10-K 1 0001.txt FORM 10-K U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the fiscal year ended December 31, 2000 Commission File Number: 0-3207 BARRINGER TECHNOLOGIES INC. ------------------------------- (Name of issuer in its charter) DELAWARE 84-0720473 ------------------------------- ------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 30 TECHNOLOGY DRIVE, WARREN, NJ 07059 (Address, Including Zip Code, of Principal Executive Offices) (908) 222 - 9100 (Issuer's Telephone Number) Securities registered pursuant to Section 12(b) of the Exchange Act: NONE Securities registered pursuant to Section 12(g) of the Exchange Act: COMMON STOCK, PAR VALUE $.01 PER SHARE Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 ----- ------ Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The aggregate market value of voting stock held by non affiliates computed by reference to the price at which the stock was sold, or the average bid and asked price of such stock, is $32,540,000 as of March 14, 2001. State the number of shares of each of the issuer's classes of common stock, outstanding as of the latest practicable date. Outstanding as of March 14, 2001 -------------------------------- Common Stock, $.01 par value 6,898,164 TABLE OF CONTENTS Page ---- PART I Item 1. Business.................................................... 3 Item 2. Properties.................................................. 9 Item 3. Legal Proceedings........................................... 9 Item 4. Submission of Matters to a Vote of Security Holders......... 9 PART II Item 5. Market for Common Equity and Related Stockholder Matters.... 10 Item 6. Selected Financial Data..................................... 11 Item 7. Management's Discussion and Analysis........................ 12 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.. 16 Item 8. Financial Statements and Supplemental Data.................. 17 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.................................. 17 PART III Item 10. Directors and Executive Officers of the Registrant.......... 18 Item 11. Executive Compensation...................................... 20 Item 12. Security Ownership of Certain Beneficial Owners and Management................................................. 24 Item 13. Certain Relationships and Related Transactions.............. 26 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................................ 26 Signatures ............................................................ 30 2 PART I ITEM 1. BUSINESS. DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on the beliefs of the Company's management as well as assumptions made by and information currently available to the Company's management. When used in this Annual Report, the words "estimate," "project," "believe," "anticipate," "intend," "expect," "plan," predict," "may," "should," "will," the negative thereof and similar expressions are intended to identify forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, financial and otherwise, could differ materially from those set forth in or contemplated by the forward-looking statements contained herein. Important factors that could contribute to such differences include, but are not limited to, the development and growth of markets for the Company's products, the Company's dependence on and the effect of governmental regulations on demand for the Company's products, the impact of both foreign and domestic governmental budgeting decisions and the timing of governmental expenditures, the reliance of the Company on a limited number of products, risks related to the start-up of manufacturing of new products, the ability of the Company to penetrate new markets and the dependency of the Company on its ability to successfully develop and market new product applications, the effects of competition, and the effect of general economic and market conditions, as well as conditions prevailing in the markets for the Company's products. Other factors may be described from time to time in the Company's filings with the Securities and Exchange Commission, news releases and other communications. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements set forth above and contained elsewhere in this Form 10-K. GENERAL The Company was incorporated under the laws of the State of Delaware on September 7, 1967. The Company is the world's leading manufacturer (based on units sold) of high sensitivity equipment used for detecting and identifying trace amounts of plastic and other explosives and illegal drugs. The Company designs and produces products that employ a proprietary application of ion mobility spectrometry ("IMS") technology that can detect and identify targeted compounds in amounts smaller than one-billionth of a gram in approximately six seconds. The Company's current principal products, the IONSCAN(R), a portable desktop system, the SABRE 2000(R), a handheld particle and vapor system, and the Sentinal Portal, a walk through detection device introduced in October, 2000, are used in explosives and chemical warfare agent detection and drug interdiction applications. As of December 31, 2000, the Company had sold over 2,050 IONSCAN(R) and SABRE 2000(R) units in 55 countries. The markets for the Company's products currently include aviation security, other transport security, facilities protection, forensics, military, corrections, customs, law enforcement and civil domestic preparedness. The Company's customers include the 3 Federal Aviation Administration (the "FAA"), the BAA, the U.S. Air Force, the U.S. Coast Guard, the U.S. Drug Enforcement Agency (the "DEA") and the Federal Bureau of Investigation (the "FBI"), the Government of Israel, as well as customs agencies in France, Canada, Australia and Japan and various prison facilities in the U.S. and elsewhere. The Company's products are also installed at over 125 airports and transportation centers in countries throughout the world, including Gatwick Airport and Heathrow Airport in the United Kingdom and Kuala Lumpur Airport in Malaysia, as well as the Eurotunnel. In the United States alone, there are approximately 460 IONSCAN(R)s installed in 85 airports such as John F. Kennedy International Airport and Chicago O'Hare International Airport. The Company believes that its principal competitive advantages are the detection capability, reliability, versatility, cost effectiveness, ease of use, portability and after-market service of the its products. These advantages enable the IONSCAN(R) to be used both in lieu of and in conjunction with bulk imaging technologies, such as enhanced x-ray and computer aided tomography ("CATSCAN"). The Company believes that many of the markets it serves are experiencing substantial growth, principally in reaction to heightened security concerns caused by the threat of terrorism and increased public awareness of drug-related criminal activity. The Company believes that the deployment of advanced detection equipment, such as those sold by the Company, will continue to increase as the acceptance of using such equipment to combat these concerns increases. For example, in 2000, the Company received an order valued at $6.1 million to provide its IONSCAN(R) equipment to the Government of Israel for various security related operations and an order from the BAA valued at approximately $2.7 million for deployment of the IONSCAN(R) at its airports in the United Kingdom. Additionally, the Company has continued to be a major supplier of trace detection equipment to the FAA. In 2000, the Company delivered approximately $2.6 million of IONSCAN(R)s to the FAA and signed a three-year contract to supply up to 800 additional units. The Company believes that there are numerous potential applications for its trace detection technology that can be applied to new markets with greater revenue and profit potential. The Company has developed a long-term strategic plan designed to develop a variety of platforms and new applications in order to expand into diversified markets. During 2000, the Company completed the development of its Sentinel walk-through portal, designed to non-invasively screen people for the presence of explosives, narcotics or chemical warfare agents. The Company believes that the portal market will include airport security screening checkpoints, military bases, nuclear facilities, embassies, and other high risk government and commercial facilities. The Company believes its complementary suite of detector platforms will provide greater reach into the security marketplace. Additionally, the Company's automated trace detector (ATD) project is nearing completion, with the first prototype expected to be delivered to the FAA during the second quarter of 2000. During the year, the Company received Phase III authorization and funding from the FAA to develop the prototype, based upon successful demonstration of the detailed design of the ATD. The ATD will provide the capability of automatically screening up to 720 bags per hour using the Company's IONSCAN(R) trace detection technology. MARKET OVERVIEW Explosives Detection In the past several years, a number of events have contributed to increased public concern regarding the threat of terrorism and have focused government attention on the limited effectiveness of x-ray and metal detection equipment and on the need for advanced explosives detection technology. As a result, several advanced technologies have been adapted for use in explosives detection applications. These technologies include bulk imaging techniques, such as enhanced x-ray and CATSCAN, as well as trace detection techniques, such as IMS, gas chromatography and chemiluminescence. Enhanced bulk imaging techniques offer certain advantages over conventional x-ray technology, but are generally expensive to deploy (as much as $1.0 million per installation), are 4 non-portable and generally reject a large number of objects as a result of perceived anomalies that are later determined not to be explosives. By comparison, trace detection equipment is capable of detecting and identifying minute amounts of chemical substances, is generally more portable and less expensive than bulk imaging equipment and has an extremely low false alarm rate. While implementation of advanced detection strategies has varied significantly around the world, the Company believes that aviation authorities, including the FAA, have generally recognized that no one detection technology provides a complete solution to the problem of enhancing existing security systems. Consequently, trace detection technology is frequently deployed as a complement to bulk imaging equipment to resolve anomalies identified by bulk detectors and in applications where it is impractical to use the larger, less mobile bulk imaging detectors, such as checking carry-on baggage. Trace detection technology is also deployed in lieu of bulk imaging equipment in certain installations because of its relatively low cost, particularly in smaller airports and in less developed countries. The development and deployment of advanced explosives detection technology is being driven by government initiatives in the United States and elsewhere in the world. For example, in response to the recommendations of the White House Commission on Aviation Safety and Security (the "Gore Commission"), since October 1996, the U.S. Congress appropriated in excess of $500 million for the procurement of advanced explosives detection technology. An additional $100 million has been appropriated for fiscal year 2001, which the FAA is using to deploy such technology in approximately 400 U.S. airports. Trace detection technology has a broad range of other explosives detection uses, including other transport security, facilities protection, forensics, military and law enforcement. Government agencies, military forces and private businesses have deployed trace detection equipment at facilities, such as the World Trade Center, military bases, embassies and public utilities, such as nuclear power plants, that are perceived as potential targets of terrorist attacks. Law enforcement agencies, such as the FBI and the New York City Police Department, and military forces also use trace detection technology for forensic purposes. For example, the IONSCAN(R) was used in connection with the investigations of the crash of EgyptAir 990 and TWA Flight 800 and the 1995 Oklahoma City bombing. Drug Interdiction As a result of increased illegal drug usage, particularly among children under 18, a heightened public awareness of drug-related criminal activity generally, and the use of more sophisticated techniques by drug traffickers, government agencies have increased their spending on drug interdiction efforts. The use of conventional x-ray scanning, random searches and canines has had limited success in suppressing illegal drug trafficking. Accordingly, customs and law enforcement agencies have turned to advanced detection technology to assist in their drug detection and interdiction efforts. For example, the U.S. Coast Guard has deployed trace detection equipment onboard its ships to search vessels at sea for illegal drugs. Similarly, prisons in the U.S. and elsewhere are employing trace detection equipment to reduce illegal drug use. Chemical Warfare Weapons of mass destruction have become a major threat in the United States and around the world over the past several years. The subway attack in Japan several years ago demonstrated how vulnerable we are to such a chemical warfare attack. During 2000, the Company completed the development of chemical warfare agent detection capabilities for both its IONSCAN(R) and SABRE 2000(R) detectors. The Company believes that the detector market for "first responders" for domestic preparedness against chemical agent attacks, and growing civil defense efforts are increasing their focus on detection capabilities. The Company believes that the SABRE 2000(R) is uniquely suited for this 5 application because it can also detect explosives and narcotics in addition to chemical warfare agents, providing a multi-use capability for potential users. Other Applications Pursuant to the Company's long term strategic development plan, the Company has begun to develop new applications for its ion mobility spectrometer platforms. Progress was made during 2000 in developing detection capabilities for the life science industry, principally in the pharmaceutical and chemical industries. Several pharmaceutical companies currently are testing our IONSCAN(R) equipment for assessment of this technology for use in a variety of analytical applications. Various process control applications have also been developed in response to specific customer requests, and marketing efforts are underway to exploit associated new market areas with these applications. SALES AND MARKETING The Company sells its products through a direct sales organization comprised of 42 sales and service employees located at its headquarters in New Jersey and at offices in Toronto, London, Paris and Kuala Lumpur. In addition, the Company utilizes a network of 70 independent sales and service representatives located in North America, Europe, the Middle East, Africa, Asia, South America and Australia. The Company's sales and marketing efforts typically involve extensive customer visits, demonstrations and field testing. Sales prospects generally are targeted by the Company or its independent sales representatives, although the Company also responds to requests for proposals. Once a sale is consummated, the Company provides training to teach operators how to use the equipment, including proper sampling techniques. The Company generally provides a one-year parts and labor warranty on its instruments, although from time to time the Company has provided extended warranties. To date, the Company's warranty claims experience has not been significant. Currently, approximately 20% - 25% of the Company's revenues are from the sale of consumables, accessories, spare parts, service and maintenance contracts. As more units are deployed, the Company believes that this revenue source will grow. For the year ended December 31, 2000, the Government of Israel accounted for approximately 18.2% and the FAA accounted for approximately 9.4% of consolidated revenues of the Company and for the years ended December 31, 1999 and 1998, the FAA accounted for approximately 48.3% and 48.1%, respectively, of consolidated revenues of the Company. BACKLOG The Company measures its backlog of instrument revenues as orders for which contracts or purchase orders have been signed, but that have not yet been shipped and for which revenues have not yet been recognized. The Company includes in its backlog only those customer orders that are scheduled for delivery within the next 18 months. The Company typically ships its products within three weeks of receiving an order. The Company follows the practice of manufacturing to a sales forecast in order to have inventory available to meet anticipated demand promptly. As a result, the Company has not historically maintained a material backlog of orders for its instruments and, in the ordinary course of business, intends to have sufficient inventory of product on hand to allow shipment upon receipt of an order. However, depending on the size and timing of customer orders, the Company may, from time to time, have a backlog of orders. At December 31, 2000, 1999 and 1998, the Company had backlog of $1.1 million, $1.1 million and $750,000, respectively. It is expected that approximately $850,000 of the Company's backlog will ship during 2001 with the balance shipping at various times pursuant to a contractual schedule. 