-----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, OI16IaBxH7k0eLI6V3NWG0xfmod3PGgOEZkQr1GwpWwhVwC+hGGIXsJ6qjJQv2ru /Hq2as7Gl+Vu1SYt/Cj87Q== 0000085608-99-000011.txt : 19990816 0000085608-99-000011.hdr.sgml : 19990816 ACCESSION NUMBER: 0000085608-99-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990704 FILED AS OF DATE: 19990813 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: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04184 FILM NUMBER: 99686928 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 July 4, 1999 ----------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------- Commission File Number 1-4184 -------------------------------------------------- MATEC Corporation - ------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Maryland 06-0737363 - ------------------------------- ------------------------- (State or other jurisdiction of (I.R.S Employer incorporation or organization) Identification Number) 75 South St., Hopkinton, Massachusetts 01748 - ---------------------------------------- ------------- (Address of principal executive offices) (Zip Code) (508) 435-9039 - ------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of August 6, 1999, the number of shares outstanding of Registrant's Common Stock, par value $.05 was 2,680,048. -1- MATEC Corporation Index Page ---- PART I. FINANCIAL INFORMATION Consolidated Condensed Balance Sheets - July 4, 1999 and December 31, 1998 ...................... 3 Consolidated Statements of Operations - Three Months and Six Months Ended July 4, 1999 and July 5, 1998 .......... 4 Consolidated Condensed Statements of Cash Flows - Six Months Ended July 4, 1999 and July 5, 1998 .......... 5 Consolidated Statements of Comprehensive Income - Three Months and Six Months ended July 4, 1999 and July 5, 1998 ........................................ 6 Notes to Consolidated Condensed Financial Statements ..... 7-8 Management's Discussion and Analysis of Financial Condition and Results of Operations ..................... 9-12 Quantitative and Qualitative Disclosures about Market Risk ............................................. 12 PART II. OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders 13 Item 6 - Exhibits and Reports on Form 8-K ................ 13 Signatures ..................................................... 14 -2- PART I - FINANCIAL INFORMATION Item 1. Financial Statements MATEC Corporation and Subsidiaries Consolidated Condensed Balance Sheets (In thousands, except share data) (Unaudited) 7/4/99 12/31/98 -------- -------- ASSETS Current assets: Cash and cash equivalents ............................ $ 3,135 $ 4,516 Receivables, net ..................................... 2,412 1,772 Inventories .......................................... 3,458 2,793 Deferred income taxes and other current assets ....... 832 1,311 ------- ------- Total current assets ............................... 9,837 10,392 ------- ------- Property, plant and equipment, at cost ................. 8,254 7,916 Less accumulated depreciation ........................ 5,576 5,264 ------- ------- 2,678 2,652 ------- ------- Marketable equity securities ........................... 3,590 3,138 Other assets ........................................... 263 320 ------- ------- $16,368 $16,502 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt .................... $ 996 $ - Accounts payable ..................................... 1,618 411 Accrued liabilities .................................. 963 1,165 Income taxes ......................................... 79 894 ------- ------- Total current liabilities .......................... 3,656 2,470 ------- ------- Deferred income taxes .................................. 1,728 1,547 Long-term debt ......................................... - 1,993 Stockholders' equity: Preferred stock, $1.00 par value- Authorized 1,000,000 shares; issued none ............ - - Common stock, $.05 par value- Authorized 10,000,000 shares; Issued and outstanding: 2,680,848 and 2,716,948 shares ..................... 134 136 Capital surplus ...................................... 4,518 4,641 Retained earnings .................................... 4,277 3,932 Net unrealized gain on marketable equity securities .. 2,055 1,783 ------- ------- Total stockholders' equity ...................... 10,984 10,492 ------- ------- $16,368 $16,502 ======= ======= See notes to consolidated condensed financial statements. -3- MATEC Corporation and Subsidiaries Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended 7/4/99 7/5/98 7/4/99 7/5/98 ------- ------- -------- -------- Net sales ..................... $ 3,355 $ 3,397 $ 5,755 $ 6,896 Cost of sales ................. 2,775 2,583 4,814 5,267 ------- ------- ------- ------- Gross profit ................ 580 814 941 1,629 Operating expenses: Selling and advertising ..... 557 500 1,078 992 General and administrative .. 262 251 527 522 ------- ------- ------- ------- 819 751 1,605 1,514 Operating profit (loss) ....... (239) 63 (664) 115 Other income (expense): Interest income .............. 