-----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, Tnae3bjpShqL5CbaqI1BjSAnQPwxIyhIMRGfJ9KPhxIGUkxI75jcc4H5Y12dHb3Y PvCEQM+glyhZQMGEbmWx5Q== 0000085608-95-000021.txt : 19951127 0000085608-95-000021.hdr.sgml : 19951127 ACCESSION NUMBER: 0000085608-95-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951001 FILED AS OF DATE: 19951114 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATEC CORP/DE/ CENTRAL INDEX KEY: 0000085608 STANDARD INDUSTRIAL CLASSIFICATION: 3310 IRS NUMBER: 060737363 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04184 FILM NUMBER: 95592154 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 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 October 1, 1995 ------------------------------------------ [ ] 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) Delaware 06-0737363 - - ------------------------------- ---------------------- (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification Number) 75 South Street, 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 November 10, 1995, the number of shares outstanding of Registrant's Common Stock, par value $.05 was 2,764,380. -1- MATEC Corporation Index Page ---- PART I. FINANCIAL INFORMATION Consolidated Condensed Balance Sheets - October 1, 1995 and December 31, 1994 ................... 3 Consolidated Statements of Operations - Three Months and Nine Months Ended October 1, 1995 and October 2, 1994 ... 4 Consolidated Condensed Statements of Cash Flows - Nine Months Ended October 1, 1995 and October 2, 1994 ... 5 Notes to Consolidated Condensed Financial Statements ..... 6-7 Management's Discussion and Analysis of Financial Condition and Results of Operations ..................... 8-11 PART II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K ................ 12 Signatures ..................................................... 13 -2- PART I - FINANCIAL INFORMATION MATEC Corporation and Subsidiaries Consolidated Condensed Balance Sheets (In thousands, except share data) (Unaudited) October 1, December 31, 1995 1994 ------------ ------------ ASSETS Current assets: Cash and cash equivalents ................. $ 502 $ 544 Receivables, net .......................... 5,188 4,852 Inventories ............................... 7,235 5,629 Deferred income taxes and other current assets ..................... 1,163 1,145 ------- ------- Total current assets .................... 14,088 12,170 ------- ------- Property, plant and equipment, at cost ...... 18,551 17,474 Less accumulated depreciation ............. 11,829 10,887 ------- ------- 6,722 6,587 Marketable equity securities ................ 2,394 1,552 Other assets ................................ 138 139 ------- ------- $23,342 $20,448 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable ............................. $ 915 $ 915 Current portion of long-term debt ......... 228 223 Accounts payable .......................... 3,265 3,152 Accrued liabilities ....................... 1,459 1,375 Income taxes .............................. 293 326 ------- ------- Total current liabilities ............... 6,160 5,991 ------- ------- Deferred income taxes ....................... 1,488 1,124 Long-term debt .............................. 2,179 428 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 3,793,695 shares .................. 190 190 Capital surplus ........................... 6,397 6,374 Retained earnings ......................... 10,809 10,727 Net unrealized gain on marketable equity securities ........................ 1,337 832 Treasury stock at cost, 1,029,215 and 1,029,145 shares ........... (5,218) (5,218) ------- ------- Total stockholders' equity .............. 13,515 12,905 ------- ------- $23,342 $20,448 ======= ======= 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 Nine Months Ended 10/1/95 10/2/94 10/1/95 10/2/94 ------- ------- ------- ------- Net sales ................... $ 7,118 $ 6,042 $20,463 $17,546 Cost of sales ............... 5,160 4,311 14,559 12,451 ------- ------- ------- ------- Gross profit .............. 1,958 1,731 5,904 5,095 Operating expenses: Selling and administrative 1,645 1,444 5,102 4,696 Research and development .. 158 238 388 729 ------- ------- ------- ------- 1,803 1,682 5,490 5,425 Operating profit (loss) ..... 155 49 414 (330) Other income (expense), net . (79) (24) (283) (44) ------- ------- ------- ------- Earnings (loss) before income taxes ............... 