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I like the look of this company. Good PE - nice earnings - investing in R&D - just set up a plant to produce electronics in Central America to fill high sales demand. Anyone else investing in these guys? BUSINESS SUMMARY Merrimac Industries, Inc. makes and sells about 1,500 components and subsystems used in signal processing systems (the extraction of usable information from radio signals) in the frequency spectrum of D.C. to 65GHz. Its products, which are designed to process signals in a wide bandwidth, are relatively small in size and lightweight. When integrated into subsystems, advantages of lower cost and smaller size are realized due to the removal of connectors, cases and headers. Components range in price from $20 to $10,000; subsystems range from $500 to $75,000 or more. The company has traditionally developed and offered for sale products built to specific customer needs, as well as standard catalog items. Sales of components and subassemblies for use in government applications accounted for 50% of revenues in 1995 (60% in 1994). About 22% of 1995 revenues (22% in 1994) were derived from initial orders for products custom designed for specific customer applications, 45% (48%) from repeat orders for such products and 33% (30%) from catalog sales. Major product categories are: (1) power dividers/combiners, (2) quadrature couplers, (3) hybrid junctions, (4) directional couplers, (5)balanced mixers, (6) variable attenuators, (7) phase shifters, (8) beamformers, (9) I&Q networks and (10) solid-state switches. Other categories include single side band modulators, vector modulators and specialized integrated assemblies. About 38% of 1995's sales (36% in 1994) were derived from products for use in high-reliability space, satellite and missile applications. These products are designed to withstand severe environments without failure or maintenance over a prolonged period. Commercial and defense applications also include use in radar, navigation, electronic warfare and countermeasures, medical electronics and communications equipment. In addition, Merrimac's products are used in systems to receive and distribute television signals from satellites and through other microwave networks, including cellular radio. Products are marketed in the U.S. and Canada through a direct sales force and 15 independent domestic sales organizations, and elsewhere, through 17 sales organizations. Export sales accounted for 29% of 1995 sales, up from 26% in 1994. Customers include most major government defense contractors. INDUSTRY OUTLOOK Electrical equipment stocks have, for the most part, trended upward this year. Year to date through July, the S&P Electrical Equipment Index gained 6.8% versus a 4.4% rise in the S&P 1500. Our near-term investment outlook for the electrical equipment industry remains positive. The secular outlook for capital spending, which drives electrical equipment companies' earnings, is bright. Nonresidential fixed investment is projected to rise 6.5% in 1996 and 2.7% in 1997. Also important is the strengthening of economic conditions in Europe and continued economic expansion in the Asia-Pacific region. | ||||||||||||||
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