6 MANUFACTURING AND ASSEMBLY The Company assembles its products from components supplied to it by various suppliers and parts manufactured internally. Once an instrument is assembled, it is "burned in" under varying environmental conditions for a period of time to assure that it is functioning properly. After successful completion of this procedure, the instrument is ready for shipment to a customer. Although many of the basic components of the instruments, such as integrated circuits, resistors, capacitors, liquid crystal displays and other similar components, are readily available from a number of sources, the Company typically purchases such components from single suppliers. A limited number of components and sub-assemblies are manufactured for the Company pursuant to the Company's proprietary specifications, but the Company does not believe it is dependent on any single source for these items. To date, the Company has not experienced any material difficulty in obtaining any components or sub-assemblies. COMPETITION The Company competes with other entities, including Intelligent Detection Systems, Inc., Ion Track Instruments Inc. and Thermedics Detection Inc. Principal competitive factors include selectivity (the ability of an instrument to identify the presence of a particular substance), sensitivity (the ability of an instrument to detect small amounts of a particular substance), false alarm rate, price, marketing, ease of use and speed of analysis. The Company believes that it competes effectively with respect to each of these factors. The Company competes for government expenditures with equipment manufacturers, such as InVision Technologies, Inc. and Perkin Elmer, which utilize other types of detection technologies, such as enhanced x-ray and CATSCAN, as well as with manufacturers of other IMS equipment and manufacturers using other trace particle detection technologies, such as gas chromatography and chemiluminescence. Because trace particle detection equipment is used in certain instances to verify detection results obtained by bulk imaging systems, the IONSCAN(R) and other trace particle detection products are often used in conjunction with bulk imaging technologies. The Company also competes with the use of canines to locate the presence of explosives or drugs. Although canines have a highly developed sense of smell and are able to follow a trail, the Company believes that its detectors are more effective and cost-efficient than canines in most applications, because they can operate 24 hours a day, have greater selectivity than canines and can identify the composition of the substance detected. GOVERNMENT REGULATION Although the Company's business is not subject to significant government regulation, government regulation plays a large role in determining the demand for the detectors. In the U.S. and most foreign countries, the aviation industry is highly regulated and authorities, such as the FAA in the U.S., have the ability to recommend or mandate use of enhanced explosives detection equipment. PRODUCT DEVELOPMENT The Company incurred $2.5 million, $1.8 million and $2.2 million, on product development activities for the years ended December 31, 2000, 1999 and 1998, respectively, of which $908,000, $324,000 and $386,000, respectively, were funded under various grants and contracts. Substantially all of the Company's product development activities have related to the development and enhancement of the Company's IMS technology and the development of new products. During 2000, the Company completed the development of the Sentinel, a walk- 7 through chemical detection portal that was developed for the FAA. See "Other Products" above. PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS Certain of the technology used in the Company's products is licensed by the Company from the Canadian government as described below. While the Company holds patents relating to certain components, systems and techniques used in its products and while certain other elements of its products are protected by other intellectual property rights, the Company has no comprehensive patent or similar exclusive intellectual property right covering its products in their entirety. In addition, the basic IMS technology used in the Company's products is not proprietary and is available in the public domain. Accordingly, present and potential competitors could use such basic technology to duplicate the performance of the IONSCAN(R) products. The initial development of the IONSCAN(R) was funded in part by Transport Canada and Revenue Canada. Pursuant to an agreement with the Canadian government, the Company has a worldwide license to use certain unpatented technology developed from such work and pays Revenue Canada a royalty equal to 1.0% of IONSCAN(R) product sales. The initial term of this license agreement expired on March 31, 1999. However, the Company has entered into an agreement with Revenue Canada, pursuant to which the Company has obtained the right to renew such licensing arrangement on a year-by-year basis for up to ten additional years. Revenue Canada has retained the right to use the technology and to produce products incorporating such technology although, to date, Revenue Canada has not attempted to do so. The Company's Sentinel portal utilizes preconcentration technology developed by and licensed from Sandia National Laboratories ("Sandia"). The Company has entered into a license agreement with Sandia for the exclusive rights to this technology for portal applications utilizing ion mobility spectrometry technology. EMPLOYEES As of December 31, 2000, the Company had 144 full-time employees, of whom 54 were engaged in manufacturing, 33 were engaged in product development activities and 57 were engaged in sales, service and general administration. 18 employees have advanced degrees (including 13 doctorates). None of the Company's employees is represented by a union, and the Company considers its relationships with its employees to be satisfactory. FINANCIAL INFORMATION ABOUT GEOGRAPHIC DATA AND EXPORT SALES For information with respect to financial information about geographic data and export sales, reference is made to the information set forth in Note 10 to the Consolidated Financial Statements of the Company included herein. RECENT DEVELOPMENTS On March 8, 2001, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Smiths Industries Aerospace & Defense Systems Inc. ("Smiths"), an affiliate of Smiths Group plc, which provides for Smiths to acquire the Company in a cash merger. The Company's stockholders will receive $11.05 in cash, for each share of common stock of the Company they own immediately before the effectiveness of the merger. The merger is subject to stockholder approval and other customary conditions to closing and is expected to close in the second quarter of 2001. A copy of the Merger Agreement has been filed as an exhibit to this Annual Report on Form 10-K. 8 ITEM 2. PROPERTIES. The Company does not own any real property and currently conducts its operations at the following leased premises:
APPROX- IMATE SQUARE ANNUAL LEASE LOCATION DESCRIPTION OF FACILITY FOOTAGE LEASE COST EXPIRATION -------- ----------------------- ------- ---------- ---------- 30 Technology Drive Corporate headquarters, 28,128 $528,000 June 2008 (1) Warren, New Jersey research, sales, customer 07059 support, assembly and warehousing 1730 Aimco Boulevard Research, manufacturing 28,380 $106,000 September 2005 Mississauga, Ontario, and assembly, sales, Canada L4W 1V1 customer support and administrative Village Fret BAT-3453 Sales and customer 2,500 $43,000 August 2001 BP 10614-4 support Rue du Te 95724, Roissy C.D.G. France Unit 3 at Manor Royal Sales and customer 1,560 $19,000 July 2001 Crawley, West Sussex support England RH10 2QU No. 21-1 Jalan 3176 D Sales and customer 1,200 $17,000 November 2001 Desa Pandah support 55100 Kuala Lumpur Malaysia
(1) On July 1, 2003, the annual lease cost will increase based upon the increase in the Revised Consumer Price Index during the first 5 years of the lease, with a minimum increase of 2% and a maximum increase of 5% per year. ITEM 3. LEGAL PROCEEDINGS. The Company is not a party to any material legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the Company's security holders during the fourth quarter of the year ended December 31, 2000. 9 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock has been included in the Nasdaq Stock Market under the symbol "BARR." The following table sets forth, for the periods indicated, the high and low sales price information for the Common Stock as reported on the Nasdaq Stock Market. HIGH LOW Fiscal 1999 First quarter $10 9/16 $5 13/16 Second quarter 7 1/2 5 1/4 Third quarter 6 1/2 5 Fourth quarter 7 1/8 4 7/8 Fiscal 2000 First quarter $7 31/32 $4 13/32 Second quarter 7 7/16 5 1/2 Third quarter 9 7/8 5 13/32 Fourth quarter 10 11/16 7 1/16 Fiscal 2001 10 7/8 7 1/4 First quarter (through March 14, 2001) On March 14, 2001, the last reported sale price of the Common Stock on the Nasdaq Stock Market was $10.75 per share. As of March 14, 2001, the Company had approximately 533 stockholders of record. DIVIDEND POLICY The Company has never declared or paid cash dividends on its Common Stock. The Board of Directors currently intends to retain future earnings to support its growth strategy and does not anticipate paying dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of the Board of Directors after taking into account various factors, including the Company's financial condition, results of operations, current and anticipated cash needs and plans for expansion. The Company is prohibited from paying cash dividends on the Common Stock unless full cumulative dividends have been paid or set aside for payment on its Class A Convertible Preferred Stock and Class B Convertible Preferred Stock at an annual rate of $0.16 per share, which dividends, at the option of the Company, are payable in cash or shares of Common Stock. RECENT SALES OF UNREGISTERED SECURITIES None. 10 ITEM 6. SELECTED FINANCIAL DATA SUMMARY CONSOLIDATED FINANCIAL DATA (In thousands, except per share data) (Unaudited)
YEAR ENDED DECEMBER 31, ----------------------- 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- CONSOLIDATED STATEMENTS OF OPERATIONS DATA (1): Revenues $10,382 $21,841 $19,321 $19,831 $27,581 Gross profit 5,480 13,699 12,398 11,007 14,296 Operating income 1,596 4,995 2,565 2,383 5,027 Income tax (benefit) (391) (371) (1,107) 1,468 2,066 Income from continuing operations 2,059 5,754 5,258 2,578 4,646 Net income 2,059 5,754 4,431 1,278 4,646 Preferred stock dividends (39) (12) (10) (9) (8) Net income attributable to common stockholders 2,020 5,742 4,421 1,269 4,638 Income per common share from continuing operations (diluted) $0.46 $0.92 $0.69 $0.33 $0.63 Net income per common share (diluted) $0.46 $0.92 $0.58 $0.16 $0.63 Weighted average common shares outstanding (diluted) 4,440 6,257 7,612 7,752 7,407 CONSOLIDATED BALANCE SHEET DATA: Working capital $14,271 $19,664 $45,697 $41,969 $42,320 Current assets 16,624 24,037 49,056 44,882 47,806 Total assets 17,323 25,608 52,644 48,765 52,271 Current liabilities 2,353 4,373 3,359 2,913 5,486 Long-term liabilities 117 121 145 286 432 Stockholders' equity 14,853 21,114 49,140 45,253 45,852
(1) Amounts for the year ending December 31, 1998, have been restated to reflect DigiVision as an operation held for sale. DigiVision was acquired on April 30, 1998 and sold December 16, 1999. Amounts for the years ending December 31, 1996 through 1999 have been reclassified to conform to the current years presentation. 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS The following table sets forth certain income and expense items from the Company's consolidated statements of operations expressed as a percentage of revenues for the periods indicated. The Company considers itself a single reporting business entity.
YEAR ENDED DECEMBER 31, ----------------------- 1998 1999 2000 ---- ---- ---- CONSOLIDATED STATEMENTS OF OPERATIONS DATA CONTINUING OPERATIONS: Revenues 100.0% 100.0% 100.0% Cost of revenues 35.8 44.5 48.2 ----- ----- ----- Gross profit 64.2 55.5 51.8 ----- ----- ----- Operating expenses: Selling, general and administrative 38.9 31.3 25.6 Business development 2.7 4.7 2.2 Product development 9.3 7.5 5.8 ----- ----- ----- Total operating expenses 50.9 43.5 33.6 ----- ----- ----- Operating income 13.3 12.0 18.2 Other income, net 8.2 8.4 6.1 Income tax (provision) benefit 5.7 (7.4) (7.5) ----- ----- ----- Income from continuing operations 27.2 13.0 16.8 Preferred stock dividends --* --* --* ----- ----- ----- Income from continuing operations attributable to common stockholders 27.2% 13.0% 16.8% ===== ===== =====