76 25 131 (374) Income (taxes) credit ....... (27) (7) (49) 122 ------- ------- ------- ------- Net earnings (loss) ......... $ 49 $ 18 $ 82 $ (252) ======= ======= ======= ======= Earnings (loss) per share ... $ .02 $ .01 $ .03 $ (.09) ===== ====== ===== ====== Average shares outstanding .. 2,765 2,765 2,765 2,765 ===== ===== ===== ===== Cash dividends per share .... $ - $ - $ - $ - ===== ===== ===== ===== See notes to consolidated condensed financial statements. -4- MATEC Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) Nine Months Ended 10/1/95 10/2/94 -------- -------- Cash flows from operating activities: Net earnings (loss) .............................. $ 82 $ (252) Adjustments to reconcile net earnings (loss) to net cash (used) by operating activities: Non-cash items ................................. 941 735 Changes in operating assets and liabilities .... (1,999) (1,300) ------- -------- Net cash (used) by operating activities (976) (817) - - ----------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures, net ........................ (1,077) (1,625) Purchase of marketable equity securities ......... - (150) Collection of amount due from sale of discontinued operations ......................... 250 155 Other, net........................................ (18) (3) ------- -------- Net cash (used) by investing activities (845) (1,623) - - ----------------------------------------------------------------------- Cash flows from financing activities: Proceeds from issuance of long-term debt and warrants .................................... 2,000 - Net borrowings under line of credit .............. - 915 Payments on long-term debt ....................... (221) (209) ------- -------- Net cash provided by financing activities 1,779 706 - - ----------------------------------------------------------------------- Net (decrease) in cash and cash equivalents ....... (42) (1,734) Cash and cash equivalents: Beginning of period .............................. 544 2,222 ------- ------- End of period .................................... $ 502 $ 488 ======= ======= See notes to consolidated condensed financial statements. -5- 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. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements in the 1994 MATEC Corporation and Subsidiaries Annual Report which is incorporated by reference in Form 10-K for the year ended December 31, 1994. 2. Inventories: Inventories consist of the following (in thousands): 10/1/95 12/31/94 ------- -------- Raw materials ....................... $ 3,494 $ 3,007 Work in process ..................... 1,025 698 Finished goods ...................... 2,716 1,924 ------- ------- $ 7,235 $ 5,629 ======= ======= Inventories of $3,106,000 in 1995 and $2,752,000 in 1994 are determined by the LIFO method. 3. Receivables, net: Receivables, net of allowances, consist of the following (in thousands): 10/1/95 12/31/94 ------- -------- Accounts receivable, less allowance for doubtful accounts of $220,000 and $199,000 $5,188 $4,602 Amount due on the sale of Alloy Surfaces Co., Inc. .............. - 250 ------ ------ $5,188 $4,852 ====== ====== 4. Income Taxes: The Company's estimated effective tax rate for 1995 is 37% compared to 32% in 1994. The lower rate in 1994 is primarily due to the limited state tax benefit of losses. -6- 4. Long-Term Debt: Long-term debt consists of the following: 10/1/95 12/31/94 -------- -------- 10% Term Debt, $2 million face amount, due in 2000; interest payable quarterly $ 1,979 $ - Industrial Revenue Bonds: Principal payments of $180,000 in 1996 and $200,000 in 1997; interest payable semi- annually at a rate of 7.0% 380 555 Semi-annual principal payments of $24,167 through 1996; interest payable semi-annually at a rate of 65% of the trustee's prime rate 48 96 ------- ------- 2,407 651 Less current portion 228 223 ------- ------- $ 2,179 $ 428 ======= ======= The Term Debt Note is secured by all the Company's assets, except for real estate, marketable equity securities, and certain specific equipment with a total book value of $266,000. The Term Debt Agreement includes covenants covering debt to equity and interest expense ratios and restrictions as to the amount of total debt, dividends, and capital stock repurchases. Under the Agreement, the lender will subordinate its security interest for up to $4 million in debt, with corresponding increases in interest rates based on the subordination amounts. As part of the Agreement, the Company issued the lender transferable common stock warrants to purchase 85,000 shares of the Company's common stock at $4.75 per share. The warrants expire on June 30, 2000. The Industrial Revenue Bonds are secured by certain assets with carrying values of $2,985,000. 