common Stock, Shares Outstanding		2,578,315
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus	Q1

CONDENSED BALANCE SHEETS

CONDENSED BALANCE SHEETS - USD ($) $ in Thousands	Feb. 27, 2016	Nov. 30, 2015
CURRENT ASSETS
Cash and cash equivalents	$ 12,090	$ 12,651
Short-term investments	2,006	2,004
Receivables, net of allowance for doubtful accounts of $0 at February 27, 2016 and November 30, 2015	2,365	2,360
Inventories:
Raw materials and supplies	3,889	4,255
Work-in process	2,874	2,613
Total inventories	6,763	6,868
Deferred income taxes	693	693
Prepaid expenses and other assets	143	161
Total current assets	24,060	24,737
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land	80	80
Buildings	498	498
Facility improvements	1,109	1,109
Furniture and fixtures	719	719
Construction in process equipment	349	347
Machinery and equipment	8,430	8,432
Total property, plant, and equipment	11,185	11,185
Less accumulated depreciation	(9,003)	(8,929)
Net property, plant, and equipment	2,182	2,256
Total assets	26,242	26,993
CURRENT LIABILITIES:
Accounts payable	452	404
Accrued compensation	410	666
Deferred revenue	2,720	2,855
Property Taxes	23	90
Income taxes payable	1	109
Other accrued liabilities	93	74
Total current liabilities	3,699	4,198
DEFERRED INCOME TAXES.	360	360
SHAREHOLDERS' EQUITY
Common stock, ($.10 par value), authorized 10,000,000 shares, 3,078,315 issued and 2,578,315 outstanding at February 27, 2016 and November 30, 2015	308	308
Additional paid-in capital	885	885
Treasury stock, 500,000 shares, at cost	(1,250)	(1,250)
Retained earnings	22,240	22,492
Total shareholders' equity	22,183	22,435
Total liabilities and shareholders' equity	$ 26,242	$ 26,993

BALANCE SHEETS PARENTHETICALS

BALANCE SHEETS PARENTHETICALS - USD ($) shares in Thousands, $ in Thousands	Feb. 27, 2016	Nov. 30, 2015
Parentheticals
Allowance for doubtful accounts	$ 0	$ 0
Common Stock, par value	$ 0.10	$ 0.10
Common Stock, shares authorized	10,000,000	10,000,000
Common Stock, shares issued	3,078,315	3,078,315
Common Stock, shares outstanding	2,578,315	2,578,315
Treasury stock, shares	500,000	500,000

CONDENSED STATEMENTS OF OPERATI

CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Feb. 27, 2016	Feb. 28, 2015
Revenues {1}
NET SALES	$ 4,205	$ 4,786
COST AND EXPENSES:
Cost of goods sold	(2,894)	(2,850)
Research and development	(307)	(568)
Selling, general & administrative expenses	(1,003)	(1,040)
Total cost and expenses	(4,204)	(4,458)
OPERATING INCOME	1	328
Other income	7	2
Expense, net	0	(2)
INCOME BEFORE TAXES	8	328
Provision for taxes	(3)	(118)
NET INCOME	$ 5	$ 210
NET INCOME PER SHARE, BASIC AND DILUTED	$ 0	$ 0.08
DIVIDENDS PER SHARE	$ 0.10	$ 0.10
WEIGHTED AVERAGE OF SHARES, basic and diluted	2,578,315	2,578,315

CONDENSED STATEMENTS OF CASH FL

CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Feb. 27, 2016	Feb. 28, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 5	$ 210
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	74	77
Deferred taxes	0	19
Changes in certain current assets and liabilities:
Accounts receivable	(5)	(1,003)
Inventories	105	151
Prepaid expenses and other current assets	18	72
Accounts payable	48	(53)
Accrued compensation	(256)	(175)
Deferred revenue	(135)	3,159
Other accrued liabilities	(48)	(7)
Income taxes payable	(108)	55
Net cash provided by (used in) operating activities	(302)	2,505
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of short term investments	2,004	2,009
Purchase of short term investments	(2,006)	(2,001)
Additions to property, plant and equipment	(1)	(37)
Net cash used in investing activities	(1)	(29)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividend	(258)	(258)
Net cash used in financing activities	(258)	(258)
Net change in cash and cash equivalents	(561)	2,218
Cash and cash equivalents at beginning of period	12,651	9,994
Cash and cash equivalents at end of period	12,090	12,212
Supplemental Cash Flow Disclosure:
Cash paid for income taxes	$ 110	$ 0

