SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------------------------------
FORM 10-Q
(mark one)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter Ended June 28, 1997.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission File Number 1-13085
METRIKA SYSTEMS CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 33-0733537
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5788 Pacific Center Boulevard
San Diego, California 92121
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 622-1000
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 [ ] No [ X ]
The Registrant became subject to the filing requirements of the
Securities Exchange Act of 1934 on June 18, 1997, the date its
Registration Statements on Form S-1 and Form 8-A became
effective, and has filed all reports required to be filed
thereunder since such date.
Indicate the number of shares outstanding of each of the
issuer's classes of Common Stock, as of the latest practicable
date.
Class Outstanding at July 25, 1997
---------------------------- ----------------------------
Common Stock, $.01 par value 8,267,828
PAGE
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
METRIKA SYSTEMS CORPORATION
Consolidated Balance Sheet
(Unaudited)
Assets
June 28, December 28,
(In thousands) 1997 1996
------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents $ 51,838 $ 20,229
Accounts receivable, less allowances of
$792 and $440 11,567 10,896
Unbilled contract costs and fees 3,263 1,706
Inventories:
Raw materials and supplies 3,978 4,207
Work in process 3,770 1,230
Finished goods 830 910
Prepaid income taxes and other current
assets 1,612 1,457
-------- --------
76,858 40,635
-------- --------
Property, Plant, and Equipment, at Cost 15,030 15,956
Less: Accumulated depreciation and
amortization 4,155 3,856
-------- --------
10,875 12,100
-------- --------
Other Assets 827 926
-------- --------
Cost in Excess of Net Assets of Acquired
Companies (Note 2) 13,187 13,105
-------- --------
$101,747 $ 66,766
======== ========
2PAGE
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METRIKA SYSTEMS CORPORATION
Consolidated Balance Sheet (continued)
(Unaudited)
Liabilities and Shareholders' Investment
June 28, December 28,
(In thousands except share amounts) 1997 1996
------------------------------------------------------------------------
Current Liabilities:
Notes payable and current maturities of
long-term obligation $ 14,255 $ 11,578
Accounts payable 2,879 2,463
Accrued payroll and employee benefits 2,661 2,225
Customer deposits 4,302 3,377
Accrued installation and warranty costs 1,877 1,350
Billings in excess of contract costs and fees 603 470
Other accrued expenses 4,541 3,150
Due to parent company and affiliated companies 1,284 7,317
-------- --------
32,402 31,930
-------- --------
Accrued Pension Costs 4,439 4,752
-------- --------
Long-term Obligation 4,502 5,223
-------- --------
Shareholders' Investment (Note 3):
Common stock, $.01 par value, 25,000,000
shares authorized; 8,267,828 and
5,967,828 shares issued and outstanding 83 60
Capital in excess of par value 58,555 26,050
Retained earnings 2,240 298
Cumulative translation adjustment (474) (1,547)
-------- --------
60,404 24,861
-------- --------
$101,747 $ 66,766
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
3PAGE
<PAGE>
METRIKA SYSTEMS CORPORATION
Consolidated Statement of Income
(Unaudited)
Three Months Ended
-------------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
Revenues $14,133 $12,589
------- -------
Costs and Operating Expenses:
Cost of revenues 7,629 7,125
Selling, general, and administrative expenses 3,419 3,246
Research and development expenses 1,053 726
------- -------
12,101 11,097
------- -------
Operating Income 2,032 1,492
Interest Income 253 1
Interest Expense (239) (109)
------- -------
Income Before Provision for Income Taxes 2,046 1,384
Provision for Income Taxes 819 554
------- -------
Net Income $ 1,227 $ 830
======= =======
Earnings per Share $ .20 $ .16
======= =======
Weighted Average Shares 6,069 5,193
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
4PAGE
<PAGE>
METRIKA SYSTEMS CORPORATION
Consolidated Statement of Income
(Unaudited)
Six Months Ended
------------------------
June 28, June 29,
(In thousands except per share amounts) 1997 1996
------------------------------------------------------------------------
Revenues $26,725 $24,183
------- -------
Costs and Operating Expenses:
Cost of revenues 14,665 13,940
Selling, general, and administrative expenses 6,795 6,384
Research and development expenses 2,060 1,405
------- -------
23,520 21,729
------- -------
Operating Income 3,205 2,454
Interest Income 473 2
Interest Expense (440) (325)
------- -------
Income Before Provision for Income Taxes 3,238 2,131
Provision for Income Taxes 1,296 852
------- -------
Net Income $ 1,942 $ 1,279