5. Short-Term Debt: On September 25, 1995 the Company entered into a $2 million demand line of credit agreement with a bank. The line is secured by all assets except real estate and marketable equity securities. There are no compensating balance requirements or commitment fees under the arrangement and the interest rate is the bank's prime rate plus 1%. Advances under the line are based on percentage formulas of specific receivable and inventory balances of certain subsidiaries. The Company had no borrowings outstanding at October 1, 1995. -7- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition - - ------------------- Cash and cash equivalents decreased $42,000 during the nine months ended October 1, 1995 and the Company received $2 million from the issuance of term debt. The main uses of the cash were operations ($976,000) and capital expenditures ($1,077,000). Increases in inventory of $1,606,000 and trade receivables of $586,000, partially offset by $961,000 of depreciation expense, were the main reasons for the use of cash by operations. While all segments reported higher levels of inventory, increased inventory levels in the electronics segment accounted for the majority of the 29% rise in total inventory. The higher inventory levels are mainly needed to support the increased levels of current and projected future business. The increase in the trade receivables is attributable to the higher sales volume. The Company spent $1,077,000 on capital expenditures during the nine months ended October 1, 1995. Machinery and equipment additions in the steel cable segment accounted for the majority of these expenditures. These additions are geared toward adding new and upgrading existing production capabilities and processes within this segment. Management believes that based on its current working capital, the expected cash flows from operations, and its $3 million lines of credit, the Company's present resources are sufficient to meet its financial needs in 1995 including a remaining capital expenditures budget of $623,000. Results of Operations - - --------------------- Net sales for the quarter and nine months ended October 1, 1995 increased $1,076,000 (18%) and $2,917,000 (17%), respectively, over the comparable periods in 1994. The following table presents by segment the amounts and percentages of sales increase (decrease) from the corresponding prior year periods. Quarter Ended Nine Months Ended 10/1/95 10/1/95 --------------- ---------------- Segment (000's) % (000's) % - - ----------------------- ------- --- ------- --- Electronics ........... $ 1,292 67 $ 2,727 47 Instruments ........... (66) (4) 685 16 Steel cable ........... (150) (6) (495) (7) ------- ------- Total ............. $ 1,076 18 $ 2,917 17 ======= ======= Electronics ----------- All product lines reported significant sales increases over both 1994 periods. The majority of the sales increases were attributable to higher sales to both OEM and contract manufacturers in the telecommunications market and to the distributor markets. -8- Instruments ----------- During both the current quarter and on a year-to-date basis, higher sales to both the non-destructive testing/evaluation ("NDT/NDE") and medical research markets, partially offset by lower sales to the colloidal markets accounted for the net sales changes from the comparable 1994 periods. The sales increases (12% for the quarter and 63% for the year-to-date) to the NDT/NDE markets were attributable to higher sales of its custom test systems. The sales increases (66% for the quarter and 5% for the year-to-date) to the medical research market resulted from both sales of its new products introduced in late 1994 and higher domestic sales partially offset by lower foreign sales. The decreased sales (32% for the quarter and 10% for the year-to-date) to the colloidal market was mainly due to lower sales of its older ESA-8000 instrument. Steel Cable ----------- During both periods, overall sales to most markets increased or decreased slightly from the 1994 periods. The net sales declines in both periods were mainly attributable to lower sales of assembly products to the fitness equipment market. Gross Profit - - ------------ During the quarter and nine months ended October 1, 1995, total gross profit increased 13% and 16%, respectively, over the comparable 1994 periods. During the current quarter the overall gross profit percentage decreased slightly from 1994, while during the nine months ended the overall