49 45 142 50 Interest expense ............. (51) (51) (102) (102) Gain on sale of assets ....... - - - 386 Other, net ................... 24 (2) 42 5 ------- ------- ------- ------- 22 (8) 82 339 Earnings (loss) from continuing operations before income taxes (217) 55 (582) 454 Income tax (expense) benefit .. 73 (22) 193 (182) ------- ------- ------- ------- Earnings (loss) from continuing operations ................... (144) 33 (389) 272 Earnings from discontinued operations, net of taxes ..... 705 207 735 309 ------- ------- ------- ------- Net earnings .................. $ 561 $ 240 $ 346 $ 581 ======= ======= ======= ======= Basic and diluted earnings (loss) per share: Continuing operations ....... $(.05) $ .02 $(.14) $ .10 Discontinued operations ..... .26 .07 .27 .11 ----- ----- ----- ----- $ .21 $ .09 $ .13 $ .21 ===== ===== ===== ===== Weighted average shares: Basic ....................... 2,688 2,747 2,702 2,740 Diluted ..................... 2,688 2,748 2,702 2,741 Cash dividends per share ...... $ - $1.75 $ - $1.75 ===== ===== ===== ===== See notes to consolidated condensed financial statements. -4- MATEC Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows (In thousands) (Unaudited) Six Months Ended 7/4/99 7/5/98 -------- -------- Cash flows from operating activities: Net earnings (loss) from continuing operations ... $ (389) $ 272 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization .................. 312 268 Deferred income taxes .......................... 40 (200) Gain on sale of assets ......................... - (386) Other .......................................... 3 2 Changes in operating assets and liabilities .... (1,165) (70) ------- ------- Net cash (used) by operating activities (1,199) (114) - ---------------------------------------------------------------------- Cash flows from investing activities: Proceeds from sale of assets ..................... - 1,862 Capital expenditures ............................. (339) (314) Collection of note receivables ................... 65 - Other, net........................................ (8) (8) ------- ------- Net cash provided (used) by investing activities (282) 1,540 - ---------------------------------------------------------------------- Cash flows from financing activities: Dividend paid .................................... - (4,827) Payments on long-term debt ....................... (1,000) Purchases of common stock ........................ (125) (164) Stock options exercised .......................... - 101 ------- ------- Net cash (used) by financing activities ........... (1,125) (4,890) - ---------------------------------------------------------------------- Net cash provided by discontinued operations ...... 1,225 6,833 - ---------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (1,381) 3,369 Cash and cash equivalents: Beginning of period .............................. 4,516 885 ------- ------- End of period .................................... $ 3,135 $ 4,254 ======= ======= Noncash investing and financing activities: During 1998, the Company retired all of its treasury stock. The total cost of the treasury shares of $5,527,000 reduced common stock, capital surplus and retained earnings by $56,000, $1,901,000 and $3,570,000, respectively. In connection with the sale of a discontinued operation in 1998, the Company recorded a $1,250,000 note receivable less a deferred gain on sale of $1,250,000. See notes to consolidated condensed financial statements. -5- MATEC Corporation and Subsidiaries Consolidated Statements of Comprehensive Income (In thousands) (Unaudited) Three Months Ended 7/4/99 7/5/98 ------- ------- Net earnings ................................. $ 561 $ 240 Other comprehensive income, net of tax: Unrealized gain (loss) on marketable equity securities, net of tax expense of $246 in 1999 and a tax benefit of $77 in 1998 ..................................... 369 (116) ------- ------- Comprehensive income ......................... $ 930 $ 124 ======= ======= Six Months Ended 7/4/99 7/5/98 ------- ------- Net earnings ................................ $ 346 $ 581 Other comprehensive income, net of tax: Unrealized gain (loss) on marketable equity securities, net of tax expense of $181 in 1999 and a tax benefit of $284 in 1998 .................................... 272 (427) ------- ------- Comprehensive income ........................ $ 618 $ 154 ======= ======= See notes to consolidated condensed financial statements. -6- MATEC Corporation and Subsidiaries Notes to Consolidated Condensed Financial Statements 1. Financial Presentation: The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. These interim financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company's 1998 Annual Report on Form 10-K as filed with the Securities and Exchange Commission. 2. Receivables, net: Receivables, net of allowances, consist of the following: 7/4/99 12/31/98 -------- -------- (in thousands) Accounts receivable, less allowance for doubtful accounts of $90 and $75 ........................ $ 2,058 $ 1,649 Recoverable Federal income taxes ................ 