BASIS OF PRESENTATION

BASIS OF PRESENTATION	3 Months Ended
	Feb. 27, 2016
BASIS OF PRESENTATION
BASIS OF PRESENTATION	Note 1 BASIS OF PRESENTATION Business Description Micropac Industries, Inc. (the "Company"), a Delaware corporation, manufactures and distributes various types of hybrid microelectronic circuits, solid state relays, power controllers, and optoelectronic components and assemblies. The Company's products are used as components in a broad range of military, space and industrial systems, including aircraft instrumentation and navigation systems, power supplies, electronic controls, computers, medical devices, and high-temperature (200 o In the opinion of management, the unaudited financial statements include all adjustments (consisting of only normal, recurring adjustments) necessary to present fairly the financial position as of February 27, 2016, the results of operations for the three months ended February 27, 2016 and February 28, 2015, and the cash flows for the three months ended February 27, 2016 and February 28, 2015. Unaudited financial statements are prepared on a basis substantially consistent with those audited for the year ended November 30, 2015. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to the rules and regulations promulgated by the Securities and Exchange Commission. The Company's fiscal year ends on the last day of November. The quarterly results end on the last Saturday of the quarter.

SIGNIFICANT ACCOUNTING POLICIES

SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Feb. 27, 2016
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES	Note 2 SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates. Revenue Recognition Sales are recorded as shipments are made based upon contract prices. Any losses anticipated on fixed price contracts are provided for currently. Sales are recorded net of sales returns, allowances and discounts. The Company recognizes sales when four basic criteria must are met: (1) persuasive evidence of an arrangement exists; (2) shipment has occurred or services have been rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. Deferred revenue represents prepayments from customers and will be recognized as sales when the products are shipped per the terms of the contract. Short-Term Investments The Company has $2,006,000 in short term investments at February 27, 2016. Short-term investments consist of certificates of deposits with initial maturities greater than 90 days. These investments are reported at historical cost, which approximates fair value. All highly liquid investments with initial maturities of 90 days or less are classified as cash equivalents. All short-term investments are securities which the Company has the ability and intent to hold to maturity and mature within one year. Inventories Inventories are stated at lower of cost or market value and include material, labor and manufacturing overhead. All inventories are valued using the FIFO (first-in, first-out) method of inventory valuation. The Company determines the need to write inventory down below its cost via an analysis based on the usage of inventory over a three year period and projected usage based on current backlog. Income Taxes The Company accounts for income taxes using the asset and liability method. Under this method the Company records deferred income taxes for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The resulting deferred tax liabilities and assets are adjusted to reflect changes in tax law or rates in the period that includes the enactment date. Property, Plant, and Equipment Property, plant, and equipment are carried at cost, and depreciation is provided using the straight-line method at rates based upon the following estimated useful lives (in years) of the assets: Buildings 15 Facility improvements 8-15 Machinery and equipment 5-10 Furniture and fixtures 5-8 The Company assesses long-lived assets for when events or circumstances indicate that an asset may be impaired. The estimated future undiscounted cash flows associated with the asset are compared to the asset's net book value to determine if a write down to market value less cost to sell is required. Repairs and maintenance are expensed as incurred. Improvements which extend the useful life of property, plant, and equipment are capitalized. Research and Development Costs Costs for the design and development of new products and processes are expensed as incurred.