margin remained level with the prior year. During both of these periods, the electronics segment reported increases in its gross profit percentages, offset by lower margins in steel cable segment. In the instruments segment, the gross profit percentage remained level with 1994 during the current quarter and decreased from 1994 on a year-to-date basis. In the electronics segment, the increases in the gross profit percentages over 1994 (67% for the quarter and 37% for the nine months) were mainly due to the favorable effects of allocating the fixed overhead expenses over the increased sales levels, increased sales of internally manufactured products which produce a higher margin than that from the resale of imported products, and product yield improvements. The overall gross profit percentage in the instrument segment remained level with that in 1994 during the quarter ended and declined 8% from last year during the nine months ended. While sales during the quarter ended declined from the prior year, the overall gross profit percentage remained level with 1994 due to changes in the product mix of sales. While sales increased during the nine months ended, a lower overall margin was reported because of changes in the product mix of sales, higher occupancy costs due to increased space requirements of the segment, and increased personnel costs caused by additional employees. -9- In the steel cable segment, the current year gross profit percentage decreased 42% and 25% from 1994 during the quarter and the nine months ended periods, respectively. During both periods, the lower margins were primarily due to the start-up expenses and the operating inefficiencies associated with several new programs scheduled for second and third quarter production, increased depreciation expense, and the effect of the fixed operating costs over the lower sales volume. Operating Expenses - - ------------------ During the quarter and nine months ended October 1, 1995, selling and administrative expenses increased $201,000 (14%) and $406,000 (9%), respectively, over the 1994 comparable periods. Higher selling expenses accounted for the majority of the increase during both periods. Increased sales commission expense in the electronics and instrument segments and increased personnel expenses due to additional employees in all segments were the major items causing the higher selling expenses. During the quarter and nine months ended October 1, 1995, research and development expenses decreased $80,000 and $341,000, respectively, from the corresponding periods in 1994. These expense decreases are due to lower expenses as product and process development projects in both the instruments and electronics segments were completed in 1994 or early 1995. Other Income (Expense), net - - --------------------------- Other income (expense), net includes the following items: Quarter Ended Nine Months Ended 10/1/95 10/2/94 10/1/95 10/2/94 ------- ------- ------- ------- (in thousands) Interest expense ........... $ (85) $ (13) $ (258) $ (16) Real estate operations ..... 5 (17) (43) (54) Interest income ............ 0 9 13 24 Other, net ................. 1 (3) 5 2 ------ ------ ------ ------ $ (79) $ (24) $ (283) $ (44) ====== ====== ====== ====== The increases in interest expense are attributable to the higher levels of outstanding debt during 1995. The improvements in the real estate operations are mainly due to lower operating expenses. The reduced amounts of interest income are attributable to the lower levels of cash investments in 1995. -10- The Company reported operating profits of $155,000 and $414,000 during the quarter and nine months ended October 1, 1995, respectively, versus an operating profit of $49,000 and an operating loss of $330,000 in the comparable 1994 periods. Non-operating expenses increased $55,000 and $239,000 over the corresponding 1994 periods, respectively, mainly as a result of increased interest expense. As a result, the Company reported a pre-tax profit of $76,000 for the quarter ended October 1, 1995 versus a pre-tax profit of $25,000 for the 1994 period. For the nine months ended October 1, 1995, the Company reported a pre-tax profit of $131,000 versus a pre-tax loss of $374,000 in 1994. The improvements in the 1995 operating performance are mainly due to the higher sales level, the increased gross margin, and the reduction in operating expenses as a percentage of sales. The Company expects to see continuing improvements in operating performance during 1995 based on the projected sales increases resulting from both the Company's sales of new products developed in recent years and in sales, product promotion and customer service geared to increasing market share. -11- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11. Statement re Computation of Per Share Earnings. Filed herein, beginning on page 14. 