-----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, UZ/S2GyM0XoBLFxhkaC2pXESQ4jVxkVee/Sdk60aWc1owCqgkB0db8kYch4+6Y2G dTzSnGSnE+Lf6XB4DRTo5Q== 0000085608-96-000005.txt : 19960607 0000085608-96-000005.hdr.sgml : 19960607 ACCESSION NUMBER: 0000085608-96-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960327 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04184 FILM NUMBER: 96538904 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-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1995 ----------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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 St., Hopkinton, Massachusetts 01748 - - -------------------------------------- ---------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (508) 435-9039 -------------- Securities registered pursuant to Section 12 (b) of the Act: Title of each class: Name of each exchange on which registered: -------------------- ------------------------------------------ Common Stock $.05 par value American Stock Exchange Securities registered pursuant to Section 12 (g) of the Act: None 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 ------ ------- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Sec.229.405 of this chapter) is not contained herein, and will not 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. [ ] -1- Aggregate market value of voting stock held by non-affiliates: $5,983,530 (computed by reference to the last sales price of such common stock on March 21, 1996 as reported in the American Stock Exchange consolidated trading index). Number of shares of common stock outstanding at March 21, 1996: 2,764,331 Documents incorporated by reference: Annual Report to Stockholders for the year ended December 31, 1995: Parts I, II and IV Proxy Statement for the 1996 annual meeting of stockholders: Part III -2- PART I Item 1. Business - - ----------------- General - - ------- MATEC Corporation ("MATEC" or "Registrant") is incorporated under the laws of Delaware. As used herein the term "Company" refers to MATEC and its subsidiaries. Industry Segments - - ----------------- The Company's business operates in three segments: Electronics, Steel Cable, and Instruments, and is conducted primarily through its four principal wholly owned operating subsidiaries. The Company has two real estate complexes, located in Delaware and Massachusetts, which are operated by its wholly owned subsidiaries, RSC Realty Corporation and MEKontrol, Inc., respectively. Financial information about industry segments is set forth in Note 12 of the Notes to Consolidated Financial Statements in the 1995 Annual Report to Stockholders, which Note is incorporated herein by reference. Principal Products and Services - - ------------------------------- Electronics ----------- Valpey-Fisher Corporation ("Valpey") is involved in the design, production, import, and sale of quartz crystals and oscillators. In addition, Valpey manufactures and provides a wide variety of piezoelectric products and related services. The quartz crystals and oscillators are used in commercial, industrial, military, and aerospace products which rely on electronic rather than mechanical control of their function. To assure precise timing and control, the electronic circuitry used in these products incorporates quartz crystals and oscillators as integral components. Except for more costly atomic standards, quartz crystals and oscillators continue to be one of the most stable references for accurately controlling electronic frequencies and time. -3- Valpey's products and capabilities include: - high-volume, low-cost crystals and oscillators for consumer and commercial applications, - high-reliability, precision crystals and oscillators used in sophisticated industrial, military and aerospace applications. - ultra-high frequency crystals used in crystal filters and oscillators for OEM telecommunications and microwave applications. Applications for Valpey's products include computers, computer peripheral equipment such as modems and high resolution graphics terminals, microprocessor-based instrumentation, communications equipment, and defense and aerospace electronics. A significant portion of the high-volume, low-cost product sales is derived from imported products. Crystal and oscillator sales accounted for 40%, 30%, and 31% of the Company's sales for the years ended December 31, 1995, 1994 and 1993, respectively. Piezoelectric products manufactured by Valpey include ultrasonic transducer crystals and assemblies, surface acoustic wave (SAW) substrates, and precision quartz crystals. In addition, Valpey provides a variety of related services to the electronic and optical markets of the research, commercial, industrial, medical, and aerospace industries. Products are sold by its direct sales personnel, independent manufacturers' representatives and distributors. Cultured quartz, which is available from a number of domestic and foreign suppliers, is the principal raw material. Valpey imports products from various Far East (including China, Japan, South Korea, and Taiwan) suppliers for resale to its customers. Historically, Valpey has not experienced significant quality or delivery problems with these suppliers. In order to eliminate the effects of currency fluctuations, Valpey purchases the product in U.S. dollars. However, Valpey is subject to the inherent risks involved in international trade such as political instability and restrictive trade policies. Steel Cable - - ----------- Bergen Cable Technologies, Inc. ("Bergen") is involved in the design and manufacture of custom mechanical control assemblies. In addition, Bergen manufactures or purchases and sells a wide range of small diameter cables made primarily of stainless or galvanized steel. Current cable capabilities range from a .0045" diameter miniature cable to a 0.187" wire rope. Bergen's sales accounted for 34%, 42% and 46% of the Company's sales for the years ended December 31, 1995, 1994 and 1993, respectively. -4- A substantial portion of Bergen's cable assembly business is custom-designed to meet customers' specifications and requirements. Bergen's major markets include the OEM automotive, aerospace, medical and marine. Bergen also produces the Safety Cable (TM) System, a fastener retention system, used in securing fasteners during the manufacture or repair of aircraft components. This System, developed by Bergen and the GE Aircraft Group, consists of Bergen's stainless steel cable, stainless steel ferrules, and an exclusive, patented crimping and cutting tool. Bergen's principal raw materials, which include carbon steel, stainless steel and improved plow steel are available from both domestic and foreign suppliers. Products are sold by its direct sales personnel and through independent manufacturers' representatives. Sales to the aerospace and automotive markets accounted for approximately 60% of Bergen's sales during each of the three years ended December 31, 1995. Instruments ----------- The Company's Instruments segment includes Matec Applied Sciences, Inc. ("MASI") and Matec Instruments, Inc.("MI"). These subsidiaries develop and manufacture computer-controlled ultrasonic test equipment to perform real-time measurements and analysis. The Instruments segment accounted for 21%, 24%, and 20% of the Company's sales for the years ended December 31, 1995, 1994 and 1993, respectively. The instruments are sold in the USA mainly through each subsidiary's sales personnel, while foreign sales are performed through independent manufacturers' representatives. Export sales accounted for 49%, 53%, and 41% of this segment's sales for the years ended December 31, 1995, 1994 and 1993, respectively. Export sales are primarily shipped to customers located in Europe, the Pacific Rim and Canada. Product is sold in U.S. dollars and may be shipped on open account (based on credit history and rating), through a letter of credit, or by payment of cash in advance. Under the European Electromagnetic Compatibility ("EMC") Directive, instruments shipped to Europe after December 31, 1995 will require the Conformite European ("CE") marking signifying compliance to the EMC standards. The CE mark indicates that the product complies with certain standards set by the European nations. MASI and MI have completed the compliance testing for the CE mark on certain of its products and will complete compliance testing in the future for additional products. The companies will not seek the CE mark for certain older products. The Company does not believe that the inability to sell these older products to the European nations will have a material effect on MASI's and MI's results of operations. -5- The principal raw materials used are electronic components. Generally, most of the components are available from a number of sources. However, a few electronic components are purchased from single suppliers. The Company believes, however, that if necessary, alternate sources of supply for these items could be developed and delays in obtaining alternate sources would not have a material adverse effect on its business. Matec Applied Sciences, Inc. ("MASI") ------------------------------------- MASI produces and sells instruments that evaluate the stability of colloidal dispersions (small particles in suspension) for fundamental and applied research in both laboratory and industrial applications. Currently, MASI sells three instruments: the ESA-8000 ("ESA"), the AcoustoSizer(TM) and the CHDF 1100 Particle Sizer ("CHDF"). The ESA system measures the tendency of particles in suspension either to remain in stable suspension or to precipitate out of suspension. Unlike older methods which are limited to dilute dispersions, ESA techniques permit measurements of opaque samples with particle concentrations up to 75% by weight. The major markets for this system include industries involved in the research and processing of pigments, minerals and ores, ceramics and petrochemicals. The CHDF, which was introduced in 1989, determines size and size distribution of submicron particles (less than forty millionths of an inch). The primary markets for this instrument are the latex, pharmaceutical and pigment industries. MASI began commercial shipments of the AcoustoSizer(TM) in the fourth quarter of 1993. The AcoustoSizer(TM) was developed by MASI in a joint effort with Colloidal Dynamics Pty Limited ("CD") and the University of Sydney ("University"), both in Australia. The instrument is manufactured and marketed by MASI under an exclusive worldwide license of the basic technology patent owned by CD and the University. The AcoustoSizer(TM) has the unique, patented capability of measuring particle size distribution and particle charge of concentrated colloidal dispersions without the need for dilution. The primary markets for the AcoustoSizer(TM) are the inorganic pigments and ceramic markets. Matec Instruments, Inc. ("MI") ------------------------------ MI designs, manufactures and sells: - high power ultrasonic instrumentation and systems for the non-destructive evaluation (NDE) and non-destructive testing (NDT) of materials. - Doppler blood flow, and heart, vascular and cell function instruments, under the Crystal Biotech trade name, used mainly in cardiovascular medical research. - ultrasonic transducers and probes