Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
May 28, 2016 | Jul. 11, 2016 | |
Document and Entity Information | ||
Entity Registrant Name | MICROPAC INDUSTRIES INC | |
Entity Trading Symbol | mpac | |
Document Type | 10-Q | |
Document Period End Date | May 28, 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 | Q2 |
CONDENSED BALANCE SHEETS
CONDENSED BALANCE SHEETS - USD ($) $ in Thousands | May 28, 2016 | Nov. 30, 2015 |
Current Assets: | ||
Cash and cash equivalents | $ 12,285 | $ 12,651 |
Short-term investments | 2,009 | 2,004 |
Receivables, net of allowance for doubtful accounts of $0 at May 28, 2016 and November 30, 2015 | 1,827 | 2,360 |
Inventories: | ||
Raw materials and supplies | 3,682 | 4,255 |
Work-in process | 2,846 | 2,613 |
Total inventories | 6,528 | 6,868 |
Deferred income taxes | 693 | 693 |
Prepaid income tax | 43 | 0 |
Prepaid expenses and other assets | 175 | 161 |
Total current assets | 23,560 | 24,737 |
PROPERTY, PLANT AND EQUIPMENT, at cost: | ||
Land | 80 | 80 |
Buildings | 498 | 498 |
Facility improvements | 1,109 | 1,109 |
Furniture and fixtures | 719 | 719 |
Construction in process equipment | 423 | 347 |
Machinery and equipment | 8,481 | 8,432 |
Total property, plant, and equipment | 11,310 | 11,185 |
Less accumulated depreciation | (9,075) | (8,929) |
Net property, plant, and equipment | 2,235 | 2,256 |
Total assets | 25,795 | 26,993 |
CURRENT LIABILITIES: | ||
Accounts payable | 515 | 404 |
Accrued compensation | 498 | 666 |
Deferred revenue | 1,705 | 2,855 |
Property taxes | 46 | 90 |
Income taxes payable | 0 | 109 |
Other accrued liabilities | 84 | 74 |
Total current liabilities | 2,848 | 4,198 |
DEFERRED INCOME TAXES. | 360 | 360 |
SHAREHOLDERS' EQUITY | ||
Common stock, ($.10 par value), authorized 10,000,000 shares, 3,078,315 issued and 2,578,315 outstanding at May 28, 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 | 22,644 | 22,492 |
Total shareholders' equity | 22,587 | 22,435 |
Total liabilities and shareholders' equity | $ 25,795 | $ 26,993 |
BALANCE SHEETS PARENTHETICALS
BALANCE SHEETS PARENTHETICALS - USD ($) $ in Thousands | May 28, 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 ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
May 28, 2016 | May 30, 2015 | May 28, 2016 | May 30, 2015 | |
Revenues {1} | ||||
NET SALES | $ 5,111 | $ 5,265 | $ 9,316 | $ 10,050 |
COST AND EXPENSES: | ||||
Cost of goods sold | (3,188) | (3,167) | (6,082) | (6,017) |
Research and development | (241) | (416) | (549) | (984) |
Selling, general & administrative expenses | (1,088) | (1,018) | (2,090) | (2,057) |
Total cost and expenses | (4,517) | (4,601) | (8,721) | (9,058) |
OPERATING INCOME | 594 | 664 | 595 | 992 |
Other income | 0 | 10 | 7 | 12 |
Expense, net | 0 | (3) | 0 | (4) |
INCOME BEFORE TAXES | 594 | 671 | 602 | 1,000 |
Provision for taxes | (190) | (213) | (192) | (331) |
NET INCOME | $ 404 | $ 458 | $ 410 | $ 669 |
NET INCOME PER SHARE, BASIC AND DILUTED | $ 0.16 | $ 0.18 | $ 0.16 | $ 0.26 |
DIVIDENDS PER SHARE | $ 0 | $ 0 | $ 0.10 | $ 0.10 |
WEIGHTED AVERAGE OF SHARES, basic and diluted | 2,578,315 | 2,578,315 | 2,578,315 | 2,578,315 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
May 28, 2016 | May 30, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 410 | $ 669 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation | 146 | 154 |
Deferred tax expense | 0 | 58 |
Changes in certain current assets and liabilities | ||
Accounts receivable | 534 | 637 |
Inventories | 341 | (702) |
Prepaid expense and other current assets | (14) | (4) |
Prepaid income taxes | (43) | 37 |
Deferred revenue | (1,150) | 2,449 |
Accounts payable | 82 | (2) |
Accrued compensation | (167) | (88) |
Other accrued liabilities | (36) | (71) |
Income taxes payable | (109) | 92 |
Net cash provided by operating activities | (6) | 3,229 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Sale of short term investments | 2,004 | 2,009 |
Purchase of short term investments | (2,009) | (2,002) |
Additions to property, plant and equipment | (97) | (98) |
Net cash used in investing activities | (102) | (91) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Cash dividend | (258) | (258) |
Net cash used in financing activities | (258) | (258) |
Net change in cash and cash equivalents | (366) | 2,880 |
Cash and cash equivalents at beginning of period | 12,651 | 9,994 |
Cash and cash equivalents at end of period | 12,285 | 12,874 |
Supplemental Cash Flow Disclosure: | ||
Cash paid for income taxes | 344 | 490 |
Supplemental Non-Cash Investing Activity: | ||
Accrued additions to equipment | $ 29 | $ 83 |
BASIS OF PRESENTATION
BASIS OF PRESENTATION | 6 Months Ended |
May 28, 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 May 28, 2016, the results of operations for the three months and six months ended May 28, 2016 and May 30, 2015, and the cash flows for the six months ended May 28, 2016 and May 30, 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. It is suggested that these financial statements be read in conjunction with the November 30, 2015 Form 10-K filed with the SEC, including the audited financial statements and the accompanying notes thereto. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
May 28, 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 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 $2,009,000 in short term investments at May 28, 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 | 6 Months Ended |
May 28, 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 | 6 Months Ended |
May 28, 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 May 28, 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 May 28, 2016 and November 30, 2015. |
COMMITMENTS
COMMITMENTS | 6 Months Ended |
May 28, 2016 | |
COMMITMENTS | |
COMMITMENTS | Note 5 COMMITMENTS On April 23, 2016, 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 | 6 Months Ended |
May 28, 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 May 28, 2016 and May 30, 2015, the Company had no dilutive potential common stock. |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 6 Months Ended |
May 28, 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) | 6 Months Ended |
May 28, 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 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 $2,009,000 in short term investments at May 28, 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) | 6 Months Ended |
May 28, 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) | May 28, 2016USD ($) |
Short term investments Details | |
Short term investments maturity date more than 90 days | $ 2,009,000 |
Property Estimated Life (Detail
Property Estimated Life (Details) | 6 Months Ended |
May 28, 2016 | |
Property Estimated Life | |
BuildingsAverageLife | 15 |
FacilityImprovementsUsefulLifeMinimum | 8 |
FacilityImprovementsUsefulLifeMaximum | 15 |
Machinery and equipmentUsefulLifeMinimum | 5 |
Machinery and equipmentUsefulLifeMaximum | 10 |
FurnitureAndFixuresUsefulLifeMinimum | 5 |
FurnitureAndFixuresUsefulLifeMaximum | 8 |
Fair Value Measurement (Details
Fair Value Measurement (Details) - USD ($) | May 28, 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) | Apr. 23, 2016USD ($) |
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 | |
May 28, 2016 | May 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 |