* Less than 0.1%. COMPARISON OF THE YEAR ENDED DECEMBER 31, 2000 TO THE YEAR ENDED DECEMBER 31, 1999 Revenues. For the year ended December 31, 2000 revenues increased by $7.8 million, or 39.1%, to $27.6 million from $19.8 million for the year ended December 31, 1999. Sales of equipment and related products increased by $7.4 million, or 37.5%, due to an increase of 59.0% in the number of units sold, and an increase of 61.9% in the sale of consumables and related products, offset in part by a decrease in the average unit selling prices of the Company's IONSCAN(R) detectors. The increase in unit sales resulted primarily from sales of the Company's recently introduced handheld SABRE 2000(R) detector in addition to sales of IONSCAN(R)s under two large contracts, one from the Government of Israel and the other from the BAA (formerly known as the British Airport Authority). The increase in sales of consumables and related products was due to significant IONSCAN(R) sales to the aviation security market, primarily to the airlines whose usage of consumables is high. The decrease in average unit selling prices resulted primarily from increased competitive activity. The Company believes that competitive factors will continue to pressure gross margins in future periods. Gross Profit. For the year ended December 31, 2000, gross profit increased by $3.3 million, or 29.9%, to $14.3 million from $11.0 million in 1999. As a percentage of revenues, gross profit decreased to 51.8% in the year ended December 31, 2000 from 55.5% in 1999. The decrease in gross profit percentage was primarily attributable to a decrease in the average unit selling price of the Company's IONSCAN(R) instruments and increased manufacturing and other costs attributable to the SABRE 2000(R) product line. Selling, General and Administrative. For the year ended December 31, 2000, selling, general and administrative expenses increased by approximately $878,000, or 14.2%, to $7.1 million from $6.2 million in 1999. As a percentage of revenues, selling, general and administrative expenses decreased to 25.6% in the year ended December 31, 2000 from 31.3% in 1999 primarily as a result of increased efficiency by the Company. Selling and marketing expenses increased by approximately $627,000 and general and 12 administrative expenses increased by $251,000 over the same period last year, primarily attributable to increased payroll costs. Business Development. For the year ended December 31, 2000, business development expenses decreased by $329,000, or 35.3%, to $604,000 from $903,000 in 1999, primarily as a result of a reduced level of business development activity. In addition, 1999 business development expenses included significant costs associated with a proposed acquisition that was not completed. Product Development. For the year ended December 31, 2000, product development expenses increased by $96,000, or 6.4%, to $1.6 million from $1.5 million in 1999. As a percentage of revenues, product development expenses decreased to 5.8% for the fiscal year ended December 31, 2000 from 7.5% in 1999. Management expects to incur increased product development expenses in future periods in connection with the enhancement of existing products and the development of new products and applications. Operating Income. For the year ended December 31, 2000, operating income increased by $2.6 million, or 111%, to $5.0 million from $2.4 million in 1999. As a percentage of revenues, operating income increased to 18.2% from 12.0% in 1999. The increase is due to the combination of factors noted above. Other Income and expense. For the year ended December 31, 2000, other income increased by $22,000, or 1.3%, to $1.7 million. The increase was attributable primarily to an increase in investment income, partially offset by increased foreign exchange losses. Income Taxes. For the year ended December 31, 2000, the Company had a tax provision of $2.1 million, as compared to $1.5 million in 1999. The Company's effective tax rate is 30.8% as compared to 36.3% in 1999 due to foreign income taxed at lower rates. As of December 31, 2000, the Company had U.S. net operating loss carryforwards of approximately $2.2 million which will carry over to future years to offset U.S. federal taxable income. The substantial portion of the net operating loss carryforward will expire in the year 2010. In addition, the Company has approximately $1.6 million of excess expenses relating to its Canadian operations that can be used to offset future Canadian income. COMPARISON OF THE YEAR ENDED DECEMBER 31, 1999 TO THE YEAR ENDED DECEMBER 31, 1998 CONTINUING OPERATIONS: Revenues. For the year ended December 31, 1999 revenues increased by $510,000, or 2.6%, to $19.8 million from $19.3 million for the year ended December 31, 1998. Sales of IONSCAN(R)s and related products increased by $437,000, or 2.3%, due to an increase of 1.4% in the number of units sold and an increase of 46.3% in the sale of consumables and related products, offset in part by a 9.2% decrease in the average unit selling price. The increase in sales of consumables and related products was due to significant IONSCAN(R) sales to the aviation security market, primarily to the airlines whose usage is high. The decrease in average unit selling prices resulted primarily from increased competitive activity. Gross Profit. For the year ended December 31, 1999, gross profit decreased by $1.4 million, or 11.0%, to $11.0 million from $12.4 million in 1998. As a percentage of revenues, gross profit decreased to 55.5% in the year ended December 31, 1999 from 64.2% in 1998. The decrease in gross profit percentage was primarily attributable to a decrease in the average unit selling price of the Company's IONSCAN(R) instruments that was only partially offset by reduced production costs. Selling, General and Administrative. For the year ended December 31, 1999, 13 selling, general and administrative expenses decreased by approximately $1.3 million, or 17.4%, to $6.2 million from $7.5 million in 1998. As a percentage of revenues, selling, general and administrative expenses decreased to 31.3% in the year ended December 31, 1999 from 38.9% in 1998. Selling and marketing expenses decreased primarily due to a $115,000 recovery of certain marketing and selling expenses, reduced payroll and related costs associated with personnel transferred to the service department whose costs are recorded in cost of revenues and other meeting expenses. General and administrative expenses decreased primarily as a result of reduced bad debt expense and reduced incentive compensation, partially offset by increased payroll and related expense and increased occupancy expense. Business Development. For the year ended December 31, 1999, business development expenses increased by $415,000, or 80.1%, to $933,000 from $518,000 in 1998. The increase was attributable primarily to costs associated with a proposed acquisition that was not completed, additional payroll and related costs and investment banking fees. Product Development. For the year ended December 31, 1999, product development expenses decreased by $316,000, or 17.5%, to $1.5 million from $1.8 million in 1998. As a percentage of revenues, product development expenses decreased to 7.5% for the fiscal year ended December 31, 1999 from 9.3% in 1998. Operating Income. For the year ended December 31, 1999, operating income decreased by $182,000, or 7.1%, to $2.4 million from $2.6 million in 1998. As a percentage of revenues, operating income decreased to 12.0% from 13.3% in 1998. The decrease is due to the combination of factors noted above. Other Income and expense. For the year ended December 31, 1999, other income increased by $77,000, or 4.9%, to $1.7 million from $1.6 million in 1998. The increase was attributable primarily to an increase in foreign exchange gain, partially offset by reduced investment income. Income Taxes. For the year ended December 31, 1999, the Company had a tax provision of $1.5 million composed of net foreign taxes of $106,000 and US federal and state taxes of $1.4 million, as compared to a net tax benefit of $1.1 million in 1998. OPERATION SOLD: Effective June 30, 1999, the Company decided to dispose of its video-enhancement business, DigiVision, and on December 16, 1999 sold the business to certain members of DigiVision's senior management. Accordingly, amounts relating to DigiVision have been accounted for as discontinued operations and presented as an operation sold. See note 13 of Notes to Financial Statements for the details of the disposition. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities was $8.0 million in 2000, $663,000 in 1999 and $2.8 million in 1998. Cash provided by operations in 2000 resulted primarily from net income of $4.6 million, adjusted for depreciation and amortization of $1.1 million, deferred taxes of $1.4 million and $1.3 million in non-cash working capital items, partially offset by changes in accounts receivable and inventory reserves and other. Cash provided by operations in 1999 resulted primarily from net income of $1.3 million, adjusted for depreciation and amortization of $859,000, deferred taxes of $728,000, loss from operation sold of $1.3 million, changes in accounts receivable and inventory reserves and other, partially offset by $3.6 million in non-cash working capital items. Cash provided by operations in 1998 resulted primarily from net income of $4.4 million, adjusted by depreciation and amortization of $741,000, losses associated with operation sold of $1.3 million, changes in accounts receivable and inventory reserves, partially offset by deferred taxes of $1.6 million, and $1.4 million in non-cash working capital items. 14 Cash used in investing activities in 2000 was $8.5 million and resulted primarily from purchases of marketable securities and equipment. Cash provided by investing activities in 1999 was $12.7 million and resulted primarily from the sale of marketable securities of $14.4 million, partially offset by capital expenditures of $1.7 million. Cash used in investing activities in 1998 was $15.4 million and resulted primarily from the purchase of marketable securities, capital expenditures and the acquisition of DigiVision. Cash used in financing activities in 2000 of $3.9 million was primarily the result of the acquisition of $4.8 million of treasury stock, partially offset by the cash received from exercise of warrants and options. Cash used in financing activities in 1999 of $5.2 million was primarily the result of the acquisition of $5.3 million of treasury stock. Cash provided by financing activities in 1998 was $23.3 million and resulted primarily from the net proceeds of the Company's public offering of common stock aggregating $25.2 million, offset in part by the purchase of treasury stock. The Company's capital expenditures in 2000 aggregated approximately $1.7 million. Such expenditures consisted primarily of production equipment, computer hardware and related software and cost related to the development of certain of the Company's new products. The Company believes that it will require approximately $900,000 in capital investment in additional tooling, equipment and facility improvements to meet its anticipated production levels for 2001. The Company has a $5.0 million unsecured credit facility with Fleet Bank, N.A. to be used for general working capital purposes, including the issuance of standby letter of credit. At December 31, 2000, $4.5 million was available under this facility. The Company has approximately $2.2 million of tax loss carryforwards to offset future taxable income in the U.S. and $1.6 million of expenses available to offset future taxable income in Canada. As of December 31, 2000, the Company had cash and cash equivalents of $22.5 million and marketable securities of $8.2 million. The Company believes that its existing cash balances, marketable securities and income from operations in future periods will be sufficient to fund its working capital requirements for at least the next twelve months. The Company's Board of Directors has approved a common stock repurchase program under which the Company is authorized to repurchase up to 2,000,000 shares of its outstanding common stock. As of December 31, 2000, the Company had repurchased 1,788,550 shares at an aggregate cost of approximately $11.6 million. INFLATION Inflation was not a material factor in either the sales or the operating expenses of the Company during the periods presented herein. YEAR 2000 COMPLIANCE The Company's cost of achieving Year 2000 compliance was not material to its results of operations or financial condition. RECENT PRONOUNCEMENTS OF THE FINANCIAL ACCOUNTING STANDARDS BOARD In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", which becomes effective for the Company during the first quarter of 2001. SFAS requires the recognition of all derivatives as either assets or liabilities in the Company's balance sheet and measurement of those 15 instruments at fair value. To date, the Company has not entered into any significant derivative or hedging activities, and, as such does not expect that the adoption of SFAS No. 133, as amended, would have a material effect on its financial statements. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's exposure to interest rate risk relates primarily to its investment portfolio. The primary objective of the Company's investment policy is to preserve principal while maximizing yields. The Company's investment portfolio consists of cash and cash equivalents and marketable securities consisting of a diverse mix of high credit quality securities, including U.S. government agency and corporate obligations, certificates of deposit and money market funds. The Company's portfolio has a weighted average maturity of 0.23 years, therefore changes in interest rate will not materially impact the Company's consolidated financial condition. However, such interest rate changes can cause fluctuations in the Company's results of operations and cash flows. The Company's $5 million unsecured credit facility has an interest rate based on the prime rate or LIBOR, at the Company's option. The Company currently has no borrowing outstanding under the unsecured credit facility. If the Company should draw down on the unsecured credit facility, interest rate fluctuations could have an impact on the Company's results of operations and cash flows. The Company's exposure to foreign currency exchange rate fluctuations is the result of operating in a number of countries throughout the world. The Company has several foreign subsidiaries whose financial statements are recorded in currencies other than U.S. dollars. As these foreign currency financial statements are translated at the end of each reporting period during consolidation, fluctuations in exchange rates between the foreign currency and the U.S. dollar increase or decrease the value of those investments. These fluctuations are recorded as a component of accumulated comprehensive income within stockholders' equity. In addition, from time to time, the Company enters into sales transactions in currencies other than U.S. dollars. Accordingly, the Company may be impacted by changes in the exchange rate between the time the sale is recorded and the time the trade receivable is collected. Where appropriate, the Company may from time to time hedge these transactions against foreign currency fluctuations. During 2000, the Company did not engage in any hedging transactions. The impact of foreign exchange transactions is reflected in the statement of operations and has not been material. 16 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA. Financial statements are contained on pages F-1 through F-21. QUARTERLY RESULTS OF OPERATIONS - The following table sets forth certain consolidated statements of operations data for each of the quarters in the two-year period ended December 31, 2000. This data is unaudited but, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, necessary for fair presentation of this information in accordance with generally accepted accounting principles. See Note 12 of Notes to Consolidated Financial Statements. On December 16, 1999, the Company sold its DigiVision operation, accordingly where appropriate, results have been re-stated. See Note 13 of Notes to Consolidated Financial Statements.
QUARTER ENDED ------------- MAR 31, JUN 30, SEP 30, DEC 31, MAR 31, JUN 30, SEP 30, DEC 31, 1999 1999 1999 1999 2000 2000 2000 2000 ---- ---- ---- ---- ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues $4,893 $5,427 $5,261 $4,250 $4,783 $8,713 $7,166 $6,919 Cost of revenues 2,016 2,297 2,407 2,104 2,391 4,187 3,194 3,513 ------ ------ ------ ------ ------ ------- ------ ------ Gross profit 2,877 3,130 2,854 2,146 1,621 4,526 3,972 3,406 ------ ------ ------ ------ ------ ------- ------ ------ Operating expenses: Selling, general and administrative 1,674 1,600 1,621 1,305 1,621 1,730 1,742 1,985 Business development 194 151 117 471 111 102 82 309 Product development 504 296 340 351 291 316 590 390 ------ ------ ------ ------ ------ ------- ------ ------ Total operating expenses 2,372 2,047 2,078 2,127 2,023 2,148 2,414 2,684 ------ ------ ------ ------ ------ ------- ------ ------ Operating income from continuing operations 505 1,083 776 19 369 2,378 1,558 722 Other income, net 502 447 386 330 400 429 480 376 Income tax (377) (600) (442) (63) (260) (955) (727) (124) ----- ------- ------- ----- ----- ------ ----- ----- Income from continuing operations 630 930 720 286 509 1,852 1,311 974 Operation sold, net of tax (130) (1,111) -- (47) -- -- -- -- ------ ------ ----- ----- ------ ------ ----- ------ Net income (loss) $500 $(181) $720 $239 $509 $1,852 $1,311 $974 ====== ====== ===== ===== ====== ====== ====== ====== Net income (loss) per common share*: Continuing operations: Basic $0.08 $0.13 $0.10 $0.04 $0.07 $0.25 $0.19 $0.14 ====== ====== ====== ====== ====== ====== ====== ====== Diluted $0.08 $0.12 $0.10 $0.04 $0.07 $0.24 $0.18 $0.13 ====== ====== ====== ====== ====== ====== ====== ====== Net income: Basic $0.06 $(0.03) $0.10 $0.03 $0.07 $0.25 $0.19 $0.14 ====== ====== ====== ====== ====== ====== ====== ====== Diluted $0.06 $ (0.03) $0.10 $0.03 $0.07 $0.24 $0.18 $0.13 ====== ====== ====== ====== ====== ====== ====== ======
* The total of each year's quarterly results may not equal the reported results for the respective years. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES. Not applicable. 17 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information regarding the Company's executive officers and directors as of March 1, 2001.