that allow these systems to measure flow in blood vessels as small as 0.3 mm in diameter and heart functions in all venues. -6- Historically MI's main focus was on selling instrumentation to the NDE/NDT market. During the last two years, MI's sales growth has been due to its sales of custom designed systems used to inspect and detect for flaws in materials. These systems may be integrated with a customer's manufacturing or quality control process. MI believes that its future growth will come from sales of these custom systems that combine ultrasonic technology with custom software, hardware and mechanical design. Instrumentation products for the NDE/NDT markets include the IMT-8000 and various custom Immersion Tank Imaging Test Systems, a family of ultrasonic PC plug-in board instruments and several older, manually and computer controlled toneburst instruments. Markets for these instruments include government and academic research laboratories, as well as R&D and quality assurance departments in industry. The IMT-8000 system is a bench-top immersion testing system capable of providing high-definition, full-color C-Scan representations of flaws deep within materials and structures. The plug-in boards, when installed in certain computers, provide the user certain material testing features. These systems facilitate the detection of defects and anomalies in metals, ceramics, composites and other types of materials. Industrial applications for the system include the evaluation of bond quality, material integrity and delamination detection. Crystal Biotech(TN) products include the CBI-8000, the Myotrac System, and the DataFlow(TN). The CBI-8000, an upgradable and modular instrument introduced in 1994, replaces the older VF-1 model and measures blood flow and myocardial dimensions in laboratory instrumented animals. Modules offered by MI enhance the capabilities of the CBI-8000 to provide the user simultaneous measurements of blood flow, organ dimensions, and tissue thickness and volumetric flow. The Myotrac System, introduced in late 1994, measures cellular function and dimension. MI's DataFlow (TN) system is a data acquisition tool that enables the user to record, analyze and display data collected from the VF-1 or any other instrument. Primary markets for these products include government and university laboratories, research hospitals and the pharmaceutical industry. Patents and Licenses - - -------------------- The Company owns various patents and has additional patent applications pending. While some of these patents are deemed to have value, the business of the Company, in the opinion of management, is not substantially dependent upon such patents, but is primarily based on know-how and market acceptance. In the Instruments Segment, MASI is a licensee of certain patented technology relating to its AcoustoSizer(TM) and CHDF-1100 products. Under the AcoustoSizer(TM) agreement, MASI is granted a world-wide sole and exclusive license to manufacture and market instruments for scientific and laboratory use. Under the CHDF agreement, MASI is granted the sole and exclusive worldwide right to manufacture and sell products utilizing certain technology. -7- Seasonal Nature of the Business - - ------------------------------- In recent years, the Company has experienced some softness in third quarter sales offset by a rise in fourth quarter sales in the Instrument segment. The Company attributes this third quarter decline to vacations taken during the summer months in the research community (industry, government and university). Working Capital - - --------------- There are no unusual working capital requirements relating to the Company's ongoing operations. Customers - - --------- During the last three years, no customer accounted for 10% of the Company's consolidated sales. A majority of the sales in the Electronics segment are to the computer and telecommunications markets. Approximately 33% of the Electronics' segment sales in 1995 were made to its five largest customers. Sales to the aerospace and automotive markets accounted for approximately 60% of the 1995 revenue in the Steel Cable segment. Approximately 36% of the Steel Cable's segment sales in 1995 were made to its five largest customers. Backlog Data - - ------------ The Company's backlog of firm orders at December 31, 1995 and 1994 are as follows (in thousands): Segment 1995 1994 ------------- ---- ---- Electronics ..................... $4,737 $3,062 Steel Cable ..................... 2,689 2,399 Instruments ..................... 373 134 ------ ------ $7,799 $5,182 ====== ====== The increase in the Electronics segment is attributable to the higher backlog level in the import product line, partially offset by lower backlog levels in the remaining product lines. The increase in the Steel Cable segment is mainly due to an increase in the marine market backlog. The increase in the Instruments segment is due to a higher level of custom designed systems for the NDE/NDT market. In the Instruments segment, management believes that backlog data is not as meaningful, since customer's orders for instruments are normally shipped upon receipt of order. -8- Government Contracts - - -------------------- Bergen's government contract-related business is in the form of firm fixed-price contracts. These contracts are subject to the standard government contract clause which permits the Government to terminate such contracts at its convenience. In the event of such termination there are provisions to enable the Company to recover its costs plus a fee. The Company does not at this time anticipate the termination of any of its major government contracts. Competition - - ----------- In most of the markets in which the Company operates there are numerous competitors. A number of the competitors are larger and have greater resources than the Company. Larger competitors include Teleflex Industries in the Steel Cable segment and M-tron Industries, Inc. in the Electronics segment. In addition, in the Electronics segment, foreign competitors, particularly from the Far East, continue to dominate the U.S. markets. However, based on the reasons below, the Company believes it can maintain a competitive position in its businesses. In the Electronics segment, the Company believes its quality, strong design and application engineering, responsive customer service and a willingness to provide specialty small quantity orders will continue to enable the Company to remain competitive in its markets. Management believes that in the Steel Cable segment, Bergen has a strong competitive edge in the cable assembly market based on its reputation for design capability, service, quality, and customer responsiveness. In the Instruments segment, the Company believes its strong design work, application engineering and quality will enable it to remain competitive in the markets in which it competes. Research and Development - - ------------------------ Expenditures for Company-sponsored research and development activities amounted to approximately $536,000, $962,000 and $1,056,000 in 1995, 1994 and 1993, respectively. Such amounts represent 1.8%, 4.0% and 5.3%, respectively, of sales for such periods. The reduction in expenses is attributable to lower expenses in the Electronics and Instruments segments as new product and process development projects were completed in late 1994. -9- Environmental Regulations - - ------------------------- To the knowledge of the Company compliance with Federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment or otherwise relating to the protection of the environment, has not had, nor will have a material effect upon capital expenditures, earnings or competitive position. Employees - - --------- No employees at the various locations of the Company are represented by a collective bargaining unit. At December 31, 1995, the Company has 320 full-time and 19 part-time employees. The Company considers its relations with its employees to be satisfactory. Foreign and Domestic Operations and Export Sales - - ------------------------------------------------ Financial information about foreign and domestic operations and export sales is set forth in Note 12 of the Notes to Consolidated Financial Statements in the 1995 Annual Report to Stockholders, which Note is incorporated herein by reference. -10- Item 2. Properties - - ------- ---------- The Company has the following facilities, each of which contains office and manufacturing space and all of which are owned (except as noted). Approximate Location Square Feet Primary Use -------- ----------- ----------- Wilmington, Delaware (1) 215,000 Real Estate Operation Lodi, New Jersey 50,560 Steel Cable Northboro, Massachusetts (2) 35,000 Real Estate Operation Instruments Hopkinton, Massachusetts (3) 32,400 Instruments Electronics Juarez, Mexico (4) 20,000 Steel Cable Carlisle, PA (5) 3,200 Electronics (1) At December 31, 1995 this facility is subject to one Industrial Revenue Bond with a total balance due of $380,000. See Note 9 of the Notes to Consolidated Financial Statements in the 1995 Annual Report to Stockholders. Approximately 207,000 square feet is leased and the remaining space is available for rent. (2) Matec Instruments occupies approximately 5,500 square feet, approximately 6,000 square feet is leased and the remaining space is available for rent. (3) At December 31, 1995 this facility is subject to an Industrial Revenue Bond with a balance due of $48,333. See Note 9 of the Notes to Consolidated Financial Statements in the 1995 Annual Report to Stockholders. (4) Facilities under lease expiring in December 1997. (5) Facilities under lease expiring in May 1996. The Company intends to exercise its 1 year renewal option under the lease. The Company believes its facilities (owned or leased) are suitable for their current uses and are in good repair. The Company believes that its facilities are adequate to satisfy its production capacity needs for the immediate future. -11- Item 3. Legal Proceedings - - ------- ----------------- The Company is involved in litigation in the ordinary course of business. The Company believes that the outcome of these actions should not have a material adverse effect on the financial condition of the Company. Item 4. Submission of Matters to a Vote of Security Holders - - ------- --------------------------------------------------- No matters were submitted to a vote of the Registrant's security holders during the last quarter of the fiscal year covered by this report. Executive Officers of the Registrant - - ------------------------------------ The names, ages and offices of the executive officers of the Registrant are as follows: Name Age Office ---- --- ------ Robert B. Gill 54 President and Chief Executive Officer Michael J. Kroll 47 Vice President and Treasurer The term of office for each officer of the Registrant is until the first meeting of the Board of Directors following the Annual Meeting of Stockholders and until a successor is chosen and qualified. Mr. Gill has been President and Chief Executive Officer of the Registrant since December 21, 1992. He was President of Laser Diode, Inc., a manufacturer of communication equipment, from prior to 1991 to December 1992. Mr. Kroll, a certified public accountant, has been Vice President and Treasurer of the Registrant