-----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, S5m4tTi+Vk7tXM/lE9UBlyGg8EenQHLu7PRDm/L96hhfMlA1RixkwtD95oERcnPp j1LLrfG0rQ57dviFdGVoCg== 0000085608-98-000005.txt : 19980519 0000085608-98-000005.hdr.sgml : 19980519 ACCESSION NUMBER: 0000085608-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980405 FILED AS OF DATE: 19980518 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MATEC CORP/DE/ CENTRAL INDEX KEY: 0000085608 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES & ROLLING & FINISHING MILLS [3310] IRS NUMBER: 060737363 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04184 FILM NUMBER: 98626815 BUSINESS ADDRESS: STREET 1: 75 SOUTH ST CITY: HOPKINTON STATE: MA ZIP: 01748 BUSINESS PHONE: 5084359039 MAIL ADDRESS: STREET 1: 75 SOUTH STREET CITY: HOPKINTON STATE: MA ZIP: 01748 FORMER COMPANY: FORMER CONFORMED NAME: RSC INDUSTRIES INC DATE OF NAME CHANGE: 19840515 FORMER COMPANY: FORMER CONFORMED NAME: REEVES INDUSTRIES INC DATE OF NAME CHANGE: 19710520 10-Q 1 FORM 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 5, 1998 ----------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------- Commission File Number 1-4184 -------------------------------------------------- MATEC Corporation - ------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) 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 offices) (Zip Code) (508) 435-9039 - ------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of May 8, 1998, the number of shares outstanding of Registrant's Common Stock, par value $.05 was 2,758,253. -1- MATEC Corporation Index Page ---- PART I. FINANCIAL INFORMATION Consolidated Condensed Balance Sheets - April 5, 1998 and December 31, 1997 ..................... 3 Consolidated Statements of Operations - Three Months Ended April 5, 1998 and March 30, 1997 ..... 4 Consolidated Condensed Statements of Cash Flows - Three Months Ended April 5, 1998 and March 30, 1997 ..... 5 Consolidated Statements of Comprehensive Income - Three Months Ended April 5, 1998 and March 30, 1997 ..... 6 Notes to Consolidated Condensed Financial Statements ..... 7-8 Management's Discussion and Analysis of Financial Condition and Results of Operations ..................... 9-11 PART II. OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K ................ 12 Signatures ..................................................... 12 -2- PART I - FINANCIAL INFORMATION Item 1. Financial Statements MATEC Corporation and Subsidiaries Consolidated Condensed Balance Sheets (In thousands, except share data) (Unaudited) 4/5/98 12/31/97 -------- -------- ASSETS Current assets: Cash and cash equivalents ............................ $ 1,295 $ 885 Receivables, less allowances of $100 and $90 ......... 3,263 3,124 Inventories .......................................... 3,927 3,193 Deferred income taxes and other current assets ....... 896 977 ------- ------- Total current assets ............................... 9,381 8,179 ------- ------- Property, plant and equipment, at cost ................. 8,855 12,143 Less accumulated depreciation ........................ 6,349 8,233 ------- ------- 2,506 3,910 ------- ------- Marketable equity securities ........................... 4,140 4,657 Net assets of discontinued operations .................. 6,276 5,662 Other assets ........................................... 97 90 ------- ------- $22,400 $22,498 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ..................................... $ 1,675 $ 1,195 Accrued liabilities .................................. 886 1,172 Income taxes ......................................... 500 416 ------- ------- Total current liabilities .......................... 3,061 2,783 ------- ------- Deferred income taxes .................................. 1,910 2,317 Long-term debt ......................................... 1,990 1,989 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 3,804,195 shares 190 190 Capital surplus ...................................... 6,443 6,443 Retained earnings .................................... 11,784 11,443 Net unrealized gain on marketable equity securities .. 2,385 2,696 Treasury stock at cost, 1,070,642 and 1,070,544 shares (5,363) (5,363) ------- ------- Total stockholders' equity ...................... 15,439 15,409 ------- ------- $22,400 $22,498 ======= ======= See notes to consolidated condensed financial statements. -3- MATEC Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended 4/5/98 3/30/97(a) ------- ------- Net sales ................................ $ 4,573 $ 3,756 Cost of sales ............................ 3,373 2,802 ------- ------- Gross profit ........................... 1,200 954 Operating expenses: Selling and administrative ............. 1,000 973 Research and development ............... 51 51 ------- ------- 1,051 1,024 Operating profit (loss) .................. 149 (70) Other income (expense): Interest expense ........................ (51) (63) Gain on sale of property, plant and equipment .............................. 386 - Other, net .............................. 13 (11) ------- ------- 348 (74) Earnings (loss) before from continuing operations before income taxes .......... 497 (144) Income tax (expense) benefit ............. (199) 58 ------- ------- Earnings (loss) from continuing operations 298 (86) Earnings from discontinued operations .... 