======= =======
Earnings per Share $ .32 $ .25
======= =======
Weighted Average Shares 6,021 5,193
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
5PAGE
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METRIKA SYSTEMS CORPORATION
Consolidated Statement of Cash Flows
(Unaudited)
Six Months Ended
------------------------
June 28, June 29,
(In thousands) 1997 1996
------------------------------------------------------------------------
Operating Activities:
Net income $ 1,942 $ 1,279
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 844 884
Provision for losses on accounts
receivable 79 -
Other noncash items 165 261
Changes in current accounts, excluding
the effects of acquisition:
Accounts receivable (111) 1,562
Inventories and unbilled contract
costs and fees (3,426) (1,423)
Other current assets (152) 559
Accounts payable 373 649
Billings in excess of contract
costs and fees 131 (1,983)
Other current liabilities 2,678 1,383
-------- --------
Net cash provided by operating activities 2,523 3,171
-------- --------
Investing Activities:
Acquisition (Note 2) (1,347) -
Purchases of property, plant, and equipment (295) (375)
Other 57 25
-------- --------
Net cash used in investing activities (1,585) (350)
-------- --------
Financing Activities:
Net proceeds from issuance of Company
common stock (Note 3) 32,527 -
Net transfers to parent company prior to
the capitalization of the Company - (1,076)
Decrease in due to parent company
and affiliated companies (6,033) (848)
Increase (decrease) in short-term
obligations 3,720 (727)
Repayment of long-term obligation (172) (398)
-------- --------
Net cash provided by (used in) financing
activities $ 30,042 $ (3,049)
-------- --------
6PAGE
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METRIKA SYSTEMS CORPORATION
Consolidated Statement of Cash Flows (continued)
(Unaudited)
Six Months Ended
-------------------------
June 28, June 29,
(In thousands) 1997 1996
------------------------------------------------------------------------
Exchange Rate Effect on Cash $ 629 $ (222)
-------- --------
Increase (Decrease) in Cash and Cash
Equivalents 31,609 (450)
Cash and Cash Equivalents at Beginning of
Period 20,229 1,302
-------- --------
Cash and Cash Equivalents at End of Period $ 51,838 $ 852
======== ========
Noncash Activities:
Fair value of assets of acquired company $ 2,380 $ -
Cash paid for acquired company (1,347) -
-------- --------
Liabilities assumed of acquired company $ 1,033 $ -
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
7PAGE
<PAGE>
METRIKA SYSTEMS CORPORATION
Notes to Consolidated Financial Statements
1. General
The interim consolidated financial statements presented have been
prepared by Metrika Systems Corporation (the Company) without audit and,
in the opinion of management, reflect all adjustments of a normal
recurring nature necessary for a fair statement of the financial position
at June 28, 1997, the results of operations for the three- and six-month
periods ended June 28, 1997, and June 29, 1996, and the cash flows for
the six-month periods ended June 28, 1997, and June 29, 1996. Interim
results are not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 28, 1996, has
been derived from the consolidated financial statements that have been
audited by the Company's independent public accountants. The consolidated
financial statements and notes are presented as permitted by Form 10-Q
and do not contain certain information included in the annual financial
statements and notes of the Company. The consolidated financial
statements and notes included herein should be read in conjunction with
the financial statements and notes included in the Company's Registration
Statement on Form S-1 (File No. 333-25243), filed with the Securities and
Exchange Commission.
2. Acquisition
On December 31, 1996, the Company acquired the assets, subject to
certain liabilities, of the Autometrics division of Svedala Industries
Inc. (Autometrics), for $1,347,000 in cash. Autometrics is a manufacturer
and marketer of on-line analysis instruments for the minerals processing
industry.
The acquisition has been accounted for using the purchase method of
accounting and its results of operations have been included in the
accompanying financial statements from its date of acquisition. The cost
of the acquisition exceeded the estimated fair value of the acquired net
assets by $400,000, which is being amortized over 40 years. Allocation of
the purchase price was based on an estimate of the fair value of the net
assets acquired and is subject to adjustment upon finalization of the
purchase price allocation.
Based on unaudited data, the following table presents selected
financial information for the Company and Autometrics on a pro forma
basis, assuming the companies had been combined since the beginning of
1996.