since prior to 1991. -12- PART II Item 5. Market for the Registrant's Common Stock and Related - - ------- ---------------------------------------------------- Stockholder Matters ------------------- The information set forth on the inside front cover of the 1995 Annual Report to Stockholders under the caption "Common Stock Information" is incorporated by reference. Item 6. Selected Financial Data - - ------- ----------------------- The information set forth on page 4 of the 1995 Annual Report to Stockholders under the caption "Five Year Financial Summary" is incorporated by reference. Item 7. Management's Discussion and Analysis of Financial - - ------- ------------------------------------------------- Condition and Results of Operations ----------------------------------- The information set forth on pages 4 through 6 of the 1995 Annual Report to Stockholders under the caption "Management's Discussion and Analysis" is incorporated by reference. Item 8. Financial Statements and Supplementary Data - - ------- ------------------------------------------- The information contained in the Consolidated Financial Statements, Notes to Consolidated Financial Statements and the Independent Auditors' Report appearing on pages 7 through the inside back cover of the 1995 Annual Report to Stockholders is incorporated by reference. Item 9. Disagreements on Accounting and Financial Disclosure - - ------- ---------------------------------------------------- None. -13- PART III The information called for by Part III is hereby incorporated by reference from the information set forth and under the headings "Voting Securities", "Security Ownership of Management", "Election of Directors", and "Executive Compensation" in Registrant's definitive proxy statement for the 1996 Annual Meeting of Stockholders, which meeting involves the election of directors, such definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K. In addition, information on Registrant's executive officers has been included in Part I above under the caption "Executive Officers of the Registrant". -14- PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on - - -------- ------------------------------------------------------- Form 8-K -------- (a) 1. The following Consolidated Financial Statements are incorporated by reference from the indicated pages of the 1995 Annual Report to Stockholders: Page Number(s) in Annual Report Consolidated Balance Sheets, December 31, 1995 and 1994 .................... 7 Consolidated Statements of Operations for the Years Ended December 31, 1995, 1994 and 1993 ................................. 8 Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1994 and 1993 ................................. 9 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1994 and 1993 ................................. 10 Notes to Consolidated Financial Statements ..... 10-16 Independent Auditors' Report ................... Inside back cover (a) 2. The following schedule to the Consolidated Financial Statements and the Independent Auditors' Report on Schedule are filed as part of this report. Page Number ----------- Independent Auditors' Report ...................... 18 Schedule II - Valuation Reserves .................. 19 All other schedules are omitted because they are not applicable, not required or because the required information is included in the Consolidated Financial Statements or notes thereto. -15- (a) 3. The exhibits filed in this report or incorporated by reference, listed on the Exhibit Index on page 20, are as follows: Exhibit No. Description ----------- --------------------------------------------- 3. (a) Certificate of Incorporation 3. (c) By-Laws 4. Instruments defining the rights of holders of long-term debt 4. (a) Common Stock Purchase Warrant 10. (a) * 1982 Incentive Stock Option Plan 10. (b) * Management Incentive Plan 10. (c) * 1992 Stock Option Plan 11. Calculation of Earnings Per Share 13. 1995 Annual Report to Stockholders 21. Subsidiaries of the Registrant 23. Consent of Independent Auditors 27. Financial Data Schedule * 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 The Registrant did not file any reports on Form 8-K during the last quarter of its year ended December 31, 1995. -16- SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MATEC Corporation Date: March 25, 1996 By:/s/ Robert B. Gill ------------------- Robert B. Gill President and Chief Executive Officer 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/ Robert B. Gill President, Chief Executive March 25, 1996 - - ------------------------ Officer, and Director Robert B. Gill /s/ Michael J. Kroll Vice President and Treasurer - - ------------------------ (Principal Financial Officer March 25, 1996 Michael J. Kroll and Principal Accounting Officer) /s/ Eli Fleisher Director March 25, 1996 - - ------------------------ Eli Fleisher /s/ Lawrence Holsborg Director March 25, 1996 - - ------------------------ Lawrence Holsborg /s/ John J. McArdle III Director March 25, 1996 - - ------------------------ John J. McArdle III /s/ Joseph W. Tiberio Director March 25, 1996 - - ------------------------ Joseph W. Tiberio /s/ Robert W. Valpey Director March 25, 1996 - - ------------------------ Robert W. Valpey /s/ Ted Valpey, Jr. Chairman of the Board and March 25, 1996 - - ------------------------ Director Ted Valpey, Jr. -17- INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders MATEC Corporation Hopkinton, Massachusetts We have audited the consolidated financial statements of MATEC Corporation and subsidiaries as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, and have issued our report thereon dated March 1, 1996; such consolidated financial statements and report are included in the MATEC 1995 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of MATEC Corporation and subsidiaries, listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Deloitte & Touche LLP Boston, Massachusetts March 1, 1996 -18- MATEC Corporation and Subsidiaries ---------------------------------- Schedule II - Valuation and Qualifying Accounts ----------------------------------------------- Additions Balance at Charged to Balance Beginning Costs and at End Description of Period Expenses Deductions of Period ----------- ---------- ---------- ---------- ---------- Allowance for Doubtful Accounts: Year ended December 31, 1995 $ 199,000 $ 23,652 $ 28,652 $ 194,000 ========= ========= ========= ========= December 31, 1994 $ 194,000 $ 59,881 $ 54,851 $ 199,000 ========= ========= ========= ========= December 31, 1993 $ 194,000 $ 45,604 $ 45,604 $ 194,000 ========= ========= ========= ========= Inventory Reserve: Year Ended: December 31, 1995 $ 853,000 $ 388,040 $ 311,040 $ 930,000 ========== ========= ========= ========== December 31, 1994 $1,121,000 $ 264,863 $ 532,863 $ 853,000 ========== ========= ========= ========== December 31, 1993 $1,164,000 $ 401,421 $ 444,421 $1,121,000 ========== ========= ========= ========== -19- EXHIBIT INDEX ------------- Exhibit No. (inapplicable items are omitted) - - ----------- 3. (a) Certificate of Incorporation (incorporated by reference to Exhibit 3. (a) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992). 3. (c) By-Laws (incorporated by reference to Exhibit 3. (c) to Registrant's Form 10-Q for the quarterly period ended April 2, 1995). 4. Each instrument which defines the rights of holders of long-term debt of Registrant and its subsidiaries under which the amount authorized does not exceed 10% of total assets of Registrant and subsidiaries on a consolidated basis has not been filed as an exhibit to this Annual Report on Form 10-K. Registrant hereby undertakes and agrees to furnish a copy of each instrument to the Securities and Exchange Commission upon request. 4. (a) Common Stock Purchase Warrant dated April 12, 1995 between the Registrant and Massachusetts Capital Resource Company (incorporated by reference to Exhibit 4.(a) on Form 10-Q for the quarterly period ended July 2, 1995. 10. (a) 1982 Incentive Stock Option (incorporated by reference to Exhibit 10. (a) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992). 10. (b) Management Incentive Plan. Filed herewith. 10. (c) 1992 Stock Option Plan (incorporated by reference to Exhibit 10. (c) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992). 11. Calculation of Earnings Per Share. Filed herewith. 13. Portions of 1995 Annual Report to Stockholders. Filed herewith. 21. Subsidiaries of the Registrant. Filed herewith. 23. Consent of Independent Auditors. Filed herewith. 27. Financial Data Schedule. Filed for electronic purposes only. -20- EX-10 2 INCENTIVE PLAN Exhibit 10 (b) MATEC Corporation Management Incentive Plan The MATEC Corporation Management Incentive Plan is established to motivate subsidiary and corporate management to optimize short and long-term operating profit. The Plan consists of two separate incentive pools. Subsidiary Pool --------------- 1. Funding - - ---------- Each subsidiary will generate an incentive pool based on the percentage achievement of that subsidiary's budgeted operating profit for the current fiscal year. The incentive pool will be determined by multiplying the subsidiary's operating profit prior to profit sharing, 401(k), incentive, and LIFO but after corporate charges and corporate interest expense/income by the percentage contained in the graph shown in Exhibit 1. This pool is independent of MATEC's overall performance. 2. Awards - - --------- Eligibility ----------- Unless otherwise approved by MATEC's Board, all participants must be employed at the beginning and end of the fiscal year for which the award is to be made. Distribution ------------ A proposed primary distribution of the incentive pool among the subsidiary president and his immediate staff shall be submitted to and approved by the Stock Option Compensation Committee at the time of the budget approval. A portion of the pool may be reserved to recognize outstanding performance below the executive level. At the conclusion of the fiscal year, the subsidiary president will submit a final recommended list of awards to MATEC's president. The recommendations should be based upon subjective evaluations of each participant's performance, contribution and effort. Individual awards are subject to MATEC Board and Stock Option Compensation Committee approval. Corporate Pool -------------- 1. Funding - - ---------- Corporate will generate an incentive pool based on the percentage achievement of corporate's budgeted total pre-tax profit for the current fiscal year. The incentive pool will be determined by multiplying MATEC's pre-tax profit prior to profit sharing, 401(k), incentives, and LIFO by the percentage contained in the graph shown in Exhibit 2. 