NEW ACCOUNTING PRONOUNCEMENTS

NEW ACCOUNTING PRONOUNCEMENTS	3 Months Ended
	Feb. 27, 2016
NEW ACCOUNTING PRONOUNCEMENTS
NEW ACCOUNTING PRONOUNCEMENTS	Note 3 NEW ACCOUNTING PRONOUNCEMENTS On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers

FAIR VALUE MEASUREMENT

FAIR VALUE MEASUREMENT	3 Months Ended
	Feb. 27, 2016
FAIR VALUE MEASUREMENT
FAIR VALUE MEASUREMENT	Note 4 FAIR VALUE MEASUREMENT The Company had no financial assets or liabilities measured at fair value on a recurring basis as of February 27, 2016 and November 30, 2015. The fair value of financial instruments such as cash and cash equivalents, short term investments, accounts receivable, and accounts payable approximate their carrying amount based on the short maturity of these instruments. There were no nonfinancial assets measured at fair value on a nonrecurring basis at February 27, 2016 and November 30, 2015.

COMMITMENTS

COMMITMENTS	3 Months Ended
	Feb. 27, 2016
COMMITMENTS
COMMITMENTS	Note 5 COMMITMENTS On January 23, 2015, the Company renewed the Loan Agreement with a Texas banking institution. The Loan Agreement provides for revolving credit loans, in amounts not to exceed a total principal balance of $6,000,000, and specific advance loans for acquisitions with an aggregate amount not to exceed $7,500,000 in a single advance or in multiple advances. The Loan Agreement also contains financial covenants to maintain at all times including (i) minimum working capital of not less than $4,000,000, (ii) a ratio of senior funded debt, minus the Company's balance sheet cash on hand to the extent in excess of $2,000,000 to EBITDA of not more than 3.0 to 1.0, and (iii) a ratio of free cash flow to debt service of not less than 1.2 to 1.0. The Company has not, to date, drawn any amounts under the loan agreement or the revolving line of credit and is currently in compliance with the financial covenants.

EARNINGS PER COMMON SHARE

EARNINGS PER COMMON SHARE	3 Months Ended
	Feb. 27, 2016
EARNINGS PER COMMON SHARE
EARNINGS PER COMMON SHARE	Note 6 EARNINGS PER COMMON SHARE Basic and diluted earnings per share are computed based upon the weighted average number of shares outstanding during the respective periods. Diluted earnings per share gives effect to all dilutive potential common shares. For the three months ended February 27, 2016 and February 28, 2015, the Company had no dilutive potential common stock.

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY	3 Months Ended
	Feb. 27, 2016
SHAREHOLDERS' EQUITY:
SHAREHOLDERS' EQUITY	Note 7 SHAREHOLDERS' EQUITY On December 16, 2014, the Board of Directors of Micropac Industries, Inc. approved the payment of a special dividend of $0.10 per share for shareholders of record as of January 12, 2015. The dividend was paid to shareholders on February 10, 2015. On December 15, 2015, the Board of Directors of Micropac Industries, Inc. approved the payment of a special dividend of $0.10 per share for shareholders of record as of January 12, 2016. The dividend was paid to shareholders on February 11, 2016.

Accounting Policies (Policies)