Three Months Six Months
Ended Ended
------------ ----------
(In thousands except June 29, June 29,
per share amounts) 1996 1996
--------------------------------------------------------------------
Revenues $12,949 $25,023
Net income 578 784
Earnings per share .11 .15
8PAGE
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METRIKA SYSTEMS CORPORATION
2. Acquisition (continued)
The pro forma results are not necessarily indicative of the actual
results that would have occurred had the acquisition of Autometrics been
made at the beginning of 1996.
3. Initial Public Offering
In June 1997, the Company sold 2,300,000 shares of its common stock
in an initial public offering at $15.50 per share for net proceeds of
$32,527,000. Following the initial public offering, Thermo Instrument
Systems Inc. owned approximately 60% of the Company's outstanding common
stock.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-looking statements, within the meaning of Section 21E of the
Securities Exchange Act of 1934, are made throughout this Management's
Discussion and Analysis of Financial Condition and Results of Operations.
For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes," "anticipates,"
"plans," "expects," "seeks," "estimates," and similar expressions are
intended to identify forward-looking statements. There are a number of
important factors that could cause the results of the Company to differ
materially from those indicated by such forward-looking statements,
including those detailed under the caption "Risk Factors" included in the
Company's Registration Statement on Form S-1 (File No. 333-25243), filed
with the Securities and Exchange Commission.
Overview
The Company develops, manufactures, and markets on-line process
optimization systems that employ proprietary ultra-high speed advanced
scientific measurement technologies for applications in raw materials
analysis and finished materials quality control. The Company is a pioneer
in the development of process optimization systems that provide
real-time, nondestructive analysis of the composition of raw materials in
basic materials production processes, including coal, cement, and
minerals. The Company also manufactures advanced systems which are used
to measure and control parameters such as material thickness, coating
thickness, and coating weight in web-type materials, such as metal strip,
rubber and plastic foils. Customers use these systems to improve product
quality and consistency, lower material costs, reduce energy consumption,
and minimize waste.
The Company intends to supplement its internal growth with strategic
acquisitions of complementary businesses. There can be no assurance that
such businesses will be available at prices attractive to the Company. On
December 31, 1996, the Company acquired the assets, subject to certain
liabilities, of the Autometrics division of Svedala Industries Inc.
(Autometrics) a manufacturer and marketer of on-line analysis instruments
for the minerals processing industry.
9PAGE
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METRIKA SYSTEMS CORPORATION
Overview (continued)
A significant portion of the Company's sales are for large systems,
the timing of which can lead to variability in the Company's quarterly
revenues and income. In addition, in 1996, approximately 56% of the
Company's revenues originated outside the U.S. and approximately 26% of
the Company's revenues were exports from the U.S. Revenues originating
outside the U.S. represent revenues of the Company's on-line finished
materials quality control business. The operations of the on-line
finished materials quality control business are located in Germany, the
United Kingdom, and France, which principally sell in their local
currencies. Exports from the Company's U.S. operation are denominated in
U.S. dollars. The Company generally seeks to charge its customers in the
same currency as its operating costs. However, the Company's financial
performance and competitive position can be affected by currency exchange
rate fluctuations. Since the operations of the on-line finished materials
quality control business are conducted in Europe, principally Germany,
the Company's operating results could be adversely affected by capital
spending and economic conditions in Europe. The Company's operating
results have been adversely affected by a recession in Germany. The
Company's strategy is to expand its on-line finished materials quality
control business in the U.S. and Asian markets, which in turn may reduce
the Company's exposure to European market conditions.
Results of Operations
Second Quarter 1997 Compared With Second Quarter 1996
Revenues increased 12% to $14,133,000 in the second quarter of 1997
from $12,589,000 in the second quarter of 1996, reflecting an increase of
$1,379,000 at the on-line raw materials analyzer business, primarily due
to increased sales in international markets and the inclusion of $368,000
in revenues from Autometrics, acquired December 31, 1996. Revenues
increased at the on-line finished materials quality control business,
principally due to an increase in demand in the U.S. and Asian markets.
The unfavorable effects of currency translation due to a stronger U.S.
dollar decreased revenues by $333,000. The future sales growth of the
Company will depend in part upon increasing industry acceptance of its
on-line raw materials analyzers, as well as the Company's ability to
further penetrate the U.S. and Asian markets for its on-line finished
materials quality control systems.
The gross profit margin increased to 46% in the second quarter of
1997 from 43% in the second quarter of 1996. The gross profit margin at
the on-line raw materials analyzer business improved to 48% in 1997 from
45% in 1996 resulting principally from the inclusion in 1996 of
lower-margin revenues from a large order, offset in part by the inclusion
in 1997 of lower-margin revenues at Autometrics. The gross profit margin
at the on-line finished materials quality control business improved to
44% in 1997 from 42% in 1996 due to higher costs incurred in the 1996
period relating to the introduction of new products, and an increase in
higher-margin sales in 1997 resulting from the introduction of such new
products.