233 - Amounts due from the sales of discontinued operations, less deferred gain of $ 0 and $1,250 361 428 Less: amounts due after one year, less deferred gain of $ 0 and $1,175 ....................... (240) (305) ------- ------- Current amounts due, less deferred gain of $ 0 and $75 ...................................... 121 123 ------- ------- $ 2,412 $ 1,772 ======= ======= 3. Inventories: Inventories consist of the following: 7/4/99 12/31/98 ------- -------- (in thousands) Raw materials ....................... $ 1,752 $ 1,529 Work in process ..................... 1,377 848 Finished goods ...................... 329 416 ------- ------- $ 3,458 $ 2,793 ======= ======= -7- 4. Discontinued Operations: On April 15, 1998, the Company sold the assets of its Bergen Cable Technologies, Inc. ("BCT") subsidiary. The purchase price received consisted of $7.5 million in cash, a 12% 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. On August 3, 1998, the Company sold certain assets of its Matec Instruments, Inc. ("MII") and Matec Applied Sciences, Inc. ("MASI") subsidiaries. The purchase price received consisted of approximately $605,000 in cash, a subordinated promissory note in the principal amount of $250,000, a $250,000 noninterest bearing receivable, and the assumption of certain liabilities including trade payables. As a result, the operating results of BCT, MII, and MASI have been reported as discontinued operations. Since the acquiring entity of BCT had significant third-party debt compared to its equity and the Company's note was subordinated to the third party debt, the Company had deferred any gain on the note and had not assigned any value to the stock portions of the sale until cash payments were received by the Company. In May 1999, the Company received $1,175,000 in cash as payment in full for the $1.2 million outstanding note receivable balance and recorded a $1,175,000 pre-tax gain on disposal of discontinued operations. In March 1999, the Company received a $50,000 note payment and recorded a $50,000 pre-tax gain on disposal of discontinued operations in the first quarter of 1999. Net sales of BCT, MII and MASI for the three months and six months ended July 5, 1998 amounted to $1,523,000 and $7,748,000, respectively. The earnings relating to the above discontinued operations are presented in the Consolidated Statements of Operations under the caption "Earnings from discontinued operations" and include: Three Months Ended Six Months Ended 7/4/99 7/5/98 7/4/99 7/5/98 ------- ------- ------- ------- (in thousands) Earnings from operations (less applicable taxes of $ 0, $5, $ 0 and $73) $ - $ 9 $ - $ 111 Gain on sale (less applicable taxes of $470, $132, $490, and $132) 705 198 735 198 ------ ------ ------ ------ $ 705 $ 207 $ 735 $ 309 ====== ====== ====== ====== -8- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents decreased $1,381,000 during the six months ended July 4, 1999. During this period, the Company's continuing operations used $2,606,000 of cash while the discontinued operations generated $1,225,000 of cash. Operating activities used $1,199,000 of cash mainly due to a $1,165,000 net increase in working capital. Inventories increased $665,000 to support the current sales backlog and customer delivery requirements. Trade accounts receivable increased $409,000 mainly as a result of the increased sales level. The $1,207,000 increase in accounts payable is mainly due to the timing of inventory and machinery and equipment purchases. Income tax payments during the six months ended July 4, 1999 amounted to $815,000. During the six months ended July 4, 1999, capital expenditures amounted to $339,000 as the Company added new and increased existing production capabilities and processes. The Company made a $1,000,000 payment on its outstanding long-term debt during the quarter ended July 4, 1999. During the six months ended July 4, 1999, discontinued operations generated cash of $1,225,000 as the Company received note payments of $1,225,000 from the sale of its Bergen Cable Technologies subsidiary in 1998. This note amount had been deferred pending collection. 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 1999 including a remaining capital expenditures budget of approximately $260,000. Results of Operations - --------------------- Net sales from continuing operations for the quarter ended July 4, 1999 decreased 1% from the comparable quarter in 1998. The sales decrease during quarter was due to a 35% decrease in sales of imported product that was partially offset by increased sales of domestically produced products. During the six months ended July 4, 1999, the sales decrease of 17% from 1998 was mainly due to lower sales of imported products. The sales decreases of imported product during both periods resulted mainly from a lower backlog at the beginning of each period as compared to 1998 and lower bookings during both periods in 1999. The sales increase of domestically produced product during the quarter ended July 4, 1999, results from both the higher beginning backlog and increased bookings over the 1998 period. During the six months ended