2. Awards - - --------- Eligibility ----------- Unless otherwise approved by MATEC's Board, all participants must be employed at the beginning and end of the fiscal year for which the award is to be made. Distribution ------------ A proposed distribution of the incentive pool among the Corporate Staff shall be submitted to and approved by the Stock Option Compensation Committee and Board at the time of budget approval. The final recommendation for pool distribution shall be made by MATEC's President and Chairman. All awards shall be approved by MATEC's Stock Option Compensation Committee and Board. Incentive Funding ----------------- Funding % --------- Budget Achievement Sub Corp Pool Rel. Size - - ------------------ ---- ---- -------------- less than 75% 0 0 0 75% 4.7 5.5 50% 100% 7.0 8.5 100% less than 125% 8.4 10.2 150% greater than 125% 8.4 10.2 MATEC Corporation Management Incentive Plan Exhibit 1 Subsidiary Incentive Pool - - --------- ------------------------- The X-axis of the graph represents the "incentive pool accrual %" and the Y-axis of the graph represents the "% budgeted operating profit achieved". The graph shows the following results: % budgeted operating incentive pool profit achieved accrual % -------------------- -------------- less than 75 0.0 75 4.7 80 5.2 85 5.6 90 6.1 95 6.5 100 7.0 105 7.3 110 7.6 115 7.9 120 8.15 125 8.4 greater than 125 8.4 MATEC Corporation Management Incentive Plan Exhibit 2 Corporate Incentive Pool - - --------- ------------------------ The X-axis of the graph represents the "incentive pool accrual %" and the Y-axis of the graph represents the "% budgeted operating profit achieved". The graph shows the following results: % budgeted operating incentive pool profit achieved accrual % -------------------- -------------- less than 75 0.0 75 5.5 80 6.1 85 6.7 90 7.3 95 7.9 100 8.5 105 8.8 110 9.2 115 9.5 120 9.9 125 10.2 greater than 125 10.2 EX-11 3 MATEC Corporation and Subsidiaries Exhibit 11 Calculation of Earnings Per Share (amounts in thousands, except per share data) Years Ended December 31, 1995 1994 1993 ------- ------- ------- Net earnings (loss): Continuing operations: Net earnings (loss) before cumulative effect of accounting change ........................ $ 303 $ (114) $(1,153) Discontinued operations: Net earnings ................................. - - 218 Gain on disposal ............................. - - 1,068 ------- ------- ------- Net earnings (loss) before cumulative effect of accounting change ......................... 303 (114) 133 Cumulative effect of accounting change ........ - - 135 ------- ------- ------- Net earnings (loss) ........................... $ 303 $ (114) $ 268 ======= ======= ======= CALCULATION OF PRIMARY EARNINGS (LOSS) PER SHARE: Weighted average common shares outstanding .... 2,765 2,765 2,884 Increase from assumed exercise of stock options and investment of proceeds in treasury stock, based upon average market prices (A) ......... 30 - 19 ----- ----- ----- Average common stock and common equivalent shares outstanding (B) ....................... 2,795 2,765 2,903 ===== ===== ===== Net earnings (loss) per common and common equivalent share: (C) Continuing operations: Earnings (loss) before cumulative effect of accounting change .......................... $ .11 $(.04) $(.40) Discontinued operations: Earnings .................................... - - .07 Gain on disposal ............................ - - .37 Cumulative effect of accounting change ....... - - .05 ----- ----- ----- $ .11 $(.04) $ .09 ===== ===== ===== (A) In loss periods, dilutive common equivalent shares are excluded as the effect would be anti-dilutive. (B) The effect of the outstanding warrants is excluded since they do not meet either test of paragraph 37 of APB Opinion No. 15. (C) Dilution from stock options is less than 3%, therefore primary earnings per share is based on the weighted average number of shares outstanding. MATEC Corporation and Subsidiaries Exhibit 11 Calculation of Earnings Per Share (amounts in thousands, except per share data) Years Ended December 31, 1995 1994 1993 ------- ------- ------- Net earnings (loss): Continuing operations: Net earnings (loss) before cumulative effect of accounting change ........................ $ 303 $ (114) $(1,153) Discontinued operations: Net earnings ................................. - - 218 Gain on disposal ............................. - - 1,068 ------- ------- ------- Net earnings (loss) before cumulative effect of accounting change ......................... 303 (114) 133 Cumulative effect of accounting change ........ - - 135 ------- ------- ------- Net earnings (loss) ........................... $ 303 $ (114) $ 268 ======= ======= ======= CALCULATION OF FULLY DILUTED EARNINGS (LOSS) PER SHARE: Weighted average common shares outstanding .... 2,765 2,765 2,884 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 28 20 ----- ----- ----- Average common stock and common equivalent shares outstanding (A) ....................... 2,798 2,793 2,904 ===== ===== ===== Net earnings (loss) per common and common equivalent share assuming full dilution: (B) Continuing operations: Earnings (loss) before cumulative effect of accounting change .......................... $ .11 $(.04) $(.40) Discontinued operations: Earnings .................................... - - .07 Gain on disposal ............................ - - .37 Cumulative effect of accounting change ....... - - .05 ----- ----- ----- $ .11 $(.04) $ .09 ===== ===== ===== (A) The effect of the outstanding warrants is excluded since they do not meet either test of paragraph 37 of APB Opinion No. 15. (B) Dilution is less than 3%, therefore the primary basis was used for per share calculations. EX-13 4 COMMON STOCK INFORMATION MATEC common stock is listed and traded on the American Stock Exchange under the symbol MXC. The range of high and low prices during each quarter for the past two years is shown below: For the years ended December 31, 1995 1994 - - --------------------------------------------------------------------- High Low High Low - - --------------------------------------------------------------------- 4th quarter 4 5/8 3 7/8 4 5/8 4 3rd quarter 4 3/4 3 7/8 4 3/4 3 5/8 2nd quarter 4 5/8 3 7/8 3 7/8 3 1/2 1st quarter 4 1/2 4 4 1/8 3 3/4 The Company paid no dividend in 1995 or 1994. Under the Term Debt Agreement, the Company is restricted to the amount of cash dividends paid in any one year. See Note 9 of the Notes to Consolidated Financial Statements. The approximate number of stockholders of record on February 29, 1996 was 3,100. This number does not include stockholders for whom shares are held in a "nominee" or "street" name. (Remaining information on "inside front cover" not incorporated by reference.) inside front cover Five Year Financial Summary
Years Ended December 31, 1995 1994 1993 1992 1991 - - --------------------------------------------------------------------------------------------------- (in thousands, except per share data) Continuing operations: Net sales $28,837 $24,229 $19,899 $19,732 $19,527 Gross profit 8,314 7,201 5,212 5,337 6,387 Earnings (loss) before income taxes and cumulative effect of accounting change 522 (156) (1,765) (1,339) 892 Income taxes (benefit) 219 (42) (612) (431) 363 Earnings (loss) before cumulative effect of accounting change 303 (114) (1,153) (908) 529 Discontinued operations - net - - 1,286 184 695 Cumulative effect of accounting change - - 135 - - - - --------------------------------------------------------------------------------------------------- Net earnings (loss) $ 303 $ (114) $ 268 $ (724) $ 1,224 =================================================================================================== Earnings (loss) per share: Continuing operations $ .11 $ (.04) $ (.40) $ (.31) $ .18 Discontinued operations - - .44 .06 .24 Cumulative effect of accounting change - - .05 - - - - --------------------------------------------------------------------------------------------------- Earnings (loss) $ .11 $ (.04) $ .09 $ (.25) $ .42 =================================================================================================== Average shares outstanding 2,765 2,765 2,884 2,896 2,900 =================================================================================================== Cash dividends per share $ - $ - $ - $ .10 $ .10 =================================================================================================== Total assets, end of year: Continuing operations $24,225 $20,448 $18,063 $15,658 $16,201 Discontinued operations - - - 2,210 2,207 - - --------------------------------------------------------------------------------------------------- $24,225 $20,448 $18,063 $17,868 $18,408 =================================================================================================== Long-term debt, end of year $ 2,180 $ 428 $ 652 $ 1,102 $ 1,356 ===================================================================================================
Management's Discussion and Analysis Financial Condition Cash and cash equivalents increased $286,000 from December 31, 1994 and the Company borrowed $3,520,000 through the use of its line of credit arrangement and the issuance of term debt. The main uses of the cash were operations ($1,880,000) and capital expenditures ($1,354,000). Increases in working capital components, partially offset by depreciation expense of $1,271,000, were the main uses of cash by operations. While all segments reported higher levels of inventory, an increase of $1,745,000 in the electronics segment inventory accounted for the majority of the overall change. The higher levels of inventory in the electronics segment are mainly needed to support the increased levels of current and projected future business and to meet customer demands for quick delivery of product. The increase in accounts receivable is attributable to the higher overall sales volume. Capital expenditures amounted to $1,354,000 during 1995 with additions of $923,000 in the steel cable segment accounting for the majority of the increase. These additions are mainly geared toward adding new and upgrading existing production capabilities and processes within this segment. Capital expenditures for 1996 are planned to approximate $1,800,000 with additions of $1,100,000 and $500,000 projected for the electronics and steel cable segments, respectively. These additions will mainly be focused on adding additional capacity, manufacturing cost reductions, and upgrading existing production capabilities. During the year, the Company obtained $2 million in secured term debt financing due in 2000. As part of the agreement, the lender was issued warrants to purchase 85,000 shares of the Company's common stock. The Company believes that this transaction improves the overall debt structure and provides financing flexibility necessary to continue to grow the business. In addition, the Company has secured lines of credit with banks totaling $2,850,000. At December 31, 1995, the unused portion of these lines was $415,000. The Company believes that based on its current working capital, the expected cash flows from operations, and its current debt arrangements its resources are sufficient to meet the financial needs and to fund the capital expenditures for the projected levels of business in 1996. New Accounting Standards The Company has not yet adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and SFAS No. 123, "Accounting for Stock-Based Compensation". Adoption of both Statements is required in 1996. The adoption of SFAS No. 121 is not expected to have a material impact on the Company's financial statements. As allowed by SFAS 123, the Company will continue to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" for employee stock compensation measurement. The anticipated effect of adopting this new standard is not expected to have a material effect on the Company's financial position or results