NAME AGE POSITION ---- --- -------- Stanley S. Binder 59 Chairman of the Board and Chief Executive Officer John H. Davies 64 Vice Chairman and Director, Chief Executive Officer of BRL Kenneth S. Wood 49 President, Chief Operating Officer and Director Richard S. Rosenfeld 54 Executive Vice President-Operations, Chief Financial Officer, Treasurer and Secretary John D. Abernathy 63 Director Richard D. Condon 66 Director John J. Harte 59 Director Lorraine M. Lavet 40 Director James C. McGrath 58 Director
Mr. Stanley S. Binder, Director since 1991. Mr. Binder joined the Company in July 1989 and has served as Chairman of the Board since February 1991 and Chief Executive Officer since July 1990. Mr. Binder also served as President of the Company from July 1989 until May 1998, Chief Operating Officer from 1989 to June 1990 and Chief Financial Officer from 1989 until July 1993. Mr. Binder also is an independent general partner in the Special Situations Fund III, L.P. ("SSF III"), a substantial investor in the Company. Mr. Binder is a past director of the American Electronics Association and past chairman of its New Jersey Council. Mr. Binder is a member of the Executive, Nominating and Technology and Strategic Planning Committees of the Board. Mr. John H. Davies, Director since 1992. Mr. Davies joined the Company in October 1967 and has been Vice Chairman of the Company since May 1998. From January 1992 to May 1998 he served as Executive Vice President of the Company. He has been Chief Executive Officer of Barringer Research Ltd. since August 1989. He is a member of the Executive, Nominating and Technology and Strategic Planning Committees of the Board. Mr. Kenneth S. Wood, Director since 1999. Mr. Wood joined the Company in 1990 and has been President and Chief Operating Officer of the Company since May 1998. From January 1992 until May 1998, he served as Vice President of Operations of Barringer Instruments Inc. He served as Secretary of the Company from March 1993 until May 1998. He is a member of the Executive and Strategic Planning and Technology Committees of the Board. Mr. Richard S. Rosenfeld. Mr. Rosenfeld is a certified public accountant. He joined the Company in January 1992 and has served as Executive Vice President-Operations since March 2001, and Vice President of Finance, Chief Financial Officer and Treasurer of the Company since July 1993 and as Secretary of the Company since May 1998. Mr. John D. Abernathy, Director since 1993. Mr. Abernathy is a certified public accountant. Since January 1995, he has been Executive Director of Patton Boggs, LLP, a Washington, D.C. law firm. From July 1983 until June 1990, Mr. Abernathy was Chairman and Chief Executive Partner of BDO Seidman, a public accounting firm. Mr. Abernathy is also a director of Oakhurst Company, Inc., a distributor of automotive parts and accessories. He is a member of the Executive, Audit and Finance and Executive Compensation Committees of the Board. 18 Mr. Richard D. Condon, Director since 1992. Mr. Condon is currently an independent consultant. From January 1996 to October 1998, Mr. Condon was a consultant to and director of Amherst Process Instruments, Inc., a scientific instrumentation company. He is a member of the Executive Compensation and Technology and Strategic Planning Committees of the Board. Mr. John J. Harte, Director since 1986. Mr. Harte is a certified public accountant and is President and CEO of Mid-Lakes Distributing Inc., a manufacturer and distributor of heating and air conditioning parts and equipment located in Chicago, Illinois. Prior to that, he served as Vice President of Mid-Lakes Distributing Inc. From 1991 until January 1997, Mr. Harte also was Vice President, Special Projects, of the Company. Mr. Harte also serves as a director and Chairman of the board of IBNET Inc., a global internet company. Mr. Harte is a member of the Audit and Finance, Executive Compensation, Strategic Planning and Technology, and Nominating Committees of the Board. Ms. Lorraine M. Lavet, Director since 1999. Ms. Lavet has been Chief Operating Officer of the American Electronics Association since September 1996. Prior thereto, from September 1994 to August 1996, Ms. Lavet was President and Chief Executive Officer of the Fairfax County Chamber of Commerce. She is a member of the Nominating and Technology and Strategic Planning Committees of the Board. Mr. James C. McGrath, Director since 1994. Mr. McGrath is an international security consultant. Since July 1989, he has been President of McGrath International, Inc., a management consulting firm specializing in the security field. He is a member of the Audit and Finance and Executive Compensation Committees of the Board. All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. The Company's Directors are elected by the holders of the Company's Common Stock, Class A Convertible Preferred Stock and Class B Convertible Preferred Stock voting as a single class. There are no family relationships among any of the directors or executive officers. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Under Section 16(a) of the Exchange Act, the Company's directors, executive officers, and persons holding more than ten percent of the Company's Common Stock are required to report their initial ownership of the Company's Common Stock and any changes in such ownership to the Securities and Exchange Commission. These persons are also required to furnish the Company with a copy of all Section 16(a) forms they file. The Company is obligated to disclose any failures to, on a timely basis, file such reports. To the Company's knowledge, based solely on a review of such reports and any amendments thereto which have been furnished to the Company, the Company has not identified any reports that were not filed in a timely manner. 19 ITEM 11. EXECUTIVE COMPENSATION The following table sets forth a summary of all compensation paid for the last three fiscal years to the Chief Executive Officer of the Company and each of the other executive officers of the Company whose total annual salary and bonus are $100,000 or more (collectively, the "Named Executive Officers"): SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION ------------------- ---------------------- SECURITIES RESTRICTED UNDERLYING ALL OTHER NAME AND FISCAL SALARY BONUS(1) OTHER ANNUAL STOCK OPTIONS/ LTIP COMPENSATION PRINCIPAL POSITION YEAR ($) ($) COMPENSATION ($) AWARD(s) SARs (#) PAYOUTS ($) ($)(1 4) ------------------ ---- --- --- ---------------- -------- -------- ----------- -------- Stanley S. Binder 2000 $270,400 $295,000 -- -- 150,000 -- $126,885(3) Chairman and Chief 1999 260,000 100,000 -- -- -- -- 89,385 Executive Officer 1998 250,000 182,000 -- -- 87,500(2) -- 69,265 John H. Davies* 2000 161,500 30,000 -- -- 40,000 -- 50,000 Vice Chairman 1999 152,888 -- -- -- -- -- 38,232 1998 149,782 46,000 -- -- 34,000(2) -- 45,815 Kenneth S. Wood 2000 186,720 160,000 -- -- 120,000 -- 44,618(3) President and Chief 1999 170,625 65,000 -- -- -- -- 28,670 Operating Officer 1998 164,063 65,000 -- -- 31,500(2) -- 29,040 Richard S. Rosenfeld 2000 135,200 110,000 -- -- 80,000 -- 33,560(3) Vice President-Finance, 1999 130,000 25,000 -- -- -- -- 21,960 Chief Financial Officer 1998 125,000 34,000 -- -- 27,300(2) -- 22,720
* Amounts converted to U.S. dollars at the average exchange rate for the respective year. (1) Includes amounts contributed by the Company pursuant to the Company's tax-qualified 401(k) deferred compensation plan ("401(k) Plan"). The Plan provides for the Company to make matching contributions to the participants in the 401(k) Plan equal to 100% of the first 5.0% of a participant's salary contributed. Company contributions to the 401(k) Plan vest proportionately over a five-year period, commencing at the end of the participant's first year with the Company. Amounts paid during 2000 on behalf of the Named Executive Officers were $8,500, $8,000, $8,500 and $8,000 for Messrs. Binder, Davies, Wood and Rosenfeld, respectively. (2) Represents repricing of options previously granted. (3) Includes premiums paid by the Company for term life insurance for Mr. Binder, Mr. Wood and Mr. Rosenfeld during 2000 in the amounts of $9,385, $1,118 and $1,560, respectively. (4) Includes amounts accrued pursuant to the Barringer Technologies Inc. Supplemental Executive Retirement Plan (the "SERP Plan"). Amounts accrued during 2000 for the Named Executive Officers were $109,000, $42,000, $35,000 and $24,000 for Messrs. Binder, Davies, Wood and Rosenfeld, respectively. Effective January 1, 1998, the Company adopted the SERP Plan. The SERP Plan provides eligible participants with certain retirement benefits supplemental to the Company's 401(k) Plan. Pursuant to the SERP Plan, the Company makes annual contributions to the account of each participant equal to a variable percentage of the participant's base salary and annual cash bonus depending on the Company's achievement of certain performance targets. The actual percentage contribution is determined by the Executive Compensation Committee, subject to certain parameters. A participant becomes vested under the SERP Plan after five years of participation therein. A participant may elect to receive benefits under the SERP Plan commencing at age 60 and is entitled to receive either a lump-sum payment of his or her account balances upon retirement or to use the account balance to purchase an annuity. In the event of the termination of a participant's employment under certain circumstances set forth in the SERP Plan, the participant is entitled to receive his or her account balance whether or not the participant has become vested under the SERP Plan. Currently, each of the Named Executive Officers participates in the SERP Plan. OPTION GRANTS The following table summarizes certain information relating to the grant of options to purchase Common Stock to each of the Named Executive Officers: 20 OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
NUMBER OF PERCENT OF TOTAL SECURITIES OPTIONS/SARS POTENTIAL REALIZABLE VALUE UNDERLYING GRANTED TO EXERCISE OR OF ASSUMED ANNUAL RATES OF OPTIONS/SARs EMPLOYEES IN BASE PRICE EXPIRATION STOCK PRICE APPRECIATION NAME GRANTED(#)(2) FISCAL YEAR ($/SH) DATE FOR OPTION TERM ---- ------------- ----------- ------ ---------- ------------------------- 5% 10% ------ ------ Stanley S. Binder 150,000 35.1% $5.03 11/21/06 $307,200 $715,800 John H. Davies 40,000 9.4 5.03 11/21/06 81,920 190,880 Kenneth S. Wood 120,000 28.1 5.03 11/21/06 245,760 572,640 Richard S. Rosenfeld 80,000 18.7 5.03 11/21/06 163,840 381,760
(1) The Company did not grant any stock appreciation rights in 2000. (2) These options are exercisable On November 21, 2006 and expire on February 21, 2007. However, they may be exercised as to 25% at an earlier time if and when the Company's Common Stock trades for $8.50 or higher for at least 30 consecutive days; as to 50% if and when the Company's Common Stock trades for $11.00 or higher for at least 30 consecutive days; as to 75% if and when the Company's Common Stock trades for $12.50 or higher for at least 30 consecutive days; and as to 100% if and when the Company's Common Stock trades for $12.50 or higher for at least 30 consecutive days. These options were issued under the Employee Plans. At December 31, 2000, 25% of the options were exercisable. OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES The following table sets forth information with respect to the Named Executive Officers concerning the exercise of stock options during 2000 and unexercised options held by such Named Executive Officers as of December 31, 2000. AGGREGATED OPTION EXERCISES IN 2000 AND LAST FISCAL YEAR-END OPTION VALUES
UPDATE NUMBER OF UNEXERCISED SECURITIES UNDERLYING VALUE OF UNEXERCISED OPTIONS/SARs IN-THE-MONEY OPTIONS SHARES AT YEAR-END(#) AT YEAR-END($)(1) ACQUIRED ON VALUE --------------------- -------------------- NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- ----------- ----------- ------------- ----------- ------------- Stanley S. Binder 100,000 $336,000 81,250 156,250 $144,900 $325,500 John H. Davies 69,500 233,545 27,000 47,000 45,296 93,456 Kenneth S. Wood 60,000 202,350 45,750 105,750 91,896 236,376 Richard S. Rosenfeld 50,000 168,000 33,650 73,650 65,195 161,515
(1) Based on the closing price of $7.438 per share for the Common Stock as of December 31, 2000. 1997 STOCK COMPENSATION PROGRAM In May 1997, the Company adopted the Barringer 1997 Stock Compensation Program (the "Stock Compensation Program") in order to promote the interests of the Company, its direct and indirect present and future subsidiaries and its stockholders by providing eligible persons with the opportunity to acquire an ownership interest, or to increase their ownership interest, in the Company as an incentive to remain in the service of the Company. The Stock Compensation Program authorizes the granting of incentive stock options, non-qualified stock options, stock appreciation rights, performance shares and stock bonus awards to employees and consultants of the Company and its subsidiaries, including those employees serving as officers or directors of the Company (the "Employee Plans"). The Stock Compensation Program also authorizes automatic option grants to directors who are not otherwise employed by the Company (the "Independent Director Plan"). In connection with the Stock Compensation Program, 1,100,000 shares of Common Stock are reserved for issuance, of which up to 1,000,000 shares may be issued under the Employee Plans and up to 100,000 shares may be issued under the Independent Director Plan. The Stock Compensation Program is administered by the Executive Compensation Committee. Options and awards granted under the Stock Compensation Program may have an 21 exercise or payment price as established by the Executive Compensation Committee; provided that the exercise price of incentive stock options granted under the Employee Plans may not be less than the fair market value of the underlying shares on the date of grant. Options granted under the Independent Director Plan must have an exercise price equal to the fair market value of the underlying shares on the date of grant. Unless otherwise provided at the date of grant, no option or award may vest within one year of the date of grant and no option or award may be exercised later than 10 years from the date of grant. Options granted under the Independent Director Plan vest one year following the date of grant and expire if not exercised on or before the fifth anniversary thereof. Unless otherwise specified by the Executive Compensation Committee, options and awards (other than pursuant to the Independent Director Plan) vest in four equal installments on the first, second, third and fourth anniversaries of the date of grant. Vesting of any option or award granted under the Stock Compensation Program may be accelerated in certain circumstances, including upon the occurrence of a "Change in Control Event" (as defined in the Stock Compensation Program). Options and awards granted under the Stock Compensation Program are nontransferable, except by will or by the laws of descent and distribution. However, the Executive Compensation Committee may permit the recipient of a non-incentive stock option granted under the Employee Plans and options granted under the Independent Director Plan to transfer the option to a family member or a trust created for the benefit of family members. During the lifetime of a participant, an option may be exercised only by the participant or a permitted transferee. In the event that a participant's employment or service terminates as a result of death, all vested awards are paid to the participant's estate by the Company and the participant's estate or any permitted transferee has the right to exercise vested options for a period ending on the earlier of the expiration dates of such options or one year from the date of death. If the participant's employment or service terminates as a result of retirement or a "disability" (as set forth in the Stock Compensation Program), all vested awards are paid to the participant by the Company and the participant or any permitted transferee has the right to exercise vested options for a period ending on the earlier of the expiration dates of such options or one year from the date of termination. If the participant's employment or service terminates for cause, all options and awards will automatically expire upon termination. If the participant's employment or service terminates other than as a result of death, disability, retirement or termination for cause, the participant has the right to collect all vested awards immediately and the participant or any permitted transferee has the right to exercise vested options for a period ending on the earlier of the expiration dates of such options or awards or 30 days from the date of termination, subject to extension at the discretion of the Administrator, or three months from the date of termination in the case of options granted pursuant to the Independent Director Plan. In