10PAGE
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METRIKA SYSTEMS CORPORATION
Second Quarter 1997 Compared With Second Quarter 1996 (continued)
Selling, general, and administrative expenses as a percentage of
revenues decreased to 24% in the second quarter of 1997 from 26% in the
second quarter of 1996, principally due to an increase in revenues.
Research and development expenses increased to $1,053,000 in the second
quarter of 1997 from $726,000 in the second quarter of 1996, primarily
due to an increase in product development expenses at the on-line raw
materials analyzer business.
Interest income increased by $252,000 in the second quarter of 1997
primarily due to interest earned on the invested net proceeds from the
Company's December 1996 private placement. Interest expense increased to
$239,000 in 1997 from $109,000 in 1996, principally due to an increase in
short-term borrowings at foreign divisions, as well as an increase in
applicable interest rates.
The effective tax rate was 40% in the second quarter of 1997 and
1996. The effective tax rate exceeded the statutory federal income tax
rate primarily due to the impact of state income taxes, nondeductible
amortization of cost in excess of net assets of acquired companies, and
foreign tax rate and tax law differences.
First Six Months 1997 Compared With First Six Months 1996
Revenues increased 11% to $26,725,000 in the first six months of 1997
from $24,183,000 in the first six months of 1996, reflecting an increase
of $3,714,000 at the on-line raw materials analyzer business, primarily
due to increased sales in international markets and the inclusion of
$1,102,000 in revenues from Autometrics, acquired December 31, 1996.
These increases were offset in part by a decrease in revenues at the
on-line finished materials quality control business due to a decrease in
demand in Germany, offset in part by an increase in sales in the U.S. and
Asian markets. The unfavorable effects of currency translation due to a
stronger U.S. dollar decreased revenues by $547,000.
The gross profit margin increased to 45% in the first six months of
1997 from 42% in the first six months of 1996. The gross profit margin at
the on-line raw materials analyzer business was unchanged at 48% in 1997
and 1996. An increase in the gross profit margin due to the inclusion in
1996 of lower-margin revenues from a large order, was offset by the
inclusion in 1997 of lower-margin revenues at Autometrics. The gross
profit margin at the on-line finished materials quality control business
improved to 42% in 1997 from 38% in 1996 due to higher costs incurred in
the 1996 period relating to the introduction of new products, and an
increase in higher-margin sales in 1997 resulting from the introduction
of such new products.
Selling, general, and administrative expenses as a percentage of
revenues decreased to 25% in the first six months of 1997 from 26% in the
first six months of 1996, principally due to an increase in revenues.
Research and development expenses increased to $2,060,000 in the first
six months of 1997 from $1,405,000 in the first six months of 1996,
primarily due to an increase in product development expenses at the
on-line raw materials analyzer business.
11PAGE
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METRIKA SYSTEMS CORPORATION
First Six Months 1997 Compared With First Six Months 1996 (continued)
Interest income increased by $471,000 in the first six months of 1997
primarily due to interest earned on the invested net proceeds from the
Company's December 1996 private placement. Interest expense increased to
$440,000 in 1997 from $325,000 in 1996 for the reasons discussed in the
results of operations for the second quarter.
The effective tax rate was 40% in the first six months of 1997 and
1996. The effective tax rate exceeded the statutory federal income tax
rate primarily due to the impact of state income taxes, nondeductible
amortization of cost in excess of net assets of acquired companies, and
foreign tax rate and tax law differences.
Liquidity and Capital Resources
Consolidated working capital was $44,456,000 at June 28, 1997,
compared with $8,705,000 at December 28, 1996. Included in working
capital are cash and cash equivalents of $51,838,000 at June 28, 1997,
compared with $20,229,000 at December 28, 1996. Additionally, included in
working capital are short-term borrowings and advances from parent
company and affiliated companies of $15,539,000 at June 28, 1997, and
$18,895,000 at December 28, 1996.
During the first six months of 1997, $2,523,000 of cash was provided
by operating activities. Cash provided by the Company's operating results
was reduced primarily by a $3,426,000 increase in inventories and
unbilled contract costs and fees, which was offset in part by a
$2,678,000 increase in other current liabilities. Inventories increased
primarily due to a build-up of inventory in anticipation of shipments at
the on-line finished materials quality control business. The increase in
unbilled contract costs and fees occurred principally at the on-line
finished materials quality control business and resulted primarily from
the timing of billing on percentage-of-completion contracts.