of operations. Results of Operations -- Overview -- 1995 versus 1994 Net sales increased $4,608,000 (19%) in 1995 to $28,837,000, mainly as a result of the record sales level reported in the electronics segment. The overall gross profit percentage decreased from 30% in 1994 to 29% in 1995 as lower margins in the steel cable and instruments segments exceeded the improved margin in the electronics segment. Selling and administrative expenses increased $570,000 (9%) over 1994 mainly due to higher selling expenses in the electronics and instruments segments. The $426,000 (44%) reduction in research and development expenses was principally a result of lower expenses in the electronics and instruments segments. Other income (expense), net amounted to $374,000 of expense in 1995 compared to $82,000 of expense in 1994. Interest expense increased $337,000 over 1994 due to the higher levels of short and long-term debt. The real estate operations loss declined $13,000 from 1994 mainly as a result of lower overall operating expenses. Other income includes $26,000 of dividend income in 1995. The effective income tax rate in 1995 was 42% compared to a benefit rate of 27% in 1994. The difference in rates is mainly due to the effective state income tax rate and the limited state tax benefit of operating losses within a state. As disclosed in the Notes to Consolidated Financial Statements, the Company recorded a valuation allowance to fully reserve for the potential state tax benefits of the state net operating loss carryforwards during both years. The change in the valuation allowance in 1995 includes the utilization of a portion of prior year state net operating loss carryforwards. Based on the higher sales level, the increased gross margin and the lower percentage of operating expenses to sales, operating profit was $896,000 in 1995 versus an operating loss of $73,000 in 1994. Nonoperating expenses increased $291,000 over 1994 mainly as a result of increased interest expense. As a result, the Company reported a pre-tax profit from continuing operations of $522,000 in 1995 versus a loss of $156,000 in 1994. The after tax earnings amounted to $303,000 in 1995 compared to a loss of $114,000 in 1994. Business Segment Results -- 1995 versus 1994 Sales in the electronics segment increased $4,646,000 (56%) over 1994 as all product lines reported significant increases. The sales increases were mainly attributable to higher sales to both OEM and contract manufacturers in the telecommunications market and to the distributor markets. The overall gross profit percentage increased 36% over last year mainly as a result of the favorable effects of allocating the fixed overhead expenses over the increased sales level and manufacturing efficiencies and product yield improvements on internally manufactured products. Total operating expenses remained level with 1994 as lower general and administrative and research and development expenses were offset by a 24% rise in selling expenses. The reduction in G&A expense was due to lower personnel expenses. The decrease in R&D expenses resulted from the completion of product and process development projects in late 1994. Increased sales commission, personnel, and advertising expenses were the major items causing the higher selling expense. As a result of the significant increase in sales and gross margin, coupled with level overall operating expenses, the electronics segment's operating profit rose to $1,870,000 compared to an operating loss of $63,000 in 1994. Sales in the steel cable segment decreased $369,000 (4%) from 1994. While sales to most major markets were comparable to last year, sales to the fitness equipment market dropped about $750,000. The Company continues to pursue product opportunities in the automotive market and other markets it serves, but continues to see softness in the fitness equipment, aerospace and government markets. The overall gross profit percentage decreased about 20% from 1994, prior to the favorable effects of the LIFO adjustment in 1994. The lower margin resulted from the start-up expenses and operating inefficiencies associated with several new programs beginning production during the year, increased depreciation expense, and the effect of the fixed operating costs over the lower sales volume. Total operating expenses increased 7% over last year primarily due to legal fees related to a suit against a former sales representative. As a result of the lower sales, the reduced gross margin and the increased operating expenses, the steel cable segment reported an operating loss of $261,000 compared to an operating profit of $628,000 in 1994. The instruments segment reported a 6% increase in sales over 1994 to a record level of $6,178,000. Higher sales to the NDT/NDE markets partially offset by a 9% decrease in sales to both the colloidal and medical research markets accounted for the net sales gain. The increased sales to the NDT/NDE markets were attributable to higher sales of the Company's custom test systems. The reduction in sales to the colloidal market was due to lower foreign sales of the ESA product partially offset by increased sales of the CHDF product. Lower foreign sales was the main reason for the decrease in sales to the medical research market. The overall gross profit percentage decreased 7% from 1994 as a result of higher occupancy costs due to increased space requirements, increased personnel costs caused by additional employees and changes in the product mix of sales. Total operating expenses increased 5% over 1994 as higher selling expenses were partially offset by lower R&D expenses. Increased advertising, promotional and commission expenses accounted for the higher selling expenses. The decrease in R&D expense was mainly attributable to a reduction in expenses associated with the development of the AcoustoSizer(TM) partially offset by increased product development expenses in the medical research and NDT/NDE market segments. While sales increased slightly over 1994, lower gross margins and higher operating expenses resulted in the instruments segment reporting $298,000 in operating profit versus an operating profit of $404,000 in 1994. Results of Operations -- Overview -- 1994 versus 1993 Net sales rose $4,330,000 (22%) in 1994 to a record level of $24,229,000 as all three segments reported sales increases. The overall gross profit percentage improved to 30% in 1994 from 26% in 1993 and was attributable to higher margins achieved in all segments. The increased margin in the steel cable segment during 1994 was mainly attributable to the favorable LIFO adjustment. Selling and administrative expenses increased $549,000 (10%) over 1993 principally as a result of higher selling expenses in the instruments and electronics segments. The $94,000 (9%) decrease in research and development expenses was mainly due to lower expenses in the instruments segment. Other income (expense), net amounted to $82,000 in expense in 1994 compared to $157,000 in expense in 1993. The real estate operations generated a loss of $68,000 in 1994 compared to a $125,000 loss in 1993. The reduction in loss was mainly due to a combination of higher rental income and lower operating expenses. Interest expense decreased $22,000 from 1993 primarily due to lower levels of short-term borrowings. The effective income tax rate for 1994 was a benefit of 27% compared to a benefit of 35% in 1993. The difference in the applicable rates is primarily due to the effect of nondeductible expenses in 1994. As a result of both significantly higher sales and an overall increase in the gross margin percentage compared to last year, the operating loss decreased from $1,608,000 in 1993 to $73,000 in 1994. Non-operating expense declined $74,000 due to a lower real estate operations loss and decreased interest expense. As a result, the Company reported a pre-tax loss from continuing operations of $156,000 in 1994 versus a loss of $1,765,000 in 1993. The after tax loss amounted to $114,000 in 1994 compared to a loss of $1,153,000 in 1993. Business Segment Results -- 1994 versus 1993 Steel cable segment sales increased $1,028,000 (11%) over 1993. This improvement resulted from a 19% increase in the sales of assembly products, partially offset by a 16% decrease in bulk cable sales. Higher sales to the automotive and marine markets, partially offset by lower sales to the fitness equipment market, accounted for the sales increase in assembly products. Lower sales to the government and the aerospace market contributed to the decrease in bulk cable sales. The Company continues to actively pursue assembly product opportunities within the markets it serves. The Company continues to see softness in the fitness equipment, aerospace, and government markets. Prior to the favorable effects of the $151,000 LIFO adjustment this year, the overall gross profit percentage increased slightly over 1993. Total operating expenses decreased slightly from last year mainly due to lower advertising and related expenses. As a result of the higher sales level, the increase in overall margin, and the slight reduction in operating expenses, the operating profit in the steel cable segment increased to $628,000 in 1994 versus a $160,000 operating profit in 1993. The instruments segment sales rose $1,857,000 (47%) over 1993 to a record level of $5,847,000. About 65% of the sales increase was attributable to higher export sales. The majority of the sales improvement was generated by increased sales to the colloidal market and to a lesser extent, higher sales to the nondestructive testing/evaluation markets. Sales to the medical research market remained relatively flat with 1993. The sales increase in the colloidal market was primarily due to unit sales of the AcoustoSizer(TM), the Company's new instrument that was introduced in December 1993. The overall gross profit percentage increased 6% as a result of the manufacturing efficiencies from the higher sales volume and a lower provision for obsolete inventory. Higher selling expenses, offset by a $110,000 reduction in research and development expenses, accounted for the $211,000 (9%) increase in total operating expenses. Increased advertising and promotion expense to promote the AcoustoSizer, and higher commission expense due to the increased sales level were the main reasons for the selling expense increase. The reduction in research and development expense was primarily attributable to lower expenses related to the development of the AcoustoSizer. As a result of the increased sales level and the improved margins, offset in part by the higher operating expenses, the instruments segment reported an operating profit of $404,000 in 1994 compared to an operating loss of $445,000 in 1993. Sales in the electronics segment increased $1,445,000 (21%) over 1993. The improvement in sales was attributable to higher sales to both OEM and contract manufacturers in the telecommunications market and to the distributor markets. All major product areas reported sales gains over the prior year. The overall gross profit percentage improved 17% over 1993 partly as a result of increased sales of internally manufactured products which produce a higher margin than that from the resale of imported product. In addition, manufacturing efficiencies and product yield