July 4, 1999, sales of domestically produced products declined slightly from 1998 mainly as a result of a lower beginning backlog compared to 1998. Sales in 1999 have also been negatively impacted by the Company experiencing late deliveries on some of its domestically produced products. The Company continues to work with its supplier base and to -9- increase its manufacturing capacity to improve its delivery performance. The backlog at the beginning of 1999 was $1.6 million (42%) lower than the backlog at the beginning of 1998. This lower backlog level resulted from a 23% decrease in bookings in 1998 versus 1997 and negatively impacted sales during the first quarter of 1999. During the six months ended July 4, 1999, the Company has experienced a positive change in its bookings as bookings have increased 49% over 1998. At July 4, 1999, the backlog is $5.2 million, compared to $2.3 million and $2.7 million at December 31, 1998 and July 5, 1998, respectively. During the quarter ended July 4, 1999, the gross profit percentage was 17% compared to 24% in 1998. For the six months ended July 4, 1999, the gross profit percentage was 16% versus 24% in 1998. The lower margins in 1999 result mainly from the unfavorable effect of allocating the fixed overhead expenses over the lower sales volumes, an increased inventory obsolescence provision in 1999 and increased labor costs due to changes in product mix. During the quarter and six months ended July 4, 1999, selling expenses increased $57,000 (11%) and $86,000 (9%), respectively, over the comparable periods in 1998. These expense increases result mainly from higher advertising, travel and personnel costs offset in part, by lower sales commissions paid to the Company's manufacturers' representatives. General and administrative expenses during the quarter and six months ended July 4, 1999, remained fairly level with the 1998 levels. During the quarter and six months ended July 4, 1999, interest income increased $4,000 and $92,000, respectively, over the 1998 periods as a result of the higher cash levels in 1999 and the interest income received on the notes receivable generated from the sales of the discontinued operations. Interest expense remained constant with the 1998 amounts. During the six months ended July 5, 1998, the Company sold its real estate complex in Delaware and realized a $386,000 pre-tax gain on the sale. Other income (expense), net includes the following (in thousands): Quarter Ended Six Months Ended 7/4/99 7/5/98 7/4/99 7/5/98 ------- ------- ------- ------- Dividend income ........... $ 26 $ 16 $ 51 $ 31 Real estate operations .... (2) (18) (9) (26) ------- ------- ------- ------- $ 24 $ (2) $ 42 $ 5 ======= ======= ======= ======= The reductions in the real estate operations losses are due to both a decrease in operating expenses and increased rental income. The estimated effective income tax rate for 1999 is 33% compared to 40% in 1998. The difference in the rates is mainly due to the limited state tax benefit of operating losses within a state. -10- During the quarter ended July 4, 1999, based on the lower sales level, the decrease in gross margin and the increase in operating expenses, the Company reported an operating loss of $239,000 compared to an operating profit of $63,000 in 1998. Other income (expense), net amounted to $22,000 of income in 1999 compared to $8,000 of expense in the corresponding 1998 period. As a result, the Company reported a pre-tax loss from continuing operations of $217,000 during the quarter July 4, 1999 compared to pre-tax earnings of $55,000 in 1998. Earnings from discontinued operations during 1998 amounted to $705,000 compared to $207,000 during the comparable 1998 period. In total, the Company reported net earnings of $561,000 during the quarter ended July 4, 1999 versus $240,000 in 1998. As a result of the decrease in sales and gross profit, and the increase in operating expenses, the Company reported an operating loss of $664,000 for the six months ended July 4, 1999 compared to an operating profit of $115,000 during the comparable period in 1998. The six months ended July 4, 1999 includes nonoperating income of $82,000 compared to $339,000 of income in 1998 mainly as a result of the gain on sale of real estate. During the six months ended July 4, 1999, the Company reported a pre-tax loss from continuing operations of $582,000 compared to earnings of $454,000 during the 1998 period. During the six months ended July 4, 1999, earnings from discontinued operations amounted to $735,000 versus $309,000 in 1998. In total, the Company reported net earnings of $346,000 during the six months ended July 4, 1999 compared to $581,000 in 1998. Year 2000 - --------- The Company is continuing to monitor the Year 2000 issue. The current accounting software is in the process of being modified to be Year 2000 compliant and the Company expects these changes to be completed by the end of the 3rd quarter 1999. Based on the responses to date, the Company's major suppliers have assured the Company that they are currently or that they will be Year 2000 