all cases, any unvested options or awards terminate as of the date of termination of employment or service. The Stock Compensation Program will terminate on February 28, 2007, unless earlier terminated by the Board of Directors. No options or awards may be granted under the Stock Compensation Program after its termination; however, termination of the Stock Compensation Program will not affect the status of any option or award outstanding on the date of termination. Stock options exercisable for an aggregate of 808,150 shares of Common Stock are outstanding under the Employee Plans. These options expire 7 and 10 years after the date of grants and have a weighted average exercise price of $5.84 per share. Of such options, 343,150 are exercisable annually in 25% increments beginning with the first anniversary of the date of grant. Of the remaining 460,000 options 25% are exercisable at an earlier time if and when the Company's Common Stock trades for $8.50 or higher for at least 30 consecutive days; 50% are exercisable at an earlier time if and when the Company's Common Stock trades for $11.00 or higher for at least 30 consecutive days; 75% are exercisable at an earlier time if and when the Company's Common Stock trades for $12.50 or higher for at least 30 consecutive days; and 100% are exercisable 22 at an earlier time if and when the Company's Common Stock trades for $12.50 or higher for at least 30 consecutive days, otherwise they are exercisable on November 21, 2006. In addition, options exercisable for an aggregate of 30,000 shares of Common Stock are outstanding under the Independent Director Plan. Such options are exercisable one year from the date of grant and expire five years from the date of grant and have a weighted average exercise price of $6.26 per share. EXERCISE PROGRAM In 1991, the Board of Directors approved a stock option exercise program (the "Exercise Program"). The Exercise Program permits all employees of the Company and its subsidiaries who are granted stock options (pursuant to either qualified or non-qualified plans) to finance the exercise of such options by causing the Company to issue the shares underlying such options upon receipt by the Company from the employee of a full-recourse demand note evidencing indebtedness to the Company in an amount equal to the exercise price. Such loans, which are secured by the underlying shares of Common Stock, are interest-free for one year from the date on which the employee exercises his or her option, after which interest accrues at the prime rate, which rate is changed monthly. The loans are repaid with a portion of the proceeds from the sale of the Common Stock to be received by the employees upon the exercise of their options. As of March 1, 2001, Messrs. Binder, Davies, Wood and Rosenfeld were indebted to the Company in the approximate amounts of $313,000, $101,000, $99,000 and $73,000, respectively, for loans made pursuant to the Exercise Program. During 2000, the largest aggregate amount of indebtedness of Messrs. Binder, Davies, Wood and Rosenfeld pursuant to such loans were $378,000, $101,000, $99,000 and $73,000, respectively. The rate of interest charged on each such loan during 2000 was the prime lending rate charged by Summit Bank. EMPLOYMENT AGREEMENTS Effective January 1, 1998, the Company entered into a five-year employment agreement with Mr. Binder, the Chairman and Chief Executive Officer of the Company (the "Employment Agreement"). Under the Employment Agreement Mr. Binder received a base salary of $270,400 for 2000. Mr. Binder's salary is subject to certain adjustments and to periodic increases as determined by the Board of Directors. In addition, Mr. Binder is entitled to receive up to a total of three special bonuses during the term of the Employment Agreement, in the amount of $65,000, $65,000 and $70,000, respectively, in the event that the Company's EBITDA (as defined in the Employment Agreement), exceeds certain targeted amounts for any fiscal year during the term of the Employment Agreement. Mr. Binder received each of these three special bonuses in 1998, 1999 and 2000. Pursuant to the Employment Agreement, Mr. Binder is also entitled to participate in the Company's cash bonus plan and to participate in the SERP Plan. Also, under the terms of the Employment Agreement, in 1997, Mr. Binder received stock options covering 50,000 shares of Common Stock having an exercise price of $11.78 per share (equal to the fair market value on the date of grant). In the Employment Agreement, the Company has agreed to maintain a $1.0 million term life insurance policy for Mr. Binder's benefit. Mr. Binder is entitled to several perquisites, including a car allowance and reimbursement for the cost of certain financial planning services. In the event that Mr. Binder's employment is terminated pursuant to a Without Cause Termination, or Mr. Binder terminates his employment for Good Reason (as such terms are defined in the Employment Agreement), Mr. Binder will be entitled to a severance payment equal to 2.99 times his then-current base salary and to certain other severance benefits. In addition, upon the occurrence of a Change in Control Event (as such term is defined in the Employment Agreement), Mr. Binder has the right to terminate his employment within 180 days, in which event the termination will be treated as a termination for Good Reason with the effects specified above. In addition, the Company has agreed to pay Mr. Binder additional amounts, if necessary, to pay any excise tax Mr. Binder may become subject to in the event that any payment made to him under the Employment Agreement constitutes an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended. 23 Pursuant to the Employment Agreement, Mr. Binder has agreed to certain confidentiality, work-for-hire and non-competition covenants. Effective September 1, 1998, the Company entered into three-year employment agreements with each of Messrs. Wood and Rosenfeld, pursuant to which Messrs. Wood and Rosenfeld received annual base salaries in 2000 of $186,720 and $135,200, respectively, subject to periodic increases at the discretion of the Board of Directors. Under their employment agreements, Messrs Wood and Rosenfeld, are entitled to participate in any cash bonus plan maintained by the Company and to participate in the SERP Plan. In the employment agreements, the Company has agreed to maintain term life insurance policies for the benefit of each of them in an amount not less than four times Mr. Wood's base salary and not less than three times Mr. Rosenfeld's base salary. In the event that Messrs. Wood and/or Rosenfeld are terminated pursuant to a Without Cause Termination (as defined in the employment agreements), they are entitled to receive, among other things, their base salary as in effect at the time of such termination for a period of twelve months from the effective date of such termination. Upon the occurrence of a "change in control" of the Company, the employee will be entitled to receive the greater of his annual base salary pursuant to the employment agreement or his then current annual base salary for the remainder of the term (payable in a single lump sum). Both of the employment agreements also contain certain confidentiality, work-for-hire and non-competition provisions which continue in effect following the termination of the employee's employment by the Company. OTHER INDEBTEDNESS OF MANAGEMENT AND DIRECTORS Senior executive officers and directors are indebted to the Company pursuant to the purchase, in December 1998 and January 1999, of shares of the Company's Common Stock in exchange for interest bearing five-year non-recourse promissory notes. As of December 31, 2000, Messrs. Binder, Davies, Wood, Rosenfeld, Abernathy, Condon, Harte, Lavet and McGrath were indebted to the Company (including accrued interest) in the amounts of $457,199, $182,880, $210,312, $182,880, $91,439, $91,439, $91,439, $106,117, and $91,439. respectively related to such loans. DIRECTORS' COMPENSATION Outside directors are entitled to an annual retainer of $3,000 per quarter (plus a $500 quarterly fee for each committee chairperson) and a fee of $1,000 for each meeting attended and $500 for each committee meeting attended (regardless of whether or not the committee meeting is held on the same day as a meeting of the Board of Directors). Pursuant to the terms of the 1997 Stock Compensation Program, each director who has not been a full-time employee of the Company or any subsidiary for at least the prior 12 months receives an option to purchase 3,000 shares of Common Stock each year on the earlier of (i) the date of the Company's annual meeting of stockholders, or (ii) June 1. Options granted to such directors under the 1997 Stock Compensation Program have an exercise price equal to the fair market value per share as of the date of grant. See "1997 Stock Compensation Program." COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Company's Executive Compensation Committee is comprised of Messrs. Abernathy, Condon, Harte and McGrath. No executive officer of the Company and no member of the Executive Compensation Committee is a member of any other business entity that has an executive officer that sits on the Company's Board or on the Executive Compensation Committee. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following table sets forth, as of March 1, 2001, the number of shares of Common Stock, Class A Convertible Preferred Stock and Class B Convertible Preferred Stock owned by each (i) Named Executive Officer, (ii) each director, (iii) all directors and executive officers as a group and (iv) any person or entity known by the 24 Company to own beneficially 5% or more of such securities. As of March 1, 2001, there were 6,898,164 shares of Common Stock, 29,168 shares of Class A Convertible Preferred Stock and 12,500 shares of Class B Convertible Preferred Stock issued and outstanding. As of that date, none of the officers and directors of the Company owned shares of the Company's Class A Convertible Preferred Stock or Class B Convertible Preferred Stock. To the Company's knowledge, there is no 5% holder of the Class A Convertible Preferred Stock. The business address for all of the executive officers and directors of the Company is 30 Technology Drive, Warren, New Jersey 07059.
BENEFICIAL OWNERSHIP OF BENEFICIAL CLASS B OWNERSHIP CONVERTIBLE OF PREFERRED STOCK COMMON STOCK(1)(2) ------------------------ ------------------------ NUMBER PERCENT NUMBER PERCENT OF OF OF OF NAME SHARES CLASS SHARES CLASS ---- ------ ----- ------ ----- Stanley S. Binder (3) - 296,386 4.2% John H. Davies (4) -- -- 187,732 2.7 John J. Harte (5) -- -- 79,850 1.2 Richard D. Condon (6) -- -- 52,250 * John D. Abernathy (7) -- -- 58,704 * James C. McGrath (8) -- -- 51,000 * Kenneth S. Wood (9) -- -- 132,386 1.9 Lorraine M. Lavet (10) -- -- 16,750 * Richard S. Rosenfeld (11) -- -- 117,686 1.7 All directors and executive officers as a group consisting of nine (9) persons -- -- 992,744 13.8 Austin W. Marxe (12) -- -- 1,178,182 17.1 153 E. 53rd St. NY, NY 10022 William D. Witter, Inc. -- -- 939,900 13.6 153 East 53rd Street New York, NY 10022 Benson Associates, LLC -- -- 538,100 7.8 111 Southwest Fifth Avenue Portland, OR 97204 Dimensional Fund Advisors -- -- 515,700 7.5 1299 Ocean Avenue Santa Monica, CA 90401 Max Gerber 12,500 100.0% 4,447(13) * 26 Broadway New York, NY 10004-1776
* Less than 1% (1) Assumes the exercise of all outstanding warrants for Common Stock, the conversion of each outstanding share of Class A Convertible Preferred Stock and Class B Convertible Preferred Stock into Common Stock and the exercise of all options exercisable within 60 days of March 1, 2001 for each person or entity. (2) Certain amounts shown are subject to adjustment in certain circumstances. (3) Includes 81,250 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 2001 owned by Mr. Binder. Excludes shares of Common Stock beneficially owned by SSF III of which Mr. Binder is an independent general partner. Mr. Binder disclaims any beneficial ownership of such shares. (4) Includes 27,000 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 2001 owned by Mr. Davies. (5) Includes 24,750 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 2001 owned by Mr. Harte. (6) Includes 24,750 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 2001 owned by Mr. Condon. (7) Includes 24,750 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 2001 owned by Mr. Abernathy. (8) Includes 24,750 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 2001 owned by Mr. McGrath. 25 (9) Includes 45,750 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 2001 owned by Mr. Wood. (10) Includes 6,750 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 2001 owned by Ms. Lavet. (11) Includes 33,650 shares of Common Stock issuable upon the exercise of options exercisable within 60 days of March 1, 2001 owned by Mr. Rosenfeld. Also includes 3,636 shares of Common Stock owned by Mr. Rosenfeld's child. (12) Includes (i) 812,207 shares of Common Stock owned by SSF III, (ii) 283,375 shares of Common Stock owned by Special Situations Cayman Fund, L.P. (the "Cayman Fund"), and (iii) 82,600 shares of Common Stock owned by Special Situations Technology Fund, L.P. ("SST"). AWM Investment Company, Inc. ("AWM") is the sole general partner of the Cayman Fund and the sole general partner of MGP Advisors Limited ("MGP"), a general partner of SSF III. Mr. Marxe is the President and Chief Executive Officer of AWM and the principal limited partner of MGP. Accordingly, Mr. Marxe may be deemed to be the beneficial owner of all of the shares of Common Stock held by SSF III, the Cayman Fund and SSTF. Mr. Binder is an independent general partner of SSF III. Mr. Binder disclaims beneficial ownership of all shares held by SSF III. (13) Consists of 4,447 shares of Common Stock issuable upon conversion of the Class B Convertible Preferred Stock. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In July 1998, the Company made a $500,000 non-recourse loan to Mr. Binder. The loan is repayable on July 5, 2003 and bears interest at the rate of 5.68% per annum, payable annually. At December 31, 2000, interest in the amount of $71,729 has been accrued. Mr. Binder's obligation to repay the loan is secured by 49,000 shares of Common Stock. In addition, the Company has made certain loans to the Named Executive Officers and directors. See "Item. 11 Executive Compensation -- Exercise Program" and "Item 11. Executive Compensation -- Stock Purchase Program." Mr. Abernathy is currently the Executive Director of Patton Boggs, LLP, a Washington, D.C. law firm. During 2000, the Company retained Patton Boggs, LLP to represent the Company in various matters and has retained such firm in 2001. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) EXHIBITS. EXHIBIT NO. DESCRIPTION PAGE ------- ----------- ---- 2.1 Agreement and Plan of Merger, dated March 8, 2001 (previously filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on March 15, 2001(File No. 0-3207) and incorporated herein by reference). 3.1 Certificate of Incorporation of the Company, as amended, (previously filed as Exhibit 3.1A to the Company's Registration Statement on Form SB-2 (File No. 333-33129) and incorporated herein by reference). 3.2 By-laws of the Company (previously filed as Exhibit 3.1 to the Company's Current Report on Form 8-K dated August 26, 1998 (File No. 0-3207) and incorporated herein by reference). 10.1 Amended and Restated Employment Agreement, dated as of December 31, 1997, between the Company and Stanley S. Binder (previously filed as Exhibit 10.1 to the Company's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1997 (File No. 0-3207) and incorporated herein by reference). 26 10.2 Employment Agreement, dated as of September 1, 1998, between the Company and Richard S. Rosenfeld (previously filed as Exhibit 10.2 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (file No. 0-3207) and incorporated herein by reference). 10.3 Employment Agreement, dated as of September 1, 1998, between the Company and Kenneth S. Wood (previously filed as Exhibit 10.3 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (file No. 0-3207) and incorporated herein by reference). 10.5 Form of 1996 nonqualified stock option agreement (previously filed as Exhibit 10.6 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.6 Description of Exercise Plan (previously filed as Exhibit 10.9 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.7 Barringer Technologies Inc. Amended and Restated 1997 Stock Compensation Program (previously filed as Exhibit 10.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (file no. 0-3207) and incorporated herein by reference). 