improvements and a lower provision for slow-moving inventory contributed to the higher margin. Total operating expenses increased $258,000 (17%) over 1993 primarily due to higher selling expenses. Increases in personnel, advertising and product promotion, and sales commission expenses accounted for the higher selling expense. As a result of the higher sales and improvement in the overall margins, partially offset by increased operating expenses, the electronics segment's operating loss decreased from $322,000 in 1993 to $63,000 in 1994. Consolidated Balance Sheets December 31, 1995 1994 - - -------------------------------------------------------------------------- Assets Current assets: Cash and cash equivalents $ 830,340 $ 544,455 Receivables, net 5,672,411 4,852,046 Inventories 7,719,160 5,628,541 Deferred income taxes and other current assets 1,032,328 1,144,896 - - -------------------------------------------------------------------------- Total current assets 15,254,239 12,169,938 - - -------------------------------------------------------------------------- Property, plant and equipment, at cost: Land and improvements 1,005,895 996,033 Buildings and improvements 6,149,253 6,044,175 Machinery and equipment 11,177,306 10,433,916 - - -------------------------------------------------------------------------- 18,332,454 17,474,124 Less accumulated depreciation 11,637,820 10,887,500 - - -------------------------------------------------------------------------- 6,694,634 6,586,624 - - -------------------------------------------------------------------------- Other assets: Marketable equity securities 2,134,799 1,552,581 Miscellaneous 140,907 139,319 - - -------------------------------------------------------------------------- $24,224,579 $20,448,462 ========================================================================== Liabilities and Stockholders' Equity Current liabilities: Notes payable $ 2,435,000 $ 915,000 Current portion of long-term debt 228,333 223,333 Accounts payable 2,636,689 3,151,971 Accrued liabilities 1,378,184 1,374,270 Income taxes 350,305 326,097 - - -------------------------------------------------------------------------- Total current liabilities 7,028,511 5,990,671 - - -------------------------------------------------------------------------- Deferred income taxes 1,435,568 1,123,772 Long-term debt 2,179,960 428,333 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 189,685 189,685 Capital surplus 6,397,485 6,374,485 Retained earnings 11,030,591 10,727,167 Net unrealized gain on marketable equity securities 1,181,415 832,197 Treasury stock at cost, 1,029,315 and 1,029,145 shares (5,218,636) (5,217,848) - - -------------------------------------------------------------------------- Total stockholders' equity 13,580,540 12,905,686 - - -------------------------------------------------------------------------- $24,224,579 $20,448,462 ========================================================================= See notes to consolidated financial statements. Consolidated Statements of Operations
For the Years Ended December 31, 1995 1994 1993 - - ----------------------------------------------------------------------------------------- Net sales $28,837,026 $24,228,683 $19,899,113 Cost of sales 20,522,548 17,028,131 14,687,529 - - ----------------------------------------------------------------------------------------- Gross profit 8,314,478 7,200,552 5,211,584 - - ----------------------------------------------------------------------------------------- Selling and administrative expenses 6,882,748 6,312,283 5,763,636 Research and development expenses 535,619 961,768 1,056,219 - - ---------------------------------------------------------------------------------------- 7,418,367 7,274,051 6,819,855 - - ---------------------------------------------------------------------------------------- Operating profit (loss) 896,111 (73,499) (1,608,271) Other income (expense): Interest expense (374,832) (37,691) (59,367) Other, net 1,145 (44,669) (97,529) - - ----------------------------------------------------------------------------------------- (373,687) (82,360) (156,896) - - ----------------------------------------------------------------------------------------- Earnings (loss) from continuing operations before income taxes and cumulative effect of accounting change 522,424 (155,859) (1,765,167) Income tax (expense) benefit (219,000) 42,000 612,000 - - ----------------------------------------------------------------------------------------- Earnings (loss) from continuing operations before cumulative effect of accounting change 303,424 (113,859) (1,153,167) Earnings from discontinued operations - - 1,285,804 - - ----------------------------------------------------------------------------------------- Earnings (loss) before cumulative effect of accounting change 303,424 (113,859) 132,637 Cumulative effect of accounting change - - 135,000 - - ----------------------------------------------------------------------------------------- Net earnings (loss) $ 303,424 $ (113,859) $ 267,637 ========================================================================================= Earnings (loss) per share: Continuing operations before cumulative effect of accounting change $ .11 $ (.04) $ (.40) Discontinued operations - - .44 Cumulative effect of accounting change - - .05 - - ----------------------------------------------------------------------------------------- $ .11 $ (.04) $ .09 =========================================================================================
See notes to consolidated financial statements. Consolidated Statements of Cash Flows
For the Years Ended December 31, 1995 1994 1993 - - ---------------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Earnings (loss) from continuing operations before accounting change $ 303,424 $ (113,859) $(1,153,167) Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities: Depreciation and amortization 1,270,785 1,101,471 997,742 Changes in deferred income taxes 132,000 (42,000) 92,000 Other 2,960 - - Changes in assets and liabilities: Receivables, net (1,070,365) (1,363,072) 629,434 Inventories (2,090,619) (1,915,987) 423,655 Other current assets 58,936 (163,054) (9,624) Accounts payable and accrued liabilities (511,368) 1,874,927 340,014 Income taxes, net 24,636 159,830 (738,248) - - --------------------------------------------------------------------------------------------------------- Net cash provided (used) by operating activities (1,879,611) (461,744) 581,806 - - --------------------------------------------------------------------------------------------------------- Cash Flows from Investing Activities: Capital expenditures, net (1,354,383) (1,903,830) (860,880) Purchases of marketable equity securities - (150,000) (300,001) Collection of amount due from sale of discontinued operations 250,000 155,000 - Other, net (26,000) (22,688) (92,201) - - --------------------------------------------------------------------------------------------------------- Net cash (used) by investing activities (1,130,383) (1,921,518) (1,253,082) - - --------------------------------------------------------------------------------------------------------- Cash Flows from Financing Activities: Proceeds from issuance of long-term debt and warrants 2,000,000 - - Net borrowings (repayments) under lines of credit 1,520,000 915,000 (850,000) Payments on long-term debt (223,333) (208,334) (496,432) Purchases of common stock, net (788) (881) (504,054) - - --------------------------------------------------------------------------------------------------------- Net cash provided (used) by financing activities 3,295,879 705,785 (1,850,486) - - --------------------------------------------------------------------------------------------------------- Cash Provided by Discontinued Operations - - 4,030,039 Net Increase (Decrease) in Cash and Cash Equivalents 285,885 (1,677,477) 1,508,277 Cash and Cash Equivalents at beginning of year 544,455 2,221,932 713,655 - - --------------------------------------------------------------------------------------------------------- Cash and Cash Equivalents at end of year $ 830,340 $ 544,455 $ 2,221,932 ========================================================================================================= Supplemental Disclosures of Cash Flow Information Cash paid during the year by continuing operations for: Interest $ 403,462 $ 78,879 $ 120,078 Income taxes $ - $ 25,620 $ 45,655
Consolidated Statements of Cash Flows - continued Noncash Investing and Financing Activities: Under Statement of Financial Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities", the Company recorded the following increases (decreases): 1995 1994 1993 - - -------------------------------------------------------------------------- Marketable Equity Securities $ 582,000 $ (248,000) $1,090,000 Deferred Income Taxes 233,000 (100,000) 110,000 Net Unrealized Gain on Marketable Equity Securities 349,000 (148,000) 980,000 In connection with the sale of its Alloy Surfaces Company, Inc. subsidiary in 1993, the Company recorded a $405,000 receivable. See notes to consolidated financial statements. Consolidated Statements of Stockholders' Equity
Unrealized Gain (Loss) on Marketable Common Stock Capital Retained Equity Treasury Shares Amount Surplus Earnings Securities Stock - - ---------------------------------------------------------------------------------------------------------------- Balance, January 1, 1993 3,793,695 $189,685 $6,374,485 $10,573,389 $ - $(4,712,913) Net earnings - - - 267,637 - - Purchases of common stock, net - - - - - (504,054) Unrealized gain on marketable equity securities - - - - 979,818 - - - ---------------------------------------------------------------------------------------------------------------- Balance, December 31, 1993 3,793,695 189,685 6,374,485 10,841,026 979,818 (5,216,967) Net (loss) - - - (113,859) - - Purchases of common stock - - - - - (881) Unrealized (loss) on marketable equity securities - - - - (147,621) - - - ---------------------------------------------------------------------------------------------------------------- Balance, December 31, 1994 3,793,695 189,685 6,374,485 10,727,167 832,197 (5,217,848) Net earnings - - - 303,424 - - Purchases of common stock - - - - - (788) Unrealized gain on marketable equity securities - - - - 349,218 - Issuance of detachable common stock purchase warrants - - 23,000 - - - - - ---------------------------------------------------------------------------------------------------------------- Balance, December 31, 1995 3,793,695 $189,685 $6,397,485 $11,030,591 $1,181,415 $(5,218,636) ================================================================================================================