43 67 ------- ------- Net earnings (loss) ...................... $ 341 $ (19) ======= ======= Basic and diluted earnings (loss) per share: Continuing operations ................... $ .10 $ (.03) Discontinued operations ................. .02 .02 ------ ------ $ .12 $ (.01) ====== ====== Weighted average shares, basic ........... 2,734 2,748 ===== ===== Weighted average shares, diluted ......... 2,735 2,748 ===== ===== Cash dividends per share ................ $ - $ - ===== ===== (a) Restated to reflect discontinued operations. See notes to consolidated condensed financial statements. -4- MATEC Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) Three Months Ended 4/5/98 3/30/97(a) -------- -------- Cash flows from operating activities: Net earnings (loss) from continuing operations ... $ 298 $ (86) Adjustments to reconcile net earnings (loss) to net cash provided (used) by operating activities: Depreciation and amortization .................. 164 169 Deferred income taxes .......................... (201) (10) Gain on sale of property, plant and equipment .. (386) - Changes in operating assets and liabilities .... (514) 210 ------- ------- Net cash provided (used) by operating activities (639) 283 - ----------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sale of property, plant and equipment 1,862 - Capital expenditures, net ........................ (234) (60) Other, net........................................ (8) (15) ------- ------- Net cash provided (used) by investing activities 1,620 (75) - ---------------------------------------------------------------------- Cash flows from financing activities: Net (repayments) under lines of credit ........... - (50) Purchases of common stock ........................ - (73) ------- ------- Net cash (used) by financing activities - (123) - ---------------------------------------------------------------------- Net cash provided (used) by discontinued operations (571) 57 - ---------------------------------------------------------------------- Net increase in cash and cash equivalents ......... 410 142 Cash and cash equivalents: Beginning of period .............................. 885 610 ------- ------- End of period .................................... $ 1,295 $ 752 ======= ======= (a) Restated to reflect discontinued operations. See notes to consolidated condensed financial statements. -5- MATEC Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (In thousands) (Unaudited) Three Months Ended 4/5/98 3/30/97 ------- ------- Net earnings (loss) ...................... $ 341 $ (19) Other comprehensive income, net of tax: Unrealized gain (loss) on marketable equity securities, net of tax benefit of $207 in 1998 and $52 in 1997 ........ (311) (78) ------- ------- Comprehensive income ..................... $ 30 $ (97) ======= ======= See notes to consolidated condensed financial statements. -6- MATEC Corporation and Subsidiaries Notes to Consolidated Condensed Financial Statements 1. Financial Presentation: The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements in the 1997 MATEC Corporation and Subsidiaries Annual Report which is incorporated by reference in Form 10-K for the year ended December 31, 1997. 2. Inventories: Inventories consist of the following (in thousands): 4/5/98 12/31/97 ------- -------- Raw materials ....................... $ 1,389 $ 1,074 Work in process ..................... 1,414 1,097 Finished goods ...................... 1,124 1,022 ------- ------- $ 3,927 $ 3,193 ======= ======= 3. Discontinued Operations: In the third quarter of 1997, the Company adopted a plan to sell its Bergen Cable Technologies, Inc. ("Bergen") subsidiary and the Company signed a letter of intent in December 1997 to sell substantially all of the assets of Bergen. In April 1998, the Company completed the sale as discussed in Footnote 5. Subsequent Events. The Company expects to realize a gain on the disposition of Bergen. The operating results of Bergen have been reported as discontinued operations, and previously reported financial statements have been reported to reflect this classification. The operating results of Bergen are presented in the Consolidated Statements of Operations under the caption "Earnings from discontinued operations" and include (in thousands): Three Months Ended 4/5/98 3/30/97 ------- ------- Net sales $ 4,150 $ 3,689 Earnings before income taxes 71 112 Income taxes 28 45 Net earnings 43 67 -7- Net assets of Bergen include (in thousands): 4/5/98 12/31/97 -------- -------- Current assets $ 5,302 $ 5,008 Property, plant and equipment, net 2,391 2,407 Current liabilities 1,417 1,753 -------- -------- Net assets of discontinued operations $ 6,276 $ 5,662 ======= ======== At April 5, 1998, all of the assets of Bergen, except real estate, are pledged as collateral for Bergen's $1 million line of credit, the Company's $1 million line of credit and the Company's Term Debt Note ($2 million face amount) due in 2000. At April 5, 1998, Bergen had no borrowings outstanding under its line of credit. 4. New Accounting Standards: The Company adopted Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income" during the first quarter of 1998, as required. SFAS 130 establishes standards for reporting and displaying comprehensive income and its components in a set of financial statements. Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from nonowner sources. Presently, the only component of comprehensive income for the Company is unrealized holding gains (losses) on available for sale marketable equity securities. The Company is currently evaluating its segment disclosures and will adopt SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" in the 1998 fourth quarter as required. 5. Subsequent Events: On April 15, 1998, the Company sold all of the assets of its Bergen Cable Technologies, Inc. ("Bergen") subsidiary. The purchase price received consisted of $7.5 million in cash, a subordinated promissory note in the principal amount of $1,250,000, a 10% stock and membership interest in the acquiring entities, and assumption of certain liabilities including trade payables. The Company will report an after-tax gain from the cash proceeds of the sale of approximately $200,000 or $.08 per share in the second quarter of 1998. Since the acquiring entity has significant third-party debt compared to its equity and the Company's note is subordinated to the third-party debt, the Company will not record any gain realized on the note and stock portions of the sale, until cash payments are received by the Company. On April 21, 1998, the Company's Board of Directors approved a special nonrecurring cash distribution payable May 15, 1998 to stockholders of record on May 4, 1998 in the amount of $1.75 per share. This special nonrecurring distribution represents a substantial portion of the net cash proceeds from the sale of Bergen. -8- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition - ------------------- Cash and cash equivalents increased $410,000 during the three months ended April 5, 1998. During this period, the Company's operations and discontinued operations used $639,000 and $571,000 in cash, respectively, and investing activities generated cash of $1,620,000. The $639,000 use of cash from continuing operations was mainly due to the $514,000 net increase in working capital. The $139,000 increase in receivables is mainly due to a slight increase in the number of days sales outstanding. The majority of the inventory increase is attributable to increased levels in the electronics segments mainly to support the current sales backlog and delivery requirements. The increase in accounts payable is mainly attributable to the timing of inventory purchases. The decrease in accrued liabilities resulted mainly from the payments of the 401(k) match, employee bonuses and professional fees. The $571,000 use of cash by the discontinued operations was mainly due to the pay off of $690,000 in short-term borrowings. During the three months ended April 5, 1998, the Company received proceeds of $1,862,000 from the sale its real estate complex located in Delaware. None of the Company's operations were located at this facility. During this period, the Company purchased $234,000 capital equipment. Machinery and equipment additions mainly in the electronics segment geared toward adding new and upgrading existing production capabilities and processes accounted for the majority of these expenditures. Management believes that based on its current working capital, the expected cash flows from operations and its $1,850,000 lines of credit availability, the Company's resources are sufficient to meet its financial needs in 1998 including a remaining capital expenditures budget of approximately $650,000. On April 21, 1998, the Company's Board of Directors approved a special nonrecurring cash distribution payable May 15, 1998 to stockholders of record on May 4, 1998 in the amount of $1.75 share. This special nonrecurring distribution represents a substantial portion of the net cash proceeds from the sale of its Bergen Cable subsidiary. -9- Results of Operations -- Overview -- - ------------------------------------ Net sales for the quarter ended April 5, 1998 increased $817,000 (22%) over the comparable period in 1997 as both the electronics and instruments segments reported increased sales. The overall gross profit percentage increased from 25% in 1997 to 26% in 1998 as slightly higher margins in the electronics segment were partially offset by lower margins in the instruments segment. Total selling and administrative expenses increased $27,000 (3%) from 1997. Selling expenses increased $69,000 (12%) from 1997 as increased expenses in the electronics segment were partially offset by lower expenses in the instruments segment. Overall general and administrative expenses decreased $42,000 (11%) from 1997 mainly as a result of lower corporate payroll and travel expenses as the Company has not replaced its former president since his resignation as an employee in the third quarter of 1997. Research and development expenses remained level with last year. Interest expense decreased $12,000 from 1997 due to the lower levels of short and long-term debt. During the quarter ended April 5, 1998, the Company sold its real estate complex located in Delaware and realized a $386,000 pre-tax gain on the sale. Other income (expense), net amounted to $13,000 of income in 1998 compared to $11,000 of expense in 1997. The main reason for the change was a lower loss in real estate operations in 1998 versus 1997. The estimated effective income tax rate for both 1998 and 1997 is 40%. Based on both