-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D7weMoq32ehpjCG/nzwEL6Ct+u/UALANdjM4spUjeI/XHINVXhYsxc3nA9Jk9awU kjH/4mmMHzNNxuzQIigMrA== /in/edgar/work/20000807/0000085608-00-000012/0000085608-00-000012.txt : 20000921 0000085608-00-000012.hdr.sgml : 20000921 ACCESSION NUMBER: 0000085608-00-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000702 FILED AS OF DATE: 20000807 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATEC CORP/DE/ CENTRAL INDEX KEY: 0000085608 STANDARD INDUSTRIAL CLASSIFICATION: [3310 ] IRS NUMBER: 060737363 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04184 FILM NUMBER: 687058 BUSINESS ADDRESS: STREET 1: 75 SOUTH ST CITY: HOPKINTON STATE: MA ZIP: 01748 BUSINESS PHONE: 5084359039 MAIL ADDRESS: STREET 1: 75 SOUTH STREET CITY: HOPKINTON STATE: MA ZIP: 01748 FORMER COMPANY: FORMER CONFORMED NAME: RSC INDUSTRIES INC DATE OF NAME CHANGE: 19840515 FORMER COMPANY: FORMER CONFORMED NAME: REEVES INDUSTRIES INC DATE OF NAME CHANGE: 19710520 10-Q 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 2, 2000 ----------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------- Commission File Number 1-4184 -------------------------------------------------- MATEC Corporation - ------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 06-0737363 - ------------------------------- ------------------------- (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification Number) 75 South St., Hopkinton, Massachusetts 01748 - ---------------------------------------- ------------- (Address of principal executive offices) (Zip Code) (508) 435-9039 - ------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (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 --- --- As of August 4, 2000, the number of shares outstanding of Registrant's Common Stock, par value $.05 was 2,740,323. -1- MATEC Corporation Index Page ---- PART I. FINANCIAL INFORMATION Consolidated Condensed Balance Sheets - July 2, 2000 and December 31, 1999 ...................... 3 Consolidated Statements of Operations - Three Months and Six Months Ended July 2, 2000 and July 4, 1999 .......... 4 Consolidated Condensed Statements of Cash Flows - Six Months Ended July 2, 2000 and July 4, 1999 .......... 5 Consolidated Statements of Comprehensive Income - Three Months and Six Months ended July 2, 2000 and July 4, 1999 ........................................ 6 Notes to Consolidated Condensed Financial Statements ..... 7-9 Management's Discussion and Analysis of Financial Condition and Results of Operations ..................... 10-12 Quantitative and Qualitative Disclosures about Market Risk ............................................. 12 PART II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K ................ 13 Signatures ..................................................... 14 -2- PART I - FINANCIAL INFORMATION Item 1. Financial Statements MATEC Corporation and Subsidiaries Consolidated Condensed Balance Sheets (In thousands, except share data) (Unaudited) 7/2/00 12/31/99 -------- -------- ASSETS Current assets: Cash and cash equivalents ............................ $ 2,326 $ 3,118 Receivables, net ..................................... 4,122 3,097 Inventories .......................................... 4,831 3,330 Deferred income taxes and other current assets ....... 1,026 811 ------- ------- Total current assets ............................... 12,305 10,356 ------- ------- Property, plant and equipment, at cost ................. 9,271 8,619 Less accumulated depreciation ........................ 6,130 5,819 ------- ------- 3,141 2,800 ------- ------- Marketable equity securities ........................... 2,846 3,073 Other assets ........................................... 135 303 ------- ------- $18,427 $16,532 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt .................... $ - $ 998 Accounts payable ..................................... 2,513 1,317 Accrued liabilities .................................. 1,683 1,064 Income taxes ......................................... 632 547 ------- ------- Total current liabilities .......................... 4,828 3,926 ------- ------- Deferred income taxes .................................. 1,298 1,429 Stockholders' equity: Preferred stock, $1.00 par value- Authorized 1,000,000 shares; issued none ............ - - Common stock, $.05 par value- Authorized 10,000,000 shares; Issued and outstanding: 2,740,323 and 2,650,148 shares ..................... 137 132 Capital surplus ...................................... 4,791 4,527 Retained earnings .................................... 5,764 4,774 Accumulated other comprehensive income ............... 1,609 1,744 ------- ------- Total stockholders' equity ...................... 12,301 11,177 ------- ------- $18,427 $16,532 ======= ======= See notes to consolidated condensed financial statements. -3- MATEC Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended 7/2/00 7/4/99 7/2/00 7/4/99 ------- ------- -------- -------- Net sales ..................... $ 6,287 $ 3,355 $11,713 $ 5,755 Cost of sales ................. 