See notes to consolidated financial statements. Notes to Consolidated Financial Statements (1) Summary of Significant Accounting Policies: Principles of consolidation -- The accompanying consolidated financial statements include the accounts of MATEC Corporation and its wholly owned subsidiaries. Significant intercompany balances and transactions have been eliminated in consolidation. Use of estimates -- The preparation of the Company's financial statements in conformity with generally accepted accounting principles necessarily 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 balance sheet dates. Estimates include reserves for accounts receivable and inventory, useful lives of property, plant and equipment, accrued liabilities, and deferred income taxes. Fair value of financial instruments -- Statement of Financial Accounting Standards No. 107 "Disclosures About Fair Value of Financial Instruments" requires disclosure of the fair value of certain financial instruments. The carrying amounts of cash, cash equivalents, accounts payable and accrued expenses approximate fair value because of their short-term nature. Marketable equity securities are recorded in the financial statements at aggregate fair value. The carrying amounts of the Company's debt instruments approximate fair value (Notes 8 and 9). Cash equivalents -- For purposes of the statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates market value. Inventories -- Inventories are stated at the lower of cost or market. Steel cable product inventory costs are determined by the last-in, first-out method (LIFO). The remaining product inventory costs are determined by the first-in, first-out method (FIFO). Property, plant and equipment -- The Company uses the straight-line method of providing for depreciation and amortization of property, plant and equipment for financial reporting purposes and accelerated methods for tax purposes. The estimated lives used to compute depreciation and amortization are as follows: land improvements - 10 years, buildings and improvements - 15 to 40 years and machinery and equipment - 3 to 10 years. Marketable equity securities -- Marketable equity securities consist of common stocks and are valued under Statement of Financial Accounting Standards No. 115 ("SFAS 115") "Accounting for Certain Investments in Debt and Equity Securities". Under SFAS 115, the Company has classified these securities as "available for sale" and are valued at fair value, with unrealized gains, net of taxes excluded from earnings and reported as a separate component of stockholders' equity. Notes continued At December 31, 1995 and 1994, the fair market value (based on quoted market prices) of these securities was $2,134,799 and $1,552,581, respectively, and the amortized cost was $710,384. Gross unrealized gains amounted to $1,424,415 and $842,197 at December 31, 1995 and 1994, respectively, and there were no unrealized loses at either date. During 1995, the Company recorded a $349,218 increase in the "Unrealized Gain (Loss) on Marketable Equity Securities" component of stockholders' equity and a $147,621 decrease in the same account during 1994. Revenue recognition -- Revenue is recognized when product is shipped. Income taxes -- The Company accounts for income taxes under Statement of Financial Accounting Standards No. 109 ("SFAS 109") "Accounting for Income Taxes". This Statement requires the Company to compute deferred income taxes based on the differences between the financial statement and tax basis of assets and liabilities using enacted rates in effect in the years in which the differences are expected to reverse. Earnings (loss) per share -- Earnings (loss) per share have been computed based on the weighted average number of shares outstanding during the years -- 2,764,503 shares in 1995, 2,764,687 shares in 1994 and 2,883,712 shares in 1993. No effect has been given to outstanding stock options and warrants as no material dilutive effect would result from the exercise of these items. (2) Discontinued Operations: In September 1993, the Company sold the stock of its Alloy Surfaces Company, Inc. ("Alloy") subsidiary for approximately $4.3 million in cash and $405,000 in receivables. The gain on the sale was $1,068,000 after a tax provision of $570,000. Accordingly, the operating results of Alloy have been reported as discontinued operations. The earnings relating to Alloy for 1993 are comprised of the following: 1993 - - -------------------------------------------------------------------------- Earnings from operations (less applicable income taxes of $95,000) $ 152,904 Gain on disposal (less applicable income taxes of $570,000) 1,067,900 Cumulative effect of income tax accounting change 65,000 - - -------------------------------------------------------------------------- Earnings from discontinued operations $1,285,804 ========================================================================== (3) Receivables, net: Receivables, net of allowances, consist of the following: 1995 1994 - - -------------------------------------------------------------------------- Accounts receivable, less allowance for doubtful accounts of $194,000 and $199,000 $5,672,411 $4,602,046 Amount due on the sale of Alloy Surfaces Co., Inc - 250,000 - - -------------------------------------------------------------------------- $5,672,411 $4,852,046 ========================================================================== Notes continued (4) Inventories: Inventories consist of the following: 1995 1994 - - -------------------------------------------------------------------------- Raw materials $3,415,021 $3,006,702 Work in process 925,168 698,022 Finished goods 3,378,971 1,923,817 - - -------------------------------------------------------------------------- $7,719,160 $5,628,541 ========================================================================== Inventories of $2,897,000 in 1995 and $2,752,000 in 1994 are determined by the LIFO method. In 1995 and 1994 the amounts of LIFO inventories were approximately $23,000 and $45,000 less than the amount of such inventories determined on the FIFO basis. (5) Income Taxes: The components of the provision (benefit) for income taxes are as follows: 1995 1994 1993 - - -------------------------------------------------------------------------- Current provision (benefit): Federal $ - $ - $(704,000) State 87,000 - - - - -------------------------------------------------------------------------- 87,000 - (704,000) - - -------------------------------------------------------------------------- Deferred provision (benefit): Federal 133,000 (62,000) 92,000 State (1,000) 20,000 - - - -------------------------------------------------------------------------- 132,000 (42,000) 92,000 - - -------------------------------------------------------------------------- Total $ 219,000 $ (42,000) $(612,000) ========================================================================== The tax effects of significant items comprising the Company's net deferred tax liability as of December 31, 1995 and 1994 are as follows: 1995 1994 - - -------------------------------------------------------------------------- Deferred tax liabilities: Depreciation $ 584,700 $ 598,600 DISC commissions 535,200 468,000 Unrealized gain on marketable equity securities 243,000 10,300 Installment sale - 25,700 - - -------------------------------------------------------------------------- Total deferred tax liabilities 1,362,900 1,102,600 - - -------------------------------------------------------------------------- Deferred tax assets: Inventory reserves 485,600 481,400 State net operating loss carryforwards 311,600 264,800 Federal net operating loss carryforwards 18,700 94,700 Allowance for doubtful accounts 70,800 80,000 Accrued expenses 100,400 124,300 - - -------------------------------------------------------------------------- Total deferred tax assets 987,100 1,045,200 Valuation allowance (311,600) (264,800) - - -------------------------------------------------------------------------- Deferred tax assets, net 675,500 780,400 - - -------------------------------------------------------------------------- Net deferred tax liabilities $ 687,400 $ 322,200 ========================================================================== Notes continued Other current assets include deferred income taxes of $748,000 and $802,000 in 1995 and 1994. Valuation allowances have been provided at December 31, 1995 and 1994 for "state net operating loss carryforwards". The allowances have been recorded since it is more likely than not that the Company may not be able to generate operating income to realize the benefit of these losses, by the expiration dates beginning in 1997. The valuation allowance increased slightly during 1995 as a result of additional state net operating losses in 1995. The total income tax provision (benefit) differs from that computed by applying the Federal income tax rate to income before income taxes. The reasons for the difference are as follows: 1995 1994 1993 - - -------------------------------------------------------------------------- Income taxes at statutory rates $ 177,624 $ (52,992) $(600,157) State income tax, net of Federal tax benefit 57,000 13,000 - Benefit of state operating loss carryforward (25,000) - - Non-deductible expenses 17,000 15,000 8,000 Other, net (7,624) (17,008) (19,843) - - -------------------------------------------------------------------------- $ 219,000 $ (42,000) $(612,000) ========================================================================== (6) Profit Sharing and Savings Plan: The Company has a trusteed profit sharing 401(k) plan that covers all qualified employees. Under the profit sharing section of the plan, the Company may make contributions to the plan at the discretion of the Board of Directors. Under the 401(k) section of the plan, the Company matched 50% of employee contributions up to 6% of compensation. Total Company contributions charged to operations were $142,000 in 1995, $115,000 in 1994 and $103,300 in 1993. (7) Accrued Liabilities: Accrued liabilities consists of the following items: 1995 1994 - - -------------------------------------------------------------------------- Employee compensation $ 364,267 $ 274,164 Other 1,013,917 1,100,106 - - -------------------------------------------------------------------------- $1,378,184 $1,374,270 ========================================================================== (8) Notes Payable: The Company has secured demand lines of credit with two banks amounting in total to $2,850,000. The $2,000,000 line of credit is secured by all assets except real estate and marketable equity securities. Advances under this line are based on percentage formulas of specific receivable and inventory balances of certain subsidiaries. The Company had $1,585,000 of borrowings outstanding under this line of credit at December 31, 1995. The $850,000 line of credit is secured by marketable equity securities. The Company had $850,000 of borrowings outstanding under this line of credit at December 31, 1995. There are no compensating balance requirements or significant commitment fees under either arrangement. The weighted average interest rate on outstanding notes payable was 9.4% at December 31, 1995 and 9.25% at December 31, 1994. Notes continued (9) Long-Term Debt: Long-term debt consists of the following: 1995 1994 - - -------------------------------------------------------------------------- 11% Term Debt, $2 million face amount, due in 2000; interest payable quarterly $1,979,960 $ - 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% 380,000 555,000 Semi-annual principal payments of $24,167 through 1996; interest payable semi-annually at a rate of 65% of the trustee's prime rate 48,333 96,666 - - -------------------------------------------------------------------------- 2,408,293 651,666 Less current portion 228,333 223,333 - - -------------------------------------------------------------------------- $2,179,960 $ 428,333 =========================================================================== 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 $255,000. The Term Debt Agreement includes covenants covering debt to equity and interest expense ratios and restrictions as to the total amount of debt, dividends, and capital stock repurchases. Dividend payments in any fiscal year are limited to 30% of the Company's net earnings of the prior fiscal year. The Company is in compliance with all such covenants at December 31, 1995. Under the Agreement, the lender will subordinate its security interest for up to $4 million in debt, with corresponding increases in the interest rate from the 10% stated rate to 12% based on the subordination amount. The lender subordinated its security interest to the $2 million bank line of credit. 