the higher sales level and gross margin, offset in part by a slight increase in operating expenses, operating profit increased to $149,000 during the quarter ended April 5, 1998 compared to a $74,000 loss during the comparable period in 1997. The 1998 quarter included nonoperating income of $348,000 mainly as a result of the gain on the sale of real estate compared to $74,000 of expense in 1997. As a result, the Company reported a pre-tax profit from continuing operations of $497,000 during the quarter ended April 5, 1998 versus a pre-tax loss of $144,000 in 1997. Earnings from continuing operations amounted to $298,000 in 1998 compared a $86,000 loss in 1997. Earnings from discontinued operations amounted to $43,000 in 1998 compared to $67,000 in 1997. In total, the Company reported net earnings of $341,000 during the quarter ended April 5, 1998 compared to a $19,000 loss in the comparable period of 1997. -10- Business Segment Results - ------------------------ Sales in the electronics segment increased $556,000 (19%) over 1997 as the current quarter's sales benefitted from a significantly higher beginning backlog level compared to last year. The overall gross profit percentage increased 7% from 1997 mainly as a result of spreading the fixed overhead expenses over the increased sales level. Total operating expenses increased 20% over 1997; however, as a percentage of sales, these expenses remained level with 1997. This increase in operating expenses is attributable to higher selling expenses mainly caused by increased personnel costs and increased sales commissions paid to independent sales representatives. Based on the increased sales and gross profit levels, offset in part by increased operating expenses, the electronics segment reported a $73,000 increase in operating profit over the comparable quarter in 1997. Total sales in the instruments segment increased $261,000 (32%) over 1997 as higher sales to both the NDT/NDE and medical research markets were partially offset by decreased unit sales of instruments to the colloidal markets. The overall gross profit percentage decreased 8% from 1997 mainly as a result of custom test systems representing a larger percentage of sales in 1998. Total operating expenses declined 14% from 1997 mainly due to lower sales travel expense and decreased professional fees. As a result of the sales increase, the increase in gross profit, and lower operating expenses, during the quarter ended April 5, 1998, the instruments segment reported a $118,000 increase in its operating profit over the comparable period in 1997. -11- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11. Statement re Computation of Per Share Earnings (Loss). Filed herein. 27. Financial Data Schedule. Filed for electronic purposes only. (b) Reports on Form 8-K - None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MATEC Corporation ------------------------------------ Date: May 15, 1998 By /s/ Ted Valpey, Jr. --------------------------------- Ted Valpey, Jr. Chairman of the Board and President Date: May 15, 1998 By /s/ Michael J. Kroll --------------------------------- Michael J. Kroll, Vice President and Treasurer (Principal Financial and Accounting Officer) -12- EX-11 2 EARNINGS PER SHARE MATEC Corporation and Subsidiaries Exhibit 11 Calculation of Earnings Per Share (amounts in thousands, except per share data) Three Months Ended 4/5/98 3/30/97(A) ------ ------- Net earnings (loss) from continuing operations ... $ 298 $ (86) Net earnings from discontinued operations ........ 43 67 ------ ------ Net earnings (loss) .............................. $ 341 $ (19) ====== ====== Calculation of basic earnings per share: - ---------------------------------------- Weighted average common shares outstanding ...... 2,734 2,748 ===== ===== Basic earnings (loss) per common share: Continuing operations ......................... $ .10 $ (.03) Discontinued operations ....................... .02 .02 ------ ------ $ .12 $ (.01) ====== ====== Calculation of diluted earnings per share: - ------------------------------------------ Weighted average common shares outstanding ...... 2,734 2,748 Increase from assumed exercise of stock options and investment of proceeds in treasury stock, based upon the average market prices (B) (C) ... 1 - ----- ----- Average common stock and common equivalent shares used to calculate diluted earnings (loss) per share ............................... 2,735 2,748 ===== ===== Diluted earnings (loss) per common share: Continuing operations ......................... $ .10 $ (.03) Discontinued operations ....................... .02 .02 ------ ------ $ .12 $ (.01) ====== ====== (A) Restated for discontinued operations. (B) The dilutive effect of stock options and warrants was not considered in 1997 since the Company reported a loss from continuing operations. (C) The dilutive effect of outstanding warrants to purchase 85,000 shares of common stock were not included in the 1998 computations since the exercise price was greater than the average market price of the common shares. -13- EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 APR-05-1998 1,295 0 3,363 100 3,927 9,381 8,855 6,349 22,400 3,061 1,990 0 0 190 15,249 22,400 4,573 4,573 3,373 3,373 0 17 51 497 199 298 43 0 0 341 .12 .12
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