10.8 License Agreement, dated February 27, 1989, between Canadian Patents and Development Limited--Societe Canadienne Des Brevets Et D'Exploitation Limite and Barringer Instruments Limited (the "License Agreement"), Supplement #1, dated March 4, 1991, Assignment of License Agreement, dated January 2, 1992, to Her Majesty the Queen in Right of Canada, as Represented By the Minister of National Revenue and Supplemental Letter Agreement, dated October 7, 1996 (previously filed as Exhibit 10.10 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.9 Letter Agreement, dated July 25, 1997, by and between Barringer Research Limited and Her Majesty the Queen in Right of Canada, as Represented By the Minister of National Revenue (previously filed as Exhibit 10.11 to the Company's Registration Statement on Form SB-2 (File No. 333-33129) and incorporated herein by reference.) 10.10 Form of Warrant issued to Janney Montgomery Scott Inc. (previously filed as Exhibit 4.2 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.11 Lease, dated as of July 1, 1998, between the Company and Mt. Bethel Corporate Center (previously filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (file No. 0-3207) and incorporated herein by reference). 27 10.12 Lease, dated as of July 27, 1995, between Barringer Research Limited and Lehndorff Management Limited (previously filed as Exhibit 10.18 to the Company's Registration Statement on Form SB-2 (File No. 333-13703) and incorporated herein by reference). 10.13 Barringer Technologies Inc. Supplemental Executive Retirement Plan as amended (previously filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (file no. 0-3207) and incorporated herein by reference). 10.14 The Merrill Lynch Non-Qualified Deferred Compensation Plan Trust Agreement between Barringer Technologies Inc. and Merrill Lynch Trust Company dated November 15, 1999. (previously filed as Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (file no. 0-3207) and incorporated herein by reference). 10.15 Revolving Credit Note dated March 13, 1998 between the Company and Fleet Bank, (previously filed as Exhibit 10.19 to the Company's Registration Statement on Form SB-2 (File No. 333-33129) and incorporated herein by reference). 10.16 Amended and Restated Unlimited Guaranty of Payment and Performance dated July 1, 1999 between the Company and Fleet Bank, N.A. (previously filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (file no. 0-3207) and incorporated herein by reference). 10.17 Revolving Credit Loan Agreement dated March 13, 1998 amongst the Company, Barringer Instruments, Inc., Barringer Research Limited and Fleet Bank, N.A. (previously filed as Exhibit 10.21 to the Company's Registration Statement on Form SB-2 (File No. 333-33129) and incorporated herein by reference). 10.18 First Amendment to Revolving Credit Loan Agreement dated July 1, 1999 amongst the Company, Barringer Instruments, Inc., Barringer Research Limited and Fleet Bank, N.A. (previously filed as Exhibit 10.18 to the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (file no. 0-3207) and incorporated herein by reference. 10.19 Amendment to Revolving Credit Loan Agreement dated February 2, 2000 amongst the Company, Barringer Instruments, Inc., Barringer Research Limited and Fleet Bank, N.A. 10.20 Third Amendment to Revolving Credit Loan Agreement dated May 18, 2000 amongst the Company, Barringer Instruments, Inc., Barringer Research Limited and Fleet Bank, N.A. 10.21 Fourth Amendment to Revolving Credit Loan Agreement dated June 15, 2000 amongst the Company, Barringer Instruments, Inc., Barringer Research Limited and Fleet Bank, N.A. 10.22 Stockholder Protection Rights Agreement, dated as of August 26,1998, between the Company and American Stock Transfer and Trust Company, as Rights Agent, including as Exhibit A the form of Rights Certificate and of Election to Exercise and as Exhibit B the form of Certificate of Designation and the Terms 28 of the Participating Preferred Stock of the Company (previously filed as Exhibit 4.1 to the Company's Current Report on Form 8-K dated August 26, 1998 (File No. 0-3207) and incorporated herein by reference). 10.23 Pledge Agreement, dated as of July 6, 1998, made by Stanley S. Binder (previously filed as Exhibit 10.19 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (file No. 0-3207) and incorporated herein by reference). 10.24 Non-Recourse Secured Promissory Note, dated July 6, 1998, made by Stanley S. Binder in favor of the Company (previously filed as Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (file No.0-3207) and incorporated herein by reference). 10.25 Form of Pledge Agreement (previously filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (file No. 0-3207) and incorporated herein by reference). 10.26 Form of Note for Executive Officers (previously filed as Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (file No. 0-3207) and incorporated herein by reference). 10.27 Form of Note for Non-employee Directors (previously filed as Exhibit 10.23 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (file No. 0-3207) and incorporated herein by reference). 21.1 List of the Company's Subsidiaries. 23.1 Consent of BDO Seidman, LLP, independent certified public accountants. (b) REPORTS ON FORM 8-K. None 29 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, there unto duly authorized. BARRINGER TECHNOLOGIES INC. By: /s/ STANLEY S. BINDER -------------------------- Stanley S. Binder, Chairman and Chief Executive Officer Dated: March 20, 2001 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Stanley S. Binder Chief Executive Officer March 20, 2001 ----------------------- and Director Stanley S. Binder (Principal Executive Officer) /s/ John D. Abernathy Director March 20, 2001 ----------------------- John D. Abernathy /s/ Richard D. Condon Director March 20, 2001 ----------------------- Richard D. Condon /s/ John H. Davies Director March 20, 2001 ----------------------- John H. Davies /s/ John J. Harte Director March 20, 2001 ----------------------- John J. Harte /s/ Lorraine Lavet Director March 20, 2001 ----------------------- Lorraine Lavet /s/ James C. McGrath Director March 20, 2001 ----------------------- James C. McGrath /s/ Kenneth Wood Director March 20, 2001 ----------------------- Kenneth Wood /s/ Richard S. Rosenfeld Executive Vice President- ------------------------- Operations, Vice President- Richard S. Rosenfeld Finance, Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer) March 20, 2001
30 BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE ---- CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Certified Public Accountants........................ F-2 Consolidated Balance Sheets as of December 31, 1999 and 2000.............. F-3 Consolidated Statements of Operations for the Years Ended December 31, 1998, 1999 and 2000.................... F-4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1998, 1999 and 2000........................................ F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1999 and 2000..................................................... F-6 Notes to Consolidated Financial Statements................................ F-7 FINANCIAL STATEMENT SCHEDULE Schedule II - Valuation and Qualifying Accounts........................... F-19 F-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders Barringer Technologies Inc. We have audited the accompanying consolidated balance sheets of Barringer Technologies Inc. and subsidiaries as of December 31, 1999 and 2000, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. We have also audited the schedule listed in the accompanying index. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedule are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedule. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the presentation of the financial statements and schedule. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Barringer Technologies Inc. and subsidiaries at December 31, 1999 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the schedule presents fairly, in all material respects, the information set forth therein. BDO Seidman, LLP New York, New York February 20, 2001, except Note 15 as to which the date is March 8, 2001 F-2 BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except par value)
DECEMBER 31, ---------------------- 1999 2000 ---- ---- ASSETS Current assets: Cash and cash equivalents $26,933 $22,503 Marketable securities 1,178 8,206 Trade receivables, less allowances of $393 and $108 (note 11) 7,397 7,644 Inventories (note 2) 5,543 6,365 Prepaid expenses and other 1,005 1,419 Deferred tax asset (note 6) 2,826 1,669 -------- -------- Total current assets 44,882 47,806 Machinery and equipment, net (note 3) 2,309 2,364 Other (note 5) 1,574 2,101 -------- -------- $48,765 $52,271 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $1,055 $2,003 Accrued liabilities 228 900 Accrued payroll and related taxes 1,122 1,678 Accrued commissions 175 104 Unearned revenue 314 609 Income taxes payable (note 6) 19 192 -------- -------- Total current liabilities 2,913 5,486 Non-current liabilities 286 432 Deferred tax liability (note 6) 313 501 Commitments (notes 4, 7 and 15) Stockholders' equity (note 5): Convertible preferred stock, $1.25 par value, 1,000 shares authorized, none outstanding - - Preferred stock, $2.00 par value, 4,000 shares authorized 270 shares designated class A convertible preferred stock, 35 and 30 shares outstanding, respectively, less discount of $28 and $24, respectively 42 36 730 shares designated class B convertible preferred stock, 23 and 13 shares, respectively outstanding 45 25 Common stock, $0.01 par value, 20,000 shares authorized; 7,865 shares issued 79 79 Additional paid-in capital 54,776 51,468 Retained earnings (deficit) (3,090) 1,548 Cumulative other comprehensive (loss) (742) (866) -------- -------- 51,110 52,290 Less: common stock in treasury, at cost, 958 shares and 974 shares, respectively (5,857) (6,438) -------- -------- Total stockholders' equity 45,253 45,852 -------- -------- $48,765 $52,271 ======== ========
See notes to consolidated financial statements. F-3 BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
YEAR ENDED DECEMBER 31, ---------------------------------------- 1998 1999 2000 ---- ---- ---- Revenues (note 11) $19,321 $19,831 $27,581 Cost of revenues 6,923 8,824 13,285 ------- ------- ------- Gross profit 12,398 11,007 14,296 Operating expenses: Selling, general and administrative 7,508 6,200 7,078 Business development 518 933 604 Product development 1,807 1,491 1,587 ------- ------- ------- Total operating expenses 9,833 8,624 9,269 ------- ------- ------- Operating income 2,565 2,383 5,027 Other income (expense): Investment income 1,641 1,612 1,810 Other, net (55) 51 (125) ------- ------- ------- 1,586 1,663 1,685 ------- ------- ------- Income from continuing operations before income tax provision (benefit) 4,151 4,046 6,712 Income tax provision (benefit) (note 6) (1,107) 1,468 2,066 ------- ------- ------- Income from continuing operations 5,258 2,578 4,646 Operation Sold (note 13): Operating loss, net of tax benefit (827) (366) -- of $202, $188 and $0, respectively Disposition loss, net of tax benefit of $0, $480 and $0, respectively -- (934) -- ------- ------- ------- (827) (1,300) -- ------- ------- ------- Net income 4,431 1,278 4,646 Preferred stock dividends (10) (9) (8) ------- ------- ------- Net income attributable to common stockholders $4,421 $1,269 $4,638 ======= ======= ======= Basic earnings per common share (note 14): Continuing operations $0.74 $0.36 $0.66 Operation sold - operating loss (0.12) (0.05) -- Operation sold - disposition loss -- (0.13) -- ------- ------- ------- $0.62 $0.18 $0.66 ======= ======= ======= Diluted earnings per common share (note 14): Continuing operations $0.69 $0.33 $0.63 Operation sold - operating loss (0.11) (0.05) -- Operation sold - disposition loss -- (0.12) -- ------- ------- ------- $0.58 $0.16 $0.63 ======= ======= ======= Weighted average common and common equivalent shares outstanding: Basic 7,153 7,181 7,056 ======= ======= ======= Diluted 7,612 7,752 7,407 ======= ======= =======
See notes to consolidated financial statements. F-4 BARRINGER TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands)
Class A Class B Common Stock Pfd Stock Pfd Stock ----------------------------------------------- Total Equity Shrs Am't Shrs Am't Shrs Am't ----------------------------------------------------------- BALANCE - JANUARY 1, 1998 21,114 5,495 $55 45 $55 23 $45 Net income 4,431 Translation adjustment (329) Comprehensive income Sale of securities net of expenses ($2,394) 25,211 2,300 23 Preferred stock conversion 0 2 (6) (8) Issuance and exercise of stock options and warrants 263 54 1 Repurchase of common stock (1,540) Sale of treasury stock, net of notes receivable of $1,281 0 Preferred stock dividends (10) ----------------------------------------------------------- BALANCE - DECEMBER 31, 1998 49,140 7,851 79 39 47 23 45 Net income 1,278 Translation adjustment 44 Comprehensive income Preferred stock conversion 1 (4) (5) Issuance and exercise of stock options and warrants 76 13 Repurchase of common stock (5,341) Repayment stockholder loan 65 Sale of treasury stock, net of note receivable of $97 Preferred stock dividends (9) ----------------------------------------------------------- BALANCE - DECEMBER 31, 1999 45,253 7,865 79 35 42 23 45 Net income 4,646 Translation adjustment (124) Comprehensive income Preferred stock conversion 0 (5) (6) (10) (20) Issuance and exercise of stock options and warrants 777 Repurchase of common stock (4,757) Repayment stockholder loan 65 Preferred stock dividends (8) ----------------------------------------------------------- BALANCE - DECEMBER 31, 2000 $45,852 7,865 $79 30 $36 13 $25 =========================================================== Cumulative Additional Retained comprehensive Paid-in Earnings income Treasury Comprehensive Capital* (deficit) (loss) Stock Income -------------------------------------------------------------------------------------- BALANCE - JANUARY 1, 1998 $30,209 $(8,780) $(457) $ (13) Net income 4,431 $4,431 Translation adjustment (329) (329) ------ Comprehensive income $4,102 ====== Sale of securities net of expenses ($2,394) 25,188 Preferred stock conversion 8 Issuance and exercise of stock options and warrants 262 Repurchase of common stock (1,540) Sale of treasury stock, net of notes receivable of $1,281 (974) 974 Preferred stock dividends (10) -------------------------------------------------------------------------------------- BALANCE - DECEMBER 31, 1998 54,693 (4,359) (786) (579) Net income 1,278 $1,278 Translation adjustment 44 44 ------ Comprehensive income $1,322 ====== Preferred stock conversion 5 Issuance and exercise of stock options and warrants 76 Repurchase of common stock (5,341) Repayment stockholder loan 65 Sale of treasury stock, net of note receivable of $97 (63) 63 Preferred stock dividends (9) -------------------------------------------------------------------------------------- BALANCE - DECEMBER 31, 1999 54,776 (3,090) (742) (5,857) Net income 4,646 $4,646 Translation adjustment (124) (124) ------ Comprehensive income $4,522 ====== Preferred stock conversion (8) 34 Issuance and exercise of stock options and warrants (3,365) 4,142 Repurchase of common stock (4,757) Repayment stockholder loan 65 Preferred stock dividends (8) -------------------------------------------------------------------------------------- BALANCE - DECEMBER 31, 2000 $51,468 $1,548 $(866) $(6,438) =======================================================================================
* At December 31, 2000 and 1999 net of notes receivable of $1,877 and $1,515, respectively, from the sale of stock. See notes to consolidated financial statement. F-5 BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
YEAR ENDED DECEMBER 31, ---------------------------------------------- 1998 1999 2000 -------- -------- -------- Operating activities: Net income $ 4,431 $ 1,278 $ 4,646 Items not affecting cash: Depreciation 583 820 997 Amortization 158 39 67 Increase (decrease) in inventory and accounts receivable reserves 382 366 (285) Loss from operation sold 827 1,300 -- Write-off of acquired technology 435 -- -- Deferred tax (benefit) provision (1,587) 728 1,345 Other (183) 35 (76) Decrease (increase) in non-cash working capital balances - continuing operations (1,465) (3,555) 1,333 -------- -------- -------- Cash provided by operating activities - continuing operations 3,581 1,011 8,027 Net cash used in operation sold (827) (348) -- -------- -------- -------- Cash provided by operating activities 2,754 663 8,027 -------- -------- -------- Investing activities: Purchase of equipment and other (1,510) (1,714) (1,696) Sale of equipment -- -- 190 Sale (purchase) of marketable securities (13,107) 14,428 (7,028) Purchase of Digivision and related costs (821) -- -- -------- -------- -------- Cash provided by (used in) investing activities (15,438) 12,714 (8,534) -------- -------- -------- Financing activities: Decrease in bank debt and other (67) -- -- Proceeds on sale of equity securities, net 25,211 -- -- Warrant and option exercises 204 39 777 Repayment from (loan to) employees (500) 65 65 Acquisition of treasury stock (1,540) (5,341) (4,757) Payment of dividends on preferred stock (10) (9) (8) -------- -------- -------- Cash provided by (used in) financing activities 23,298 (5,246) (3,923) -------- -------- -------- Increase (decrease) in cash and cash equivalents 10,614 8,131 (4,430) Cash and cash equivalents--beginning of year 8,188 18,802 26,933 -------- -------- -------- Cash and cash equivalents--end of year $ 18,802 $ 26,933 $ 22,503 ======== ======== ======== Changes in components of non-cash working capital balances related to operations: Trade receivables $ 951 $ (1,013) $ 38 Inventories (567) (2,130) (822) Other current assets (206) (81) (456) Accounts payable and accrued liabilities (1,643) (331) 2,573 -------- -------- -------- Decrease (increase) in non-cash working capital balances $ (1,465) $ (3,555) $ 1,333 ======== ======== ========