compliant. The Company is continuing to review its manufacturing equipment and facility to assess and minimize Year 2000 issues. At this time, the Company does not believe there is any major obstacle that would effect its manufacturing equipment or its facility in the Year 2000. The Company expects that the estimated costs to resolve the Company's Year 2000 issues will not exceed $75,000. The Company does not have a formalized contingency plan if the software changes are not completed and working before 2000. The Company will continue to monitor progress on these changes and will determine by the end of the 3rd quarter if a contingency plan is required. The Company believes that it will not experience significant operational problems as a result of the Year 2000 issue. However, the Company could experience operational problems or disruptions if third-party vendors are unable to provide their services or materials due to Year 2000 issues. -11- Forward-Looking Statements - -------------------------- Certain statements made herein contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Words such as "expects", "believes", "estimates", "plans" or similar expressions are intended to identify such forward-looking statements. Factors that could cause such differences include, but are not limited to those discussed in this section and those discussed in the Company's Form 10-K for the year ended December 31, 1998 under the section "Forward-Looking Statements" included under the caption "Management's Discussion and Analysis", is herein incorporated by reference. Item 3. Quantitative and Qualitative Disclosures About Market Risk - ------------------------------------------------------------------ There have been no material changes in the Company's market risk during the six months ended July 4, 1999. The information set forth on page 5 of the 1998 Annual Report to Stockholders under the section "Qualitative and Quantitative Disclosures about Market Risk" included under the caption "Management's Discussion and Analysis" is incorporated by reference. -12- PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Special in Lieu of Annual Meeting of Stockholders was held on May 13, 1999. Listed below are the matters submitted to stockholders and the results of the stockholder votes. (i) Election of six directors: Nominee "For" "Withheld" --------------------------- --------- ---------- Eli Fleisher 2,107,553 401,636 Lawrence Holsborg 2,109,204 399,985 John J. McArdle III 2,109,053 400,136 Robert W. Muir, Jr. 2,109,904 399,285 Joseph W. Tiberio 2,109,299 399,890 Ted Valpey, Jr. 2,108,903 400,286 (ii) To approve the Company's 1999 Stock Option Plan: "For" 2,043,842 "Against" 444,195 "Abstain" 21,152 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 11. Statement re Computation of Per Share Earnings. Filed herein. 13. Annual report to security holders, Form 10-Q or 10-QSB, or quarterly report to security holders. Filed for electronic purposes only. 27. Financial Data Schedule. Filed for electronic purposes only. (b) Reports on Form 8-K - None -13- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MATEC Corporation ------------------------------------ Date: August 13, 1999 By /s/ Ted Valpey, Jr. --------------------------------- Ted Valpey, Jr. Chairman of the Board and President Date: August 13, 1999 By /s/ Michael J. Kroll --------------------------------- Michael J. Kroll, Vice President and Treasurer -14- 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 7/4/99 7/5/98 ------- ------- Net earnings (loss) from continuing operations ... $ (144) $ 33 Discontinued operations: Net earnings from operations ................... - 9 Gain on sale ................................... 705 198 ------ ------ Net earnings (loss) .............................. $ 561 $ 240 ====== ====== Calculation of basic earnings (loss) per share: - ----------------------------------------------- Weighted-average shares ......................... 2,688 2,747 ===== ===== Basic earnings (loss) per common share: Continuing operations ......................... $ (.05) $ .02 Discontinued operations: Operations .................................. - - Gain on sale ................................ .26 .07 ------ ------ $ .21 $ .09 ====== ====== Calculation of diluted earnings (loss) per share: - ------------------------------------------------- Weighted average common shares outstanding ...... 2,688 2,747 Increase from assumed exercise of stock options and investment of proceeds in treasury stock, based upon the average market prices (A) (B) ... - 1 ----- ----- Adjusted weighted-average shares ................ 2,688 2,748 ===== ===== Diluted earnings per common share: Continuing operations ......................... $ (.05) $ .02 Discontinued operations: Operations .................................. - - Gain on sale ................................ .26 .07 ------ ------ $ .21 $ .09 ====== ====== (A) The dilutive effect of stock options and warrants was not considered in 1999 since the Company reported a loss from continuing operations. (B) The dilutive effect of outstanding warrants to purchase 85,000 shares of common stock was not included in the 1998 computation since the exercise price was greater than the average market price of the common shares. -15- MATEC Corporation and Subsidiaries Exhibit 11 Calculation of Earnings Per Share (amounts in thousands, except per share data) Six Months Ended 7/4/99 7/5/98 ------- ------- Net earnings (loss) from continuing operations ... $ (389) $ 272 Discontinued operations: Net earnings from operations ................... - 111 Gain on sales .................................. 735 198 ------ ------ Net earnings ..................................... $ 346 $ 581 ====== ====== Calculation of basic earnings per share: - ---------------------------------------- Weighted-average shares ......................... 2,702 2,740 ===== ===== Basic earnings (loss) per common share: Continuing operations ......................... $ (.14) $ .10 Discontinued operations: Operations .................................. - .04 Gain on sales ............................... .27 .07 ------ ------ $ .13 $ .21 ====== ====== Calculation of diluted earnings per share: - ------------------------------------------ Weighted-average shares ......................... 2,702 2,740 Increase from assumed exercise of stock options and investment of proceeds in treasury stock, based upon the average market prices (A) (B) ... - 1 ----- ----- Adjusted weighted-average shares ................ 2,702 2,741 ===== ===== Diluted earnings (loss) per common share: Continuing operations ......................... $ (.14) $ .10 Discontinued operations: Operations .................................. - .04 Gain on sales ............................... .27 .07 ------ ------ $ .13 $ .21 ====== ====== (A) The dilutive effect of stock options and warrants was not considered in 1999 since the Company reported a loss from continuing operations. (B) 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. -16- EX-13 3 Exhibit 13 1998 Annual Report Management's Discussion and Analysis - ------------------------------------ Forward-Looking Statements - -------------------------- This Annual Report, including Management's Discussion and Analysis, the Letter to Stockholders and Operations, contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Words such as "expects", "believes", "estimates", "plans" or similar expressions are intended to identify such forward-looking statements. The forward-looking statements are based on the Company's current views and assumptions and involve risks and uncertainties that include, but not limited to: the ability to develop, market and manufacture new innovative products competitively, the ability of the Company's suppliers to produce and deliver materials competitively, and the ability to limit the amount of the negative effect on operating results caused by pricing pressures. Quantitative and Qualitative Disclosures about Market Risk - ---------------------------------------------------------- The Company's cash balances in excess of operating requirements are currently invested in money market accounts. These money market accounts are subject to interest rate risk and interest income will fluctuate in relation to general money market rates. Based on the cash and cash equivalent balance at December 31, 1998, and assuming the balance was totally invested in money market instruments for the full year, a hypothetical 1% decline in interest rates would result in an approximate $45,000 decrease in interest income. The Company's investment in marketable equity securities, which are classified as available-for-sale, represents 517,527 shares of MetroWest Bank common stock and are subject to equity price risk. These securities are recorded on the balance sheet at fair market value with unrealized gains (losses) reported as a separate component of stockholders' equity under the caption "accumulated other comprehensive income". Accordingly, while a hypothetical 10% decline in the market value of these securities would reduce total assets by approximately $314,000, this decrease would not have an effect on the statement of operations unless the securities were actually sold. At December 31, 1998, the Company has a $2 million face amount term note at a 10% fixed interest rate. A hypothetical 10% adverse change (i.e. decrease) in interest rates, would result in a $30,000 increase in the fair value of the term note at December 31, 1998. The Company purchases certain inventory from and sells product to foreign countries. As these activities are currently transacted in U.S. dollars, they are not subject to foreign currency exchange risk. However, significant fluctuation in the currencies where the Company purchases inventory or sell product could make the U.S. dollar equivalent of such transactions more or less favorable to the Company and the other involved parties. EX-27 4
5 1,000 6-MOS DEC-31-1999 JUL-04-1999 3,135 0 2,502 90 3,458 9,837 8,254 5,576 16,368 3,656 0 0 0 134 10,850 16,368 5,755 5,755 4,814 4,814 0 14 102 (582) (193) (389) 735 0 0 346 .13 .13
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