27. Financial Data Schedule. Filed for electronic purposes only. (b) Reports on Form 8-K - None -12- 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: November 13, 1995 By /s/ Robert B. Gill ------------------------------ Robert B. Gill, President and Chief Executive Officer Date: November 13, 1995 By /s/ Michael J. Kroll ------------------------------ Michael J. Kroll, Vice President and Treasurer -13- EX-11 2 COMPUTATION OF PER SHARE EARNINGS MATEC Corporation and Subsidiaries Exhibit 11 Calculation of Earnings Per Share (amounts in thousands, except per share data) Three Months Ended 10/1/95 10/2/94 ------- ------- Net earnings ....................................... $ 49 $ 18 ====== ====== CALCULATION OF PRIMARY EARNINGS PER SHARE: Weighted average common shares outstanding ........ 2,765 2,765 Increase from assumed exercise of stock options and investment of proceeds in treasury stock, based upon average market prices ................. 29 12 ----- ----- Average common stock and common equivalent shares outstanding (C) ........................... 2,794 2,777 ===== ===== Net earnings per common and common equivalent share (A) ............................. $ .02 $ .01 ====== ====== CALCULATION OF FULLY DILUTED EARNINGS PER SHARE: Weighted average common shares outstanding ........ 2,765 2,765 Increase from assumed exercise of stock options and investment of proceeds in treasury stock, based upon the higher of average or quarter-end market prices ........................ 41 43 ----- ----- Average common stock and common equivalent shares used to calculate fully diluted earnings per share (C) .................................... 2,806 2,808 ===== ===== Net earnings per common and common equivalent share assuming full dilution (B) ....................... $ .02 $ .01 ====== ====== (A) Dilution from stock options is less than 3%, therefore primary earnings per share is based on the weighted average number of shares outstanding. (B) Dilution is less than 3%, therefore the primary basis was used for per share calculations. (C) The effect of the outstanding warrants is excluded since they do not meet either test of paragraph 37 of APB Opinion No. 15. -14- MATEC Corporation and Subsidiaries Exhibit 11 Calculation of Earnings per Share (amounts in thousands, except per share data) Nine Months Ended 10/1/95 10/2/94 ------- ------- Net earnings (loss) ............................... $ 82 $ (252) ====== ====== CALCULATION OF PRIMARY EARNINGS (LOSS) PER SHARE: Weighted average common shares outstanding ....... 2,765 2,765 Increase from assumed exercise of stock options and investment of proceeds in treasury stock, based upon average market prices (A) ............ 29 - ----- ----- Average common stock and common equivalent shares outstanding (D) .......................... 2,794 2,765 ===== ===== Net earnings (loss) per common and common equivalent share (B) ............................ $ .03 $ (.09) ====== ====== CALCULATION OF FULLY DILUTED EARNINGS (LOSS) PER SHARE: Weighted average common shares outstanding ....... 2,765 2,765 Increase from assumed exercise of stock options and investment of proceeds in treasury stock, based upon the higher of average or quarter-end market prices ....................... 33 15 ----- ----- Average common stock and common equivalent shares used to calculate fully diluted earnings per share (D) ................................... 2,798 2,780 ===== ===== Net earnings (loss) per common and common equivalent share assuming full dilution (C) ..... $ .03 $ (.09) ====== ====== (A) In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. (B) Dilution from stock options is less than 3%, therefore primary earnings per share is based on the weighted average number of shares outstanding. (C) Dilution is less than 3%, therefore the primary basis was used for per share calculations. (D) The effect of the outstanding warrants is excluded since they do not meet either test of paragraph 37 of APB Opinion No. 15. -15- EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1995 OCT-01-1995 502 0 5,408 220 7,235 14,088 18,551 11,829 23,342 6,160 2,179 190 0 0 13,325 23,342 20,463 20,463 14,559 14,559 5,453 37 258 131 49 82 0 0 0 82 .03 .03
-----END PRIVACY-ENHANCED MESSAGE-----