Accounting Policies (Policies)	3 Months Ended
	Feb. 27, 2016
Accounting policies
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition	Revenue Recognition Sales are recorded as shipments are made based upon contract prices. Any losses anticipated on fixed price contracts are provided for currently. Sales are recorded net of sales returns, allowances and discounts. The Company recognizes sales when four basic criteria must are met: (1) persuasive evidence of an arrangement exists; (2) shipment has occurred or services have been rendered; (3) the fee is fixed and determinable; and (4) collectibility is reasonably assured. Deferred revenue represents prepayments from customers and will be recognized as sales when the products are shipped per the terms of the contract.
Short-Term Investments	Short-Term Investments The Company has $2,006,000 in short term investments at February 27, 2016. Short-term investments consist of certificates of deposits with initial maturities greater than 90 days. These investments are reported at historical cost, which approximates fair value. All highly liquid investments with initial maturities of 90 days or less are classified as cash equivalents. All short-term investments are securities which the Company has the ability and intent to hold to maturity and mature within one year.
Inventories	Inventories Inventories are stated at lower of cost or market value and include material, labor and manufacturing overhead. All inventories are valued using the FIFO (first-in, first-out) method of inventory valuation. The Company determines the need to write inventory down below its cost via an analysis based on the usage of inventory over a three year period and projected usage based on current backlog.
Income Taxes	Income Taxes The Company accounts for income taxes using the asset and liability method. Under this method the Company records deferred income taxes for the temporary differences between the financial reporting basis and the tax basis of assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. The resulting deferred tax liabilities and assets are adjusted to reflect changes in tax law or rates in the period that includes the enactment date.
Property, Plant, and Equipment	Property, Plant, and Equipment Property, plant, and equipment are carried at cost, and depreciation is provided using the straight-line method at rates based upon the following estimated useful lives (in years) of the assets: Buildings 15 Facility improvements 8-15 Machinery and equipment 5-10 Furniture and fixtures 5-8 The Company assesses long-lived assets for when events or circumstances indicate that an asset may be impaired. The estimated future undiscounted cash flows associated with the asset are compared to the asset's net book value to determine if a write down to market value less cost to sell is required. Repairs and maintenance are expensed as incurred. Improvements which extend the useful life of property, plant, and equipment are capitalized.
Research and Development Costs	Research and Development Costs Costs for the design and development of new products and processes are expensed as incurred.

Property, Plant, and Equipment

Property, Plant, and Equipment (Tables)	3 Months Ended
	Feb. 27, 2016
Property, Plant, and Equipment {1}
Property, Plant and Equipment	Property, plant, and equipment are carried at cost, and depreciation is provided using the straight-line method at rates based upon the following estimated useful lives (in years) of the assets: Buildings 15 Facility improvements 8-15 Machinery and equipment 5-10 Furniture and fixtures 5-8

Short term investments (Details

Short term investments (Details)	Feb. 27, 2016USD ($)
Short term investments Details
Short term investments maturity date more than 90 days	$ 2,006,000

Property Estimated Life (Detail

Property Estimated Life (Details)	3 Months Ended
	Feb. 27, 2016
Property Estimated Life
BuildingsAverageLife	15
FacilityImprovementsUsefulLifeMinimum	8
FacilityImprovementsUsefulLifeMaximum	15
PropertyPlantAndEquipmentUsefulLifeMinimum	5
PropertyPlantAndEquipmentUsefulLifeMaximum	10
FurnitureAndFixuresUsefulLifeMinimum	5
FurnitureAndFixuresUsefulLifeMaximum	8

Fair Value Measurement (Details

Fair Value Measurement (Details) - USD ($)	Feb. 27, 2016	Nov. 30, 2015
Fair Value Measurement
Financial assets or liabilities measured at fair value on a recurring basis	$ 0	$ 0
Nonfinancial assets measured at fair value on a nonrecurring basis	$ 0	$ 0

Commitments (Details)

Commitments (Details)	Jan. 23, 2015USD ($)
Loan Agreement details
Loan Agreement provides for revolving credit loans,	$ 6,000,000
Advance loans for acquisitions to the Company with an aggregate amount not to exceed	7,500,000
Minimum working capital of not less than	4,000,000
Balance sheet cash on hand to the extent in excess	$ 2,000,000
Maximun EBITDA	3
Minimum EBITDA	1
Maximun free cash flow to debt service	1.2
Minimum free cash flow to debt service	1

Earnings Per Common Share (Deta

Earnings Per Common Share (Details) - shares	3 Months Ended
	Feb. 27, 2016	Feb. 28, 2015
Earnings Per Common Share Details
Company had dilutive potential common stock	0	0

Shareholders (Details)

Shareholders (Details)	Dec. 15, 2015	Dec. 16, 2014
Shareholders
Payment of special dividend to all shareholders	0.10	0.10