See notes to consolidated financial statements. F-6 BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements comprise the accounts of the Company and all of its subsidiary companies. All intercompany transactions have been eliminated. Principles of Translation Assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars by using year-end exchange rates and statement of operation items are translated at average exchange rates for the year. Resulting translation adjustments are accumulated in a separate component of stockholders' equity. Marketable Securities Marketable securities consist primarily of commercial paper with original maturities at date of purchase of less than 12 months. The Company has both positive intent and ability to hold these securities to maturity. The Company carries these securities at cost which approximates fair value. Inventories Materials and sub-assemblies are carried at the lower of average cost or market value. Finished goods and work-in process are carried at the lower of average cost or net realizable value. Property and Equipment Property and equipment are carried at cost. Depreciation of owned equipment is computed on a straight-line basis over the estimated useful lives of the related assets, generally from three to ten years. Leasehold improvements are amortized over the term of the related lease, generally from five to ten years, which approximates the useful lives of these improvements. Equipment under capital lease is amortized on a straight-line basis over the term of the lease, generally four to ten years, which approximates the estimated useful lives of the leased equipment. Per Share Data Basic earnings per share is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share is computed assuming the conversion of convertible preferred stock and the exercise or conversion of common equivalent shares, if dilutive, consisting of unissued shares under options and warrants. Statements of Cash Flows For purposes of the Statements of Cash Flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash equivalents at December 31, 1999 and 2000 of $17.3 million and $21.5 million, respectively, consist of commercial paper, government obligations, time deposits and other money market instruments. Revenue Recognition The Company recognizes product revenue upon shipment of its product. The Company provides a reserve for its estimated warranty costs at the time of shipment. F-7 Financial Instruments and Credit Risk Concentration Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of investments and trade receivables. Marketable securities consist primarily of investments in U.S. government and agency obligations and commercial paper. The Company has not experienced any material losses on these investments to date. Concentrations of credit risk with respect to trade receivables are limited primarily to governmental agencies. The Company has not experienced any material losses related to trade receivables to date. Long-Lived Assets Long-lived assets, such as machinery and equipment, are evaluated for impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows from the use of these assets. If and when any such impairment exists, the related assets will be written down to fair value. This policy is in accordance with Statement of Financial Accounting Standards No. 121, ("SFAS 121") "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of". No write-downs have been necessary through December 31, 2000. Stock-Based Compensation The Company has adopted the disclosure only provisions of SFAS 123, "Accounting for Stock-Based Compensation", but applies Accounting Principle Board Opinion No. 25 "Accounting for Stock Issued to Employees", in accounting and measuring compensation expense related to stock option plans. There was no compensation expense related to the issuance of stock options to employees for the years ended December 31, 1998, 1999 and 2000. Fair Value of Financial Instruments The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, marketable securities, accounts receivable, accounts payable and accrued liabilities approximate fair value because of the immediate or short-term maturity of these financial instruments. Use of Estimates The preparation of financial statements in conformity with 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 revenues and expenses during the reporting period. Actual results could differ from these estimates. Many of the Company's estimates and assumptions used in the financial statements relate to the Company's products, which are subject to technology and market changes. It is reasonably possible that changes may occur in the near term that would affect management's estimates with respect to accounts receivable, inventories, equipment and deferred income taxes. Recent Pronouncements of the Financial Accounting Standards Board In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", which becomes effective for the Company during the first quarter of 2001. SFAS requires the recognition of all derivatives as either assets or liabilities in the Company's balance sheet and measurement of those instruments at fair value. To date, the Company has not entered into any significant derivative or hedging activities, and, as such does not expect that the adoption of SFAS No. 133, as amended, would have a material effect on its financial statements. F-8 Reclassification Certain items in the 1998 and 1999 consolidated financial statements have been restated to conform to the 2000 presentation. 2. INVENTORIES At December 31, 1999 and 2000, the Company had parts, subassemblies and work in process of $3.8 million and $5.4 million and finished goods of $1.7 million and $1.0 million, respectively. 3. MACHINERY AND EQUIPMENT The major categories of machinery and equipment are as follows:
DECEMBER 31, ------------------------------- 1999 2000 ----------- ----------- Office equipment $1,641,000 $1,810,000 Machinery and equipment 2,974,000 3,653,000 Leasehold improvements 473,000 512,000 ----------- ----------- 5,088,000 5,975,000 Accumulated depreciation and amortization (2,779,000) (3,611,000) ----------- ----------- Totals $2,309,000 $2,364,000 =========== ===========
4. BANK CREDIT FACILITY The Company has a $5.0 million unsecured credit facility with Fleet Bank, N.A. (the "Bank") to be used for general working capital purposes, including the issuance of standby letters of credit (the "Facility"). Drawings under the Facility may not be used to fund acquisitions unless approved in advance by the Bank. Amounts drawn under the Facility bear interest at a variable rate per annum selected by the Company and equal to either the Bank's prime rate less 1.00% or LIBOR (determined on the basis of a 30, 60 or 90-day interest period, as applicable) plus 1.5%. The Facility expires on June 30, 2001, subject to renewal. The Facility is guaranteed by the Company's primary U.S. subsidiary, Barringer Instruments Inc. ("BII"). Pursuant to the Facility, the Company is required to comply with certain customary covenants, including certain financial tests. In addition, BII and the Company's Canadian subsidiary, Barringer Research Limited ("BRL"), have agreed not to pledge their assets to any other creditor without the Bank's prior written consent. At December 31, 2000, the Company had $4,470,000 available under this facility. Approximately $530,000 was used to secure letters of credit. 5. STOCKHOLDERS' EQUITY Stockholder Protection Rights Plan On August 26, 1998, the Company's Board of Directors declared a dividend payable September 9, 1998 of one right (a "Right") for each outstanding share of common stock, par value $.01 per share, of the Company held of record at the close of business on September 8, 1998, or issued thereafter and prior to the Separation Time (generally the date of the commencement of a tender or exchange offer or at such time as an acquirer becomes a 15% or more shareholder of the Company) and thereafter pursuant to options and convertible securities outstanding at the Separation Time. Each Right entitles its registered holder to purchase from the Company, after the Separation Time, one one-hundredth of a share of a new class of preferred stock designated Participating Preferred Stock, par value $2.00 per share, for $32.50, subject to adjustment. Stock Repurchase Program The Company has a common stock repurchase program under which it is authorized to repurchase up to 2,000,000 shares. As of December 31, 2000, the Company had repurchased 1.8 million shares at an aggregate cost of $11.6 million. Additional F-9 repurchases will be made from time to time in open market transactions in amounts as determined by the Company's management and will be funded out of the Company's working capital. Public Offerings On April 3, 1998, the Company completed the sale of 2,000,000 shares of common stock in a public underwriting. On April 30, 1998, the underwriters exercised their over-allotment option and acquired an additional 300,000 shares of common stock. The aggregate net proceeds to the Company, after all expenses of the offering, was approximately $25.2 million. Due from Officers and Directors In 1994 and 2000, in connection with the exercise of options to acquire an aggregate of 150,000 and 279,500 shares, respectively, of the Company's Common Stock, four officers of the Company signed full recourse interest bearing (no interest the first year, prime rate thereafter) unsecured promissory demand notes aggregating $203,000 and $404,500, respectively, under the Company's stock option purchase program. As of December 31, 2000, and 1999, notes in the amount of $477,500 and $138,000, respectively, were outstanding and included in additional paid-in-capital on the balance sheet. In July 1998, the Company made a $500,000 non-recourse loan to its Chief Executive Officer. The loan is repayable on July 5, 2003 and bears interest at the rate of 5.68% per annum, payable annually. The obligation to repay the loan is secured by 49,000 shares of the Company's common stock. The loan is included with other assets on the balance sheet. In December 1998, the Company sold an aggregate of 153,000 shares of Common Stock held in treasury to the senior executive officers of the Company and certain of the Company's independent directors at a purchase price of $8.375 per share, the closing price of the Common Stock on the date of the sale. Substantially all of the purchase price for the shares of Common Stock sold was paid in the form of five-year non-recourse promissory notes aggregating approximately $1.3 million secured by pledges of the underlying Common Stock. The notes bear interest at a rate of 4.52% per annum. In January 1999, the Company sold an additional 10,000 shares of Common Stock to a new independent director at a purchase price of $9.75 per share, the closing price of the Common Stock on the date of sale. The consideration paid was substantially the same as described above, except that the note bears interest at a rate of 4.64% per annum. Such interest represents a non-recourse obligation and, accordingly, the purchase of company shares through the use of non-recourse notes is being accounted for in a manner similar to a variable option plan. Under these guidelines any increase in the fair market value of the related shares in excess of their original purchase price is recorded as compensation expense by the Company. For the years ended December 31, 1999 and 2000, there was no compensation expense. At December 31, 1999 and 2000, $1.4 million of such notes were outstanding and included in additional paid-in-capital on the balance sheet. F-10 Common Stock Outstanding or Reserved for Issuance The following table sets forth the number of shares of Common Stock outstanding as of December 31, 2000 as well as the number of shares of Common Stock that would be outstanding in the event that all of the options and warrants are exercised and all Series of Convertible Preferred Stock and Debentures are converted into Common Stock. COMMON STOCK EXERCISE, OUTSTANDING OR CONVERSION OR RESERVED FOR OPTION PRICE ISSUANCE ------------ -------- Common stock 6,890,664 Class A convertible preferred stock 0.361745 10,552 Class B convertible preferred stock 0.355839 4,448 Stock options (i) $1.00 to $8.375 901,750 Underwriter's warrants (ii) $10.276 125,000 --------- Total 7,932,414 ========= (i) Stock Compensation Plans From time to time, the Company has granted options to various employees and directors. The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees", and related Interpretations in accounting for the plans. Under APB Opinion 25, because the exercise price of the Company's stock options issued to employees equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. SFAS 123, "Accounting for Stock-Based Compensation", requires the Company to provide pro-forma information regarding net income and earnings per share as if compensation cost for the stock option grants had been determined in accordance with the fair value based method prescribed in SFAS 123. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants in 1998 and 2000; no dividend yield; expected volatility of 46.1% in 1998 and 55.0% in 2000; risk-free weighted average interest rates of 4.75% in 1998 and 6.7% in 2000; and expected lives for the options of 7.4 years in 1998 and 7 years in 2000. The option grants in 1999 were immaterial. Under the accounting provisions of SFAS 123, the Company's net income, basic earnings per share and diluted earnings per share on a pro-forma basis are as follows:
YEAR ENDED DECEMBER 31, ------------------------------------------- 1998 1999 2000 ---------- ---------- ---------- Net income- continuing operations: As reported $5,258,000 $2,578,000 $4,646,000 Pro-forma $4,858,000 $2,278,000 $3,346,000 Basic earnings per share from continuing operations: As reported $0.74 $0.36 $0.66 Pro-forma $0.68 $0.32 $0.47 Diluted earnings per share from continuing operations: As reported $0.69 $0.33 $0.63 Pro-forma $0.64 $0.29 $0.45
In 1997, the Company's stockholders approved the adoption of the Company's 1997 Stock Compensation Program ("Program"). The Program authorizes the granting of incentive stock options, non-qualified supplementary options, stock appreciation rights, performance shares and stock bonus awards to employees and consultants of the Company and its subsidiaries, including those employees serving as officers or directors of the Company ("Employee Plans"). The Program also authorizes automatic option grants to directors who are not otherwise employed by the Company ("Independent Director Plan"). F-11 In connection with the Program, 1,100,000 shares of Common Stock are reserved for issuance, of which up to 1,000,000 shares may be issued under the Employee Plans and up to 100,000 shares may be issued under the Independent Director Plan. In the event that an option or award granted under the Program expires, is terminated or forfeited or certain performance objectives with respect thereto are not met prior to exercise or vesting, then the number of shares of Common Stock covered thereby will again become eligible for grant under the Program. The Company receives no consideration for grants of options or awards under the Program. Options granted under the Employee Plans are at market value on the date of grant, generally expire ten years from the dates of grant and are generally exercisable and vested as to 25% of the optioned shares after the first year, 50% after the second year, 75% after the third year and 100% after the fourth year. Options issued under the Independent Director Plan expire five years from the dates of grant and are fully exercisable after one year. At December 31, 2000, there were 211,500 options available for grant under the Employee Plans and 70,000 options available for grant under the Independent Director Plan. On January 19, 2000, the Company granted options to acquire 37,500 shares of the Company's Common Stock to 10 employees at an exercise price of $5.75. These options were issued under the Employee Plans. On February 21, 2000, the Company granted options to the Company's executive officers and directors to acquire 465,000 shares of the Company's Common Stock at $5.03 per share. These options are exercisable on November 21, 2006 and expire on February 21, 2007. However, they can be exercised as to 25% at an earlier time if and when the Company's Common Stock trades for $8.50 or higher for at least 30 consecutive days; as to 50% if and when the Company's Common Stock trades for $11.00 or higher for at least 30 consecutive days; as to 75% if and when the Company's Common Stock trades for $12.50 or higher for at least 30 consecutive days; and as to 100% if and when the Company's Common Stock trades for $15.00 or higher for at least 30 consecutive days. The options granted to executive officers and directors are now exercisable as to 25% of the options granted. These options were issued under the Employee Plans. A summary of the status of the Company's outstanding options is presented below:
Option Price Weighted-Average Option Shares per Share Price per Share -------------------------------------------------------- Outstanding at December 31, 1997 691,025 $1.00 - $13.875 $5.31 Granted (fair value $5.86) 472,000 $6.19 - $8.375 $7.68 Exercised (9,087) $1.00 - $2.00 $1.31 Forfeited (13,250) $9.375 - $13.875 $9.95 Canceled (287,700) $9.375 - $13.875 $10.76 --------- Outstanding January 1, 1999 852,988 $1.00 - $8.375 $4.71 Granted (fair value $2.48) 15,000 $6.188 $6.18 Exercised (9,288) $1.00 - $2.00 $1.32 Forfeited (123,100) $6.19 - $11.813 $10.35 --------- Outstanding January 1, 2000 735,600 $1.00 - $6.188 $3.83 Granted (fair value $3.23) 517,500 $5.03 - $6.344 $5.12 Exercised (327,850) $1.00 - $8.375 $1.57 Forfeited (23,500) $5.75 - $8.375 $7.03 --------- Outstanding December 31, 2000 901,750 $5.03 - $8.375 $5.31 =========
On October 21, 1998, the Company's Board of Directors approved the repricing of options exercisable for an aggregate of 287,700 shares of Common Stock previously granted to key employees of the Company and the Company's non-employee directors pursuant to the Company's 1997 Stock Compensation Program (the "Repricing"). Pursuant F-12 to the Repricing, option holders exchanged options with exercise prices ranging from $9.375 to $13.875 per share for new stock options covering the same number of shares and having an exercise price of $6.19 per share, the closing price of the Common Stock on the NASDAQ National Market on October 21, 1998. Options granted pursuant to the Repricing vest over a four-year period, with 25% of the options becoming exercisable in each year commencing one year after the date of the Repricing and will expire ten years after the Repricing. Options issued prior to the adoption of the Program are non-qualified stock options and are exercisable as to 25% of the optioned shares immediately, 50% after the first year, 75% after the second year and 100% after the third year. The following table summarizes information about stock options outstanding.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------------------------- --------------------------------- NUMBER NUMBER OUTSTANDING AT REMAINING EXERCISABLE AT EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, PRICE 2000 LIFE PRICE 2000 ----- ---- ---- ----- ---- $1.00 62,500 0.3 years $1.00 62,500 5.03 465,000 9.2 years 5.03 116,250 5.75 31,000 9.0 years 5.75 -- 6.18 15,000 3.4 years 6.18 15,000 6.19 274,600 7.2 years 6.19 137,300 6.34 15,000 4.6 years 6.34 -- 8.38 38,650 7.9 years 8.38 19,325 ------- -------- $5.31 901,750 7.7 years $4.99 350,375
(ii) Underwriters' Warrants In connection with the Company's November 1996 public offering, the managing underwriter received a warrant ("Underwriter's Warrant") to purchase from the Company 125,000 shares of Common Stock at an exercise price of $10.276 per share ("Exercise Price") and 125,000 warrants ("Underlying Warrant") at an exercise price of $0.06 per warrant. Each Underlying Warrant entitles the holder to purchase one-quarter of a share of Common Stock at an exercise price of $9.847 per share. The Underwriter's Warrants are exercisable with respect to the Common Stock up through November 12, 2001. The Underlying warrants expired on November 12, 1999. 6. INCOME TAXES Income (loss) from continuing operations before income taxes consisted of the following (000s): YEAR ENDED DECEMBER 31, --------------------------------- 1998 1999 2000 ------- ------ ------- Domestic $4,242 $2,897 $4,828 Foreign (primarily Canadian) (91) 1,149 1,884 ------- ------ ------- Total $4,151 $4,046 $6,712 ======= ======= ======= F-13 The provision (benefit) for income taxes is as follows:
YEAR ENDED DECEMBER 31, --------------------------------------------------- 1998 1999 2000 ----------- ----------- ----------- Current tax expense (benefit): Federal $ 1,058,000 $ 337,000 $ 1,219,000 State 339,000 145,000 387,000 Utilization of net operating losses--U.S (1,251,000) (482,000) (1,152,000) Foreign (primarily Canada) 132,000 72,000 267,000 ----------- ----------- ----------- Total Current 278,000 72,000 721,000 ----------- ----------- ----------- Deferred tax expense (benefit): Federal (1,556,000) 524,000) 1,315,000 State 9,000 204,000 30,000 Foreign (primarily Canada) (40,000) -- -- ----------- ----------- ----------- Total deferred (1,587,000) 728,000 1,345,000 ----------- ----------- ----------- Total income tax provision (benefit) $(1,309,000) $ 800,000 $ 2,066,000 =========== =========== =========== Allocated as follows: Continuing operations $(1,107,000) $ 1,468,000 $ 2,066,000 Discontinued operation (202,000) (668,000) -- ----------- ----------- ----------- Total income provision (benefit) $(1,309,000) $ 800,000 $ 2,066,000 =========== =========== ===========
Significant components of the Company's deferred tax assets and liabilities at December 31 are as follows:
1999 2000 ---------- ---------- Nondeductible allowances against trade receivables $ 151,000 $ 36,000 Nondeductible reserves and accruals 145,000 221,000 Machinery and equipment 398,000 445,000 Tax benefit of U.S. operating loss carry forwards 1,983,000 750,000 Other 149,000 217,000 ---------- ---------- Total deferred tax assets 2,826,000 1,669,000 Temporary difference for development costs 313,000 501,000 ---------- ---------- Total deferred tax liabilities 313,000 501,000 ---------- ---------- Net deferred tax asset $2,513,000 $1,168,000 ========== ==========
At December 31, 2000 the total deferred tax asset of $1,669,000 included $445,000 and $1,224,000 related to the Company's Canadian and U.S. operations, respectively. The deferred tax liability of $501,000 is due to temporary differences related to product development costs incurred in the Company's U.S. operations. At December 31, 1998, a valuation allowance had been provided for certain limitations applied to the net operating loss carryforward of a subsidiary, which was subsequently sold in December 1999. Accordingly, the valuation reserve is a component of the loss from operation sold in 1999. Based on historical results and estimated 2001 earnings, which include earnings from certain contracts, as well as available tax planning strategies, management considers realization of the unreserved deferred tax asset more likely than not. F-14 The Company's income tax provision (benefit) differed from the amount of income tax determined by applying the applicable statutory U.S. federal income tax rate to pretax income from continuing operations as a result of the following (000s):
YEAR ENDED DECEMBER 31, --------------------------------------- 1998 1999 2000 ------- ------- ------- Income taxes computed at the U.S. statutory rate $ 1,061 $ 1,376 $ 2,282 Foreign income taxed at lower rates (211) (390) (641) U.S. losses and expenses for which no tax benefit has been recognized 184 370 -- Utilization of U.S. net operating losses (943) -- -- Decrease in beginning of the year deferred tax asset valuation allowance (1,344) -- -- State income taxes 146 -- 417 Other -- 112 8 ------- ------- ------- Provision (benefit) for income taxes $(1,107) $ 1,468 $ 2,066 ======= ======= =======
At December 31, 2000, the Company had net operating loss carry forwards in the U.S. of approximately $2.2 million for federal income tax purposes which expire in varying amounts at various dates through 2010 and $1.6 million of expenses available to offset future taxable income in Canada. At December 31, 2000, undistributed earnings of the Company's foreign subsidiaries amounted to approximately $6.9 million. Deferred income taxes are not provided on these earnings as it is intended that the majority of these earnings will be indefinitely invested in those entities. 7. COMMITMENTS The Company rents facilities, automobiles and equipment under various operating leases. Rental expenses under such leases amounted to $444,000, $474,000 and $585,000 for 1998, 1999 and 2000, respectively. At December 31, 2000 the aggregate minimum commitments pursuant to operating leases, including a lease renewal are as follows: YEAR ENDING DECEMBER 31, 2001 $590,000 2002 690,000 2003 694,000 2004 676,000 2005 641,000 Thereafter 1,430,000 The Company has multi-year employment contracts with three key executives. Pursuant to those contracts the Company has annual minimum salary commitments aggregating $635,000 and $284,000 for the two years ended December 31, 2002, respectively. 8. EMPLOYEE BENEFIT PLANS The Company maintains a 401(k) salary deferral plan for all U.S. employees and a money purchase plan for its Canadian employees. Neither plan establishes any Company liability other than a discretionary matching formula to employee contributions. The aggregate cost of both plans for 1998, 1999, and 2000 was $141,0000, $172,000 and $175,000 respectively. Effective January 1, 1998, the Company adopted the Barringer Technologies Inc. Supplemental Executive Retirement Plan (the "SERP Plan"). The SERP Plan provides eligible participants with certain retirement benefits supplemental to the Company's F-15 401(k) Plan. Pursuant to the SERP Plan, the Company makes annual contributions to the account of each participant equal to a variable percentage of the participant's base salary and annual cash bonus depending on the Company's achievement of certain performance targets. The actual percentage contribution is determined by the Executive Compensation Committee, subject to certain parameters. A participant will become vested under the SERP Plan after five years of participation therein. For the years ended December 31, 1998, 1999 and 2000, contributions aggregating $144,000, $135,000 and $210,000, respectively, were made into the plan. 9. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Income taxes of $498,000, $347,000 and $338,000, were paid for the years ended December 31, 1998, 1999 and 2000, respectively. 10. SEGMENT AND GEOGRAPHIC DATA The Company has determined that it has only one business segment. A summary of the Company's revenues and long-lived assets by geographic area is as follows (in thousands):
REVENUES LONG-LIVED ASSETS FOR THE YEAR ENDED DECEMBER 31, AS OF DECEMBER 31, ------------------------------------- ------------------------------------- 1998 1999 2000 1998 1999 2000 ------- ------- ------- ------- ------- ------- United States $13,336 $13,190 $17,733 $ 754 $ 2,313 $ 3,116 Canada 800 308 1,172 1,423 1,523 1,309 Other foreign countries 5,185 6,333 8,676 172 47 40 ------- ------- ------- ------- ------- ------- Totals $19,321 $19,831 $27,581 $ 2,349 $ 3,883 $ 4,465 ======= ======= ======= ======= ======= =======
Revenues are attributed to the countries based on location of the customer. For the year ended December 31, 1998, 1999 and 2000, export sales, including sales from Canada to other countries, comprised 25.8%, 31.4%, and 55.7% of total revenues and were made primarily to Western Europe, Middle East, Asia and South America. 11. SALES TO MAJOR CUSTOMERS For the year ended December 31, 2000, the Government of Israel accounted for approximately 18.2% and the FAA accounted for approximately 9.4% of consolidated revenues of the Company and for the years ended December 31, 1999 and 1998, the Federal Aviation Administration ("FAA") accounted for approximately 48.3% and 48.1%, respectively, of consolidated revenues of the Company. As of December 31, 2000, the aggregate amount due from these two customers amounted to $1.9 million. 12. FOURTH QUARTER ADJUSTMENTS During the fourth quarter of 2000 and 1999, the Company had no material adjustments. During the fourth quarter of 1998, the Company recorded a deferred tax benefit related to a decrease in the deferred tax asset valuation allowance of $635,000. 13. SALE OF SUBSIDIARY On April 30, 1998, the Company acquired all of the outstanding capital stock of DigiVision, Inc. ("DigiVision"), a San Diego-based developer of video enhancement products, for an aggregate cash purchase price of approximately $821,000, including incurred acquisition costs, in a business combination accounted for as a purchase. The excess of the purchase price (including acquisition related costs) over the fair value of net assets acquired was $778,000. Effective June 30, 1999, the Company determined that it would dispose of DigiVision and on December 15, 1999, sold all of the outstanding capital stock of DigiVision to a group comprised of DigiVision senior management. Accordingly, the financial results of DigiVision have been accounted for as a discontinued operation and reported as an operation sold. The Company has conformed 1998 to this change. The selling price consisted of a $500,000 interest F-16 bearing note which, if not paid by December 31, 2000, (subsequently extended to March 15, 2001) was to increase to $1,000,000. In addition, the Company will be entitled to receive an earn-out based upon annual revenues in excess of $2,000,000. The Company will recognize income on the note receivable and the earn-out when collectability is reasonably assured. The earnout for 2000 was $1,250. For the years ended December 31, 1998 and 1999, DigiVision's revenues were $769,000 and $720,000 and its operating losses were $1,029,000 and $554,000, respectively. For the year ended December 31, 1999, the Company recorded a disposition loss of $1,414,000 which related primarily to the write-off of goodwill. 14. EARNINGS PER SHARE Basic and Diluted earnings per share for continuing operations has been computed as follows:
INCOME SHARES PER SHARE FOR THE YEAR ENDED DECEMBER 31, 2000: (NUMERATOR) (DENOMINATOR) AMOUNT ------------------------------------- ----------- ------------- ------ Basic Earnings Per Share: Income attributable to common stockholders from continuing operations $4,638,000 7,056,000 $0.66 ===== Effect of dilutive securities Warrants and options 336,000 Convertible preferred dividends 8,000 15,000 ---------- --------- Diluted Earnings Per Share: Income attributable to common stockholders and assumed conversions from continuing operations $4,646,000 7,407,000 $0.63 ========== ========= ===== FOR THE YEAR ENDED DECEMBER 31, 1999: Basic Earnings Per Share: Income attributable to common stockholders from continuing operations $2,569,000 7,181,000 $0.36 ===== Effect of dilutive securities Warrants and options 550,000 Convertible preferred dividends 9,000 21,000 ----------- --------- Diluted Earnings Per Share: Income attributable to common stockholders and assumed conversions from continuing operations $2,578,000 7,752,000 $0.69 =========== ========= ===== FOR THE YEAR ENDED DECEMBER 31, 1998: ------------------------------------- Basic Earnings Per Share: Income available to common stockholders from continuing operations $5,248,000 7,153,000 $0.74 ===== Effect of dilutive securities Warrants and options 437,000 Convertible preferred dividends and debentures 10,000 22,000 ---------- --------- Diluted Earnings Per Share: Income available to common stockholders and assumed conversions from continuing operations $5,258,000 7,612,000 $0.69 ========== ========= =====
Options and warrants to purchase 163,650 and 175,000 shares of common stock, F-17 BARRINGER TECHNOLOGIES INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (concluded) exercisable at between $8.375 and $10.276 per share, were outstanding at December 31, 2000 and 1999, respectively, but were not included in the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock underlying the warrants and options. Options and warrants to purchase 577,000 shares of common stock, exercisable at between $9.847 and $11.81 per share, were outstanding at December 31, 1998 but were not included in the computation of diluted earnings per share because the exercise prices were greater than the average market price of the common stock underlying the warrants and options. 15. SUBSEQUENT EVENT On March 8, 2001, the Company entered into an Agreement and Plan of Merger with Smiths Industries Aerospace & Defense Systems Inc. ("Smiths"), an affiliate of Smiths Group plc, which provides for Smiths to acquire the Company in a cash merger. The Company's stockholders will receive $11.05 in cash, for each share of common stock of the Company they own immediately before the effectiveness of the merger. The merger is subject to stockholder approval and other customary conditions to closing and is expected to close in the second quarter of 2001. F-18