During the first six months of 1997, the Company expended $1,585,000
of cash for investing activities. On December 31, 1996, the Company
acquired the assets, subject to certain liabilities, of Autometrics for
$1,347,000 in cash (Note 2). The Company expended $295,000 for the
purchase of property, plant, and equipment during the first six months of
1997.
The Company's financing activities provided $30,042,000 of cash in
the first six months of 1997. In June 1997, the Company sold 2,300,000
shares of its common stock in an initial public offering for net proceeds
of $32,527,000 (Note 3). During the first six months of 1997, the Company
increased its foreign short-term borrowings by $3,720,000 and repaid
$172,000 of its long-term obligation. A decrease in "Due to parent
company and affiliated companies" used $6,033,000 in cash during the
first six months of 1997.
In the remainder of 1997, the Company plans to make capital
expenditures for property, plant, and equipment of approximately
$400,000. Although the Company expects to have positive cash flow from
its existing operations, the Company may require significant amounts of
cash for the acquisition of complementary businesses. The Company
12PAGE
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METRIKA SYSTEMS CORPORATION
Liquidity and Capital Resources (continued)
expects that it will finance any such acquisitions through a combination
of internal funds, additional debt or equity financing from the capital
markets, or short-term borrowings from Thermo Instrument Systems Inc. or
Thermo Electron Corporation, although it has no agreement with these
companies to ensure that funds will be available on acceptable terms, or
at all. The Company believes that its existing resources are sufficient
to meet the capital requirements of its existing businesses for the
foreseeable future.
PART II - OTHER INFORMATION
Item 6 - Exhibits
See Exhibit Index on the page immediately preceding exhibits.
13PAGE
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METRIKA SYSTEMS CORPORATION
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 as of the 5th day of August
1997.
METRIKA SYSTEMS CORPORATION
Paul F. Kelleher
-----------------------
Paul F. Kelleher
Chief Accounting Officer
John N. Hatsopoulos
-----------------------
John N. Hatsopoulos
Vice President and Chief
Financial Officer
14PAGE
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METRIKA SYSTEMS CORPORATION
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
-----------------------------------------------------------------------
11 Statement re: Computation of Earnings per Share.
27 Financial Data Schedule.
Exhibit 11
METRIKA SYSTEMS CORPORATION
Computation of Earnings per Share
Three Months Ended Six Months Ended
------------------------ -------------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
------------------------------------------------------------------------------
Computation of Primary
Earnings per Share:
Net income (a) $ 1,227,000 $ 830,000 $ 1,942,000 $ 1,279,000
----------- ----------- ----------- -----------
Shares:
Weighted average shares
outstanding 6,068,932 5,000,000 6,018,382 5,000,000
Add: Shares issuable
from assumed
issuance of private
placement shares
and the assumed
exercise of options
(as determined by
the application of
the treasury stock
method) - 193,086 2,884 193,086
----------- ----------- ----------- -----------
Weighted average
shares outstanding,
as adjusted (b) 6,068,932 5,193,086 6,021,266 5,193,086
----------- ----------- ----------- -----------
Primary Earnings
per Share (a) / (b) $ .20 $ .16 $ .32 $ .25
=========== =========== =========== ===========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM METRIKA
SYSTEMS CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE
28, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUN-28-1997
<CASH> 51,838
<SECURITIES> 0
<RECEIVABLES> 12,359
<ALLOWANCES> 792
<INVENTORY> 8,578
<CURRENT-ASSETS> 76,858
<PP&E> 15,030
<DEPRECIATION> 4,155
<TOTAL-ASSETS> 101,747
<CURRENT-LIABILITIES> 32,402
<BONDS> 4,502
0
0
<COMMON> 83
<OTHER-SE> 60,321
<TOTAL-LIABILITY-AND-EQUITY> 101,747
<SALES> 26,725
<TOTAL-REVENUES> 26,725
<CGS> 14,665
<TOTAL-COSTS> 14,665
<OTHER-EXPENSES> 2,060
<LOSS-PROVISION> 79
<INTEREST-EXPENSE> 440
<INCOME-PRETAX> 3,238
<INCOME-TAX> 1,296
<INCOME-CONTINUING> 1,942
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,942
<EPS-PRIMARY> .32
<EPS-DILUTED> 0
</TABLE>