4,394 2,775 8,196 4,814 ------- ------- ------- ------- Gross profit ................ 1,893 580 3,517 941 Operating expenses: Selling and advertising ..... 753 557 1,375 1,078 General and administrative .. 383 262 794 527 ------- ------- ------- ------- 1,136 819 2,169 1,605 Operating profit (loss) ....... 757 (239) 1,348 (664) Other income (expense): Interest income .............. 39 49 84 142 Interest expense ............. - (51) (9) (102) Gain on sale of investment ... - - 1,226 - Other, net ................... 35 24 63 42 ------- ------- ------- ------- 74 22 1,364 82 Earnings (loss) from continuing operations before income taxes 831 (217) 2,712 (582) Income tax (expense) benefit .. (332) 73 (1,084) 193 ------- ------- ------- ------- Earnings (loss) from continuing operations ................... 499 (144) 1,628 (389) Earnings (loss) from discontinued operations, net of taxes ..... - 705 (90) 735 ------- ------- ------- ------- Net earnings .................. $ 499 $ 561 $ 1,538 $ 346 ======= ======= ======= ======= Basic earnings (loss) per share: Continuing operations ....... $ .18 $(.05) $ .59 $(.14) Discontinued operations ..... - .26 (.03) .27 ----- ----- ----- ----- $ .18 $ .21 $ .56 $ .13 ===== ===== ===== ===== Diluted earnings (loss) per share: Continuing operations ....... $ .17 $(.05) $ .57 $(.14) Discontinued operations ..... - .26 (.03) .27 ----- ----- ----- ----- $ .17 $ .21 $ .54 $ .13 ===== ===== ===== ===== Weighted average shares: Basic ....................... 2,740 2,688 2,726 2,702 Diluted ..................... 2,900 2,688 2,867 2,702 Cash dividends per share ...... $ - $ - $ .20 $ - ===== ===== ===== ===== See notes to consolidated condensed financial statements. -4- MATEC Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) Six Months Ended 7/2/00 7/4/99 -------- -------- Cash flows from operating activities: Net earnings (loss) from continuing operations ... $ 1,628 $ (389) Adjustments to reconcile net earnings to net cash provided (used) by operating activities: Depreciation and amortization .................. 311 312 Deferred income taxes .......................... (241) 40 Gain on sale of investment ..................... (1,226) - Other .......................................... 2 3 Changes in operating assets and liabilities .... (639) (1,165) ------- ------- Net cash (used) by operating activities (165) (1,199) - ---------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sale of investment ................. 1,319 - Capital expenditures ............................. (652) (339) Collection of note receivables ................... 83 65 Other, net........................................ (8) (8) ------- ------- Net cash provided (used) by investing activities 742 (282) - ---------------------------------------------------------------------- Cash flows from financing activities: Payments on long-term debt ....................... (745) (1,000) Dividend paid .................................... (548) - Stock options exercised .......................... 14 - Purchases of common stock ........................ - (125) ------- ------- Net cash (used) by financing activities ........... (1,279) (1,125) - ---------------------------------------------------------------------- Net cash provided (used) by discontinued operations (90) 1,225 - ---------------------------------------------------------------------- Net (decrease) in cash and cash equivalents ....... (792) (1,381) Cash and cash equivalents: Beginning of period .............................. 3,118 4,516 ------- ------- End of period .................................... $ 2,326 $ 3,135 ======= ======= Noncash investing and financing activities: During 2000, the Company issued 85,000 common shares upon the conversion of the lender's warrant as payment for $255,000 of debt. See notes to consolidated condensed financial statements. -5- MATEC Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (In thousands) (Unaudited) Three Months Ended 7/2/00 7/4/99 ------- ------- Net earnings ................................. $ 499 $ 561 Other comprehensive income, net of tax: Unrealized gain (loss) on marketable equity securities, net of a tax benefit of $40 in 2000 and tax expense of $246 in 1999 ..................................... (58) 369 ------- ------- Comprehensive income ......................... $ 441 $ 930 ======= ======= Six Months Ended 7/2/00 7/4/99 ------- ------- Net earnings ................................ $ 1,538 $ 346 Other comprehensive income, net of tax: Unrealized gain (loss) on marketable equity securities, net of tax benefit of $92 in 2000 and tax expense of $181 in 1999 .................................... (135) 272 ------- ------- Comprehensive income ........................ $ 1,403 $ 618 ======= ======= See notes to consolidated condensed financial statements. -6- MATEC Corporation and Subsidiaries Notes to Consolidated Condensed Financial Statements 1. Financial Presentation: The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. These interim financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company's 1999 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. 