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 were valued at $23,000 on the date of issuance. The warrants expire on June 30, 2000. The Industrial Revenue Bonds are secured by certain assets with carrying values of $2,936,000. The aggregate principal payments on long-term debt due in each of the next five years are as follows; 1996 - $228,333; 1997 - $200,000; 1998 - $0; 1999 - 0; and 2000 - $2,000,000. (10) Stock Options: The MATEC Corporation 1992 Stock Option Plan allows for the granting of options to officers, key employees, and other individuals to purchase a maximum of 300,000 shares of the Company's common stock. The option price and terms are determined by the Company's Stock Option-Compensation Committee. The options granted may qualify as incentive stock options. At December 31, 1995, there were 73,750 options available for future grant under this Plan. Notes continued The 1982 Incentive Stock Option Plan allowed for the granting of options to employees, including officers, to purchase a maximum of 150,000 shares of the Company's common stock at a price not less than the fair market value of the stock at or about the time of grant. Options may be exercisable in installments or under such terms as the Company's Stock Option-Compensation Committee may determine. As of March 23, 1992, there were no further options to be granted under this Plan. All options granted and outstanding under the 1982 Plan remain outstanding and exercisable in accordance with their terms. At December 31, 1995, the Company has reserved 327,000 shares of common stock for these Plans. A summary of the changes in stock options of the above Plans is as follows:
1995 1994 1993 - - ------------------------------------------------------------------------------------------------------- Number Option price Number Option price Number Option price of shares per share of shares per share of shares per share - - ------------------------------------------------------------------------------------------------------- Outstanding, January 1, 241,750 $3.50 - 5.25 189,500 $3.50-5.25 190,500 $3.50-5.25 Exercised - - - - - - Granted 12,500 4.38 55,250 3.69-4.25 8,500 3.63 Expired/cancelled (1,000) 5.25 (3,000) 4.94 (9,500) 4.94 - - ------------------------------------------------------------------------------------------------------- Outstanding, December 31, 253,250 $3.50 - 5.25 241,750 $3.50-5.25 189,500 $3.50-5.25 ======================================================================================================= Exercisable, December 31, 131,450 $3.50 - 5.25 81,575 $3.50-5.25 45,500 $3.50-5.25 =======================================================================================================
(11) Other Income (Expense), net: Other, net consists of the following items: 1995 1994 1993 - - -------------------------------------------------------------------------- Interest income $ 21,006 $ 25,872 $ 22,011 Real estate operations (54,698) (67,652) (125,090) Other items, net 34,837 (2,889) 5,550 - - -------------------------------------------------------------------------- $ 1,145 $(44,669) $ (97,529) ========================================================================== Interest expense in 1995, 1994 and 1993 of $32,725, $44,608, and $64,267, respectively, is included in real estate operations. (12) Business Segments: The Company operates in three industry segments: Electronics, Steel Cable, and Instruments. In addition, the Company operates two real estate subsidiaries. Operating profit (loss) represents net sales less all identifiable operating expenses. General corporate expenses, income taxes, and other income or expense are excluded from segment operations. Notes continued 1995 1994 1993 - - ----------------------------------------------------------------------------- (in thousands) Net Sales: Electronics $ 12,911 $ 8,265 $ 6,820 Steel Cable 9,748 10,117 9,089 Instruments 6,178 5,847 3,990 - - ----------------------------------------------------------------------------- Total $ 28,837 $ 24,229 $ 19,899 ============================================================================= Operating Profit (Loss): Electronics $ 1,870 $ (63) $ (322) Steel Cable (261) 628 160 Instruments 298 404 (445) - - ----------------------------------------------------------------------------- Total 1,907 969 (607) General Corporate Expenses (1,011) (1,043) (1,001) Real Estate Operations, Net (55) (68) (125) Other Income (Expense), Net (319) (14) (32) - - ----------------------------------------------------------------------------- Earnings (loss) before income taxes $ 522 $ (156) $ (1,765) ============================================================================= Identifiable Assets: Electronics $ 8,109 $ 5,398 $ 3,657 Steel Cable 7,111 6,601 4,878 Instruments 3,511 3,058 1,871 Corporate 3,258 2,968 5,090 Real Estate Operations 2,236 2,423 2,567 - - ----------------------------------------------------------------------------- $ 24,225 $ 20,448 $ 18,063 ============================================================================= Capital Expenditures: Electronics $ 209 $ 667 $ 151 Steel Cable 923 1,021 498 Instruments 179 180 140 Corporate - 2 8 Real Estate Operations 43 41 64 - - ----------------------------------------------------------------------------- $ 1,354 $ 1,911 $ 861 ============================================================================= Depreciation and Amortization: Electronics $ 330 $ 298 $ 249 Steel Cable 527 385 305 Instruments 190 195 220 Corporate 3 5 6 Real Estate Operations 221 218 217 - - ----------------------------------------------------------------------------- $ 1,271 $ 1,101 $ 997 ============================================================================= Corporate assets consist mainly of cash and cash equivalents and marketable equity securities. Notes continued Summarized financial information covering the Company's domestic and foreign (Mexico) operations is outlined below: 1995 1994 1993 - - ----------------------------------------------------------------------------- (in thousands) Net Sales: Domestic $24,634 $19,739 $15,672 Foreign 4,203 4,490 4,227 - - ----------------------------------------------------------------------------- $28,837 $24,229 $19,899 ============================================================================= Operating Profit (Loss): Domestic $ 2,358 $ 1,301 $ (118) Foreign (451) (332) (489) - - ----------------------------------------------------------------------------- $ 1,907 $ 969 $ (607) ============================================================================= Identifiable Assets: Domestic $22,044 $18,448 $16,148 Foreign 2,181 2,000 1,915 - - ----------------------------------------------------------------------------- $24,225 $20,448 $18,063 ============================================================================= Export sales amounted to approximately $5,248,000, $4,704,000 and $2,621,000 in 1995, 1994 and 1993, respectively. (13) Quarterly Financial Data (unaudited): Selected unaudited quarterly financial data for 1995 and 1994 is set forth below: First Second Third Fourth - - ------------------------------------------------------------------------ 1995 (in thousands, except per share data) Net sales $6,319 $7,026 $7,118 $8,374 Gross profit 1,818 2,129 1,958 2,410 Earnings before income taxes 8 47 76 391 - - ------------------------------------------------------------------------ Net earnings $ 5 $ 28 $ 49 $ 221 ======================================================================== Net earnings per share $ .00 $ .01 $ .02 $ .08 ======================================================================== 1994 Net sales $5,686 $5,817 $6,043 $6,683 Gross profit 1,590 1,773 1,731 2,107 Earnings (loss) before income taxes (253) (146) 25 218 - - ------------------------------------------------------------------------ Net earnings (loss) $ (167) $ (103) $ 18 $ 138 ======================================================================== Net earnings (loss) per share $ (.06) $ (.04) $ .01 $ .05 ======================================================================== In the 1994 fourth quarter, adjustments relative to the LIFO valuation of inventories increased gross profit by $74,000 and increased net earnings by $54,000 or $.02 per share. (14) Contingencies: The Company is involved in litigation in the ordinary course of business. The Company believes that the outcome of these actions should not have a material adverse effect on the financial condition of the Company. Independent Auditors' Report To the Stockholders and Board of Directors of MATEC Corporation: We have audited the accompanying consolidated balance sheets of MATEC Corporation and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of MATEC Corporation and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Deloitte & Touche LLP Boston, Massachusetts March 1, 1996 (Remaining information on inside back cover is not incorporated by reference.) inside back cover EX-21 5 Exhibit (21) . Subsidiaries of the Registrant -------------- ------------------------------ The following is a list of the Registrant's subsidiaries (all of which are 100% owned): State or Other Jurisdiction Of Incorporation --------------------------- Bergen Cable Technologies, Inc. New Jersey Cable Bergen de Mexico, S.A. de C.V. Mexico Matec Applied Sciences, Inc. Delaware MATEC EFO Corp. Massachusetts Matec Fiberoptics, Inc. Massachusetts Matec Instruments, Inc. Delaware Matec International, Inc. Massachusetts Matec Microelectronics, Inc. Massachusetts MEKontrol, Inc. Massachusetts RSC Realty Corporation Delaware Valpey-Fisher Corporation Massachusetts EX-23 6 INDEPENDENT AUDITORS' CONSENT The Board of Directors MATEC Corporation We consent to the incorporation by reference in these Registrations Nos. 2-77851 and 33-77554 of MATEC Corporation on Form S-8, as amended, of our reports dated March 1, 1996, appearing in the Annual Report on Form 10-K of MATEC Corporation for the year ended December 31, 1995. Deloitte & Touche LLP Boston, Massachusetts March 25, 1996 EX-27 7
5 YEAR DEC-31-1995 DEC-31-1995 830,340 0 5,866,411 194,000 7,719,160 15,254,239 18,332,454 11,637,820 24,224,579 7,028,511 2,179,960 0 0 189,685 13,390,855 24,224,579 28,837,026 28,837,026 20,522,548 20,522,548 0 23,652 374,832 522,424 219,000 303,424 0 0 0 303,424 .11 .11
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