2. Receivables, net: Receivables, net of allowances, consist of the following: 7/2/00 12/31/99 -------- -------- (in thousands) Accounts receivable, less allowance for doubtful accounts of $116 and $93 ....................... $ 4,000 $ 2,820 Refundable income taxes ......................... - 154 Amounts due from the sale of discontinued operations .................................... 122 123 ------- ------- $ 4,122 $ 3,097 ======= ======= 3. Inventories: Inventories consist of the following: 7/2/00 12/31/99 ------- -------- (in thousands) Raw materials ....................... $ 2,493 $ 1,797 Work in process ..................... 1,803 1,179 Finished goods ...................... 535 354 ------- ------- $ 4,831 $ 3,330 ======= ======= 4. Long-Term Debt: In January 2000, the Company paid $745,000 in cash and issued 85,000 shares of common stock as payment in full for the $1 million term debt note due June 30, 2000. The common shares were issued upon conversion of the lender's warrant. -7- 4. Discontinued Operations: During 1998, the Company sold the assets of its Bergen Cable Technologies, Inc. ("BCT") subsidiary. As a result of the sale, the Company is performing environmental clean-up at that site. During the first quarter of 2000, the Company expensed $150,000 to increase the environmental expense accrual to reflect the current available estimate to complete the remediation. As of July 2, 2000, $800,000 has been expensed for the clean-up and $275,000 is accrued for future payments. In the second quarter of 1999, the Company received $1,175,000 in cash as payment in full for the $1.2 million outstanding note receivable balance and recorded a $1,175,000 pre-tax gain on disposal of discontinued operations. In the first quarter of 1999, the Company received a $50,000 note payment and recorded a $50,000 pre-tax gain on disposal of discontinued operations. Since the entity acquiring the assets of BCT had significant third-party debt compared to its equity and the Company's note receivable was subordinated to the third party debt, the Company had deferred any gain on the note until cash payments were received by the Company. 5. Gain on Sale of Investment: In the first quarter of 2000, the Company sold its common stock interest in Bergen Cable Technology, Inc., received $1,319,000 in cash after estimated expenses and recorded a pre-tax gain of $1,226,000 on the sale. The Company acquired these shares as part of the purchase price for the sale of BCT. In addition, the Company's share of the escrow balance amounts to approximately $170,000. This escrow balance, less any claims for indemnity thereon, will be distributed to the Company on or before January 4, 2002. The Company will record a gain on this escrow balance when the cash is received. 6. Earnings (Loss) Per Share: The computation of basic and diluted earnings (loss) per share from continuing operations is as follows: Three months ended In thousands, except per share amounts 7/2/00 7/4/99 - -------------------------------------- ------ ------ Basic ----- Earning (loss) from continuing operations $ 499 $ (144) ====== ====== Weighted average shares outstanding 2,740 2,688 ====== ====== Basic earnings (loss) per share from continuing operations $ .18 $ (.05) ===== ====== -8- Three Months Ended In thousands, except per share amounts 7/2/00 7/4/99 - -------------------------------------- ------ ------ Diluted ------- Earning (loss) from continuing operations $ 499 $ (144) ====== ====== Weighted average shares outstanding 2,740 2,688 Increase from assumed exercise of stock options 160 - ------ ------ Diluted weighted average shares outstanding 2,900 2,688 ====== ====== Diluted earnings (loss) per share from continuing operations $ .17 $ (.05) ===== ====== Six Months Ended In thousands, except per share amounts 7/2/00 7/4/99 - -------------------------------------- ------ ------ Basic ----- Earnings (loss) from continuing operations $1,628 $ (389) ====== ====== Weighted average shares outstanding 2,726 2,702 ====== ====== Basic earnings (loss) per share from continuing operations $ .59 $ (.14) ===== ====== Diluted ------- Earnings (loss) from continuing operations $1,628 $ (389) Plus: interest impact, net of taxes from the assumed reduction of debt from the conversion of warrants 4 - ------ ------ Adjusted earnings (loss) from continuing operations $1,632 $ (389) ====== ====== Weighted average shares outstanding 2,726 2,702 Increase from the assumed : exercise of stock options 128 - conversion of warrants 13 - ----- ----- Diluted weighted average shares outstanding 2,867 2,702 ===== ===== Diluted earnings (loss) per share from continuing operations $ .57 $(.14) ===== ===== In 1999, options to purchase 59,356 shares of common stock and warrants to purchase 85,000 shares of common stock were not considered in the computation of diluted earnings per share since the Company reported a loss from continuing operations. -9- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents decreased $792,000 during the six months ended July 2, 2000. During this period, the Company's continuing operations and financing activities used cash of $165,000 and $1,279,000, respectively, and investing activities provided cash of $742,000. Discontinued operations used $90,000 in cash. Trade receivables, net increased $1,180,000 mainly as a result of the increased sales level. Inventories increased $1,501,000 mainly to support the current sales backlog and customer delivery requirements. The $1,196,000 increase in accounts payable is mainly due to the higher inventory level. Income tax payments during the six months ended July 2, 2000 amounted to $1,211,000. During the six months ended July 2, 2000, the Company sold its common stock in Bergen Cable Technologies, Inc. and received $1,319,000 in cash after estimated expenses of the sale. During this same period, capital expenditures amounted to $652,000 as the Company upgraded and increased its existing production capabilities and processes and began installation of a new computer information system. In January 2000, the Company paid $745,000 in cash and issued 85,000 shares of common stock as payment in full for the $1 million term debt note due June 30, 2000. The common stock was issued upon conversion of the lender's warrant. In February 2000, the Company paid a special cash dividend amounting to $548,000 or $.20 per common share. Management believes that based on its current working capital, the expected cash flows from operations and its $1,850,000 lines of credit availability, the Company's resources are sufficient to meet its financial needs in 2000 including a remaining capital expenditures budget of approximately $200,000. Results of Operations - --------------------- For the quarter ended July 2, 2000, net sales from continuing operations increased $2,932,000 or 87% over the comparable quarter in 1999. During the six months ended July 2, 2000, net sales increased $5,958,000 or 104% over comparable period in 1999. The higher backlog at the beginning of 2000 ($6.4 million) as compared to that at the beginning of 1999 ($2.3 million) and the continued strong bookings during the current year are the main reasons for these sales increases over last year. The strong market demand from the telecommunications, networking and wireless markets are mainly responsible for the increases in the sales, bookings and backlog amounts. The backlog at July 2, 2000 is $12.8 million compared to $5.2 million at July 4, 1999. During 2000, the Company has experienced some late shipping deliveries with some of its products. The Company is continuing to work with its supplier base and to increase its manufacturing capacity to improve its delivery performance. -10- During the quarter ended July 2, 2000, the gross profit percentage was 30% compared to 17% in 1999. For the six months ended July 2, 2000, the gross profit percentage was 30% versus 16% in 1999. The higher margins during the current year results mainly from the favorable effects of allocating the fixed overhead expenses over the increased sales volumes. Overall direct labor and material costs decreased slightly as a percentage of sales from 1999 mainly as a result of changes in sales mix. During the quarter and six months ended July 2, 2000, selling and advertising expenses increased $196,000 (35%) and $297,000 (28%), respectively, over the comparable periods in 1999. Higher sales commission expense to the Company's outside manufacturers' representatives and increased advertising expenses were the main reasons for the expense increases during these periods. General and administrative expenses during the quarter and six months ended July 2, 2000, increased $121,000 (46%) and $267,000 (51%), respectively over the comparable periods in 1999. These increases were mainly due to increased personnel expense and provision for the management incentive bonus. During the quarter and six months ended July 2, 2000, interest income decreased $10,000 and $58,000, respectively, from the comparable periods in 1999 mainly as a result of the lower interest income received on the notes receivable generated from the sales of the discontinued operations. The decreases in interest expense during both periods is mainly due to lower levels of outstanding debt. During the six months ended July 2, 2000, the company sold its common stock investment in Bergen Cable Technology, Inc. and realized a $1,226,000 pre-tax gain on the sale. The estimated effective income tax rate for 2000 is 40% compared to 33% in 1999. The difference in the rates is mainly due to the limited state tax benefit of operating losses within a state. For the quarter ended July 2, 2000, the Company reported an operating profit of $757,000 compared to an operating loss of $239,000 in comparable quarter of 1999 mainly as a result of the increase in gross margin offset in part by higher operating expenses. Nonoperating income amounted to $74,000 in 2000 compared to $22,000 of income in the corresponding 1999 period. As a result, the Company reported net earnings from continuing operations of $499,000 during the quarter July 2, 2000 compared to a net loss of $144,000 in 1999. Earnings from discontinued operations during the quarter ended July 4, 1999 amounted to $705,000. In total, the Company reported consolidated net earnings of $499,000 during the quarter ended July 2, 2000 versus $561,000 in the comparable quarter of 1999. During the six months ended July 2, 2000, the Company reported an operating profit of $1,348,000 compared to an operating loss of $664,000 during the comparable period in 1999 as a result of the increase in gross profit offset in part by higher operating expenses. For the six months ended July 2, 2000 nonoperating income amounted to $1,364,000 compared to $82,000 of income in 1999. As a result, the Company reported net earnings from continuing operations of $1,628,000 during the six months -11- ended July 2, 2000 versus a net loss of $389,000 in 1999. Discontinued operations reported a loss of $90,000 for the six months ended July 2, 2000 versus net earnings of $735,000 in 1999. In total, the Company reported consolidated net earnings of $1,538,000 during the six months ended July 2, 2000 compared to $346,000 in 1999. Forward-Looking Statements - -------------------------- Certain statements made herein contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Words such as "expects", "believes", "estimates", "plans" or similar expressions are intended to identify such forward-looking statements. Factors that could cause such differences include, but are not limited to those discussed in this section and those discussed in the Company's 1999 Form 10-K under the section "Forward-Looking Statements" included under the caption "Management's Discussion and Analysis", is herein incorporated by reference. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------ There have been no material changes in the Company's market risk during the six months ended July 2, 2000. The information set forth on pages 5 of the 1999 Annual Report to Stockholders under the section "Qualitative and Quantitative Disclosures about Market Risk" included under the caption "Management's Discussion and Analysis" is incorporated by reference. -12- PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Annual Meeting of Stockholders was held on May 18, 2000. Listed below is the matter submitted to stockholders and the results of the stockholder votes. Election of nine directors: Nominee "For" "Withheld" -------------------- --------- ---------- Richard W. Anderson 2,069,210 7,225 Michael Deery 2,069,210 7,225 Eli Fleisher 2,067,710 8,725 Lawrence Holsborg 2,067,710 8,725 Michael P. Martinich 2,069,210 7,225 John J. McArdle III 2,067,710 8,725 Robert W. Muir, Jr. 2,069,210 7,225 Joseph W. Tiberio 2,067,710 8,725 Ted Valpey, Jr. 2,069,210 7,225 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 10.3* Management Incentive Plan. 13. Page 5 of the 1999 Annual Report to Stockholders. Filed for electronic purposes only. 27. Financial Data Schedule. Filed for electronic purposes only. * Management contract or compensatory plan or arrangement required to be filed as an Exhibit pursuant to Item 14(c) of this report. (b) Reports on Form 8-K - None -13- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MATEC Corporation ------------------------------------ Date: August 7, 2000 By /s/ Ted Valpey, Jr. --------------------------------- Ted Valpey, Jr., Chairman of the Board and President Date: August 7, 2000 By /s/ Michael J. Kroll --------------------------------- Michael J. Kroll, Vice President and Treasurer -14- EX-10 2 0002.txt Exhibit 10.3 MATEC Corporation Management Incentive Plan The MATEC Corporation Management Incentive Plan is established to attract, retain and to motivate middle and senior management and to optimize short and long-term operating profit. The plan is to encourage strong financial and operational performance and to link staff compensation to the interests of shareholders. The plan will be established annually and reviewed and approved annually by the Stock Option-Compensation Committee and Board of Directors. 1. Funding - ---------- The Corporation will generate an incentive pool based on the achievement of the Corporation's budget and will specifically be established by gross margin, operating income and top-line growth. The Company's budget for 2000 has established a gross profit %, an operating income amount and a net sales amount as set forth in Exhibit A. The budget has established an incentive base pool as set forth in Exhibit A, which is reflected under operating expenses and is part of the accrual for Profit Sharing and 401K which total the amount set forth in Exhibit A in the budget. This budget is the minimum acceptable for the incentive payments. The pool may be increased at the discretion of the Stock Option-Compensation Committee as follows: A. The base pool as set forth in Exhibit A will be increased by the % set forth in Exhibit A for each full percentage point (or a portion thereof) of gross margin above the amount set forth in Exhibit A. B. The base pool as set forth in Exhibit A will be increased by the % set forth in Exhibit A for additional operating income over the amount set forth in Exhibit A and up to the amount set forth in Exhibit A. When operating income is in excess of the amount set forth in Exhibit A, the amounts or increments set forth in Exhibit A will be added to the pool, for each level attained, on an accumulative basis. C. The base pool will be increased by the the % set forth in Exhibit A of net sales over the amount set forth in Exhibit A. Definitions: The terms defined below correspond to those presented in the monthly internal financial statements submitted to the Board of Directors and the 2000 budget attached as Exhibit B: Gross profit or gross margin = Net sales less cost of goods sold. Operating income = Gross profit less operating expenses. Operating expenses include G&A, selling and advertising, commissions, profit sharing, 401(k) match, management incentive bonus and corporate administration. Net sales = Gross sales less returns and allowances. In future years a portion as set forth in Exhibit A of the bonus will be based on individual attainment of specific goals set at the time of the budget process. 2. Eligibility/Participants - -------------------------- Unless otherwise approved by MATEC's Stock Option-Compensation Committee, all participants must be employed at the beginning and end of the fiscal year for which the award is to be made. The participants are set forth in Exhibit A. 3. Distribution - --------------- A proposed distribution of the incentive pool among the participants listed in Exhibit A shall be reviewed and recommended by the Stock Option-Compensation Committee and approved by the Board of Directors. A percentage of the pool as set forth in Exhibit A will be held for discretionary payments for those not listed in Exhibit A or for extraordinary performance by any participant. The list of participants will be awarded a percentage of the pool as listed in Exhibit A as recommended at year end. The final recommendation for pool distribution shall be made by MATEC's Chairman, CEO and President. Individual accomplishment will be considered in the CEO and President's recommendation. Partial payment of the bonus as set forth in Exhibit A is to be paid following the December close and the balance as set forth in Exhibit A following the audit. The Company's approved budget will be made a part of this plan. EX-13 3 0003.txt Exhibit 13 1999 Annual Report Management's Discussion and Analysis - ------------------------------------ Forward-Looking Statements - -------------------------- This Annual Report, including Management's Discussion and Analysis, the Letter to Stockholders and Operations, contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Words such as "expects", "believes", "estimates", "plans" or similar expressions are intended to identify such forward-looking statements. The forward-looking statements are based on the Company's current views and assumptions and involve risks and uncertainties that include, but not limited to: the ability to develop, market and manufacture new innovative products competitively, the ability of the Company's suppliers to produce and deliver materials competitively, and the ability to limit the amount of the negative effect on operating results caused by pricing pressures. Quantitative and Qualitative Disclosures about Market Risk - ---------------------------------------------------------- The Company's cash balances in excess of operating requirements are currently invested in money market accounts. These money market accounts are subject to interest rate risk and interest income will fluctuate in relation to general money market rates. Based on the cash and cash equivalent balance at December 31, 1999, and assuming the balance was totally invested in money market instruments for the full year, a hypothetical 1% decline in interest rates would result in an approximate $31,000 decrease in interest income. The Company's investment in marketable equity securities, which are classified as available-for-sale, represents 517,527 shares of MetroWest Bank common stock and are subject to equity price risk. These securities are recorded on the balance sheet at fair market value with unrealized gains (losses) reported as a separate component of stockholders' equity under the caption "accumulated other comprehensive income". Accordingly, while a hypothetical 10% decline in the market value of these securities would reduce total assets by approximately $307,000, this decrease would not have an effect on the statement of operations unless the securities were actually sold. The Company purchases certain inventory from and sells product to foreign countries. As these activities are currently transacted in U.S. dollars, they are not subject to foreign currency exchange risk. However, significant fluctuation in the currencies where the Company purchases inventory or sell product could make the U.S. dollar equivalent of such transactions more or less favorable to the Company and the other involved parties. EX-27 4 0004.txt
5 1,000 6-MOS DEC-31-2000 JUL-02-2000 2,326 0 4,238 116 4,831 12,305 9,271 6,130 18,427 4,828 0 0 0 137 12,164 18,427 11,713 11,713 8,196 8,196 0 22 9 2,712 1,084 1,628 (90) 0 0 1,538 .56 .54
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